The world’s greatest investors: James Robert Keene

Keene was born in London in 1838 to a prosperous family and moved to the US in 1852. After a brief spell as a journalist, among other jobs, he made a fortune in mining, which he lost in speculation and went broke. A senator gave Keene his seat on the San Francisco Stock Exchange and told Keene he could pay when he was able to.

Keene thrived and was eventually appointed president of the San Francisco Stock Exchange and a governor of the Bank of California. He lost his fortune due to a bet on grain prices in 1884, made a comeback managing a stock fund, and later became a well-known manager of “investment pools” and a very successful horse breeder. He died in 1913.

What was his strategy?

Up until 1884, Keene invested using a combination of fundamental analysis, attempting to gauge market sentiment and going with his gut instinct. His later career was characterised by his involvement in “pools” and “rings”, shadowy syndicates where people would spread rumours designed to inflate a company’s share price, before dumping large amount of shares on the market.

Did this work?

Before his disastrous bet on grain prices, Keene was said to have a fortune of $13m ($324m in today’s money). When he died in 1913 his estate was estimated at $15m ($370m). The legendary trader Jesse Livermore rated Keene highly. He called him both a “master manipulator” and a “consummate trader”.

What were his biggest successes?

In the early 1870s Keene’s doctor advised him to take a long sea voyage to restore his health. Before he left, he bought a couple of shares in mining companies that were poised to strike it rich, on the advice of a friend. On his return a year later his investment of a few hundred dollars was now worth $200,000. As the mining craze intensified, he cashed in his stake and sold some of the most overvalued mining shares short. He subsequently made $3m from these short sales.

What lessons are there for investors?

While regulation is (thankfully) stricter than it was in Keene’s day, market bubbles still occur. This creates an opportunity for short-sellers to step in, provided they have enough courage and can endure volatility. His wife’s insistence that Keene hand over half of his profits to her, to be invested in high-quality bonds, also enabled him to ride the occasional downturn in his fortunes. Interestingly, Keene himself advised the general public to stay away from speculation.