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Long-Term Capital Management was one of the most celebrated hedge funds in financial history. Founded by legendary bond trader John Meriwether and advised by Nobel Memorial Prize-winning economists Robert C. Merton and Myron Scholes, LTCM generated extraordinary returns and reshaped how Wall Street thought about risk.

But beneath the success was a highly leveraged strategy built on a single dangerous assumption: that markets would behave rationally. When financial crises erupted across global markets in 1998, that assumption failed catastrophically. Within months, LTCM's losses were so severe that the Federal Reserve Bank of New York organized a private-sector rescue to prevent a cascade of failures that threatened the stability of the global financial system.

This episode examines the rise of Long-Term Capital Management, the risks concealed behind its sophisticated models, and why its collapse, engineered by some of the brightest minds in finance, remains one of the most instructive episodes in modern financial history.

Written and Produced by Economist James Murphree

Narrated by Grace Meridan

Audio Production by Ramsey Valentyn

Murphree Investment Group® produces original research and historical documentaries exploring the people, events, and decisions that shaped financial history. Each production is developed through independent research, archival sources, and professional narration.

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