Vanderbilt And Buffet , Railroads And Stocks
In this otherwise excellent WSJ
story about "Commodore" Cornelius Vanderbilt's 19th century railroad empire as it relates to Warren Buffet's acquisition of Burlington Northern, in which you learn a lot about the history of the railroads as well as that of the stock market, the little, offhand, parenthetical comment highlighted below has stuck with me...
Mr. Buffett's approach to investment often seems to parallel the Commodore's. Vanderbilt accepted no salary as an executive, but took only the dividends on his personal stock. (In his era, investors expected steady dividends, not rising share prices.)
To prosper, he had to make his corporations profitable, year after year. He bought lines with permanent advantages—those that ran through developed regions that provided local traffic, for example, and that had low grades, which reduced operating expenses. So, too, does Mr. Buffett look to the long term.
It seems that, back in the olden days when money and credit didn't flow quite as freely as they do today (for better or worse), investors bought stocks for the dividend stream rather than in hopes of capital appreciation - a higher stock price was a bonus.
Today, we use the dividend stream to determine whether the share price seems fair while getting little or no dividends in return.
Isn't there something fundamentally wrong with that sort of "progress".
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