It was almost exactly one year ago, on August 14, 2011, that the New York Times published an opinion piece by Warren Buffett.
The title of the article, as you may recall, was “Stop Coddling the Super-Rich.”
(It should be noted that Buffett himself is one of the richest men in the world.)
His argument was simple: The government needs more money; the super-rich (those making over a million dollars per year) do not. Therefore, increase taxes on those Americans making $1 million in income per year, and raise them even higher for those making $10 million per year.
Uncle Warren ended his editorial tugging at the heartstrings:
My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.
Dickens couldn’t have evoked the emotions better.
And apparently it worked…
Uncle Warren's words reached the highest level of the federal government: the White House.
Eight days after the piece ran, President Obama placed a call to Uncle Warren during which the two discussed the economy, taxes, and how to spur growth and create jobs.
Just three weeks later, Obama announced his “Buffett Rule.”
The Buffett Rule is a tax plan that would apply a minimum tax rate of 30% on individuals making more than a million dollars a year.
Of course, Buffett fully endorsed the proposal. He probably wrote it himself.
And of course the Democrats were in full rally mode...
I mean, having the world’s richest man support Obama’s tax increase plan is a slam dunk, right?
Well, not so fast. Check this out...
Four months after Obama announced the “Buffett Rule,” he killed the proposal for building the Keystone XL Pipeline that would carry oil from the Canadian oilsands through Montana, South Dakota, Nebraska, Kansas, Oklahoma, and Texas.
The key state was Nebraska.
The original proposed plan was for the Keystone XL to be built over the Ogallala Aquifer.
Nebraskans — with the support of Uncle Warren — protested the construction of the pipeline, citing concerns that an oil spill would seep into the major freshwater source.
This raised eyebrows among the skeptical. Because with the hope of transporting Bakken oil through the Keystone Pipeline now dashed, oil producers in North Dakota would now be forced to transport most of their oil by rail...
Buffett happens to be the largest owner of railroads in America, owning all of Burlington Northern Santa Fe.
The typically excellent investigative reporting by the financial blog ZeroHedge was quick to pounce on the news:
Just when one thinks American crony capitalism couldn't hit new lows, here comes Warren Buffett and his personal puppet, the president, proving everyone wrong once more. Because if one thinks there is no (s)quid pro quo for all that "sage" advice that Buffett has been giving to Obama on extracting as much wealth as possible from future wealthy Americans (before they decide they have had enough with this crony shit and leave the country for good), one would be fatally wrong.
As it turns out, it is not just natural resources and aquifer purity that Obama had in mind when sealing the fate of the Keystone XL Pipeline. No — it appears there were far more relevant numerical metrics that determined Obama's decisions.
Such as the bottom line number of Buffett's Burlington Northern, which according to Bloomberg, is among U.S. and Canadian railroads that stand to benefit from the Obama administration’s decision to reject TransCanada Corp.’s Keystone XL oil pipeline permit. '“Whatever people bring to us, we’re ready to haul,” Krista York-Wooley, a spokeswoman for Burlington Northern, a unit of Buffett’s Omaha, Nebraska-based Berkshire Hathaway Inc. (BRK/A), said in an interview. If Keystone XL “doesn’t happen, we’re here to haul."
And haul they have.
According to a Bloomberg report last week:
The amount of crude oil and petroleum products transported by U.S. railways during the first half of 2012 increased 38% from the same period in 2011, according to industry data.
The number of rail tanker cars hauling crude oil and petroleum products totaled close to 241,000 during January-June 2012 compared to 174,000 over the same period in 2011, according to the Association of American Railroads (AAR). Rail deliveries of crude oil and petroleum products in June alone jumped 51% to 42,000 tanker cars from a year earlier to an average weekly record high of 10,500 tanker cars for the month.
One rail tanker car holds about 700 barrels. This would be equivalent to about 927,000 barrels per day (bbl/d) of oil and petroleum products shipped, on average, during the first half of 2012 versus 673,000 bbl/d in the same period in 2011, and June 2012 shipments were almost 980,000 bbl/d.
Burlington National is the biggest railway mover of U.S. crude, transporting one-third of Bakken oil production alone with unit trains carrying up to 85,000 barrels of oil. The company's carloadings of crude oil and petroleum products increased 60% during the first six months of 2012.
Burlington Northern is “seeing strong double-digit type growth” in all markets related to shale fracturing, CEO Matt Rose said in an interview in May. Buffett’s Berkshire Hathaway spent $26.5 billion in 2010 to acquire the 77.5 percent of Fort Worth, Texas-based BNSF it didn’t already own in the billionaire investor’s biggest takeover.
“Everything to do with drilling, horizontal drilling, frack sand, pipe, oil, it’s phenomenal,” Rose said.
In fact, the entire rail industry is on fire...
Union Pacific is sitting at an all-time record high:
Since making a bottom in early 2009 — at a time when Bakken oil production started to take off — Union Pacific’s stock has increased +236%.
Canadian National Railway is rockin', too:
And so is Canadian Pacific Railway:
And it’s not just oil these railroads are shipping. They’re also carrying drilling equipment like pipes and sand.
In fact, Burlington Northern and U.S. Silica Holding are jointly building a warehouse in Southwest Bexar County that will store sand that will be shipped to the Eagle Ford Shale in South Texas.
In the past, I’ve told you about current bull markets in biotechnology and health care.
I showed you how baby boomer stocks like Cracker Barrel and Bob Evans are making all-time record highs.
And two weeks ago I reported on how deep-discount retailers like Dollar General and Family Dollar are making their investors millionaires.
Now it’s trains, thanks to Uncle Warren...
He's done it again — even if he had to rub Obama’s back to get it.
The original bull on America,
Brian is a founding member and President of Angel Publishing and investment director for the income and dividend newsletter The Wealth Advisory. He writes about general investment strategies for Wealth Daily and Energy & Capital. Known as the "original bull on America," Brian is also the author of the 2008 book, Profit from the Peak: The End of Oil and the Greatest Investment Event of the Century. In addition to writing about the economy, investments and politics, Brian is also a frequent guest on CNBC, Bloomberg, Fox and countless radio shows. For more on Brian, take a look at his editor's page.