Buffett bets on transportation with deal

Marketplace Staff Nov 3, 2009
HTML EMBED:
COPY

Buffett bets on transportation with deal

Marketplace Staff Nov 3, 2009
HTML EMBED:
COPY

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.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.