Customer Reviews:
 Incredible story October 6, 2007
Two things make this a great book: a riveting story (losing hundreds of millions a day is mind-boggling) and excellent writing. Roger Lowenstein, first of all, is a master of using analogies explain complex things, like financial derivaties and how the big investment banks operate. Long Term Capital Management was a gang of complex gamblers (including a couple of Nobel Prize winners to boot) that employed equations and theories from the academic world of finance to build an enormously successful hedge fund that sucked in the big banks of Wall Street. Lowenstein details the rise of LTCM (it seems it had to have taken place with an interesting mixture of Luck, Smarts, and Arrogance) and their massive and rapid failure with a cadence that makes it difficult to put the book down. When Genius Failed offers a glimpse into the world of big-time finance and the unrepentant and bizarre characters that it attracts (the money these guys rake it in and how they do it will stun you if you aren't familiar with Wall Street). Highly recommended - even a decade after the collapse of LTCM!
November 2008 update: Mindboggling to think that some of the players in the LTCM tale were still screwing up the financial world a decade later.
great book September 20, 2007
Great read. Didn't want to put it down and finished it in a few days. Great to read how these smart guys lost all their money by being too greedy. Thumbs up for sure.
A fantastic tale of risk, reward and rue September 20, 2007
It's a wonderfully written account of a remarkable risk taking adventrue crafted by the best of wall street's arbitrage mavens and acclaimed academic laureates. Author has done a supreb job as a slueth who followed the trail that aparantly divulged very little about its journey into the financial debacle that could've brought the whole financial world down. Throughout the work of the author, one can perceive the vastness of his research into this matter, his depth of knowledge in the world of arbitrage and his exquisite story telling skill.
He portrayed each character with great care that went above and beyond what I expected. Though at times the deatils seemed a bit overwhelming and unnecessary, it was enjoyable nonetheless.
Besides gaining a great deal of knowledge about bond trading, risk arbitrage and about all the parties associated with it, it also gave me a good picture about the human inter-relations that plays into the rise and fall of such wall street ventures. One thing I wanted to see in this book is Greenspan's involvement and opinion on this. But, not sure why his role in the shoring up of LTCM wasn't covered. I earlier read a book on Greenspan where his rebuttal on the criticism of Fed's involvement with the bail out LTCM was deatiled. I expected Lowenstein to cover this as well.
I first came across the story of LTCM from Taleb's "Black Swan", then went to wikipedia to know more about it, and finally got a hold of this book and I'm glad that I did. I love real life stories where turns of events and drama unfold from the work of an invisible hand, not from that of a gifted writer. I would love to see the story of LTCM on big screen one of these days. I caught a glimse of the NOVA's episode "The Trillion Dollar Bet [2000]" which covered LTCM, but I couldn't get a hold of the full content.
It's a must read for anyone who has interest in wall street, business, risk and how they all work. Lowenstein is a great writer in my opinion and I will move on to reading his pervious work on Buffet.
 Great insight into market movements September 12, 2007
1 out of 1 found this review helpful
The LTCM story is fascinating, and Lowenstein makes clear enough what kind of 'hedging' they were doing. The most valuable details to me were the intertwining of instituions and trades. I thought it illuminated how forced trading and fear can spread. Also captures the mood of the nineties well, I'd like to find detailed history of other market eras.
And from an academic viewpoint, his discussion of 'fat tails' was great.
Playing Dice With The Universe September 8, 2007
1 out of 1 found this review helpful
Like the RMS Titanic, Long-Term Capital Management was the engineering miracle of its day, designed to ride an ocean of volatility and liquidity in high style. Like the Titanic, LTCM became a shibboleth for catastrophe. Roger Lowenstein's "When Genius Failed" takes you along for the hedge fund's short, ill-fated ride.
Published in 2000, two years after Long-Term's collapse necessitated a Fed-encouraged bailout to forestall a second Great Depression, "When Genius Failed" makes macro economics almost readable. It also makes the somewhat incomprehensible details of Long-Term's management and breakdown very understandable to laypeople like me.
The central idea of Long-Term, formed early on when they were active mostly in the fixed income market, was that value spreads between various financial vehicles, say a pair of related bonds or derivatives, could be tracked by computer and calculated with minute precision, thus allowing a speculator to bet on the expected difference. Being right was thus not a challenge, it was only the ability to put down enough money on your bets to make the game worthwhile. Long-Term started out with enough money, and quickly accumulated more, though the fact this money was not theirs was a large part of their problem.
"Backed by their models, they felt more certain than others did - almost invincible," Lowenstein writes. "Given enough time, given enough capital, the young geniuses...felt they could do no wrong, and Meriwether...began to believe the geniuses were right."
"Meriwether" is John Meriwether, the founder and managing partner of Long-Term Capital Management. As described by Lowenstein, he was not the greediest or most self-promotional guy, cautioning associates in one instance that dickering about profit-enhancement was a bit much given things just a few dozen city blocks away in Harlem. "J.M." liked to make his money quietly and, like his LTCM partners, didn't enjoy a particularly lavish lifestyle. But he liked being king, and with his partners ran an astonishingly callous, risk-taking business that threw its elbows about with disdain.
"The pursuit of money may have been central to their lives, but as is often the case, it went far beyond any conceivable lifestyle needs," Lowenstein writes. "The money was a scorecard, a proof of their superlative trading skills."
Many say Long-Term's fatal flaw was greed, but that's not true. What sunk them, as Lowenstein richly recounts, was hubris. Thus, when spreads narrowed and profit-making opportunities shrunk, Long-Term extended itself far more, "picking up nickels in front of bulldozers," in order to sustain their elite reputation.
Lowenstein makes the finances comprehensible and exciting. His writing is ironically drier when it comes to capturing the people and their interactions, probably hobbled by the unwillingness of many key players to talk with him. One wishes for more insight on what the partners were thinking as things fell apart and they appeared on the verge of setting off an international financial collapse.
But if sober-sided analysis of a key moment in American financial history is your cup of tea, you will want to read this sturdy primer in the extent and limits of human ego when up against the world's market forces. Hedge funds may pride themselves on daring such limits, and betting "against the gods" as it were, but "When Genius Failed" shows mortals still have a few tricks left to learn.
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