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To: Jon Koplik who wrote (123733)	9/3/2002 1:35:40 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 152472

I still maintain (I have posted this before) that LTCM's true "achille's heel" was a combination of : being under-margined (for the massive size of their positions) this is well documented. they were working on effectively 100 times leverage. however, it was not that simple. or at least, it wasn't supposed to be that simple, except... and having the rest of the securities industry "ganging up" on them by this only happened after the fact. the fact being that they were going to be liquidated. the timing of who knew what when was documented extensively in "When Genius Failed". by the time people started betting against LTCM, it was already GAME OVER. however, one of the big problems with their system was that they assumed that their positions would remain liquid, so that they would be able to close out in the event of distress. their positions had been carefully calibrated to have low covariances so that if one thing was tanking, other things wouldn't tank. but they hadn't backtested (indeed, had been unable to backtest) the systemic stress that could result if they started liquidating their positions en masse. so it was their own fault. it was only after they had dug their own grave that the vultures piled on for the sucker punches. at least according to Lowenstein (author of the book "When Genius Failed", which is required reading for anybody interested in the LTCM tale).