And thanks to their cast-which included a pair of future Nobel Prize winners-investors believed them. truly believed that their finely tuned computer models had tamed the genie of risk, and would allow them to bet on the future with near mathematical certainty. They promised that the investors' money would be placed in a variety of trades simultaneously-a 'hedging' strategy designed to minimize the possibility of loss. In a decade that had seen the longest and most rewarding bull market in history, hedge funds were the ne plus ultra of investments: discreet, private clubs limited to those rich enough to pony up millions.

And so Long-Term Capital Management was born. He gathered together his former disciples and a handful of supereconomists from academia and proposed that they become partners in a new hedge fund different from any Wall Street had ever seen. Then, in 1993, Meriwether made a historic offer. For two years, his fiercely loyal team-convinced that the chief had been unfairly victimized-plotted their boss's return.

Then, in 1991, in the wake of a scandal involving one of his traders, Meriwether abruptly resigned. A mysterious and shy midwesterner, he knitted together a group of Ph.D.-certified arbitrageurs who rewarded him with filial devotion and fabulous profits. John Meriwether, a famously successful Wall Street trader, spent the 1980s as a partner at Salomon Brothers, establishing the best-and the brainiest-bond arbitrage group in the world.

Ltcm when genius failed