Tuesday, November 3, 2009

An All-In Wager on the Economic Future of the United States

The title of this post comes from a statement by Warren Buffet, which he said this morning when commenting on his purchase of 100% of Burlington National Railroad (BNSF). Here's the whole quote:
"Berkshire's $34 billion investment in BNSF is a huge bet on that company... Most important of all, however, it's an all-in wager on the economic future of the United States... I love those bets."
Not only is Buffett buying the whole railroad, he is paying a 30% premium over yesterday's closing stock price. Mr. Buffett is many things, but one word rarely used to describe him is stupid. That said, he has certainly made mistakes in the past, and this purchase of BNSF might prove to be one of those mistakes. The bigger question is, is he wrong in betting on the economic future of the US? History suggests that betting against the US economy, or betting against Warren Buffett, is usually a suckers bet.