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Buffett bets on transportation with deal

Marketplace Staff Nov 3, 2009
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Buffett bets on transportation with deal

Marketplace Staff Nov 3, 2009
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TEXT OF INTERVIEW

Bill Radke: Warren Buffett’s done some big deals in his life, but this is his biggest. His firm, Berkshire Hathaway, is buying the giant rail company Burlington Northern Santa Fe. Actually, he’s buying the three-quarters of the company
he doesn’t already own. Total price: $44 billion. Marketplace’s Mitchell Hartman joins us live to talk about this breaking news. Good morning, Mitchell.

Mitchell Hartman: Good morning, Bill.

Radke: What is behind this deal?

Hartman: Well, based on the statement from Berkshire Hathaway in Omaha this morning, it’s about the economy. Buffet says, “It’s an all-in wager on the economic future of the United States.” So basically he’s putting in a bet on rail, on transportation more generally, on Americans having to move stuff from here to there in greater volumes than they are right now in the recession.

Radke: Right, rail companies have not exactly been rolling in money and business lately.

Hartman: No, they haven’t. Freight volume’s been way down. They’ve mothballed thousands of rail cars. Now that is starting to turn around with the economic recovery, but it’s only doing that slowly. Still, according to Mark Zandi of Moody’s Economy.com, this isn’t about today’s economic indicators anyway.

MARK ZANDI: I think Buffet is right that a lot of the growth in our economy going forward will come from trade, trading with the rest of the world, and that will require a lot of shipping across this country and thus the rail investment. So it’s not a bet on this year or next year, but over the next 10-20 years.

Zandi also points out that rail’s more energy-efficient than other methods of transit. In fact, Buffet pointed that out when he explained this purchase for Berkshire Hathaway.

Radke: Marketplace’s Mitchell Hartman joining us live. Thank you.

Hartman: You’re welcome.

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