Do you want to invest in some of the safest companies on the planet? If so, just follow Uncle Sam’s checkbook. You’ll find a long list of companies that Washington has vowed to keep alive.

But let me warn you, as appealing as this strategy sounds, it’s hell for shareholders.

[ad#Google Adsense 336×280-IA]We all remember 2008. Washington used the Fed’s printing press to bail out plenty of companies. General Motors (NYSE: GM), Wells Fargo (NYSE: WFC), Goldman Sachs (NYSE: GS), Chrysler (NYSE: FCAU)… the list goes on.

They were all deemed too big to fail.

In 1971, it was Lockheed Martin (NYSE: LMT). The defense contractor was poorly managed and, despite a steady stream of cash from a war-loving government, it was on the cusp of bankruptcy.

But yet again, Washington wondered how the nation would survive without the company. It passed the Emergency Loan Guarantee Act for major businesses when they got in trouble. Lockheed took $1.4 billion worth of taxpayer money.

In each of these cases, the little guy got creamed. Taxpayers were fleeced, shareholders got slammed and the smaller (often better) competition wondered why it wasn’t tossed a life ring.

Those big businesses should have been left to fail. The economy and its investors would be much better off.

A deep study of each of these bailouts would prove that government intervention in the free market often hurts everybody but the politicians and their corporate cronies. But we’ll stick with just one.

It’s the most fascinating example.

It comes from that oh-so-embarrassing government entity known as Amtrak.

Its CEO is picked by the president. Its funding is allocated by Congress. And its workforce is one of the most unionized on the planet.

Dare I state the obvious? It’s a disaster.

It’s no wonder the company loses $32 for every passenger who hops aboard.

Left alone, the free market would have gobbled up the beast a long time ago. Instead, Washington keeps the derelict trains rolling, pushed down the track with hordes of taxpayer money.

But what most folks don’t realize is that Amtrak had a sort of sister organization. It now runs outside the long reach of the government. It’s entirely in the private sector. And, oh boy, is it profitable.

It’s clear that when these two tracks split, they went in very different directions.

You see, Amtrak wasn’t some sort of government creation. No, Uncle Sam got involved when our elected leaders decided that the huge Penn Central railroad needed a bailout in 1970.

At the time, the company’s failure represented the largest bankruptcy in American history. Washington refused to let the fallout spread. Among many other expensive moves (with the taxpayer footing the bill), it split the railway in two.

One piece became the choo-choo boondoggle known as Amtrak. The other became The Consolidated Rail Corporation, or simply Conrail.

To be clear, Conrail started as a mess of its own. After all, the government had tied several failing regional lines into one railway.

But the freight carrier had something Amtrak didn’t. It had a free market leader named Stanley Crane. His vision was to get the company out of Washington’s hands. Instead of relying on a guaranteed budget and guaranteed mediocrity, he wanted to take a risk in the free market.

Some six years after he took office, that’s exactly what happened.

Not only did Conrail turn a large profit, but Crane also led an IPO that paid back American taxpayers and eventually put $10 billon into shareholder pockets as the company was sold to Norfolk Southern (NYSE: NSC) and CSX (Nasdaq: CSX).

Today, Amtrak, with its dependency on public funding, continues to lag far behind its global brethren. It’s yet to earn its first profit.

Yes, like so many folks who rely on the government, it is 45 years old and has never earned a penny. So you tell me…

Do bureaucrats make good businessmen? Do you want to invest your money alongside Uncle Sam?

It rarely ends well.

Companies like Boeing (NYSE: BA), Northrop Grumman (NYSE: NOC) and General Dynamics (NYSE: GD) are all certainly too big to fail. With their rich defense contracts, they’re tempting targets for investors.

But history shows it’s those lucrative deals that entice their leaders to make greedy decisions. It’s their dependency on the government that ultimately brings them down.

And when times get tough, these sorts of “safe” companies are the first to separate investors from their cash.

They may feel safe today. And no doubt Washington will ensure the companies will stick around. But it will do it at the expense of ordinary shareholders.

It always does.

Keep the government out of the private sector. And keep your private sector investments away from the government.

We’ll all be better off.

Good investing,



Source: Investment U