Thursday, June 25, 2009
Was Keynes a Good Investor?
In a post chocked full of interesting tidbits, Scott Sumner reveals that Keynes as an investor got wiped out in 1920 but his father bailed him out. That changes everything, according to Sumner:
Don’t anyone write in and tell me that Keynes made lots of other good investments, because if you’ve got a rich backstop, none of that matters. Here’s what I’d do if Bill Gates was willing to lend me $3.57 billion dollars for a day:Unfortunately, Sumner goes on to argue that if you disagree with him, you support Hitler, or something almost as silly. But overall, still an excellent post. See too his rating of Wilson versus Harding.
I’d go to Vegas and put $5 million on numbers 1 through 34 on the roulette wheel. The odds are roughly 90% I’d win. If I did so, I’d win $180 million on a bet of $170 million. I repay the $3.57 billion and pocket my $10 million dollars and be rich for the rest of my life, clipping coupons. If numbers 35, 36, 0, or 00 came up I’d bet again, this time $100 million on each number 1 through 34. If I won, I’d receive $3.6 billion, repay Gates, and have $30 million dollars to spend for the rest of my life. The odds are nearly 99% that I’d win one of these two bets. Of course if both failed, I’d be in big trouble. But that’s not very likely is it?
What’s the point? If you have a rich backstop it’s relatively easy to come up with investment strategies that will usually (not always) make you look like a genius.) From now on I will never believe anyone who tells me that Keynes was a great investor.
Comments:
Didn't he make a bundle investing in gold mining companies after he was pretty sure he'd convinced FDR to devalue the dollar?
# posted by 
: June 25, 2009 at 8:36 PM
: June 25, 2009 at 8:36 PM
english bob, I know Keynes had a meeting with FDR, but I was under the impression it was a failure.
# posted by : June 25, 2009 at 10:32 PM
: June 25, 2009 at 10:32 PM
$10mil and Sumner would be "rich for the rest of his life" clipping coupons?
Is he joking? Or does he not know what inflation does to savings?
Or does he mean he'd be clipping coupons for private retailers to stretch his money?
Sumner seems like he'd be a really bad investor... no surprise really given his support of institutionalized theft as an economic cure-all.
Is he joking? Or does he not know what inflation does to savings?
Or does he mean he'd be clipping coupons for private retailers to stretch his money?
Sumner seems like he'd be a really bad investor... no surprise really given his support of institutionalized theft as an economic cure-all.
"In the long run, we are all dead."
Well I guess he kind of had first hand experience through his acquaintance with "Gambler's ruin."
Well I guess he kind of had first hand experience through his acquaintance with "Gambler's ruin."
# posted by : June 26, 2009 at 2:31 AM
: June 26, 2009 at 2:31 AM
Actually, Sumner is just a bit wrong. If he lost both bets he wouldn't be the one hurting- it would be Bill Gates, at least a little.
# posted by : June 26, 2009 at 11:31 AM
: June 26, 2009 at 11:31 AM
As Keynes was politically-connected in his day, with intimate knowledge of macro trends due to the fact that he was advising on them and receiving all the data, would any kind of steady, above-market return on his investments really surprise anyone, much like how Goldman is now paying out record bonuses?
And if he failed and lost a lot, would it be any more surprising that Keynes was also a man of hubris who overestimated his own investment "virility," much like every other insider who thinks that, because of his priveleged position and god-like intellect, he can do no wrong with his decision making and investment strategy?
And if he failed and lost a lot, would it be any more surprising that Keynes was also a man of hubris who overestimated his own investment "virility," much like every other insider who thinks that, because of his priveleged position and god-like intellect, he can do no wrong with his decision making and investment strategy?
If this gambling strategy works on roulette, why isn't everyone doing it?
Well, I don't know about you, but I haven't been able to get Bill Gates to lend me $3.57 billion...for a day.
Scott Sumner's plan starts out this way:
what I’d do if Bill Gates was willing to lend me $3.57 billion dollars for a day
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Well, I don't know about you, but I haven't been able to get Bill Gates to lend me $3.57 billion...for a day.
Scott Sumner's plan starts out this way:
what I’d do if Bill Gates was willing to lend me $3.57 billion dollars for a day
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