There was an article in the LA Times this week saying that the Port of LA had its best month ever this spring. Long Beach did better too but not quite as good as LA. And a lot of that goes east on BNSF.
Jack
The Port of L.A. had its best month EVER? What gives?
That’s good news! [:)]
Here is a link to the Times article.
What is actually said was:
The Port of Los Angeles had its busiest June ever for cargo, surpassing the number of containers moved during the height of the global economic boom in 2006, and the neighboring Port of Long Beach also showed a strong increase in imports, port officials said Tuesday.
To address the premis of the Threads title: Warren Buffet seems to have the financial timing of a dancer. His group has historically been among the more profitable in the Market, based upon his guidance.
I’m sure he’s made some mistakes, but his ‘picks’ seem to continally make money for his group [Berkshire-Hathaway]. His purchase of BNSF seems to have hit all the pluses for him: price, value and timing. [2c]
Everyone please read the previously linked story in the Times, and note that poster’s emphasis on this being the strongest JUNE for these ports. The subhead and complete text of the Times story make it clear this localized spike in imports was due mainly to retailers stocking their shelves with the usual change-of-season merchandise, and that future box traffic through L.A./Long Beach is expected to be flat before hitting a likely drop-off later in the year.
There’s a Reuters report just out today which says “consumer sentiment weakened in early July to its lowest in 11 months on a resurgence in fears about the economy.” Those consumers are the ones who will or will not be buying that latest wave of imported merchandise. Not much more I can say about that.
But I will say that we need to keep a broader perspective as well as read between the lines when trying to analyze and make predictions on this stuff. One good month of container traffic, or witnessing a fleet of westbound baretables racing across the middle of the country (without knowing exactly where those baretables are ultimately headed, and why) may, or may not, be indicators of anything substantial coming our way.
That and if they can get the Longshoremen to settle the Strike out there. Last I heard they were still on the Pickets. Traffic is down on the Transcon I can see that for sure here has fallen Bigtime in the last few days still seeing the Domestic stuff but very few Imported cans right now.
There is a lot of smoke being blown these days to advance an agenda about all the wonderful new growth in the economy. That is why you hear stories saying that unemployment is up, but that is a good thing because it means that more people are entering the job market because of all the new jobs. It’s gibberish.
There is no accounting that would show people entering the job market and thus adding to the unemployment rolls. Yet I must have heard that report 100 times recently. The people behind this nonsense have a stake in whether or not the public believes the economy is good. That is why we are being told that it is good. It is spin.
Making money = buy low + sell high
As to the headline of this post, we are about 20 years too early to draw any conclusion.
Mac
Not necessarily, or at least, not the way Warren Buffett plays the game. When Warren buys into a company, he’s in it for the long term – he’d really rather not sell at all (which means means Buffett sells only if he messes up, which he occasionally does – look at his investment in USAir). Why should he buy and hold?? Long ago, Buffett figured out that when you sell at a price higher than you initially paid, you take a tax hit from your capital gain and have to relinquish a piece of that gain to the tax collector. This kills the return on his investment. Knowing this, he’d rather have have teeth pulled without novacaine than give up his hard-won capital to the feds. As long as he holds, and as long as his stake is rising (meaning as long as the underlying value, the net worth, of his investment is growing), his investment likewise grows in value – independent of, and unimpeded by, the tax collector. His Berkshire Hathaway will, of course, pay taxes on dividends (and interest) it receives from its investments, but one presumes that Buffett would prefer that the firms he owns pieces of, like Coca-Cola (instead of owning the the entire company, like GEICO or BNSF) pay minimal or, better yet, no dividends, so his Berkshire Hathaway won’t have fewer of no taxes to pay on dividends received. Dividends foregone – not paid out – also known as retained earnings (meaning retained cold cash) simply add the the value of BH’s holding.
For this investment strategy to work requires patience, the discipline to buy only when the price is right, and the prescient ability to choose the right company to buy into – buying a turkey outfit
Yep!
[quote user=“billio”]
[quote
In this assertion, I agree completely. Light yourself a big (preferably bootleg Cuban) cigar! – or at least a cheroot. For Buffett’s buy-and-hold strategy to work best, he needs 1) a good company/business, competently and honestly run; 2) the ability to pick the right firms to buy into; and, 3) the DISCIPLINE to lay off 'em until the price is right. In the case of BNSF, he appears to have done so.
Now only if you and I were smart enough to do likewise…
[tup]
And also 4) the discipline to “leave’ em alone” and let the company do its thing, as long as it continues to do so competently and profitably. Which BNSF / Matt Rose & Co. appear quite capable of and are in fact doing.
Speaking as a former very small BNSF shareholder, who was involuntarily cashed out by Mr. Buffett, who knew a good thing when he saw it . . . [sigh]
- Paul North.
Just a weird question from left field, What are the tax write offs one would get from a railroad investment. ie can you take tax losses from your railroad and apply them to places that are making lots and lots of money?
I’m not sure how to phrase this question.
Rgds IGN
Absolutely. Goes hand-in-hand with Number 1. Besides, the very last thing Warren Buffett wants (after he’s bought a company) is to get bogged down with day-to-day management. He’d much rather look for other bargains floating around in the marketplace.
Which is why the absolute last thing he cares about is what color BNSF’s locomotives are painted, or whether BNSF has, or should have, a steam locomotive program. In fact, maybe it it because BNSF&
BNSF as an organization has developed a very strong Intermodal service offering and suite of customers. By focusing on premium product, asset based COFC and TOFC service offerings they are in some ways better positioned to be a leader in this area. I think their success with this overall strategy is more important than the quarterly numbers at a single (but significant) US port.
Also keep in mind, Intermodal is traditionally a faster-growing, but lower profit margin product compared to other carload traffic on the system, so big intermodal gains do not necessarily translate into big profit gains.
As long as they are making money at it, I do not think Buffet really cares.
If you invest in a railroad (or any other enterprise), why do you think you you would be entitled to writeoffs? In the case of Buffett and BNSF, he has employed Berkshire Hathaway capital to buy BNSF outright – lock, stock and barrell. The underlying expectation is that the cash flows from BNSF, and its inherent rise in value as an ongoing business, will over the long run repay Berkshire’s investment at a rate exceeding the rate of inflation, thereby creating wealth.
Although it is a wholly-owned Berkshire Hathaway subsidiary, BNSF still has to account for its revenues and expenses, list its assest and liabilities just like its competitors, except that it accounts to Berkshire Hathaway management, not its shareholders. As a common carrier railroad, BNSF remains subject to the same rules and regs that apply to its publicly-owned Class I peers, with respect to accounting policies, the manner in which it invests and employs capital, labor relations, regulators, and the like. If BNSF requires capital, it must make its case to Berkshire Hathaway management in the same manner as it made its case to the lenders in the capital markets before Berkshire snapped it up.
The precise reason Buffett bought BNSF for Berkshire Hathaway is that it is, in his judgement, a money-maker, a winner, but not a loser. By definition, winners are not engin