Lowenstein knows how to develop characters

books:

	• When Genius Failed: The Rise and Fall of Long-Term Capital Management Roger Lowenstein Random House Trade Paperbacks, 2001 - 288 pages average customer review:based on 210 reviews view larger image
	for more information click here

highly recommended

Great Story of Greed Gone Awry

A fascinating and well-told account of what happened with Long-Term Capital Management - and how close the entire financial system came to collapse because of a greedy group that believed they could do no wrong and that they were invincible.

It was an exciting read till the end

The collapse of Long-Term Capital Management (LTCM) in 1999 tells the story of how financial markets all over the world are so interrelated with one another; the irrational behaviour of traders and investors and how the Federal Reserve orchastrated one of the biggest rescue in its history.

LTCM was a hedge fund setup by John W. Meriwether who was formely a star trader at Salomon Brother's arbitrage group. As a hedge fund, it is like a private firm, free to do what it likes as it is not regulated by the authorities. Many of the partners of the firm were people who were the cream of the crop from the financial world- which included two Nobel Prize winning economist and a cadre of Wall Street finest.

In August 1998, the Russia government devalued its currency, defaulted on its domestic debt and declares a moratorium on payment to foreign creditors. LTCM which has a substantial holding of russian debts suddently found itself in the begining of a crisis. There were problems in emerging countries and the crisis suddenly spread to other parts of the world. LTCM which was heavily leverage (borrowed massively against its assets), was losing money every day from its investments. There was a "flight to quality" as investors withdrew their money and bought U.S. Treasury bills (which was the safest financial instrument, backed by the United States). Traders and investors were dumping whatever investments they had and running towards the safest.

Diversification did not help as the correlation between various markets and instruments moved together. LTCM which was betting the spreads to close, instead found itself facing spreads that widen every day, causing it to lose millions. It had started the year with $4.67 billion suddently, it was down $2.9 billion and losing millions every day.

Realizing the implication of the impending diaster that might have bought the whole financial market down with it, the Federal Reserve moved to stage a massive rescue by bringing together all the biggest investment banks in the U.S., including some from Britian and France to help to pump in $3.65 billion in total to rescue the failing hedge fund. It was the first and the biggest bail out of any financial institution by the coperation of so many top-tier banks. If the money came in late by days, LTCM would have collapse, bringing the whole financial market with it.

Greed, has bought down not only this hugely successful fund but possibly the whole financial market with it. Even for geniuses, their confidence and appetite for recognition and wealth grew so great that they became disillusioned with their ability.

for more information click here

Great educational stuff

Very interesting details that invisible for outsiders. Another great material every trader should read.

Lowenstein knows how to develop characters

The story of LTCM is a good one. If you want a summary, there are plenty of other reviews here. But it is Lowenstein's ability to describe characters that makes this book truly memorable. He has almost a novelist's ability to create vivid images of the characters in his books. Thus my memories of the book are dominated by images of Don-ish Scholes, the truly technocratic Merton, and the calm, enigmatic Meriweather. Lowenstein is essentially a great biographer, telling history through the people.

The technical details are a little dry, and yet not actually detailed enough to fully understand. The book is written with the slightly disapproving tone Lowenstein tends to use when not writing about Warren Buffett or similar traditional investors. But the subject is so timely and important, given the lastest craze for complex Hedge Funds, risky derivatives and investing in emerging markets (China this time instead of Russia)...that I must give this book 5 stars.

for more information click here

reviews: 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, page 15, 16, 17, 18, 19, 20

hot

not?

What's your opinion?

Write a review and share your thoughts!

recommendations

Trying to understand Wall Street, the credit crunch and market mayhem?
Understanding Markets, Finance, and Life as a risk taker
Must Read 'Guy Books' for the Modern Dude
Finance, Economics and Trading
Business Books For Non MBA's

search for books
when genius, capital, failed, fall, genius, long-term, management, term

Impressum / about us