Investing by the Books
#55 Edward Chancellor: Capital Returns
Mar 4, 2024
Christian Billinger and Edward Chancellor discuss the benefits of capital cycle investing, forecasting supply vs. demand. They explore the impact of quality on generating Alpha, excesses in the current market, and applying the framework in capital-light industries. The conversation touches on market bubbles, underinvestment trends, and navigating turbulent markets with a supply-focused approach.
45:07
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Quick takeaways
- Capital cycle investing focuses on forecasting supply over demand to benefit investors.
- The capital cycle theory challenges traditional value and growth distinctions in portfolio allocation.
Deep dives
Overview of Capital Returns by Edward Chancellor
Capital Returns by Edward Chancellor delves into marathon asset management's equity investing strategy post the 2000 IT crisis. The book highlights marathon's focus on supply side dynamics as key to understanding low returns due to large capital investments. Chancellor, a financial historian, emphasizes the importance of historical analysis, citing examples like the British Railway Mania and the surge of investment in telecoms during the internet boom. The book addresses the impact of inaccurate demand forecasts paired with excessive supply on investment returns, offering a unique perspective on market dynamics.
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