CITY DIARY
CHRISTOPHER FILDES
Time was when the monthly trade figures could be forecast with complete confidence by the application of Lawson's Fourth Law: Bad figures take longer to add up than good ones. If on the eleventh of the month the Board of Trade was ready to declare its hand, there would be aces and kings in it; but if by the eighteenth there were still no figures, the Board was clearly going mis4e. I acquired a quite unfounded reputation for prescience by using this simple index. Then the Board of Trade bought a com- puter and spoilt the game.
Or has it? This week's—they came out on Tuesday, and real stinkers they are—were de- cidedly late by the Board's new standards, and were Preceded by a heavy barrage of official hints that too much should not be looked for. This in my warlike days was known as the Army's Beatitude: Blessed are they that expect little, for they shall not be disappointed. Similar hints, though, were to be heard before last month's figures, which most people took as highly encouraging: perhaps the Board, like me, thought that the best you could say for them was that they were awful, but less awful than their predecessors.
Now I wonder what will become of that odd euphoria which spread through the City this last month and has infected observers, unofficial and official, though not, conspicuously not, Mr Jenkins or Mr Crosland? As for the Prime Minister, whose euphoria has what I may call a low flashpoint, he is presumably sparing the Bishop Rock any sequel to his 'economic miracle' speech at Newtown, Montgomeryshire.
That speech seems to have been based on a rather engaging mistake. Mr William Clarke (who is, inter alio, director of the Committee on Invisible Exports) published an article in The Director called 'How to judge the eco- nomy.' In it he listed seven indicators—a decline in imports, for example—which would suggest that the economic crisis was coming to an end. This article was taken up by the financial press, but misreported: Mr Clarke was understood to say that all these indicators were already showing better things ahead. This was the version that inspired the Prime
Minister: even the bosses' house-journal was on his side! Bad luck, really.
I have, of coune, the utmost confidence in all Lawson's Laws: it is with more hesitation that I offer you a law of my own. It is wholly simple . when a company calls in Cooper Brothers in addition to its usual accountants, sell the shares. The British Printing Corporation affords the best-known example—'in our opinion the books have not been properly kept': what a noble polemic that report was! But now look at poor old Headquarters and General. The Ionian Bank puts in directors to protect its interest: the directors call in Cooper Brothers to find out how the company stands: and what do Cooper Brothers tell them? They tell them it's bust. So here is tr and c, battling along, apparently making a profit at the moment, but insolvent, which means it has to be put in the hands of a receiver; and down goes the share price by over 40 per cent.
A keener instance of this kind of difficulty is afforded by Whiteside's, the popular maker of pickles and peanut butter. All was going well until some officious accountant discovered that the stocks were overstated by some three- quarters of a million pounds. The company never recovered from the blow, and has gone into liquidation, the shareholders getting nothing.
A different, but comparable, phenomenon has been studied by Professor J. K. Galbraith, to whom we owe the concept of the bezzle. This is the total sum of money' which people think they have although, in fact, somebody else has embezzled it. Double-counting is the essence of credit creation, and the bezzle shows double-counting at—shall I say its purest? Per- haps the International Monetary Frind should look at ways of establishing a world bezzle. Or perhaps one is there already, in which case the IMF must be at pains not to find out.
Liquidity of another kind has been engaging my attention; that thick black liquidity dis- pensed by Mr Cornelius O'Sullivan in his select bar in Co Kerry. Two incidental pleasures: the first was to be reminded that Aer Lingus are the agents for El Al. This alliance is of long standing: the two shared a terminal in New York, where they did a roaring trade among the more ethnically conscious passengers, and were known collectively as 'Abie's Irish Airline.' I think they should have brought in Alitalia and scooped the pool.
Pleasing, too, was a note in the financial columns of the Cork Examiner. A team from the World Bank has been visiting Ireland, and the Examiner thinks a loan may be on its way; possibly to finance the draining of the Shannon. All I can say is that there will be stiff competi- tion from the Marquis of Donegall's older- established and equally practical project for the levelling out of Switzerland.
Fond as I am of the Examiner, I find a soft spot for another paper, which (John Bull tells me) has sprung up and flourishes in New York : it is called Mergers and Takeovers Monthly. This title brings to high finance a touch of that humbler acquisitiveness more often associated with the racecourse: indeed, the most obvious merger or takeover would link m and tit with, say, The Winner, or the Greyhound Express. It would have a tailor-made editor in Captain Threadneedle, and I should look forward to his cross doubles—So Blessed in the Nunthorpe coupled with J. Slater's Selected.
The Stock Exchange Council thinks that Cazenoves broke the rules but weren't to know: Cazenoves think that they didn't break the rules and were to know. 'We did not breach the Code as it is,' says Sir Anthony Hornby, the senior partner—'we may have breached the code as they wish they had written it.' So the great Gallaher row ends. At least Cazenoves, and their clients Morgan Grenfell, have had the courage of their convictions, even though the convictions were misguided and the courage misplaced. So much cannot be said for the City authorities.
It may be that dog just won't eat dog; that a system which has the Hornbys and Hampdens tried by their peers (quite a lot of them are peers, anyhow) asks too much of human nature. In fact, the City's natural way of passing judg- ment is informal. If a rule is accepted as a good rule, someone who keeps it in the letter but breaks it in the spirit—`the code as they wish they had written it'—gets a name for being what the City calls 'hot.' That is both damaging and lasting: it is hard to live down. Cazenoves and Morgans may 'escape this verdict because of the doubt cast on the authority behind the rules.
I meant to write last week that the top rate for investment grants was 45 per cent. The figures were transposed, to read 54 per cent. Sorry.
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