Similarly, John Wasik claims that Keynes was a “stunningly successful investor;” and the blurb in the jacket accompanying Justyn Walsh’s book4 lauds his

As evidence of their claims, Zweig, Walsh and Wasik cite the research of academics such as Chambers and Dimson. Alas, the non-academics overstate and perhaps even misrepresent the results of the academics’ research. Chambers and Dimson, who claim that they “provide the first detailed analysis of [Keynes’s] investment ability in terms of his management of portfolios,” actually find, in their own words, that “previous studies … claimed that Keynes’s performance for [King’s College of the University of Cambridge] was stellar. Our results, however, qualify this view.” Specifically, “his investment performance for King’s College, whilst impressive, was not the uninterrupted success that has previously been believed.”5

Seven Aspects of a More Balanced Assessment

I reanalyse data compiled by (1) Chambers and Dimson and (2) Moggridge. Unlike the academics, I analyse Keynes’s personal portfolio as well as the main external one (i.e., the “Discretionary Portfolio” of King’s College) over which he possessed virtually unfettered discretion. When I

I find that his overall results were indeed excellent (albeit extremely volatile); but they weren’t as good as Chambers and Dimson state – and not phenomenal as Walsh, Wasik and Zweig imply. Moreover,

Finally, I add four set of points that put Keynes, his modus operandi and results into perspective:

[drizzle]4. In key respects Keynes was blatantly hypocritical: privately, he eagerly speculated in markets; publicly, he self-righteously demanded that the government regulate them. The public-spirited reformer purported to see the damage that volatile prices wreaked upon consumers and producers; yet the self-interested speculator sought unabashedly to profit thereby. 5. Jason Zweig also adopts a double standard: he lauds the concentration of Keynes’s portfolio – including his heavy emphasis upon gold mining stocks – yet for exactly the same reason excoriates Ron Paul’s. 6. The academic establishment, too, has greatly changed its tune. A few decades ago its standard of evidence was exceedingly strict: leading professors emphatically denied that “outperformance” was possible – and even if it was, without up to 75 years of quarterly data they couldn’t ascertain whether it resulted from brains or mere luck. Today, however, they accept Keynes’s subjective “estimates” (rather than hard evidence from contract notes and the like) of the Discretionary Portfolio’s 20-year track record, and ignore the more volatile and leveraged results of his personal investments. On this basis, they laud Keynes’s “outperformance.” 7. We can’t ignore the incontrovertible truth that Keynes was insufferably arrogant, and that such people usually get their comeuppance – as Keynes the speculator did. Yet we must also acknowledge that Keynes the investor did progress (as opposed to originate) genuine innovations; and as Zweig notes in John Maynard Keynes: Courage Is the Key to Investing (The Wall Street Journal, 14 October 2016), during market crashes he displayed courage and patience.

Chambers and Dimson, as well as Walsh and Wasik, rightly conclude that Keynes learnt from adverse experience. Fortunately, he saw the light at just the right time. But was he, as Zweig gushes, “one of the greatest investors of the past century”? That’s an exaggeration. He was a courageous innovator who achieved excellent long-term results; but he was also extremely well-connected – and his contacts allowed him to borrow heavily and repeatedly saved him from oblivion. In that sense, too, he was lucky. Keynes the investor (unlike Keynes the economist) deserves study and in some respects emulation – but not veneration.

See the full PDF below.

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