He was 83% long going into the downturn that resulted in the 1929 crash (p. 21)So how could Keynes be a great investor with such a bad performance? Because Keynes, the evil bastard, along with Bernard Baruch, talked FDR into confiscating the gold owned by all Americans. He then loaded up his portfolio with gold mining stocks and then urged FDR to prop up the price of gold.
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Bottom line, as far as I'm concerned, Keynes was a terrible investor, as shown by his pre-gold mining stock losses. The only time he made real money in the markets was when he traded on inside information about FDR's plan to drive the gold price up, and loaded up on gold mining stocks. Got that? The man who called gold a "barbarous relic" in his 1924 book, Monetary Reform, had 66% of his portfolio in gold mining stocks in the 1930s.
I ask only because according to the reputable sources I've read, Keynes made a fortune from his investments, and he also made a lot of money for Cambridge University, whose portfolio he managed for a few decades. Here's some reliable information on his track record as an investor:
Previous personal research, mainly. However, a quick check through the LSE paper you linked: However, performance in the late 1920s was disappointing, as we saw in
the previous section. His 83% equity allocation at the end of August 1929 indicates
that he failed to foresee the imminent sharp fall in the London market. This
sobering experience could well have led Keynes to his beauty contest metaphor
and to bemoan the seeming inability of the “serious-minded” investor, frustrated by
the “game-players”, “to purchase investments on the best genuine long-term
expectations he can frame” (Keynes, 1936: 156).
I'd be surprised if the other sources failed to acknowledge that he busted badly in 1929-31.
jpdoctor: it makes no sense to judge his long-term results based on a short stretch of under-performance. According to that same paper, the portfolio he managed for Cambridge University beat the market by 8%/year on average from the early 1920's until his death in 1946. That period includes the Great Crash of 1929 and the Great Depression of the 1930's!
PS. That would be like judging Warren Buffett's impressive long-term investment record based on the sharp decline in Berkshire Hathaway's share price during the financial panic of 2008!
PPS. If you think Buffett's record is explained by luck, check out the subsequent long-term record of the seven investors identified in this article he wrote for Columbia Business School's magazine in 1984: http://www4.gsb.columbia.edu/null?&exclusive=filemgr.dow... -- all materially outperformed the major stock indices after being identified by Buffett -- what are the odds of that?
> it makes no sense to judge his long-term results based on a short stretch of under-performance.
It makes enormous sense: He missed the biggest economic event of three generations. If you can't call the big ones, then there's very little proof his returns were something other than luck.
Look, both Keynes and Buffett (since you mentioned him) have long term positive results when there was a long term positive market. Choose a high-beta portfolio in such an environment, and voila! you beat the market. In order to show you have any actual insight and aren't just playing for luck, you need to show that you beat the market significantly in both up and down environments.
BTW, the entire mutual fund market is based on this approach, and when a fund seriously underperforms, it is conveniently removed from the portfolio of Fidelity/Janus/insert hucksters here.
And FWIW: He also lost a fortune by investing in his own lifetime. (He was nearly wiped out in the 1929 crash, which he failed to foresee.)