Rating: 
Summary: Thourough and Down-to-Earth
Review: The problem with books about financial scandals is that they tend to devolve into hype and hate-mogering. A financial player is turned into a villain, who is persecuted throughout the book. This does not happen here. Lowenstein's WHEN GENIUS FAILED is objective and avoids sensationalism. It explains well the transactions and the trading strategies that Long Term Capital Management used, how it over-did it, and how so many of its counterparties got duped into thinking it was safer and better than it really was.One of the fundamental lessons from the event, which the book illustrates well, is that the markets are comprised of people who learn. When a trading strategy works well, it will attract immitation and it will no longer be as profitable and as safe. The additional funds pursuing the same source of profits will dry it up. The additional players chasing those profits cause stampedes when they run for the exits, while a small group could avoid a crisis. WHEN GENIOUS FAILED is more than a book about a financial accident; it illustrates the futile and never-ending nature of the chase of profitable financial innovations. Yesterday's innovation is today's standard operation procedure. The faster markets become, the faster do innovations become obsolete. The Nobel-prize-winners of LTCM never figured that out untill it bit them.
Rating: 
Summary: An astonishing story of the modern financial history!
Review: I red this book as a junior majoring in finance.I have to admit that this book changed the way I view the global financial markets. It made me realize that "when you walk into a casino, Ph.D.'s don't matter".
It is a book very well written. It goes into great detail describing the history of the facts and the character of the people involved.
However, in certain cases,you find it difficult to understand if you are not an expert in derivatives or if you don't have at least some general knowledge of trading.
Rating: 
Summary: A decent chronicle of LTCM's fall
Review: This book is a pretty good telling of the story of LTCM's rise and fall. It is heavy on the personalities, and light on the technical factors involved with the failure. There are some attempts at describing the complex trades and markets, but they usually leave you wanting more. The author is quite judgemental, oversimplifying the matter by placing blame on the traders and investors who are described as greedy, egotistical, and pretty-much dumb for missing the obvious fallacy of their strategies. It's an interesting book though, and gives a lot of insight into the thinking of the people involkved
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Summary: Absorbing account, flawed conclusions
Review: Lowenstein's book traces the collapse of the hedge fund Long-Term Capital Management in 1998. It draws two cautionary lessons, one relating to financial markets and one more widely applicable to human affairs: first, there are inherent limits to the usefulness of models based on historical data; secondly, there are inherent limits to human intelligence ' even Nobel Prize-winning intelligence ' when it is not tempered by judgement. Lowenstein maintains that LTCM's models had an excessively narrow concept of risk, interpreted as volatility around the mean. Historic volatility proved to be an inadequate guide ' and in the autumn of 1998, no guide at all ' to future volatility. He states that a more relevant measure of risk for LTCM, unacknowledged by its partners, was leverage: the position size was too big. In the autumn of 1998 - when Russia in effect defaulted on its sovereign debt, and markets in South-East Asia and Latin America crashed in short order ' markets became characterised by so-called 'contagion', which gave a new understanding of the risk of leverage. A highly-leveraged fund found that it could not count on being right (that is, on betting on mean reversion) eventually: it had to be right sufficiently, every day. If it was highly leveraged and its bets proved wrong, it would not be able to get to the long term. A fund could be illiquid and heavily exposed, or it could be leveraged; if it was both, it could be wiped out in a single day. This simple truth was the weakness at the heart of LTCM. The company's models indicated that they were unlikely to lose more than about $40 million on any given day; in two days, in August and September 1998, they lost more than $500 million on each day. Lowenstein's account is fascinating; he focuses on the irony that LTCM's strategic rationale was the management of risk, yet in practice the company ended up speculating and lost. But this is where his argument goes awry. He argues that this experience 'betrayed the flaw at the very heart ' the very brain ' of modern finance'. Yet the evidence contained in the book suggests the opposite conclusion. Modern finance teaches that you cannot earn 40% a year without some risk of losing a lot of money; LTCM's experience confirms that. Indeed, Lowenstein makes two further points that are perfectly consistent with modern finance. First, LTCM's weakness was not its strategic rationale or its models, but its management procedures: there was no independent check on the traders. Perversely, LTCM increased its leverage as spreads narrowed ' as if borrowing more would turn an unsound business into a better one rather than a still-riskier one. Secondly, while LTCM's diversification strategy ostensibly proved of little value, as markets crashed simultaneously, in fact the company's investments were less well-diversified in practice than in theory. LTCM had in effect taken the same bet ' on lower-rated bonds ' but done so in so many permutations as to give the illusion of diversification. Diversification it might have been; efficient it was not. The experience of LTCM should in no respect be taken as an indictment of the role of financial markets in allocating scarce resources to productive uses, or of modern financial theory - whose insight it confirms rather than refutes.
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Summary: Dont' wait for the movie, read the book!!
Review: Not many places on earth are under the microscope as intensely as Wall Street (I know because I work for one of its largest firms). Its history is filled with speculation, greed, fear, made fortunes and lost fortunes. The bond-trading firm Long Term Capital, staffed with some of greatest financial and mathematical minds in the world (including Nobel Prize winners in economics), helped write one of the most unique chapters in Wall Street history by bringing the world's financial markets to the brink of chaos. Roger Lowenstein does an admirable job of depicting the events surrounding the rise and fall of LTC, one of the most compelling investment firms of its time. Be aware: this is not an easy subject. Long Term Capital used very sophisticated investment models (without the number crunching power to today's computers LTC would surely not have been able to do what it set out to do) to drive their results. Lowenstein's work is not an analysis of these models but the story surrounding the personalities involved in this event (I believe one day text books will emerge detailing the nuts and bolts of LTCs strategies if enough of the inner workings of the firm are divulged...which may not happen!!). The reader learns how the Federal Reserve came to the rescue and which Wall Street firms remained calm enough to help save us from themselves. Personally, I found this book intriguing and finished it within 48 hours. Having some knowledge of how the financial works will enhance your read. Don't buy this book to learn the LTC way. But it for what it is: a quality work on the inner workings of Wall Street and Fed when the lights go out. If you believe greed and arrogance rules 'The Street' then this classic tale is worth the investment.
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Summary: More Pulitzer Less Nobel
Review: A brilliant book, covering a wide range of Wall St. topics from arbitrage to risk management to the unsettling revelation that sometimes the "Invisible Hand" means that no one's really in charge. The author's brilliance is in communicating a technically dense series of topics through personification and anecdotes which can readily be understood by anyone with passing familiarity with CNBC. A fascinating read with real substance.
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Summary: Logicians Snared in their Lair
Review: By now Long-Term Capital Management's tale is well known. A group of hot bond arbitrage traders joined forces with a pair of future Nobel Prize winning academics to form a hedge fund that promised it had conquered the ogre of risk. As profits grew, greedy bankers and brokers stood in line to provide financing on the finest of terms. Yet, like other speculators before them, they failed. The markets, as G. K. Chesterton wrote, lay "a trap for logicians . . .. It looks just a little more mathematical and regular than it is; its exactitude is obvious, but its inexactitude is hidden; its wildness lies in wait." While the hedge fund's history is familiar, Lowenstein's conclusions are worthy of examination by both historians and investors. 1. Long-Term Capital Management's (LTCM) profits look less impressive in light of the losses that followed. The "profits" used by bankers and brokers to justify their loans and investments in the fund were not "earned", merely borrowed against the day the tide turned. 2. LTCM saw the cycle was turning, yet refused to limit its exposure. As spreads markets withered, the partners opted to increase their leverage to maintain returns. 3. The fund had faith in diversification. Its history serves as ample notification that eggs in different baskets can and do all break at the same time. 4. One can be big - read illiquid; one can be leveraged, but to be both is begging for trouble. No one can be right every trading day. 5. Traders are not computer chips. They are motivated by emotions; they run in herds, they retreat in hordes. Uncertainty will never conform itself to a numeric straitjacket despite the risk defining desires of the academic community. This book tells a timeless tale. Markets are cunning animals, there to exploit investors' mistakes and hubris.
Rating:
Summary: Slightly Disappointing
Review: This is a good book, but it's not as good by any means as the same author's Warren Buffett biography, or more important, it's nowhere near as good as Nicholas Dunbar's Inventing Money, also about LTCM. The problem is that the author, although in fairness he probably does understand the arcana that made up LTCM's strategies, does not have the fluency in the language required to explain them to the reader. Dunbar, on the other hand, deals thoroughly with all the background and history in a way I found quite remarkable in its lucidity. Lowenstein's approach is too journalistic and insufficiently rigorous to do justice to a fascinating subject. By all normal standards, this is a good story well told. Unfortunately for Lowenstein, someone else was writing the same book at the same time, and doing a much better, in fact an outstanding job.
Rating:
Summary: Well written book
Review: Lowenstein brings a well written perspective delving into the personalities that shaped Long-Term Capital Management. He brings a "human" dimension to the abstract world of theories behind trading bonds and derivatives. Mainly, take this book as a story of individuals who charmed Wall Street based on their mystique alone. John Meriwether, one of the partners of the firm, orchestrates the relationships between his firm and the investment banks with whom he would do business. The firm eventually manages to trade carte blanche with all of them and not have to make any concessions in return. This story shows that even in the sophistication of high finance, bankers and hedge fund managers alike can become jaded with the reputations and intellect of the partners who made up Long-Term Capital Management without protecting themselves or scrutinizing the plans of how they intend to make money. Don't attempt to try to understand the mechanics of how Long-Term made money because the book doesn't try to explain in detail of how they made so much money at first, although Lowenstein does explains the basics. However, try to understand the context of how these trades exposed them to risks and how these risks took them down in the end.
Rating:
Summary: Hindsight is a wonderful thing
Review: As a lender, it was easy to approach this book from the viewpoint of 20:20 hindsight, so "Of course this situation should never have arisen". However, Lowenstein actually offers a vivid account of the LTCM business as it developed, and the characters involved, to a point where you can actually see how easy it was for bigtime investment bankers to get lured into the false sense of security that the elegant financial models engender. Clearly, it was crazy to stake everything on a sequence of bets, escalating in size, about changes in spreads and share prices. All the more so using multiple leverage techniques of debt in the fund, debt on equity in the fund, and derivative positions off the balance sheet. But, on the other hand, the models had cred and the people behind LTCM were as close to financial market gurus as you would hope to find. A salutary lesson in why hardened credit people must not drop their standards of disclosure and risk, but written in a very digestible style. I couldn't put the book down until it was done!
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