Skip to comments.Buffett's big bet on coal
Posted on 11/05/2009 4:55:34 AM PST by thackney
Warren Buffett's Berkshire Hathaway upped its stake in Burlington Northern yesterday, paying about $26 billion for the rest of the big railway system.
Is the purchase all about playing with trains? Not really. Buffett said it's a bet on the U.S. economic recovery, that moving goods around will surge when things pick-up again.
It's also seen by some as a big bet on coal. B&N's system goes through Wyoming's Powder River Basin, which is the primary source for a lot of the low-sulfur coal many U.S. power plants rely on these days to keep down their emissions (including the W.A. Parish plant south of Houston).
Buffett also owns MidAmerican Energy, which owns nearly a dozen coal fired plants among its many assets, so "The Oracle" has more than fleeting interest in coal.
(Excerpt) Read more at blogs.chron.com ...
The Left says that there is no clean coal.
The liberals and environmentalists say a lot of foolish things.
But I they really believe CO2 is a pollutant, they should limit their breathing and breeding.
If he is betting on coal then he is betting that the obamination is a passing thing.
And, with the pending closure of the Yucca Mountain nuke repository they're forcing the issue with nuclear, too.
I don't know about you, but I'm sick of Congress approving these billion dollar boondoggles. Then, when they are about to become functional they get scrapped. We've paid billions for a 52 mile long hole in the ground in Texas, only to have it scrapped. Things aren't looking so hot for the future of the ISS, either. The list is endless. And to think some folks believe Maddoff is a crook.....
If Buffett thinks Wyoming coal is a long term good investment, he either knows something about the environmental movement's willingness to let it be mined and shipped- or he remains naively confident that obama’s long term intentions are to act in he United States’ best interests
Or he knows that after global cap’n tax passes, Americans will be mining our coal and shipping it to our ports to send to China
You’re correct. Barama threatened to backrupt anyone who wants to build coal generation plants. Buffett is calling his bluff.
Buffet endorsed Obamalamadingdong. Either Buffet has done a 180, or there's something else afoot here....my guess is the latter....
I think it’s less a bet on future use/shipment of coal and more a bet that crude will go up to $140 a barrel again and stay there for a very long time. This would make shipping by roadway extremely expensive. Consumers, hit by both high unemployment, wages that are not increased to meet inflation, and higher taxes, will only buy those goods that are cheaper because their transportation was cheaper.
Buffet bought a delivery system that will be far cheaper than trucking: rail.
But in that scenario people buy far fewer goods and conserve even more energy because they cannot afford to do otherwise. I believe this railroad may ship as much coal as everything else together.
The theory of cost being controlled by supply/demand does not apply in this situation.
We actually have a glut of petroleum right now. All other factors being equal, gas should be well under $2 a gallon.
The cost of fuel is greatly effected by the value of the dollar, and there is even a direct correlation.
The fundamental is this: if crude goes up to even $120 per barrel, and inflation hits, and taxes increase, the trucking industry is dead. Delivery will still need to be made. Someone needs to make those deliveries. They will be made by rail, which uses a tiny fraction of the amount of diesel to deliver far greater quantities. This will be used for the bulk shipment. Trucking will be reduce to the local level.
Why? The market will not be able to support any other type of delivery operations.
Of course, there will be far less being delivered. All the “junk” will be eliminated from our economy and we will be subsisting on mainly the basics with the occasional luxury.
From a Wall Street Journal article:
Isnt it ironic that Buffetts deal is sparking a lot of discussion about how railroads are an eco-friendly industry when much of Burlington Northerns revenue comes from hauling coal? (The fossil fuel accounted for almost half the tonnage that the railroad hauled in the first nine months of the 2009). It is possible that carbon pricing would hurt not only truckers, but Buffetts coal hauling railroad, too.
Think as a Chicago thug politician thinks.
There will be a BIG payoff for Buffet here. The gov’t will make sure this investment is VERY profitable for Buffet.
Buffet wouldn't gamble 44 billion unless 'bammy gave him an assurance that it wouldn't be peeing down a rathole.
The coal connection was the first thing I thought of when I heard Buffett bought BN.
Buffett has been investing far long than Obama has been around and will still be when Obama is a bad memory.
Buffett has normally bought companies with “old-fashon” value like assets and tangible sales products like Gas Pipelines. He tends to stay away from things like dot-com business. He is also very good at buying at the bottom of price swings.
Yep. On the one hand we have Mr. Buffet, with behind the scenes help from the gubmint, making hundreds of millions, if not billions, off of coal and coal related industries. Meanwhile, we have Algore set to become the first "Green Billionaire" off of trading carbon credits from C02 emissions from, among other things, coal fired power plants. Makes me dizzy just thinking about it. Scams on top of scams.
As Sir Winston Churchill said:
"It is a riddle, wrapped in a mystery, inside an enigma"...and the taxpayer will get screwed...again.