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 - Intro03:34 - 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<ul>
<li>Join the exclusive <a href="https://www.theinvestorspodcast.com/mastermind-2/">TIP Mastermind Community</a> to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members.</li>
<li>Lowenstein’s book: <a href="https://www.amazon.com/dp/0375758259?bestFormat=true&k=when+genius+fails&crid=1P4N7SZOX2MYB&sprefix=when+genius+fails&linkCode=ll1&tag=tipnetwork-20&linkId=75d895e47fa7bf99dd0e4bb6d4bf9a9d&language=en_US&ref_=as_li_ss_tl">When Genius Failed</a>.</li>
<li>Mentioned book: <a href="https://www.amazon.com/Big-Mistakes-Investors-Investments-Bloomberg/dp/1119366550?crid=27QPEY6LWK604&dib=eyJ2IjoiMSJ9.WKvShjYAN_kJHAfEnxvdsFc3tXl9r3ziMp3vTcF7ZiqUAyWI3yrW1uNTeM-AWRQXyrGPkcjpk6yZbP9QmBKCZVNzEbt0EXfiJzMnutcbTbuiu-gQV9XVy4I3YsnLLUn0F3uOr8WVQ8IuVxxRhCW3YyJioKQkynCdWfbCzG_QbaWeunu4wEgisp3jcJpErj47zCfy7p2_0FRvMazvjpEzKAv1eKuQ1_lpz4mcLm3mVoqNciKYf3Oeui_aonD6S41L6OzgmaofmVagv0nUHcFf6pBDQ9cIu7mG3DSRCKOoUrEwmbjjjgpEezlVRcTQsGghPz6XiE-aYWwrZG7JlzcHmyOAIcYiupg-0Ftfuw9HCQlG0hKFQiEmx4sT-lB3sDQhoOQyhhDPD2HItZpXGxRYa7SFxuEg5VtpZbPEZhDPU6B-AlW3kbnst2YZPqx_EOfB.MN_0HmDz80WZQRQPEasph3CKRvlSZi7tEVJ31vZwaCQ&dib_tag=se&keywords=big+mistakes&qid=1741903961&sprefix=big+mistakes%2Caps%2C141&sr=8-1&linkCode=ll1&tag=tipnetwork-20&linkId=3c8d5ec76f8bd192bbf082eeaf46c858&language=en_US&ref_=as_li_ss_tl">Big Mistakes</a>.</li>
<li>Related Episode: Listen to <a href="https://www.theinvestorspodcast.com/episodes/permanent-supply-chain-disruptions-that-will-sink-the-economy-w-jim-rickards/">TIP514: Permanent Supply Chain Disruptions that Will Destroy the Economy w/ Jim Rickards</a>.</li>
<li>Email Shawn at <a href="mailto:shawn@theinvestorspodcast.com">shawn@theinvestorspodcast.com</a> to attend our free events in Omaha or visit <a href="https://www.theinvestorspodcast.com/how-to-attend-the-berkshire-hathaway-annual-meeting/">this page</a>.</li>
<li>Follow Clay on <a href="https://twitter.com/Clay_Finck">X</a>. </li>
<li>Check out all the books mentioned and discussed in our podcast episodes <a href="https://prodcast.io/wsb">here</a>.</li>
<li>Enjoy ad-free episodes when you subscribe to our <a href="https://premium.theinvestorspodcast.com/">Premium Feed</a>.</li>
</ul><h3></h3>NEW TO THE SHOW?<ul>
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<li>Follow our official social media accounts: <a href="https://twitter.com/TIP_Network">X (Twitter)</a> | <a href="https://www.linkedin.com/company/the-investor's-podcast/">LinkedIn</a> | <a href="https://www.instagram.com/theinvestorspodcastnetwork/">Instagram</a> | <a href="https://www.facebook.com/TheInvestorsPodcast">Facebook</a> | <a href="https://www.tiktok.com/@theinvestorspodcast">TikTok</a>.</li>
<li>Browse through all our episodes (complete with transcripts) <a href="https://www.theinvestorspodcast.com/we-study-billionaires/">here</a>.</li>
<li>Try our tool for picking stock winners and managing our portfolios: <a href="https://www.theinvestorspodcast.com/tip-finance/">TIP Finance Tool</a>.</li>
<li>Enjoy exclusive perks from our <a href="https://www.theinvestorspodcast.com/affiliates/">favorite Apps and Services</a>.</li>
<li>Learn how to better start, manage, and grow your business with the <a href="https://www.theinvestorspodcast.com/podcasts/20-best-business-podcasts/">best business podcasts</a>.</li>
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