[PRCo] Re: Wha[i]t a Minute...

[Fred Schneider]

I would imagine in many cases the bond holders never were full paid  
for their investments because the life of the industry was so  
short.   Assuming that most railways seldom lasted more than 30 years  
and the payback was commonly around 3 percent of original investment  
per year, most probably only got about 90% of their money back  
without any interest!     And considering 30 years later that they  
were being paid in dollars worth far less than they had originally  
invested, I'd say, Derrick, that the little old school teacher from  
Kittanning or Brookdale or West Chester who invested her savings got  
screwed.

Remember, most never got the principal back.

 From the other side of the table, the railways never really paid out  
the true cost of providing the service because they never had enough  
years to amortize the investment before the automobile beat them.

No one realized that one automobile for every four families was the  
critical mass (to use a uranium term) that seemed to be needed to get  
the politicians to pave highways, and once that was done it went from  
one car to two cars to three cars for every four families in just ten  
years.    I think some of the people in the auto industry (like the  
president of Packard and not Henry Ford) had a better handle on it  
than anyone in the railway industry in 1920.

On Jun 12, 2006, at 5:33 PM, Derrick J Brashear wrote:

> On Mon, 12 Jun 2006, Fred Schneider wrote:
>
>> This is an interesting concept ...
>>
>> Bled dry by underlying companies.
>>
>> It simply means that instead of PRC paying for its own property, it
>> rented its property.   It never paid to build 650 miles of track.
>> Other companies paid to build 500 or so miles of track and PRC merely
>> rented it.   It was a common way of doing it in Pennsylvania.    Bled
>> dry?
>>
>> Is that any different from me deciding not to own a fleet of trucks
>> for my business, but rather to rent them from Avis?   Then I go
>> broke.   Do I accuse Avis of bleeding me to death?   It's a business
>> expense.   I need trucks.   I chose to rent them instead of buy them.
>
> And you may have made a mistake by not buying them outright, and  
> instead
> paying for them many times over. I bet the railway and not the  
> underliers
> had to do the maintenance, possibly reimbursing themselves out of  
> their
> payments at some rate which did not keep pace with inflation, screwing
> themselves harder. Tell me I'm wrong.
>
> Of course, maybe it was deliberate:
>
>> stock.   The really bright ones inflated the value of the property
>> the built (the old $600 toilet seat concept) and still demanded it in
>> cash.   It wasn't ABC or DEF that bled PRC but it might have been the
>> promoters and construction companies that took their money up front
>> back in the 1890s and ran with it.
>
> Derrick
>
>