Long-Term Capital Management’s Pamphlet

Source: LTCM

If you like financial history, this piece of marketing is too good not to share. Thanks to François Denault, a value investor from Montreal, for the find. Here’s the pamphlet of Long-Term Capital Management (LTCM)’s marketing pamphlet. The stock photos are absolutely ridiculous. I can’t imagine anybody working there looking like that. If there’s a museum of ridiculous financial artifacts, this should be up there.

For the younger readers of this blog, Long-Term Capital Management (LTCM) almost brought down the financial system in 1998. LTCM was founded in 1994 by John W. Meriwether, the former vice-chairman and head of bond trading at Salomon Brothers. Again with the financial history, what happened at Salomon Brothers wasn’t pretty either. You may remember Meriwether from such books as Michael Lewis’ Liar’s Poker, in which Lewis painted his old boss as a high-stakes gambler (read it if you haven’t). Anyway, John Meriwether, the investment wizard (gambler/speculator), assembles the “dream team” of Wall-Street, which included two economists with a Nobel prize and the Vice-Chairman of the Federal Reserve. The best of Wall-Street under one roof.

Source: LTCM

Initially successful at first, LTCM used a highly leveraged strategy that backfired following the 1997 Asian financial crisis and 1998 Russian financial crisis requiring financial intervention by the Federal Reserve. By 1998 LTCM had amassed about $125 billion in debts against $4.7 billion in assets, and the notional value of its derivative positions had ballooned to well more than $1 trillion. On the eve of the bailout, LTCM’s leverage ratio had ballooned to 50-to-1, but investor flight further reduced the firm’s capital base before the bailout could calm the herd. The Federal Reserve of New-York organized a $3.6 billion bailout because LTCM’s failure could cause a chain reaction in numerous markets, causing catastrophic losses throughout the financial system. This was similar to what we saw in 2008 on a larger scale.

Source: Wikipedia and JayHenry
Source: LTCM

 

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