Warren Buffet is nobody’s fool when it comes to global business and investing. We should all heed his suggestion to invest in America’s Railroads and private companies designing, building and maintaining key national and regional infrastructure projects around the world. We won’t be able to buy BNSF shares for a short time since Berkshire Hathaway will own 100% of it, but within the next few years, there will be several new public stock offerings of BNSF stock so Mr. Buffet can recoups some of his original investment.
Americans can still purchase shares in the other 3 national railroad companies (NS, CSX & UP) and the 2 up in Canada (CN & CP) that also indirectly operate in the U.S. through subsidiaries. Furthermore, other excellent investment choices are the multinational companies such as Siemens, Alstom, and Bombardier, that build railways, roads, bridges, dams, energy plants and distribution grids, provide infrastructure and railroad rolling stock equipment, plus many other publicly-traded businesses that engaged in transportation consulting or provide rolling stock and rail maintenance services around the world.
Almost every state in the Union and most advanced and developing countries around the globe are putting together massive new railroad spending projects. Only complete ideological imbeciles such as Governor Jindal of Louisiana vetoed pursuing federal funds for new trains that his state legislature, transportation department and overall electorate wanted.
Mr. Buffet always prefers to put his money into companies that have simple business models, own valuable tangible assets and captive customers, generate tons of cash, and consistently show a net profit year after year. Mutual funds that invest in various multinational infrastructure construction and transportation service companies should do quite well for many years to come.
U.S. Freight railroads will do well in this new environment because they move big commodities such as grains and coal, plus many consumer goods in containers. The more energy efficient and customer-sensitive they become, will permit them to challenge trucks to move more time-sensitive business products door to door using captive trucking companies to do the first and last few miles of any journey. However, they will also reap the benefits of new commuter and intercity passenger trains they abandoned back in 1971.
The new bi-partisan emphasis in Washington to expand mass transit, Amtrak, and conventional passenger rail service will all benefit these existing railroads who own over 90% of the tracks and rights-of-way that must be improved through public funds. In order to make passenger train travel more competitive, they simply have to go faster as they do in Europe and Asia. Too many Amtrak trains average only 40 to 60 mph on most of its routes because of tracks built decades ago which were never upgraded to modern travel needs.
In most corridors between our major cities and within large metropolitan areas, this policy will mean improving and adding to existing tracks, installing advanced PTC signaling, and removing all road/rail grade crossings to permit 90 to 120 mph passenger service and concurrently freight train travel between 70 and 80 mph. The U.S. freight railroads will benefit directly from these policies because they will always own the tracks.
After large sums of public money are invested in these private sector owned and controlled infrastructures, commuter and intercity train operators will pay annual rental fees for the right to operate their trains over these improved rail lines to cover maintenance expenses and built-in profits for the owner railroads. Most of these user fees will continue to be paid from the public sector through operating subsidies.
This huge input of public funds into any private company’s major real estate assets, coupled with permanently higher rental charges from new tenants and users, would significantly improve the bottom line significantly. Even if the public purchases and owns these rights-of-way, the private freight railroads would reap huge profits from these asset sales, and they would still be able to profitably serve their freight customers by eliminating the heavy fixed costs associated with maintaining these massive infrastructures. No matter what, these infrastructure assets and the jobs operating passenger and freight trains cannot be outsourced. Talk about a win-win-win-win situation no matter what happens. As I said initially, Mr. Buffet is nobody’s fool.
After decades of complete neglect, the initial amounts allocated to mass transit and intercity passenger rail expansions and new rail starts is a modest $13 billion over the next 5 years. Considering the state of the current U.S. economy, and the strong interest of our wealthy investor class for a solid, long-term, profitable, publicly-subsidized cash cow, many more billions of dollars will be pushed into this sector within the next 5 to 10 years. This is an inevitability that any investor can bet on, and I’m sure Goldman Sachs and other major financial players are securing their positions in these areas as I write this post.
Local and State Governments will be issuing many tax-free bonds to leverage federal funds to make even greater infrastructure investments. Who do you think is going to market these bonds worldwide? Do I hear “Goldman Sachs” in the back of the room? They are not really doing “God’s Work” but simply working for our nation’s oligarchy and demigods – which is far more profitable. Right now, this new investment locomotive is just idling in the station but just wait a few years when it starts to barrel down the tracks at higher and higher speeds.
Congress will find the tens of billions of dollars needed through (1) the upcoming reauthorization of multi-year transportation legislation, (2) establishment of a National Infrastructure Bank, and (3) additional stimulus legislation as unemployment pushes higher and higher over the next 2 years. When it comes to helping Wall Street, the money is always found – even if – dammit – it also helps the American public. These rail lines run through the vast majority of congressional districts and are far more ubiquitous than our Military Bases or other Federal spending projects. Politicians love ribbon-cuttings and there are tons of opportunities here.
The pending environmental legislation may likely eliminate proposed cap and trade plans and collapse in favor of a few simple new regulations, laws, tax credits and incentives, plus fees and excise taxes to encourage conservation and developing renewable energy sources.
Energy and transportation legislation during the next few years will probably include raising oil import fees and the federal gasoline tax over several years from 18.3 cents per gallon to around 40 cents per gallon. All U.S. states and commonwealths will also increase their gasoline taxes over the next few years to maintain transportation spending. Every penny in the federal gas tax generates from $800 million to $1 billion annually for transportation projects. These taxes would provide more money into the federal highway and mass transit trust funds which have been depleted. It would also improve the likelihood that Americans actually change their car purchasing and driving habits permanently. Those changes would improve the American auto industry and create new jobs.
Unfortunately these rail projects will take anywhere from 2 to 10 years to complete, so they are not immediate solutions to current unemployment. However they are needed long-term investments that once the funding is in place, they will be impossible to change as are most military and public spending programs. Besides, when our country’s oligarchy wants something, they always get it from a very accommodating political class.
These infrastructure investments are fully defensible and meritorious because public funding on our transportation, energy and educational infrastructures benefits private business, investors and most every American. Additionally strong bi-partisan Congressional and Administration support merely reflects wide public support across all demographic and geographic areas. Those simpletons who decry such spending are in the distinct minority and will be ignored for the long-term benefit of the country.
This Wall Street Investor Class policy will have several major ancillary nationwide benefits for the vast majority of Americans.
(1) It will provide new jobs in construction, and ongoing maintenance and operations for millions of Americans.
(2) It will reduce our nation’s carbon footprint and reduce air pollution.
(3) Over the next 2 decades, it will stop suburban sprawl in favor of infilling the unused urban lands within our central cities.
(4) It will permit our airlines to concentrate on more profitable long-distance and international routes and encourage joint interchange with medium-distance rail lines to operate more efficiently.
(5) The increase in overall urban density will improve opportunities for small, local businesses that require a critical mass of people close by to succeed.
(6) It will noticeably reduce highway congestion nationwide by removing trucks and cars in favor of transporting more people and goods by rail.
(7) It will provide a large new and sustainable investment option that will not be another bubble but instead match the rail investments being made by all our global economic competitors.
So let’s all board this new investment train now waiting in the station. Mr. Buffet is already waving to us from inside a first class business compartment. When Wall Street and Main Street can both profit from an industry’s long-term success, individuals should be wise to re-align their personal investments accordingly.
Marc Pascal in Phoenix, AZ