When Genius Failed

The Rise and Fall of Long-Term Capital Management

Roger Lowenstein

Book Synopsis

"When Genius Failed" by Roger Lowenstein is a gripping and meticulously researched account of the rise and fall of Long-Term Capital Management (LTCM), a hedge fund founded by renowned economists and Nobel laureates.

The story begins with the brilliant minds behind LTCM, who believed they had cracked the code to predict financial markets and yield consistent profits. Their quantitative approach and complex mathematical models seemed infallible, attracting investors from all corners of the financial world.

However, as the book unfolds, it becomes clear that LTCM's strategies were highly risky and heavily leveraged, exposing them to catastrophic losses. The Russian debt crisis of 1998 sent shockwaves through global markets, which LTCM failed to anticipate. Their investments plummeted, sending the firm into a downward spiral of insurmountable losses.

Lowenstein deftly illustrates the greed, hubris, and herd mentality that contributed to LTCM's downfall. He delves into the personal lives and personalities of the key players, revealing how their brilliance and arrogance ultimately led to their undoing.

The author skillfully explains complex financial concepts and paints a vivid picture of the events leading up to LTCM's unraveling. He also delves into the role of regulators and central banks, who ultimately intervened to prevent a full-blown financial crisis.

"When Genius Failed" serves as both a cautionary tale and a fascinating study of human nature. It reminds us that even the most brilliant minds can falter, and that the risks associated with complex financial instruments should never be underestimated.

Throughout the book, Lowenstein keeps readers on the edge of their seats, offering valuable lessons about risk management, excessive leverage, and the dangers of unchecked egos. "When Genius Failed" is a must-read for anyone interested in finance, investing, or the inherent fallibility of the human mind in the face of financial markets.

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