If hedge and proprietary fund managers were to continue to follow the strategies and risk management disciplines they laid out in all those PowerPoint presentations, they'd be heading for what pilots call a "ground loop" and a smoking hole.

The really smart money, after all, "knows" that what you look for in discontinuous or troubled times is free money in the form of arbitrages. No need to take real risk; you just look for absurdly oversold and therefore undervalued assets and buy them. Simultaneously, you short-sell the still wildly overvalued assets that were, historically, correlated with those long positions. Locked in profit, without risk.