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Politics : Formerly About Applied Materials

AMAT 223.31

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Nov 13 3:59 PM EST

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To: Ian@SI who wrote (49117)	7/12/2001 6:19:43 PM
From: Raymond Duray	Read Replies (1) of 70976

OT OT: LTCM redux Hi Ian, Re: LTCM folk - They, and especially Merriwether, seem to have an uncanny knack for landing on their feet. I'm curious about your take on the imitators among LTCM's counterparties being the proximate cause of LTCM's demise. I've read Dunbar's "Inventing Money" and between that analysis and other material I've read, I would conclude that the fatal flaw of LTCM's "money machines" was the assumption that markets always return to the norm. In the months leading up to the end for LTCM as a self-administered entitiy, the premium for less-than-investment grade bonds continued to expand, confounding any historical pattern and the Russian default was an unprecedented event that no quant's algorithm could have accurately predicted. From my understanding, it was these dislocations, rather than counterparty imitation that was the proximate cause of the demise of the company. If you can point me to literature on the nature of the counterparty trades I'd be most appreciative. Cordially, Ray :)

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