Sheil's Reviews > When Genius Failed: The Rise and Fall of Long-Term Capital Management

When Genius Failed by Roger Lowenstein
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's review
Feb 16, 2010

it was amazing
bookshelves: business-must-reads
Recommended for: Those interested in business and finance
Read from February 27 to March 03, 2010

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 rational before we finally get the hint?

I found it fascinating that LTCM was such a large firm that when word got out that it was in trouble, other banks rushed to sell their positions because they knew that if LTCM had to liquidate, markets would crash simply because LTCM's positions were so large.

I highly recommend this book to anyone interested in business and finance. The boldness of LTCM's management wasn't what surprised me the most. It was that almost the exact same scenario - this time in CMBS instead of bonds and currencies - repeated itself less than ten years later in the crash of 2008.
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