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  Buffett the Betting Man
Reported by The Big Money on Wednesday, 4 November 2009 (on November 4, 2009)
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Evidently, Warren Buffett is a betting man. And a big one at that. The Wall Street Journal and The New York Times strike nearly identical headlines this morning in describing Buffett's surprising $26.3 billion acquisition of Burlington Northern Santa Fe Corp, both declaring "Buffett bets big" on, of all things, freight trains. The NYT notes the investment seems more 19th Century than 21st Century, but this is not just the move of a wealthy old man who likes to play with trains. "Mr. Buffett is wagering that as the economy revives, so will the demand for goods to be shipped by train. Burlington Northern carries coal and timber from the West, grain from the Midwest and imports arriving directly from Mexico and Canada, as well as through California ports," the newspaper writes. The move, the WSJ notes, completely transforms Berkshire Hathaway "into a megaoperator of industrial firms, moving the Omaha, Neb., conglomerate further from its roots as a nimble investment outfit." The thinking is that high fuel costs are here to stay and therefore freight trains will be a more efficient way to move goods around the country than trucks.
The world demand for oil, however, has never been so uncertain. According to the WSJ, the world may be on the cusp of shaking off a global recession, but that's not having the expected lift for oil demand. The newspaper writes, citing sources, that "the International Energy Agency next week will make a "substantial" downward revision to its long-term forecast for global oil demand... marking the second year running the group has slashed its view of the world's thirst for oil."
General Motors stunned the automotive world yesterday with news that no, it will not be selling its European division, Opel. "The decision was a blow to the Canadian auto supplier Magna, which was poised to acquire a 55 percent stake in Opel with the backing of the German government and labor unions," The NYT writes. Instead, the new GM board decided it would keep Opel and pour billions into restructuring the unit, which includes British automaker Vauxhall. "GM's change of heart reflects the car maker's increasing confidence about its outlook as well as the direction of its aggressive new chairman, Edward E. Whitacre Jr. The former AT&T Corp. chief, who was picked by the U.S. government for his post, has told GM executives to concentrate on expanding its market, not shrinking it," the WSJ writes. Don't feel so bad for Magna though. In a separate article, the WSJ reports that "being dumped by GM is a blessing." Turning around Opel would be costly and time-consuming for Magna, the newspaper notes. Across town, Chrysler's new turnaround maestro, Sergio Marchionne, the CEO of Fiat, will unveil his plan to restore Chrysler's business later today. How can Marchionne save Chrysler, which has seen U.S. auto sales drop by 40 percent in the past year? With Fiats, writes BusinessWeek. "Marchionne will lay out his plan, which, according to industry insiders, involves plugging Chrysler's product holes with Fiat-engineered cars."
Retail bounced back in October as sales figures show "robust sales growth for the first time in more than a year," the NYT writes. Sales for women's apparel have increased for the first time since August 2008 and across-sector sales in California also appear to be stabilizing. Overall, Thomson Reuters, "which aggregates analysts' estimates for 30 companies, predicts a 2% increase," writes the WSJ. Of course this good news is only relative to how badly things had become during the last 12 months but still, as the NYT writes: "Contrary to predictions made only a few weeks ago, the nation’s stores could be poised for a merrier Christmas this year than last."
China is in on a tear with its economy now expected to grow 8.4 percent this year, according to the World Bank’s latest projection, the NYT writes. The Bank raised its forecast for growth in China, "though it cautioned that more policy adjustments would be necessary in the medium term to ensure the country’s recovery would be sustained." But the World Bank also worries that a new Asian economic bubble be on the rise, asks the WSJ. The sudden injection of billions of dollars in investment capital in the region is "raising concerns about asset price bubbles" in equity markets China, Hong Kong, Singapore and Vietnam's real estate markets, the Bank said.
And finally, consider the rotten job the poor human resources manager has these days. Whenever they post a "help wanted" ad, they get inundated with résumés and cover letters, most of them unqualified. CNNMoney.com reports that there are quality job positions that continue to go unfilled despite the highest unemployment rate in generations. The reason? Not enough qualified candidates. CNNMoney.com cites a recent survey by Human Capital Institute and TheLadders. It concluded: "more than half of employers said "quality of candidates" or "availability of candidates" are their greatest challenges -- despite the recession."
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