# LTCM — The Case Against a Model Without a Combinator

**Canonical URL:** https://stratcraft.ai/alpha-factory/ltcm-lessons

## Case Study: Long-Term Capital Management

**Verdict:** Died (1994–1998)

**Thesis:** The canonical take-B. LTCM had the best single-model convergence trade on the Street. When the model broke, there was no second signal, no combinator, no fusion — just leverage and hope. Four months from peak to bailout.

## Key Facts

- Founded: 1994 by John Meriwether
- Partners included: Myron Scholes, Robert C. Merton (Nobel laureates)
- Strategy: Convergence arbitrage — pair spreads reverting to mean
- Collapse: Lost $4.6B in 4 months (1998)
- Bailout: Federal Reserve orchestrated $3.6B private bailout

## Why It Failed

One model. One read. No second opinion. When the Russian default broke the correlation assumptions, every position moved against them simultaneously. A combinator layer — fusing multiple independent signals — would have caught the regime change.

## Brand

- Product: StratCraft
- URL: https://stratcraft.ai
- This page: dark standalone design (case study layout, "died" variant)