For those of you who are unfamiliar with John Meriwether, he's the dude that made a fortune on Wall Street in the 80's in bonds (the securitization of mortgages, as I remember, but I could be wrong) and then went on to co-found and lead Long Term Capital Management. LTCM blew up when the partners, including Nobel-Prize winning economists, failed to appropriately manage their risk and lost $3.6 of their own and investor's money.
It didn't take Meriwether long to start another hedge fund -- in fact, the ink was hardly dry (about a year) on the LTCM rescue deal, when he went out and raised another zillion dollars (ok, it was more like $1 billion) and started running the money again. Keep in mind that if his management fee was 1% of assets, he was pulling in $10 million per year just to open the doors. Where I come from, we have a saying about that much money: holy crap.
Now Meriwether is in trouble again. Bloomberg reports that his fixed-income (bond) fund lost 24% year to date. This is about 10 years after the collapse of LTCM.
I just wanted to mention this, since it might be a good time to bring up the fact that none of us are immune to making the same mistakes twice. None of us learn our lessons so good that we no longer require adult supervision when trading. The same rules of risk apply to you and me, and to John Meriwether, to your forex dealer, to Bear Stearns, and to European Banks (waiting for the other shoe to drop).
When you start thinking that the rules of risk management don't apply to you, that's when risk comes knocking at your door.
NOTE/UPDATE: There are two good books worth reading about all of this and, in particular, John Meriwether. The first is Liar's Poker: Rising Through the Wreckage on Wall Street
