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Warren Buffet is an asshole: Burlington Northern

Of all the people who rode the wave of monetary policy in the last 30 years, Buffett is the only one left who has not yet had his reputation tarnished. He annoys me the most because I see him as the most facetious and hypocritical of the bunch.  So as to not dredge up old history, let’s just focus on what has happened in the last few years. And I am going to try to keep this column going as a serial.

Burlington Northern acquisition – This is Buffet’s Steve Case move. In retrospect 10 years from now it will be viewed as the deal of the century.

What Buffett says happened: He saw the chance to acquire a great company at a great price and took it.

What actually happened? : Buffett prospered during an era of low inflation and low energy prices. This allowed him to make butt loads of money in the bond market. The problem now is that Berkshire is primarily a financial services firm, heavily overweight the insurance, banking, and financial services sectors. On top of that his holdings of consumer products firms, Coca Cola and the like, make him heavily short of energy and commodities.

He’s basically looking ahead and seeing an era of high inflation and high energy prices. So he needs to convert his soon to be devalued financial portfolio into one consisting of real assets and with exposure to energy. He needs to do a big deal and to do it fast, before 2011-2012. And he needs to do it without moving the market. If word gets out he is selling, the bond market would crash, and he simply has too big a portfolio for that not to happen. So the only way he could do this, is via a “transformative deal” , as he put it.

He doesn’t want to buy a mining firm, because the beta is too high, and he would have to take on serious operational risk. He wants a stable asset.

Enter Burlington Northern, which is basically an irreplaceable asset at this point. It’s an asset valued of USD50billion, with a replacement cost running into the trillions. Can you imagine how expensive it would be to acquire the land rights and build something of that scale again? So it a definite “real” asset.

As energy prices go up, trucking, shipping and all other forms of transportation which are less energy efficient will increase in cost much more than rail transportation will. Furthermore, as oil is depleted and more coal is eventually burned in the US, Burlington will have a prime position in transporting coal from where it is mined to where it is burned.

In about 5 years, you will start hearing politicians in Ohio start screaming as coal miners get fucked over by Burlington. And companies across the US scream as they convert from container trucking to rail.

Why Buffet is an asshole: This is an AOL like deal here. He’s basically managed to trade a less valuable paper asset for a much more valuable real one. But this is only going to be evident going forward. He’s managed to put out a great story, that this is a vote of confidence in the US, when actually it is the exact opposite, it is vote that high inflation and energy prices are going to put a serious dent in US economic growth, but through this deal he would have enhanced his relative position.

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May 1, 2010 - Posted by | Uncategorized | ,

6 Comments »

  1. I agree completely, I thought the exact same thing about the “vote of confidence” bs.

    Comment by David H | May 3, 2010

  2. Welcome back Paul! Keep up your postings! Don’t go afk again. Your analysis feels very insider to me and thus it’s very entertaining and knowledgeble.

    Comment by Steven Tan | May 4, 2010

  3. very insightful!

    Comment by AW | July 8, 2010

  4. ITs not nice calling him an AH! Burlington N Sf was a great deal and not necessarily bad for bnsf shareholders who got buffets diversification in exchange. unfortunately BNSF spun off real estate , timber, mining some time ago. Don’t be too sure energy prices have to go up and out of sight. I monitor the technology and it has kept up and beyond. Oxy-dental petro is getting oil out of dead wells near LA That tech can revive TX and saudi arabia not only that Iran and Iraq are still unexplored and untapped with post 1970s tech. The saudis threw out the Exxonians but they are getting there. Add to that enornmous potential brazil, the new deep gulf of mexico ,off shore isreal and ex soviet union sites and we are looking at $10 a barrel supply as far as the eye can see into the future. Buffet will be in trouble with Burlington becasue the truckers will soon have the same co-generation engines the locomotives have and maybe quite competitive per mile. There is unlimited geothermal to tap right under mt saint helens with the water supply from the mountain sides to feed the steam generators year round. The magma chamber under mtSaint helens is hotter and larger than anyone expected it to be it can compete with the super volcano status of yosemite. Similar sites are around the world where the technology will spring forth once the enviornmentalists are blamed for $6 a gallon gasoline coming soon maybe with the royals of saudia arabia going off to Singapore when they have an end of times revolt . Buffet can get his percentage out of coal just with the rail lines with out ever having to own a mine. He will probably move more into gas pipelines i would guess which is his style to have a monopoly service just the way carlos slim works down in Mexico. Exxon can compete with buffet with ready cash even after its recent aquistion of natural gas x co….i bet on natural gas as his next big aquaisition which nests with mid america. not oil . nuclear is very unlikely because he can’t understand it. He will want to control access to the pipeline and charge a toll. There is also a real estate company that can exact tolls he might go for. I will plot the pipelines on a map to see how they match up with rail lines and if they service buffet’s industrial plants….

    Comment by AH | February 28, 2011

  5. I like all you insightfullness into the aspects of Warren Buffett who is a schrewed old man. I watched his interview on Bloomberg with Charlie Rose and heared him say that the 16 countries in the EU gave up their right to print their money and control credit for the promise of a stable EU dollar which is what Congressmen were promised in Dec of 1913 by the Bankster Gangsters without reading the bill itself HR7837 crafted at Jekyll Island 1910 by Warburg, Schiff, Aldrich, & many other men of the money trust from Wall Street and Kuhn Loeb. This is a similar treatease that all central banks us for fractional reserve banking in every country that they are controlling the economy and funnelling their proceeds through Bis in Basal Switzerland from 27 different countries. The fractional reserve economic system is based on creation of debt and the constant access to credit with the proliferation of money being circulated which drives inflation. This process goes on until it destroys the economy of the country. The economic valleys and highs are never ending controlled by the the banksters or money lenders at their whim and they are the ones who profit from these downturns. Read what Thomas Jefferson said about the central banksters amoung others such as Andrew Jackson, Congressman Lindberg 1908, Lincoln, Kennedy EO 11110 June 1963, Lewis T. McFaddin 1932 Chrm Banking & currency Cmte 1920-1932 floor of House, Congressman Trafficant, Ben Franklin, Eisenhower, FDR, & many moore. Do your own research as I have done for years. Seek the truth as it is stranger than fiction. The 16th amendment was crafted and passed in congress by 36 states ratifying except there was forgery in this process. The banksters knew that if they were going to print our money and get paid interest the American people had to pay the interest via a personal income tax calle the Federal Income Tax. Facts never lie. Historical economic facts don’t deceive they liberate the mind. Read what Mark Pittman wrote about Wall Street’s Faustian Bargain and what Dr. Michael Burry wrote on missteps to Mayhem inside the the doomsday machine mortgage brokers chasing bad credit for subprime loan toxic mtgs with teaser interest rates. The Fed prints our money for 3.5cents per bill and charges up interest on every 2,5,10,20,50,100 bill they print by monitizing the amounts with Treasury bills at the rate of approx $7 to $8 billion daily m-f. Debt needs to be created in order for credit to be available the the Fractional Reserve Banking system except for now as credit is fairly tight across for most small businesses nationwide. All our gold is in the hands of the banksters since 1913 & 1933 paid for with the fiat worthless paper money. The gold is in the Fed vault 80′ under the street in Manhattan, London, Hamberg Germany, Italy, & Spain central banks. Central banks are private corporation funded by the unsuspecting people unaccountable and unauditable by the Governments they print money for. How stupid politicians are. Woodrow Wilson lamented on his death bed that he had unwittingly done his county in by signing HR7837 on Dec 13, 1913. Enough said as I have tons more you do the homework. America is doomed under this debt ridden economic bankster fractional reserve system with fiat paper money backed by nothing but the American dream which is dead on arrival. Who fomented the war of 1904 between Japan & Russian navy over Korea? Who fomented all the wars in Europe since the 1700’s. Who funded Hitler until he began printing his own money. Who prevented mercinaries from intervening in Lincoln’s war on the South but the Zhar of Russia and who was mordered in the socalled Russian Revolution of 1917 and who funded Lennin & Trotsky in 1917 but Kuhn Loeb & Co of Manhattan,N.Y. Who was mad at the Chzar but Rothschild for his aiding lincoln. Conncet the dots as I have and have and have and you will see that Mel Gibson was right at 2AM in Ca drunk as he was. Wake up and smell the roses.

    Comment by Louis T. McFaddin | August 23, 2011

  6. WBuffet has lost more than much more than his $$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$$$$$$ than his death-bed can be reaquired?! Sleep well in hell.

    Comment by patrick walker | April 9, 2012


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