No More Champagne

by David Lough

  Across Canada Churchill found himself intoxicated by the country’s money-making opportunities, especially in exploration for oil and gas. Gripped by investment fever as he reached the Prairies, he asked Butterworth to pay his next set of royalties early and to Vickers da Costa, not to the bank, explaining: ‘I see various opportunities of profitable investment of the money in this country which may not be open by the time I return.’20 To head off any protests from Clementine, he set out the successes of the trip so far:

  I have written one article for Nash’s & one for Answers for £750, have sold 1,200 extra copies of The Aftermath so far, (in Canada £250), have made another £250 with Vickers in London: & £2,000 wh[ich] Sir H. McGowan*9 made for me by investing in Electric shares & have contracted to write 10 articles in Canada & the US @ $250–300 each. I hope to make some successful investments here & in US; & am glad to be able to find a little capital for that purpose. So you do not need to worry about money. The more we can save the better, but there is enough for all of us.’21

  At Winnipeg Churchill began to put his plan into action. He instructed Vickers da Costa to transfer £2,000 to an account he had opened with James Richardson,*10 a local commodity trader and a director of the Canadian Pacific Railway. Before the money had even arrived Churchill found himself the proud owner of stakes in two small exploration companies, Baltac Oil and Hargal Oil.22

  The excitement continued as the party moved on to Alberta’s oilfields – ‘dotted with structures shaped like the Eiffel Tower, 120 feet high’, as he described them to Clementine. ‘I am thinking of buying a thousand pound share in one of these companies if all my enquiries are satisfactory.’23 He mentioned the cautionary tale of Lord Cowdray, who had turned down a stake in an oilfield, which would have cost him $80,000, only for the field to turn out to be worth $80 million. By writing and investing, Churchill had earned nearly £6,000 since leaving London, he confided to Clementine, yet he had paid for virtually nothing.

  I am greatly attracted to this country. Immense developments are going forward. There are fortunes to be made in many directions. The tide is flowing strongly. I have made up my mind that if N. Ch. [Neville Chamberlain] is made leader of the C.P. [Conservative Party] or anyone else of that kind, I clear out of politics and see if I cannot make you & the kittens a little more comfortable before I die.24

  As soon as the party reached Vancouver, Churchill committed another $2,000 to Structure Oil, a Calgary exploration venture promoted by the fast-talking Fred A. Schultz. ‘Now, Mr Churchill,’ wrote Schultz, ‘to be quite frank with you I liked your manner of fast action in accepting our proposition, showing that we Britishers can make up our mind in a hurry as well as any Yankees can.’25 Structure Oil was to be put into administration two years later, without finding any significant oil.

  Before he left Canada Churchill’s final move was to open an extra account with James Richardson for dealing in American shares, so that he could buy $26,400-worth of stock in American Rolling Mills. In all, Churchill had transferred £3,000 of cash from London to Richardson in order to back £7,000 of investments made through him. Richardson wanted another £500 contribution transferred, so that he was lending Churchill no more than half, but Churchill preferred not to do so. ‘I do not expect to hold these shares for more than a few weeks,’ he explained.26

  Early in September the Churchills reached America, where they endured a less comfortable night on a public train from Seattle down the western coast. ‘I am lying on the top berth of our compartment,’ Randolph confided to his diary. ‘Papa is unpacking and swearing down below. We miss the Mount Royal.’27 The party transferred early to cars for the remainder of the journey to San Francisco, where they stayed with the banker William H. Crocker.*11 Next they moved on to William Randolph Hearst’s mansion and ranch at San Simeon, where host and guest circled each other warily before the ice broke. Churchill described his impressions in a letter home to Clementine:

  A vast income always overspent: ceaseless building & collecting not v[er]y discriminating works of art: two magnificent establishments, two charming wives;*12 complete indifference to public opinion, a strong liberal and democratic outlook, a 15 million daily circulation, oriental hospitalities, extreme personal courtesy (to us at any rate) & the appearance of a Quaker elder – or perhaps better Mormon elder.28

  At San Simeon Churchill encountered one of the other names on Baruch’s list: William Van Antwerp. His senior by ten years, the anglophile collected early editions of books by English authors, but doubled as a San Francisco partner of the major American securities firm E. F. Hutton. Conversation between the pair clearly concentrated on stocks rather than books, because within days Churchill had opened a new investment account with Van Antwerp’s firm. A letter to Clementine, marked ‘All v[er]y secret’, explained how Churchill’s appetite for investment had been whetted again by a bulletin from Sir Henry McGowan.

  Now my darling I must tell you that v[er]y g[reat]t & extraordinary good fortune has attended me lately in finances. Sir Harry McGowan asked me – rather earnestly – before I sailed whether he might if an opportunity came buy shares on my account without previous consultation. I replied that I could always find 2 or 3,000£. I meant this as an investment limit. He evidently took it as the limit to wh[ich] I was prepared to go in a speculative purchase on margin. Thus he operated on about ten times my usual scale, & as I told you made a profit on our joint account of £2,000 in Electric Bonds & Shares. With my approval he reinvested this in Columbia Gas & Electric & sold at a further profit of £3,000. He thus has £5,000 in hand on my account, & as he has profound mines of information about this vast American market, something else may crop up.

  Churchill listed £22,000 of ‘earnings’ that had now ‘come to hand’ since leaving office, although in truth much of it was due for books or articles still to be written or investment profits still to be realized. ‘So here we have really recovered in a few weeks a small fortune,’ he wrote to Clementine. ‘I am trying to keep £20,000 fluid for investment & speculation with Vickers da Costa & McGowan. This ‘mass of manoeuvre’ is of the utmost importance and must not be frittered away.29

  In between late-night parties with the Hollywood élite and day-time studio tours, Churchill set about arranging his new reserve: half was to be kept in London and the other half invested in North America. He held on to his new Canadian oil exploration companies, but transferred the rest of his cash in Winnipeg and at Vickers da Costa to E. F. Hutton’s San Francisco office, eager to join in America’s share boom.30

  Four days later, after lunch with Charlie Chaplin on the set of City Lights, Churchill reported his first success: ‘Since my last letter from Santa Barbara, I have made another £1,000 by speculating in a stock called Simmons. It is a domestic furniture business. They say “You can’t go wrong on a Simmons mattress”.’ He had taken his profit while on board Hearst’s yacht, but failed to mention to Clementine that he had sold only half of the $70,000 which he had originally invested in the company (five times the amount of cash in his E. F. Hutton account). As far as Churchill was concerned, Van Antwerp had already earned his spurs. ‘I think he is a very good man,’ he wrote home. ‘This powerful firm watch my small interests like a cat and mouse. There is a stock exchange in every big hotel. You go and sit and watch the figures being marked up on slates every few minutes.’31

  Emboldened, Churchill abandoned his new strategy and moved more than half of his funds to America. Selling some London stocks, he bought shares in another two of Van Antwerp’s recommendations: American Smelting and Montgomery Ward, a large department store.32 Then, after meeting Van Antwerp’s wife, Churchill handed his new friend full dealing authority over his share account during his eastward journey by rail. ‘His firm has the best information about the American Market,’ he told Clementine. ‘He will manipulate it with the best possible chances of success. All this looks very confiding – but I am sure it will prove wise.’33

  Van Antwerp’s telegrams fo
llowed Churchill’s progress eastwards in Schwab’s railcar. The second cable of 1 October, which intercepted Churchill’s train at Damille, might perhaps have sounded a warning note: ‘Market heavy. Liquidating becoming more urgent. Will await your telephone from Wellington. Your bank still losing gold & there are rumours of increase in bank rate.’34

  A lull in dealings followed until Churchill reached New York, where he was put up in the Savoy Plaza Hotel at Bernard Baruch’s expense.35 Neither the long train journey nor Van Antwerp’s warning had permanently dampened Churchill’s enthusiasm to rejoin the trading action. Baruch, one of the biggest participants in the Wall Street market, provided Churchill with a desk and an introduction to his East Coast brokers. On Tuesday 8 October Churchill signalled to Van Antwerp that he was once again ready ‘to take command’.36 Over the next four days Churchill’s turnover with E. F. Hutton reached $200,000, mostly quick trades in and out of Simmons. ‘Have sent you some reinforcements,’ he cabled to Van Antwerp, after sending on his fee for a New York speech (arranged by Baruch) in response to a call for more cash.37

  Nor did Churchill neglect his London-based holdings. ‘Delighted Sherwood. Shall I get a few thousand more?’ he cabled to Sir Abe Bailey.38 A positive reply brought an instruction to Vickers to spend another £2,500,39 which Bernau refused to lend, so Vickers had to fund. At this stage, Churchill began to lose track of his positions, which were now spread across at least three different brokers, markets and time zones. He complicated matters by telling Vickers (instead of Hutton) to buy extra Simmons shares in London rather than San Francisco, while asking the London firm to send certificates for a share that he had sold in New York.40

  Undeterred by the confusion, Churchill increased his turnover during the week between Monday 14 and Friday 18 October to $420,000.41 He also managed to make time for the long-awaited meeting at Collier’s Weekly. He convinced the editor, William Chenery, to squeeze in six articles before his Strand series started appearing the following spring. When Curtis Brown won another series of six from the Saturday Evening Post, Churchill was able to tell Clementine that his trip had brought twenty-two writing assignments, worth nearly £10,000,42 on top of his investment successes.

  On Saturday 19 October Baruch took the Churchills on a four-day trip to Virginia’s Civil War battlefields. Only occasional brokers’ calls punctuated the pilgrimage until on 22 October, a day before their return, Churchill asked his brokers by telephone to prepare a list of all his shareholdings, their original cost, latest price and the location of their certificates, ready for his return. He found himself confused: E. F. Hutton no longer listed any Simmons shares, for example, yet Churchill thought he had at least 100 in San Francisco and 200 in London.

  By the time he arrived back in New York on Wednesday 23 October storm clouds were gathering as traders followed the tortuous passage of the Smoot–Hawley Tariff bill through Congress:*13 the price of two of Churchill’s shareholdings had already fallen appreciably – ‘Smelters’ (the American Smelting and Refining Company) from 116 to 106 and Silica Gel from 36½ to 32. Churchill made two sales that day, but bought other stock, as did Baruch. At the opening bell in the New York Stock Exchange on Thursday 24 October prices fell by an average of 11 per cent. However, leading Wall Street bankers stemmed the panic by authorizing the Exchange’s vice president to bid for large blocks of leading shares, just as they had done in 1907. The Dow Jones Industrial Average index closed only 2 per cent down at the end of the day.

  That evening Churchill asked Van Antwerp for advice on what he should do about his remaining Simmons and Montgomery Ward shares. ‘I believe yesterday’s debacle laid the foundation for a constructive advance which will probably extend well into next year,’ his broker replied. ‘My best judgement is that you should buy two hundred additional shares each [of] the stocks you name.’43 While prices continued tumbling the next morning, Friday 25 October, Churchill followed Van Antwerp’s advice, investing an extra $26,500 in five more batches of Simmons shares: the first cost $120 each, the last $100.*14

  Churchill was only slightly concerned that Friday evening, when he cabled Sir Henry McGowan: ‘Trust gale damage not irreparable. Returning Berengaria. Regards Winston.’44 The weekend was spent trying to close his American accounts and transfer their contents to London, before they all sailed home on the Monday evening.

  The first inkling of serious losses did not come until Monday morning, when Churchill tried to make sense of Hutton’s valuation based on prices at the close of business the previous Friday evening. Headed ‘Cash equity’ the bottom figure was only $25,097, where Churchill had expected at least $35,000. He cabled Hutton urgently to ask whether there had been a mistake. No, came the reply.

  Share prices continued to fall on Monday and showed no sign of stopping. The Dow Jones index ended the day down by a record 13 per cent. Bernard Baruch had arranged a dinner that evening for New York’s financial élite to bid Churchill farewell. His guests were stoic and Churchill’s parting toast was to ‘Friends and former millionaires’.45

  The full extent of his own losses did not begin to sink in until the following day, Tuesday 29 October, while Churchill crossed the Atlantic. He used prices from the ship’s ticker tape to recalculate his fortunes. The Dow Jones index had lost another 12 per cent: over two trading days $30 billion of the market’s $80 billion value had disappeared. That evening the ticker tape did not stop recording its litany of losses until 7:45 p.m.*15 Churchill’s loss on Simmons alone, now down to $85 a share, had cost him $32,000; Montgomery Ward, its price now less than half of what he paid, had cost him another $12,000.46

  The mood on the way home was a far cry from the optimism of the outward voyage. Churchill always told friends that his losses in the Wall Street Crash of 1929 amounted to $50,000. W. Averell Harriman, who first met him at Baruch’s farewell dinner, recalled: ‘He told me on a number of occasions he had this money and he saw Baruch speculating and calling on the telephone and he thought he’d do the same thing and he succeeded in losing all the fifty thousand dollars.’47

  But this was only part of the story. The $50,000 figure only accounts for Churchill’s losses on shares that he bought through E. F. Hutton. He was lucky to escape damage on those he had purchased via Bernard Baruch’s brokers, because his friend felt partially responsible and could afford to be generous (despite severe losses, Baruch’s tax return shows earnings for 1929 of almost $2 million).48 ‘Oh boy Montgomery 66 Simmons 82 Bethlehem 95 Steel 185 Miss you’,49 Baruch cabled two days after Churchill had left, while transferring to his friend the $7,200 personal profit he had made for himself on a big Montgomery Ward trade. ‘This nearly evens the Rolling Mills and Smelts miss I took over for you.’50

  Even with Baruch’s compensation, however, Churchill’s losses almost certainly exceeded $75,000, taking into account the falls in other shares kept with Richardson, McGowan and Vickers. Churchill decided to wait until he met Clementine on the station platform in London before telling her the grim news that he had lost the equivalent of all his advances for the Marlborough book before having written a single word of it.

  Nevertheless, in a newspaper column written a month after his return, Churchill showed that the trauma of the Crash had not dislodged his sense that America remained a testing ground for a new way of life:

  Under my very window a gentleman cast himself down fifteen storeys and was dashed to pieces. No one could doubt that this financial disaster, huge as it is, cruel as it is to thousands, is only a passing episode in the march of a valiant and serviceable people who by fierce experiment are hewing new paths for man, and showing to all nations much that they should attempt and much that they should avoid.51

  Churchill’s abiding impression of America’s strength and vitality would help shape his wartime strategy a decade later, and would ultimately lead to a transformation in his finances.

  *1 William Berry (1879–1954), journalist, founder Advertising World 1901, The War Illustrated 1914; with his brothe
r Gomer, purchased inter alia The Sunday Times 1915, the Financial Times 1919, established Allied Newspapers Ltd. 1924, purchased The Daily Telegraph 1927, The Morning Post 1937; knighted 1921, Lord Camrose 1929, viscount 1941.

  *2 Paul Reynolds (1905–83), joined his father’s Paul R. Reynolds literary agency 1926; retired 1978.

  *3 Bernard Baruch (1870–1965), clerk, partner A. A. Housman & Co, stockbrokers 1891–5, making his first financial coup in sugar; purchased seat, New York Stock Exchange 1897; adviser, Guggenheim family from 1903, earned an estimated $7–9 million in the stock of Texas Gulf Sulphur Company (see J. Grant, Bernard Baruch, p. 140); chairman, War Industries Board 1918; US delegate, Versailles Peace Conference 1919; US representative, United Nations Atomic Energy Commission 1946–7.

  *4 William Van Antwerp (1868–1938), night city editor, The New York Times 1899; purchased seat, New York Stock Exchange 1900; stockbroker, E. F. Hutton 1927; collector of rare English books; author The Stock Exchange Within (1913).

  *5 Richard Mellon (1858–1933), banker and philanthropist; president, Mellon Bank, Pittsburgh 1921–33; brother of Andrew, secretary of US Treasury 1921–32.

  *6 Samuel McClure (1857–1949), born in Ireland; established the first US newspaper syndicate 1884; founder McClure’s Magazine 1897; co-founder, Doubleday & McClure 1897; introduced investigative (‘muckraking’) journalism.

  *7 The submarines were taken across the Canadian border for assembly, to circumvent American neutrality.

  *8 Horace Cecil Vickers (1882–1944), founding partner, Vickers da Costa 1917; Vickers’ previous firm, Nelke & Phillips, had closed when the Stock Exchange banned Paul Nelke on account of his German origins.