Monday, November 29, 2010

Mini-Review of "When Genius Failed" by Roger Lowenstein

"When Genius Failed" is one of the those books that has been "on my list" of books to read for quite some time. I finally read it, and I found it to be a story worth telling of the rise and fall of the hedge fund wunderkinder at Long-Term Capital Management. Roger Lowenstein is a rare financial journalist who understands the power of good story-telling. He delivers a very readable account of the roller-coaster ride experiences by those in and around bond arbitrageur, John Meriwether, as he built Long-Term Capital into a $100 billion juggernaut that came crashing to earth when its overly leverages positions did not survive the perfect storm that hit the world bond and stock markets in the mid 1990's.

The story, as told by Lowenstein, paints a picture of Wall Street (and Greenwich, CT) greed and hubris, and the over-dependence on slick mathematical models develop by Nobel laureate economists.

The description of the last minute maneuverings and machinations involving the Federal Reserve Bank of New York and most of the usual suspects on Wall Street reads like a fast-paced David Mamet play. The New York Times review put it perfectly when it observed that this book is "richly textured and lucid . . . a riveting account that reaches beyond the market landscape to say something universal about risk and triumph, about hubris and failure."

Now, even fifteen years down the road, the lessons to be learned are still timely and relevant.

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