Skinflint's City Diary
Last week I wrote a few words saying that Scottish Widows had been selling equities, particularly ICI and Distillers. This was to illustrate the self-feeding demands of a stock market slump coupled with a squeeze on private credit. As small investors are pressed by their banks they have so often final resort only to the paid up portion of their insurance policies and any equity element that they have in their houses. If this becomes contagious it must result in certain insurance firms selling equities to meet these redemptions. To say this particularly at the present time has certain dangers and it is difficult for a commentator to steer a cautious path between his duty to his readers and what has been called the 'public weal.' In the case of Scottish Widows th'e information I received was incorrect particularly as to the timing of ICI sales and I have received a severe scolding from Mr Kingsnorth, general manager, of Scottish Widows, whose letter I am glad to print below.
Sir: It was with amazement that 1 read Skinflint's article under the heading 'Big Sellers' in your issue of August 24. First and unequivocably I would state that the information about the Scottish Widows' Fund is absolutely untrue and clearly shows the danger of publishing information as authentic which has been obtained from a junior member of the staff of a firm of stockbrokers. Even if the information were correct, the person concerned would be acting very reprehensively and irresponsibly if he disclosed confidential information about one of the clients of his firm.
Far from making recent sales of ICI and Distillers, the true facts are that the Society has not sold Distillers shares since 1954 — I repeat, 1954 — and sales of ICI shares have not been made since the summer and autumn of last year when in fact substantial sales were made at prices materially above those which can be obtained at the present time. Finally, the Society has not been a net seller of equities in recent weeks: indeed we built up substantial holdings of cash well before the end of last year in anticipation of better investment opportunities at some time in the future and this cash has yet to be committed.
So much for the facts which speak for themselves. Perhaps more important at the present time is the danger of the news Media spreading rumours: in the case of my own office a short telephone conversation with us would have prevented Skinflint from wasting his time writing an article which was without foundation.
Cavenham Foods
The rise of Cavenham Foods owes much to the takeover of Bovril (masterminded for Jimmy Goldsmith by J. D. Slater) and on the back of this the takeover of the strategic stake in Allied Foods from Unilever that then permitted a full scale bid. Now Goldsmith has the reputation of being a 'player' by which I mean big roller, punter or 'sportsman.' The thing with gamblers, especially those that have a reputation for not being on the losing end of the table, is that whatever they say needs calm and reflective study.
Cavenhams balance sheet shows borrowings of £99.6 million and the business is capitalised at a miserly £54.8 million, yet they made £32.4 million. There are cross holdings between General Occidentale and Anglo Continental Investments amounting to £39.25 of the Cavenham capital. I always view cross holdings with the deepest suspicion particularly. if they have been built up through incestuous takeovers or the support of a share price during a bid. Goldsmith has been very gloomy in his report saying that after they have made the new investments they plan there will be a negative cash flow in spite of pre-tax profits of the £32.4 million for last year which they are intending to repeat. Goldsmith gloomily says: "Cavenham can live with the situation for some time because we have managed our cash affairs well and have large liquid resources. But we cannot expect to sustain a cash drain indefinitely and for industry as a whole the situation is likely to be much more serious." Now what does this mean? Is Goldsmith the pokerfaced gambler saying that things are bad for Cavenham? Surely not. This would imperil his credit, and bother his bankers. Perhaps and' more likely things are not all roses and he feels that a display of blunt candour will be seen as a show of insouciant strength and that analysts will take into reckoning that a man with a reputation for being at his best in the hours after midnight would be incapable of a bearish word unless he was well able to withstand whatever winter brings.
Deals will be harder now for Cavenham for which I have had considerable respect over the past two years. A slow withdrawal may be prudent.
Anyway I am glad to see that Jimmy Goldsmith is taking a holiday in Deanville, and hope he comes back fit and well. Safer perhaps than in one of his late father's hotels on the Cote d'Azur, noted for its polluted beaches
where some wit, Noel Coward probably, after changing to swim is reported to have said as he glanced down, sadly slushing the lavatory "Au revoir, but not goodbye?"?
Powell for the city!
For years politicians of both parties have been muttering against that grand, mummified, implacable institution, the City. Labour politicians have been swallowed up by it, Tory politicians have lain on their backs and loved it. What is that curious square mile of well-lunched wealth actually worth to the country? Both parties — indeed, all three parties — have, from time to time, suggested a deep and searching investigation of the activities and usefulness of the City. Such investigations have never taken place, partly because the radicals of the parties have, once in power, fallen into the thrall of the City, partly because nobody can be trusted to examine the blessed place. Hence, Skinflint and his nominee. I note that Mr Enoch Powell has time on his hands, that he speaks regularly (for, so it is said, high fees) to captivated City audiences, and that he commands respect among all parties as a grave logician. Why not let Mr Powell loose on the City, with terms of reference which would allow him to produce a general report on the usefulness of the place?
Schultz goes
I am sorry to see that my friend Harry Schultz, a contributor to this paper and fervent gold addict (he even has gold cufflinks) has emigrated, in the face of our financial crisis, to Amsterdam. (I should add that, though he had so vanished, nobody had an Amsterdam address for him last week.) I am sorry not only because such goldbugs as myself and Jim Slater and William Rees-Mogg lack the stimulus of Harry's economic advice because of his departure; nor just because we miss his company. I am sorry because he has chosen the wrong European capital to emigrate to. Vienna, surely, is the place; for beyond doubt the Austrian schilling is the soundest currency now available, and Austrian tax laws suitably lax. It is a case, not of 'come back Harry,' but of 'go on Harry.'
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