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

PickingupwhereLiar’sPokerleftoff(literally,inthebonddealer’sdesksofSalomonBrothers)thestoryofLong-TermCapitalManagementisofagroupofeliteinvestorswhobelievedtheycouldbeatthemarketand,likealchemists,createlimitlesswealthforthemselvesandtheirpartners.FoundedbyJohnMeriweather,anotoriouslyconfidentbonddealer,alongwithtwoNobelprizewinnersandafloorofWallStreet’sbrightestandbest,Long-TermCaptialManagementwasfromthebeginninghailedasanewgoldstandardininvesting.Itwastobethehedgefundtoendallotherhedgefunds:adiscreetprivateinvestmentclublimitedtothoserichenoughtoponyupmillions.Itbecamethebanks’ownfavouritefundandfromitsinceptionachievedarunofdizzyinglyspectacularreturns.NewinvestorsbargedeachotherasidetogettheirinvestmentmoneyintoLTCM’shands.ButascompetitorsbegantomimicMeriweather’sfund,healteredstrategytomaintainthefund’sperformance,leveragingcapitalwithcreditonascalenotfullyunderstoodandneverseenbefore.WhenthemarketsinIndonesia,SouthAmericaandRussiacrashedin1998LCTM’sinvestmentscrashedwiththemandmountainousdebtsaccumulated.Thefundwasinmelt-down,andthreateningtobringdownintoitstrillion-dollarblackholeahostoffinancialinstiutionsfromNewYorktoSwitzerland.It’sataleofvividcharacters,overwheeningambition,andperilousdramatold,inRogerLowenstein’shands,withbrilliantstyleandpanache.