In this episode, Clay explores When Genius Failed by Roger Lowenstein, the gripping story of the rise and fall of Long-Term Capital Management (LTCM).
Founded by Wall Street’s brightest minds, including Nobel Prize-winning economists, LTCM generated astronomical returns using complex mathematical models and extreme leverage—until a financial crisis in 1998 exposed its fatal flaws. Clay also discusses the dangers of overconfidence, the illusion of diversification, and why excessive leverage can be a ticking time bomb.
Additionally, he shares details on an exclusive value investing event hosted by TIP in Big Sky, Montana, in September 2025.
IN THIS EPISODE YOU’LL LEARN:
00:00 - Intro
03:34 - How John Meriwether and a team of Wall Street’s brightest minds, including Nobel laureates, built a hedge fund that seemed invincible, using sophisticated financial models and extreme leverage.
25:55 - LTCM’s reliance on mathematical models that assumed markets behaved rationally, leading them to underestimate the possibility of extreme events.
48:30 - How the Russian debt default triggered widening credit spreads, exposing LTCM’s overleveraged positions and leading to catastrophic losses.
54:49 - Why LTCM’s failure posed systemic risks to the global financial system, forcing the Fed to coordinate a rescue with major Wall Street banks.
01:08:17 - The dangers of excessive leverage, overconfidence in financial models, and the mistaken belief that markets always revert to historical norms.
01:15:09 - How to attend our new value investing event in Big Sky, Montana, bringing together passionate investors for deep discussions and meaningful connections.
And so much more!
Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.
BOOKS AND RESOURCES
Join Clay and a select group of passionate value investors for a retreat in Big Sky, Montana. Learn more here.
Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members.
Lowenstein’s book: When Genius Failed.
Mentioned book: Big Mistakes.
Related Episode: Listen to TIP514: Permanent Supply Chain Disruptions that Will Destroy the Economy w/ Jim Rickards.
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