There is a difference!

Warren Buffet is one of my favorite people. I’ve written about him and his buddy, Bill Gates, before in this space. In the news today, Buffet is buying Burlington Northern Railroad for 34 billion dollars.

Good for him. It’s a solid bet on the future prosperity of America.

But events like this invite comparisons that are just too good to pass up.

Comparison 1: 34 Billion Dollars

• 30% of the current annual cost of the Iraq war
• Only 25% more than the cost of ONE new aircraft carrier (note 1 below)
• 76% of the cost of the B2 Stealth Bomber program

America will not fall to foreign aggressors! … But China might decide to simply buy us with our own dollars some day.

Anyway … there’s an even better comparison out there. Buffet is buying BN at the jolly round figure of $100 a share. The day before the offer, BN was trading at $76 a share. Why the difference? The answer is proof positive of something that has ALWAYS bugged me:

Common Shareholders, the theoretical “owners” of a corporation, really only own a fraction. When Buffet buys the whole corporation, however, he is also buying that part that the shareholders don’t, in nitty-gritty fact, actually own. This is the ONLY time that the common shareholder actually receives the real value of shares.

Whenever you read some business press release BS that such and such was “done in the interest of the shareholder” – disregard it completely. Corporate executives place themselves at the feeding trough first and foremost. If they consider the actual interest of the shareholder at all, it’s only because we throw of few of them in jail every now and then for being so greedy that they get careless and break enough laws to prosecute them.

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Note 1: Wikipedia – “… budgeting for the $12–14.5 billion (plus $12 billion for development and research) for the 100,000-ton Gerald Ford-class carrier (estimated service 2015) …”