When Genius Failed by Roger Lowenstein

A hedge fund launched by a veteran bond trader and former vice-chairman of Salomon Brothers with two noble laureates and an investor road show put together by Merrill Lynch had a very good chance of succeeding. Long Term Capital Management or LTCM as the fund came to be known was indeed very successful in its early years returning as much as 40% a year after fees to its investors. The book When Genius Failed: The Rise and Fall of Long-Term Capital Management is about the rise and spectacular fall of this fund.

Written by Roger Lowenstein who also wrote Buffett: The Making of an American Capitalist, the book is an eye opener and a lesson in how things can go wrong when you combine extreme leverage with financial instruments that are beyond your core area of expertise.