I think there was a bit more to it than that, and as I understand it, the portfolio on net unwound profitably over time. A lot of time.
ok... now the thread is about LTCM Since I like to talk about stat-arb I post a simple graph showing a pair-strategy. If you entered the strategy when the spread is below 0.06 (exit@0) and shorted the spread when it's above 0.04 (exit@0), then you would have earned 12'808 CHF (or a multiple of). Since the strategy is $-neutral your initial amount is 0CHF (I invested 20k CHF on each side). The strategy would have generated 7 Trades in a 3 years timeframe with an average holding period about 36 days. All the trades are profitable. If I run the spread through an Augmented Dickey Fuller Test I get a ADF stat of -3.68 with a p-value about 0.024. That means that with a probability of 97.6% the spread is cointegrating.