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WSJ: Keynes One Mean Money Manager


PlanMaestro
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No one is a Keynesian now—at least not among money managers. And that is a shame.

 

Great lead paragraph by Jason Zweig and the best birthday present I've had in a long time. I was preparing a series of articles on Keynes as an investor and was stuck in trying to find more quantitive information.

 

Has anybody seen other sources? Please? There is a volume of his collected writings on his investment related letters, I think 12 or 13, but is out of print. Has anyone seen it?

 

Zweig article and video: http://online.wsj.com/article/SB10001424052702304177104577313810084976558.html

Keynes study: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2023011

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“As time goes on, I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence… One’s knowledge and experience are definitely limited and there are seldom more than two or three enterprises at any given time in which I personally feel myself entitled to put full confidence.”

 

That's basically my approach.

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It's a very good book, easy to read.  :)

 

My personal behavior model is Lord Keynes: I wanted to get rich so I could be independent, and so I could do other things like give talks on the intersection of psychology and economics. I didn’t want to turn it into a total obsession. - Charlie Munger

 

http://media.wiley.com/product_data/excerpt/6X/04702849/047028496X.pdf

 

From Keynes and the Market by Justyn Walsh:

 

Some surprise has been expressed about the large fortune left by Lord Keynes.Yet Lord Keynes was one of the few economists with the practical ability to make money. —FINANCIAL TIMES, September 30, 1946

 

In September 1946, five months after his death, the bequest of John Maynard Keynes was made public. His net assets totaled just under £480,000, or around $30 million in today’s money. Although Keynes had secured a number of board positions at leading City institutions and had received considerable royalties from some of his better-selling books, general amazement greeted news of his fortune. He had, after all, spent most of the preceding six years as an unpaid Treasury adviser; his parents had outlived him and therefore provided no inheritance; and Keynes, a great arts patron, had funded many cultural ventures out of his own pocket.

 

As suggested in the salmon-pink pages of the Financial Times, it was indeed Keynes’ skill in the art of moneymaking that contributed to the bulk of his riches. Keynes’ facility with money was not just limited to his own account, however. King’s College—Keynes’ spiritual, intellectual, and sometimes temporal home—was also a beneficiary of his financial acumen. In its obituary on Keynes, the Manchester Guardian reported that:

 

As bursar of his own college in Cambridge . . . he was conspicuously successful, and by bold and unorthodox methods he increased very greatly the value of its endowments.

 

Although little known to the wider world, in certain circles Keynes’ investment expertise was prized. There are stories of other college bursars making the pilgrimage to King’s College, where Keynes would lounge Buddha-like and regally impart investment wisdom to an eager audience. A colleague noted that “such was his influence in the City and his reputation abroad” that markets would move in response to his speeches delivered as Chairman of the National Mutual Life Assurance Society. He sat on the boards of numerous investment companies, from which he would, with the unwavering conviction of a papal nuncio, declaim his views on the stock market and government economic policy.

 

This aspect of Keynes—the shrewd investor, the canny player of financial markets—is rather unexpected in light of the man’s early life and beliefs. Keynes was an aesthete, his first allegiance to philosophy and the art of living well. At school and university he displayed little interest in worldly matters, and for the remainder of his life exhibited an intensely ambivalent attitude to the pursuit of wealth. He believed in Francis Bacon’s dictum that money makes a good servant but a bad master—in Keynes’ formulation, money’s merit lay solely in its ability to secure and maintain the conditions allowing one to “live wisely and agreeably and well.” Like economics itself, money was a mere expedient, nothing other than “a means to the enjoyment and realities of life,” and moneymaking little more than an “amusement.”

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  • 11 months later...

No one is a Keynesian now—at least not among money managers. And that is a shame.

 

Great lead paragraph by Jason Zweig and the best birthday present I've had in a long time. I was preparing a series of articles on Keynes as an investor and was stuck in trying to find more quantitive information.

 

Has anybody seen other sources? Please? There is a volume of his collected writings on his investment related letters, I think 12 or 13, but is out of print. Has anyone seen it?

 

Zweig article and video: http://online.wsj.com/article/SB10001424052702304177104577313810084976558.html

Keynes study: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2023011

 

He did about 12% annually through the great depression largely investing in US rails.

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The beginnings. Keynes’s Investment Activities while in the Treasury during World War I.

 

http://www.hetsa.org.au/hetsa2011/conference_papers/hetsa%202011%20-%20paperpdf%20-%20kent%20-%20Keyness%20Investment%20Activities%20WWI.pdf

 

Keynes’s own financial records are the sources of the data for this paper. In January 1903 Keynes started keeping an account book in which he kept both a cash account and a record of the status of his bank account. In the cash account, he used double entry bookkeeping, recording the sources of cash on the left side of the account book and the uses of cash on right side. It appears that he recorded every single source and every single use. Every few pages he updated the status of his bank account. Again using double entry booking he recorded the sources of payments into his bank account on the left side and his expenditures out of his bank account on the right side. He stopped keeping the last of these records in 1916.

 

He kept records of his holdings of individual stocks. In a ledger, in which he kept records for individual stocks, he listed on the right page the number of shares bought or sold of a stock, the purchase or sale price, and the total value, and on the left page the dividends received. In the Keynes Papers there also are what appears to be his bank books from Barclay and Company; they are not in his handwriting. These bank books have on the left side a listing of the payments he made and on the right side a record of deposits into his account. The bank books start in October 1903 and continue through the period of his service in the Treasury in World War I and beyond.

 

 

It appears though that Keynes was a very ethical person. Mini states, “A reading of all Keynes’s works – books, pamphlets, essays, letters and memos – shows his appreciation of standards other than the economic: ethical standards, standards of justice, of health, of duty are also important” (Mini 1996, p. 109). During his life there are times when, in his financial dealings, Keynes behaved ethically, not taking advantage of opportunities that could have been profitable.

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PlanMaestro,

thank you very much for the treasure chest of information about Keynes’s ways of investing that you have shared with us!

Very much appreciated!  :)

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

 

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