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Government Sticking Too Much of Its Nose Into Transportation .. Again!

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Posted by Convicted One on Tuesday, July 20, 2021 2:59 PM

adkrr64
I see nothing wrong or unethical about it when done responsibly.

'There's quite a few folks out there who feel little responsibilty other than to their own prioritites.

 

Pump, dump, and leave a debt riddled mess behind after they execute their exit

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Posted by charlie hebdo on Tuesday, July 20, 2021 2:28 PM

It's interesting how Wall Street types in the past in corporations used to use watered stock to line their own pockets at the expense of its ongoing business growth. Now they use stock buybacks, often in disregard for it's ongoing (beyond a few quarters) business growth.  

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Posted by Overmod on Tuesday, July 20, 2021 2:01 PM

adkrr64
What is so bad about using debt to finance the purchase of equity...

What he's saying is something rather different: that using that debt to maintain the critical income-generating aspects of the company might be a better opportunity use.  The market cap of the company doesn't matter if the company can't do the business that generates its income effectively.

 

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Posted by adkrr64 on Tuesday, July 20, 2021 1:38 PM

charlie hebdo
CW: Using debt to finance stock buybacks is just another legal trick to get the stock price to increase.  Fewer shares =  a higher eps which attracts buyers.  Debt should be used for infrastructure and equipment investment to grow the business.

What is so bad about using debt to finance the purchase of equity, especialy when interest rates are so low? Yes, financing the purchase puts debt on the books, but it also puts equity on the books; equity that has value and which can be sold in the future to repay the debt or return cash to the organization. If the re-purchase of shares also causes the value of the stock to rise, then the value of the just purchased equities increase, increasing the overall market value of the company.

Like anything, it is entirely possible to do this in an irresponsible way, creating excessive and possibly debilitating debt load, especially if the stock price drops substantially. But as a basic financial strategy, I see nothing wrong or unethical about it when done responsibly.

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Posted by charlie hebdo on Tuesday, July 20, 2021 1:24 PM

Juniata Man

They have reduced their capex concurrent with borrowing money to buy back stock. They may not be deferring critical maintenance but, the capital reduction can be an indication they have decided to defer some projects.

CW

 

 
CMStPnP

 

 
Juniata Man
UP has used debt to finance stock repurchases. There may be others. CW  

 

But not causing deferred maintenence which was the other half of the assertion.   

 

 

 

CW: Using debt to finance stock buybacks is just another legal trick to get the stock price to increase.  Fewer shares =  a higher eps which attracts buyers.  Debt should be used for infrastructure and equipment investment to grow the business. 

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Posted by Euclid on Tuesday, July 20, 2021 1:14 PM

Convicted One
 
Euclid
It almost has the ring of a conspriacy theory. 

 

Perhaps so, but the same issues seem to be coming to the attention of many separate and disparate people.

 

https://transportation.house.gov/imo/media/doc/2021-5-12%20Letter%20to%20GAO%20on%20PSR%20Study.pdf

 

Well that is the list of grievances often presented by the labor unions.  However, it is not a list that confirms those problems are actually real.  Obviously Labor is focused on jobs, and part of PSR will eliminate jobs.  So they have a vested interest in finding the greatest number of reasons why PSR should be eliminated.  So even if it reads like a conspiracy theory, it does have a purpose.

The key would be to hear the response to this request to investigate the list of charges.  Can you find that response?   A formal investigation might confirm or deny these charges. 

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Posted by charlie hebdo on Tuesday, July 20, 2021 1:11 PM

BaltACD

 

 
jeffhergert
 
CMStPnP 
Juniata Man
UP has used debt to finance stock repurchases. There may be others. CW   

But not causing deferred maintenence which was the other half of the assertion.    

As most of you probably can tell, my favorite railroad was the Rock Island.  I grew up along their Chicago/Denver main line in Iowa.

As most of you probably know, I work for Uncle Pete.

A lot of times I'm seeing things that make me think I'm seeing a replay of the Rock Island.

Jeff       

 

When you spend $1M on maintenance but should have spent $5M - you are deferring maintenance.

Hired out on the B&O in the mid 60's - at that time I THOUGHT the property was in 'good repair' - as I found out throughout my career the state of the B&O at that time was far from 'good repair'.  Maintenance, while being performed, was not being performed to the extent that was really necessary.

If the funds MofW request for 'good maintenance' are not being provided at the level MofW requests - Maintenance is being deferred!

 

The huge increase in weight of freight cars and length of trains likely takes a toll on track and thus requires more maintenance. 

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Posted by Convicted One on Tuesday, July 20, 2021 11:13 AM

Euclid
It almost has the ring of a conspriacy theory. 

Perhaps so, but the same issues seem to be coming to the attention of many separate and disparate people.

 

https://transportation.house.gov/imo/media/doc/2021-5-12%20Letter%20to%20GAO%20on%20PSR%20Study.pdf

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Posted by BaltACD on Wednesday, July 14, 2021 7:39 PM

jeffhergert
 
CMStPnP 
Juniata Man
UP has used debt to finance stock repurchases. There may be others. CW   

But not causing deferred maintenence which was the other half of the assertion.    

As most of you probably can tell, my favorite railroad was the Rock Island.  I grew up along their Chicago/Denver main line in Iowa.

As most of you probably know, I work for Uncle Pete.

A lot of times I'm seeing things that make me think I'm seeing a replay of the Rock Island.

Jeff       

When you spend $1M on maintenance but should have spent $5M - you are deferring maintenance.

Hired out on the B&O in the mid 60's - at that time I THOUGHT the property was in 'good repair' - as I found out throughout my career the state of the B&O at that time was far from 'good repair'.  Maintenance, while being performed, was not being performed to the extent that was really necessary.

If the funds MofW request for 'good maintenance' are not being provided at the level MofW requests - Maintenance is being deferred!

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Posted by jeffhergert on Wednesday, July 14, 2021 7:01 PM

CMStPnP

 

 
Juniata Man
UP has used debt to finance stock repurchases. There may be others. CW  

 

But not causing deferred maintenence which was the other half of the assertion.   

 

As most of you probably can tell, my favorite railroad was the Rock Island.  I grew up along their Chicago/Denver main line in Iowa.

As most of you probably know, I work for Uncle Pete.

A lot of times I'm seeing things that make me think I'm seeing a replay of the Rock Island.

Jeff       

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Posted by tree68 on Wednesday, July 14, 2021 12:15 PM

Euclid
It is widely agreed to include cost cutting, which includes cutting jobs. 

The problem that has been reported here is that all too many of the jobs that have been cut have been those that contribute to long-term growth, such as sales/marketing.  

Add to that the apparently intentional shedding of lower yield customers and it's not hard to imagine that PSR is, as has been suggested, all about moving money to the bottom line where it can be harvested.

One has to wonder how many rail customers share the feelings of ShadowtheCat with regard to reduced service levels, or even the complete loss of service.  Presumably such service is being charged a realistic price, but apparently the profit margin is not large enough to continue providing it.

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Posted by Convicted One on Wednesday, July 14, 2021 11:36 AM

Euclid
Certainly someone would notice if their railroad got stolen right out from under them.  It should not require flashing signs to reveal the caper. 

Depends upon if they understand what they are looking at

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Posted by Euclid on Wednesday, July 14, 2021 9:38 AM

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Posted by Juniata Man on Wednesday, July 14, 2021 6:25 AM

They have reduced their capex concurrent with borrowing money to buy back stock. They may not be deferring critical maintenance but, the capital reduction can be an indication they have decided to defer some projects.

CW


CMStPnP

 

 
Juniata Man
UP has used debt to finance stock repurchases. There may be others. CW  

 

But not causing deferred maintenence which was the other half of the assertion.   

 

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Posted by zugmann on Wednesday, July 14, 2021 5:53 AM

The other issue is that railroads (like all big corps) do not operate in a vacuum.  Their actions (or inactions) can and do have a direct consequence on the public at large of which they have to share this little rock we all live on. 

 

   The opinions expressed here represent my own and not those of my employer or any other railroad, company, or person.

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Posted by Gramp on Tuesday, July 13, 2021 11:02 PM

tree68

Any problem with profit usually comes down to what people think is an appropriate amount (very subjective) and where it ends up (also subjective).

 

I agree with that on the surface. Fundamentally though, I think a whole lot of people do not have a clear, grounded understanding of the subject. A while back, Greyhounds posted one of the best explanations of creating wealth I have read.

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Posted by tree68 on Tuesday, July 13, 2021 10:18 PM

Any problem with profit usually comes down to what people think is an appropriate amount (very subjective) and where it ends up (also subjective).

LarryWhistling
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Posted by Gramp on Tuesday, July 13, 2021 9:38 PM

Paul Milenkovic

 

 
Gramp

I'd like to suggest getting a copy of the book "Good Profit" by Charles G. Koch. Refreshing account of creating a business. 

 

 

 

Oh, the Humanity! 

"Good" and "Profit" in the same phrase?  Charles G. Koch!  Isn't he one of the Koch Brothers?

You should have warned us about your post that we could cover our eyes.

 

Yup, "How Creating Value for Others Built One of the World's Most Successful Companies"

I have a hunch the rap artist who was ambushed (shot 64 times) while leaving Chicago's Cook County Jail the other day did not read the book. 

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Posted by CMStPnP on Tuesday, July 13, 2021 9:10 PM

Convicted One
Think about it...if they put up a flashing sign announcing "This is our future!"...what would all the other stockholders do?

The investor calls are pretty frank about asking where money is being spent and the questions are very direct towards management.    Management may obfuscate but the stock analysts rarely do.   Nobody on the stock analyst side is shy about tip-toeing around an issue because it might lead to a sell off.   In fact most analysts are on the call because their firms are considering a purchase or they need to publish their analysis for clients to see and their butt is on the line in regards to discovery.    So I really do not have to think about it.   I have sat in on numerous conference calls (all of which are open to the public and announced).

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Posted by CMStPnP on Tuesday, July 13, 2021 9:05 PM

Juniata Man
UP has used debt to finance stock repurchases. There may be others. CW  

But not causing deferred maintenence which was the other half of the assertion.   

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Posted by MidlandMike on Tuesday, July 13, 2021 8:10 PM

mudchicken
....USRA moved all the traffic over to D&RG after they ran the CM plant into the ground. They were so bad that ATSF walked (ran) away from them.

Yes, did that run the D&RG into the ground or was it better built to handle the traffic?  In either case the USRA did the same to both railroads- send all the traffic their way in turn, and yet the CM died and the D&RG thrived.  If two students take the same test, and one passes and the other fails, I don't think the test is the problem.

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Posted by Euclid on Tuesday, July 13, 2021 6:22 PM

Convicted One
 
Euclid
By conspiracy theory, I am referring to the belief that such looting is actually happening under the guise of PSR.  It may be a popular belief, but where is the evidence that it is happening?

And just to be abundanly clear, I do not have any "meat and potatoes" examples to share.  I'm not sure that a shrewd operator doing such a thing would put up any flashing signs to attract attention, fwiw.

 

 

Certainly someone would notice if their railroad got stolen right out from under them.  It should not require flashing signs to reveal the caper. 

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Posted by Convicted One on Tuesday, July 13, 2021 6:14 PM

I've been doing some interesting reading the past hour, searching old threads here. I had recalled there was a fund prior to Mantle Ridge that tampered with CSX, but could not place the name...it was "Children's fund". 

Other old threads I've found interesting include:

"Mantle Ridge Sells Most of It's Stake in CSX"

"So Why so Much Long Term Debt on the Balance Sheet?"

"Newswire: CSX Reports Record Earnings Thanks to Cost-Cutting, Efficiency Gains"

"Newswire: Analysts ask why Union Pacific isn't more like CSX"

 

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Posted by Juniata Man on Tuesday, July 13, 2021 5:37 PM

I have a recollection of that discussion but, wanted to leave it "may be others". UP I was sure of as I own UP stock. Main point was to respond to CMStPnP's comment he'd never heard of a railroad borrowing money to buy back stock in preference to maintaining its physical plant.

CW

 

Convicted One

 

 
Juniata Man
UP has used debt to finance stock repurchases. There may be others.

 

I thought that was a big part of the discussion we had here earlier about CSX, that the hedgefund got control of the board, ordered debt financed stock buyback, and then sold their holdings at considerable profit.

 

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Posted by Convicted One on Tuesday, July 13, 2021 5:06 PM

Juniata Man
UP has used debt to finance stock repurchases. There may be others.

I thought that was a big part of the discussion we had here earlier about CSX, that the hedgefund got control of the board, ordered debt financed stock buyback, and then sold their holdings at considerable profit.

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Posted by Juniata Man on Tuesday, July 13, 2021 4:55 PM

UP has used debt to finance stock repurchases. There may be others.

CW

 

https://seekingalpha.com/article/4377377-union-pacific-good-long-buybacks-last

 

CMStPnP

 

 
Convicted One
A business might, for instance defer all 'not absolutely essential' maintenance in order to use the money to buy back stock.  After a few short years, the opportunists sell, and beat a hasty get-away. Is that a "conspiracy", or just shrewd operating?

 

Railroads in good financial health defer maintenence on branch and some main lines where it appears the traffic is declining over time to a point where the line may no longer be viable and might need to be taken out of service.   It is efficient use of capital even though it might not be popular with train crews.   A well managed railroad can spot the decline 5-7 years before the traffic falls to a point where maintaining the line exceeds the revenue brought in by the traffic.

I have never heard of a railroad borrowing money to buy stock as a preference over maintaining it's phyiscal plant.    Further it is highly unlikely stock analysts would reward such a practice and very likely they would spot it and sound the alarm to investors.    

I keep seeing this scenario espoused over and over again in these forums but the specific railroad that is doing it is never mentioned nor are financial stats provided that prove the theory that investment in physical plant is well below what it should be for a steady state of maintenece.

 

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Posted by Convicted One on Tuesday, July 13, 2021 3:54 PM

Think about it...if they put up a flashing sign announcing "This is our future!"...what would all the other stockholders do?

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Posted by CMStPnP on Tuesday, July 13, 2021 3:31 PM

Convicted One
A business might, for instance defer all 'not absolutely essential' maintenance in order to use the money to buy back stock.  After a few short years, the opportunists sell, and beat a hasty get-away. Is that a "conspiracy", or just shrewd operating?

Railroads in good financial health defer maintenence on branch and some main lines where it appears the traffic is declining over time to a point where the line may no longer be viable and might need to be taken out of service.   It is efficient use of capital even though it might not be popular with train crews.   A well managed railroad can spot the decline 5-7 years before the traffic falls to a point where maintaining the line exceeds the revenue brought in by the traffic.

I have never heard of a railroad borrowing money to buy stock as a preference over maintaining it's phyiscal plant.    Further it is highly unlikely stock analysts would reward such a practice and very likely they would spot it and sound the alarm to investors.    

I keep seeing this scenario espoused over and over again in these forums but the specific railroad that is doing it is never mentioned nor are financial stats provided that prove the theory that investment in physical plant is well below what it should be for a steady state of maintenece.

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Posted by Paul Milenkovic on Tuesday, July 13, 2021 1:45 PM

Gramp

I'd like to suggest getting a copy of the book "Good Profit" by Charles G. Koch. Refreshing account of creating a business. 

 

Oh, the Humanity! 

"Good" and "Profit" in the same phrase?  Charles G. Koch!  Isn't he one of the Koch Brothers?

You should have warned us about your post that we could cover our eyes.

If GM "killed the electric car", what am I doing standing next to an EV-1, a half a block from the WSOR tracks?

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