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Roger Lowenstein
Published: 2001
"When Genius Failed" is a book by Roger Lowenstein that tells the story of Long-Term Capital Management (LTCM), a hedge fund that was once considered one of the most successful and innovative in the world. It provides a comprehensive examination of the events that led to the collapse of the fund in 1998, which almost brought down the global financial system and had to be bailed out by the Federal Reserve. The book takes the reader through the rise and fall of the fund, exploring the strategies and tactics used by its founders, the people behind LTCM, the causes of its collapse and its aftermath.
The book begins by introducing the main characters of the story, including John Meriwether, the founder of LTCM, and a team of brilliant mathematicians and economists who were recruited to work at the fund. The team used complex mathematical models and sophisticated risk management techniques to make large investments in the bond market, and they were able to achieve annual returns of over 40% for several years, which made LTCM one of the most successful and envied hedge funds of the time.
However, as the book explains, the fund's success was built on a foundation of risky and leveraged investments. When Russia defaulted on its debt in 1998, it caused a massive shock to the bond market and the fund's positions began to unravel. Despite their best efforts to save the fund, LTCM's losses were so great that it had to be bailed out by a group of major banks and investors.
The book delves into the complex and rapidly changing world of global finance in the 1990s, which was marked by increased deregulation and the explosion of new financial instruments and technologies. It offers a detailed look at the events that led to the collapse of Long-Term Capital Management, and the impact it had on the global financial system. It also explores the role of the Federal Reserve in the bailout of the fund, and the lessons learned from the LTCM crisis.
Throughout the book, Lowenstein provides an in-depth look at the people behind LTCM and the strategies they used, how they were able to attract investors and achieve such incredible returns, how the fund was structured, how the fund was managed, how the fund was leveraged, and how the fund failed in such spectacular fashion. The book also examines the personal and professional lives of the LTCM's key players and how their decisions, successes, and failures affected the fund's ultimate demise.
The book serves as a cautionary tale about the dangers of excessive leverage and complexity in finance, and the need for proper risk management, which would be crucial for any business or individual involved in the markets.
In summary, "When Genius Failed" is a comprehensive, gripping, and informative account of the rise and fall of one of the most successful and innovative hedge funds of all time. It provides an inside look at the events that led to the collapse of Long-Term Capital Management, and the impact it had on the global financial system. It's a must-read for anyone interested in finance, economics, and investment management and serves as a valuable resource for students, professors, investors, and policymakers.
The book begins by introducing the main characters of the story, including John Meriwether, the founder of LTCM, and a team of brilliant mathematicians and economists who were recruited to work at the fund. The team used complex mathematical models and sophisticated risk management techniques to make large investments in the bond market, and they were able to achieve annual returns of over 40% for several years, which made LTCM one of the most successful and envied hedge funds of the time.
However, as the book explains, the fund's success was built on a foundation of risky and leveraged investments. When Russia defaulted on its debt in 1998, it caused a massive shock to the bond market and the fund's positions began to unravel. Despite their best efforts to save the fund, LTCM's losses were so great that it had to be bailed out by a group of major banks and investors.
The book delves into the complex and rapidly changing world of global finance in the 1990s, which was marked by increased deregulation and the explosion of new financial instruments and technologies. It offers a detailed look at the events that led to the collapse of Long-Term Capital Management, and the impact it had on the global financial system. It also explores the role of the Federal Reserve in the bailout of the fund, and the lessons learned from the LTCM crisis.
Throughout the book, Lowenstein provides an in-depth look at the people behind LTCM and the strategies they used, how they were able to attract investors and achieve such incredible returns, how the fund was structured, how the fund was managed, how the fund was leveraged, and how the fund failed in such spectacular fashion. The book also examines the personal and professional lives of the LTCM's key players and how their decisions, successes, and failures affected the fund's ultimate demise.
The book serves as a cautionary tale about the dangers of excessive leverage and complexity in finance, and the need for proper risk management, which would be crucial for any business or individual involved in the markets.
In summary, "When Genius Failed" is a comprehensive, gripping, and informative account of the rise and fall of one of the most successful and innovative hedge funds of all time. It provides an inside look at the events that led to the collapse of Long-Term Capital Management, and the impact it had on the global financial system. It's a must-read for anyone interested in finance, economics, and investment management and serves as a valuable resource for students, professors, investors, and policymakers.
1. The importance of proper risk management: "When Genius Failed" highlights the dangers of excessive leverage and complexity in finance, and the importance of proper risk management. It illustrates how LTCM's failure was caused in part by a lack of proper risk management and inadequate stress testing of its portfolio.
2. The dangers of overconfidence: The book also illustrates the dangers of overconfidence, as LTCM's founders believed that they could use complex mathematical models and sophisticated risk management techniques to achieve returns that were too good to be true.
3. The dangers of leverage: The book illustrates the risks associated with excessive leverage, as LTCM's over-leveraged positions were among the factors that led to its collapse.
4. The role of government in the financial system: The book shows the role of government in the financial system, and how the Federal Reserve played a critical role in rescuing the fund and avoiding a global financial crisis.
5. The human factor in finance: "When Genius Failed" not only tells the story of LTCM, but it also provides an in-depth look at the people behind LTCM, their motivations, and how they were able to achieve such incredible returns. It also illustrates how their personal and professional lives affected the fund's ultimate demise. It serves as a reminder that finance is not just about numbers, but also about people and their decision making.
2. The dangers of overconfidence: The book also illustrates the dangers of overconfidence, as LTCM's founders believed that they could use complex mathematical models and sophisticated risk management techniques to achieve returns that were too good to be true.
3. The dangers of leverage: The book illustrates the risks associated with excessive leverage, as LTCM's over-leveraged positions were among the factors that led to its collapse.
4. The role of government in the financial system: The book shows the role of government in the financial system, and how the Federal Reserve played a critical role in rescuing the fund and avoiding a global financial crisis.
5. The human factor in finance: "When Genius Failed" not only tells the story of LTCM, but it also provides an in-depth look at the people behind LTCM, their motivations, and how they were able to achieve such incredible returns. It also illustrates how their personal and professional lives affected the fund's ultimate demise. It serves as a reminder that finance is not just about numbers, but also about people and their decision making.
"When Genius Failed" is a book by Roger Lowenstein that tells the story of the rise and fall of Long-Term Capital Management (LTCM), a hedge fund that was once considered one of the most successful and innovative in the world. The book details the events leading up to the fund's collapse in 1998, which almost brought down the global financial system and had to be bailed out by the Federal Reserve.
The book provides an in-depth look at the people behind LTCM and the strategies they used to achieve such incredible returns in the early days of the fund. The main characters of the book are John Meriwether, the founder of LTCM, and a team of brilliant mathematicians and economists who were recruited to work at the fund. The team used complex mathematical models and sophisticated risk management techniques to make large investments in the bond market, and they were able to achieve annual returns of over 40% for several years.
However, as the book explains, the fund's success was built on a foundation of risky and leveraged investments, and when the Russian government defaulted on its debt in 1998, it caused a massive shock to the bond market and the fund's positions began to unravel. Despite their best efforts to save the fund, LTCM's losses were so great that it had to be bailed out by a group of major banks and investors.
The book provides an inside look at the inner workings of one of the most famous and controversial hedge funds of all time and how its founders, who were considered some of the most brilliant minds in finance, were unable to predict and prevent its downfall. It shows the dangers of excessive leverage and complexity in finance, and the need for proper risk management.
The book provides an in-depth look at the people behind LTCM and the strategies they used to achieve such incredible returns in the early days of the fund. The main characters of the book are John Meriwether, the founder of LTCM, and a team of brilliant mathematicians and economists who were recruited to work at the fund. The team used complex mathematical models and sophisticated risk management techniques to make large investments in the bond market, and they were able to achieve annual returns of over 40% for several years.
However, as the book explains, the fund's success was built on a foundation of risky and leveraged investments, and when the Russian government defaulted on its debt in 1998, it caused a massive shock to the bond market and the fund's positions began to unravel. Despite their best efforts to save the fund, LTCM's losses were so great that it had to be bailed out by a group of major banks and investors.
The book provides an inside look at the inner workings of one of the most famous and controversial hedge funds of all time and how its founders, who were considered some of the most brilliant minds in finance, were unable to predict and prevent its downfall. It shows the dangers of excessive leverage and complexity in finance, and the need for proper risk management.
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