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Producers versus Speculators~ Problem of the Age?
Baron Lord John Maynard Keynes, mathematician turned speculative economist, managed money for himself, insurance companies and King’s College Cambridge where he taught.
From 1924 to 1946, when he died, he managed the Kings College Chest Fund. He sold declining properties and took the Chest Stock Fund from 30,000 to 380,000 Pounds, for a CAGR Compound Annual Growth rate of 12.3%. That sounds puny by today’s standards until we realize that increased the money almost 13 times in 22 years during the Great Depression and World War II.
What is remarkable about this is that Bursar Keynes spent the dividends on college expenses rather than reinvest them.
The standard formula is that up to half of total return comes from dividends, so the total annual return may have been over 24%.
Keynes proposed a modest Transaction Tax to tone down the casino mentality of speculative markets leading to economic Great Depression.
Keynes wrote in 1936:
Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.
http://en.wikipedia.org/wiki/Financial_transaction_tax
http://www.maynardkeynes.org/keynes-the-investor.html
Today, our cost of living continues to rise, while people with less and less free income scratch their heads, scramble for work and vote out the incumbents in revenge.
In fact, the 1980 CPI went up at a 10% rate, while the Case Shiller Housing Index fell as much as 20.6% in Las Vegas last year.
http://www.shadowstats.com/alternate_data/inflation-charts
