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Why do railroads run intermodal so fast?
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[quote]QUOTE: <i>Originally posted by smalling_60626</i> <br /><br />pt. 3: Dave, why specifically FOREIGN stockholders? <br /> <br />Al <br />[/quote] <br /> <br />I'll clarify: <br /> <br />Look at the ownership of the Class I's. Subtract the insider holdings, and most of what is left is owned by global investment firms. It is my opinion that the modus operandi of these global investment firms reflects what would similarly occur if the stocks were owned outright by non U.S. holders. Namely, squeeze out what you can in the short run, then after the property has been bled dry, sell out the remains and go to the next capital intensive American stock which is on its low ebb price wise. There is no attempt at truly reinvesting in expanding market reach, else we wouldn't even be talking about the retrenchment practices of the last two decades. Foreign stockholders tend not to be too keen on the idea of reinvesting the profits from U.S. companies back into the heartland of the U.S. <br /> <br />You have to remember, in a global market there is a good deal of "intangible" investment that really is a way to cover the backside of the primary investment. Let's go back to the grain trade for a moment. The U.S. grain grower competes with dozens of other major grain growing nations. The grain marketers of those countries are just as dependent on their rail systems as we are on ours. Look at Australia, a major grain shipper who competes for the Pacific Rim markets with the U.S. Their rail system is open access, and thus their grain shippers have access to competitive rate offerings (or at least the threat of other rail transporters moving in if the primary rail transporter[s] price their service too high). Thus, their farmers recieve a bigger share of the price the Pacific Rim nations are willing to pay than the American farmer who is held captive by one of the Class I's. In theory, the Australian grain shipper has more residual income to invest in the stock market than the American grain shipper. If the Aussie wants to in effect kill two bird with one stone, he invests part of his stock holding in the U.S. railroad, since the latter is aiding the Aussie's cause by minimizing the ability of the American farmer to compete with him. That way, he gets a better price for his grain via his own country's open access rail system <i>and</i> he aids in repressing one of his major competitors in the U.S. farmer, who otherwise may undercut the Aussie's price if the former also had access to competitive rail rates. <br /> <br />The same scenario occurs in the other grain growing nations, wherein the global investment in U.S. railroads serves to aid their own ideas of expanding their market base via the U.S. railroads practice of "differential pricing". The fact is differential pricing hurts the American shipper to the advantage of the American's foriegn competition, so anything these stockholders can do the keep that situation in place is something for which the stay abreast. Which is as good an explanation as any for why things are the way they are today in regards to U.S. railroad company practices.
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