Review: Lowenstein’s When Genius Failed

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

Roger Lowenstein

The death of Longterm Capital Management (LTCM) is one of the biggest collapses in modern financial history. So big, the Fed stepped in and made a number of major banks pony up serious dough to cover LTCMs loses so that the world financial markets didn’t tank. This book is the story of the very smart dudes (multiple noble prize winners, and a bunch of Phds) who made the classic finance mistake of thinking that markets would behave as the models said they would. Well, turns out, markets don’t always do what they’re told, and if your leveraged to the tune of billions of dollars, you can get yourself in a world of trouble when things go south.

Does this all sound familiar? Yeah, it does. But LTCM wasn’t part of the 08 crisis, it was ten years earlier. Did we learn anything? Apparently not.

This is a fast read and actually pretty educational if you want to get a sense of how the highly quantitative hedge funds work. Definitely worth checking out if you’re a business book geek like me.

Recommended for the enthusiast. 

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