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

4.13 of 5 stars 4.13  ·  rating details  ·  8,265 ratings  ·  300 reviews
When Genius Failed: The Rise and Fall of Long-Term Capital Management [Paperback]Roger Lowenstein (Author)
Paperback, 236 pages
Published October 9th 2001 by Random House Trade Paperbacks (first published January 1st 2000)
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Barbarians at the Gate by Bryan BurroughToo Big to Fail by Andrew Ross SorkinLiar's Poker by Michael LewisWhen Genius Failed by Roger LowensteinThe Big Short by Michael Lewis
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Duffy Pratt
Long Term Capital Management was a hedge fund made up of a group of former hotshot bond traders from Solomon Bros., together with some high powered financial academics (including two Nobel prize winners), and one former central banker. They were the biggest stars in the business, and they had all the arrogance and greed that you could possibly imagine. They also seemed to be as good as they thought themselves. In five years, they turned a billion dollars into 4.5 billion dollars. Then they lost...more
I started reading this book in summer of 2007 and then picked it up again this fall. In 1997 I was blithely running around France checking out art while this country's financial system nearly came to a halt, the Fed had to step in and major banks suffered huge losses as a result of hubris and lack of understanding the true risks they were taking. Lowenstein brilliantly takes us behind this scenes to unravel how real geniuses-- Long-Term's marketing strategy was touting the number of Nobel prize-...more
Sagar Jethani
Lowenstein crafts a superb narrative around the failure of the immense hedge fund, Long Term Capital Management. The details of the failure are complex, but I found myself returning to the fact that so many factors cited as contributing to the near-collapse of the financial system in 2008 were evident ten years earlier with the demise of LTMC:

* Unregulated shadow banks
* Spiraling complexity of derivatives which few understood
* Over-reliance upon computer models which failed to account for the fa...more
As a student of the efficient market idea I has always wondered what these guys were up to in more detail even after seeing the Nova program about the meltdown of Long Term Capital Management in 1998. This is an excellent book that explains as well as can be in a general work of literature less than 300 pages.

There are several lessons here, that apparently will not be learned.

Mathematical models are based on very good math with very many assumptions required to make the computations workable. T...more
Matthew Richman
It's easy to see why this book is a finance classic. Lowenstein does a great job, both on the technical and narrative sides. He explains LTCM's complicated trade structures and academic ideas which backed them up. He also is a great writer, and tells a readable and engaging story - even though most readers will know how the book ends, Lowensteins grip on the narrative makes you believe briefly that it could turn out differently.

Another piece of interest in this book is Lowenstein's meditation LT...more
Aaron Arnold
There's a graph at the very beginning of this book that's got to be one of the funniest displays of financial information I've seen in a while. It's very simple - a line showing the notional value of a dollar invested in Long-Term Capital Management over the firm's all-too-brief lifespan. The line climbs slowly from its beginning in March 1994, picks up speed through the intervening years, peaks at a bit over $4 in April 1998, and then drops off a cliff Wile E. Coyote-style to about 25 cents ove...more
Rishi Prakash
There are lot of incidents which happen on Wall Street which are no less than the best Hollywood's thrillers. This story of "Long Term Capital Management" must be right up there among all time greatest folklore of Wall Street. The rise of this Arbitrage Company did surprise few people initially in 1994 when it managed to raise $1.25 billion(largest start-up ever)but its fall ended up flabbergasting many if not all on the Wall Street. This was a group which broke away from one of the Wall Street'...more
Mirek Kukla
NOTE: this "review" is less about what I thought of the book, and more about what the book itself is about. So - spoiler alert?

It's All About the Fund
As the title suggests, "When Genius Fails" is about the "Rise and Fall of Long-Term Capital Management." Don't expect to learn why the economy itself went to shit, causing LTCM to lose ungodly sums of money. The main character of this tale is the fund itself, and Lowenstein does a fine job of documenting its meteoric rise and catastrophic fall.

Mar 03, 2010 Sheil rated it 5 of 5 stars
Recommends it for: Those interested in business and finance
This book was rated a four... and then came the epilogue. Roger Lowenstein did a great job summarizing what was a monumental collapse by Long Term Capital Management, and the epilogue really drove the point home. It makes me wonder why, having graduated college just last May, we finance majors are taught the efficient market theory over and over again, but we never hear about behavioral finance until we read books like this. How many times do we need to be shown that markets simply are not ratio...more
Brian G. Murphy
It works until it doesn't. Hard to believe that after LTCM's fall John Meriwether went on to found a new firm, JWM Partners, which, not surprisingly, blew up in the 2008-2009 downturn. What is surprising? In 2010, he founded a third firm, JM Advisors Management; so much for high-water marks.
Julia Matoshchuk
Must read it one more time. I am finding it absolutely brilliant and I am in total love with this book. But "technical part" was a real challenge. I should definitely go thoroughly over financial theory of derivatives and arbitrage before returning to this book one more time.
Grrrrrr. The details almost don't matter. The outlines of the story will almost always be the same. Greed and hubris. Alan Greenspan bemoaning excess regulation, even as, and after, things go very wrong because there was little regulation. People paying lip service to ideas of risk. In this particular case, abnormal levels of secrecy because these fellows thought they were extra smart (they were - two of them won the Nobel prize shortly before the fund imploded) and their secret formulas and por...more
Dan Ragsdale
Mar 01, 2010 Dan Ragsdale rated it 4 of 5 stars
Recommends it for: roy ragsdale
This review has been hidden because it contains spoilers. To view it, click here.
Too big to fail.... LTCM might have not been the first to be bailed out. It wasn't the last. However, it might have the dubious distinction of being possibly the only firm who had a lion’s share to play in what eventually turned into a global contagion. Read and re-read. Save for posterity.
The fund boys: Meriwether, the leader, Victor Haghani & Larry Hilibrand, the overbearing maverick traders, Profs Merton and Scholes, the Nobel laureates and tutors to the rest of the street and many other...more
Cramer Williams
Oct 23, 2009 Cramer Williams rated it 4 of 5 stars
Recommends it for: Everyone
This is one of the most interesting non-fictional stories that I have ever read. It appears as though the entire thing was created for a movie. It explains the story of Jon Meriwether's hedge fund, Long Term Capital Management(LTCM), and how it almost single-handedly (although it includes the carelessness and hubris of the major banks) brought the financial markets to a halt. It appears that LTCM was about 9 years ahead of their time as their bets with international arbitrage started to go bad,...more
This is a great tale about how greed and ego caused the collapse of a hedge fund that boasted profits that turned out to be too good to be true. Lowenstein, who covered the story about Long Term Capital Management as a reporter at the Wall Street Journal and the New York Times, gives an insider's look into the personalities of the managers who worked to turn millions into billions, the Nobel prize winning economists who thought their fancy models were foolproof and the Wall Street bankers who de...more
For better formatting and a full review

Rating: 7/10

This book was quite technical (though the author did a good job of explaining terms overall), and a bit tough to wade through. But the subject is crucial, hence the high rating. Lowenstein takes a look at an elite firm (Long-Term Capital Management) and shows how their hubris, greed, and detachment led not only to their own downfall, but threatened to exasperate an economic crisis in 1998. What’s really revealed, however, is that LTCM is merely...more
What happens when you cull twenty-five Phds, two Nobel Laureates, hundreds of years of cumulative experience? the result is a loss of virtually all of your capital!

I think far too many people commit the argumentum ad verecundiam fallacy (appeal to authority). Just the other night, a friend of mine referred to a strategy and added it was created by a Nobel prize winning economist. I think one should have to argue why a particular idea has merit than merely cite the fact it was accorded a Nobel p...more
Wow I just finished reading this book (it's about 3 am here) and I can just feel the heaviness of the entire debacle and its lessons weigh upon my shoulders, but it's a good feeling. It's always wonderful to learn and to enjoy the entire process.

What a fantastic read! Lowenstein is quite masterful in explaining both the detailed financial concepts necessary to understand what happened and all the little human errors of sorts that lead to the mess now known as LTCM.

Several times in the midst of...more
Long-Term Capital Management was a hedge fund founded in 1994, which specialized in finding out, which pairs of bonds reflect the same underlying business reality and therefore should cost the same, but in fact are priced differently, buying the cheaper bond of the pair and short selling the more expensive one. The differences were small, but the fact that the fund was very highly leveraged amplified them. After this market had dried out, they switched to doing similar tricks with equity; there...more
Chris Abel
In 1998 -- 10 years before the most recent financial crisis -- the collapse of a single hedge fund, Long-Term Capital Management (LTCM), threatened to spark a similar crisis.

This well-written book details the origins and resolution of the crisis, starting with the background of the fund's founder, John Merriwether, its investment philosophy and corporate culture, the economic events that lead to its downfall, and its unlikely rescue by a large group of Wall Street banks.

The firm boasted an incr...more
While visiting the library in Sq. Hill in Pittsburgh and I saw this book on the bookshelf and picked it up out of pure curiosity. I walked out with my nose between the pages.
I enjoyed Lowenstein's approach to explaining some of the finer details of what 'quants' on Wall Street do and explaining how risky and flawed some of the deals they get into can be in a non-intimidating and confusing manner.
The book is a nice chronological flow of events that details well the rise and fall of one large hed...more
John and Kris
The collapse of Long-Term Capital Management (LTCM) in 1998, a hedge fund that lost nearly $4.5 billion in a matter of weeks, a firm that needed the blessing of an orchestrated bank bailout by the Federal Reserve, makes one wonder if Wall Street has any foresight beyond huge broker fees and if our current recession, kicked off by the events of 2008, could’ve been avoided with a bit of regulation and oversight in the late nineties. As most Americans grappled with what President Clinton did or did...more
The book recounts the story of Long-Term Capital Management, a hedge fund that collapsed 1998. The only reason it didn't bring others down with it: Wall Street's major banks intervened at the Fed's behest. But even then, they intervened only because they perceived LTCM--with a trillion dollars in derivatives exposure and leverage that reached 100:1--was too big to fail.

The lessons from that episode are eerily familiar: the dangers of unchecked leverage, undisclosed derivatives, and unbridled hu...more
Nuevo libro de aventuras y desventuras financieras. Long Term Capital Management (LTCM), que sería algo así como “Gestión de capital a largo plazo”, fue un fondo de inversión creado en 1994 por John Meriwether, un trader del banco de inversión Salomon Brothers. El fondo contaba con los mejores cerebros en el mundo de las finanzas, incluyendo a dos premios Nobel en economía. Comenzó dando los mayores beneficios de todos los fondos del mundo, obteniendo más y más rentabilidad sin aparente esfuerzo...more
This book turns out to be like a sequel or call it a spin-off to the Liar's Poker. When Genius Failed documents the story of the infamous hedge fund Long Term Capital Management started by famed trader J. Meriwether, formerly of Salomon Brothers. After having to resign from Salomon Brothers, post the trading scandals that he had to take certain moral responsibility for, J. Meriwether started his famous hedge fund in 1994 with an initial equity of 1.25 billion! The staggering rise of the hedge fu...more
Maciej Janiec
Po przeczytaniu książki można się zastanawiać, czy upadek LTCM w 1998 r. nie nauczył niczego Fed oraz instytucji finansowych w zakresie charakteru rozkładów na rynkach finansowych (rozkłady nie-gaussowskie) i związanego z tym występowania zjawisk rzadkich ("black swans"), zarządzania ryzykiem, stosowania lewaru czy wykorzystywania pozabilansowych instrumentów finansowych (derywatytyw)?

Dla przykładu, można znaleźć podobieństwo między stosowaną przez LTCM strategią gry na zmniejszanie się zmiennoś...more
I've had this book for a few years and after reading The Big Short I wanted to circle back to this book, because I suspected that part of the situation with irresponsible leveraging found in the recent financial crisis could be tied to the Fed-organized bailout of Long-Term Capital Management. After reading this book, I think I'm right.

From page 231: "If the Long-Term episode proved anything, it is that the system of disclosure that has worked so well with regard to traditional securities has no...more
Warren Buffett likes to use LTCM as an example of how something can end up horribly wrong, even when the stars seem perfectly in alignment. LTCM had it all: a star-studded cast of Nobel Prize winners and Wall Street legends, lucrative financing arrangements from complicit banks and a set of clever, if dangerously leveraged trading strategies. The partners had even invested a significant portion of their own considerable wealth into the fund, supposedly avoiding some of the moral hazard that come...more

Summary –

When Genius Failed chronicles meteoric rise and fall of Long Term Capital Management. Once dubbed as a fund that could do no wrong and would always stay ahead of market no matter the circumstances, LTCM’s demise was sudden and turbulent. Lowenstein has recounted the story with great detail.

Review –

If you are a serious reader of finance this book is a ‘must read’ on your list. We normally are aware of the happenings in the equity market. The ticker...more
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Roger Lowenstein has reported for the Wall Street Journal for more than a decade and is a frequent contributor to The New York Times and The New Republic. He is the author of Buffet: the Making of an American Capitalist

More about Roger Lowenstein...
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