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When Genius Failed

The Rise and Fall of Long-Term Capital Management

This book is available for download with iBooks on your Mac or iOS device, and with iTunes on your computer. Books can be read with iBooks on your Mac or iOS device.

Description

With a new Afterword addressing today’s financial crisis

A BUSINESS WEEK BEST BOOK OF THE YEAR

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.

When it was founded in 1993, Long-Term was hailed as the most impressive hedge fund in history. But after four years in which the firm dazzled Wall Street as a $100 billion moneymaking juggernaut, it suddenly suffered catastrophic losses that jeopardized not only the biggest banks on Wall Street but the stability of the financial system itself. The dramatic story of Long-Term’s fall is now a chilling harbinger of the crisis that would strike all of Wall Street, from Lehman Brothers to AIG, a decade later. In his new Afterword, Lowenstein shows that LTCM’s implosion should be seen not as a one-off drama but as a template for market meltdowns in an age of instability—and as a wake-up call that Wall Street and government alike tragically ignored.

From Publishers Weekly

Sep 04, 2000 – In late September 1998, the New York Federal Reserve Bank invited a number of major Wall Street investment banks to enter a consortium to fund the multibillion-dollar bailout of a troubled hedge fund. No sooner was the $3.6-billion plan announced than questions arose about why usually independent banks would band together to save a single privately held fund. The short answer is that the banks feared that the fund's collapse could destabilize the entire stock market. The long answer, which Lowenstein (Buffett) provides in undigested detail, may panic those who shudder at the thought of bouncing a $200 check. Long-Term Capital Management opened for business in February 1994 with billion in funds. Armed with the cachet of its founders' stellar credentials (Robert Merton and Myron Scholes, 1997 Nobel Prize laureates in economics, were among the partners), it quickly parlayed expertise at reading computer models of financial markets and seemingly limitless access to financing into stunning results. By the end of 1995, it had tripled its equity capital and total assets had grown to $102 billion. Lowenstein argues that this kind of success served to enhance the fund's golden legend and sent the partners' self-confidence off the charts. As he itemizes the complex mix of investments and heavy borrowing that made 1994-1997 profitable years, Lowenstein also charts the subtle drift toward riskier (and ultimately disastrous) ventures as the fund's traditional profit centers dried up. What should have been a gripping story, however, has been poorly handled by Lowenstein, who obscures his narrative with masses of data and overwritten prose.

Customer Reviews

Leverage at its best

Must read as it reminds us how history can be prone to repeat itself. This should find itself on the bookshelf for generations to come as part of the history for current finance.

When Genius Failed

Once in your hand you don't want to put it down till you finish reading it.
It is totally worth your time to read it.

A must read

A brilliant book on financial models run amuck. All models have assumptions, and assumptions are set by humans. And leverage can be your best friend and your worst enemy.

When Genius Failed
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  • $13.99
  • Available on iPhone, iPad, iPod touch, and Mac.
  • Category: Finance
  • Published: Sep 12, 2000
  • Publisher: Random House Publishing Group
  • Seller: Penguin Random House LLC
  • Print Length: 304 Pages
  • Language: English
  • Requirements: To view this book, you must have an iOS device with iBooks 1.3.1 or later and iOS 4.3.3 or later, or a Mac with iBooks 1.0 or later and OS X 10.9 or later.

Customer Ratings