Buffett continues to play with trains
Warren Buffett is calling his acquisition of the Burlington Northern Santa Fe railroad company a $34 billion wager on the economic future of the U.S. It's his biggest investment ever. But what's he really betting on? Alisa Roth reports.
A Burlington Northern Santa Fe train sits idle at the Port of Oakland in Oakland, Calif. (Justin Sullivan/Getty Images)
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Kai Ryssdal: Warren Buffett's holding company, Berkshire Hathaway, owns a whole lot of things. It owns insurance companies and an ice-cream maker. It owns an underwear manufacturer and a brick company. Pretty soon it's going to own the Burlington Northern Santa Fe railroad, too. Buffet says he's making a $34 billion bet on the economic future of the country. The guy's right up among the most successful investors ever. This is the biggest investment he's ever made. But what's he really betting on? We asked Marketplace's Alisa Roth to find out.
ALISA ROTH: Burlington Northern makes more money than any other rail company in the country. It has 32,000 miles of track that run through 28 states and two Canadian provinces. It plays a key role in the economy: it transports everything from consumer goods to corn.
Lee Klaskow is a transportation analyst at Longbow, a research firm. He says Warren Buffett is figuring that where the economy goes, the trains will follow.
LEE KLASKOW: What he's betting on is that given that the rail industry and transportation companies in general are imperative to the movement of goods that when the economy does begin to pick up steam again, these companies will benefit.
Buffett seems to like playing with trains: he already owned about a quarter of Burlington Northern. And he owns stock in two other big players: Union Pacific and Norfolk Southern.
One of Burlington Northern's most profitable businesses is carting coal.
Frank O'Donnell is president of Clean Air Watch, it's a non-profit environmental group. He says Buffett's acquisition is a sign he doesn't think the government's going to do much on global warming.
FRANK O'DONNELL: Well, this is very ominous from the standpoint of climate change. Warren Buffett is no dummy, and he seems to be making a multi-billion dollar bet that coal use is not only going to continue but grow in the future.
He says Buffett's in this to make money, not to change policy. But people follow Buffett. And deals like this one could make it hard to convince Americans we need to.
I'm Alisa Roth for Marketplace.
Comments
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From Jacksonville, FL, 11/04/2009
I wish your story had told more about how this is a green industry.
Railroading remains the most efficient form of transportation there is, regardless of whether the country decides to go green or whether FRANK O'DONNELL is right that coal will grow in the future. The efficiencies have been there and always will. Currently we move 1 ton 436 miles on 1 gallon of diesel fuel and this continues to improve. Buffet knows as the economy improves more traffic will go by rail. If carbon emmissions get regulated rail is the way to go. As crowded highways get more crowded, rail is the way to go -- for people and for freight. Way to go Mr. Buffet!
Scott Setser
Director CSX
From Menlo Park, CA, 11/03/2009
Err... You guys missed the mark on this story. You went with spinners instead of visionaries.
Did you realize trains are already half electric?
Did you realize the Right of Way of worth more than the railroad?
From Gloucester, MA, 11/03/2009
Warren Buffet is a true visionary, who insist on being hell bent on saving the future of America ... saving it from itself and those greedy pucks on wall street and the Bernie (Bernard) Madoffs and Alan Greenberg (of AIG fame) ...as a none believer of the death penalty... I would put those two and several others from of the hollow halls of Goldman Sachs throw in Rupert Murdock, in the deepest darkest hole (or one of those inhuman super-max cells). Just maybe America might be a true Democracy again.
From merrimack, NH, 11/03/2009
What evidence do you have that Warren isn't investing in rail for the long term when green makes a long term investment today in high speed rail, and the real market here is high speed freight which takes business from trucking. Imagine a hundred mile an hour light freight rail system - not coal and iron ore, but the fruits and veggies and toys and DVD players, able to beat trucks even when the trucks are required to deliver to the delivery point.
Is that the future of rail? I'm not sure, but Warren invests in firms by buying them when he has a century long time horizon, rather than the short term focus of Wall Street that is interested in making fees from deals, not in building real productive capital.
Warren Buffett is a true capitalist, while Wall Street focuses in my view on destroying capital, with burning coal as a prime example of sending natural capital up in smoke to reap short term fees with future generations paying for their mess.
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