Good News for Transports: Well Played, Mr. Buffett

It is kind of crazy to think that someone would shell out billions in this environment to buy a railroad when loads are way down. This purchase also saved the transports index from a complete breakdown which would have, according to Dow Theorists, a broad decline in all of the markets. Whether or not this was a good move, I do not know since I do not follow the railroads, but I do know that it temporarily saved the transport index as it is up pretty big today.

If one wants to draw a conspiracy theory to all of this, they could very easily. After all, Mr. Buffet is very close to the Obama administration and he did invest heavily last year knowing things were very bad, worse than he let on. He also did this on the day that the transports were about to melt down as well, so, as I said, one could very easily draw conspiracy theories from this purchase. However, I believe the transports will still melt down, it will just take a bit longer than expected.

As for the ISM data yesterday, as David Rosenberg put it, you got 55.9 from all those regional readings. Right, that is believable. Rosenberg also called into question the GDP number as well, which I did tool, as we had a decrease in hours worked, but a 3.5% print. Well, with the government steroids, sure it is possible, but if you knock out government, forget it, as the historical average is -.5% GDP growth with that type of hours worked. However, that ISM number did scare this bull and I did knock out my January puts, at only a 205 profit, only to have a reversal in the market.

So, my point is: If this market was for real it would have rallied on yesterday’s huge ISM number and what happened? It fizzled out and almost posted a negative day - that should scare you if you are long. As for the rest of the week, the FOMC might change its language in its decision, but other than that don’t get too excited. The ADP number will give you insight into Friday’s number, but when Friday comes around, check out the BLS.gov’s birth/death model to see what voodoo they added to the number (I know the government never would stretch the truth or anything). Thursday, if we do not crack below that 500K initial claims, there is no recovery, sorry.

Again, nice play, Mr. Buffet.

Comments

[Tony Petroski]

The title is "Good News for Transports: Well played Mr. Buffett."

Then we have this:

"If one wants to draw a conspiracy theory to all of this, they could very easily. After all, Mr. Buffet is very close to the Obama administration and he did invest heavily last year knowing things were very bad, worse than he let on. He also did this on the day that the transports were about to melt down as well, so, as I said, one could very easily draw conspiracy theories from this purchase. However, I believe the transports will still melt down, it will just take a bit longer than expected."

Buffett isn't close to the Obama administration (he may think he is) and according to the article, Mr. Buffett has bought into a sector that is going to "melt down." Either he is wrong or you are Ray.

2009 Nov 03 11:46 AM

[ryanclarke]

If Buffett can hold onto the BNI purchase for 10 years AND no new CHEAP technology replacement for gasoline engines appears in this time frame ... Buffett and his heirs will own America. Just a hunch ... but to do the BNI deal I bet he decided to shake hands with GS and end his business relationship with the investment banking firm or a cordial basis.

2009 Nov 03 12:38 PM

[mrxg4]

"If one wants to draw a conspiracy theory to all of this, they could very easily. After all, Mr. Buffet is very close to the Obama administration and he did invest heavily last year knowing things were very bad, worse than he let on. He also did this on the day that the transports were about to melt down as well, so, as I said, one could very easily draw conspiracy theories from this purchase."

Also, in addition to what Tony P. said, if he were sure of the coming 'meltdown', why wouldn't he postpone his purchase for a few weeks and save tens of millions? The 'theory' that he's basing his purchase to save a potential breakdown of the transports is truly ridiculous. Buffett doesn't even believe in technicals...

2009 Nov 03 04:00 PM

[bob adamson]

The renewed interest in US railways suggests the following.

It might be worth your while to look seriously at the two major Canadian transcendental railroads: Canadian National Railway Company (CN) and the Canadian Pacific Railway Company (CPR). Both are among the largest railway companies in North America and benefit significantly from buoyancy the bulk shipping of agricultural and commodities. They are major holders of land and subsurface rights through Western Canada among other assets and should be seen as conglomerates as much as transportation giants.

The real point at present is that there are increased partnerships between US and Canadian railways and renewed interest in US railways should reflect favourable on CP and CN.

These companies are interlisted on both Canadian and US stock exchanges.

The foregoing isn’t necessarily a recommendation that you purchase shares in these companies, only that they are worth serious investigation on their own intrinsic merits, because of the inter-relationship each has with US counterparts and the US rail transportation system and because of the general prospects for rail transportation throughout North America.

2009 Nov 03 08:04 PM