A MUST READ for every investment professional Esp.. for Arbitragers..

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	• 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 206 reviews view larger image
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highly recommended

A Great Read!

What an exciting book! Although you won't learn much about investing from this book, you will enjoy the ride from the beginning to the end. Long-Term Capital Management held Wall Street by its hands and thought it was on top of the world. Well, considering how much profits they made, they were. However, people at LTCM soon found out that maybe they weren't as smart as they think.

A story of mathematical precision vs. human unpredictability

This classic Wall Street story is another must-read for anyone with an interest in money management. When Genius Failed chronicles the failure of the hedge fund Long Term Capital Management (LTCM), a pioneer in quantitative investment strategies. With roots from the renowned Salomon investment bank, LTCM gathered some of the world's top financial gurus to design mathematical arbitrage strategies so well planned, they were widely regarded as having virtually no risk. Among the mathematical wizards was Myron Scholes, co-creator of the Black-Scholes model.

After several years of handsome returns, this formula turned out too good to be true. After convincing investment banks and clients to pour billions of dollars into this near-"riskless" fund, tragedy struck in 1998. A credit crisis in Asia prompted a chain reaction of panic that the fund's mathematical models could not anticipate. The story of this fund's collapse proves that markets are not efficient. It is a lesson that precision calculations in the world of finance, no matter how correct or ingenious, are no match for human irrationality when panic strikes.

Amplifying the unforeseen risk of the fund were human errors made by the principals. The firm's superior performance depended on incredible leverage (borrowed money), but that leverage also led to LTCM's demise when the margin calls hit. The principals also deviated from their core investment strategy when arbitrage opportunities started to dry up; they began making directional bets and speculating, something for which mathematical models are just inadequate for quantifying the risk.

One disadvantage of this book is that it focuses so much on the people involved that it sacrifices explanation of the market forces behind the Asian currency crisis. I felt that some chapters contained too many dry details on the interaction between the LTCM principals and the banks.

The advantage of its focus on people is that the reader can see many of today's Wall Street icons in action. Almost a continuation of Liar's Poker, many of the same Salomon traders including John Meriwether are pivotal to LTCM. Warren Buffett and George Soros play a role, allowing readers to see their investment acumen at work. Many Wall Street characters and investment banks still prevalent in today's news were plugged into the LTCM fiasco.

Because of the high-profile characters and Wall Street firms involved with LTCM, this is a great read for students aspiring for a career on the Street. It also provides good insight into trading strategies and the hedge fund world. I would recommend When Genius Failed to anyone with an interest in investing.

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Nothing Could be More Timely!!!!

This book is excellent and illustrates the climate of the market at the time of the collapse, as well as the particulars of LTCM.

With a credit crunch currently plaguing the markets, and hedge funds suffering with losses . . . nothing could be more timely. The parallels between the events around LTCM and the daily happenings in this summer's markets are unbelievably similar. This book could almost as easily be written about a firm today.

This is a MUST READ for those who want to understand better what is happening today - and how to protect themselves and benefit from it!

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A MUST READ for every investment professional Esp.. for Arbitragers..

Most of the books written on the subject of investment can be easily recommended as a replacement for sleeping pills. This book is a clear exception to that and it is like a hollywood thriller. I enjoyed every page of this book though the tragedy at the end is well known in advance. In my opinion this book should be the textbook for every investment professional, who is over confident about his skills especially when in arbitrage.

A Must Must read for every Arbitrage Trader..!

Shipped quickly - excellent quality

Transaction was flawless - this book is great too! The author writes in such a way as to make these seemingly sophisticated and complex transactions appear understandable. Great read!!!!!

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reviews: 1, 2, 3, 4, 5, page 6, 7, 8, 9, 10, 11, 12, 13, 14, 15

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