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Quote of the Day

“There is a third, more subjective, element to an intrinsic value calculation that can be either positive or negative: the efficacy with which retained earnings will be deployed in the future. We, as well as many other businesses, are likely to retain earnings over the next decade that will equal, or even exceed, the capital we presently employ. Some companies will turn these retained dollars into fifty-cent pieces, others into two-dollar bills.

This “what-will-they-do-with-the-money” factor must always be evaluated along with the “what-do-we-have-now” calculation in order for us, or anybody, to arrive at a sensible estimate of a company’s intrinsic value. That’s because an outside investor stands by helplessly as management reinvests his share of the company’s earnings. If a CEO can be expected to do this job well, the reinvestment prospects add to the company’s current value; if the CEO’s talents or motives are suspect, today’s value must be discounted. The difference in outcome can be huge. A dollar of then-value in the hands of Sears Roebuck’s or Montgomery Ward’s CEOs in the late 1960s had a far different destiny than did a dollar entrusted to Sam Walton.”

-Warren Buffett in his 2010 letter to Berkshire Hathaway Shareholders

December 28th – This Day in Stock Market History

December 28th, 1917- The United States takes over all railroads in the country.

The takeover provided the use of the railroads to the government in wartime.

Nationalization allowed for the government to use multiple rail lines for shorter, more direct routes when delivering supplies.

The railroads would remain under the government’s control until March 1st, 1920.

December 28th, 2000 – Montgomery Ward (then owned by General Electric) files chapter 11 bankruptcy.


The company was once one of the largest retailers in the country, but it was unable to compete with companies like Sears, Target, and Walmart. 

The company was owned by the oil giant Mobil from 1973 to 1988, when it was then purchased by GE Capital, a segment of General Electric.

December 28th, 2017 – The Dow Jones Industrial Average closes at 24,837, a new record high. It would be the Dow’s 71st all time high in the year, a record for the number of all-time high closes in a year in the index’s 121 year history.

Below, a chart of the Dow Jones Industrial Average in 2017 – Pretty much a straight line up!


Best December 28th in Dow Jones Industrial Average History

1934 – Up 2.88%, 2.89 points.

Worst December 28th in Dow Jones Industrial Average History

1937 – Down 3.66%, 4.52 points.

Read of the Day

Our quote of the day at the beginning of this posts touches on a topic that Buffett has spoken to a lot.

In fact, Berkshire’s “Owner’s Manual” talk about what has become known as the “Buffett Test”, which aims to measure how well a company’s CEO allocates the company’s money.

We talk about this much more in our post:

2 Qualities That Make a Great CEO

Go To Next Day: December 29th: 1989 – Japan’s Nikkei index peaks at 38,916, marking the top of one of the largest stock market bubbles in history–>