Caterpillar Cowboy

ltcm’s collapse in 1998 was triggered by the Russian default: A country with thousands of nuclear weapons and immense oil resources going bankrupt was an unimaginable apocalyptic scenario that was not supposed to happen or be allowed to happen. But in the endgame of the Asian financial crisis of 1997–98, with stretched lenders and oil prices cut in half, this unimagined scenario became real. The failure of the imagination then swung to the other extreme as the panicked, coordinated rate cuts of central banks kicked off the final stage of the 1990s technology bubble, with even so-called “macro” funds (like Soros or Tiger) failing to grasp the extent to which the marshaling of liquidity forces would overwhelm the micro facts of poor business models, incompetent management, and expensive valuations.