Buffet's Burlington Bet

Link:
http://online.barrons.com/article/SB125731575786627535.html

Last week, Warren Buffett made one of the biggest bets on the US economy since the start of the recession. He put up $34 billion in cash and stock to buy the remaining 78% of Burlington Northern Railroad that Berkshire Hathaway didn’t already own. It seems like Buffett is making a huge gamble on the economic state of our country, but when one looks closer, it looks like Buffett is gambling on greater foreign growth.

With an extensive web of track across the United States, Burlington Northern looks like an indicator of the US economy. With Union Pacific as the only larger railroad in America, Burlington is the biggest transporter of food products and coal (it has enough of the energizing rock to generate 10% of the nation’s electricity).

But when Burlington Northern is looked at closer, it appears to be a better indicator of the global economy. With major ports on the west coast in both the US and Mexico, the railroad can transport goods to the west to be shipped to Asia. It is also convenient in bringing imported goods from China and other eastern countries to the central and eastern American territories.

In addition to this, the current of the US must be considered. With bankruptcies, foreclosures, and credit-card defaults at record highs, consumer spending has obviously plummeted. Why is Buffett supposedly making a move on these conditions at this specific time? As he gets even older, Buffett is going to look to put his billions to work. And one of the best places to start right now is with emerging global markets.