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When genius failed : the rise and fall of Long-Term Capital Management (edition 2000)

by Roger Lowenstein

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Member:gangleri
Title:When genius failed : the rise and fall of Long-Term Capital Management
Authors:Roger Lowenstein
Info:New York : Random House, c2000.
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Tags:lowenstein, Roger Lowenstein, ↑loC, , ♠♠♥♥♦♦♣♣•, ♥♥↑↑↑, ♥♥-X

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When Genius Failed: The Rise and Fall of Long-Term Capital Management by Roger Lowenstein

  1. 10
    The Big Short: Inside the Doomsday Machine by Michael Lewis (browner56)
    browner56: The hubris, greed and mismanagement behind two of the most devasting financial collapses of the last 75 years, brilliantly and carefully told.
  2. 00
    The Ascent of Money: A Financial History of the World by Niall Ferguson (mikeg2)
    mikeg2: Like this book, The Ascent of money covers the major financial disasters that have taken place including the LTCM debacle.
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» See also 16 mentions

Showing 1-5 of 17 (next | show all)
if you enjoyed the book "Inventing Money" consider this that books sister – not twin – whereas Inventing Money is very heavy on financial modelling, this book is very heavy on the personalities that invented convergence arbitrage. ( )
  peterclark | Dec 30, 2012 |
While a better title might be “When Hubris Failed,” Lowenstein still tells an engaging and comprehensible story of fools who thought they were too smart to go broke, and turned out to be too big to fail. Indeed, after crashing a multibillion-dollar fund, many though not all of the principals went back to merely gorging themselves like ticks on the body politic, earning outrageous Wall Street salaries and waiting once again for the government to come fix the problems their risk-taking caused. The basic problems were simple: LTCM thought that it could arbitrage irrationalities in the market, but as more and more people figured out those irrationalities, it was required to take more and more risk for less and less profit—aka supply and demand, except that when the demand is for risk and when you can leverage (borrow) to multiply your exposure then things can go very wrong indeed. Moreover, LTCM’s model assumed that markets would behave pretty much as they’d done during the period covered by its models, which they then didn’t; as Nassim Taleb and others have pointed out, the market can stay “irrational” longer than you can stay solvent—unless of course Uncle Sam rides to your rescue, which poses a pretty serious moral hazard problem of its own. The most awful thing is that this wasn’t the last act: LTCM’s implosion demonstrated how dangerous derivatives were and how deluded Wall Street had become, and yet neither the government nor the market participants—too enamored of their bonuses and their short-term greed—took action to avoid another disaster. It’s as if there was a second Titanic following the first that didn’t even bother to change course. ( )
  rivkat | Apr 16, 2012 |
This book is aptly named as it delivers just what the title implies. Young John Meriwether began his career as a high school math teacher. After only one year of teaching he enrolled in the University of Chicago and began work to attain a business degree after which he was hired by the investment giant, Solomon Bros. Just as inflation was changing the way bonds were sold and held, Meriwether entered the field in the mid 1970’s as a bond trader. Being one to adapt to a situation he found a niche for himself working within a division of Solomon and with other egghead intellectuals or quants, if you will. The quants, using quantitative methods , historic data and computer models, played the market to their advantage. Meriwether soon left his division of Solomon to create his own firm, Long Term Capital Management. By using an increasingly large amount of leverage to purchase bonds and work the spread Long Term became quite a significant power on Wall Street in just a short period of time. Still, Meriwether, his ultra private partners, and Nobel Prize winner mathematicians could not have foreseen the world events that transpired in the later part of the 1990’s which had a negative effect on their investments. They had sent themselves on a course for disaster.
This book could have been just another rehashing of Wall Street greed but it is more than that. Lowenstein offers up enough information about the major players to humanize them, each with their own foibles, ambitions and wants. The reader who is not familiar with John Meriwether and Long Term Capital Management will be on the edge of their seat as the story unfolds watching each personality react to dire situations. ( )
1 vote Carmenere | Nov 3, 2010 |
비즈니스,월스트리트
  leese | Nov 23, 2009 |
This book traces the rise, fall, and rescue of Long-Term Capital Management, perhaps the most celebrated (and infamous) hedge fund in history. It is a remarkable account of how a lot of really smart people—from the fund’s partners to its bankers to the regulators charged with protecting the public’s interest—did some things that, with the luxury of hindsight, proved to be very foolish.

It is a story with few heroes, but one with many lessons to be learned. However, beyond merely offering a cautionary tale of how greed, hubris and myopia almost brought down the entire financial system, Lowenstein also provides the reader with an excellent description of the myriad investment strategies that continue to be employed by the hedge fund industry today. At the very least, this is a book that will challenge what you think you know about leverage, liquidity and diversification. ( )
  browner56 | Sep 12, 2009 |
Showing 1-5 of 17 (next | show all)
LTCM is a great story/fable populated with memorable characters. Lowenstein does a nice job in pacing the story and I recommend reading the book for these reasons alone. There is a certain pleasure reading about the demise of the haughty and rich (or least people characterized that way). The book fails, however, in communicating a convincing moral. Lowenstein views the LTCM failure as a warning about applying high-tech, financial models and theories of efficient capital markets to financial markets that "are not always reasonable."
 
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Amazon.com Amazon.com Review (ISBN 0375758259, Paperback)

On September 23, 1998, the boardroom of the New York Fed was a tense place. Around the table sat the heads of every major Wall Street bank, the chairman of the New York Stock Exchange, and representatives from numerous European banks, each of whom had been summoned to discuss a highly unusual prospect: rescuing what had, until then, been the envy of them all, the extraordinarily successful bond-trading firm of Long-Term Capital Management. Roger Lowenstein's When Genius Failed is the gripping story of the Fed's unprecedented move, the incredible heights reached by LTCM, and the firm's eventual dramatic demise.

Lowenstein, a financial journalist and author of Buffett: The Making of an American Capitalist, examines the personalities, academic experts, and professional relationships at LTCM and uncovers the layers of numbers behind its roller-coaster ride with the precision of a skilled surgeon. The fund's enigmatic founder, John Meriwether, spent almost 20 years at Salomon Brothers, where he formed its renowned Arbitrage Group by hiring academia's top financial economists. Though Meriwether left Salomon under a cloud of the SEC's wrath, he leapt into his next venture with ease and enticed most of his former Salomon hires--and eventually even David Mullins, the former vice chairman of the U.S. Federal Reserve--to join him in starting a hedge fund that would beat all hedge funds.

LTCM began trading in 1994, after completing a road show that, despite the Ph.D.-touting partners' lack of social skills and their disdainful condescension of potential investors who couldn't rise to their intellectual level, netted a whopping $1.25 billion. The fund would seek to earn a tiny spread on thousands of trades, "as if it were vacuuming nickels that others couldn't see," in the words of one of its Nobel laureate partners, Myron Scholes. And nickels it found. In its first two years, LTCM earned $1.6 billion, profits that exceeded 40 percent even after the partners' hefty cuts. By the spring of 1996, it was holding $140 billion in assets. But the end was soon in sight, and Lowenstein's detailed account of each successively worse month of 1998, culminating in a disastrous August and the partners' subsequent panicked moves, is riveting.

The arbitrageur's world is a complicated one, and it might have served Lowenstein well to slow down and explain in greater detail the complex terms of the more exotic species of investment flora that cram the book's pages. However, much of the intrigue of the Long-Term story lies in its dizzying pace (not to mention the dizzying amounts of money won and lost in the fund's short lifespan). Lowenstein's smooth, conversational but equally urgent tone carries it along well. The book is a compelling read for those who've always wondered what lay behind the Fed's controversial involvement with the LTCM hedge-fund debacle. --S. Ketchum

(retrieved from Amazon Mon, 30 Sep 2013 13:21:00 -0400)

(see all 2 descriptions)

John Meriwether, a famously successful Wall Street trader, spent the 1980s as a partner at Salomon Brothers, establishing the best - and the brainiest - bond arbitrage group in the world. A mysterious and shy midwesterner, he knitted together a group of Ph. D.-certified arbitrageurs who rewarded him with filial devotion and fabulous profits. Then, in 1991, in the wake of a scandal involving one of his traders, Meriwether abruptly resigned. For two years, his fiercely loyal team - convinced that the chief had been unfairly victimized - plotted their boss's return. Then, in 1993, Meriwether made a historic offer. He gathered together his former disciples and a handful of supereconomists from academia and proposed that they become partners in a new hedge fund different from any Wall Street had ever seen. And so Long-Term Capital Management was born." "When Genius Failed is the cautionary financial tale of our time, the saga of what happened when an elite group of investors believed they could actually deconstruct risk and use virtually limitless leverage to create limitless wealth.… (more)

(summary from another edition)

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