I’ve been reading through the annual meeting speeches John Maynard Keynes made during his tenure at National Mutual Life Assurance Society. Several things stood out like his views on the U.S. leading up to and after the ’29 crash or his hot takes on the global economy and how to fix the issues of the time.
Another thing that stood out was how things have not changed much over the years. Sure, it’s easier to invest. It’s cheaper. We have more choices.
But the issues he dealt with and decisions he made are no different than today: things like stocks or bonds, home or foreign, short or long term, and more. And his thoughts on some of those issues are no different than what other great investors repeat all the time:
On the limits of size and liquidity:
If our holdings in any particular security or class of security were very large, market limitations would come in to prevent the completion of our plans, for I need not tell you that there are times when even the London Stock Exchange is not anxious to buy or sell great blocks of securities, however good they may be.
It will not be many years, if we go on at our present rate of development, before our aggregate funds reach a total greater than, in the opinion of your board, we can manage to the best advantage.
On the difficulty in predict interest rates:
Success in the investment of insurance funds mainly depends on anticipating, so far as possible, the course of the rate of interest. Unforeseen fluctuation in this rate is the one factor which is capable of seriously upsetting our calculations. If only we knew for certain what the course of the rate of interest was going to be, whether high or low, we could act without hesitation.
Guessing at the future rate of interest is, in my opinion, one of the most puzzling problems in the world. I am quite unable to take a confident view either way.
On the need for shareholder activism:
…do much to remedy one of the greatest difficulties and evils of the present stage in the evolution of joint-stock enterprise — namely, the complete impotence, when things are going wrong, of the shareholders, separated from one another, each with only a tiny stake in the concern, and practically incapable of joint action, against a board of directors who may, as shareholders, have no great sum at risk. There may be important future possibilities in cooperative action between insurance offices, and a committee representing them might be able to play the part of the reasonable, well informed shareholder able to make his views and wishes felt, which is at present so signally lacking in the existing scheme of things.
On the trying to chase yield:
Nor is it wise, in my judgement, to be too much influenced in pursuing an investment policy by the desire to obtain as high a current yield as possible, since those investments which are most satisfactory in the long run are often those which yield a comparatively low running income at the moment.
On big market fluctuations not being the end of the world (and it wouldn’t matter if it was):
But I should suppose that we have done slightly worse than the average, since one would expect the market valuation of investments distributed as ours are to be somewhat lower, at the bottom — or at what one hopes may be near the bottom — of the greatest industrial slump in history, than that of the holding in which Ordinary shares are a much smaller proportion and mortgages and properties a much larger proportion of the whole. Nor need this disturb us. For if the slump continues no kind of asset, however insensitive its nominal valuation may be over a short period, will escape calamity in the end; while if recovery comes, the former relative valuations will be restored.
On the risk of trying to time a crash and missing out on the recovery:
Looking back on the year’s operation, we could, of course, have saved depreciation by a wholesale disposal of our Ordinary shares and long-dated fixed interest securities such as Treasury Bills. But even apart from the fact that such a course would have resulted in a certain loss in interest yield…it would have remained a gamble whether we could have got back again into permanent investments at just the right moment… My own candid opinion, for what it is worth, may be summed up by saying that we might, with a little better luck or a little better management, have suffered 2 per cent less in depreciation, but that, in view of the universal character of the collapse in values, we could not, by any reasonably practicable selection of securities compatible with general long-term policy and the maintenance of our interest income, have done much better than that.
On how one’s perception of the future may be biased:
In speaking of future prospects it is often difficult to make the distinction clear between what one considers the most desirable in the public interest and what one reckons to be the most probable in the actual circumstances. For unfortunately the course of events which is the most desirable is not always the most probable!
The Times: National Mutual Life Assurance Society 1922 – 1937
John Maynard Keynes on Owning More Stock