Keynes Letter on Investments in 1938

I was Googling to see if I could find any shareholder letters from John Maynard Keynes. Haven't found any yet. But I did come across this letter to an individual dated January 16, 1938:

Dear Recknell,

I agree with you in doubting the wisdom of buying more American Common Stocks at the present time. Our recent sales were mostly Sterling securities (and I did not agree with by any means all of them), and to replace these by Americans would not, I think increase the stability of our holdings. For, in spite of my letters to the Times (2), I agree on the whole with the Government that the immediate prospects for this country are not satisfactory, and much less open to doubt, I should have thought, than the American position.

As regards America, my view of the prospects can be summed up as follows. The slump at the end of last year was so extreme and carried current production such a long way below current consumption that some upward reaction in activity seems very probable in the near future. This may be further aided by the upward seasonal trend usual at the beginning of the year, by virtual certainty of an increase in freight rates and by an increased armament programme.

But I see no convincing evidence of adequate increased investment in the durable goods industries in the near future. It looks as if the various plans in this direction may easily take six months to a year to mature. Moreover other forms of Government assistance will probably only come to the rescue after there are signs of a renewed decline. Roosevelt seems to talk an astonishing lot, but he does not give an impression of having a clear policy such as might lead to decisive action of any kind whatever. (3)

In these circumstances there appears to me to be a risk, by no means negligible, of another period of disappointment before the basis can be laid for a genuine renewal of the recovery movement. The opportunities for such an eventual recovery are ample. But for the time being there is a word much to be said for a waiting policy.

This does not apply with equal force to purchases of American second-grade Bonds, and high yielding Preferreds. I believe that it is possible to find extremely cheap stocks amongst these which fully discount any likely recession, whilst capable of recovering, if the more optimistic view proves justified. For example, I would much rather buy the Continental Gas and Electric Bonds which the Board have considered last week than increase the holdings of Common Stocks.

Other purchases I would suggest are Columbia Gas and Electric 6 per cent "A" Preferred, United Gas Corporation $7 First Preferred (increasing our holding by another 500 shares). We have done better with this class of share in the past and might do so, I think, again.

Yours sincerely
J M Keynes

Comments

[Ben Tanen]

This is fabulous and hilarious (the Roosevelt comment). Do let us know if you find anything else. I wonder if Keynes's papers from his time as Bursar of King's are accessible. I am going to check into this now.

-Ben

[John]

Ben: The new book about Keynes I posted about the other day might (should?) have lots of this type of stuff in it. I'd love to read a collection of his shareholder letters. If I find anything else online I'll be sure to post it. And if you find anything, let me know.

[Ethan Bloch]

Great find.

"Roosevelt seems to talk an astonishing lot, but he does not give an impression of having a clear policy such as might lead to decisive action of any kind whatever. (3)" -- Sound like anyone in the news recently... a recent president elect maybe...? ;p

Really great to get a glimpse into JMK's mind during this time period. I don't know boat loads about him, but I do know he was a rather successful (focus) investor. Do share more letters if you find them.

Cheers.

Ethan

[John]

Ethan: I will. I've linked to a new book on Keynes as an investor. I haven't been to a book store lately to see if there's a copy to thumb through. Hopefully it has lots of this type of stuff.