Warren Buffet Completely Bets on Rail, and America

If not so much on rail, than on the American economy, the bet by Berkshire Hathaway (BRK.A) and Warren Buffet on Burlington Northern (BNI) buying the remaining 77% stake to take complete control over the railway company is a stern statement about the direction and prosperity of America. The $44Billion value of the deal including debt and previous investments makes it, for Berkshire, the biggest investment in the history of their business.

An efficient rail system, especially one built on high-speed rail transit, has been one focus of the current US Administration with plans calling for an $8Billion investment in rail as part of the Stimulus Package, with another $5Billion rail investment set aside in the budget for 2010. While President Barack Obama's plans call for efficiencies and high speed in the passenger rail business, the infrastructure work is sure to bode well for the transports and delivery businesses as well.

It is in this business that Mr. Buffet plans to play the recovery of American economics. Eventually as demand for good picks up with improving unemployment, the demand for transport of those various goods for manufacturing and sale will boost the prospects of companies like Burlington Northern.

Investors over the years have learned to trust the calculated wisdom of Mr. Buffet, and it generally isn't a good idea to bet against the man that's built one of the biggest fortunes of our time. As he's shown as recently as the financial crises (with an investment near the bottom in Goldman Sachs that's bore much applauded profits), the Oracle of Omaha isn't sitting on any of his laurel's. This investment is as much a bet on an American recovery in jobs and economic growth as it is about the prospects of the two hundred year old rail business.

Even if investor's aren't convinced rail is the future, the actions of one of America's wisest and most patient investing minds have to taken seriously.

Disclosure: Author holds no position in BRK.A nor BNI

That's why they call him the Oracle of Omaha...

Recommended Reading (Link): Interesting take from Bloomberg today on Berkshire Hathaway and its iconic Investment Mind Warren Buffett.

In short, in the midst of the financial crisis the "Oracle of Omaha" pledged support for Goldman Sachs in the form of a $5Billion investment of preferred shares and warrants to purchase $5Billion in Goldman common stock.

Mr. Buffett, for his company Berkshire Hathaway, has since made $2Billion in profits on paper on these warrants, since Goldman's earnings blowout and subsequent climb to the mid $160s. The warrants give Berkshire the opportunity to purchase Goldman shares at $115 anytime within 4 years. Not to mention the preferred shares are paying out $500Million in annual dividends.

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Disclosure: Author owns Goldman Sachs

Markets up Wednesday, Dow gains 99 led by General Motors

American Markets enjoyed another positive day with the Dow Jones finishing to the plus side by 99 points. The big push was provided by General Motors (GM) as it enjoyed a 9% gain. GM and the United Auto Workers Union reached a deal to renew auto worker contracts and restructure GM obligations to workers and the union. The threat of a long-term strike was lifted from the shoulders of GM and the stock jumped accordingly.

Also enjoying positive sentiment were the Investment Banks as Bear Stearns (BSC) jumped over 7% on reports that the big man himself, Warren Buffett is eyeing a stake in the company. These reports went on to say that several big banks are also interested in purchasing as much as 20% of the company. This news had investors feeling pretty good about the potential for these companies, specifically the investment banks, to overcome the losses and the mistakes that were made during the sub-prime credit situation.

In technology stocks, momentum for Research In Motion (RIMM) kept going strong as the company continues to defy gravity and bloated P/E valuations. The rule of 80-leads-to-100 was in full effect for the BlackBerry maker as it hit a high of $100.75 before settling to close at $99/share. Apple (AAPL) this morning opened to an all-time high and continued to $155 before drifting down and closing slightly lower just under $153. The recently opened Amazon (AMZN) DRM-Free MP3 store is making its rounds and while there hasn't been much of an effect on Apple's stock yet the consensus has been that this can emerge as a true competitor to iTunes.

With the quarter coming to a close investors will be keen to be placed in the right companies as the earnings season kicks into high gear.

Disclosure: Author is long AAPL