Burlington Northern -- a cheap buy

A report from NYTimes:

Mr. Buffett singled out Burlington Northern, for which he paid $26 billion last year for the 77.4 percent he didn’t already own, for hefty praise. Here’s how he sees the benefits of owning a majority stake in the railroad operator, which earned $3.6 billion last year, on $15.1 billion in revenue

What a cheap buy! 26/0.774/3.6=9.3, that means 10.7% profit a year...And Burlington still grows...

Why Paul Samuelson Does Not Support Leverage Investing

It is quite strange that academic fellows still advocate leverage investing, even though  one of the greatest economists Paul Samuelson declared against it and Warren Buffett was mentioned.

Obviously, I think professor Samuelson was right and so is Warren Buffett. This kind of stories in investment always happen. These academic fellows once again act as "falling victim to the 'law of large numbers' fallacy". They are wrong simply because they use short term debt to "invest" long term or uncertain time period realized asset. That is crazy. Quite different from buying a house with leverage, debt of stock leverage is quite uncertain and liquidation time is always short than those fellows expect. No long term financial tools are present for ordinary stock leverage.

We need to remember Mr. Buffett's advice: never leverage.