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When Genius Failed: The Rise and Fall of Long-Term Capital Management Paperback – October 9, 2001

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Product Details

  • Paperback: 304 pages
  • Publisher: Random House Trade Paperbacks; Reprint edition (October 9, 2001)
  • Language: English
  • ISBN-10: 0375758259
  • ISBN-13: 978-0375758256
  • Product Dimensions: 5.2 x 0.6 x 8 inches
  • Shipping Weight: 6.4 ounces (View shipping rates and policies)
  • Average Customer Review: 4.5 out of 5 stars  See all reviews (397 customer reviews)
  • Amazon Best Sellers Rank: #7,036 in Books (See Top 100 in Books)

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Customer Reviews

Top Customer Reviews

4.0 out of 5 starsThe gang that couldn't hedge stright
By reader 1001 on October 8, 2000
Format: Hardcover
A somewhat didactic narrative history of the hedge fund Long Term Capital Management. Nicholas Dunbar covers the same subject in his book "Inventing Money." Both books present a blizzard of details about who did what and when. Too much detail. The general reader would better served by a medium sized article. Nevertheless if you're a finance buff interested in the nitty-gritty then read both books. Dunbar has a physics background and his book is more technical, while Lowenstein comes from journalism and his narrative flows better.
LCTM began operating in 1994, set up by John Meriwether formally head of the bond-arbitrage group at Solomon Brothers. He put together a star-studded cast that included three (1997) Nobel prize winners in economics. Their basic strategy was something called convergence arbitrage. In essence this strategy says buy two bonds that you think will track one another. Go long on the cheap one and short on the other; you make money if the spread narrows. In theory you are protected from changing prices as long as the two vary in the same way. To make the big bucks LCTM was after they took a gigantic number of highly leveraged arbitrage positions all over the world. To get high leverage you borrow for the position, like buying a stock on margin. LCTM got really high leverage by avoiding something called the "haircut," which is an extra margin of collateral banks usually demand, but forgave LCTM. Why would banks they do such a thing? Because they were blinded by the glitter of the cast, and in some cases the banks themselves were investors in LCTM. By 1997 convergence arbitrage opportunities in bonds began to dry up, everyone was doing it. So LCTM applied their strategy to stocks.Read more ›
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3.0 out of 5 starsEntertaining dose of schadenfreude - but inferior product
By Olly Buxton on May 30, 2003
Format: Paperback
A couple of years ago I read Nick Dunbar's account of the LTCM collapse "Inventing Money", and a friend recently lent me this book. They make an interesting comparison.
Dunbar - a physicist by trade - is more interested in the theoretical economics that went into the risk arbitrage fund in the first place and how this came unstuck. He gives a long description of the Black-Scholes model, what it says, and how it was used to pull off the risk "free" trades which made Long Term so much money for three or four years.
Lowenstein, by contrast, barely mentions either the Black-Scholes model (he barely touches on option pricing at all, as a matter of fact) or the Italian convergence trades which eventually blew the gaffe on the fund, but instead tells the human story, exposes the inevitable egos, and indulges in more than a little smuggery (this book is long on wisdom after the fact) in dissecting the naivety of the LTCM hedging and trading strategy and the people who ran it.
As long as he sticks to the egos and the posturing, When Genius Failed is a dandy read: the negotiations amongst the Wall Street top brass as the fund is going under rate with anything served up in Barbarians at the Gate, and as this is a large part of the book, it rips along quite nicely.
But the schadenfreude grates: One of the lessons of the whole fiasco was that the smart money is with the guy who can predict the future: any old mug can be a genius with hindsight. Lowenstein spends a lot of his time wisely pointing out what the traders should have done.Read more ›
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5.0 out of 5 starsDrama on Wall Street
By Bruce I Jacobs on October 1, 2000
Format: Hardcover
In 1994, bond arbitrage guru John Meriwether, late of Salomon Brothers, launched a hedge fund. Its partners included two soon-to-be Nobel laureates and an ex-vice chairman of the Federal Reserve. The fund was to exploit highly quantitative techniques to bet on (primarily) bond spreads throughout the world, using large amounts of leverage to magnify small returns from supposedly low-risk positions. By early 1998, each dollar invested in the fund had grown to $4.11. By early fall 1998, that $4.11 was down to 33 cents. The fund's potential bankruptcy so threatened the world economy that the U.S. Federal Reserve had to step in to broker a rescue.
The tale of the rise and fall of Long-Term capital was coming to its end as I was putting to press my own book on option-based trading strategies and their effects on market volatility (Capital Ideas and Market Realities). The whole adventure constituted a perfect capstone to my story, which goes back to the crash of 1929, showing how strategies that purport to eliminate the risk of investing can end up exploding in the face of their followers and investors generally.
Now Roger Lowenstein, formerly a journalist at the Wall Street Journal and author of a biography on Warren Buffett, has devoted a whole book to LTC. Drawing largely on contemporaneous reporting and on his own personal interviews with many of the principal and supporting players (although not, alas, Meriwether himself), Lowenstein manages to create a real page-turner out of the unfolding events, even for readers who already know the ultimate outcome.
Part of the tension, it seems to this reader, stems from the unresolved (and probably unresolvable) ambiguity about the real nature of the story.Read more ›
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Most Recent Customer Reviews

5.0 out of 5 starsFive Stars

Insightful and very well written book.

Published 2 days ago by Marc J. Verissimo
5.0 out of 5 starsExcellent book for the financially literate

The rise and fall of Lont-Term Capital Management, a hedge fund that was founded by a couple of Nobel prize winning financial economists and a major Wall Street player is ably... Read more

Published 1 month ago by JP
5.0 out of 5 starsMini-Version of 2008

The more things change the more they stay the same. An earlier mini-version of the 2008 financial crisis, from which nothing seems to have been learned.

Published 1 month ago by TTOOL
4.0 out of 5 starsEasy to read, highly insightful and entertaining

I bought this book on a whim, fully expecting most of the literature to be completely beyond my understanding. Read more

Published 1 month ago by JAF van Wyk
3.0 out of 5 starsA good book for those interested in financial manipulation

An education. A good book for those interested in financial manipulation.

Published 2 months ago by Alan
4.0 out of 5 starsFour Stars

Pretty good read. Although it looks as if Corzine wasn't paying attention.

Published 2 months ago by Run2Daylite
5.0 out of 5 starsFive Stars

Great book

Published 3 months ago by Amazon Customer
5.0 out of 5 starsWill be A Classic

I read this book a few years ago. It was great then and still is.

I bought it for two reasons. Read more

Published 4 months ago by Amazon Customer
4.0 out of 5 starsInteresting book

Pretty entretaining book and pretty interesting episode to read about. Well written but the author engages in some grandious explanations of the fundamental causes of the crisis... Read more

Published 4 months ago by Huberto M. Ennis
5.0 out of 5 starsAn amazing true story of unbridled greed and pride.

This is the story of how a small group of guys went from nothing to billionaires and then back to nothing. A true story of people who truly believed they couldn't fail. Read more

Published 4 months ago by Derek Dwilson

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