Book Review: Capital Account

Capital Account: A Fund Manager Reports on a Turbulent Decade (1993-2002)




What Is It About?

This book chronicles selected reports written by Marathon Asset Management during the period of 1993 through 2002. The reports were selected and edited by Edward Chancellor, author of Devil Take the Hindmost: A History of Financial Speculation. The reports provide insight into a professional money management firm during an over-exuberant period in the stock market. The reports also warned of disconnect between price and value in many stocks during the last decade and bring to light several examples of duplicitous action by corporate actors and financial institutions used to delay the inevitable crash. The reports are presented in a manner which demonstrate that over-exuberance in any one period is not caused by external market forces, but rather can occur at any time as a result of the internal machinations of human beings.


What Did I Get Out Of It As A New Investor?

Of the several dozen reports included with this book, several stand out as particularly informative. This is because they have practical application in today’s market and are accompanied by charts which illustrate the text. Among the most helpful was a discussion of the capital cycle, which is described by Keynes in The General Theory of Employment, Interest, and Money at page 151. There is also a very clear and informative decision tree for growth stocks which provides an easy checklist to evaluate whether growth is sustainable. I also found useful a discussion of the momentum cycle which incorporates aspects of behavioral finance.


The Good News

The above mentioned sections of the book illustrate concepts which a new investor should be aware in understanding the business cycle.


The Bad News

Not all of the reports discuss topics that a new investor may easily grasp. In re-reading the text certain reports are clearer to me now then when I read it several months ago. Therefore, a new investor who tackles this book should be prepared to take a modular approach to reading the reports in any order which best suits their needs.


The Bottom Line

This is a good book for a new investor but one I would recommend you borrow from the library.


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