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  • Graham and ...: 
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  • R.W. Wentworth & Co.
  It's been a century since Daniel Drew and JJ Hill tried to corner the railroads. With that century time horizon, Buffett knows what he is doing.

  Nov 13 05:26 PM | Link | Reply
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  • H.J. Huneycutt: 
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  • The Upward Society: Laying the Foundations for a Post-Oil Age Economy
  This sort of disproves the coal theory being thrown around. This is a bet that the trucking industry dies --- pure and simple. And Buffett is right --- they will.
  
  Why, you ask?
  
  (1) Rising oil prices resulting from increasing scarcity and higher costs of extraction
  
  (2) The American states and Federal government heavily subsidize the American road system --- neither is going to be able to do so and stay solvent in the future like they have in the past; there will be more tolls and charges for usage
  
  (3) Highway congestion is already costing trucking companies opportunity costs and it's a catch-22; either the road system stays nightmarish or it gets more expensive. The highway building machine that America has become will be all but dead within two decades
  
  (4) Political pressure for more environmentally friendly alternatives to oil will increase over time --- rail is the cleanest transportation we have right now
  
  All in all, I wouldn't be betting on the trucking industry either. Rail was the past and rail is the future.

  Nov 13 06:49 PM | Link | Reply
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  • Cincinnatus: 
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  Could you explain how the federal road system (or state highways) are heavily subsidized? I see this often claimed but never defended. In fact just the opposite is true - our roads are one of the few areas where user fees/user pays is actually applied. The federal highway trust fund has been raided constantly for mass transit and deficit reduction. I understand it's nearly depleted now, but would not be if it had not been raided for the last 20 years for other purposes. Likewise my state (Oregon) raids the state highway fund (fuel taxes) constantly for light rail, bus lanes, bike lanes, etc.. The problem is in fact just the opposite, decreasing fuel-use per capita is starving the very projects (like rail) that rely on subsidies by fuel taxes that should have always gone to roads.

  Nov 13 07:34 PM | Link | Reply
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  • H.J. Huneycutt: 
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  • The Upward Society: Laying the Foundations for a Post-Oil Age Economy
  Cincinnatus,
  
  The Highway Trust Fund is dramatically underfunded. Since legislators have refused to take the politically unpopular step of raising gasoline taxes over the past two decades, instead, they've begun using general taxes to subsidize the system. We are now at a point where only 70% of the system is funded from gasoline taxes (90% on the Federal level, but only 60% on the state level).
  
  It's a extremely mistaken viewpoint that public transit "steals" money from the highways. In actuality, public transit struggles becoming viable precisely because policymakers' misguided obsession with the highway system.
  
  The thing about highways is that they have no real self-funding mechanism other than (static) gasoline taxes. Whereas, public transit agencies are required to charge usage fees that help pay for maintenance and development.
  
  On top of this, states have (particularly in the past) had a tendency to tax the living h@!$ out of the railways. So you had a situation where the trucking industry was being massively subsidized, while rail was being forced to pay overwhelming taxes in order to compete. It was the ultimate distortion. Taxes on railroads have moderated some since then, but there are still heavy distortions created by Federal and state subsidies for the highway system (from general taxes).
  
  Our entire transportation system is greatly affected by these cost distortions because, for years, rail
  
  
  On Nov 13 07:34 PM Cincinnatus wrote:
  
  > Could you explain how the federal road system (or state highways)
  > are heavily subsidized? I see this often claimed but never defended.
  > In fact just the opposite is true - our roads are one of the few
  > areas where user fees/user pays is actually applied. The federal
  > highway trust fund has been raided constantly for mass transit and
  > deficit reduction. I understand it's nearly depleted now, but would
  > not be if it had not been raided for the last 20 years for other
  > purposes. Likewise my state (Oregon) raids the state highway fund
  > (fuel taxes) constantly for light rail, bus lanes, bike lanes, etc..
  > The problem is in fact just the opposite, decreasing fuel-use per
  > capita is starving the very projects (like rail) that rely on subsidies
  > by fuel taxes that should have always gone to roads.

  Nov 14 02:42 PM | Link | Reply