I'd like to learn more about trading Puts, as this looks like something I should really
learn more about to use as a safety net. Does anyone have anything they can recommend?
Thank you Henry for starting this thread and to everyone else with some fantastic
recommendations. Boston

Last edited on: 11-15-2007 05:50 pm

they have a documentary on LTCM look for Pbs Nova - Trillion Dollar Bet

Last edited on: 09-02-2007 01:05 pm

e) To make matters worse, numerous sovereign wealth funds, foreign governments, and
big-time banks had put their own cash into the fund. You've got to wonder: could it really
get any worse?
f) It took only 5 weeks for them to lose it all...
g) The S&P500 and the Dow both fell more than 20% in about 1 month.


That is some scary stuff. In my mind, today is not close to what was going on then...

Last edited on: 09-01-2007 10:16 pm

d) Long-Term had borrowed from practically every major bank in the world. Not only that,
but they rarely put up margin, which meant that these banks had no collateral if LTCM went
under. Thus, if LTCM went under, there was a great chance that a lot of the banks we know
today would be out of business. Literally.

Specifically, they had a $100 BILLION balance sheet. And that didn't even include the over
$1.25 TRILLION worth of derivatives contracts they were holding. $1.25 TRILLION... think
about that... There is no hedge fund that has the whole banking system wrapped around its
finger like that today... not even close...

I'll put it this way. Hedge funds now - collectively - have more than $1 trillion in
assets. Thus, LTCM blowing up was like most every hedge fund in the world losing all their
assets at the same time. What makes it even worse then was that today banks actually hold
collateral. IN '98, everyone was allowing LTCM to borrow as much as they wanted, and they
never had to put up collateral. As that book says, "if (LTCM) defaulted, nothing would be
left"....

Last edited on: 09-01-2007 10:17 pm

I don't know:

a) The LTCM implosion likely helped to create what we're seeing today.
b) Many people that I've spoken to that are long-time vets of the bond market say that
what they saw then was really out-of-this-world. There was such a demand for liquidity
that people wouldn't buy off-the-run (issues that don't trade often) TREASURIES. Plus the
U.S. had just bombed Afghanistan, Russia had just defaulted on its debt, and Clinton was
being impeached. As one 30-year vet once told me "that was the only time in my career that
I was actually really nervous."
c) A year before, we had had the Asian currency crisis, during which there was a global
credit crunch, and a # of currencies devalued by more than 40%. People in these nations
were so crushed by the events that - as of just 2 years ago - aggregate demand in most of
these countries STILL hadn't returned to the levels they were in 1996 (they're just
returning to those levels now).

Last edited on: 09-01-2007 09:49 pm

by mock portfolio (17 hours ago) - Ignore this user
. . .
The failure of LTCM really marks when everything changed. That whole period of time was
probably the greatest risk the global financial system had faced since the Great
Depression....

Last edited on: 09-01-2007 03:13 am
---

Until the present time, that is. . .

"Liar's Poker" is also good.

My favorite finance-related book: "When Genius Failed: The Rise & Fall of Long-Term
Capital Management", by Roger Lowenstein. It gives a good understanding of how smart some
of the teams on wall street are, how even a team filled with geniuses can fail, how
leverage can leave you spiraling downward, how de-levering works, how the Fed views hedge
funds, etc...

The failure of LTCM really marks when everything changed. That whole period of time was
probably the greatest risk the global financial system had faced since the Great
Depression....

Last edited on: 09-01-2007 03:13 am

Jeremy Siegel's "Stocks for the Long Run", Phillip Fisher's "Common Stocks Uncommon
Profits"

*mistake*

Last edited on: 09-01-2007 03:02 am