The Great Debate UK
Warren Buffett's annual missive to Berkshire Hathaway's shareholders is out. Among the usual folksy nuggets, the Sage of Omaha notes that he funded Goldman Sachs, General Electric and others at the height of the crisis.
The $21 billion invested is now worth a quarter more and yields 10 percent annually. Short term at least, that's more than Buffett's bet on railroad Burlington Northern Santa Fe is likely to deliver.
Berkshire has deployed a similar amount of cash to buy BNSF -- some $22 billion. It has also issued stock. That's why Buffett's latest letter is partly a primer for the 65,000 new shareholders the deal added to the half million or so that Berkshire already had.
Even Buffett, though, admits that the decision to buy BNSF in November was a "close one". The generous $34 billion price tag for the rail company's equity looked even higher from Buffett's point of view because he paid partly in stock. He and his investing partner Charlie Munger like issuing shares "about as much as we relish prepping for a colonoscopy", the 79-year-old Buffett writes.
from The Great Debate:
Warren Buffett's acquisition of the remaining 77.4 percent of Burlington Northern Santa Fe (BNSF) railroad his Berkshire Hathaway does not already own looks like a strategic bet that America's future energy needs will be met, in large part, through a massive expansion in coal-fired power generation coupled with carbon capture and storage (CCS).
Coal is the most important item moved on BNSF's railroads. It accounted for almost half the tonnage moved by BNSF in the first nine months of the 2009 (214 billion revenue ton miles out of a total of 444 billion) and a quarter of the company's revenues ($2.7 billion out of a total of $10.4 billion).