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

4.17  ·  Rating details ·  17,561 Ratings  ·  488 Reviews

With a new Afterword addressing today’s financial crisis


In this business classic—now with a new Afterword in which the author draws parallels to the recent financial crisis—Roger Lowenstein captures the gripping roller-coaster ride of Long-Term Capital Management. Drawing on confidential internal memos and interviews with dozens of key

Kindle Edition, 288 pages
Published (first published January 1st 2000)
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Duffy Pratt
Feb 11, 2011 rated it really liked it  ·  review of another edition
Shelves: journalism, trading
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
Jan 25, 2009 rated it it was amazing  ·  review of another edition
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
Mar 16, 2011 rated it liked it  ·  review of another edition
(3.5) Eerily similar to a crisis almost exactly 10 years later

An interesting, well-told if brief account of the rise and fall of Long-Term Capital Management (you remember that one, don't you?). When things get heated it was along the lines of Sorkin's Too Big to Fail, but otherwise a decent treatment of the significant events in the life and death of LTCM.

Don't have too much more to share other than how prescient the following quotation (the book was written in 2000) was (or, perhaps how Wall S
Dec 13, 2008 rated it it was amazing  ·  review of another edition
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
Mar 08, 2012 rated it it was amazing  ·  review of another edition
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
Kara Lane
Aug 20, 2014 rated it really liked it  ·  review of another edition
Roger Lowenstein's book is a captivating look at what happens when even brilliant people rely on models and ignore the human element in investing. Their models did not take into consideration that when people are motivated by fear and greed, they are capable of extreme behavior. And as John Maynard Keynes is quoted as saying in the book, "Markets can remain irrational longer than you can remain solvent." LTCM discovered the truth of that statement too late.

LTCM earned great returns in the early
Brian G. Murphy
Nov 03, 2012 rated it really liked it  ·  review of another edition
Shelves: finance
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.
Mirek Kukla
May 01, 2012 rated it really liked it  ·  review of another edition
Shelves: business
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.

Feb 16, 2010 rated it it was amazing  ·  review of another edition
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
Sagar Jethani
Feb 24, 2010 rated it really liked it  ·  review of another edition
Shelves: finance
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
Книга Ловенстайна «Когда гений терпит поражение» стала для меня отличным продолжением после книги «Покер лжецов» Майкла Льюиса (

В книге описывается история создания, анализ деятельности и громкое падение столь «звёздной» компании известной на Уолл-Стрит как LTCM (Long-Term Capital Management).

В книге переплетаются профессиональный и глубоко научный подход вместе с человеческими страстями к наживе к большим и сверхприбылям. Рекомендую прочитать и посмотр
Felipe Farah
Sep 01, 2015 rated it it was amazing  ·  review of another edition
Shelves: 2015
O livro levanta dois questionamentos interessantes:

1) até que ponto os modelos de risco que se utilizam do passado para tentar prever o futuro conseguem ser úteis em momentos de grande irracionalidade nos mercados?

2) o salvamento organizado pelo FED não poderia dar espaço para Moral Hazard no futuro?

Bem, acho que a crise de 2008 nos dá algumas respostas para isso....
Julio Loo
Dec 28, 2015 rated it it was amazing  ·  review of another edition
Even complex mathematical models fails to take into account the irrational nature of human beings. These models are based on countless amount of assumptions, and they followed it blindly. Arrogance, greed and flawed models obliterated LCTM.
May 08, 2016 rated it really liked it  ·  review of another edition
I read to understand how they lost half of my money. A terrific read for your inner finance nerd.
Lokesh Dhaker
Aug 18, 2015 rated it it was amazing  ·  review of another edition
Seductive theory of efficient market and Rational Economic Man (REM) is proven wrong. The assumptions of Modern Quantitative Finance used by LTCM were too optimistic and clad with an aura of invincibility. Greed was one of the driving factor behind large speculative positions. Oh! but they weren't speculative for LTCM's point of view. They were foolishly confident of predicting future. They thought they were right and market was wrong, therefore, paid heavy price. An interesting and eye opener t ...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
Jul 28, 2014 rated it it was amazing  ·  review of another edition
This review has been hidden because it contains spoilers. To view it, click here.
Rishi Prakash
Mar 30, 2012 rated it it was amazing  ·  review of another edition
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
Preston Kutney
Jul 07, 2015 rated it really liked it  ·  review of another edition
Shelves: business
Great finance book - definitely on par with "The Big Short" and "Liar's Poker". Obviously very satisfying to read about brash Wall Street "geniuses" whose overconfidence precipitated their spectacular crash.

There were a lot of very fascinating takeaways about markets:

- "Markets conspire against the weak". Once the fund started to lose money, a number of fatal processes were kickstarted that accelerated the fall. First, LTCM was so massive in its positions that any move it made would move the ma
Mark Bell
Jun 13, 2017 rated it it was amazing  ·  review of another edition
“Life is ‘a trap for logicians’ because it is almost reasonable, but not quite; it is usually sensible but occasionally otherwise: it looks just a little more mathematical and regular than it is; its exactitude is obvious, but it’s inexactitude is hidden; its wildness lies in wait.”

This book was a fascinating account of the hubris in traders and demonstrates the fundamental problems with economist modeling. The efficent-market hypothesis takes a big hit in this book.
Mark Geise
Apr 26, 2015 rated it really liked it  ·  review of another edition
This is a great account of the meteoric rise and fall of Long-Term Capital Management, a highly leveraged hedge fund run by several huge names in finance including John Meriweather, Robert Merton, Myron Scholes, and David Mullins. LTCM specialized in arbitrage trades; it generally bet that spreads on riskier assets and less-risky assets would narrow. They were able to capitalize while others fled to safety due to liquidity issues and were able to capitalize on developing, less efficient derivati ...more
Jonathan Perez
Oct 17, 2014 rated it really liked it  ·  review of another edition
I had this book on my reading list for a while. I wished I had read it earlier. To me this is a book about the dangerous seductive effects of excessive confidence. When you see it, learn to be sceptical. LTCM was a debutant on prom night and all the banks and wallstreet wanted to dance. I didnt know Seth Klarman had refused to take a stake in LTCM. He looks even greater now in my eyes. Investing is about being able to stand past the 100 year storm. At LTCM 2 simple small mistakes could wipe you ...more
I think that if I didn't work in the financial sector and didn't already find it rather fascinating, I would have rated this book a bit lower. Lowenstein shows a command of the subject (which is no small feat for someone not in the industry) but the writing itself was just a bit too cold and clinical to consistently hold my attention. The figures mentioned in the book are staggering (trillions and billions are thrown around freely) as are the number of players involved in the rise and fall of LT ...more
Mar 19, 2015 rated it really liked it  ·  review of another edition
Lowenstein does a workmanlike job of crafting a clear narrative and spelling out the technical details of the financial markets. The rise and then fall of Long Term Capital Management is clearly presented from beginning to end. Though the story never soars, it never lags or gets lost in the weeds so overall I enjoyed the book and learned something as well. As an outsider to the hedge fund world, I appreciated Lowenstein's frequent stops to explain a particular trade or strategy, and I liked his ...more
This is a good account of the crisis that hit Long Term Capital Management (LTCM) in 1998. It's also really interesting reading this book when the last crisis (the subprime mortgage crash) is still in the recovery stage. There are a lot of analagies to draw between the two.

It's essentially an example story of what can happen when some very smart economists model what they expect to be a very lucrative business, but fail to take into account the human factor and how in times of crisis everyone he
Sep 09, 2014 rated it really liked it  ·  review of another edition
Shelves: business
They thought their model solved it all, it did not, money evaporated and no one learnt anything at all. Is the glib but concise summary which sells this book short.

So the longer version is that star traders united with star economists unshaken in their belief in supremely rational and efficient markets to set up a fund. This fund made a lot of money investing in bets that any discrepancies in risk spreads would return to the norm. Over the course of 18 months they made their clients but above al
Jan 15, 2009 rated it really liked it  ·  review of another edition
Shelves: business-finance
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
Mar 28, 2015 rated it it was amazing  ·  review of another edition
Like American Icon which I read a couple weeks ago, another absolutely phenomenal piece of journalism. I was so impressed with Lowenstein's writing and found the story of Long Term Capital Management's rise and fall to be a gripping--albeit horrifying--ride. Though I thought this book was just fantastic, I would not recommend to those who have no (or limited) familiarity with Wall Street and/or don't have a fairly solid understanding of the mechanisms of basic financial instruments (like bonds) ...more
Although the author's writing isn't as engaging as Michael Lewis (The Big Short, Liar's Poker), it's still clear and easy to read. The causes of this debacle are clearly laid out and explained, as well as summarized at the end. In addition, the author adds some commentary on why this kind of thing is likely to happen again and it's chilling to read this book published in 2000 clearly describe some of the significant factors of the meltdown in 2007-2008.

And yet I think the author gets a bit mixed
Jerry Peace
Aug 10, 2015 rated it really liked it  ·  review of another edition
You don't have to understand derivatives to read this book. Or swaps or puts or spreads or bonds or leverage or liquidity. Just be aware of the Holy Trinity governed and tragically still governs the markets- Greed, Greed, and More Greed. The lesson-as long as there are no rules, stiff as many as you can to get as rich as you can for as long as you can, with the assurance that your government buds (who wallow at the same trough) will not only enable your arrogance but, as soon as you've sucked al ...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

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“If Wall Street is to learn just one lesson from the Long-Term debacle, it should be that. The next time a Merton proposes an elegant model to manage risks and foretell odds, the next time a computer with a perfect memory of the past is said to quantify risks in the future, investors should run—and quickly—the other way. On” 1 likes
“Hewlett-Packard is somewhat riskier than GE;, riskier still.” 0 likes
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