Barry Ritholtz at Bloomberg View reminds us that today is the 16-year anniversary of the rescue of Long Term Capital Management.
If you haven’t read the book When Genius Failed it’s a chilling prequel to the financial crisis and reinforced the lesson that over-leveraged, risky funds would be rescued.
Ritholtz also underscores one of the most important trading lessons: It’s the timing, not necessarily the trade that’s most important:
Here is the kicker: It isn’t that the mathematical models designed by LTCM’s Nobel laureates had failed. The upshot of the entire episode was that the trades eventually worked, just not on LTCM’s timetable. The math was right; what was all wrong was the psychology of the trade. That was, and always will be, the hardest thing to get right.
