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When Genius Failed (Abridged): The Rise and Fall of Long-Term Capital Management Audiobook
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John Meriwether, a famously successful Wall Street trader, spent the 1980s as a partner at Salomon Brothers, establishing the best--and the brainiest--bond arbitrage group in the world. A mysterious and shy midwesterner, he knitted together a group of Ph.D.-certified arbitrageurs who rewarded him with filial devotion and fabulous profits. Then, in 1991, in the wake of a scandal involving one of his traders, Meriwether abruptly resigned. For two years, his fiercely loyal team--convinced that the chief had been unfairly victimized--plotted their boss's return. Then, in 1993, Meriwether made a historic offer. He gathered together his former disciples and a handful of supereconomists from academia and proposed that they become partners in a new hedge fund different from any Wall Street had ever seen. And so Long-Term Capital Management was born. In a decade that had seen the longest and most rewarding bull market in history, hedge funds were the ne plus ultra of investments: discreet, private clubs limited to those rich enough to pony up millions. They promised that the investors' money would be placed in a variety of trades simultaneously--a "hedging" strategy designed to minimize the possibility of loss. At Long-Term, Meriwether & Co. truly believed that their finely tuned computer models had tamed the genie of risk, and would allow them to bet on the future with near mathematical certainty. And thanks to their cast--which included a pair of future Nobel Prize winners--investors believed them. From the moment Long-Term opened their offices in posh Greenwich, Connecticut, miles from the pandemonium of Wall Street, it was clear that this would be a hedge fund apart from all others. Though they viewed the big Wall Street investment banks with disdain, so great was Long-Term's aura that these very banks lined up to provide the firm with financing, and on the very sweetest of terms. So self-certain were Long-Term's traders that they borrowed with little concern about the leverage. At first, Long-Term's models stayed on script, and this new gold standard in hedge funds boasted such incredible returns that private investors and even central banks clamored to invest more money. It seemed the geniuses in Greenwich couldn't lose. Four years later, when a default in Russia set off a global storm that Long-Term's models hadn't anticipated, its supposedly safe portfolios imploded. In five weeks, the professors went from mega-rich geniuses to discredited failures. With the firm about to go under, its staggering $100 billion balance sheet threatened to drag down markets around the world. At the eleventh hour, fearing that the financial system of the world was in peril, the Federal Reserve Bank hastily summoned Wall Street's leading banks to underwrite a bailout. Roger Lowenstein, the bestselling author of Buffett, captures Long-Term's roller-coaster ride in gripping detail. Drawing on confidential internal memos and interviews with dozens of key players, Lowenstein crafts a story that reads like a first-rate thriller from beginning to end. He explains not just how the fund made and lost its money, but what it was about the personalities of Long-Term's partners, the arrogance of their mathematical certainties, and the late-nineties culture of Wall Street that made it all possible. When Genius Failed is the cautionary financial tale of our time, the gripping saga of what happened when an elite group of investors believed they could actually deconstruct risk and use virtually limitless leverage to create limitless wealth. In Roger Lowenstein's hands, it is a brilliant tale peppered with fast money, vivid characters, and high drama.
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"I read this book in about 5 days. It was facinating and well written. I did not completely understan most of the financial interactions and still am not completely sure how these people made money or were supposed to make money, but it is fascinating that such things exist."
— Dkujawinski (4 out of 5 stars)
When Genius Failed Listener Reviews
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" An excellent read for any one who is involved in finance or financial markets... "
— Bijo, 2/20/2014 -
" A very important book that has to be re-read from time to time. "
— Alex, 2/18/2014 -
" A good reminder of the paradigm that LTCM was, especially when so much history of derivatives and leverage occurred nearly a decade after the collapse of LTCM and many of the people involved were still creating or managing the banks in 2008. "
— Jeremy, 2/5/2014 -
" It was intriguing to read the full story of this hedge fund, the good times and the bad. Particularly the reasons why it ended up failing. "
— Christian, 2/3/2014 -
" Nicely written. Good scope and level of detail "
— Beth, 1/18/2014 -
" An incredible story, very well told. Most interesting and enjoyable. "
— Judith, 1/5/2014 -
" Another vacation book and although I am a finance major I think this is a good book for anyone. I learned a lot about the hedge fund world and the banking world in general that I didn't know before. A good book about greed and what people think they can get away with. "
— Hilary, 1/4/2014 -
" Lowenstein does a good job capturing the diverse set of characters in his rise and fall of LCTM - again show that brains don't outweigh the negative effects of hubris and an irrational crowd. "
— Tom, 1/2/2014 -
" Good book, presaged the problems of 2008-2009 with the mortgage market very well. The author loses points for excessive use of italics. "
— Peter, 11/28/2013 -
" Highly recommended. Well research, does an excellent job in making complex financial topics accessible. "
— Maurice, 8/22/2013 -
" If you think your might like a book on Wall Street and hedge funds, you will like it. If that sounds totally boring, you probably will not. Focuses on both the personalities and the methods. "
— Bert, 8/3/2013 -
" A well-written and fascinating account of the LTCM meltdown. "
— Gekko, 3/31/2013 -
" The takeaway from the LTCM episode - if you invest money you don't have, with the intent of making money you don't need, more often than not, you will end up in trouble. "
— Siddharth, 1/13/2013 -
" Very real recount of an unreal story. Perfect mix of emotions and naked numbers. "
— Nico, 1/8/2013 -
" This book talks about a crazy hedge fund that thought they were so smart they could leverage forever and make billions and never have any problems. Unfortunately, we didn't learn anything from this and deregulated Wall Street even more...fast forward to 2008... "
— Joe, 11/5/2012 -
" Scary how history repeated itself. "
— Christian, 9/19/2012 -
" Actually not bad, better than I expected. But probably not that interesting for anyone who isn't a douchebag. The main story can be summarized in a good 250 words, the rest is pleasant, but not groundbreaking. "
— alan, 4/7/2012 -
" Books about hedge funds failing apart are always fun & its pretty relevant to all the stuff happening in the markets now. "
— Kristin, 4/4/2012 -
" made finance fun! hard to believe "
— Lara, 2/28/2012 -
" they fail big and take the fucking economy down with them "
— Murugan, 6/17/2011 -
" You would think that people might have learned something from Long Term Capital Management's collapse, but sadly, no. "
— Jennifer, 5/4/2011 -
" pre 9-11 books read like fairy tails. this is as exciting and telling as harry markopoulos and michael lewis made it out to be! "
— Mary, 5/2/2011 -
" The takeaway from the LTCM episode - if you invest money you don't have, with the intent of making money you don't need, more often than not, you will end up in trouble. "
— Siddharth, 4/12/2011 -
" Good book to learn about the inner workings of wall street financial products and the people behind them. Somewhat difficult to understand all the lingo and concepts if you're not in the industry. Good investigation on lowenstein's part. Seems very thorough. "
— Brad, 4/9/2011 -
" I knew absolutely nothing about this before I read it. More than a few times I had to go back and re-read whole sections, and it's certainly not a page-turner, but I learned a ton. "
— Lily, 4/6/2011 -
" Great book. Amazing story of LTCM. It is incredible how these guys operated and how confident they were in their smartness. Had it not been for some amazing one time events like Russia defaulting on their debt they would have actually made billions of dollars. "
— David, 1/27/2011 -
" love it this is like a nice prequel to the financial meltdown of 08.<br/>a great view and description of the high stakes trade of the quants that left salomon bro. and a nice description of the perils and hiddent traps that led to the demise of LTC. "
— Omarquina, 1/22/2011 -
" omg! this was the hardest book i have ever almost finished reading! i still don't understand it all, but i'm still very intrigued! "
— Kim, 1/5/2011 -
" Reads like a thriller, with the race of Long Term Capital to fix their hedges after realizing their formula was not loss-proof. Only complaint is that I would have like more details as to the mechanics of the derivatives that led to the massive losses. "
— David, 12/29/2010 -
" Interesting review of the steps leading to and events during the LTCM failure "
— Colin, 12/27/2010
About Roger Lowenstein
Janet Lowe is the author of the bestselling Warren Buffett Speaks, Jack Welch Speaks, and Bill Gates Speaks, all from Wiley. Her articles have appeared in such publications as Newsweek, the Christian Science Monitor, the Los Angeles Times, and the San Francisco Chronicle.