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TheFlyingDisk
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Berkshire Hathaway Buying Shares of US4

Mon Nov 14, 2016 11:53 pm

When Warren Buffett starts investing in AA, UA, DL & WN, what does it mean?

http://www.reuters.com/article/us-inves ... SKBN1392IS
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BobPatterson
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 12:09 am

It means that Berkshire Hathaway, and almost surely Mr. Buffett, thinks the big 4 airlines are good investments at this time. They do not invest for quick profits, but for long periods of growth. I'd guess it also means that they think the price of oil will remain moderate.
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atypical
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 12:15 am

This is from the man who said, "How do you become a millionaire? Make a billion dollars and then buy an airline."

It means he has Alzheimer's disease.
 
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NYCRuss
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 12:19 am

atypical wrote:
This is from the man who said, "How do you become a millionaire? Make a billion dollars and then buy an airline."

It means he has Alzheimer's disease.

Richard Branson said that.
 
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enilria
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 12:23 am

 
goboeing
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 12:42 am

enilria wrote:


I think the scene today vs. US Air in 1995 is not very similar.
 
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TheFlyingDisk
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 12:47 am

enilria wrote:


Well at least he managed to sell US shares at a "hefty gain".
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Erebus
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 12:55 am

Is he betting on the new administration curtailing the expansion of the ME3 and other threats to the US airlines like Norwegian into the US?
 
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Channex757
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 1:20 am

Buffett is presumably happy to buy in now as the shares look a good long term bet. The Chapter 11 and merger issues are starting to become ancient history with only some leftover labour negotiations to get through. The hardware side of it is all going well and the various chunks of unserviceable debt left behind.

The ME3 stuff is a tiny fraction of the business of the Big Three. They are valuable for their domestic and Pacific networks more than anything. Fltying domestic passengers in the USA is something no ME3 or European airline will ever get new rights to sell seats on.
 
Alias1024
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 1:23 am

If you think about it, the airline industry in the US has come to resemble the railroad industry here after all the consolidation of the last decade. When it comes to freight hauling railroads you have four big players (Union Pacific, BNSF, CSX, and Norfolk Southern) with some smaller players in geographical niches. The industry has become much more stable and investable, and the roads can now earn reasonable returns for shareholders. Well, the passenger airline business is looking similar with four big players (AA, DL, UA, WN) and niche players (B6, AS, NK, F9). The question is whether this stable situation will hold. It isn't easy to move rail lines around to meet changing demand and competition, but an airplane doesn't have to fly between the same two cities. That means lower barriers of entry into new markets and makes the competition much more fast moving.

Of course, it isn't clear whether this was Buffett and/or Munger pick, or if this investment was made by one of the two newer portfolio managers at Berkshire. For all we know airlines could still be on Buffett and Munger's 'Too Hard' pile.
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 1:53 am

Well, it certainly DOESN'T mean that he is bullish on the ULCC's. At least from my perspective.
-Dave


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G500
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 2:03 am

about 10 years ago Mr. Buffett said "The airlines haven't made a profit since the wright brother's first flight"

I guess he is changing his tune

This is great great news for the airline industry. They're getting his stamp of approval. In business, it means A LOT
 
Varsity1
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 2:20 am

He is getting old and senile.
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 2:37 am

NYCRuss wrote:
atypical wrote:
This is from the man who said, "How do you become a millionaire? Make a billion dollars and then buy an airline."

It means he has Alzheimer's disease.

Richard Branson said that.


Unless you have a source superior to The Economist I'm sticking with Buffet.
 
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enilria
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 2:52 am

goboeing wrote:
enilria wrote:


I think the scene today vs. US Air in 1995 is not very similar.

No, it's similar. Buy high, sell low. Airlines have much higher profit margins than is historical right now. That's the definition of buying high. Does he think oil is going to $10?
Erebus wrote:
Is he betting on the new administration curtailing the expansion of the ME3 and other threats to the US airlines like Norwegian into the US?
Channex757 wrote:
The ME3 stuff is a tiny fraction of the business of the Big Three. They are valuable for their domestic and Pacific networks more than anything. Fltying domestic passengers in the USA is something no ME3 or European airline will ever get new rights to sell seats on.

If that's his strategy it's a bad one. The only thing the ME3 impact are their own countries and India. Even if the ME3 were somehow stopped from expanding or shrunk, the Indian carriers would just be next to trash it. Also, India-USA is not big enough to impact airline profits significantly.
 
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enilria
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 2:55 am

atypical wrote:
NYCRuss wrote:
atypical wrote:
This is from the man who said, "How do you become a millionaire? Make a billion dollars and then buy an airline."

It means he has Alzheimer's disease.

Richard Branson said that.


Unless you have a source superior to The Economist I'm sticking with Buffet.

In every other area I would defer to his track record, but even I knew USAir was a bad bet. Southwest is certainly a questionable bet with all their headwinds. The rest are tied to fuel, really. Oil goes up to $80 and he gets wiped out. Very risky bet. Perhaps it is a hedge to his rail strategy. Rail gains from high oil (they transport the oil) and airlines lose.
 
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Erebus
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 3:19 am

PlanesNTrains wrote:
Well, it certainly DOESN'T mean that he is bullish on the ULCC's. At least from my perspective.


One of the reasons to invest in "full service" carriers over ULCCs is if you expect the "full service" travel market to grow as a consequence of an improving economy giving people/businesses more disposable income.
 
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 3:34 am

Varsity1 wrote:
He is getting old and senile.

I'll stick with Buffett. Pretty hard to beat the S&P 500 on the kind of run he's had. Look at the right two columns of the first page of this letter:

http://www.berkshirehathaway.com/letters/2015ltr.pdf

He doesn't win them all, but he's pretty damn good.
 
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 3:44 am

Buffet is a lot smarter than me, but airline profitability could easily go wayyy deep into an extraordinarily deep toilet.
 
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 3:57 am

enilria wrote:
goboeing wrote:
enilria wrote:


I think the scene today vs. US Air in 1995 is not very similar.


To ignore the industry consolidation after the wave of bankruptcy reorganizations is simply ignorant.

The fact that Buffett is investing in these four airlines indicates that his organization believes there has been a change in the industry at a very fundamental level.

Again -- comparing present day DL, UA, WN, and AA to the US Air of 1995 is absurd.
Last edited by goboeing on Tue Nov 15, 2016 3:58 am, edited 1 time in total.
 
dc10lover
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 3:58 am

Buffet is also known to do "insider trading". Surprise he didn't buy into Alaska Airlines.
Why endure the nightmare and congestion of LAX when BUR, LGB, ONT & SNA is so much easier to fly in and out of. Same with OAK & SJC when it comes to SFO.
 
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 4:09 am

goboeing wrote:
To ignore the industry consolidation after the wave of bankruptcy reorganizations is simply ignorant.

enilria wrote:
Oil goes up to $80 and he gets wiped out.

Consolidation or no consolidation he can't control oil. As I said, if anything this is an oil hedge bet on his rail empire...and probably a small hedge bet relative to the oil investment. You don't always buy expecting to win. Sometimes you just need to balance your portfolio. If oil doesn't go down from here he will make nothing.

Airlines are also a Leading Cyclical which means if the economy goes down the airlines go down first, the reverse is also true. He was a Hillary backer so that implies he has little faith in a Trump economy. That pushes further toward this being a hedge bet. Perhaps the market reversal from election night led him to believe he needed a hedge.
 
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 4:10 am

enilria wrote:
Rail gains from high oil (they transport the oil) and airlines lose.


I love the stuff you can read on this board.

The fact is that most oil is transported by pipeline. The amount of oil transported by rail is insignificant and the effect of oil price on rail gains/losses is also insignificant. The effect of overall energy prices on rail is very significant, but it is because of coal, not oil.
 
Planeflyer
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 4:25 am

As I have said on several threads over the past 2.5 years oil will trade between 30-60$ for the next 20 years.With his exposure to the frackers I'm guessing he knew this as well so it could be he is just bullish on the US economy and what this means for US4.
 
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 5:14 am

Planeflyer wrote:
As I have said on several threads over the past 2.5 years oil will trade between 30-60$ for the next 20 years.With his exposure to the frackers I'm guessing he knew this as well so it could be he is just bullish on the US economy and what this means for US4.

If Oil stays low long term then someone will bite on much lower fares and everyone will be forced to match.
 
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 5:21 am

dc10lover wrote:
Buffet is also known to do "insider trading". Surprise he didn't buy into Alaska Airlines.


Hardly. David Sokol was accused of this and eventually resigned from Berkshire. Buffett's known to be a highly ethical investor. In fact he was brought in to turn around Solomon Brothers after a series of ethics issues.
 
StrandedAtMKG
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 5:26 am

Varsity1 wrote:
He is getting old and senile.



The greatest investor in the history of the world makes a move a few people on A.net don't agree with and they immediately rush to call him "old and senile" and Internet-diagnose him with Alzheimer's. Stay classy, A.net.
 
stlgph
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 7:55 am

If Buffett is investing, some of the rules are simple
1) He believes in the management of the company and long term stability with key members of the management team being around for several years to come.
2) He believes in the long term product of the company ... i.e., will there be a need for their product in 30 years?
3) Berkshire generally goes long in their investments, so they're pretty much looking to see good dividends for years to come or they look at a down-the-road sell for a nice profit of course. Or, in a few years they may see the company is in a good position and may choose to increase their holdings.
4) It's a good portfolio mix to offer up to Berkshire clients and it's a good play along other companies in their investment portfolios.

With Buffett & Berkshire, it's that simple when it's broken down.
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 12:51 pm

atypical wrote:
NYCRuss wrote:
atypical wrote:
This is from the man who said, "How do you become a millionaire? Make a billion dollars and then buy an airline."

It means he has Alzheimer's disease.

Richard Branson said that.


Unless you have a source superior to The Economist I'm sticking with Buffet.

You, sir, are correct! Branson said something similar. What you posted was indeed from Buffett.
 
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SomebodyInTLS
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 2:35 pm

NYCRuss wrote:
atypical wrote:
NYCRuss wrote:
Richard Branson said that.


Unless you have a source superior to The Economist I'm sticking with Buffet.

You, sir, are correct! Branson said something similar. What you posted was indeed from Buffett.


Nope!

I have here a link to a Buffet-watching website quoting Branson in 2007!

http://intelligentinvestorclub.com/berk ... illionaire

Branson is the reference for the quote as early as 2001...

https://en.wikiquote.org/wiki/Richard_Branson

Personally, I always thought Branson was himself paraphrasing Howard Hughes, but I couldn't find anything on that just now.
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Alias1024
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 3:24 pm

enilria wrote:
Airlines are also a Leading Cyclical which means if the economy goes down the airlines go down first, the reverse is also true. He was a Hillary backer so that implies he has little faith in a Trump economy. That pushes further toward this being a hedge bet. Perhaps the market reversal from election night led him to believe he needed a hedge.


The regulatory filing revealing the positions was for the period ended September 30. These purchases were made before the election. Besides, the combined purchases are roughly 1% of Berkshire's publicly traded portfolio. It isn't much of a hedge when it is that small a position.
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frmrCapCadet
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 3:41 pm

There has been a profound change in investment strategy over the last 10 years. What happened in Japan seems to be moving to the rest of the major economies including our own. Low interest rates, and even lower inflation than most central bank goals persist. Stocks are stronger as investments, but no where as near as strong as in the past. My very well managed pension fund is not confident that stock gains of the past are likely in the future. Hence the once automatic raises from time to time have disappeared. The goal is to be 120% funded for the next several years. All of the large economies are stalled, and reasons for it are poorly understood. The WSJ had a good article on interest rates and the trauma they have created in very large pension funds.

Warren's purchases are interesting. Somewhat equal amounts in the four dominant airlines. He is not betting that one is going to do all that much better than the others. His fund is very large now, and the 'laws of growth' make big gains more difficult. It could be that prudent investing in our immense economy dictates some presence in the airline sector. He does have a huge cache of cash, and it is not earning all that much in interest. (see previous paragraph)

I wonder if I will have to change my 'signature'? LOL
Buffet: the airline business...has eaten up capital...like..no other (business)
 
Jano
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 3:59 pm

I think these purchases were done by either Combs and/or Weschler. These were rather small targets. As such, they would not be worth to point the elephant gun at.
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Varsity1
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 4:10 pm

Airlines are in the commodity air travel business. Always will be. No structural advantages.
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enilria
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 5:07 pm

IPFreely wrote:
enilria wrote:
Rail gains from high oil (they transport the oil) and airlines lose.

I love the stuff you can read on this board.

The fact is that most oil is transported by pipeline. The amount of oil transported by rail is insignificant and the effect of oil price on rail gains/losses is also insignificant. The effect of overall energy prices on rail is very significant, but it is because of coal, not oil.

I thought people would know I was talking about Bakken oil (which has no high volume pipeline thanks to the Keystone debacle), but I guess I should never expect that on this board. I will fill in the blanks for those who have not paid attention to the changes in oil prices over the last few years.

Bakken oil production is vastly down right now because global oil prices have gone down and Bakken oil is a high cost production site. It is high cost because of the production method and also because the lack of a high volume pipeline makes transportation expensive (how Buffet/BNSF makes money). Since rail is the primary transportation option for Bakken oil, the decline in this business has hurt BNSF. The decline in oil also impacts the cost of other forms of energy negatively and has also hurt coal which is also a mainstay of BNSF revenue. Buffet owns BNSF.
http://www.marketwatch.com/story/berksh ... 2016-05-06
http://bakken.com/news/id/250617/csx-pr ... d-in-2016/
http://www.salon.com/2014/06/29/the_inf ... g_partner/
If oil goes down BNSF profits weaken, but airlines make more. If oil goes up more bakken oil and coal is produced and BNSF makes more money. Airlines make less. They hedge each other.
Alias1024 wrote:
It isn't much of a hedge when it is that small a position.

You could also make the argument that the entire investment is fairly insignificant.
 
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 5:57 pm

enilria wrote:
Perhaps the market reversal from election night led him to believe he needed a hedge.


The investment in the Big 3 was made prior to September 30, the investment in Southwest somewhat later. This was not a reaction to the election results, although I suspect Mr. Buffett expected Clinton would win ( as did I ).
Facts are fragile things. Treat them with care. Sources are important. Alternative facts do not exist.
 
luftaom
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 6:16 pm

Steady on. Bakken oil wasn't mentioned or alluded to before your last post. It's entirely uncontroversial that the overwhelming majority of the world's petroleum products (oil, gas and refined products) are transported over land by pipeline (and not rail).

At any rate, even at >$70/barrel was Bakken oil transportation a significant percentage of BNCF's volume?
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enilria
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 6:19 pm

BobPatterson wrote:
enilria wrote:
Perhaps the market reversal from election night led him to believe he needed a hedge.


The investment in the Big 3 was made prior to September 30, the investment in Southwest somewhat later. This was not a reaction to the election results, although I suspect Mr. Buffett expected Clinton would win ( as did I ).

He was an overt Clinton backer.

luftaom wrote:
Steady on. Bakken oil wasn't mentioned or alluded to before your last post. It's entirely uncontroversial that the overwhelming majority of the world's petroleum products (oil, gas and refined products) are transported over land by pipeline (and not rail).

At any rate, even at >$70/barrel was Bakken oil transportation a significant percentage of BNCF's volume?

Did you read the links I already posted? Profits down 25% on energy transportation weakness.

The concerns have been greatest across the Great Plains and the Upper Midwest, where BNSF is among the dominant rail players and has been the biggest beneficiary of a boom in shipping a high-value commodity - crude oil - from the Bakken oil patch of North Dakota and Montana.
http://www.reuters.com/article/bnsf-rai ... Y020140505
 
goboeing
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 6:43 pm

Gordon Bethune: I've never seen it this good

http://video.cnbc.com/gallery/?video=3000568243
 
luftaom
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 7:08 pm

Yes I did - which is kind of why I'm very confused about where you are coming from. Your article says 'BNSF said crude still represents just 4 percent of its total traffic'.
airliners.net's passenger - simultaneously connecting and flying direct.
 
IPFreely
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 7:14 pm

luftaom wrote:
It's entirely uncontroversial that the overwhelming majority of the world's petroleum products (oil, gas and refined products) are transported over land by pipeline (and not rail).


It's not controversial at all. It's just a fact. But facts don't stop conspiracy theorists from doing what they do best!
 
IPFreely
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 7:20 pm

luftaom wrote:
Yes I did - which is kind of why I'm very confused about where you are coming from. Your article says 'BNSF said crude still represents just 4 percent of its total traffic'.


It stated profits were down based on energy sector weakness. For rail transportation the energy sector means coal, not oil. Maybe 96% coal and 4% oil if someone wants to nitpick. But 4% is insignificant.
 
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BobPatterson
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 8:19 pm

IPFreely wrote:
luftaom wrote:
Yes I did - which is kind of why I'm very confused about where you are coming from. Your article says 'BNSF said crude still represents just 4 percent of its total traffic'.


It stated profits were down based on energy sector weakness. For rail transportation the energy sector means coal, not oil. Maybe 96% coal and 4% oil if someone wants to nitpick. But 4% is insignificant.


Please cite and give link(s) to sources supporting your stated 96%-4% split.

If BNSF says 4% of total traffic is crude oil (I haven't seen that figure published, don't know if it means carloadings or revenues), it represents a much larger percentage of BNSF's total energy-related traffic. Coal transportation in 2015 contributed nearly 22% to BNSF revenues.

http://marketrealist.com/2016/08/bnsfs- ... y-volumes/

Using the 22:4 ratio between coal:oil, oil is to BNSF about 18% of energy-related traffic/volume, not insignificant.

Looked at another way, BNSF handled approximately 75% of rail shipments from the Bakken field where 70% of all oil shipments travelled by rail. Important business for BNSF.
Facts are fragile things. Treat them with care. Sources are important. Alternative facts do not exist.
 
luftaom
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 8:40 pm

Regardless of the oil/coal split, I don't (for a number of reasons) agree that:

(a) Rail gains from high oil (they transport the oil); or
(b) Berkshire's airline investment is a hedge against the BNCF investment.
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enilria
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 8:45 pm

IPFreely wrote:
luftaom wrote:
It's entirely uncontroversial that the overwhelming majority of the world's petroleum products (oil, gas and refined products) are transported over land by pipeline (and not rail).

It's not controversial at all. It's just a fact. But facts don't stop conspiracy theorists from doing what they do best!

But it has nothing to do with Warren Buffet and that is the topic of this thread. Trains carry where oil where there are no pipelines or the pipelines are at capacity. Delta is even using trains to supply Bakken oil to its Trainer facility across the country. http://www.bloomberg.com/news/articles/ ... a-refinery

That's great that oil pipelines carry lots of oil. I'll file that under fun fact.
 
cloud4000
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 8:45 pm

Let's see...Buffett says he's buying airlines...market reacts...buys airlines too...share price goes up...making Buffett millions and be called a genius. Lesson here: Be like Buffett.
Boston, USA
 
spyglass
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Re: Berkshire Hathaway Buying Shares of US4

Tue Nov 15, 2016 10:03 pm

Well, Bob Crandall, who likely forgot more about the airline business than most folks will ever know, repeatedly told us that airlines, while a great, fun place to work, were a lousy investment, and repeatedly advised us against stock purchases in them (even tho we had a great employee purchase plan). That seems still valid, given that there are so many factors which the industry has little or no control over that can rapidly, and adversely, affect revenues.

As regards RR profits, judging from all the trains I see passing thru my town (both BNSF & UP), it seems the biggest generator of $ for the RR's is intermodal transport....still some oil trains, auto carriers, grain haulers, but fewer coal carriers, due in large part to many of the utilities converting or phasing out the coal-fired generating plants. Wind, solar & natural gas (atom pwr on hold for now, I guess). Makes the EPA and the globular warmification crowd happy....
I remember when......a plane trip was a big deal.
 
PlanesNTrains
Posts: 9526
Joined: Tue Feb 01, 2005 4:19 pm

Re: Berkshire Hathaway Buying Shares of US4

Wed Nov 16, 2016 3:34 am

spyglass wrote:
Well, Bob Crandall, who likely forgot more about the airline business than most folks will ever know, repeatedly told us that airlines, while a great, fun place to work, were a lousy investment, and repeatedly advised us against stock purchases in them (even tho we had a great employee purchase plan). That seems still valid, given that there are so many factors which the industry has little or no control over that can rapidly, and adversely, affect revenues.

As regards RR profits, judging from all the trains I see passing thru my town (both BNSF & UP), it seems the biggest generator of $ for the RR's is intermodal transport....still some oil trains, auto carriers, grain haulers, but fewer coal carriers, due in large part to many of the utilities converting or phasing out the coal-fired generating plants. Wind, solar & natural gas (atom pwr on hold for now, I guess). Makes the EPA and the globular warmification crowd happy....


Despite the downturn in oil and coal in recent years, BNSF is at near-meltdown mode along the northern transcon at times of late. Grain is moving in unbelievable quantities, coal is still moving good, and I think oil is rebounding a bit. Regardless, there is so much traffic that I doubt the drop in oil - in and of itself - is a huge issue.
-Dave


MAX’d out on MAX threads. If you are starting a thread, and it’s about the MAX - stop. There’s already a thread that covers it.
 
tjh8402
Posts: 957
Joined: Sat Jan 12, 2013 4:20 am

Re: Berkshire Hathaway Buying Shares of US4

Wed Nov 16, 2016 2:54 pm

enilria wrote:
IPFreely wrote:
luftaom wrote:
It's entirely uncontroversial that the overwhelming majority of the world's petroleum products (oil, gas and refined products) are transported over land by pipeline (and not rail).

It's not controversial at all. It's just a fact. But facts don't stop conspiracy theorists from doing what they do best!

But it has nothing to do with Warren Buffet and that is the topic of this thread. Trains carry where oil where there are no pipelines or the pipelines are at capacity. Delta is even using trains to supply Bakken oil to its Trainer facility across the country. http://www.bloomberg.com/news/articles/ ... a-refinery

That's great that oil pipelines carry lots of oil. I'll file that under fun fact.


Rail does benefit from high oil prices, but not necessarily because it ships more oil. Because their fuel consumption is so low relative to other modes of transportation, rail benefits because their costs don't rise as quickly as others do in response to increasing oil prices. Rising oil prices prompts rails competitors to raise their prices whereas rail can remain about the same. When oil prices are low, its harder for rail to offer significant cost savings vs other means of transport and be competitive. I don't know about western railroads like BNSF that Buffet owns, but I know eastern railroads like NS and CSX have been hurt by cuts in coal traffic.

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