"28th NATIONAL CONFERENCE of the AMERICAN SOCIETY of CORPORATE SECRETARIES"
THE OPENING PAGES OF THIS SPEECH AND OTHERS, GIVING A PERSONAL IMPRESSION OF RAY GARRETT, JR., HAVE BEEN GRACIOUSLY PROVIDED BY HARVEY L. PITT.

An Address by
Ray Garrett, Jr., Chairman
Securities and Exchange Commission

Presented before
28th NATIONAL CONFERENCE of the AMERICAN SOCIETY of CORPORATE SECRETARIES
Cerromar Beach Hotel
June 14, 1974
Dorado Beach, Puerto Rico

I had not planned to talk about capital markets this morning. I had a somewhat more pedestrian topic in mind. But when I arrived yesterday afternoon I heard much discussion about John Whitehead's remarks, and John was nice enough to give me a copy of his talk for bedtime reading. Because of the transcendent importance of John's subject and my immense respect for his experience and views, it seems appropriate to spend awhile on the same subject and curtail my remarks on other matters.

There is no question at all in my mind that we should all be deeply concerned with the apparent capital needs of the American economy for the foreseeable future. At the moment all vital signs seem bad. However in keeping with my Midwestern tradition of being less panic-prone than Wall Street, I must confess that I am not quite as alarmed as John.

I first encountered this business of projecting capital needs and matching them against available sources last fall when an officer of a major New York bank wrote a report on the subject. It was not optimistic. Then another prominent New York bank officer gave some well-publicized talks to the effect that energy alone would require $1.3 trillion to be raised over the next ten years, which would require an average return of some 18% on invested capital. Other estimates have now come to General Electric's guess of $3.3 trillion over ten years, or $300 billion a year.

In watching this numbers game, one is tempted to observe that the first liar hasn't a chance, but that is flip and unfair. I do not suspect anyone engaged in the exercise of projecting our future capital requirements of being other than perfectly sincere -- certainly not of lying. But having observed all of the other projections of disaster that have not come true in my lifetime does make me somewhat hesitant about the degree of alarm called for.

We have had so many of them. When I was in the third grade one of those weekly newspapers for school kids reported that we had only a twenty-year supply of oil -- so, at the age of eight, I lay awake worrying about the dismal prospect of our running out of gasoline shortly after I became of age to drive and wondering whether we could make fuel out of corn stalks -- a commodity in abundant supply in Illinois. At the Chicago World's Fair in 1933, the Census Bureau had an exhibit which reported the estimated population of the United States every minute. It was more or less 120 million at the time. At the age of 13 I was gratified to see the number decreasing if ever so slightly, because everyone knew in those days that we had too many people. With the closing of the Western frontier we had become a static society, and population had to at least stabilize.

So with the post World War II population explosion, and our now unfilled schoolrooms and few jobs for teachers. So with the dread threat of competition from cheap labor and German and Japanese automobile manufacturers now seeking sites for production facilities in the U. S.

Jim Fullerton, currently Chairman of the Investment Company Institute, told a wonderful story about economic projections recently. He was quoting an author, and I wish I could remember his name to give him proper credit. Anyway, this man went back to 1850 and, based upon available data and trend lines, sought to project the future production of horses and chewing tobacco. From these data it was quite clear that by now Washington would be awash in tobacco juice while New York City would be covered all over with 300 feet of horse manure....

back