Masters of the universe return - Business - News - The Independent

Masters of the universe return

The man who set up the LTCM hedge fund is trying to win it back with an old rival. Dan Gledhill reports

When Liar's Poker was published in 1989, Wall Street blushed at the glimpse of unimaginable excess and mind-blowing consumption provided by a book that has become required reading for any young hopeful embarking on a career in the bond markets.

Michael Lewis's work catalogues his experience as a bond salesman with Salomon Brothers, the investment bank which has become a byword for everything that is good - and bad - about life on the trading floor. Lewis's title refers to a high-stakes game of bluff that the traders used to relieve the stress brought on by their high-octane occupation. The book begins by recounting a famous occasion when John Gutfreund, then chairman of Salomons, stunned his underlings by challenging John Meriwether, his star trader, to a game of Liar's Poker for a $1m (pounds 650,000) stake.

When he wasn't competing with his colleagues in games of one-upmanship, Meriwether devoted his energy to out-gunning his rivals at Goldman Sachs, the other great bond trading house. Jon Corzine was the acknowledged star of Goldman's bond team and his duels with Meriwether have gone into the annals of Wall Street history.

Their paths diverged in the early 1990s. Meriwether left Salomons after the bank was accused of attempting to corner the market in US Treasury bonds. But his reputation as a "big swinging dick", a nickname reserved for only the finest traders, was undiminished and in 1994 investors flocked to back his next venture, a hedge fund called Long-Term Capital Management. Two Nobel Prize winning economists were recruited to a team that revelled in the description "Masters of the Universe".

Meriwether, brimming with characteristic confidence, threw a chunk of his own fortune into LTCM and, within three years, the value of the fund had almost trebled.

Meanwhile, Corzine continued his effortless rise up the ranks of Goldman to become joint chairman. He was the driving force behind last year's announcement that the venerable investment bank was planning to shed its out-dated partnership structure in favour of a flotation, which eventually should net Corzine a $200m windfall.

But the last year has been unkind to two men accustomed to effortless success. When investors pulled the plug on Russia last August, the ensuing global meltdown meant that the best-laid plans of LTCM's Nobel Prize-winning minds were upset and the fund collapsed.

Much to his consternation, Meriwether's former employer, Salomon Smith Barney, was among the 14 banks that contributed to a $3.625bn rescue package to salvage his brainchild.

Corzine's reputation was also exposed by the market carnage. As the leading proponent of Goldman's flotation, he took the blame last September when the plunging US stock market forced the bank to postpone its IPO. Although the float should go ahead this year, the collateral damage inflicted by last year's failure forced Corzine on to the sidelines at Goldman and he will soon quit the bank altogether.

But in adversity the two former rivals are on the verge of forming an unlikely alliance. Although sources close to LTCM insist that the talks are at a tentative stage, Meriwether and Corzine appear to be hatching a deal to win back control of the hedge fund.

It is little wonder that Meriwether is keen to be reunited with LTCM. Since last summer's nadir, the fund has made a 20 per cent return even as its backers have been trying to trim its riskier investments. For Corzine, a stake in LTCM would mark a return to his roots in the bond market. Both men are itching for an opportunity to re-establish their reputations after recent reversals.

One seasoned bond market observer says: "Between them they have a lot of brain power and great roller-decks full of contacts. The only question is whether they are on top of their game."

There is sure to be an army of investors willing to take a chance on Meriwether re creating his old magic.

After all, according to Michael Lewis's book, this is the man who responded to Gutfreund's $1m challenge by upping the ante to $10m. Like most people who have taken on John Meriwether, Gutfreund had to walk away.

Life and Style
tech
Arts and Entertainment
Robin Thicke's video for 'Blurred Lines' has been criticised for condoning rape
music
News
Paper trail: the wedding photograph found in the rubble after 9/11 – it took Elizabeth Keefe 13 years to find the people in it
newsWho are the people in this photo? It took Elizabeth Stringer Keefe 13 years to find out
Arts and Entertainment
Matt Damon as Jason Bourne in The Bourne Ultimatum (2007)
filmMatt Damon in talks to return
PROMOTED VIDEO
Arts and Entertainment
Evil eye: Douglas Adams in 'mad genius' pose
booksNew biography sheds light on comic genius of Douglas Adams
News
peopleThe report and photo dedicated to the actress’s decolletage has, unsurprisingly, provoked anger
Life and Style
Bono and Apple CEO Tim Cook announced U2's surprise new album at the iPhone 6 launch
tech(but you can't escape: Bono is always on your iPhone)
Sport
FootballFull debuts don't come much more stylish than those on show here
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig is believed to be donning skies as 007 for the first time
Arts and Entertainment
Fringe show: 'Cilla', with Sheridan Smith in the title role and Aneurin Barnard as her future husband Bobby Willis
tvEllen E Jones on ITV's 'Cilla'
News
ebooksAn unforgettable anthology of contemporary reportage
News
i100
Sport
Tim Wiese
sport
Life and Style
Kim Kardashian drawn backlash over her sexy swimsuit selfie, called 'disgusting' and 'nasty'
fashionCritics say magazine only pays attention to fashion trends among rich, white women
Arts and Entertainment
TVShows like Agents of S.H.I.E.L.D are little more than marketing tools
Arts and Entertainment
Hit the roof: hot-tub cinema east London
architectureFrom pools to football pitches, rooftop living is looking up
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Sales Executive

£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

Payroll & Accounts Assistant

£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Senior BA - Insurance **URGENT**

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week