Thursday, April 23, 2009

Long Term Capital Management a look back from an Insider

Wow! Great presentation! It is Eric Rosenfeld (one of the players of LTCM) speaking to Zvi Bodie's class on Long Term Capital Management Ten Years Later.

This is a DEFINITE must see. I just sat transfixed (must confess it totally changed what I had planned on doing all morning) for over an hour. I have read the books and case studies, watched a Trillion Dollar Bet, and have thought about it for hundreds of hours in classes over the years. That said, I still learned things from it. You will too.

Thanks Zvi!


Richard said...

WOW - Great video. I just showed the Trillion Dollar Bet to my MBA class. This is a fantastic follow up - it'll be in my course next fall!

Thanks for posting!

John Lu said...

Thanks, Professor.

I posted a comment on my blog:

See below for a part of it:

"And to my surprise, he sort of came clean:

1. The business model doesn’t work any more the way LTCM did it, i.e. with the kind of leverage employed. However, he said the strategy could work with no or little leverage. I agree on the first part but for the second part, I counter that the strategy thrives on leverage – similar to a mass producer which profits by volume on thin margin. Without leverage, there will be no LTCM.

2. Risk management was broken. If LTCM survived 98 crash, it wouldn’t have made it through 08. When it was a shocker in 98 with spread blown out to 100bps, one had to stare down at 900bps and tried to stay sane.

3. LTCM partners started new funds afterwards, had low teen returns and collapsed again in 08. This is no news. But what surprised me is how he spelt it out matter-of-factly. No tears and no remorse. You need thick skin to survive in the game.

But don't get me wrong, he seems to be a very nice and solid guy."