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

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LTCM managers learned the effects of leverage by paying up with their careers, social positions apart from personal investments in LTCM. LTCM is said to have leveraged its equity even up to 1:55 levels using direct leverage at one point of time with 1:30 to 1:40 being the norm.

On account of a crisis at LTCM, McDonough had summoned— invited," in the Fed's restrained idiom-the heads of every major Wall Street bank.Victor Haghani, a partner at LTCM, said about this time "it was as if there was someone out there with our exact portfolio,. Meriwether picked Northwestern University, in Evanston, Illinois, on the chilly waters of Lake Michigan, twenty-five miles and a world away from Rosemoor. of him, mainly, that the bankers had agreed to give financing to Long Term-and had agreed on highly generous terms.

The successful plan, the subsequent default and disintegration of LTCM did not harm the market as a whole. They use academic calculations and guesswork and state-of-the-art computer software to identify opportunities and capitalize on them quickly.They had programmed the market for a cold predictability that it had never had; they had forgotten the predatory, acquisitive, and overwhelming protective instincts that govern real-life traders.

These rules are the catechism of bond trading; they ordain a vast matrix of yields and spreads on debt securities throughout the world. These blinks will provide you with an important reminder that no company, no matter how important, can hope to cheat the market.Because of the loosening of the law, hedge funds become a hot but also dangerous and risky bait in the eyes of investors. LTCM was founded in 1993 by a group of trading and intellectual “geniuses” that included Nobel Prize-winning economists, such as Scholes and Merton, as well as successful bond arbitrageur John Meriwether. PDF] [EPUB] When Genius Failed: The Rise and Fall of Long-Term Capital Management Download by Roger Lowenstein.