History repeats. It just looks different

September 1998 is when the star-studded hedge fund Long Term Capital Management (LTCM) was wound up. Large institutional investors bailed it out. One bank – Bear Stearns,  refused to participate.

A decade later, Bear Stearns was bought over by J P Morgan Chase. Trouble at the bank had started after two of its hedge funds got into trouble.

Reason for failure of LTCM – derivative trades using leverage

Reason for failure of Bear Stearns’ hedge funds – derivative trades using leverage

History repeats. It just looks different.

#RidingTheRollerCoaster – 245

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