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 enlarge | Author: Roger Lowenstein
Publisher: Random House Trade Paperbacks
Category: Book
List Price: $14.95
Buy New: $7.75
You Save: $7.20 (48%)
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Rating:  213 reviews
Sales Rank: 1422
Media: Paperback
Number Of Items: 1
Pages: 288
Shipping Weight (lbs): 0.4
Dimensions (in): 8 x 5.6 x 0.6
ISBN: 0375758259
Dewey Decimal Number: 332
EAN: 9780375758256
ASIN: 0375758259
Publication Date: October 9, 2001
Availability: Usually ships in 1-2 business days
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| Customer Reviews:
 Day of Reckoning in Greenwich (Heimlich for Hedgies) September 3, 2007
1 out of 1 found this review helpful
Roger Lowenstein is one of the few current writers who can make financial stories interesting; he has also written for the Wall Street Journal and a biography of uber-investor Warren Buffett.
In some ways this book is an update on characters we first met in Michael Lewis' Liar's Poker. John Meriwether was drummed out of Salomon for not adequately supervising the bond desk, where a trader was regularly telling fibs to the Fed. Of course, Wall Street is loaded with second acts and Meriwether re-assembles his gang of boy-geniuses and know-it-all professors at his own shop, LTCM. Every one on Wall Street knew that his team made the money for Salomon, so a frenzy begins over who can give him the most money to invest, with minimal interest and no collateral.
Things run well at first, profits for the fund soar for a few years. Then as is inevitable, others copy the strategies. It is really not complicated, you just need all the liquidity, market intelligence, and cojones in the world. Eventually the return on these initial winning plays trends down to the cost of capital, so LTCM starts to chase riskier bets to boost the returns.
Eventually things go wrong. The Nobel prize winning academicians say the fund is hedged so that it can not lose money in consecutive quarters, yet a melt-down begins. Wall Street loves the smell of blood in the water; front-runners make the situation worse, until finally a bail-out is necessary.
Warren Buffett flirts with the boys from Greenwich, but he does not consumate the deal, so it falls to a consortium of investment bankers to make an equity investment to stabilize the dizzying rate of descent. As was widely reported at the time, the Fed and the NYSE, although making no investment on their own, had to push the investment banks into doing something to save their own game.
These characters did not fade away however. John Corzine masterminded the bail-out, although he overlooked his own shop's blatant front-running and overstepped his authority to invest. After his partners at Goldman booted him in a boardroom coup, he became the governor of New Jersey and current poster boy encouraging the public to wear seat belts when speeding and driving distracted.
Buffett is still allowed to actively manage his insurance premiums, although stock holders have had some years when they questioned why. Some of the others were able to get their names in the paper once again, for tolerating market timing in mutual funds, to the obvious detriment of long term investors. Even Meriwhether has re-emerged to start another fund, no reports yet on its performance.
Shakespearean Tragedy meets WallStreet August 29, 2007
If you're enticed by the idea of the tragic hero, the story of Long Term Capital Management will tickle your fancy. Lowenstein turns the partners of a firm into modern day Macbeths. The book starts toward the end of the real life story, with the bank managers meeting at the Federal Reserve to discuss how they should deal with LTCM and the men who put the entire U.S. economy on the brink of collapse. It then goes back to the beginning of John Meriwether and his crew of geniuses that created Long Term. Each character has their distinct qualities and its the relationships between them that drive the book. They rose with their intelligence and their unbelievable arrogance, and came tumbling down even faster.
This book would stand strongly on its own as a piece of fiction but the fact that it is all real just makes it even better. The book is a must read for anyone interested in the world of finance, but it is just as good for anyone else who enjoys a rise and fall drama. For me it is the modern equivalent of Shakespeare's Macbeth. Ambitious men rise and fall. One loses his entire net worth, $500 million, in a month. But its not the numbers that hold the book together, its the feeling you get as a reader. You really feel like you know and understand the partners. Lowenstein does a great job of simplifying what exactly it was they did to make and lose all their money.
If you have a math brain, an interest in finance, or you simply love drama and tragedy, this book will fit well.
Timley Reading 9 Years Afterwards August 27, 2007
1 out of 1 found this review helpful
This is a fantastic story about how pride and cockiness ultimately led to the meteoric rise and even more rapid and stratospheric fall of one of the most infamous hedge funds. The author wrote a fantasticly good tale that was well balanced and flowed smoothly. This was a surprisingly quick read. It is even more astounding to read this story at this particular time. This past August is exactly nine years since LTCM failed and the events of August 2007 mirror those of August 1998 so closely it is deeply concerning. This time around the scope is much wider than just one hedge fund. What is even more interesting is the founder of LTCM and his team got their start in mortgage backed securities decades before. The Federal Reserve's brokered bailout of LTCM seems to exacerbated the moral hazard we see today. I highly recommend those concerned with the financial services industry read this story. Especially in light of recent events. Although LTCM was not limited to mortgage backed securities, their trading strategy mirrors many of those firms that have failed recently. A very well written book that flows quite smoothly and quickly. Although somewhat sympathetic to many of the characters involved, punches are still thrown. Some of the players involved in this story are still in the industry today. What is truly disappointing, not about the book, but about the outcome, is how many of the key players, partucularly the least repentent, walked away from the wreckage fairly unscathed other than their reputation. They certainly weren't much worse than they were before LTCM started - many actually became in demand. An interesting footnote for the industry and an interesting lesson: better to fail big than to not succeed at all.
 A story of mathematical precision vs. human unpredictability August 20, 2007
2 out of 2 found this review helpful
This classic Wall Street story is another must-read for anyone with an interest in money management. When Genius Failed chronicles the failure of the hedge fund Long Term Capital Management (LTCM), a pioneer in quantitative investment strategies. With roots from the renowned Salomon investment bank, LTCM gathered some of the world's top financial gurus to design mathematical arbitrage strategies so well planned, they were widely regarded as having virtually no risk. Among the mathematical wizards was Myron Scholes, co-creator of the Black-Scholes model.
After several years of handsome returns, this formula turned out too good to be true. After convincing investment banks and clients to pour billions of dollars into this near-"riskless" fund, tragedy struck in 1998. A credit crisis in Asia prompted a chain reaction of panic that the fund's mathematical models could not anticipate. The story of this fund's collapse proves that markets are not efficient. It is a lesson that precision calculations in the world of finance, no matter how correct or ingenious, are no match for human irrationality when panic strikes.
Amplifying the unforeseen risk of the fund were human errors made by the principals. The firm's superior performance depended on incredible leverage (borrowed money), but that leverage also led to LTCM's demise when the margin calls hit. The principals also deviated from their core investment strategy when arbitrage opportunities started to dry up; they began making directional bets and speculating, something for which mathematical models are just inadequate for quantifying the risk.
One disadvantage of this book is that it focuses so much on the people involved that it sacrifices explanation of the market forces behind the Asian currency crisis. I felt that some chapters contained too many dry details on the interaction between the LTCM principals and the banks.
The advantage of its focus on people is that the reader can see many of today's Wall Street icons in action. Almost a continuation of Liar's Poker, many of the same Salomon traders including John Meriwether are pivotal to LTCM. Warren Buffett and George Soros play a role, allowing readers to see their investment acumen at work. Many Wall Street characters and investment banks still prevalent in today's news were plugged into the LTCM fiasco.
Because of the high-profile characters and Wall Street firms involved with LTCM, this is a great read for students aspiring for a career on the Street. It also provides good insight into trading strategies and the hedge fund world. I would recommend When Genius Failed to anyone with an interest in investing.
Nothing Could be More Timely!!!! August 16, 2007
1 out of 1 found this review helpful
This book is excellent and illustrates the climate of the market at the time of the collapse, as well as the particulars of LTCM.
With a credit crunch currently plaguing the markets, and hedge funds suffering with losses . . . nothing could be more timely. The parallels between the events around LTCM and the daily happenings in this summer's markets are unbelievably similar. This book could almost as easily be written about a firm today.
This is a MUST READ for those who want to understand better what is happening today - and how to protect themselves and benefit from it!
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