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