Note: This will be focusing on the U.S Part of John Maynard Keynes Investments.
United Gas and Electric Power and light were his major investments between 1934-1935. These companies were connected to oil companies and at the time in the 1930s, due to the recession, oil prices fell down a lot and as the economy was recovering, there was a forecasted spike in Oil Prices!
You lucky King’s college students or just those of you who have access to the Archives of the University, have the opportunity to peruse Keynes personal letters, some of which contain his financial transactions! This notes are from a lecture I attended held by my University’s Investment society meeting.
Fun Fact: He was in charge of the portfolio of Kings College, for which he was particularly successful, and that of University of Cambridge.
I have reached a stage in my life where adulting has become necessary, and so I have taken up reading books about self-development, investing and other adult related topics. My conclusion is that I wish I had swapped my Dan Brown’s for this early on because there is a lot to learn and this knowledge does not have an age stamp attached to it. So to encourage more millennial’s to start out early, here are some things to learn from the great economist and greater investor, John Maynard Keynes.
Keynes method of investing was putting all of the resources available to him into a fund known as the Chest, hence Chest Fund.
- He Invested in Common stocks aka shares and also invested in preferred stocks which pay a fixed dividend and are subordinate to debt. It is often preferable to common stock due to its added advantage of privy information.
- Keynes was also known to be a value investor. This means investments that are relatively cheap compared to the value you will receive. The opposite of this is the growth investors who look at the future return of an investment. An example is investors who forecasted Microsoft’s growth and invested in the 1980s.
- He was not a trader but a portfolio manager. He financed more on companies that had their market value very close to their book value aka breakup value. This is seen that even his median investment in his portfolio is close to 100% between Book to Market Values. Biggest Evidence that he was a value investor!
- Keynes invested heavily in U.S depressed railroads bonds in the 1930s although war was brewing and it broke out in Europe. The U.S who weren’t involved in the war but were large weapon producers would need to transport weapons across the continent. This naturally meant railroad traffic will increase and hence a productive sector to invest in.
- Initially Keynes relied on his knowledge of economics as an investment tool but soon realized that as an investor, you can’t invest based on economic theories. You will need detailed information about individual companies and have to study their patterns. Keynes also believed in investing in companies that you are familiar with especially for large investments which he did in individual companies with balance sheets he could study.
Here is a quote for better understanding of the man and his thought process.
Investment trust are like a hedge of the entire market, people buy these for the safety of their investments!
Market value: It’s potential for growth in the future
Book Value: Its value on paper
To read more on this, check out this paper: D. Chambers & A. Kabiri, “Keynes and Wall Street”, Business History Review 19 (2016), 301-328
P.S: I came across this house where Keynes spent the last 30 years of his life whilst playing Pokemon Go in London! Who says games aren’t good for education?!
Thanks for reading.