One of the stocks that I own is Fortress Investment Group. Orginally founded to manage hedge funds it now has grown to manage public and private pension funds. One of the basic foundations of pensions was that employees lacked the displine to save for their retirement and that co-op board of workers and management would save and invest in best instrests of all. A main feture would invest in the company first and related indistries. A auto company would invest pension money in steel mills,railroads,coal mines and other related industry. A public pension fund would invest in what would make the state grow like Ohio would invest in GM and Maine would invest in paper and lumber and California would invest in tech and Slicon valley. I have heard setiments from Fortress board members and management is that they are having trouble finding new money to "play" with as traditional sources of capital are drying up like pension funds. 401ks dont have the power the big pension funds have and mutual funds are at the whim of a single manager. Investment companies have to go overseas for new capital and take risks like dealing with less then savory people who may have the funds frozen by the fires of this world. We have killed the golden goose by ending pension funds and unions who by the way have elected members to INC. publicy traded boards of directors who in the intrest of short term gain and ended and raided pension funds that put them in power to begin with?
Well, I've never had a pension and have worked on straight commission for the past 20 years. Like many people I'm saving for my own retirement. Most of my savings are in stocks.. so the companies I invest in get my money for their own use for 20 to 30 years . Lots of people do what I do.. no pension or money manager required.
But the power of Instutional investors over what you can do is like being a kitten with 2,000 lb Elaphants in the room
The "elaphants" bought a lot of Enron stock. Bummer.
Thanks to Chris / CopCarSS for my avatar.
Not to mention Bre-X and Northern Telecom.
The money is still there, it just becomes a different instrument, for example a 401k or a fund.
Dave H. Painted side goes up. My website : wnbranch.com
What does this topic have to do with trains and railroading? It wasn't made clear to me .
There was a topic in there?
23 17 46 11
Two words: Moon pies.
And while I like the topic, I agree not really relevant to this forum. But it does make one think "what if?"..
Modeling the Cleveland and Pittsburgh during the PennCentral era starting on the Cleveland lakefront and ending in Mingo junction
Murphy Siding Two words: Moon pies.
With RC Cola?
It's been fun. But it isn't much fun anymore. Signing off for now.
The opinions expressed here represent my own and not those of my employer, any other railroad, company, or person.t fun any
1) BNSF likely has no problem getting the money it needs from Uncle Warren (Buffett) / Berkshire Hathaway.
2) 2 -3 years back, NS was able to sell somthing like $600 Million in 100-year bonds for about 6% annual interest - and there was demand for even more. I read that most of the buyers were life insurance companies with similar long time horizons.
The following is in caps for the usual reason - I'm 'shouting', because I want to make sure this cuts through all the crap and gets heard:
3) MANY PEOPLE - INCLUDING SOME PROFESSIONAL MONEY MANAGERS - HAVE REALIZED THAT 'ACTIVELY' MANAGED FUNDS ARE TOO EXPENSIVE IN FEES COMPARED TO THE ADDITIONAL EARNINGS (IF ANY) THAT THEY GENERATE. WORSE, MANY OF THE 'STOCK PICKERS' DON'T DO ANY BETTER THAN MONKEYS THROWING DARTS AT THE STOCK LISTING PAGE OF THE WALL STREET JOURNAL (several academic studies over the years have shown this to be literally true). AS A RESULT, THE VAST MAJORITY OF SAVVY INVESTORS USE INDEX FUNDS, OF WHICH VANGUARD IS THE PRIME EXAMPLE - EVEN BUFFETT RECOMMENDS IT. WITHIN THE LAST COUPLE MONTHS VANGUARD ACHIEVED SOME MILESTONE BY BEING THE LARGEST SINGLE MUTUAL FUND COMPANY - SOMETHING LIKE $3 TRILLION - AND HAVING MORE MONEY GOING INTO IT THAN ALL OF THE ACTIVELY MANAGED FUNDS COMBINED.
Index funds buy a representative portion of the entire market. If a railroad needs money and chooses to raise it 'publicly", put the shares or bonds out here, and they'll still get bought (or not), depending on their merits. No pension funds or "back room deals" needed. (P.S. - Too many pension funds were naive or undiversified at best - too much money invested in their own company - or corrupt in various ways at worst.)
You can find out more about this by the usual search tools, or books such as "The CoffeeHouse Investor", "A Random Walk Down Wall Street", etc.
Disclosure: After having been ripped-off by several investment firms - Jack Grubman of Smith Barney, Gary Mayo of IDG/ Amex, etc. - almost all of my investments are in Vanguard funds. The only ones that aren't are shares in several of the Class 1 railroads (I was one of those bought out of BNSF by Warren Buffett about 5 years ago), and 1 intermodal company. I believe my portfolio has outperformed the S&P 500 over the last 15 years, and any stock picker ("Invest in what you know", as Warren says).
- Paul North.
I'll bring it back on topic. Pensions may be in decline but railroads and other large companies are able to find investment capital elsewhere through direct investing as well as the thousand of mutual funds that include railroads in their portfolios. Moreover, thanks to globalization, there is now more foreign investment than ever before, which is a good thing for us because the more demand for railroads shares, the more valuable they become.
This topic is probably more relevant to railfans than to railroaders. Railroaders have pensions while the rest of us generally have to fend for ourselves. And since we are railfans, investing in what we enjoy makes sense to some of us.
While it is true that private sector pension plans are largely a thing of the past, if one considers the larger category of retirement savings plans, I believe there is a larger pool of investable funds out there than ever before. It consists of IRA's, SEPs, 401's and the like I'd be interested if anyone has any statistics regarding the dollar size of the various plans.
Something I've always wondered -- are both tiers of Railroad Retirement essentially "pay as you go" plans, or do they manage a pool of investments? If they are managing a pool, what is the nature of their investments and who is doing the managing?
A further point: Interest rates on bonds down in the low single digits - in some European countries (Germany), even negative ! - means that there's plenty of money out there (domestic and international) looking for a home with a stable, reliable, return on investment, whatever the form of the ownership of that investment (pension, mutual fund, 401(k), hedge fund, etc.).
The benefits of that includes the railroads, too, which are attractive investments because of their huge fixed and capital asset values, good "franchise" value in the pricing and earning power, mature technology, well-defined property rights in a stable nation, history of steady earnings and increases, very utility-like in providing an essential and practically irreplaceable service, etc.
Paul_D_North_Jr WORSE, MANY OF THE 'STOCK PICKERS' DON'T DO ANY BETTER THAN MONKEYS THROWING DARTS AT THE STOCK LISTING PAGE OF THE WALL STREET JOURNAL (several academic studies over the years have shown this to be literally true).
WORSE, MANY OF THE 'STOCK PICKERS' DON'T DO ANY BETTER THAN MONKEYS THROWING DARTS AT THE STOCK LISTING PAGE OF THE WALL STREET JOURNAL (several academic studies over the years have shown this to be literally true).
Aw Paul, you gave away my strategy. I guess now I'll just give the monkeys typewriters and have them work on Shakespeare.
Jeff
There is some concern over control by foreign investors over critical domestic infrasrtucture. Childrens Investment Trust was a british/brazialin outfit who had some control over CSX. Then we had the Germans trying to buy out the Pennsy Turnpike and then the French running MBTA.
jeffhergertAw Paul, you gave away my strategy. I guess now I'll just give the monkeys typewriters and have them work on Shakespeare.
"It was the best of times, it was the blurst of times"
That's Dickens, not Shakespeare..don't confuse the monkeys..
trackrat888 There is some concern over control by foreign investors over critical domestic infrasrtucture. Childrens Investment Trust was a british/brazialin outfit who had some control over CSX. Then we had the Germans trying to buy out the Pennsy Turnpike and then the French running MBTA.
Relax, the Germans and the French have nothing on the Chinese..
Paul:Have you ever visited the bogelhead.com forum? It is dedicated to the principals of John Bogel, the founder of Vanguard. Quite a group of passionate passive investors. I straddle the fence, using Vanguard for bond funds, due to their very low costs and also use some index funds, but stray from the reservation with my individual stock holdings.
We all get along pretty well for the most part.
Railroads have no problem in attracting necessary capital. Most rails have a capital structure of about 40% debt/ 60% equity. Most of the equity is in the form of retained earnings. As Paul indicated the debt paper of the railroads these days is quite popular.
In fact the railroads are generating so much free cash flow these days that they are not only using about 20% of revenue for investment purposes, but also are returning considerable amounts back to the investors. Consider the following for CN:
2014 revenues - $11.6 B
Reinvestment - $ 2.138B - this is primarily in form of added equipment, replacement of track, etc.
Dividends - $.795 B ($795 million returned to shareholders)
Stock repurchased - $1.4B (reduced the total number of shares by 17 million during 2014.
Simple math indicates that if CN really need more cash for investing purposes then another $2.1B would be available by suspending dividends and share buybacks. Realistically, it would be difficult to eliminate the dividends, as the equity market would react negetively, but the $1.4B would be readily available.
So, when one reads on this forum that railroads need cash for capacity issues, one must simply follow the money and realize they are choosing to allocate only a portion of their cash to their business and returning a similar amount to the owners.
Paul, if you havent done so...checkout the bogelheads forum.
Well worth it.
Ed
Just wait until all those people with self managed retirement savings retire.
It will be an eye opener.
Dave
Lackawanna Route of the Phoebe Snow
Phoebe:You are correct...many people have not planned adequately. Social Security is in place for a percentage of earnings.
Pension plans had flaws, but if a person did stay with one company for 20 years there was a pension payout. The days of cradle to grave employment are long gone tho.
We are fortunate to be railfans... if you did nothing else but invest in rail stock 20 years ago then your investment has outperformed the market by a wide margin, and there's no sign the party is over yet.
I am stunned by the returns of CN (Illinois Central prior to merger) in the 20 years it has been held. I am also stunned at how quickly that time has passed.
zugmann Murphy Siding Two words: Moon pies. With RC Cola?
Breakfast of champions!
Sounds like a recipe for seriously bad gas..
For the benefit of any of you who never saw or drank an RC Cola, the full name is Royal Crown Cola.
Johnny
The last time I saw RC cola was in vending machines in western Wisconsin.
Ulrich That's Dickens, not Shakespeare..don't confuse the monkeys..
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