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

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Availability: Usually dispatched within 24 hours Binding: Paperback
Dewey Decimal Number: 332
EAN: 9781841155043
ISBN: 1841155047
Label: Fourth Estate
Manufacturer: Fourth Estate
Number Of Pages: 275
Publication Date: January 02, 2002
Publisher: Fourth Estate
Studio: Fourth Estate
Sales Rank: 3572

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Editorial Review:

Amazon.co.uk Review:
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 by the Fed to discuss the highly unusual prospect of 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 behind the Fed's unprecedented move, the incredible heights reached by LTCM, and its eventual dramatic demise.

Lowenstein, a financial journalist and author of Buffet: The Making of an American Capitalist, uncovers and examines the personalities, academic expertise, professional relationships, and layers of numbers behind LTCM's roller-coaster ride with the precision and knowledge 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 US Federal Reserve--to join him in starting a hedge fund that would beat all hedge funds.

LTCM began trading in February 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 dollars. 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 dollars, profits that exceeded forty 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 at the start 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), and 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

Customer Reviews

Average Rating: out of 5 stars

Rating:

- Interesting but difficult at times
I read this book due to the current economic climate and found it quite interesting.
I know nothing about stocks, shares and bonds so some of the book went over my head. It is quite easy to get the general gist of the story though and the sheer front these guys had was amazing (if it is all true).
How can anybody lose 4.5 billion in a few months is beyond me.
Interesting if you're in to Wall Street and the stock market.

Rating:

- The writing on the wall
I am not an expert in finance; neither do I want to look into the details of LTCM's trading strategies. I was therefore still at a loss about what the LTCM's intricate financial schemes was all about even when I finished reading this book. Nevertheless, Lowenstein's work has impressed me very much since I read his another book 'Buffett: The Making of An American Capitalist' a few months ago. 'When Genius Failed' didn't disappoint me as well.

History repeats itself. Somewhat different as the backdrop and story of those events might have been, numerous financial debacles have taken place so far. Writers of financial history seem to find no shortage of materials on financial disasters. Sooner or later other similar books on the ... Read More:

Rating:

- Utterly imprecise
Horrible book. Very interesting topic but very poor story telling. The author clearly knows next to nothing about statistics and finance and did very poor research; non experts in the field will struggle to understand the key concepts behind the trading strategies. True, some of those trades were extremely complex, but at least the basic concepts could and should have been explained more clearly. If I didn't work in finance myself I would have understood very little.
One passage is particularly worth commenting on, when the author mentions theoretical models whereby asset "prices follow the normal distribution, or, in mathematical terms, the log-normal distribution". ??? Unless we speak a different language, this phrase means that the ... Read More:

Rating:

- Essential Reading
It would be a shame if this book were confined to readers of the 'Business' section. It should be required reading for anyone whose life is affected by the machinations of the financial sector - i.e. everyone.

In itself the tale is one of high drama, but it helps that it's told by a writer with the ability to keep up the pace and energy throughout, despite the complexities and opaqueness of a lot of the subject matter - and then distil the argument into one killer sentence: "Neither the Nobel prize nor all the degrees mattered now; the professors were rolling the dice." This single phrase encapsulates the essence of the story. Emboldened by their initial success and oblivious to any flaws in their 'system' they took on the mind-set ... Read More:

Rating:

- Good, but could do better
Last week I finished reading the book `When Genius Fails: The Rise and Fall of Long Term Capital Management'. Although the book was generally interesting for those interested in banking and Wall Street if your looking for book that documents the incredible rise and embarassing fall of (apperently) extremely intelligent individuals then I would suggest that you go for the Enron story instead. The two books are extremely similar in content but the Enron story is more colourful and gives a much better insight into the greed and ambition of the main players.

Books : When Genius Failed: The Rise and Fall of Long Term Capital Management