No More Champagne
Page 22
He had been writing non-stop, yet during the first half of 1931 Churchill had brought in to his bank account £5,000 less than he had spent.40 Undaunted, he left for his usual August holiday with the duke of Westminster, as soon as he had handed over the finished The Eastern Front to his publishers. ‘Thank God it is finished,’ he told Eddie Marsh. ‘I am longing to get on to Marlborough.’
At Mimizan Churchill found his fellow guests pre-occupied by the global markets. ‘Everybody I meet seems vaguely alarmed that something terrible is going to happen financially’,41 he confided to Marsh. Austria’s Creditanstalt bank had sparked a run on its deposits after announcing a large loss in May, and the contagion had spread through Eastern Europe after Austria’s severance of its currency’s link with gold.
Warnings from Bernard Baruch had prompted Churchill to cut back his stock exchange positions during June and July. Once he had finished his book in August, however, he returned to trading. He incurred more losses when the shock waves reached London: the Bank of England was forced into borrowing from the US Federal Reserve Bank and from the Banque de France to stop gold leaving the City. Just as Vickers da Costa asked Churchill for another £3,000 of cash to meet his fresh losses on the share markets, the crisis produced an unlikely insurance windfall.
Because of his money worries, Churchill had decided during the summer that he would have to go ahead with his American lecture tour, whatever the tax position. However, he had insured himself against the cost of having to cancel for political or medical reasons and having to pay a cancellation penalty. Quotes had been as high as 40 per cent of the sum assured, until Thornton Butterworth produced a contact at the Excess Insurance Company, who were prepared to quote only 5 per cent.42 Churchill immediately took out a policy for £5,000, for which he paid on 13 August,43 a week before the Labour government announced an emergency package of measures to save sterling’s link to gold. This package combined spending cuts and higher taxes in equal measure, but Conservative leaders told Prime Minister Ramsay MacDonald that they would support only one quarter of the total coming from taxes; several Labour ministers resigned in sympathy with the trade unions, which opposed any spending cuts.
MacDonald handed in his resignation as prime minister on 23 August 1931, but was asked by the king to stay on to lead a National Government to meet the immediate economic emergency. MacDonald invited four senior Conservatives to join his new cabinet, but Churchill was not one of them, so no claim was triggered on his insurance policy. However, an autumn election now looked a distinct possibility and this would trigger a full payout of the policy. Merrick-Taylor, Excess Insurance’s managing director, decided to cut his likely losses and to unwind his company’s policy at almost any cost less than the £5,000 covered. Bernau, an insurance specialist, led Churchill’s side of the negotiations, Churchill appearing only at the end of the talks to seal the ‘highly confidential’ deal under which the insurer would pay him £3,75044 in return for a promised Churchill oil painting. The windfall was all the more valuable because it was untaxed, and because Churchill faced no corresponding penalty to pay Alber, whose lecturing contract lay still unsigned on his desk. Only once the insurance cheque had been safely banked did Churchill cable the promoter with the news that he was postponing his lecture tour.45
Churchill used £2,000 of the windfall money to repay his brother’s loan from earlier in the year. He returned to Mimizan increasingly optimistic that he could earn enough to meet the following year’s expenditure, which he estimated at £12,000.46 That forecast was still based on his standard figure for household bills of £500 a month, although a look at Churchill’s bank account would have revealed the real cost to be running at almost double that amount. Nor did Churchill’s estimates ever include his losses at casinos, which became a regular feature of his holidays in France during the 1930s.47 In 1931 the poor summer weather in southern France helped drive Churchill towards the casinos in both Biarritz and Cannes, where he withdrew 72,000 francs in cash. On return to London, he deposited only 10,000 francs, a loss of approximately £500.48
More happily, Brendan Bracken rang Churchill during his holiday with some good news: Esmond Harmsworth,*3 son of Lord Rothermere, was taking a more prominent role at the ailing Daily Mail and on Bracken’s suggestion he had decided to liven up the newspaper by carrying a weekly column from Churchill at £150 a column; the contract would be worth up to £7,800 a year. Churchill was delighted, but then began to impose conditions from afar, despite Bracken’s warning that some old hands at the Daily Mail were resistant to the idea. In the end, Harmsworth scaled back his offer to thirteen columns a year, worth a much reduced £1,950.
A disappointed Churchill returned to England just as the new National Government prepared for Britain’s final break with gold. He told Harrap that he was at last about to turn his attention towards Marlborough.49 In truth, he was still distracted by the need for immediate cash. He sent Butterworth twenty old articles on ‘eminent personages’, which he planned to put together into two fresh books, one to be called Great Contemporaries and the other Thoughts and Adventures.50 Butterworth and Scribner quickly signed up.51 Then, in October 1931 a general election was announced and Marlborough was shelved once more.
The election campaign produced an unexpected family complication. Earlier that year Churchill’s son Randolph, now twenty years old, had returned from his own American lecture tour saddled with debts of $2,000.52 Work as a journalist on both Rothermere and Beaverbrook newspapers had done little to ease the situation. Recklessly, Randolph then bet just under £400 that the National Government would win the general election by a majority of fewer than 150 seats; on the other hand, the higher the National Government’s majority climbed above that number, the more he would lose.
By the middle of the campaign period, the National Government appeared to be heading for a landslide victory and an exasperated Churchill had to call in his brother Jack to deal with a serious threat (the National Government’s final victory by a majority of 493 seats would have cost Randolph approximately £600 in addition to the loss of his initial stake). Coolly deploying £1,000 from Churchill’s account at Vickers da Costa, Jack closed off Randolph’s bets and took out a much larger bet on a high majority in his father’s name. The tactic proved so successful that Churchill emerged with a profit of almost £900, once he had reallocated just enough of his winnings to limit Randolph’s loss to £100.53 Churchill’s letter to his son carries echoes of those his father had sent him at Sandhurst forty years earlier:
If you feel yourself able to keep a magnificent motor car & chauffeur at a rate which must be £700 or £800 a year, you are surely able to pay yr debts of honour yrself. Unless & until you give proof of yr need by ridding yrself of this gross extravagance you have no right to look for aid from me: nor I to bestow it.54
While the election results were still emerging, The Eastern Front hit London’s and New York’s bookshelves. Sales were disappointing. Butterworth attributed this to the general economic malaise, but Churchill’s own researcher, Maurice Ashley,*4 had a different explanation: ‘I received the impression that The Eastern Front was written primarily to earn money,’ he wrote years later.55 Financially, the book was a disappointment: more than half of Churchill’s final £1,000 advance had been eaten up by bills for author’s corrections and for the inclusion of sixty-nine maps.56
Ramsay MacDonald remained at the head of the National Government, although the number of Labour Party seats had collapsed from 288 to just 52 after the election. Meanwhile, Churchill had doubled his personal majority at Epping. His victory was part of a strong national showing by the Conservatives, whose leader Stanley Baldwin emerged as the new government’s real master. Baldwin asked eleven Conservatives to take up the majority of cabinet positions, but Churchill was again overlooked. An isolated objector to Indian self-government, Churchill remained outside the Party’s mainstream and was reconciled to yet another period on the backbenches. At least this meant he could tell Alb
er that he was now free to lecture in the United States between December and February. Chartwell’s ground floor was dust-sheeted and Churchill sailed in early December for New York, accompanied by Clementine, their daughter Diana and a bodyguard.
On the evening of their arrival in New York Churchill gave the first of forty lectures, before the family spent a quiet weekend. On the Sunday evening Bernard Baruch invited Churchill to meet two old colleagues from the War Industries Board at his apartment. Dispensing with his bodyguard, Churchill hailed a cab, but forgot to take with him Baruch’s address. After a fruitless hour trying to find the building, he climbed out of the cab to examine the street from the other side of the road and was promptly hit by a car.
*1 Howard Frank (1871–1932), senior partner Knight Frank & Rutley & Co (London), Walton & Lee (Edinburgh); president, the Institute of Estate Agents 1912-14; adviser, Ministry of Munitions 1916–22; knighted 1914, baronet 1922.
*2 In Spain, an ‘inferior officer of justice’.
*3 Esmond Harmsworth (1898–1978), MP 1919–29; chairman, Associated Newspapers 1932–71; chairman, Daily Mail & General Trust 1932–78; 2nd Viscount Rothermere 1940.
*4 Maurice Ashley (1907–94), literary assistant to Churchill 1929–33; leader writer Manchester Guardian 1933–7; sub-editor The Times 1937–9; editor Britain Today 1939–40; Intelligence Corps 1940–5; deputy editor, editor (from 1958) The Listener 1945–68; author Churchill as Historian 1968.
15
‘Poor Marlborough has been shunted’
Trading Futures, 1932–3
Exchange rate: $5 = £1; (1933) francs 100 = £1
Inflation multiples: US x 18; UK x 60
THE INJURIES TO Churchill’s head and legs were serious enough to keep him in hospital for over a week in December 1931, running up a bill. It would have been higher if the New York Telephone Company’s president had not provided the ‘princely courtesy’ of free telegrams from Churchill’s bedside.1
Churchill’s second insurance policy from Phoenix Assurance did not cover medical bills, but it would pay compensation of £60 a week if he was ‘totally disabled’.2 So Churchill cabled William Bernau on the morning after the accident: ‘Notify insurance that accident will entail at least four weeks total disablement.’3
Within days of the accident he had recovered sufficiently to appreciate its journalistic potential. ‘Have complete recollection of whole event & believe can produce literary gem about 2,400 words,’ he cabled Esmond Harmsworth. ‘Am of course marketing here & will synchronize publication.’4 The resulting article – sold to the Sunday Star in Washington and the Los Angeles Times – fetched more than £600 worldwide. ‘I received a great price for it,’ Churchill told his son, ‘but find it very dearly bought.’5
Unfortunately the Daily Mail printed Churchill’s article in Britain on the same day that Bernau notified Phoenix Assurance of the doctors’ ruling that Churchill should remain out of action for a month. A phone call followed from a manager at the insurance company, who ‘pointed out that as you were well enough to follow your “profession or occupation” of writing you were no longer totally disabled and the weekly allowance would, of course, cease’. Bernau enjoyed telling Churchill how he had dealt with the objections: ‘I pointed out that you did not write the articles yourself but merely dictated them, and from my knowledge of you I told him there was no more exertion to you in giving off these remarks than there would be for him to write to his brother describing an accident he had been through.’6 Phoenix Assurance relented and continued to pay.
From his hospital bed Churchill managed to tie up final arrangements for another six articles with Collier’s Weekly, then opened a dollar bank account with the National City Bank of New York, ready to receive his lecture and writing fees. The bank’s vice president George Duis explained to Churchill how he could take advantage of the dollar’s rise of almost a third against sterling in the four months since Britain had abandoned the gold standard, by buying sterling in advance of being paid in dollars, using the ‘forward’ currency market. Impressed by the bank’s professionalism (its statements were machine-produced, while Lloyds Bank’s were still handwritten), Churchill committed half of his fees to buy £6,000 forward for the end of March.7
The next day he sailed to convalesce in the Bahamas, where his party stayed at Nassau’s expensive Polly Leach Hotel, until a newly arrived governor invited them to move into Government House. Churchill was suffering, however. ‘Last night he was very sad,’ Clementine told Randolph, ‘and said that he had now in the last 2 years had 3 very heavy blows. First the loss of all that money in the crash, then the loss of his political position in the Conservative Party and now this terrible physical injury.’8
Expecting his accident to cost him half the lecture tour’s profits,9 Churchill forced himself to start lecturing again at the end of January, usually speaking each day and travelling by night. The first results surpassed expectations. ‘Very fine meetings and very fat profits,’ he reported a week later to his former parliamentary aide, Bob Boothby,10 after being paid for early engagements in New York, Hartford and St Louis. Then the cheque for his lecture in Cleveland bounced, the first of three to do so, forcing Churchill to waive his daily expense allowance as part of a renegotiation with Alber. An increasingly exhausted Churchill continued lecturing and travelling almost daily until 10 March, taking only one weekend off at Bernard Baruch’s waterside home in the Carolinas. Churchill had fallen behind with his Daily Mail columns. ‘I have not the margin of life and strength to do them while travelling and speaking so many nights in succession,’ he confessed to Esmond Harmsworth.11
In the end Churchill’s lecture tour earned him profits of $23,00012 rather than $50,000, but another $9,000 was expected from Collier’s. Churchill consulted Cecil Vickers, Baruch and Duis about what to do with the dollars that he had not already committed to buying sterling. Vickers offered little practical help from London: ‘Market wild uncontrolled. Opinion immediate future impossible advise.’13 Duis, on the other hand, gave Churchill a second master-class on hedging, prompting his pupil to commit all of his surplus dollars to buying more sterling ‘forward’. The last to reply, Baruch urged Churchill to buy US government bonds. Unable to resist, although all his dollars were theoretically committed, Churchill emptied his New York bank account to follow this advice, ending up ‘short’ of $15,000, rather than hedged as Duis had advised.14
Business complete, Churchill sailed home first class at Alber’s expense*1 to be greeted at London’s Paddington station by a new Daimler, a gift worth £2,000 from a group of English and American friends. ‘There was some controversy as to whether you would prefer a Rolls-Royce, a Daimler or a Bentley,’ its organizer Brendan Bracken explained to Churchill. ‘The controversy was solved by fixing on the car which is least expensive to maintain.’15
There had been no time to dabble on the stock market in America, but Churchill returned home to find that his remaining shares were worth only £4,900 while he owed Vickers da Costa £5,700 in funding. The deficit widened as prices fell further during March, at the end of which his brokers asked for another cheque.
Churchill decided on a complete change of approach: he asked for a list of large American companies whose share prices had fallen to low levels. He planned to buy them and to hold on for two or three years until the economy recovered. Cecil Vickers sent a list, but advised him against buying what amounted to ‘gambling’ stocks. ‘I am very much afraid of missing the bus,’ Churchill had to explain to an equally sceptical Jack. ‘I do not think America is going to smash. On the contrary I believe that they will quite soon recover.’16
A compromise was reached: ‘If and when the market goes weak,’ Vickers summarized, ‘we shall buy a certain number of low priced shares... with the intention of selling them at say anywhere between 70% to 100% profit and then wait for another fall.’17 Jack still disapproved, but Churchill possessed the broader view of the politician:
Undoubtedly the whole
force of the Republican Party will be to make a better market before the election, and give the appearance the corner has turned. The risk of investments in America now is incomparably less than it was a year ago when I sometimes had as much as twenty thousand pounds of steak [sic].18
Churchill made his move in late July and early August, when he sold the US Treasury bonds he had bought in March, emptied his New York bank account and used the $12,000 thus raised to buy $20,000-worth of shares (he borrowed the balance from brokers).19 An anxious Churchill tracked the shares’ prices closely each day using a copy of the New York Herald specially delivered to Chartwell by train and taxi. ‘There seemed a good many telephone calls to Baruch in New York and some sense of financial botherations,’ recalled the Oxford historian Keith Feiling, who was staying at Chartwell before embarking with Churchill on a study trip to Marlborough’s battlefields.20