Gavyn Davies writes in FT:
In May 1920, the markets became temporarily optimistic about developments in Germany, and over-leveraged positions in the market were rapidly reversed. Keynes and his syndicate were effectively wiped out, though he managed to survive by borrowing more money from his father...But then we get into nonsense about Keynes the "great" investor:
Keynes was not deterred. By the late 1920s, he believed that the Federal Reserve would be able to maintain economic growth at a high level, because inflation was under control. He was therefore exposed both to equities, and especially to commodities in 1928-29, when the Fed unexpectedly tightened interest rate policy and the global cartel in rubber collapsed.
Again, he sustained large losses as the Great Depression started.
In the mid 1930s, he was convinced that President Franklin D. Roosevelt would succeed in stimulating the US economy, and he again used margin to leverage his personal portfolio. He had a volatile ride, but this time he was right, and he made the bulk of his personal fortune, which exceeded £400,000 when he died in 1946.As I have written many times, the reason Keynes was convinced about FDR's action was because he was advising FDR on what to do. Keynes did not buy into the US industrial stocks of the day, he bought into gold mining stocks. From the outside this would have appeared an absurd investment, since the US was in the middle of a great depression and all prices were following. Further, FDR had confiscated the gold holdings of all Americans and made gold illegal to hold.
Who would anyone buy gold under these conditions? To most observers it would have looked as though there would be no demand for gold coming from the US. Yet, Keynes, who had already called gold the "barbarous relic" plowed nearly his entire portfolio into gold. mining stocks,
The real reason he did this was not because of some great investment insight but because he was part of a clique that included Bernard Baruch, who were advising FDR and advising him to prop up the price of gold by having the government start a gold buying program. FDR did this and Keynes and Baruch both made fortunes, while the average American, because he had his gold taken away from him was left out in the cold.