Why is Buffett buying Burlington Northern? (credit, buy, companies, money)

[evilnewbie]

Honestly, I don't see a very high return for buying an old railway system... Am I missing something, what does Buffett think is going to happen? Anyone else have better insight? I wouldn't buy any Berkshire shares, they are way too expensive and I don't have that much money... hahaha...

[Tightwad]

Well....hahahaha...rail is the wave of the future for transporting both goods and people. Hi speed rail will have to come to America and more and more goods will move off the decaying interstates to rail.

Warren Buffet remembers the days before the interstates and knows what rail can do cheaper. Crazy like a fox he is..............

[rubber_factory]

He probably sees value for the price. I would imagine those rail companies have a ton of illiquid assets.

[North Beach Person]

With the continuing fuel crunch railraoads are an efficient method of freight movement over long distances. Since deregulation in the late 70's and early 80's they've been able to shed their non-profitable routes. BN is also recognized as one of the better managed lines with updated equipment and good routes.

[evilnewbie]

I have ridden on the rails before and they are NOT cheaper or efficient (if you measure efficiency by time)... I have looked for the past 5 years and the cost of going on passenger rail versus by plane is about the same costs... But plane is way, way faster (I travel long distances most of the time)... unless he is looking for developing new rail inside cities, etc, I don't see why rail is so "good"... yes, I do see that transportation of goods is cheaper on rail but is he looking at massive transport of goods in the future?? What goods and why? Maybe he is looking at Europe's carbon credit system and saw that rail did very well and thinks it will be replicated over here when they pass the carbon credit system?? What does he know?

[oakparkdude]

Originally Posted by evilnewbie

I have ridden on the rails before and they are NOT cheaper or efficient (if you measure efficiency by time)... I have looked for the past 5 years and the cost of going on passenger rail versus by plane is about the same costs... But plane is way, way faster (I travel long distances most of the time)... unless he is looking for developing new rail inside cities, etc, I don't see why rail is so "good"... yes, I do see that transportation of goods is cheaper on rail but is he looking at massive transport of goods in the future?? What goods and why? Maybe he is looking at Europe's carbon credit system and saw that rail did very well and thinks it will be replicated over here when they pass the carbon credit system?? What does he know?

Hopefully, you realize that there's a big difference between Amtrak (passenger rail) and freight rail companies. In the US rail carries more freight than the trucking industry, and as fuel prices increase that lead will only increase.

[J Arp]

Originally Posted by oakparkdude

Hopefully, you realize that there's a big difference between Amtrak (passenger rail) and freight rail companies. In the US rail carries more freight than the trucking industry, and as fuel prices increase that lead will only increase.

And the freight guys own the road. Amtrak has to "pull over" for all freight-- they have the right of way. That takes a good chunk of time.

[evilnewbie]

Originally Posted by oakparkdude

Hopefully, you realize that there's a big difference between Amtrak (passenger rail) and freight rail companies. In the US rail carries more freight than the trucking industry, and as fuel prices increase that lead will only increase.

Yes, I do... someone mentioned it above and I had to rebutt it... Perhaps Buffett is thinking about expanding Burlington to do passenger rails in the future? I really don't know what his reasoning that rail will do so well in the future... I do know that rail carries more freight BUT I don't see more freight increasing in the near or long future... I suppose Buffett is hedging against oil prices but that wouldn't be a "wise" bet unless he knew something and I don't know what he knows or his reasoning... I expect teamsters and their unions being very strong about not losing to rail, so I still don't know what is up with Buffett or whoever "really" runs Berkshire... I am thinking Buffett is old and just poised as a talking head while the brains work in closed doors and hidden from anyone's knowledge...

[StealthRabbit]

Obviously Buffett is making a 'value-play' (Tho he has been wrong a few times in the past).

I would guess he sees a current bargain with the potential for future growth and profitability. I would think speculation of high future energy prices are his primary driver. I highly doubt he has any visions of transporting people in the future, or a carbon credit strategy (let's hope that never happens).

[oakparkdude]

Originally Posted by evilnewbie

Yes, I do... someone mentioned it above and I had to rebutt it... Perhaps Buffett is thinking about expanding Burlington to do passenger rails in the future? I really don't know what his reasoning that rail will do so well in the future... I do know that rail carries more freight BUT I don't see more freight increasing in the near or long future... I suppose Buffett is hedging against oil prices but that wouldn't be a "wise" bet unless he knew something and I don't know what he knows or his reasoning... I expect teamsters and their unions being very strong about not losing to rail, so I still don't know what is up with Buffett or whoever "really" runs Berkshire... I am thinking Buffett is old and just poised as a talking head while the brains work in closed doors and hidden from anyone's knowledge...

Why wouldn't freight traffic increase in the future? Are you betting against future prosperity and increased standard of living? We transport a lot more "stuff" now than we did 50 years ago, and we'll likely transport a lot more "stuff" fifty years from now, and most of it will probably be by rail.