Did Keynes have bought Bitcoin?

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John Maynard Keynes (1883-1946) is the greatest economist of the twentieth century. What is less well known is that he had a parallel career as a successful investor: quite successful early in his career, and spectacularly successful later when he changed his strategy.

After the First World War, his income depended more on his investments than on his academic work.

In addition to his personal investments, he managed the investments of King’s College Cambridge, of which he was a member.

Under his leadership, the value of the King’s College fund grew twelve-fold during a period in which the larger markets did not even double.

Keynes has been said to have achieved these high yields by only devoting half an hour each morning to the task, before getting out of bed.

Keynes quoted with approval to his friends a line from Volpone, a classic poem:

I pride myself more in the clever purchase of my wealth than in the happy possession

He certainly seemed to place more importance on the skill with which he made money than on the money itself. He saw strategy as an alternative to art for someone who lacked the talent.

Young Keynes

Keynes, in his youth, was very confident in his own abilities, and less in those of the general public.

In his early investments he tried to take advantage of market timing, just staying ahead of the crowd.

Compared to the crowd at that time, young Keynes invested more in stocks (stocks) than in bonds (debt).

He also speculated on exchange rates and commodities. And he was much more willing than the crowd at the time to invest outside his country, being fond of Australian government bonds.

Read more: What is the fundamental value of Bitcoin? It’s a good question

Among his portfolio were modern works of art. Some were his friends but – judging by the records he kept of their prices – some were also used as investments.

He spent 13,000 yen to accumulate works of art valued at 76 million yen in 2019.

Still Life with Apples from 1877 by Paul Cézanne, bought by Keynes in 1918. Fitzwilliam Museum

Keynes’ artistic judgments produced an annual real rate of return of 6%, which is similar to what he might have earned in stocks. But it provided him with what stocks couldn’t – what the arts and literary group Bloomsbury, of which he was a part, called “the pleasure of beautiful objects.”

This young Keynes would have certainly thought of Bitcoin, believing that he could buy something before it got big, then sell on time.

But the formula didn’t always work, even for him.

The older and wiser Keynes

The former Keynes switched to value investing, carefully selecting and holding stocks with the prospect of good long-term returns. It turned out to be more successful.

He now considered that trying to get the timing right for cyclical investing was “impractical”, claiming that most of those who attempt to do so “sell too late and buy too late”.

He wrote that most of those who try it focus too much on capital appreciation and too little on “immediate return or future prospects and intrinsic value.”

Read more: What is an ETF? And why is this bringing Bitcoin back to all-time highs?

One of today’s most successful investors, Warren Buffett, wrote about his admiration for Keynes’ brilliance and emulated his style.

Shortly before his death, Keynes warned of the dangers for investors to join the bandwagon. As he said

if everyone agrees on its merits, the investment is necessarily too expensive and therefore unattractive

During this most successful period, Keynes avoided betting on products with no fundamental value.

And he worried about them for broader reasons. As he says in his General Theory of 1936

when the development of a country’s capital becomes a by-product of a casino’s activities, the job risks being poorly done

The Keynes of the last days would not have bought Bitcoin and even preached against it.

These are the Keynes whose investments have been the most successful.

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