📰 The Impact of Long Term Capital Management on Modern Finance

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Dear readers,

Today, I want to take you on a journey down Financial Memory Lane to explore the epic tale of hubris and financial peril that occurred 25 years ago. This story revolves around Long Term Capital Management (LTCM), a hedge fund that had to be rescued by a group of firms corralled by the Federal Reserve. The fund's bets were so large and used so much borrowed money that they threatened to blow a hole in the global financial system.

LTCM's roster included two Nobel Prize winners and a dream team of modern finance, which gave them false confidence in the safety of their bets. However, the events that unfolded had a lasting impact on every crisis that came after it, as well as the world of hedge funds.

Fast forward to today, and we find ourselves in a different landscape. There is a fair bit of late 1990s-style irrational exuberance present, with a sense that Wall Street analysts are whistling past the graveyard amidst the highest bond yields in 16 years. As Warren Buffett famously said, it isn't until the tide goes out that you know who has been swimming naked.

Stocks have been displaying some jitters lately, with the Nasdaq Composite down 5.9% for September. The Dow Jones Industrial Average also experienced a decline. These market movements remind us that the details of rising rates can be messy and unpredictable.

But let's not dwell on the negatives. I want to share with you some exciting articles that caught my attention:

These articles provide fascinating insights into different aspects of the financial world. I highly recommend giving them a read!

That's all for today, folks. Remember to stay informed and keep an eye on the ever-changing landscape of finance.

Best regards,

Daniel Silva

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