In 1991, John Meriwether lost his job at Salomon Brothers in the wake of a government bond scandal; he then proceeded to open up his own hedge fund: Long-Term Capital Management. After the collapse of that fund nearly torpedoed the entire global economy -- and was chronicled in the highly readable When Genius Failed -- Meriwether has gone through a string of less notable ventures.

His latest is now coming to an end. Bloomberg reports that "JWM Partners LLC is closing its main Relative Value Opportunity II fund after losing 44% from September 2007 to February 2009."

It's hard to have much sympathy for the investors who lost their money putting their faith in the mastermind of one of the biggest disasters in the history of global finance, although he was more conservative this time around: The Relative Value Opportunity II fund was leveraged just 15 to 1 instead of the more than 25 to 1 that led to the demise of Long-Term Capital. This time though, Meriwether's fund was a victim of market problems instead of a cause of them.

In a new book discussed in today's Wall Street Journal, hedge fund manager and derivatives pioneer Richard Bookstaber warns of the potential for disaster created by modern markets and derivatives (which Warren Buffett referred to as financial WMDs): "The financial markets that we have constructed are now so complex, and the speed of transactions so fast that apparently isolated actions and even minor events can have catastrophic consequences."

In the book, Bookstaber admits to playing a role in the market crash of 1987 and the collapse of hedge fund Long-Term Capital Management (For an amazing book on that fiasco, check out When Genius Failed: The Rise and Fall of Long-Term Capital Management).

Of course, the financial establishment disagrees with Bookstaber's argument. But what else are they going to say? "Yes, the products we've been creating and trading and getting rich from are very likely to cause a disaster." It reminds me of another Warren Buffett witticism: "Never ask a barber if you need a haircut."

I'll be ordering a copy of this book tonight and I'll let you know what I think of it.