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When Genius Failed: The Rise and Fall of Long-Term Capital Management by [Roger Lowenstein]

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Roger Lowenstein

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

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“A riveting account that reaches beyond the market landscape to say something universal about risk and triumph, about hubris and failure.”—The New York Times

NAMED ONE OF THE BEST BOOKS OF THE YEAR BY BUSINESSWEEK

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 players, Lowenstein explains not just how the fund made and lost its money but also how the personalities of Long-Term’s partners, the arrogance of their mathematical certainties, and the culture of Wall Street itself contributed to both their rise and their fall.

When it was founded in 1993, Long-Term was hailed as the most impressive hedge fund in history. But after four years in which the firm dazzled Wall Street as a $100 billion moneymaking juggernaut, it suddenly suffered catastrophic losses that jeopardized not only the biggest banks on Wall Street but the stability of the financial system itself. The dramatic story of Long-Term’s fall is now a chilling harbinger of the crisis that would strike all of Wall Street, from Lehman Brothers to AIG, a decade later. In his new Afterword, Lowenstein shows that LTCM’s implosion should be seen not as a one-off drama but as a template for market meltdowns in an age of instability—and as a wake-up call that Wall Street and government alike tragically ignored.

Praise for When Genius Failed

“[Roger] Lowenstein has written a squalid and fascinating tale of world-class greed and, above all, hubris.”—BusinessWeek

“Compelling . . . The fund was long cloaked in secrecy, making the story of its rise . . . and its ultimate destruction that much more fascinating.”—The Washington Post

“Story-telling journalism at its best.”—The Economist

Print length

288 pages
Language

English
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Random House
Publication date

Jan. 18 2001
File size

1041 KB
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From Amazon

On September 23, 1998, the boardroom of the New York Fed was a tense place. Around the table sat the heads of every major Wall Street bank, the chairman of the New York Stock Exchange, and representatives from numerous European banks, each of whom had been summoned to discuss a highly unusual prospect: rescuing what had, until then, been the envy of them all, the extraordinarily successful bond-trading firm of Long-Term Capital Management. Roger Lowenstein's When Genius Failed is the gripping story of the Fed's unprecedented move, the incredible heights reached by LTCM, and the firm's eventual dramatic demise.

Lowenstein, a financial journalist and author of Buffett: The Making of an American Capitalist, examines the personalities, academic experts, and professional relationships at LTCM and uncovers the layers of numbers behind its roller-coaster ride with the precision of a skilled surgeon. The fund's enigmatic founder, John Meriwether, spent almost 20 years at Salomon Brothers, where he formed its renowned Arbitrage Group by hiring academia's top financial economists. Though Meriwether left Salomon under a cloud of the SEC's wrath, he leapt into his next venture with ease and enticed most of his former Salomon hires--and eventually even David Mullins, the former vice chairman of the U.S. Federal Reserve--to join him in starting a hedge fund that would beat all hedge funds.

LTCM began trading in 1994, after completing a road show that, despite the Ph.D.-touting partners' lack of social skills and their disdainful condescension of potential investors who couldn't rise to their intellectual level, netted a whopping $1.25 billion. The fund would seek to earn a tiny spread on thousands of trades, "as if it were vacuuming nickels that others couldn't see," in the words of one of its Nobel laureate partners, Myron Scholes. And nickels it found. In its first two years, LTCM earned $1.6 billion, profits that exceeded 40 percent even after the partners' hefty cuts. By the spring of 1996, it was holding $140 billion in assets. But the end was soon in sight, and Lowenstein's detailed account of each successively worse month of 1998, culminating in a disastrous August and the partners' subsequent panicked moves, is riveting.

The arbitrageur's world is a complicated one, and it might have served Lowenstein well to slow down and explain in greater detail the complex terms of the more exotic species of investment flora that cram the book's pages. However, much of the intrigue of the Long-Term story lies in its dizzying pace (not to mention the dizzying amounts of money won and lost in the fund's short lifespan). Lowenstein's smooth, conversational but equally urgent tone carries it along well. The book is a compelling read for those who've always wondered what lay behind the Fed's controversial involvement with the LTCM hedge-fund debacle. --S. Ketchum

--This text refers to an alternate kindle_edition edition.

From Publishers Weekly

In late September 1998, the New York Federal Reserve Bank invited a number of major Wall Street investment banks to enter a consortium to fund the multibillion-dollar bailout of a troubled hedge fund. No sooner was the $3.6-billion plan announced than questions arose about why usually independent banks would band together to save a single privately held fund. The short answer is that the banks feared that the fund's collapse could destabilize the entire stock market. The long answer, which Lowenstein (Buffett) provides in undigested detail, may panic those who shudder at the thought of bouncing a $200 check. Long-Term Capital Management opened for business in February 1994 with $1.25 billion in funds. Armed with the cachet of its founders' stellar credentials (Robert Merton and Myron Scholes, 1997 Nobel Prize laureates in economics, were among the partners), it quickly parlayed expertise at reading computer models of financial markets and seemingly limitless access to financing into stunning results. By the end of 1995, it had tripled its equity capital and total assets had grown to $102 billion. Lowenstein argues that this kind of success served to enhance the fund's golden legend and sent the partners' self-confidence off the charts. As he itemizes the complex mix of investments and heavy borrowing that made 1994-1997 profitable years, Lowenstein also charts the subtle drift toward riskier (and ultimately disastrous) ventures as the fund's traditional profit centers dried up. What should have been a gripping story, however, has been poorly handled by Lowenstein, who obscures his narrative with masses of data and overwritten prose. Agent, Melanie Jackson. Author tour. (Sept.)
Copyright 2000 Reed Business Information, Inc. --This text refers to an alternate kindle_edition edition.

From Library Journal

This is a marvelous, unauthorized chronicle of the rise, fall, and re-emergence of Long-Term Capital Management, a private hedge fund that in September 1998 benefited from a Federal Reserve-orchestrated $3.6 billion bailout. Based primarily on interviews with key players from the six banks that participated in the rescue of the firm, Lowenstein, who previously wrote Buffett: The Making of an American Capitalist, presents a well-crafted, easy-to-follow text. Readers will better appreciate the inner workings of the firm; the nuances of the individual partners; primary differences among investing in stocks, bonds, and derivatives; the fallacy of the efficient market hypothesis; the impact of computers on financial trading; and the importance of moderation. Recommended for both academic and public libraries.
-DNorman B. Hutcherson, Kern Cty. Lib., Bakersfield, CA
Copyright 2000 Reed Business Information, Inc. --This text refers to an alternate kindle_edition edition.

Review

Praise for Roger Lowenstein's national bestseller Buffett: The Making of an American Capitalist

"A delightful portrait . . . Mr. Lowenstein has done a masterly job."
-- The New York Times Book Review

"A significant contribution to the craft of biography as well as an illuminating and comforting story for investors everywhere."
-- Chicago Tribune

"The singular achievement of Lowenstein's excellent biography... is that it burnishes the Buffett myth while deconstructing it with heavy doses of reality."
-- Barron's

"Lively, smoothly written, and elaborately researched, Buffett is likely to stand as the definitive biography."
-- Business Week

"Thoroughly researched and perceptive . . . a highly readable account."
-- Financial Times

"Lowenstein has accomplished something remarkable."
-- Los Angeles Times --This text refers to an alternate kindle_edition edition.

About the Author

Roger Lowenstein, author of the bestselling Buffett: The Making of an American Capitalist, reported for The Wall Street Journal for more than a decade, and wrote the Journal's stock market column "Heard on the Street" from 1989 to 1991 and the "Intrinsic Value" column from 1995 to 1997. He now writes a column in Smart Money magazine, and has written for The New York Times and The New Republic, among other publications. He has three children and lives in Westfield, New Jersey. --This text refers to an alternate kindle_edition edition.

Excerpt. © Reprinted by permission. All rights reserved.

Introduction

The Federal Reserve Bank of New York is perched in a gray, sandstone slab in the heart of Wall Street. Though a city landmark building constructed in 1924, the bank is a muted, almost unseen presence among its lively, entrepreneurial neighbors. The area is dotted with discount stores and luncheonettes-and, almost everywhere, brokerage firms and banks. The Fed's immediate neighbors include a shoe repair stand and a teriyaki house, and also Chase Manhattan Bank; J. P. Morgan is a few blocks away. A bit further, to the west, Merrill Lynch, the people's brokerage, gazes at the Hudson River, across which lie the rest of America and most of Merrill's customers. The bank skyscrapers project an open, accommodative air, but the Fed building, a Florentine Renaissance showpiece, is distinctly forbidding. Its arched windows are encased in metal grille, and its main entrance, on Liberty Street, is guarded by a row of black cast-iron sentries.

The New York Fed is only a spoke, though the most important spoke, in the U.S. Federal Reserve System, America's central bank. Because of the New York Fed's proximity to Wall Street, it acts as the eyes and ears into markets for the bank's governing board, in Washington, which is run by the oracular Alan Greenspan. William McDonough, the beefy president of the New York Fed, talks to bankers and traders often. McDonough especially wants to hear about anything that might upset markets or, in the extreme, the financial system. But McDonough tries to stay in the background. The Fed has always been a controversial regulator-a servant of the people that is elbow to elbow with Wall Street, a cloistered agency amid the democratic chaos of markets. For McDonough to intervene, even in a small way, would take a crisis, perhaps a war. And in the first days of the autumn of 1998, McDonough did intervene-and not in a small way.

The source of the trouble seemed so small, so laughably remote, as to be insignificant. But isn't it always that way? A load of tea is dumped into a harbor, an archduke is shot, and suddenly a tinderbox is lit, a crisis erupts, and the world is different. In this case, the shot was Long-Term Capital Management, a private investment partnership with its headquarters in Greenwich, Connecticut a posh suburb some forty miles from Wall Street. LTCM managed money for only one hundred investors, it employed not quite two hundred people, and surely not one American in a hundred had ever heard of it. Indeed, five years earlier, LTCM had not even existed.

But on the Wednesday afternoon of September 2-3, 1998, Long-Term did not seem small. On account of a crisis at LTCM, McDonough had summoned-- invited," in the Fed's restrained idiom-the heads of every major Wall Street bank. For the first time, the chiefs of Bankers Trust, Bear Stearns, Chase Manhattan, Goldman Sachs, J.P. Morgan, Lehman Brothers, Merrill Lynch, Morgan Stanley Dean Witter, and Salomon Smith Barney gathered under the oil portraits in the Fed's tenth-floor boardroom-not to bail out a Latin American nation but to consider a rescue of one of their own. The chairman of the New York Stock Exchange joined them, as did representatives from major European banks. Unaccustomed to hosting such a large gathering, the Fed did not have enough leather-backed chairs to go around, so the chief executives had to squeeze into folding metal seats.

Although McDonough was a public official, the meeting was secret. As far as the public knew, America was in the salad days of one of history's great bull markets, although recently, as in many previous autumns, it had seen some backsliding. Since mid-August, when Russia had defaulted on its ruble debt, the global bond markets in particular had been highly unsettled. But that wasn't why McDonough had called the bankers.

Long-Term, a bond-trading firm, was on the brink of failing. The fund was run by, John W. Meriwether, formerly a well-known trader at Salomon Brothers. Meriwether, a congenial though cautious midwesterner, had been popular among the bankers. It was because of him, mainly, that the bankers had agreed to give financing to Long Term-and had agreed on highly generous terms. But Meriwether was only the public face of Long-Term. The heart of the fund was a group of brainy, Ph.D.-certified arbitrageurs. Many of them had been professors. Two had won the Nobel Prize. All of them were very smart. And they knew they were very smart.

For four years, Long-Term had been the envy of Wall Street. The fund had racked up returns of more than 40 percent a year, with no losing stretches, no volatility, seemingly no risk at all. Its intellectual supermen had apparently been able to reduce an uncertain world to rigorous, cold-blooded odds-they were the very best that modern finance had to offer.

Incredibly, this obscure arbitrage fund had amassed an amazing $100 billion in assets, all of it borrowed-borrowed, that is, from the bankers at McDonough's table. As monstrous as this leverage was, It was by no means the worst of Long-Term's problems. The fund had entered into thousands of derivative contracts, which had endlessly intertwined it with every bank on Wall Street. These contracts, essentially side bets on market prices, covered an astronomical sum-more than $1 trillion worth of exposure.

If Long-Term defaulted, all of the banks in the room would be left holding one side of a contract for which the other side no longer existed. In other words, they would be exposed to tremendous-and untenable-risks. Undoubtedly, there would be a frenzy as every bank rushed to escape its now one-sided obligations and tried to sell its collateral from Long-Term.

Panics are as old as markets, but derivatives were relatively new. Regulators had worried about the potential risks of these inventive new securities, which linked the country's financial institutions in a complex chain of reciprocal obligations. Officials had wondered what would happen if one big link in the chain should fall. McDonough feared that the markets would stop working, that trading would cease; that the system itself would come crashing down.

James Cayne, the cigar-chomping chief executive of Bear Stearns, had been vowing that he would stop clearing Long-Term's trades which would put it out of business-if the fund's available assets fell below $500 million. At the start of the year, that would have seemed remote, for Long-Term's capital had been $4.7 billion. But during the past five weeks, or since Russia's default, Long-Term had suffered numbing losses-day after day after day. Its capital was down to the minimum. Cayne didn't think it would survive another day.

The fund had already gone to Warren Buffett for money. It had gone to George Soros. It had gone to Merrill Lynch. One by one, it had asked every bank it could think of. Now it had no place left to go. That was why, like a godfather summoning rival and potentially warring- families, McDonough had invited the bankers. If each one moved to unload bonds individually, the result could be a worldwide panic. If they acted in concert, perhaps a catastrophe could be avoided. Although McDonough didn't say so, he wanted the banks to invest $4 billion and rescue the fund. He wanted them to do it right then-tomorrow would be too late.

But the bankers felt that Long-Term had already caused them more than enough trouble. Long-Term's secretive, close-knit mathematicians had treated everyone else on Wall Street with utter disdain. Merrill Lynch, the firm that had brought Long-Term into being, had long tried to establish a profitable, mutually rewarding relationship with the fund. So had many other banks. But Long-Term had spurned them. The professors had been willing to trade on their terms and only on theirs-not to meet the banks halfway. The bankers did not like it that now Long-Term was pleading for their help.

And the bankers themselves were hurting from the turmoil that Long-Term had helped to unleash. Goldman Sach's CEO, Jon Corzine, was facing a revolt by his partners, who were horrified by Goldman's recent trading losses and who, unlike Corzine, did not want to use their diminishing capital to help a competitor. Sanford I. Weill, chairman of TravelersSalomon Smith Barney, had suffered big losses, too. Weill was worried that the losses would jeopardize his company's pending merger with Citicorp, which Weill saw as the crowning gem to his lustrous career. He had recently shuttered his own arbitrage unit-which, years earlier, had been the launching pad for Meriwether's career-and did not want to bail out another one.

As McDonough looked around the table, every one of his guests was in greater or lesser trouble, many of them directly on account of Long-Term. The value of the bankers' stocks had fallen precipitously. The bankers were afraid, as was McDonough, that the global storm that had begun so innocently with devaluations in Asia, and had spread to Russia, Brazil, and now to Long-Term Capital, would envelop all of Wall Street.

Richard Fuld, chairman of Lehman Brothers, was fighting off rumors that his company was on the verge of failing due to its supposed overexposure to Long-Term. David Solo, who represented the giant Swiss bank Union Bank of Switzerland (UBS), thought his bank was already in far too deeply, it had foolishly invested in Long-Term and had suffered titanic losses. Thomas Labrecque's Chase Manhattan had sponsored a loan to the hedge fund of $500 million; before Labrecque thought about investing more, he wanted that loan repaid.

David Komansky, the portly Merrill chairman, was worried most of all. In a matter of two months, the value of Merrill's stock had fallen by half-$19 billion of its market value had simply melted away. Merrill had suffered shocking bond-trading losses, too. Now its own credit rating was at risk.

Komansky, who personally had invested almost $1 million in the fund, was terrified of the chaos that would result if Long-Term collapsed. But he knew how much antipathy there was in the room toward Long-Term. He thought th... --This text refers to an alternate kindle_edition edition.

From the Inside Flap

her, a famously successful Wall Street trader, spent the 1980s as a partner at Salomon Brothers, establishing the best--and the brainiest--bond arbitrage group in the world. A mysterious and shy midwesterner, he knitted together a group of Ph.D.-certified arbitrageurs who rewarded him with filial devotion and fabulous profits. Then, in 1991, in the wake of a scandal involving one of his traders, Meriwether abruptly resigned. For two years, his fiercely loyal team--convinced that the chief had been unfairly victimized--plotted their boss's return. Then, in 1993, Meriwether made a historic offer. He gathered together his former disciples and a handful of supereconomists from academia and proposed that they become partners in a new hedge fund different from any Wall Street had ever seen. And so Long-Term Capital Management was born.<br> In a decade that had seen the longest and most rewarding bull market in history, hedge funds were the ne plus ultra of i --This text refers to an alternate kindle_edition edition.

From the Back Cover

Praise for Roger Lowenstein's national bestseller Buffett: The Making of an American Capitalist

"A delightful portrait . . . Mr. Lowenstein has done a masterly job."
-- The New York Times Book Review

"A significant contribution to the craft of biography as well as an illuminating and comforting story for investors everywhere."
-- Chicago Tribune

"The singular achievement of Lowenstein's excellent biography... is that it burnishes the Buffett myth while deconstructing it with heavy doses of reality."
-- Barron's

"Lively, smoothly written, and elaborately researched, Buffett is likely to stand as the definitive biography."
-- Business Week

"Thoroughly researched and perceptive . . . a highly readable account."
-- Financial Times

"Lowenstein has accomplished something remarkable."
-- Los Angeles Times --This text refers to an alternate kindle_edition edition.

Product details

ASIN ‏ : ‎ B000FC1KZC
Publisher ‏ : ‎ Random House; 1st edition (Jan. 18 2001)
Language ‏ : ‎ English
File size ‏ : ‎ 1041 KB
Text-to-Speech ‏ : ‎ Enabled
Screen Reader ‏ : ‎ Supported
Enhanced typesetting ‏ : ‎ Enabled
X-Ray ‏ : ‎ Enabled
Word Wise ‏ : ‎ Enabled
Sticky notes ‏ : ‎ On Kindle Scribe
Print length ‏ : ‎ 288 pages

Best Sellers Rank: #54,361 in Kindle Store (See Top 100 in Kindle Store)
- #14 in Economic Theory in Accounting & Finance
- #14 in Economic Theory (Kindle Store)
- #16 in Banks & Banking Industry

Customer Reviews:
1,699 ratings

About the author

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Roger Lowenstein

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Roger Lowenstein (born in 1954) is an American financial journalist and writer. He graduated from Cornell University and reported for the Wall Street Journal for more than a decade, including two years writing its Heard on the Street column, 1989 to 1991. Born in 1954, he is the son of Helen and Louis Lowenstein of Larchmont, N.Y. Lowenstein is married to Judith Slovin.

He is also a director of Sequoia Fund. His father, the late Louis Lowenstein, was an attorney and Columbia University law professor who wrote books and articles critical of the American financial industry.

Roger Lowenstein's latest book, America's Bank: The Epic Struggle to Create the Federal Reserve (The Penguin Press) was released on October 20, 2015.

Bio from Wikipedia, the free encyclopedia.

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Customer reviews

4.6 out of 5

1,699 global ratings

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2 star		1%
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Top reviews from Canada

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Must read

Reviewed in Canada 🇨🇦 on October 5, 2022

Verified Purchase

Fascinating look into a hedge fund that employed some of the best pure intellectual minds in finance. You'd think with the best brains they would be impervious to catastrophic blow-ups but as the story tells, it's quite the opposite. The intellect attracted huge sums of investor money and even worse, unbelievable leverage.

This book was referred to in several others I've read about '08 crisis so I had to buy it and I'm glad I did. Definitely going to re-read.

Reviewed in Canada 🇨🇦 on March 4, 2022

Verified Purchase

I haven't finished reading. So far is good.

Helpful

Gavin Radzick

Lowenstein is a great storyteller and this is an excellent tale of hubris ...

Reviewed in Canada 🇨🇦 on April 5, 2015

Verified Purchase

Lowenstein is a great storyteller and this is an excellent tale of hubris and the desire to look at the world the way we want to see it - rather than how it really is. Back in 1995 I was taking Finance 301 in university and the course covered the Black Scholes options pricing model. I showed the textbook to the options brokers at the office I worked at and asked, "Do you guys use this stuff?". They laughed.

I went back to my prof and told him that real-world people don't use Black-Scholes (or BS for short). We got into a heated argument - Theory vs. Practice. I would highly recommend this book for anyone serious about investing. One of my favorites!

Reviewed in Canada 🇨🇦 on March 9, 2019

Verified Purchase

Well written. Easy to read. Entertaining. Based on real life events but reads like a fiction. Lessons to be learned about the ins and outs of Wall Street characters. Highly recommended to anyone who likes to read investment books (this one is much different, doesn't read like a professor giving a lecture).

Reviewed in Canada 🇨🇦 on February 16, 2020

Verified Purchase

Excellent lessons in high finance and the dangers of high leverage.

Helpful

Ben Hargrave

I did not realize it was possible for 1 book ...

Reviewed in Canada 🇨🇦 on February 4, 2016

Verified Purchase

I did not realize it was possible for 1 book to teach a person so much about....economics, finance, politics......and there is more.....global strategy, interlinking of nations, social impact of economic decisions...

Reviewed in Canada 🇨🇦 on July 29, 2018

Verified Purchase

Bought as a gift, arrived as advertised in great condition.

Helpful

boyan

Interesting, but fells like a journal

Reviewed in Canada 🇨🇦 on April 14, 2013

Verified Purchase

My title said it best - the topic of the book is very interesting, but the writing style does not make you want to finish it in one reading.

Helpful

Top reviews from other countries

Hamizan Amran

An excellent book that details the rise and fall of LTCM in precise detail

Reviewed in the United Kingdom 🇬🇧 on January 1, 2019

Verified Purchase

I'm a numbers guy, so I was always interested in how a group full of the best minds in the world blew up so badly. It turns out there were two factors and in them subfactors. One factor is the funds themselves: models that don't go back far enough, pushing margins that were very small and enough leverage to break global economies. The other factor is the human factor: over-reaching their expertise, pride and a bit too much greed.

The book starts off, first, talking about how the fund started and then the addition of the few 'head' traders/speculators. They made a huge number of bids in a boat load of financial instruments betting that price 'differences' will eventually converge to equilibrium. Their basis was the efficient market hypothesis, which postulates that markets will eventually converge to a steady state. With their money and self worth on the line, they borrowed an obscene amount of money to bet on the very small oppurtunities that exist (picking up pennies on the road behind a bulldozer). They made a lot of money in return and the banks never failed to lend them more getting a few pennies of their own.
The fall came when an event that is fairly common in global markets happen, crisises. In this case, the default of the Russian debt and hyper inflation. Since LTCM was so levered, and they bet markets would converge, when their bets diverged, they got destroyed. No one wanted to take on any risk and they were there to take all the beating.
A lovely read all the way and bit of foresight on what would happen to the new LTCM once the 2008 financial crash happened.

8 people found this helpful

SEA WARRIOR

GRIPPING STORY, WELL TOLD

Reviewed in the United Kingdom 🇬🇧 on May 21, 2020

Verified Purchase

I enjoyed this and it passed my Beach Read Test - though probably won't for many. I was struck by the many similarities - greed, hubris, lack of oversight - between the fall of LTCM and that of Barings. And that caused me to compare this book with 'All that Glitters' by Gapper. Both have very similar formats but Gapper's benefits from the use of telephone call transcripts and, perhaps, having a central figure, in Nick Leeson, that more readers can identify with. Who might enjoy this? Anyone working in financial services who believes that they have got the risk management problem well and truly nailed. LTCM thought they had - and no-one else bothered to check.

Garrett McQuaid

Interesting especially now we see one of the big Sovereign Funds now copying that failed strategy

Reviewed in the United Kingdom 🇬🇧 on February 21, 2022

Verified Purchase

An interesting book on what turned out a failed strategy. And now in the news it was announced one of the biggest Middle Eastern Sovereign Funds with over 700 billion dollars to invest is now planning a similar strategy for it investment portfolio. It will be interesting to reflect in a decade time will this new fund have done any better with it.

EV

Anyone interested in financial markets needs to read this

Reviewed in the United Kingdom 🇬🇧 on September 8, 2015

Verified Purchase

This is a superb book - particularly for those that work in finance. Very well researched and with a good amount of detail on what actually happened and what trades LTCM had on. What was quite striking was that none of the trades were particularly exotic - they just used far too much leverage and the greedy banks were too willing to give it out in order to try to get access to market flow. To those who were working in the markets over the Great Financial Crisis, it is interesting to see some of the names that were so well known in that episode also making an appearance in the book. All in all, it is a good lesson in what can happen if you get too greedy and you believe that financial modelling can trump the human element. I found the book very difficult to put down. It is still relevant in 2015.

3 people found this helpful

badams

i preferred dunbar's "inventing money"

Reviewed in the United Kingdom 🇬🇧 on June 26, 2014

Verified Purchase

nicholas dunbar's book on long-term capital management (and it's failure) was much better than this version. i read that one first because it was already available on kindle. i had been eagerly awaiting "when genius failed" on kindle, but i don't think it is nearly as good. the 2 books together provide a very thorough account, but lowenstein's version seems to gloss over some key details. lowenstein also seems to be in awe of the nobel laureates and the collective brain-power at LTCM, essentially mesmerized in the same way as the investors in LTCM.

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

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