When Genius Failed - On the Run Summary & Analysis

Roger Lowenstein
This Study Guide consists of approximately 29 pages of chapter summaries, quotes, character analysis, themes, and more - everything you need to sharpen your knowledge of When Genius Failed.
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In 1994, the Fed raised interest rates and bond prices fell more than they should have. The thirty year Treasury bond dropped sixteen percent, which raised its yield. There was panic in the markets and investors trying to sell widened the spread further. Michael Steindardt was one of the traders that was caught. "The real culprit in 1994 was leverage. If you aren't in debt, you can't go broke and can't be made to sell, in which case 'liquidity' is irrelevant. But a leveraged firm may be forced to sell, lest fast-accumulating losses put it out of business. Leverage always gives rise to this same brutal dynamic, and its dangers cannot be stressed too often" (Chap. 3, pp. 42-43).

With their style of trading, Long-Term was in a better position than most other firms. It made good trades so the company made money. Their...

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This section contains 678 words
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Buy the When Genius Failed Study Guide
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