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

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Apparently, just like Midas’ touch, the Midas formula had one essential flaw: it couldn’t take into consideration the extent of the irrationality of the market and its speed (calculations were sometimes out-of-date few moments before they were even made). De Goede, Marieke (2001). "Discourses of Scientific Finance and the Failure of Long-Term Capital Management". New Political Economy. 6 (2): 149–170. doi: 10.1080/13563460120060580. ISSN 1356-3467. S2CID 220355463. Above, you have just learned about the key tactics of LTCM. The next chapter will explain why their approach is successful. LTCM applies academic knowledge to investing. The lessons Lowenstein draws from this story are relevant for any investor or financial institution today."

Loomis, Carol J. (1998). "A House Built on Sand; John Meriwether's once-mighty Long-Term Capital has all but crumbled. So why did Warren Buffett offer to buy it?". Fortune. Vol.138, no.8.a b A financial History of the United States Volume II: 1970–2001, Jerry W. Markham, Chapter 5: "Bank Consolidation", M. E. Sharpe, Inc., 2002 In 1996 he published his first book, “Buffett: The Making of an American Capitalist,” four years after which “When Genius Failed” followed. In 2004, Lowenstein published “ Origins of the Crash ,” which was described as “a crucial account of an era of excess and folly.” 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. Immediately after the crisis in Russia, the default event of LTCM will trigger a new world financial crisis, the market will be completely destroyed. No one cared much about what would happen to the fund but was forced to find a way to protect their assets. As the English essayist G. K. Chesterton wrote, life is "a trap for logicians" because it is almost reasonable but not quite; it is usually sensible but occasionally otherwise: "It looks just a little more mathematical and regular than it is; its exactitude is obvious, but its inexactitude is hidden; its wildness lies in wait”

Due to the increasing number of banks joining the fund, the leverage ratio of the fund increased dramatically, putting the company at great risk if something unfortunate happened.Lowenstein, Roger (2000). When Genius Failed: The Rise and Fall of Long-Term Capital Management. Random House. ISBN 978-0-375-50317-7. All attempts to raise capital have failed. LTCM sought help from Warren Buffett, George Soros and a few other banks. But who can buy such a huge fund? The size of LTCM makes no bank hope to save the company. Leading scholar in finance; Ph.D., Massachusetts Institute of Technology; Professor at Harvard University Like other hedge funds, LTCM controls the investment system with an arbitrage trading strategy . Accordingly, hedge fund managers buy and sell financial products with the expectation or expectation that prices will change to their liking in the near future. When Genius Failed shows us the importance of understanding the full scope of a situation before taking risks."