Lot of the trades LTCM put on were total crap shoots. They did a lot of short equity volatility. Over a billion dollars worth. That is insane. They had no hedge on that so pure naked exposure there. They also began speculating on stocks and junk debt. They lost billions on this stuff. Let’s ignore all this for a moment and stick to the mathematical arbitrage trades. The fact of the matter is their bet was wrong. Anyone can make the claim that they had to get out of their trades early and if they just had enough capital they could have weathered it out. Ever heard of the saying the markets can remain irrational longer then you can remain solvent? If we use your rationality, that given enough time they would have come out ahead then why can't everyone use that excuse. Hell given enough time most good companies bounce back right, most sports teams, most businesses, most marriages, the weather, traffic, you name it, any pattern in nature, even evolution. As mark twain once said, in the long run we are all dead. Well in the long run we are all right. A 6 year old child can make predictions and be even right in the long run. A broken clock is right twice a day right? So if I am out on the street screaming the wrong time. Eventually, given enough time, I will be right at least twice. The problem is I don't see the skill in that. I don't see any edge. Now as far as credit spreads go in the fixed income market, everyone knows that they always come back to some normal level. The trick is being able to time it, not in the prediction that it will eventually happen. But here is the kicker. Society is full of people who make money every day on flawed theories due to random luck yet call it skill. But given enough time, every man that has made his living on luck and false theories eventually gets to meet his black swan. And you know what he says when he comes face to face with that black swan. He tells everyone that what happened to him was a once in a thousand year event. Something that could have not been predicted. But then he will go on to say that if he had been able to wait it out or if he had more capital, given enough time, he would have been right.