I recently received a book summary from getAbstract about John Maynard Keynes. Called ‘Keynes and the Market” it is written by Justyn Ward and it reveals a side of Keynes I never knew. I remember Keynes hazily from my studies at university – micro and macro economic theory. I did quite well in those exams because I borrowed the notes for all the lectures I missed from a certain Hugh Sloane. Yes, that Hugh Sloane, founder of Hedge fund company, Sloane Robinson, 291st on the Sunday Times rich list. He was very clever and worked incredibly hard at Bristol. He should have been at Cambridge (so should we all) but he proved it by being the only guy in the faculty to get a first class degree.
Anyway, I digress. For some reason I always assumed that Keynes was a dull Cambridge academic. Not so. Apart from being a rather liberal, bi-sexual philanderer who ran with the Bloomsbury set he was also a shrewd and successful investor. Justyn Ward presents him as the Warren Buffet of his day with a very similar approach to investing. He believed in value rather than momentum investing. In other words, rather than carrying baskets of shares and trying to make money by getting ahead of the market trends he cherry picked under-valued companies. A natural contrarian, he liked to “lean into the wind”, as he put it, and buy into “out-of-favour stocks with sustainable earnings”. He advocated that holding a fewer number of carefully selected stocks was much less risky than a diversified portfolio. I guess it is if you pick the right ones. This was easier for Kenynes than it has been for Buffet because in Kenyes’ era company assets were largely tangible which made the judgement of whether or not they were under-valued considerably easier. Buffet has had to contend with intangible assets that can be well over half the asset value of a business. In other words he has had to get to grips with brand value. As is well known he made a killing during the dot com bubble by buying heavily into a small brand called Coca Cola when it was under-valued.
A ground breaking economist who was also smart enough to make himself a small fortune through his investments and human enough to enjoy life to the full – that’s someone to look up to.