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Was Keynes a Brilliant Investor?


The latest example of Keynes hagiography is an article by David Chambers and Elroy Dimson in the Journal of Economic Perspectives (volume 27, number 3, Summer 2013, pp. 213–228).

The thesis is that Keynes was an investment genius and innovator who developed methods later used by Warren Buffett and George Soros.

Keynes did make a modest fortune through a combination of writing and investing. But to compare his speculative style with Warren Buffett’s long term investment style is preposterous. Consider these facts:

Keynes’s initial foray into investing led to a smash up. He lost everything he had unwisely borrowed and had to be bailed out by his parents, who had some inherited money but were not wealthy.

He did not do well in the 1920s. He was taken unawares by the the 1929 Crash and also by the 1937 rout. In both instances, he came perilously close to being wiped out again because of very concentrated holdings of currencies, stocks, and commodities and continuing use of leverage (as much as one pound of debt for every pound of his own). In short, Keynes was a speculator, at the same time that he criticized speculators and the “casino” atmosphere of the market. He also failed entirely to understand that the casino was fueled by the easy money policies which he espoused.

The article does disclose Keynes’s very large gold mining stock position in the 1930′s but fails to note the irony of this holding or his private praise of gold as a portfolio diversifier.

Hunter Lewis is author of twelve books, including The Secular Saints: And Why Morals Are Not Just Subjective, Economics in Three Lessons & One Hundred Economic Laws, Where Keynes Went Wrong, and Crony Capitalism in America 2008-2012, and has contributed to the New York Times, the Washington Post, the Times of London, The Atlantic and many other magazines and web sites including Mises.org and LewRockwell.com. Lewis is also co-founder of Against Crony Capitalism.org as well as co-founder and former CEO of Cambridge Associates, a global investment firm. He has served on boards and committees of fifteen not-for-profit organizations, including environmental, teaching, research, and cultural organizations, as well as the World Bank.

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