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Earlier today Warren Buffett called his buying of railroad operator Burlington Northern an “all-in wager on the economic future of the United States. I love these bets.”
Long term it will be fine so long as rail is the way we transport goods. But, bet is probably the key word at this point. We will see the real state of affairs once the stimulus wears off. Considering consumers are shedding debt and banks aren’t lending, I am not expecting too much for a few years from the choo-choos (unless oil continues its climb).
My professor had an interesting theory about this which makes a lot of sense.
However the economics of rail transportation work out in the long run, there is also the intrinsic value of the real estate the rails run on top of. With huge electrical grid upgrades slated to take place at some point in the future, perhaps he is also betting that Burlington’s property will be more valuable because it already crosses the country and could be used to take much of the grid with it.
Makes sense. Also wonder if Buffett views that as his capstone acquisition, or if he has more big things in store…
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