Magazine article The Spectator

Lessons for Life from the Crash of '73

Magazine article The Spectator

Lessons for Life from the Crash of '73

Article excerpt

There are some days you just never forget. It was Monday morning, 12 November 1973, and I was in my office at Town & City Properties in Carlton Gardens. I was a main board director and a substantial shareholder, having sold my company, Eldonwall, to Town & City some three years before.

Those years had brought about a remarkable property boom. We were already the second largest property company on the London stock exchange -- but I think Barry East, the founder and chairman, wanted to be number one. The company had discovered an apparently inexhaustible source of finance and embarked on a frenetic dash for growth. We had always fully financed our developments before construction started but now we bought and bought -- often, I thought, at the very top of the market. I had become so alarmed that the previous December I had a big row with Barry, went non-executive and refused to draw a salary.

However, I did not sell any of my shares.

There then followed easily the worst year of my life. I had time on my hands, thought that I had accumulated enough, and started to think about public service. I had been offered, but reluctantly declined, the chairmanship of the British Rail Property Board, flirted with the thought of going back for my Masters degree, and spent a pretty aimless and depressing year. Meanwhile property prices surged. Land Securities, the largest UK property company, revalued its portfolio twice that year, first by 30 per cent and then barely five months later by a further 26 per cent. New house prices went up by half in 12 months.

But the Yom Kippur war ended with oil prices quadrupling, followed by a credit squeeze with record interest rates. Meanwhile, attracting little attention, the shares of secondary banks had fallen by half since the summer.

Jeffrey Sterling (later Lord Sterling of Plaistow, of P&O fame), an old friend, had suggested that we take a rather leisurely tour round the Far East to pick up some ideas for the redevelopment of Earls Court and Olympia which our joint venture was planning. I regarded it as a bit of a boondoggle, but since I had little else to do -- my negotiations to create a new venture with the New York bank Manufacturers Hanover were being held up by the Federal Reserve in Washington -- I looked forward to the trip.

As I sat with my secretary dictating a few final notes, my broker rang. The FT index was just under 2000; Town & City shares were at 116p, he said, but should be 125p before Christmas. Good, I replied, please sell 200,000 when they get there. I put the phone down and carried on, then suddenly thought I was being greedy and should sell now. I asked my secretary to get the broker back, but he was engaged. The car came before we could speak and I tried again (this was long before the days of mobiles) in the airport lounge, but he was at lunch. The flight was called.

It was a very long flight indeed in those days, with little to do on board. At one point Jeffrey and I played chess and the Chinese crew quickly surrounded us. We were into our second game before I realised that, rather than admiring our play, they were betting on the result, so we stopped. Failing to sell my shares must have played on my mind because I remember calculating all my assets and liabilities and figuring out that I was just 8 per cent borrowed.

It was Tuesday evening when we landed in Singapore. I rang the office from the hotel and found the market had broken that day and our shares had dropped substantially. As I was still on the board there was no way I could now sell. Throughout our travels, to Hong Kong, Bangkok, Manila, Seoul and Tokyo, we would ring back nervously to London each day to find the fall turning into a rout. By the time we returned my shares had nearly halved and there seemed to be no floor to the market.

We came back to a changed world. There was an air of apprehension and uncertainty around the office; glad confident morn no more. …

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