"I'm perplexed by this deal," says Tom Bonney, managing director at Philly business advisor CMF Associates LLC, re Berkshire Hathaway's planned $billions investment in the giant Burlington Northern Santa Fe railroad.
"I read (Berkshire boss Warren Buffett)'s public statements about the belief in the American economy and the bet on commodities... But I think that there has to be something else here." Like maybe:
1. "A bearish bet on the U.S. dollar and inflation." Buffett doesn't like foreign investments; so the big Western railroad is "a natural hedge. Their customers are commodity sellers." If the dollar falls and inflation rises, "the price of those commodities would increase," and BNSF can boost rates, given the lack of alternative shippers out in mining country.
2. "Land play." BNSF controls access to lots of Western property.
3. "Passenger rail play... Perhaps through his contacts in Washington DC (Buffett) has an inside track on the government's plans for passenger rail" on BNSF's lonely lines, from Houston to Los Angeles, Minneapolis to San Francisco, Chicago to Seattle.
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