SKINFLINT'S CITY DIARY

The Prime Minister's appointment of Lord Cromer of Baring Brothers as Ambassador in Washington in place of that rat-trap col- lectivist John Freeman would have been thought by Bagehot to be an excellent choice. He said: 'The aristocracy is better suited for such work [diplomacy]; it is trained to the theatrical part of life and if it is fit for that it is fit for anything'.

I hope that the privilegia of this column allows me to comment on further fun the Prime Minister may be having in thinking of a replacement to Sir Alec Douglas-Home whose days, by his own choice, are numbered as Foreign Secretary. He might well con- sider Christopher Soames (except for the jibes I am told by a French journalist of great repute he was making at Mr Heath's expense at the time of the general election). The Prime Minister has a-safe seat in his gift at Thirsk and Malton, still loyally held by sixty-seven year old Mr Robin Turton who agreed to hang on because of the with- drawal just before the general election of that luckless young meteor Jonathan Aitken as the adopted candidate. Keen thruster Aitken, a member of Lady Antonia Fraser's political salon, is to bring the colour pages of his cousin Sir Max Aitken's Evening Standard to life.

If Christopher Soames came back from Paris, another imaginative appointment from the House of Lords might be dutiful ama- teur actor the Earl of Bessborough whose mother is a member of the French banking family of Neuflize, and whose wife is daugh- ter of that famous racing figure in Paris and Palm Beach. Charlie Munn. Bessborough (he must have the least audible platform voice in public life—no bad thing that) was until recently a Minister of State at the Ministry of Technology and he has been promised 'a better job' in the New Year.

He will well live up to those other words of Bagehot that 'an ambassador is not only an agent, he is a spectacle'.

Doggone, Getty I am sorry to hear that that kind and cul- tivated seventy-seven year old, Paul Getty, is leaving England for warmer places. Every- thing with which this richest oil-man in the business is connected is Texas-sized. He drove himself to Lord Beatty's house, Chicheley Hall, some years age and arriving a little late for lunch in an old (by American standards) Cadillac Eldorado said, 'I saw a notice "Tradesmen" at the end of your long drive and thought "Getty, this means you" and lost my way'. At lunch Getty admired a poodle belonging to Lord Beatty's eighteen year old fiancee, Diane Kirk, who fell into the trap of asking if he too had a dog. 'Yes', Getty was able to say, 'I have forty-three Dobermann Pinschers at my gallery in Cali- fornia, fourteen Alsatians at Sutton Place, ten Getty has had fun, like Jack Benny, cultivating a mean public face by putting coin-operated telephones into Sutton Place and competing with rich friends on who doesn't pay the bill.

With a nom-de-plume like mine, one inevitably admires the instruction about begging letters he gave his new young personal assistant. 'If they're from private individuals, put them in the waste-paper basket. If they're from charity organisations, write back and say no.'

Painting by numbers

I came across two of the 1970s self-made recently—hard-faced young men who look as if they might have done well out of takeovers or exploiting other people's Thrift.

Self-deprecatingly they describe the methods they built up their picture collec- tions. The first, whom I cared for least, had apparently chosen a school and after visiting a couple of Sotheby's and Christie auctions had started bidding, (without previously viewing) if he vaguely recognised the painter's name and if in his own decorative terms the painter was acceptable. In this way he apparently bought some 140 paintings and drawings in two days. After cleaning and framing he had the sort of collection that drew from a cultivated art lover: 'But where is your Russell Flint?'

The second of these men of business, plainly the more successful, had an approach which though original was reminiscent of Duveen. He argued that one painter at a time should be collected. The problem was to choose a painter, which by the nature of availability and price meant, in his judg- ment, a minor master and almost inevitably a Victorian. He suggested that the minor master needed researching for an hour or so to confirm his life span and probable output if it was recorded. His trick then And still going Strong was to buy only from dealers not from sale rooms or from private owners. Under no . circumstances were purchases to be made for less than the dealer's full asking price, but just before producing a cheque he asked for a re-purchase undertaking at that price less 10 per cent. He found that dealers were so pleased to be getting the set price without bargaining that they readily agreed to this suggestion. As the collection was built up from a variety of dealers it was, of course, being underwritten for its cost less 10 per cent.

Inevitably prices rose as the collection expanded because more than one dealer was of the opinion that he had an enthusiastic client and it was not to their advantage in allowing prices to fall when their re-purchas- ing undertaking might be invoked. One or two pictures only had to be sold at a true profit for the investment to become gilt- edged.

He (and his friends) now have to live with his success—the gloomy monsters are gathering value everywhere, in his drawing room, dining room, study, hall, and even his offices.

Enterprise not Thrift

'If Enterprise is afoot, wealth accumulates whatever may be happening to Thrift; and if Enterprise is asleep, wealth decays what- ever Thrift may be doing.' (J. M. Keynes) Just now we are being told that the slug- gishness of corporate capital investment is due to a critical shortage of company liquidity. This is plain but the probable cause and cure are in my belief not being put for- ward by most commentators. For a number of years since the Capital Issues Committee was wound up there has been a spate of takeover and anti-takeover activity which has invariably meant that companies have tried to maximise their declared profits by every means at their disposal. The steps they have taken included cutting back proper organic investment; capitalising expenses which should be a proper charge against revenue and through liberal accountancy interpretations reporting higher than healthy profits and paying excessive dividends (and taxes). All this, in sum, to produce high price earning multiples and high share prices for making or fending off takeovers. This has, year by year, drained cash which com- panies have hoped, unsuccessfully as it nov, turns out, to recoup by convertible loan stock or equity issues at propitious times.

Strict interpretation, please Obviously, the setting up of an appropriate authority from outside the City to control this speculation is vital but, in addition, there is a simple measure at present open to the Stock Exchange Council which should pro- duce a slow but effective cure. When no companies are floated it is usual for the proceeds of the floatation to finish in the pockets of the vending shareholders and the opportunity is not taken to raise new capital directly for the company. In short, there should be a strict interpretation by the Share. and Loan Department of the Stock Ex- change, of the proper capital requirements that are likely to be needed. In assessing capital requirements it should be presumed that no bank or outside borrowing facilities will be available and that a considerable degree of liquidity is expected.

SKINFLINT