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"The Barbarians At The Gate" For The 1990s, 18. September 2000
This book reads like a horror story: we know John Merriwether and his arbitrageurs shouldn't ratchet up their leverage again and again but we can't tear our eyes away when they do it. Already knowing what ultimately happens to the Fund does nothing to alleviate the suspense and trepidation as a wave of panics begins to richocet from seemingly unrelated financial markets to trigger a worldwide financial crisis with LTCM square in the middle. Lowenstein's detailed description of the daily losses the Fund experienced will take your breath away.
All in all, this book provides a vivid portrait of how sensible, seemingly "safe" investment strategies can go terribly wrong when greed overcomes prudence and positions are pushed to the limit. Yet LTCM is not the only one who comes off bad here: Goldman Sachs is portrayed as shameless front-runners, Alan Greenspan looks like he is more out of touch than Ronald Reagan and Wall Street brokers and bankers appear as rational as rabbits in heat as they fall over themselves to extend credit to LTCM without charging hardly any margin whatsoever. This "easy credit" is what let LTCM leverage their assets up to an incredible 100X by the time of their downfall.
I promise you this: "When Genius Failed" will become "The Barbarians At The Gate" for the 1990s. And it will rightfully go down as one of the best books of business history of the last 25 years.