Montagu Norman and Steels
By Our City Editor
To boom or not to boom? That is the question.
As these lines go to press, the general indication appears to lie in the direction of " Not to boom," or at any rate of not booming just yet. On the first two days after Whitsun there could be no doubt of the continuance of a strong upward move ment in prices. The fact that the international barometer remained at " Set Fair " brought a number of new buyers into the market, causing
a substantial rise both in ordinary and fixed interest shares. Then came a rather damping speech by M. Molotov. It is odd that the supreme capitalist institution of the Stock Exchange should be so abjectly dependent on the Russian liver, but it is a fact, and on the present occasion the indication that complete agreement between Russia and Britain was not yet in sight produced a mild but definite reaction.
On top of everything, the offer of 16 million 4 per cent. stock by the Commonwealth of Australia at 98ii came at a moment that was psychologically unfortunate. There was some reason for this high interest rate, as Australia is not quite in the top layer as a borrower. Nevertheless, the rate was symptomatic of the market in general and immediately brought about falls in the scrip issues of South Africa and Northern Ireland as well as in War Loan and other British Government issues. Simultaneously a definite listlessness prevailed over all industrials.
TWO CAUSES OF WAIT AND SEE There can be no doubt whatever that the market just at present is refusing to discount the rising tide of industrial profits. For this there are two reasons.
One of them has already been indicated in these columns. It is the uncertainty as to future fiscal policy and the anticipation that a voracious exchequer may take most of the profit increases for itself.
The other consideration is at least of equal importance. It is that the Incipient boom is startlingly lopsided. Naturally enough, as more wage earners are absorbed into the rearmament industries, there is an Increase in the purchases of consumption goods. But confidence has definitely not returned.
This applies not merely to the capital goods industries (other than those concerned in rearmament), but to what constitutes " investment " for the ordinary wage earner at £3 a week. Furniture, clothing. radios, and residential building are still depressed to the point of almost complete submersion. The same considerations which make the owner of ample funds cautious of speculative enterprise make the citizen of slenderer means contemplate with diffident aversion the purchase of a new pair of pants.
The chances are not yet too remote that a bomb may end the venture of the first, while enforced khaki may render redundant the acquisition of
the second. Defence spending alone Cannot nkodify the obstinate prevalence of a mood of "Wait and See" to which a drop of nearly eight per cent. in department store sales bears alarming testimony.
ODD POSITION OF MONTAGU NORMAN
I recently commented (together with many others) on the very odd position of Mr Montagu Norman in the very odd business of the Czech gold. It is time that attention was again drawn to the very odd position of Mr Montagu Norman in the even odder business of the Steel Industry. In July of 1938 it was announced that Richard Thomas and Co. had come tinder the control of a committee of which Mr Norman is the chairman. Later it was announced that John Summers was about to erect a new strip mill, which, according to credible reports, is to exploit a new American process that substitutes one heating for three. Finance was provided by that very curious and powerful subsidiary of the Bank of England, the Bankers Industrial Development Company, and needless to say Mr Norman is again on the controlling committee. The Bankers Industrial Development Company is in this case quite definitely on a good thing, since it has annexed the entire equity interest in the new concern, while the public has merely been tossed a sop in the form of debentures —a very strange proceeding for the subsidiary of a bank.
A SMALL WATERTIGHT KINGDOM Now it would be uncharitable to scout the idea that Mr Norman serves on these committees solely out of zeal for the common good, and that the very considerable profits which he thus controls will by some devious channels ultimately flow to the taxpayers' relief. But the Czech gold business ha.S lot
the painful impression that Mr Norman rules a small watertight kingdom of his own, and we wonder whether the proceeds of these enterprises will not remain dammed up within its confines. That Mr Norman has picked on the right industry to engage so considerable a portion of his time and interest IS beyond all doubt. It has recently been pointed out that though steel output fell heavily between 1937 and 1938, the fall in profits was comparatively slight, while for the current year, when output Is rising, profits, despite a price cut, promise to be higher still. In other words, this vital industry, thanks to its strong organisation, can do moderately well in bad times and excellently in good. Seeing that the industry is so largely engaged on work of national concern, might not the taxpayer be assured of some direct share in these secure and pleasant earnings.
Some time ago, Lord Nuffield (who felt that he was being overcharged at the time) designated the whole steel industry as " a perfect ramp, an absolute ramp—big cigars and nothing to do." This may be a little unkind, but the fact remains that what the steel industry does not know about rings and price fixing is not worth knowing.