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Risk & ruin

When Genius Failed

Roger Lowenstein

The smartest people in the room went broke through leverage - brilliance plus borrowed money is how sure things turn fatal.

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Chapters

11
  1. Chapter 01MeriwetherA quiet, math-driven bond trader built a money machine, then left under a cloud to start his own fund.Read this chapter →
  2. Chapter 02Hedge FundThe fund launched with Nobel-caliber economists and total secrecy, so investors and banks handed it money on prestige alone.Read this chapter →
  3. Chapter 03On the RunThey earned pennies on tiny price gaps between nearly identical bonds, then borrowed enormously to turn pennies into fortunes.Read this chapter →
  4. Chapter 04Dear InvestorsSpectacular early returns bred overconfidence, so the fund pushed into markets it understood less.Read this chapter →
  5. Chapter 05Tug-of-WarAs rivals copied its trades the easy money vanished, so the fund returned outside cash and cranked up leverage to fake the old returns.Read this chapter →
  6. Chapter 06A Nobel PrizeJust as its founders won the Nobel Prize, the fund trusted models that assumed markets stay calm, continuous and normal.Read this chapter →
  7. Chapter 07Bank of VolatilityThe fund sold insurance against market swings on a massive scale, betting the calm would continue right before the storm.Read this chapter →
  8. Chapter 08The FallWhen Russia defaulted, every one of the fund's supposedly unrelated bets lost at once, and huge leverage turned losses into collapse.Read this chapter →
  9. Chapter 09The Human FactorThe fund couldn't sell without crashing the price, and frightened rivals traded against it while the models offered no comfort.Read this chapter →
  10. Chapter 10At the FedThe fund was so entangled with every major bank that the Fed gathered them to fund a rescue, fearing systemic collapse.Read this chapter →
  11. Chapter 11EpilogueThe geniuses lost nearly everything, proving the one unforgivable mistake is betting so big you can't survive being wrong.Read this chapter →

This is my own plain-English understanding of the book’s ideas, in my own words with my own ₹ examples, laid out against the book’s real chapters so you can relate the two. It is not the book and reproduces none of its text - if it helps, please buy the book. Not affiliated with the author or publisher. The author is not SEBI-registered; nothing here is investment advice.