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Whistle Stopper - When Genius Failed: The Rise and Fall of Long-Term Capital Management
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List Price: $14.95
Our Price: $8.16
Your Save: $ 6.79 ( 45% )
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Manufacturer: Random House Trade Paperbacks
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Average Customer Rating:  
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Binding: Paperback
Dewey Decimal Number: 332
EAN: 9780375758256
ISBN: 0375758259
Label: Random House Trade Paperbacks
Manufacturer: Random House Trade Paperbacks
Number Of Items: 1
Number Of Pages: 288
Publication Date: 2001-10-09
Publisher: Random House Trade Paperbacks
Release Date: 2001-10-09
Studio: Random House Trade Paperbacks
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Spotlight customer reviews:
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Customer Rating:
Summary: "It was the arrogance of people... who really believed that they were more intelligent than others."
Comment: Even supposedly smart people can get utterly carried away. Perhaps they weren't as smart as they believed. In any case, we should always remember to take information and advice from "the experts" with a grain of salt.
Incidentally, Bear Stearns was the firm that cleared LTCM's trades. And now, like LTCM, Bear Stearns is pretty much no longer.
Customer Rating:
Summary: Entertaining read on complex subject
Comment: It's a common story, a group of extremely talented and smart individuals done in by their own hubris, greed, and carelessness. What distinguishes this story from others is that we get a reasonably lucid description of the complex world or hedge funds and exotic investments. There is also good storytelling here of a largely unkown firm of a couple hundred people, that nearly took down several major banks with them.
Customer Rating:
Summary: Excellent and education read
Comment: History repeats itself and one can be better armed for volatile times when they understand the catalysts that lead to LTCM's failure. Excessive leverage and simple stress testing is not enough anymore. As Buffet says, When the tide goes down, we see who was swimming without their bathing suits.
Customer Rating:
Summary: The story of of Long-Term Capital Management
Comment: I liked this book so much that I have re-read it twice in row before writing this review. As you see, this book is so popular that I'm the 200th reviewer of this title on amazon.com.
The book tells the story of Long-Term Capital Management (LTCM), a hedge fund founded in 1994 by John Meriwether (the former vice-chairman and head of bond trading at Salomon Brothers). On its board of directors were Myron Scholes and Robert C. Merton, who shared the 1997 Nobel Memorial Prize in Economics. Initially enormously successful with annualized returns of over 40% in its first years, in 1998 it lost $4.6 billion in less than four months and became a prominent example of the risk potential in the hedge fund industry. On the precipice of not only an American financial disaster, the fund's imminent collapse had significant international monetary implications, jeopardizing the financial system itself. Prompted by deep concerns about LTCM's thousands of derivative contracts, in order to avoid a panic by banks and investors worldwide, the Federal Reserve Bank of New York stepped in to organize a bailout with the various major banks at risk.
Roger Lowenstein, the author of this book, is an American financial journalist, reported for the Wall Street Journal for more than a decade, including two years writing its Heard on the Street column, 1989 to 1991. He is also the author of the famous title "Buffett: The Making of an American Capitalist", published in 1995, which is one of my favorite books. What is prominent about the Lowenstein's way of writing is the ability to analyze the facts that he describes. The books of Roger Lowenstein not only improve the reader's awareness in a field of economy, but also educate the reader by giving the knowledge of the market and its behavior, and by developing the abilities to understand the financial system better.
Customer Rating:
Summary: Why Hubris Failed
Comment: I managed to finish this book in two days: it's that good. Particularly the first half is very hard to put down. It is right up there with "Liar's Poker" and "Barbarians at the Gate" in terms of gripping storytelling. The author presents a very convincing case study of a briliant group of individuals who seemed blind to the possibility of failure, so much so that they continually plowed their own savings and bonuses (and then some) into shrinking opportunities all the while pushing out their original investors. There are probably half a dozen ways where these guys went wrong (trusting too much in the differential equations they used to model the stock market was only one of them) but the author lets you make up your own mind about these guys. He never comes off as judgemental or overly critical of them.
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Editorial Reviews:
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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
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