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When Genius Failed: The Rise and Fall of Long-Term Capital Management (平装)
by Roger Lowenstein
| Category:
Hedge fund, Bond trading, Greed, Risk, Financial markets |
| Market price: ¥ 168.00
MSL price:
¥ 138.00
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MSL rating:
 Good for Gifts |
| MSL Pointer Review:
An excellent engrossing story of finance, greed and ego and a riveting account of the life and death of a business in a tragical way. |
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AllReviews |
1 2   | Total 2 pages 12 items |
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Publishers Weekly (MSL quote), USA
<2006-12-24 00:00>
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 $1.25 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. |
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The Economist (MSL quote), UK
<2006-12-24 00:00>
This book is story-telling journalism at its best. |
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Barron's (MSL quote), USA
<2006-12-24 00:00>
Strongly reported and cleanly written... Lowenstein adds fresh detail, personality, and even drama to the tale. |
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A reader, USA
<2006-12-24 00:00>
Turning topics like bond arbitrage, volatility selling, and "flight to liquidity" into a crisp, condense, top-selling book is probably Lowenstein's crowning achievement with When Genius Failed. He's a very talented writer with a knack for fleshing out a diverse array of colorful characters, and that makes this book appealing both to the interested layman, as well as all but the most curmudgeonly financial professional.
The book takes us back to Saloman's bond arbitrage desk, where the enigmatic John Meriwether first mastered some of the convergence strategies he and the brain trust would later use to great effect in Greenwich.
Then we learn some about how the fund's management was constructed, all the various places they drew money from, and ultimately observe the masters in action, placing their token efficient market bets that yield spreads just couldn't get any wider. All this leads up to 1998, where even early in the year certain cracks in the hull began to appear; namely concerns over vanishing opportunities in the bond arbitrage market (the rifraff had become wise to some of the professors' token strategies, thereby eliminating their effectiveness), and LTCM's extensions into fields beyond its expertise, particularly merger arbitrage. All this leads to the perfect storm of 1998, when the fund's short volatility positions exploded in a summer storm of apocalytic proportions. Lowenstein chronicled the actual debacle superbly.
One quibble is Lowenstein's cautioning reptition of how dangerous it is for traders/investors to use historical patterns to get a read on how the market might look in the future. While I agree that it's dangerous to bet 10,000% of your equity on the likelihood of a particular pattern repeating, one can't really trade without a healthy understanding of historical precedent. In the financial markets, history does repeat itself more often than not. So, I think LTCM's debacle was more the result of its gargantuan margin than a horrible, fatal flaw in its trading models.
All that aside, this is a great book, as fun to read as it is informative. Highly Recommended. |
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Lee Carlson, USA
<2006-12-24 00:00>
Were the individuals who initiated and ran Long Term Capital Management geniuses, as the title of this book indicates? When reading the book, the reader is led to believe, via their quoted statements, that they themselves thought they were geniuses. Did the eventual behavior of the markets convince them otherwise? Did the downfall of LTCM inject them with an overwhelming dose of humility? Without knowing them this would be hard to say. But one can say with a large degree of confidence that no amount of intellectual ability will negate the fact that the financial markets are a collective, emergent entity. The markets do not care about the accolades or credentials of the traders that invest in them. The only reason for displaying these credentials is to convince investors to take part in a financial scheme, whether it is a private investment group, a new business, or some other entity that requires expertise in finance. When reading this book, it is apparent that the prospective investors in LTCM viewed its proprietors with an uncritical adulation, and did not ask the probing questions that they should have before they made the decision to invest. They should have ignored the fact that a few of these proprietors were their former professors or tutors, and concentrated instead on the content of their proposals, for it is only this that is relevant. If indeed the investors were overly impressed by the titles and awards possessed by the members of LTCM, then they clearly made a mistake. They should have only been concerned with the content of the proposals made by LTCM. If they did not have the mathematical knowledge to understand the proposals, they should have either obtained it on their own or have withdrawn their investment. The list of investors is quite amazing when viewed in retrospect: Sumitomo Bank, Dresdner Bank, Liechtenstein Global Trust, Julius Baer, Republic New York Corporation, Banco Garantia, Michael Ovitz, Phil Knight, Robert Belfer, James Cayne, St. John's University, Yeshiva University, University of Pittsburgh, Paragon Advisors, PaineWebber, Donald Marron, Black & Decker, Continental Insurance of New York, and Presidential Life Corporation are examples. The interest of these institutions and investors is fascinating given that derivatives trading and sophisticated mathematical modeling was relatively new at the time. Their decision to invest therefore had weak historical precedent, and therefore it is easy to believe the author's contention that this decision was based on their uncritical adulation of the LTCM members. The "mystique" of these members was taken "to a very high extreme", writes the author.
The author attempts to give the reader insight into the personalities of the LTCM members, and his descriptions of them work to a certain degree. Such insight is necessary to gain a proper understanding of their behavior. But a description of their overt behavior and demeanor still leaves the reader wanting as to whether their appearance, i.e. the way they portrayed themselves to others, did reflect what they truly believed inside. Was their behavior part of their salesmanship, a conscious strategy to portray themselves as savvy business people who had great insight into the workings of the financial markets, masking their hidden insecurities on these workings? Or was their behavior reflective of what they truly were, i.e. individuals who through their training in finance and mathematics, were confident in themselves and in the concept of LTCM. For example, was John Meriwether indeed a quiet, private individual with a "steel-trapped" mind as the author portrays him, or was this merely a facade that Meriwether thought would give him a sphinx-like aura of mystery? And if the latter is true, why did Meriwether think that such behavior was necessary? What historical precedent did he follow in this regard? Does such behavior result in better financial contracts? A better understand of the markets? The markets of course do not care about the personalities of the traders that participate in them. The markets do not hold any special affection for a James McEntee, who "traded from his gut." Nor do they care about the commentary of a Seth Klarman, who accused the mathematical models of LTCM as being blind to "outlier events." And they certainly do not respect the boasting of a Greg Hawkins, who proclaimed that LTCM made more money because its members "were smarter."
The book is interesting even from a contemporary perspective, in that it brings out the still ongoing tension between those who prefer a more mathematical/ scientific approach to trading and those who "trade from the gut." The financial modelers still refer to the latter as "uniformed speculators", "noise traders", or "nonscientific, old-fashioned gamblers." The gut-traders still scold the modelers as a "dressed-up form of gambling" or as "pure academics" and "not applicable to the real world." The debate between these two groups though is evolving, due in part to the rapid automation of the financial markets. More trust is being given to machines that can not only crunch the numbers but can also exercise the "intuitive judgment" that some traders still insist is the way to go in trading. It will be interesting to see if these machines can deal with the markets in a manner that is superior to what humans have done for centuries. Genius arising from silicon will compete with genius arising from carbon. But one thing is certain: if machine trading results in instabilities in the markets, with huge losses to the institutions that own them, there is little doubt that these failures will be protected by the same boards of governance that rescued LTCM. To paraphrase the author, high finance rewards success, but in the twenty-first century, failure will be protected as well. |
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A reader, USA
<2006-12-24 00:00>
In a world of essentially infinite electronic money, investment has become musical chairs with an amusing twist. Imagine the childhood game in which players collect a dollar a minute for as long as the music continues, and are enticed to secrete their reward in the bowels of one or more of the chairs. The chairs as a group are viewed as a perfectly safe haven because as long as the game has been played no one has ever snatched away more than one chair when the music stopped, and even players who were compelled to retire got to keep what they had stashed in the remaining chairs.
The chairs in fact are so safe that over time they became repositaries for the savings of the middle and upper classes, who have only the vaguest idea of how the game works but see the chairs increasing exponentially in value because the game continues twenty-four hours a day and the profits of the players "have to be somewhere". From the sidelines they rush into the area with fists full of dollars, making the chairs increasingly cushy places for the exhausted players, from time to time, to sit.
An entire professional class emerges for the purpose of guiding the pecuniary class from chair to chair, its members evolving a devout enthusiasm for vague and essentially untestable principles of selection which have the advantage of rewarding them with substantial fees and commissions, whether their choices turn out to be fortunate or unfortunate. Moreover, for years on end, there is so much money deposited into all of the chairs that only the churlish who refused to diversify succumb to a loss of their entire fortune. Accordingly, their whining is ignored by everyone except Ralph Nader, who is dismissed as a man who wears white socks with a dress suit.
The game becames so popular (and so profitable) that mathematicians and physicists from Harvard abandon their professions and devote their energies to an analysis of musical chair history, in order to discover which of the chairs is most and least likely to vanish from time to time, respectively. In a manner of months, they realize that provided the chairs continue to be snatched away in the future as they had been snatched away in the past (i.e., in a rational manner), fortunes can be made by capitalizing on temporary increases and decreases in chair popularity, occasioned merely by chance.
Meanwhile, bankers, adrift in a world of diminishing interest rates are persuaded to replace lending with making bets among themselves as to which of two chairs will vanish first. Being prudent men they seek in the manner of bookmakers to lay off their bets in such a way as to be "risk neutral", and live off the vig. The more they bet the less profitable the betting becomes, as the spreads narrow. Their solution is obvious: double (and triple and quadruple, etc.) the bet!
Anyone looking at the game from the outside will ask a simple question: what happens if all the chairs are snatched away simultaneously? Analyzing the potential for disaster of financial derivative trading is slightly more complicated. Here, the essential problems are two: first, there is no limit to the size of the bets our institutions are empowered to make (and no way to determine how high their exposure is), and second, every player's asset is another player's liability. If any major player stumbles in the wake of an unlikely event, he must be rescued by the community to avoid a situation in which multiple players hold unenforceable one sided contracts as protection against their own disaster.
Moreover, when a major player finds himself long assets of rapidly diminishing value (like Russian bonds) it must liquidate assets of unquestionable value (like shares of Dupont) to satisfy collateral demands of customers. If the leverage is high enough a single drunk driver can wipe out the City of Boston, As Lowenstein explains, Russian capitalists did more damage to the American financial system in two years of kleptocracy than the Communist dictatorship was able to accomplish in forty years of Cold War.
Alan Greenspan, our presiding Dr. Pangloss, is asked about derivatives regularly at Congressional Hearings which only occasionally are attended by Senator John Corzine, the only American Politician having even the most remote idea as to the meaning (if any) of Dr. Greenspan's explanations. I often wonder what Senator Corzine is doing with his own money.
Those who for reasons of intellectual curiosity (or financial survival) are concerned about the possibilities of derivative trading would do well to read this book and one other: Fooled by Randomness, by Nassim Taleb. Both are wonderfully literate explanations of what can (and most probably will) happen to our securitized economy in which idiots playing heads they win, tails we loose are empowered to trifle with the public's money. If there is a non-political solution to this problem no one has yet come up with it. Meanwhile, I sit at my computer with trepidation, on the lookout for a black swan. |
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R. Shaff, USA
<2006-12-24 00:00>
When Genius Failed is as I've described in my title...the classic example of the fear and greed that grips all of us (at one point in time or another) when it comes to money. The simple pomposity of our egos and how small we can actually become when it's proven, as it is over and over, that we cannot control the capital markets. No gimmick, no software program, no "next best thing" is going to make a difference long term. The market moves as it will, predictable at times, and unnervingly random at others. When Genius Failed is such a prime example of this "malady," that I would arguably offer it as a requisite for anyone making any sort of financial, economic, or market-based decisions. Yes, this covers broad territories, but this book, and its corresponding lesson, is both sad and fantastic. On to the review...
John Meriwether, the founder and leader of LTCM, became a star at Salomon Brothers, where he was one of the top bond traders, and ultimately became head of the fixed income securities department. Meriwether, while a Wall Street boor, was not necessarily one of the pompous elite, but he was very good, very meticulous, and very disciplined in his trade. Meriwether felt most bond trading, as it related to the markets, could be reduced to mathematical terms (high-level quantum calculus to be sure), and thus, a software program could be constructed to provide the necessary algorithms (assuming proper attribute input) to predict the move of the markets. As such, Meriwether was one of the "trailblazers" associated with bringing mathematicians and physicists from top-notch schools to become the heart and soul of a new bond trading model. This model would be built with a foundation of logic, mathematical principles, historical trend arrays, and simple, unemotional statistics. However, like most models producing reasonable results, emotion begins to cloud the attribution input, and in a flash, your "Vulcan-like" model becomes all to human.
Meriwether, through a variety of events, began to see the need and potential for a hedge fund, whose sole purpose would be to capitalize on the fixed income markets using the models created by his financial/mathematical wunderkind. In 1994, LTCM was founded, and the ride, and ultimate crash, began. The hubris of LTCM, which would become infamous on Wall Street, was illuminated by Meriwether's first principle: because investors in LTCM were getting the best and brightest of Wall Street and academe, LTCM would charge investors over double the normal and customary management fees associated with a fund of this nature. Those privileged enough to be ultimately chosen as investors didn't mind; they were all too eager to throw their money at a "sure thing."
The players in this game, those that gave it panache (besides Meriwether), were Robert Merton and Myron Scholes. While partners of LTCM, and just months before the LTCM implosion, Merton and Scholes were jointly awarded the Nobel prize in economics. This award was proof positive that the brightest minds equate to financial success...at least that was the spin at the time. In technical terms, LTCM was set up to profit from irrational disparities in valuation inside the bond market and other derivative markets. LTCM made famous the assumption that these disparities occurred randomly in a normal distribution pattern, which was hailed as correct by most financial academe. Net, net, Merton and Scholes believed they could profit from the ostensible continual nature of markets, and the ostensible predictability of the volatility factors in those markets. Because of the nature of the bond (fixed income) markets, profitability at the individual trade level is incredibly small. Consequently, to ensure the bongo profits it envisioned and proselytized, LTCM endeavored to maximize size the size of each trade, and (this is important) maximize the leverage of each trade. This two-prong approach, along with faulty conceptual reasoning about the predictability of markets, would lead to the crash of this vaunted entity. However, prior to this event, LTCM distributed galactic profits to themselves and selected investors; thus, the glamour and accolades. For the first four years, LTCM's trading strategies yielded profits unseen in the markets on any consistent basis. The fact that LTCM continued to wring these profits out of the "thin profit" bond markets made the reputation grow ever larger, ever faster. But, as the saying goes, "what goes up, must come down," LTCM was in for a rude awakening.
As previously noted, LTCM used incredible levels of leverage. For instance, for every real dollar of assets contributed by investors (capital), they borrowed anywhere from $20 to $30 to increase the size of their trades. In other words, for every trade with a 1:20 ratio of capital-to-debt, LTCM had 5% exposure to loss of its own assets, where the banks had 95% exposure to the loss. However, because banks don't lend uncompensated, and because banks don't lend without the presence of collateral, ALL LTCM's assets were pledged in each and every trade. Thus, the snowball effect of a massive level of leverage in every LTCM trade made the potential outcome fantastically large or fantastically catastrophic. The sheer size of LTCM's leveraged capital base forced them into markets with less liquidity, and thus, less potential to trade in and out upon demand.
Because of their highly leveraged positions in these somewhat arcane and thinly-traded markets, LTCM's crash was fast and furious. At the point LTCM descent began, they had positions in securities with over $1 Trillion of face value. Concurrently, and primarily because of LTCM's stellar performance record, most of the large investment banks were similarly positioned (though not as leveraged and not with positions even closely approaching LTCM) and were losing hundreds of millions of dollars weekly and monthly. Although disparate in nature and always fighting for the almighty dollar, the Fed (Federal Reserve) and Wall Street heavyweights grew increasingly concerned that if LTCM began experiencing the massive losses felt by almost all investment banks in this space, or, even worse, defaulted on their contracts, it would cause chaos unseen in capital markets. This concern was prescient.
As expected, the thinly-traded markets, and the bongo levels of leverage sent LTCM into a tailspin, following its investment bank brethren. The Fed, along with a group of banks and investment banks infused $4 Billion into LTCM. In return, this group took possession of LTCM's market positions. The investors and partners effectively were sold out of their interests in LTCM for Nothing. Yes, although they had experienced massive profits years earlier, they now were totally eviscerated.
LTCM's arrogant bets coupled with unseen leverage and relatively low capital caused an implosion of historic proportions. For competitors and the Fed to involve themselves in a bailout of LTCM, the potential effect of an LTCM death spiral and its effects on the markets was fear incarnate. Miscalculations by the stellar minds at LTCM were not necessarily the primary issue; the primary issue revolves around the hubris associated with pairing their concepts of market attributes to derivative markets. These guys felt "above the law," as it were.
For those uninitiated to financial markets and accompanying jargon, this When Genius Failed will be a tougher read. It is however, a fascinating story even without that requisite knowledge. Regardless, this is an important read, a historical read, if you will. For college level students majoring in business, finance, accounting, and economics, this should be required reading, as it presents the primary basis for capital market principles, attempted manipulation, the effects of a non-discriminatory market, and ultimate folly of even the greatest of minds. Highly recommended. |
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Victor Lan, Singapore
<2006-12-24 00:00>
The collapse of Long-Term Capital Management (LTCM) in 1999 tells the story of how financial markets all over the world are so interrelated with one another; the irrational behaviour of traders and investors and how the Federal Reserve orchastrated one of the biggest rescue in its history.
LTCM was a hedge fund setup by John W. Meriwether who was formely a star trader at Salomon Brother's arbitrage group. As a hedge fund, it is like a private firm, free to do what it likes as it is not regulated by the authorities. Many of the partners of the firm were people who were the cream of the crop from the financial world- which included two Nobel Prize winning economist and a cadre of Wall Street finest.
In August 1998, the Russia government devalued its currency, defaulted on its domestic debt and declares a moratorium on payment to foreign creditors. LTCM which has a substantial holding of russian debts suddently found itself in the begining of a crisis. There were problems in emerging countries and the crisis suddenly spread to other parts of the world. LTCM which was heavily leverage (borrowed massively against its assets), was losing money every day from its investments. There was a "flight to quality" as investors withdrew their money and bought U.S. Treasury bills (which was the safest financial instrument, backed by the United States). Traders and investors were dumping whatever investments they had and running towards the safest.
Diversification did not help as the correlation between various markets and instruments moved together. LTCM which was betting the spreads to close, instead found itself facing spreads that widen every day, causing it to lose millions. It had started the year with $4.67 billion suddently, it was down $2.9 billion and losing millions every day.
Realizing the implication of the impending diaster that might have bought the whole financial market down with it, the Federal Reserve moved to stage a massive rescue by bringing together all the biggest investment banks in the U.S., including some from Britian and France to help to pump in $3.65 billion in total to rescue the failing hedge fund. It was the first and the biggest bail out of any financial institution by the coperation of so many top-tier banks. If the money came in late by days, LTCM would have collapse, bringing the whole financial market with it.
Greed, has bought down not only this hugely successful fund but possibly the whole financial market with it. Even for geniuses, their confidence and appetite for recognition and wealth grew so great that they became disillusioned with their ability. |
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Jerry Sanchez, USA
<2006-12-24 00:00>
This short book tells the story of the rise and fall of Long- Term Capital Management during the second half of the 1990s and the Wall Street investment banks that came to Long-Term's rescue. The author does a great job recreating the events through interviews with the key players and news coverage at the time, and the story he tells is beautifully written. I was mesmerized, wanting to know what happens next. I don't remember the event when it actually occurred because I was out of the country at the time and failed to follow the events on Wall Street. But now that I am working on Wall Street with an interest in private equity, I realized quickly that I needed to learn from other people's previous mistakes.
In short, this book is about how a small group of economic and financial geniuses raised an incredible sum of money in a short time, betting that the past was indicative of the future. The author argues, however, that the traders at Long-Term failed to account for the human factor and the fact that the market is not always rationale. In only a few months, the fund's billions had disappeared and the titans of Wall Street, which were all intertwined with the fund, had to step in under the auspices of the Federal Reserve to avoid a financial disaster. Once bailed out, the Long-Term traders brushed off the events of autumn 1998 as a fluke that occurred only once every hundred years. After completing the book, however, I am convinced that is not the case. Anyone willing to bet all they have on limited information with the result resting on numerous variables is bound to fall sometime - even if it's only twice a century. |
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Declan Heyes, Japan
<2006-12-24 00:00>
- Inventing Money: The Story of Long-Term Capital Management and the Legends Behind It. By Nicholas Dunbar.
- When Genius Failed: The Rise and Fall of Long-Term Capital Management. By Roger Lowenstein. Random House .
Long Term Credit Management's demise is one of a number of recent high profile collapses involving the world's derivatives markets. Other recent ones include those of Sumitomo's chief copper trader, Yasuo Hamanaka, who lost $1.8 billion during a decade of unauthorized dealing and price manipulation in the copper market; Orange County's $1.7 billion loss on risky, highly leveraged investments on the direction of interest rates; Metallgesellschaft's $900 million loss on crude oil hedges; and, of course the activities of Nicholas Leeson, Baring's infamous Rogue Trader.
All of these cases throw forward lessons I use in my Futures and Option classes at Sophia University. Important though they are, the main textbooks remain those written by such Nobel Prize winners as Robert Merton and Myron Scholes. The irony is that both of these geniuses were centrally involved in LTCM's demise. Despite their faux paus, their works remain seminal. They are brainy guys. Unfortunately, brains are not enough. Genius sometimes fails.
LTCB was actually very short-term focused. Their assets consisted of a gigantic pile of extremely short-term pieces of paper leveraged to an unimaginable degree. They bought vast amounts of government paper and borrowed even greater amounts to pay for it. When Russia's markets collapsed in 1998, so did LTCM. The bank's complex mathematical bets on discrepancies in values amongst different bonds and derivatives came dramatically unstuck. Its US$7 billion capital base was eroded overnight. Most of LTCM's bets were in credit spreads, particularly European ones in the run-up to European monetary union. Essentially, LTCM held two different instruments - usually Italian, Greek or Danish bonds - and bet that the spread between the rates they offered and their German and American equivalents would narrow.
When the Russian government defaulted on its debt, credit spreads in all markets widened suddenly and spectacularly as investors stampeded into the safest of safe havens. Investors fled Italian bonds, Brady bonds and every other relatively risky bond that LTCB depended on for sustenance. Borrowings had put LTCM's total exposure at more than US$100 billion, more than fourteen times its equity base. Most of this money had been sunk in derivatives. As its positions worsened, its daily margin calls bankrupted it. LTCB made the cardinal mistake of not cutting its losses. It threw good money after bad, believing that its fortunes would reverse. They didn't. Unable to meet margin calls, LTCB asked the US Federal Reserve Bank to bail it out. The Fed, afraid that LTCM's collapse might imperil the world's entire system, duly obliged.
Because LTCB was comprised of Wall Street's best and brightest, there are lessons galore to be learned here for students and practitioners alike. Unfortunately, these two books do not do full justice to the lessons this case brings out. Lowenstein is a very successful American financial journalist and his book is by far the easier to read. He discusses the main characters involved in the debacle. Unfortunately for him, most of the main players have no real personalities to speak of at all. They are the so-called rocket scientists, the guys and gals with the quantitative expertise necessary to implement the complex strategies LTCM's Nobel Prize winners devised. To do them justice, one also needs a quantitative background. And because Lowenstein lacks this background, his book, though an enjoyable read, is peppered with potentially serious mistakes. And, in the world of derivatives, mistakes can be extremely costly.
Dunbar has the quantitative background Lowenstein lacks. However, Dunbar wanders far from this. He discusses such irrelevant things as the role Chicago's grain markets played in America's civil war. He also spends more than half the book explaining how option pricing developed and the key role Scholes and Merton played in that process. Countless other books and articles, including those by Scholes and Merton, do this much better. Dunbar's book should have concentrated more on LTCM's collapse - he spends les than 50 pages on it - and less on America's Civil War.
Therefore although Lowenstein's book is stronger on the human side of the LTCM debacle, Dunbar's is more technically correct - even though it has also considerable shortcomings in that regard. If Hollywood had to choose between them, it would choose Lowenstein's book. However, Hollywood aside, neither will notch up significant sales in academia or in business circles. Academics and practitioners will continue to plump for the penmanship of Merton, Scholes and their like. At least they have the theory right, even if they sometimes get the practice wrong with the devastating results LTCM's demise typifies. In the end, the faulty scholarship evident in both books and the faulty strategies propounded by both Nobel Prize winners drive home the old message of caveat emptor, buyer beware.
(A negative review. MSL remarks.) |
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