John Maynard Keynes as an Investor

choi

Philip Delves Broughton, Cambridge Values; John Maynard Keynes was both a far-seeing economist and a shrewd investor, a savant who was undaunted by the churn of the markets. Wall Street Journal, Mar 30, 2021
https://www.wsj.com/articles/inv ... -values-11617057461
(book review on Justyn Walsh, Investing with Keynes; How the world's greatest economist overturned conventional wisdom and made a fortune on the stock market. Pegasus, 2021).

Note:
(a) "Why * * * wait decades for your returns to compound, when there's a snappy little ETF right there waiting to catapult you to riches in months?  John Maynard Keynes is best remembered as an economist who made the case for governments to spend their way out of recessions. * * * a diligent savant who could crunch the numbers, discern the qualitative aspects of a toothsome investment and remain unflustered by the churn of the markets.
(i) English dictionary:
* snappy (adj): "STYLISH, SMART  <a snappy dresser>"
https://www.merriam-webster.com/dictionary/snappy

As you can see in the next definition, this "dresser" is not furniture but a person.
* dresser (n): "a chest of drawers or bureau with a mirror"
"one that dresses   <a fashionable dresser>"
https://www.merriam-webster.com/dictionary/dresser
(ii) ETF stands for exchange-traded fund.

James Chen, Exchange-Traded Fund (ETF). Investopedia, last updated Mar 3, 2021
https://www.investopedia.com/terms/e/etf.asp
("it's traded on an exchange just like stocks. The price of an ETF's shares will change throughout the trading day as the shares are bought and sold on the market. This is unlike mutual funds, which are not traded on an exchange, and trade only once per day after the markets close. * * * An ETF is a type of fund that holds multiple underlying assets, rather than only one like a stock. Because there are multiple assets within an ETF, they can be a popular choice for diversification. * * * not all ETFs track an index in a passive manner.  There are also actively managed ETFs, where portfolio managers are more involved in buying and selling shares of companies and changing the holdings within the fund. Typically, a more actively managed fund will have a higher expense ratio than passively managed ETFs")
(iii) "John Maynard Keynes is best remembered as an economist who made the case for governments to spend their way out of recessions."

I will talk about this in the next posting.
(iv) Keynes family
https://en.wikipedia.org/wiki/Keynes_family  
(section 2 History: name origin but not meaning)
(v) savant (n; Did You Know?)
https://www.merriam-webster.com/dictionary/savant

Did You Know?: "Savant comes from Latin [verb] sapere ('to be wise') [to know in some Latin-English online dictionaries; Wiltionary: accent is on second syllable, the last letter e is pronounced, to make it a three-syllable word] by way of Middle French, where 'savant' is the present participle of savoir, meaning 'to know.' 'Savant' shares roots [note the plural form; I double check and the following two words share roots of Latin via Middle French] with the English words 'sapient' ('possessing great wisdom') and 'sage' ('having or showing wisdom through reflection and experience'). "
(A) (Modern) French-English dictionary:
* savoir (spelled the same in Old French, too -- not just in Middle French)
https://en.wiktionary.org/wiki/savoir
(pronunciation)
(B) sapient (adj; Did You Know?: 'the term 'Homo sapiens' ('humankind') comes in part from the Latin word sapiens, meaning 'wise' or 'intelligent.' 'Sapiens' in turn comes from the verb 'sapere' ")
https://www.merriam-webster.com/dictionary/sapient
(C) Latin sapiens will be discussed in the posting after next.


(b) "As a young man at Cambridge University in the first decade of the 20th century, he [Keynes] was a committed aesthete and sensualist"
(i) aesthete (n)
https://www.merriam-webster.com/dictionary/aesthete
(ii)
(A) sensualist (n)
https://www.lexico.com/definition/sensualist
(B) Sean O'Grady, The Amazing Sex Life of Economist John Maynard Keynes. Australian Financial Review (AFR), Mar 17, 2015
https://www.afr.com/policy/econo ... nes-20150316-1m0nul
("In the latest biography of him, by Richard Davenport-Hines * * * 1925, when he [1883 – 1946] married the Russian ballerina Lydia Lopokova. She was no beard * * * Wittgenstein went on honeymoon with them, which can't have helped. * * * 'I want to be foxed and gobbled abundantly' * * * much in the way he rejected classical economics for his new theories * * * Soho and Bloomsbury were centres of this demi-monde, as were public parks and baths. One list reveals his catholic tastes: 'Stable boy of Park Lane; The Swede of the National Gallery; The Soldier of the baths; The French Conscript; The Blackmailer; sixteen-year-old under [Sicily's 3,326-meter Mount] Etna; Lift boy of Vauxhall; Jewboy; Grand Duke Cyril of the Paris Baths.' * * * Thus did Keynes at least meet people from less privileged backgrounds [Keynes was born in Cambridge to an upper-middle-class family, whose father was an economist at Univ of Cambridge: Wikipedia] * * * There were longer lasting affairs too, the most significant being with Duncan Grant * * * Rent boys were not ruled out * * * The Cleveland Street Scandal of 1889 alerted wider society to the practice of men procuring GPO telegram delivery boys for cheap sex")
• AFT republished this book review that first appeared on The Independent (was a daily when founded in 1986; exclusively online presently; based in London) on Mar 11, 2015. The Independent still has this review on its website, but places it behind paywall.
• Australian Financial Review
https://en.wikipedia.org/wiki/Australian_Financial_Review
(business-focused, daily newspaper; started as a print-only weekly newspaper in 1951; table: Headquarters Sydney)
• beard (n): "North American informal  a woman who accompanies a gay man as an escort to a social occasion, in order to help conceal his homosexuality"
https://www.lexico.com/definition/beard
• Why "beard"?  See beard (companion)
https://en.wikipedia.org/wiki/Beard_(companion)  
(section 2 Concealing infidelity)
• Ludwig Wittgenstein
https://en.wikipedia.org/wiki/Ludwig_Wittgenstein
(1889 (Vienna) –  1951; From 1929 to 1947, Wittgenstein taught at the University of Cambridge)
• "I want to be foxed"

foxed (adj): "archaic, informal  drunk  <I am perhaps a trifle foxed>"
https://www.lexico.com/definition/foxed
• "he rejected classical economics"

classical economics
https://en.wikipedia.org/wiki/Classical_economics
• demi-monde
https://en.wikipedia.org/wiki/Demimonde
("For the men, the high life of the demimonde was isolated from the other world of wives and families and duties (if any)" )
• stable boy (n): "a young man who works in a stable taking care of the horses"
https://www.collinsdictionary.co ... /english/stable-boy
• The "Park Lane" is not
Park Lane
https://Park Laneen.wikipedia.org/wiki/Park_Lane
("The road was originally a simple country lane on the boundary of Hyde Park, separated [from Hyde Park] by a brick wall")
, but Park Lane Stables in Teddington.
https://en.wikipedia.org/wiki/Teddington
• liftboy (n): "a person who operates a lift [British English for 'elevator'], esp in large public or commercial buildings and hotels"
https://www.collinsdictionary.com/us/dictionary/english/liftboy
• Vauxhall
https://en.wikipedia.org/wiki/Vauxhall
(section 3 History, section 3.1 Toponymy)
• Grand Duke Kirill Vladimirovich of Russia
https://en.wikipedia.org/wiki/Gr ... imirovich_of_Russia  
(1876 – 1938; He was "a first cousin of Nicholas II, Russia's last tsar * * * In 1905, he married his paternal first cousin, Princess Victoria Melita of Saxe-Coburg and Gotha, who both defied Nicholas II by not obtaining his consent. They had two daughters and settled in Paris before they were allowed to visit Russia in 1909")
• Cyril
https://en.wikipedia.org/wiki/Cyril  
(variants include Kirill; English pronunciation at the top of the table)
• "Thus did Keynes * * * meet people from less privileged backgrounds"

JungKim, Thus had they parted [Subject-auxiliary inversion]. WordReference.com Language Forum, Mar 19, 2014
https://forum.wordreference.com/ ... -inversion.2805521/
("The Cambridge Grammar of English Language has these examples of the subject-auxiliary inversion (at page 96): Thus had they parted the previous evening. * * * The CGEL basically says that the underlined "fronted elements" triggered the subject-auxiliary inversion in formal style, and that the inversion is optional")
• Duncan Grant
https://en.wikipedia.org/wiki/Duncan_Grant
• rent boy (n): "informal British  a young male prostitute"
https://www.lexico.com/definition/rent_boy
• Cleveland Street Scandal
https://en.wikipedia.org/wiki/Cleveland_Street_scandal
• General Post Office
https://en.wikipedia.org/wiki/General_Post_Office
(1660-1969; GPO; successor Post Office Ltd)


(c) "Mr Walsh, a former investment banker and the chief executive of an asset-management firm"
(i) Justyn Walsh
https://au.linkedin.com/in/justynwalsh
("CEO, BridgeLane Agriculture Partners at BridgeLane Group Sydney, Australia")
(ii) BridgeLane Group's website:

"The BridgeLane Group is a privately-owned asset management firm specialising in the agricultural, real estate and innovation sectors."

"BridgeLane is an alternative investment company established by Markus Kahlbetzer in 2009 with the objective to bring innovation to more traditional industries, rather than just hedging bets on the status quo"

"venture capital"

(iii) However, Australia is not a high-tech country. So their venture capital is not on electronics or software.
(iv) Justyn Walsh. Simon and Schster, undated
https://www.simonandschuster.com/authors/Justyn-Walsh/181828004
("Justyn Walsh is CEO of BridgeLane Agriculture Partners, an asset management firm focused on the conversion of large-scale agricultural holdings to organically accredited and regeneratively farmed operations. Prior to this, he worked in Europe, Asia, the Middle East and Australia as an investment banker and corporate lawyer")


(d) "It was no good to have economists constantly speaking of the long run, he wrote, as 'in the long run we are all dead.' "

John Maynard Keynes. Wikiquote
https://en.wikiquote.org/wiki/John_Maynard_Keynes  
(section 1 Quotes, section 1.2 1920s: " 'But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task, if in tempestuous seasons they can only tell us, that when the storm is long past, the ocean is flat again.' A Tract on Monetary Reform (1923), Ch 3, p 80" (italics original) )

What Keynes meant is heeding short term. For example, deploy stimulus during recession, when neoclassical macroeconomists take the hand-off approach.

choi

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In this frenzied moment of limitless stimulus and GameStop fever, the notion of value investing seems almost quaint. Why waste your time bargain hunting for good companies at good prices, and then wait decades for your returns to compound, when there’s a snappy little ETF right there waiting to catapult you to riches in months?

John Maynard Keynes is best remembered as an economist who made the case for governments to spend their way out of recessions. But as an investor, he was a kind of proto-Warren Buffett, a diligent savant who could crunch the numbers, discern the qualitative aspects of a toothsome investment and remain unflustered by the churn of the markets.

As a young man at Cambridge University in the first decade of the 20th century, he was a committed aesthete and sensualist with a contempt for money-making. But as he grew older, Justyn Walsh writes in “Investing With Keynes,” he came to see the value of money as a “means of securing the conditions for a well-lived life.” Keynes amassed fortunes for himself and King’s College, Cambridge, which he served for many years as bursar.

When Keynes died in 1946, his net assets totaled some $30 million in today’s money. While his books had sold well, he had made the bulk of his fortune by investing smartly, often from his bed in the mornings after digesting the news. During his 25 years running the King’s College endowment, he generated an annual return of 16%, adapting his investment style to flourish even during the Great Depression and World War II.

Mr. Walsh, a former investment banker and the chief executive of an asset-management firm, explains how. Keynes lived an extraordinary and vivid life. A precocious boy and student, he joined the civil service after Cambridge. He attended the Paris Peace Conference after World War I as an economic adviser with the British delegation. He was appalled by the terms imposed on the defeated countries of Europe and accurately predicted a “final civil war between the forces of reaction and the despairing convulsions of revolution, before which the horrors of the late German war will fade into nothing.”

But he was more than an adviser and pontificator. In March 1918, as the Germans prepared their final spring offensive on the Western Front, their guns trained on Paris, Keynes heard that the private collection of Edgar Degas was to be auctioned. Keynes proposed to the British treasury that it bid on some of the works, offsetting the cost against any outstanding debts already owed by France to Britain. He then snuck into Paris to attend the auction in person and bought 27 drawings and paintings, works now worth millions, for next to nothing. It was an early lesson in value investing.

During the next decade, Keynes went through the hazing that almost any investor must endure. Not even as brilliant an intellect as his could resist the fevered markets of the Roaring Twenties. He bought as the market ran up, and in the final two years of the 1920s lost 80% of his net worth. He initially described the Wall Street crash of late 1929 as a correction but soon changed his view.

In the 1930s, writes Mr. Walsh, Keynes “switched from market timer to value investor, seeking to profit from swings in the market rather than participating in them.” As he wrote to the King’s College Estates Committee, trying to time the market was “impracticable and indeed undesirable. Most of those who attempt it sell too late and buy too late, and do both too often, incurring heavy expenses and developing too unsettled and speculative a state of mind.” The true investor, in Keynes’s mind, was focused on “ultimate values” rather than “exchange values.”

Identifying real value took hard-headed analysis but also a more nuanced view of the world than most investors possessed. Keynes constantly sought to balance his knowledge as an academic economist with the practicalities he saw and experienced as an investor. It was no good to have economists constantly speaking of the long run, he wrote, as “in the long run we are all dead.” He was equally dismissive of people with too much faith in quantitative data. “When statistics do not seem to make sense, I find it is generally wiser to prefer sense to statistics.”

He was always bracingly modern in his thinking. Economic orthodoxy, he wrote, required constant examination and reinvention. There is a clear intellectual line from Keynes to Benjamin Graham, the evangelist of value investing, and to Mr. Buffett and his many disciples. This is most glaring in Keynes’s six key principles: focus on the intrinsic value of a stock, represented by its projected earnings; make sure you have a large margin of safety between the price you pay and that intrinsic value; think for yourself and be contrarian if necessary; maintain a steadfast holding of stocks, to limit transaction costs; concentrate your portfolio in a few great companies; and have the right temperament, balancing “equanimity and patience” with decisiveness. As Mr. Walsh summarizes: “The value investor focuses on specific stocks rather than the broader index, and remembers always that there is no such thing as an undifferentiated ‘stock market’—there is only a market for individual stocks.”

For students of investment history and psychology, Mr. Walsh’s book is full of evocative anecdotes. The author tells the tale of Keynes’s protégé, the Italian economist Piero Sraffa, who took an extreme value approach of waiting for “the one perfect investment” for his inherited fortune. After the bombing of Hiroshima and Nagasaki, he supposedly piled into Japanese government bonds and made a fortune in the years that followed as Japan recovered.

I wish that Keynes were around today, as he could easily have been describing the past year when he wrote: “It is because particular individuals, fortunate in situation or in abilities, are able to take advantage of uncertainty and ignorance . . . that great inequalities of wealth come about.” He would doubtless have had strong opinions on our current investing environment.

Mr. Delves Broughton is the author of “The Art of the Sale: Learning From the Masters About the Business of Life” and a partner at the Brunswick Group.