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Norfolk Southern Tests Debt Market, Actuarial Tables with 100-Year Bond Offering

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THE LONG VIEW
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Okay, I'll say it: Norfolk Southern railroad will probably not exist in 100 years. But before we get into the nuts and bolts of that bold statement, let's look a bit closer at the details of this 100-year bond offering by Norfolk Southern.

Yesterday we learned the railroad company planned to boost to $250 million its sale of 100-year bonds scheduled to mature in 2110, a number I, for one, will never, ever have the opportunity to use in the year it designates. Now, this isn't the first time we've seen 100-year debt issued. In fact, Norfolk Southern issued $300 million 100-year bonds in March 2005.

The issuance makes perfect sense for Norfolk Southern. Long-term yields are at historic lows. But for investors? Not so much. After all, it's not just the case that anything can happen over 100 years, it's more the case that everything will happen over the course of 100 years. Literally.

But let's go back to the rather bold statement that Norfolk Southern won't even be around 100 years from now. Could that be true? From a purely probabilistic stance, almost certainly. In 2009, Tokyo Shoko Research scoured their database of nearly 2 million companies worldwide and found that only about 21,000 or so had been around for 100 years. Of those, almost 90 percent employed fewer than 300 people. Norfolk Southern, which has been around since 1982, employs more than 28,000 people. Also, did I mention it's a railroad? I'm pretty sure railroads don't exist in the future, according to the hit animated television series The Jetsons. I should also add that there will be absolutely no repercussions to me personally should this prediction be totally wrong.


POSITION:  No positions in stocks mentioned.

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