The charade is over. For the past couple of years, a lot of people on Wall Street were pretending to be something they were not. Mathematicians were posing as financial experts, and they came into town determined to make a quick buck. With their computer programs in place, they pumped more than $100 billion into complex investment vehicles known as arbitrage hedge funds.

I'm sure you've heard about this in the news lately. Arbitrage investing is when someone purchases securities on one market and then resells them on another market for a profit. Traders in the Japanese yen carry trade, for instance, buy Japanese currency and then convert it into another currency, profiting from the interest rate differential.

Traders invested in these, as well as other super-risky investments, such as hedge funds that were bursting at the seams with subprime loans. Others placed big bets on the idea that financial stocks would continue to plummet and sold them short.

Well guess what happened? In August, many of these trading schemes blew up. We witnessed multiple short-covering rallies that decimated many arbitrage hedge fund strategies. As the credit crunch escalated, investors fled battered hedge funds in droves, and many of these arbitrage players were left holding the bag.

These math guys who thought that they were so smart didn't anticipate that liquidity often dries up in August, and as a result, their computerized trading systems were simply overloaded as markets were violently whipsawed. These arbitrage players have been forced to de-leverage their positions, since their trading schemes failed and they're now facing mass redemptions. Record trading volume ensued as they de-leveraged and unwound their positions. Finally, on August 16, the stock market got its capitulation day, which marked the definitive stock market low, when the Dow staged its incredible 344-point intraday reversal. This was important, since Wall Street was finally convinced that the stock market had bottomed out.

I must say I am absolutely ecstatic with how well my Emerging Growth stocks performed last month. After multiple arbitrage strategies blew up, our stocks saw persistent and relentless buying pressure from institutional investors.

While this summer will go down as one for the record books, what happened is further evidence that the market's "seismic shift" from value stocks into growth stocks is under way. Arbitrage is out of favor, and fundamentals are back in. I guess those arbitrage quants run by younger guys with all their hair gel can learn a lesson from an old guy like me (I'll be 50 this year). In fact, they may want to check out a copy of my new book, "The Little Book That Makes You Rich." It'll be hitting bookstores next month.