Streetwise Professor

September 13, 2012

A Better Brand of Billionaire?

Filed under: Economics,Energy,Politics,Regulation — The Professor @ 11:21 am

The FT reports a huge boom in rail in the Midcontinent, with oil shipments from the Bakken driving this growth.  And who is capturing the bulk of this traffic?

The exports have helped North Dakota become the second-biggest oil producing US state, behind only Texas. Customers of BNSF, the railway that handles 44 per cent of the region’s oil exports, have built terminals on its routes through the region capable of handling 1m barrels of oil a day.

. . . .

Mr Smith says BNSF should retain between 25 and 37 per cent of the Bakken Shale’s export market once pipelines arrive, and when the field is fully developed, that should provide more traffic than its current 44 per cent market share.

“As long as we can provide transportation services to markets that pay better than [the market served by] the pipeline, we’re going to maintain and retain our market share,” Mr Smith says.

And who owns BNSF?  Berkshire Hathaway, of course.

I’m sure that’s totally immaterial to the government’s failure to approve the building of the northern piece of the Keystone XL pipeline.

Speaking of Buffett, his most famous utterance is about derivatives being financial weapons of mass destruction.  That quote is recycled over and over and over again when anyone wants to warn about the dangers of derivatives.

But Buffett doesn’t take his own advice.  In 2007-well after his FWMD quote-Berkshire sold credit protection on municipal bonds.  $8.25 billion in notional, to be exact.  He exited that trade last month, but remember it whenever Buffett’s quote is used.  Also remember his big sale of S&P 500 put options right before the crisis.

It’s not as if I’m shocked that multi-billionaires are out to make money, and will use a variety of means (e.g., influencing government policy to benefit an investment from competition, taking risks that they damn in public-perhaps thereby scaring off competition, cornering markets) to make it.  Just saying don’t fall for the folksy shtick, and think that Buffett is a better brand of billionaire.

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3 Comments »

  1. Wow

    Comment by David Hoopes — September 14, 2012 @ 5:13 pm

  2. Buffet is a crony capitalist jerk! Why is he given the best deals while the taxpayer is ripped off? Boycott Berkshire Hathaway products!

    Comment by Bob — September 16, 2012 @ 7:42 am

  3. …and buy Koch Industry products. (at least for the time being).

    Comment by pahoben — September 17, 2012 @ 7:11 am

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