Most investors looking for the "next big thing" seek out whiz-bang investments like alternative energy, lifesaving biotech drugs, handheld Internet devices and, for doomsayers, hard assets like gold.
Railroads, which had their heyday in another era, are rarely mentioned as a must-have investment for those looking to get rich.
So why is Warren Buffett, arguably the world’s most famous and successful investor, betting more than $26 billion of his spare cash to acquire all of Texas-based railroad Burlington Northern Santa Fe?
On Tuesday, Buffett turned heads on Wall Street when he placed his biggest bet of his career on rails — and the battered USA economy, for that matter.
Here is why he is doing it.
"Burlington Northern Santa Fe last year moved, on average, a ton of goods 470 miles on a single gallon of diesel, and society has an enormous interest in using less oil to transport goods," Buffett says.
Indeed, Buffett very much likes the green component to his rail investment, likening it to an energy-saving play.
"Each train displaces 280 trucks on the road," Buffett says. "When it comes to spewing pollutants there is nothing more efficient than trains. It is very much in line with the future goals of society. While the railroads won’t take over the world it is something that is part of the future."
Okay, this is why this is interesting to me. Buffett is making a massive investment based on the idea that Peak Oil is real and it’s going to influence how we travel, move goods, and our way of life. You also can’t notice that in some ways, he is betting against cars or at least how expensive it is going to be to get from Point A to Point B. That is something that will reshape not only the transportation of goods but cities, how we interact as communities, and where we live. It’s something that you never hear from government officials, probably because governments are good at a lot of things but planning for the future is not one of them.
It’s a conversation that the church needs to have. For the last two decades the idea has been big campuses with lots of parking on the outskirts of town or in the suburbs. The question I have is as gas prices rise, those in lower income brackets will see their world get a lot smaller, will the churches just be refuges for those who are rich enough to get to them or even worse, will the impact on the church, be the same as it expected for sprawling and emptying out suburbs.
I like railroads, they did not blow away, they are using technology to improve and they have a place especially with volatile energy prices. They are not the “end all”, but they have carved out their niche and can expand. As far as the church, or in this case, “churches”, well, I like what Scott Williams posted as “heretical musings on the church”. Maybe the “corporate church needs to go bye-bye so we can really be the Church as Jesus intended it to be, his bride…
BNSF and UP are the two big American railroads and BNSF was clearly the one to buy. BNSF hauls more coal and more intermodal containers and piggybacks than UP. Ten percent of America’s electricity is from BN coal.
BNSF has better management than UP, and is poised to benefit from America’s overall infrastructure upgrade. The smart grid needs more wires, and the easiest place to put long distance power wires is alongside the railroads. One way to allow more cars on highways is to keep trucks off highways. The easiest way is to put the trailers on trains. BNSF (and Buffett) get along well with the government; Amtrak trains on BNSF are rarely delayed, while UP often delays Amtrak. BNSF is a lot more likely to get stimulus money, as well as quick approval, for things like on-dock rail. That’s where the containers come off the ship, and get placed right on the train. Local containers go to trucks, but the stuff going from Oakland to Bentonville’s warehouses can go quicker.
Suburban rail systems are popping up, and cooperative railroads are reaping the benefit. Austin comes to mind, there are others in the works. BNSF will probably manage them better than UP.
As far as a (trivia) connection with railroads and churches, the second largest (after the feds) real estate owner in the west is UP. In the east, number 2 is the Catholic Church!
Three decades ago, the suburban church was fairly good at integrating itself with the (core) city. Nowadays, the megachurch model is pretty unconnected with everything, including the city .