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

4.15 avg rating
( 15,443 ratings by GoodReads )
 
9780375758256: When Genius Failed: The Rise and Fall of Long-Term Capital Management

With a new Afterword addressing today’s financial crisis

A BUSINESS WEEK BEST BOOK OF THE YEAR

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.

"synopsis" may belong to another edition of this title.

Review:

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

From the Inside Flap:

John Meriwether, 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.
        In a decade that had seen the longest and most rewarding bull market in history, hedge funds were the ne plus ultra of investments: discreet, private clubs limited to those rich enough to pony up millions. They promised that the investors' money would be placed in a variety of trades simultaneously--a "hedging" strategy designed to minimize the possibility of loss. At Long-Term, Meriwether & Co. truly believed that their finely tuned computer models had tamed the genie of risk, and would allow them to bet on the future with near mathematical certainty. And thanks to their cast--which included a pair of future Nobel Prize winners--investors believed them.
        From the moment Long-Term opened their offices in posh Greenwich, Connecticut, miles from the pandemonium of Wall Street, it was clear that this would be a hedge fund apart from all others. Though they viewed the big Wall Street investment banks with disdain, so great was Long-Term's aura that these very banks lined up to provide the firm with financing, and on the very sweetest of terms. So self-certain were Long-Term's traders that they borrowed with little concern about the leverage. At first, Long-Term's models stayed on script, and this new gold standard in hedge funds boasted such incredible returns that private investors and even central banks clamored to invest more money. It seemed the geniuses in Greenwich couldn't lose.
        Four years later, when a default in Russia set off a global storm that Long-Term's models hadn't anticipated, its supposedly safe portfolios imploded. In five weeks, the professors went from mega-rich geniuses to discredited failures. With the firm about to go under, its staggering $100 billion balance sheet threatened to drag down markets around the world. At the eleventh hour, fearing that the financial system of the world was in peril, the Federal Reserve Bank hastily summoned Wall Street's leading banks to underwrite a bailout.
        Roger Lowenstein, the bestselling author of Buffett, captures Long-Term's roller-coaster ride in gripping detail. Drawing on confidential internal memos and interviews with dozens of key players, Lowenstein crafts a story that reads like a first-rate thriller from beginning to end. He explains not just how the fund made and lost its money, but what it was about the personalities of Long-Term's partners, the arrogance of their mathematical certainties, and the late-nineties culture of Wall Street that made it all possible.
        When Genius Failed is the cautionary financial tale of our time, the gripping saga of what happened when an elite group of investors believed they could actually deconstruct risk and use virtually limitless leverage to create limitless wealth. In Roger Lowenstein's hands, it is a brilliant tale peppered with fast money, vivid characters, and high drama.

"About this title" may belong to another edition of this title.

Top Search Results from the AbeBooks Marketplace

1.

Roger Lowenstein
ISBN 10: 0375758259 ISBN 13: 9780375758256
New Quantity Available: > 20
Seller
BWB
(Valley Stream, NY, U.S.A.)
Rating
[?]

Book Description Book Condition: New. Depending on your location, this item may ship from the US or UK. Bookseller Inventory # 97803757582560000000

More Information About This Seller | Ask Bookseller a Question

Buy New
US$ 10.34
Convert Currency

Add to Basket

Shipping: FREE
Within U.S.A.
Destination, Rates & Speeds
International Edition
International Edition

2.

Roger Lowenstein
ISBN 10: 0375758259 ISBN 13: 9780375758256
New Paperback Quantity Available: > 20
International Edition
Seller
US_Superfast_Bookstore
(New Castle, DE, U.S.A.)
Rating
[?]

Book Description Paperback. Book Condition: New. This is an International Edition Brand New Paperback Same Title Author and Edition as listed. ISBN and Cover design differs. Similar Contents as U.S Edition. Standard Delivery within 6-14 business days ACROSS THE GLOBE. We can ship to PO Box address in US. International Edition Textbooks may bear a label "Not for sale in the U.S. or Canada" or "For sale in Asia only" or similar restrictions- printed only to discourage students from obtaining an affordable copy. US Court has asserted your right to buy and use International edition. Access code/CD may not provided with these editions. We may ship the books from multiple warehouses across the globe including Asia depending upon the availability of inventory. Printed in English. Customer satisfaction guaranteed. Bookseller Inventory # OS9780375758256

More Information About This Seller | Ask Bookseller a Question

Buy New
US$ 9.18
Convert Currency

Add to Basket

Shipping: US$ 2.65
Within U.S.A.
Destination, Rates & Speeds

3.

Roger Lowenstein
Published by Random House Trade Paperbacks
ISBN 10: 0375758259 ISBN 13: 9780375758256
New PAPERBACK Quantity Available: 4
Seller
Booksland2016
(Upper Darby, PA, U.S.A.)
Rating
[?]

Book Description Random House Trade Paperbacks. PAPERBACK. Book Condition: New. 0375758259 Brand New Book. Bookseller Inventory # A-IAT-3609

More Information About This Seller | Ask Bookseller a Question

Buy New
US$ 8.50
Convert Currency

Add to Basket

Shipping: US$ 3.99
Within U.S.A.
Destination, Rates & Speeds

4.

Roger Lowenstein
Published by Random House USA Inc, United States (2001)
ISBN 10: 0375758259 ISBN 13: 9780375758256
New Paperback Quantity Available: 10
Seller
The Book Depository US
(London, United Kingdom)
Rating
[?]

Book Description Random House USA Inc, United States, 2001. Paperback. Book Condition: New. Reprint. 200 x 130 mm. Language: English . Brand New Book. With a new Afterword addressing today s financial crisis A BUSINESS WEEK BEST BOOK OF THE YEAR 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. Bookseller Inventory # ABZ9780375758256

More Information About This Seller | Ask Bookseller a Question

Buy New
US$ 13.07
Convert Currency

Add to Basket

Shipping: FREE
From United Kingdom to U.S.A.
Destination, Rates & Speeds

5.

Roger Lowenstein
Published by Penguin Random House
ISBN 10: 0375758259 ISBN 13: 9780375758256
New Quantity Available: > 20
Seller
INDOO
(Avenel, NJ, U.S.A.)
Rating
[?]

Book Description Penguin Random House. Book Condition: New. Brand New. Bookseller Inventory # 0375758259

More Information About This Seller | Ask Bookseller a Question

Buy New
US$ 9.88
Convert Currency

Add to Basket

Shipping: US$ 3.50
Within U.S.A.
Destination, Rates & Speeds

6.

Roger Lowenstein
Published by Random House Trade Paperbacks
ISBN 10: 0375758259 ISBN 13: 9780375758256
New PAPERBACK Quantity Available: > 20
Seller
Mediaoutlet12345
(Springfield, VA, U.S.A.)
Rating
[?]

Book Description Random House Trade Paperbacks. PAPERBACK. Book Condition: New. 0375758259 *BRAND NEW* Ships Same Day or Next!. Bookseller Inventory # SWATI2122085611

More Information About This Seller | Ask Bookseller a Question

Buy New
US$ 9.39
Convert Currency

Add to Basket

Shipping: US$ 3.99
Within U.S.A.
Destination, Rates & Speeds

7.

Roger Lowenstein
Published by Random House USA Inc, United States (2001)
ISBN 10: 0375758259 ISBN 13: 9780375758256
New Paperback Quantity Available: 10
Seller
The Book Depository
(London, United Kingdom)
Rating
[?]

Book Description Random House USA Inc, United States, 2001. Paperback. Book Condition: New. Reprint. 200 x 130 mm. Language: English . Brand New Book. With a new Afterword addressing today s financial crisis A BUSINESS WEEK BEST BOOK OF THE YEAR 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. Bookseller Inventory # ABZ9780375758256

More Information About This Seller | Ask Bookseller a Question

Buy New
US$ 13.49
Convert Currency

Add to Basket

Shipping: FREE
From United Kingdom to U.S.A.
Destination, Rates & Speeds

8.

Roger Lowenstein
Published by Random House Trade Paperbacks
ISBN 10: 0375758259 ISBN 13: 9780375758256
New PAPERBACK Quantity Available: 9
Seller
Movie Mars
(Indian Trail, NC, U.S.A.)
Rating
[?]

Book Description Random House Trade Paperbacks. PAPERBACK. Book Condition: New. 0375758259 Brand New Book. Ships from the United States. 30 Day Satisfaction Guarantee!. Bookseller Inventory # 4315601

More Information About This Seller | Ask Bookseller a Question

Buy New
US$ 10.33
Convert Currency

Add to Basket

Shipping: US$ 3.99
Within U.S.A.
Destination, Rates & Speeds

9.

Roger Lowenstein
Published by Random House Trade Paperbacks (2001)
ISBN 10: 0375758259 ISBN 13: 9780375758256
New Paperback Quantity Available: 1
Seller
Ergodebooks
(RICHMOND, TX, U.S.A.)
Rating
[?]

Book Description Random House Trade Paperbacks, 2001. Paperback. Book Condition: New. Reprint. Bookseller Inventory # DADAX0375758259

More Information About This Seller | Ask Bookseller a Question

Buy New
US$ 13.31
Convert Currency

Add to Basket

Shipping: US$ 3.99
Within U.S.A.
Destination, Rates & Speeds

10.

Roger Lowenstein
Published by Random House Trade Paperbacks (2001)
ISBN 10: 0375758259 ISBN 13: 9780375758256
New Paperback Quantity Available: 3
Seller
Ergodebooks
(RICHMOND, TX, U.S.A.)
Rating
[?]

Book Description Random House Trade Paperbacks, 2001. Paperback. Book Condition: New. Bookseller Inventory # BKTY9780375758256

More Information About This Seller | Ask Bookseller a Question

Buy New
US$ 13.90
Convert Currency

Add to Basket

Shipping: US$ 3.99
Within U.S.A.
Destination, Rates & Speeds

There are more copies of this book

View all search results for this book