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Minyan Mailbag - About LTCM



Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next column with that very intent.

Hi John,

I managed to scan the book, When Genius Failed: Rise and Fall of LTCM. I do not know if anyone would have done differently than Greenspan at that time.

After that Greenspan had a wonderful opportunity to regulate derivatives trading and control the risks of any such event happening in future. Now I understand in different light about why Warren Buffet calls derivatives "the financial wapons of mass destruction."

I hear all kinds of rumors about American Int'l Group (AIG) these days. So far they are just rumors, but who knows how deep the problems are. I am not sure how long they can keep this monster in check when we already have let it out of the bottle...

Sorry just a rant, but could not help but write to you when I am reading this LTCM book. I think I also now understand you when you say "you do not trade your gold."

Minyan Suhas


I have written the AG at the time had to do what he did to stabilize the stock market because the whole system was ready to collapse. I only fault him for not tightening margin requirements afterward and then his subsequent lapse into "monetary lunacy." I firmly believe that monetary expansion should only accommodate the financing of productive assets, not the prices of financial ones.

AIG I know to be one of the largest derivative dealers in the world, closely behind JP Morgan (JPM). There could definitely be trouble there in a cascading situation.

Prof. Succo

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