When Genius Failed: the rise and fall of Long-Term Capital Management
By Roger Lowenstein, Fourth Estate, £16.99stg
You can never buck the market. This much bandied cliche has been the watchword of capitalism throughout the past century. Norman Lamont took his career and sterling to the wall in the 1990s proving this point.
When a company has such luminaries on board as Mr John Meriwether, one of Wall Street's most successful bond traders, two Nobel Prize-winning economists from Harvard and a slew of the best and brightest from Salomon Brothers, one would think that this truism would be tattooed on their foreheads.
Unfortunately for Long-Term Capital Management (LTCM) and its backers, this was not the case and Lowenstein expertly and enjoyably plots how this small Connecticut firm dug a $3.6 billion hole and forced the Federal Reserve to organise a controversial bailout.
Mr Meriwether was one of the most fearsome trading warlords on Salomon's books. In 1994, out of work having been sacrificed in a scandal (not of his making) at Salomon, Mr Meriwether founded LTCM and took his disciples with him.
The principle was simple. Tame the markets with the use of hedge funds and very, very big sums of money. In this way, a small percentage profit meant huge returns - if the sums used were big enough.
For a while it worked. In spectacular fashion. Meriwether and his gang never had more than 100 clients but when these were the biggest banks in the world it meant that the amount of money involved was huge.
When the markets in Brazil, Indonesia and Russia all failed at the same time they took LTCM and its beneficiaries with them.
comidheach@irish-times.ie
