FINANCE AND INVESTMENT
THE City has taken the Simon and the Hitler hurdles in good style, but having done so is looking round again as anxious and puzzled as before. For it is already clear that last week's events, so far from having resolved any of the investor's major doubts, have added to them. The external political risk, always unassessable, seems to be unaltered, unless, of course, one really believes that the Berlin-Rome Axis is showing signs of wear, and developments on the domestic political front raise a whole crop of new problems. Shareholders in armament companies, for example, are naturally worried by the Prime Minister's projected limita- tion of profits plans and the conscription issue involves some readjustment of ideas both as to gilt-edged stocks and many groups of equity shares.
Until the Armament Profits Limitation Bill appears one cannot be sure what the Government has in mind, but pre- sumably it is something in the nature of a tax. The exist- ing " control " over armament profits exercised through cost accountancy devices is, it seems, ineffective, doubtless because the companies' rewards have risen sharply with the steady expansion of their turnover. My own feeling is that the holder of armament shares, especially in the aircraft group, should not jettison his shares at current prices which make a very generous allowance for any likely setback in earnings in the near future. Yields ranging between to and 12 per cent., which can now be had on shares such as Fairey Aviation and Hawker Siddeley seem to me to dis- count the unfavourable factors quite adequately. I only hope that the Bill itself will not bring fresh uncertainties for the armament industry and impose a check oil rapid expan- sion of production.
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