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Thursday, August 02, 2007

Book Review: When Genius Failed

"When Genius Failed: The Rise and Fall of Long-Term Capital Management" by Roger Lowenstein is one great lesson in the perils of investing in hedge funds. Combine hot shot traders and Nobel prize winning economists, and you have a company, Long-Term Capital Management (LTCM) that was the envy of wall street. LTCM was a super-secretive hedge fund, hugely leveraged (like many of today's funds) filled with brilliant Ph.D.s and sophisticated market models. How could you go wrong? Things went amazingly well for a few years. They racked up huge returns. Their models of the market were doing great. Well, things eventually did go wrong, and LTCM endured rapid spectacular losses before being bailed out by several large wall street banks. It's a fast, easy book to read- highly recommended for anyone with even a passing interest in investing, hedge funds, and private equity.