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Book: When Genius Failed: The Rise and Fall of Long-Term Capital Management :: Book
Date: Friday, 09 January, 2009 :: 08:38
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When Genius Failed: The Rise and Fall of Long-Term Capital Management
List Price: USD $14.95
from USD $8.29
Product Group: book
Manufacturer: Random House Trade Paperbacks
Release Date: 2001-10-09
Studio: Random House Trade Paperbacks
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Editorial Review:
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Reviews:
Average Customer Review: 
Summary: The danger of ignoring the human element in investing!
Date: 2009-01-03 - 
Comment: 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 years through the use of leverage, derivatives and easy credit terms from its banks. But when the market failed to behave as LTCM's models predicted they would, LTCM's leverage and large, illiquid trades caused them to quickly spiral downward. Even if they had ultimately been proven correct, they could not remain solvent long enough to benefit from their risky trades.
The story of LTCM, as told by Lowenstein, is fascinating. But the thing that intrigued me the most is that it does not appear that the Wall Street banks learned a lasting lesson from the debacle. In order to avoid systemic losses throughout the financial system, there were 14 banks that ultimately bailed out the LTCM fund, including firms like Lehman Brothers, Merrill Lynch, Chase, Goldman Sachs, Salomon Smith Barney, UBS, etc. These financial institutions saw firsthand the devastating losses that could occur due to overleveraging, excessive use of derivatives and providing easy credit terms to borrowers, and yet many of these same firms suffered severe losses in 2008 due to these very same factors. It does make you wonder if this cycle of greed and fear is bound to repeat itself, or if a new paradigm will emerge among financial institutions and regulators to prevent these meltdowns in the future.
This is a riveting book, which I would highly recommend.
Summary: Deja Vu
Date: 2008-12-03 -
Comment: Scary. Although LTCM rose and fell some time ago, it could be TODAY. Goes into high level of detail on the more obscure things in the capital markets. While not a quick read, an interesting one.
Summary: Great Read, Well Written
Date: 2008-12-03 -
Comment: This book was a great read, well written, and hard to put down. Highly recommend.
Summary: Arrogance and greed
Date: 2008-11-25 -
Comment: This story about Long-Term Capital Management seems like a precursor to today's subprime mortgage fiasco that has come so close to collapsing the world financial markets. While much smaller in scope to the problems we are facing today, the LTC story demonstrates one sad truth : the big Wall Street players take on inordinate amount of risks and if they risk collapse, it is ultimately the taxpayer who has to bail them out.
Summary: Fun for everyone...
Date: 2008-10-07 - 
Comment: This is a fascinating book about the collapse of one of the largest and most sophisticated hedge funds of all time. The book gives great insight to the hedge fund world, as run by Nobel prize winners and other mathematical geniuses, without being technical. Anyone with a passing interest in the world of finance is likely to enjoy this book.
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