Every time the market plunges, I smell cigar smoke. It filled the halls where I once worked as an analyst for a hedge fund. The fund next door was primarily a short fund, betting heavily that certain stocks would go down. The further the market fell, the thicker the smoke.
A similar scenario has played out over the past month, when markets stopped what had become a vertiginous ascent, driven largely by a bubble of low interest rates, and started behaving erratically. Concerns about interest rates rising became more acute, and currency markets spiraled downward. Then China suddenly devalued the yuan, triggering a huge selloff. Panic was in the air. It was time for hedge funds to shine.