austrian63

John Maynard Keynes's Strategy Still Makes Money Today

I did not know about Keynes' investment expertise. Regarding his economic expertise, is it not true that in the period 1921 - 1927, that the American economy was actually Keynesian before he published his treatise in the 1930's? In the 1920's wasn't there an unprecidented growth in the money supply, sharply lower interest rates and an increase in both business and individual debt loads (more money via credit creation) unlike any seen before in history? Didn't this cause the real estate bubble that peaked in 1927 and then began deflating, at first slowly and later more rapidly? And didn't stock prices inflate during this period also?

As for Keynes' contrarian investment philosophy, I do think this is sound no matter how unsound his economic philosophy. However, since the world has now become Keynesian again as in the 1920's (before he published his book) and in the 1930's (after he published his book) I think contrarian investors would do well to look with suspicion on Keynesian ideas since they are generally accepted as valid and part of the current herd mentality in economics and business. To not be in favor of Keynesian economic ideas (stimulus packages, low interest rates, etc.) is to be a "fool."

Investing in the preferreds of utilities is not necessarily a glimpse of Keynesian brilliance but rather a run to safety which is another story in itself. If Keynes was so confident in his own ideas, why did he run to safety in utilties as he saw his policies implemented in the 1930's and 1940's? Hmmm..... This could be a "deep thought" on SNL.

Dr. Skousen, you may believe you are a "free market" economist but I hate to burst your bubble, you are not. If you were, you would not have stated in your article "While the Keynesian policies of reinflation and deficit spending may avert another Great Depression, it threatens to reignite price inflation and another dollar crisis down the road." It was Keynesian policies that "caused" the Great Depression by turning a recession, caused by asset bubbles, caused by bad monetary policies into a depression. Boom and bust cycles are natural within economies that are "managed" where interest rates are forced to artificially low levels and the mirage of debt as the preferred way to finance growth and acquire riches replaces the reality that without real savings and equity finaincing, the boom is ALWAYS unsustainable.

While your recommendation of preferred stocks is probably a good one, the true contrarians will be moving into commodity and energy related stocks and funds and even real estate as we await the inevitable, "unintended" consequences of our current brilliant Keynesian policies.

Kind of reminds me of the great definition of insanity: doing the same thing over and over again expecting different results.