“Net income for the third quarter was $547 million, down 61 percent from the third quarter of 2008, but up 162 percent from the second quarter of 2009. Earnings in the third quarter were down from the same quarter in 2008 primarily due to lower Upstream crude oil and natural gas commodity prices as a result of the global economic downturn. Downstream earnings in the third quarter of 2009 were impacted by reduced demand for products, resulting in lower overall downstream margins.
Net income for the first nine months of 2009 was $1,045 million or $1.22 a share, versus $3,218 million or $3.60 a share for the first nine months of 2008.
Continued lower commodity prices and tight downstream margins resulted in challenging business conditions for the quarter compared to the same period last year. Imperial continues to weather this economic downturn well, with earnings supporting our investments in company growth projects through the down cycle. Our proven approach of focusing on those elements of the business within our control, combined with prudent financial management and disciplined capital investment, will continue to reward our shareholders in these uncertain times. (Oil price down from last year peak at a level above US$140/bbl to only US$70-80/bbl in 3q09.)
Imperial Oil continued its long-term focus and disciplined approach to capital investment. In the third quarter, capital and exploration expenditures increased to $575 million, up 60 percent from the same period last year. For the first nine months of 2009, capital and exploration expenditures were $1,604 million, an increase of 72 percent over the first nine months of 2008. The company continues to develop its outstanding portfolio of company growth projects, delivering new energy supplies which are vital to economic growth. (Bilibala thinks the Oil price will stay at US$80/bbl on average. Once the unemployment rate reach the peak early next year and the economy start to pick up in a more stable manner, oil price should reach US$100/bbl.)
During the first nine months of 2009, the company distributed $747 million cash to shareholders through dividends of $257 million and share repurchases of $490 million."
Third quarter items of interest
Net income was $547 million, versus $1,389 million for the third quarter of 2008, and $209 million for the second quarter of 2009.
Net income per common share was $0.64, versus $1.57 for the third quarter of 2008.
Cash flow from operating activities was $698 million, compared with $1,635 million in the same period last year.
Capital and exploration expenditures were $575 million, versus $360 million for the third quarter of 2008.
Gross oil-equivalent barrels of production averaged 304,000 barrels a day, compared with 310,000 barrels a day in the same period last year.
Project updates
Kearl oil sands project update
Following board approval of the first phase of Kearl in May, the project has been proceeding with
detailed design, procurement and construction activities with a current workforce of about 3,000
employees and contractors. Kearl will be developed in three phases and could ultimately produce
more than 300,000 barrels of bitumen a day before royalties. The first phase of the project is
expected to start up in late 2012. Imperial holds a 71-percent interest in the project and is the
operator in this joint venture with ExxonMobil Canada.
Cold Lake surpasses one billion barrels of production
The company's Cold Lake heavy oil operation in northeastern Alberta has surpassed one billion
barrels of cumulative production. Only three other fields in Canada have achieved this milestone, and it is the only in-situ operation to have done so. During four decades of operation at Cold Lake, technological advancements have tripled recovery rates while reducing fresh water use and surface land disturbance.
Cold Lake expansion
In September, Imperial filed amendment applications for the previously approved Cold Lake Nabiye project (2004). The proposed changes to the project will result in improved energy efficiency, reduced greenhouse gas and sulphur dioxide emissions, and reduced surface footprint. The Nabiye expansion is continuing to be advanced, and if sanctioned, will add about 30,000 barrels a day of production from a new plant. The expansion will access 250 million barrels of previously undeveloped resource at the Cold Lake heavy oil operation.
(Our world need more and more energy, and Bilibala don't think anyone nor any source can replace oil & gas in the coming 10 years. Imperial Oil has a rich oil sand portfolio to meet continue growth need and the global demand)
Third quarter 2009 vs. third quarter 2008
Upstream net income in the third quarter was $439 million versus $999 million in the same period of 2008.
Earnings decreased primarily due to lower crude oil and natural gas commodity prices of about $950 million as a result of the global economic downturn. Lower realizations were partially offset by lower royalty costs due to lower commodity prices of about $200 million, the impact of a lower Canadian dollar of about $115 million and lower energy costs of about $95 million.
The average price of Brent crude oil in U.S. dollars, a common benchmark for world oil markets, was $68.29 a barrel in the third quarter, down about 41 percent from the corresponding period last year. The company's realizations on sales of Canadian conventional crude oil mirrored the same trend as world prices, decreasing about 43 percent in the third quarter, compared to the same period last year.
The company’s average realizations for Cold Lake heavy oil also declined about 40 percent in the third quarter of 2009, compared to the corresponding period last year. The decline was less than that of lighter crude oil, due to the narrowing price spread between light crude oil and Cold Lake heavy oil.
The company's average realizations for natural gas averaged $2.90 a thousand cubic feet in the third quarter, down from $9.20 in the same quarter last year.
Gross production of Cold Lake heavy oil averaged 145 thousand barrels a day during the third quarter, versus 143 thousand barrels in the same quarter last year. The cyclic nature of production at Cold Lake and lower maintenance activities contributed primarily to the increase in production in the third quarter of 2009.
The company's share of Syncrude's gross production in the third quarter was 78 thousand barrels a day, versus 79 thousand barrels in the third quarter of 2008. Gross production of conventional crude oil averaged 25 thousand barrels a day in the third quarter, essentially the same as the corresponding period of 2008. Gross production of natural gas during the third quarter of 2009 decreased to 291 million cubic feet a day from 309 million cubic feet in the same period last year. The lower production volume was primarily a result of natural reservoir decline.
Net income from Downstream was $62 million in the third quarter of 2009, compared with $270 million in the same period a year ago. When compared to the same period in 2008, earnings in the third quarter of 2009 were negatively impacted by reduced demand for products, resulting in lower overall downstream margins of about $160 million. North American refining margins in the third quarter of 2008 were significantly higher as a result of Hurricane Gustav in the Gulf of Mexico. Also impacting third quarter 2009 earnings were lower sales volumes due to the slowdown in the economy.
Chemical net income was $19 million in the third quarter, compared with $38 million in the same quarter last year. Earnings were lower in the quarter primarily due to lower margins for polyethylene products.
Net income effects from Corporate and other were $27 million in the third quarter, compared with $82 million in the same period of 2008. The decrease in earnings effects in the third quarter reflected changes in share-based compensation charges.
Cash flow from operations was used to fund growth projects such as Kearl. The company will continue to evaluate its share-purchase program in the context of its overall capital activities.
In the third quarter of 2009, the company built $68 million of cash while funding its higher capital program requirements from operating cash flow.
First nine months 2009 vs. first nine months 2008
Net income for the first nine months of 2009 was $1,045 million or $1.22 a share on a diluted basis, versus $3,218 million or $3.60 a share for the first nine months of 2008.
First nine months highlights
Net income was $1,045 million, down from $3,218 million in the first nine months of 2008.
Net income per common share decreased to $1.22 compared to $3.60 in the same period of 2008.
Cash flow from operations was $664 million, versus $3,351 million in the same period of 2008.
Capital and exploration expenditures were $1,604 million, up 72 percent.
Gross oil-equivalent barrels of production averaged 292 thousands of barrels per day, compared to 309 thousands of barrels per day in the first nine months of 2008.
Imperial distributed a total of $747 million cash to shareholders in 2009 through dividends and share repurchases, compared with $2,048 million in 2008.
Per-share dividends declared in the first three quarters of 2009 totaled $0.30, up from $0.28 in the same period of 2008.
11.06.2009
TransCanada 3q09 press release
CALGARY, Alberta – November 4, 2009 – TransCanada Corporation (TSX, NYSE: TRP) (TransCanada or the Company) today announced net income for third quarter 2009 of $345 million or $0.50 per common share. TransCanada’s Board of Directors also declared a quarterly dividend of $0.38 per common share. (inline with Bilibala's expectation)
“TransCanada continues to post solid earnings and strong cash flows on the strength of our diverse energyinfrastructure business. Third quarter earnings were ahead of last year for our pipelines and natural gas storage assets, while the economic downturn continues to impact power revenues,” said Hal Kvisle, TransCanada’s president and chief executive officer. (Pipeline & Power Generation is a defensive sector during recession, because the business is based on seasonal demand rather than following economic cycle.)
“We made significant progress during the quarter executing the major projects within our $22 billion capital program. TransCanada is well positioned to fund this unprecedented growth. The carrying costs and dilution associated with financing this multi-year program continues to have a near-term impact on our earnings and cash flow per share. However, we are confident that our capital program will generate significant growth in cash flows and earnings over the next four years as our large scale, highly attractive projects commence operations.” (Continue expansion through acquisition and in house construction helps TransCanada's revenue to keep growing in future years. Canada currently having shortage in power supply and population increase will keep pipeline and power demand high.)
Third Quarter 2009 Highlights
(All financial figures are unaudited and in Canadian dollars unless noted otherwise)
Net income of $345 million or $0.50 per common share
Comparable earnings of $335 million or $0.49 per common share
Comparable earnings before interest, taxes, depreciation and amortization (EBITDA) of $994 million
Funds generated from operations of $772 million
Dividend of $0.38 per common share declared by the Board of Directors
Awarded a 20-year contract to build, own and operate a $1.2 billion, 900 megawatt (MW) power generating station in Oakville, Ontario
Issued $550 million of cumulative redeemable first preferred shares
Continued to advance $22 billion capital program
TransCanada reported net income for third quarter 2009 of $345 million ($0.50 per common share) compared to $390 million ($0.67 per common share) for third quarter 2008.
Comparable earnings were $335 million ($0.49 per common share) in third quarter 2009 compared to $366 million ($0.63 per common share) for the same period in 2008. This decrease was primarily due to lower power prices and volumes sold in Western Power and reduced generation volumes from New England and Bruce Power. (inline with expect)
Partially offsetting these decreases were higher earnings from Canadian pipelines, natural gas storage, Ravenswood acquired in August 2008 and the start up of Portlands Energy and the Carleton wind farm. (Bilibala expected a colder winter, TransCanada should be benefit from this)
Comparable earnings per common share in third quarter 2009 was further reduced compared to the same period last year due to an 18 per cent increase in the average number of shares outstanding following the Company’s issuances of 58.4 million and 35.1 million common shares in second quarter 2009 and fourth quarter 2008, respectively. Proceeds from the offerings were used to fund the acquisition of additional interests in Keystone and for other capital projects, general corporate purposes and to repay short-term debt. TransCanada’s $22 billion capital program is expected to boost cash flow and earnings in the coming years as projects come on-line. (The new shares issues are justified based on the projects listed below given continue monitor their status and performance in future are needed.)
Comparable earnings in third quarter 2009 and 2008 excluded $10 million of after tax net unrealized gains and $2 million of after tax net unrealized losses, respectively, resulting from changes in the fair value of proprietary natural gas inventory in storage and natural gas forward purchase and sale contracts.
Comparable earnings in 2008 also excluded $26 million of favourable income tax adjustments.
Comparable EBITDA in third quarter 2009 was $994 million compared to $1,066 million in third quarter 2008.
Funds generated from operations in third quarter 2009 were $772 million compared to $711 million in third quarter 2008.
Notable recent developments in Pipelines, Energy and Corporate include:
Pipelines:
On August 14, 2009, TransCanada purchased ConocoPhillips’ remaining interest in Keystone for US$553 million plus the assumption of US$197 million of short-term debt. TransCanada now owns 100 per cent of this project.
TransCanada also assumed responsibility for ConocoPhillips’ share of the capital investment required to complete the project, resulting in an incremental commitment of US$1.7 billion through the end of 2012.
The first phase of the pipeline is now approximately 90 per cent complete and TransCanada expects to begin filling the line in the fourth quarter of this year with deliveries of oil to the U.S. Midwest commencing in first quarter 2010.
Keystone is currently seeking the necessary regulatory approvals in Canada and the U.S. to build and operate an expansion and extension of the pipeline system that will provide additional capacity of 500,000 barrels per day (bbl/d) from Western Canada to the Gulf Coast in 2012.
In September 2009, the National Energy Board (NEB) held a hearing to review the application for the Canadian portion of the Keystone Gulf Coast expansion with a decision expected in early 2010. Permits for the U.S. portion of the expansion are expected by mid-2010. Construction of the Keystone expansion is expected to begin in 2010 once TransCanada receives all the necessary regulatory approvals.
When completed, the approximately US$12 billion Keystone pipeline will be one of the largest oil
delivery systems in North America with the capacity to deliver 1.1 million bbl/d from Western Canada to the largest refining markets in the United States.
Keystone has secured long-term commitments for 910,000 bbl/d for an average term of 18 years, which represents 83 per cent of the commercial design of the system.
The pipeline is expected to begin generating EBITDA in first quarter 2010 when oil begins flowing to Wood River and Patoka, Illinois. EBITDA is expected to increase through 2011 and 2012 as future phases of Keystone become operational.
Based on current long-term commitments of 910,000 bbl/d, Keystone is expected to generate EBITDA of approximately US$1.2 billion in 2013, its first full year of commercial operation serving both the U.S. Midwest and Gulf Coast markets.
If volumes were to increase to 1.1 million bbl/d, Keystone would generate approximately US$1.5 billion of annual EBITDA. In the future, the pipeline could be economically expanded from 1.1 million bbl/d to 1.5 million bbl/d based on market demand.
On September 28, 2009, TransCanada began work on the 160 kilometre (km) Red Earth section of the North Central Corridor (NCC) pipeline that is expected to be complete by April 2010. The 140 km North Star section has been completed and two 13 MW compressor units at the Meikle River compressor station were operational on May 15, 2009 and August 21, 2009 respectively.
The NCC project is a 300 km natural gas pipeline in the northern section of the Alberta System. It will provide capacity needed to deal with increasing gas supply in northwest Alberta and northeast B.C., declining gas supply in northeast Alberta, growing markets within the province, and help deliver more gas to interconnecting pipelines at the Alberta-Saskatchewan border.
The NCC pipeline is expected to reduce fuel consumption on the entire Alberta System by
approximately 50 per cent which is expected to result in shipper savings of between $50 million-$75 million per year.
The Alaska Pipeline Project continues to move forward, with the joint TransCanada and ExxonMobil project team actively advancing the engineering, technical, commercial, environmental and stakeholder engagement work leading to the project's initial open season targeted for completion by July 2010.
Energy:
On September 30, 2009 the Ontario Power Authority (OPA) awarded TransCanada a 20-year clean energy supply contract to build, own and operate the 900 MW Oakville Generating Station in Oakville, Ontario. A contract has now been finalized with the OPA.
TransCanada expects to invest approximately $1.2 billion in the natural gas-fired, combined-cycle plant, scheduled to start producing power by the end of 2013.
Commissioning of the first phase of the Kibby Wind Power project began in September 2009. Twentytwo of the 44 turbines have been constructed and were in service effective October 30, 2009. Roads and foundations for the remaining 22 turbines will be completed this year and the turbines are expected to be installed and operational by the end of third quarter 2010. Kibby will have the capacity to produce 132 MW.
Construction of the approximately $670 million, 683 MW Halton Hills Generating Station is continuing on schedule and the facility is anticipated to be in service in the summer of 2010. All of the power produced by the facility will be sold to the OPA under a 20-year power purchase agreement.
TransCanada began construction of the US$500 million Coolidge Generating Station in August 2009. The 575 MW power facility is expected to be on-line in second quarter 2011. All of the power produced by the facility will be sold to the Phoenix, Arizona based utility Salt River Project under a 20-year power purchase agreement.
The simple-cycle, natural gas-fired peaking facility will provide a quick response to peak power demand. The facility will also provide reserve capacity and have the ability to generate power on short notice to support power reliability in the region.
Initial brush clearing work for the 212 MW Gros-Morne wind farm in Québec has been completed. Clearing for the 58 MW Montagne-Sèche wind farm will be completed by the end of November 2009. The Montagne-Sèche project and phase one of the Gros-Morne wind farm are expected to be operational by 2011. Gros-Morne phase two is expected to be operational by 2012.
These are the fourth and fifth Québec-based wind farms under development by Cartier Wind, which is 62 per cent owned by TransCanada. These two wind farms are expected to have a capital cost of approximately $340 million. Once these two phases are complete, Cartier Wind will be capable of producing 590 MW of electricity. All of the power produced by Cartier Wind is sold to Hydro- Québec Distribution under a 20-year power purchase agreement.
Progress continues on the refurbishment and restart of Bruce A Units 1 and 2 with work now advanced to the re-assembly of the reactors. As of September 30, 2009, Bruce A had incurred approximately $3.1 billion in costs for the refurbishment and restart of Units 1 and 2. TransCanada believes that the work on Units 1 and 2 is now approximately 75 per cent complete, with the bulk of the highly technical, high risk work now finished. Although a significant amount of work remains to be done, most of this work is conventional power plant construction activity.
The project has experienced delays and TransCanada now expects that Unit 2 will be restarted mid-2011, with Unit 1 expected to follow approximately four months thereafter. The impact of this delay is mitigated by the previously announced extension of the operating lives of Unit 3 to 2011 and Unit 4 to 2016, with further life extensions expected as additional reactor optimization activities proceed.
TransCanada continues to work closely with Bruce Power to address productivity and overall project management and notes that there have been recent, significant successes in this area.
Corporate:
TransCanada and its subsidiaries held cash and cash equivalents of $2.4 billion at September 30, 2009.
On September 30, 2009, TransCanada completed a public offering of 22 million cumulative redeemable first preferred shares. Net proceeds from the $550 million preferred share offering are expected to be used by TransCanada to partially fund capital projects, for general corporate purposes and to re-pay short-term debt of TransCanada and its affiliates.
TransCanada is well positioned to fund its existing capital program through its growing internallygenerated cash flow, its dividend reinvestment and share purchase plan, and its continued access to capital markets. TransCanada will also continue to examine opportunities for portfolio management, including an ongoing role for TC PipeLines, LP in the financing of TransCanada’s capital program.
11.05.2009
Opinion on China Banks
做中資股的股東感覺特別安心，因為它們每季須公布業績，讓你知道公司最新情況。
大部分中資銀行在上星期公布了第三季度業績，若它們成績符合預期，我會更加安心，可惜不是。
工行公布第三季純利為三百四十億元人民幣（下同），計及上兩季，累積盈利約一千億元，較去年稍低。到目前為止，工行每季約賺三百至三百五十億元，若第四季能保持的話，全年盈利便達一千三百億元。不過，去年中國政府落力冷卻市場，大部分銀行在第四季出現巨額撥備，令盈利減少，故此去年工行全年盈利只得一千一百億元。
中行最平無人知悉今年會否再有類似的巨額撥備，我個人意見是有，但未必像去年一樣多；我預期工行今年盈利約為一千二百億元，或每股賺港幣四毫。以上週收市價六元三角計算，其市值約為二萬一千億港元，市盈率約十五倍半。工行貴為全球市值最大的銀行，增長速度可能逐漸放緩，惟它仍然會增長，我預期每年增長幅度約一成至一成半，十五倍半的市盈率頗為吸引，但已不及往昔。
建行（ 939） 第三季盈利為三百億元， 首三季加起來賺八百六十億元， 以工行的準則推算，建行全年盈利應為一千零五十億元，即每股賺港幣五毫。以每股六元八角計算，市值約為一萬六千億港元，市盈率十三點三倍，比工行便宜，我認為仍然是一項好投資，儘管不再是極度吸引。至於中行，第三季賺二百一十億元，首三季合共賺六百二十億元，若第四季純利達一百三十億元，全年便可賺七百五十億元，以每股四元五角計算，其市值約為一萬一千五百億港元，市盈率十三倍，比建行更平。
港股應公布季度業績我們亦可以資產淨值，來比較這三隻內銀股，工行的每股資產淨值為一元九角三分；建行為二元三角；中行則是一元九角四分。跟股價相比，工行是三者中最貴，中行則最平。這未必是最好的評審標準，因為資產質素及管理層的水準，更加影響公司的盈利能力。
投資組合方面，我看不到有任何理由作出變更，雖然建行今天的股價比工行便宜，而中行則更平，但差異未至於需要為其額外負擔一筆交易徵費。如果我是一個活躍的投資者，可能會沽工行換馬建行或中行，但我相信大部分的讀者，都寧願採取一個溫和舒適的投資態度。
當收到這些中資銀行的季度業績，讓大家清楚知道手持的內銀股的最新情況，大家應該質疑香港的監管機構，為何對在港上市的大公司沒有類似要求。特別是當滙豐的董事既然每季向美國監管機構公布業績，為什麼不讓持股更多的香港股東了解最新情況？若股東的知情權不受重視，有可能導致謠言滿天飛。滙豐作為大藍籌的一哥，若能率先在港公布季度業績，將能加強我們信心。
天下第一仓 拨 论尽三大内银股 东尼 11月5日
大部分中資銀行在上星期公布了第三季度業績，若它們成績符合預期，我會更加安心，可惜不是。
工行公布第三季純利為三百四十億元人民幣（下同），計及上兩季，累積盈利約一千億元，較去年稍低。到目前為止，工行每季約賺三百至三百五十億元，若第四季能保持的話，全年盈利便達一千三百億元。不過，去年中國政府落力冷卻市場，大部分銀行在第四季出現巨額撥備，令盈利減少，故此去年工行全年盈利只得一千一百億元。
中行最平無人知悉今年會否再有類似的巨額撥備，我個人意見是有，但未必像去年一樣多；我預期工行今年盈利約為一千二百億元，或每股賺港幣四毫。以上週收市價六元三角計算，其市值約為二萬一千億港元，市盈率約十五倍半。工行貴為全球市值最大的銀行，增長速度可能逐漸放緩，惟它仍然會增長，我預期每年增長幅度約一成至一成半，十五倍半的市盈率頗為吸引，但已不及往昔。
建行（ 939） 第三季盈利為三百億元， 首三季加起來賺八百六十億元， 以工行的準則推算，建行全年盈利應為一千零五十億元，即每股賺港幣五毫。以每股六元八角計算，市值約為一萬六千億港元，市盈率十三點三倍，比工行便宜，我認為仍然是一項好投資，儘管不再是極度吸引。至於中行，第三季賺二百一十億元，首三季合共賺六百二十億元，若第四季純利達一百三十億元，全年便可賺七百五十億元，以每股四元五角計算，其市值約為一萬一千五百億港元，市盈率十三倍，比建行更平。
港股應公布季度業績我們亦可以資產淨值，來比較這三隻內銀股，工行的每股資產淨值為一元九角三分；建行為二元三角；中行則是一元九角四分。跟股價相比，工行是三者中最貴，中行則最平。這未必是最好的評審標準，因為資產質素及管理層的水準，更加影響公司的盈利能力。
投資組合方面，我看不到有任何理由作出變更，雖然建行今天的股價比工行便宜，而中行則更平，但差異未至於需要為其額外負擔一筆交易徵費。如果我是一個活躍的投資者，可能會沽工行換馬建行或中行，但我相信大部分的讀者，都寧願採取一個溫和舒適的投資態度。
當收到這些中資銀行的季度業績，讓大家清楚知道手持的內銀股的最新情況，大家應該質疑香港的監管機構，為何對在港上市的大公司沒有類似要求。特別是當滙豐的董事既然每季向美國監管機構公布業績，為什麼不讓持股更多的香港股東了解最新情況？若股東的知情權不受重視，有可能導致謠言滿天飛。滙豐作為大藍籌的一哥，若能率先在港公布季度業績，將能加強我們信心。
天下第一仓 拨 论尽三大内银股 东尼 11月5日
11.04.2009
Canada 2010 Outlook
加拿大一度是港人外移的「天堂」，可是，当回归后香港表面一切如常寻且经济活力又动起来之后，港人便生落叶归根之念，纷纷卖掉或租出加国物业，重投香港怀抱；这种做法是否正确，因人亦即因环境、背景不同而异，不能一概而论。
大体而言，和香港比较，加拿大经济有如一潭死水，但现在似乎已有一些变化；自从「金融海啸」之后，加拿大的保守财金政策（包括裁削预算开支及严管金融活动等）成效渐彰，加上近年她采取了「一篮子减税」政策，降低最高税率、提高免税额、增加资本性投资税务豁免，效益已见；在金融机构相继倒闭或需政府注资的新闻日有所闻的情形下，加拿大银行基本上都能安度危机，成为西方银行界的奇葩。
「金融海啸」来袭，美企业的加拿大分厂无法不受波及，而美国消费市场衰退则打击加拿大对美国的直接出口，令加拿大失业率一路攀升。然而，近来加拿大失业率开始下降，当地经济学家（如Scotia Economics）认为这是经济开始健康回升而非偶生事件，八月份的失业率百分之八点七应为最高点，九月微顺至百分之八点四（净就业增三万一千多个职位）。这种转变并非因为美国市场复苏，而是对本地市场比较敏感进而能够作出弹性适应的小企业（僱员百名以下）已走出衰退的阴影。小企业僱员占全加私营企业总就业人数百分之六十七，但对失业率的「贡献」只有百分之四十三；反观五百僱员以上的大厂，僱员占总就业人数百分之十三，惟构成百分之三十五的失业率。非常明显，大厂中有不少是美企分厂或产品以美国市场为主，因而受创较重。
和失业率一样，加拿大的物业市场亦有转好之象，九月份的平均销售量已较去年同期增百分之一点五，而平均单位售价同期升百分之十四。这些数字特别是和香港市场比较，真是微不足道，但在西方物业市道仍处下降轨的现在，已属难能可贵。值得注意的还有，据Scotia Economics的分析，楼价上扬并非「投机者（过去是港台如今是内地豪客）入市」，而是供应量严重不足（serious housing shortage）。加拿大独有（？）的「登记—卖出比率」（Listing-to-Sales ratio）去月是一点五一，为二○○四年同月以来最低（显示供求平衡的基准比率为二）！
由于加拿大非「金融海啸」重灾区，居民所受财政创伤不重，等于基础较稳，回升（复苏）便较为有力。美国家庭今年第二季的净总资产值较○七年年底跌百分之十七，加拿大的同类数字只减百分之五；同一来源估计加拿大家庭九月底可动用的净资产值在六千三百五十亿至一万亿美元之间，「机会」一旦来临，加拿大经济将有不错的表现。
对于与加拿大银行往来的香港人来说，由于加银行业无资不抵债的难题，因此银行存款远较安全，Scotia的资料显示二十国集团的政府平均负债为ＧＤＰ的百分之八，加拿大的只在百分之三至四之间；在经合组织（ＯＥＣＤ）中，加拿大银行最稳健；标准的一级资本负债比率为百分之七，但加拿大六大银行达百分之八点五……。在投机活动热火朝天的时候，加拿大银行的业绩表现肯定「滞后」，但在比较淡静的市场情况下，加拿大银行显然较为可取！
比较健康的经济表现，充分反映在加元滙价上，昨天加元兑零点九三美元（三月底只兑零点七七美元），这种趋势令「顺藤摸瓜」式论者指出美元加元平兑快现，对此笔者不敢表态，笔者知道的只是比起美国政府，加拿大政府更乐见其滙价趋强。加拿大物产丰富，人所共知，加元因而是所谓「商品货币」（commodity currency），天然资源特别是能源有价，加上经济表现不俗，加元滙价（相对美元及陪葬的港元）上扬，情理中事；虽然加国央行行长加尼（M. Carney）去周表示，近期加元滙价上升可能抵销了经济及金融市场改善带来的好处，但他同时认为加拿大经济已有力在中止刺激经济方案后仍增长。在当前的经济环境，加拿大央行步澳洲央行加息后尘的可能性大大存在。
投读者所好，亦谈谈加拿大股票。由于油价在经济增长似有若无之下依然上升，令人进一步看好油价；万一经济复苏较明显的增长，油价无法不大幅弹升，不少分析者因而看淡货车及空运业，以不断上升的能源开支会使它们的利润增长有限。这种形势令人看好铁道股。加拿大地大路长，铁道纵横，铁道股占相当比重，但哪种铁道股值得投资？笔者是门外汉，惟看「股圣」毕非德的公司持有大量加拿大贝灵顿北方（股市编号ＢＮＩ）的股票，大家不妨加以留意。截至六月底，巴郡持有该公司七千六百八十多万股（为其股票发行量百分之二十二点六），当时值五十六亿美元；据巴郡年报，其购入价在七十二至八十四美元之间，现价在七十六至七十七美元升沉，其价偏软皆因该公司刚公布去年业绩大倒退……。毕非德无宝不落，巴郡「揸重货」的原因是看好铁路运输而ＢＮＩ是佼佼者。笔者并非建议入货，但有余资者不妨和投资顾问商量并评估毕非德的正误。（林行止 文）
大体而言，和香港比较，加拿大经济有如一潭死水，但现在似乎已有一些变化；自从「金融海啸」之后，加拿大的保守财金政策（包括裁削预算开支及严管金融活动等）成效渐彰，加上近年她采取了「一篮子减税」政策，降低最高税率、提高免税额、增加资本性投资税务豁免，效益已见；在金融机构相继倒闭或需政府注资的新闻日有所闻的情形下，加拿大银行基本上都能安度危机，成为西方银行界的奇葩。
「金融海啸」来袭，美企业的加拿大分厂无法不受波及，而美国消费市场衰退则打击加拿大对美国的直接出口，令加拿大失业率一路攀升。然而，近来加拿大失业率开始下降，当地经济学家（如Scotia Economics）认为这是经济开始健康回升而非偶生事件，八月份的失业率百分之八点七应为最高点，九月微顺至百分之八点四（净就业增三万一千多个职位）。这种转变并非因为美国市场复苏，而是对本地市场比较敏感进而能够作出弹性适应的小企业（僱员百名以下）已走出衰退的阴影。小企业僱员占全加私营企业总就业人数百分之六十七，但对失业率的「贡献」只有百分之四十三；反观五百僱员以上的大厂，僱员占总就业人数百分之十三，惟构成百分之三十五的失业率。非常明显，大厂中有不少是美企分厂或产品以美国市场为主，因而受创较重。
和失业率一样，加拿大的物业市场亦有转好之象，九月份的平均销售量已较去年同期增百分之一点五，而平均单位售价同期升百分之十四。这些数字特别是和香港市场比较，真是微不足道，但在西方物业市道仍处下降轨的现在，已属难能可贵。值得注意的还有，据Scotia Economics的分析，楼价上扬并非「投机者（过去是港台如今是内地豪客）入市」，而是供应量严重不足（serious housing shortage）。加拿大独有（？）的「登记—卖出比率」（Listing-to-Sales ratio）去月是一点五一，为二○○四年同月以来最低（显示供求平衡的基准比率为二）！
由于加拿大非「金融海啸」重灾区，居民所受财政创伤不重，等于基础较稳，回升（复苏）便较为有力。美国家庭今年第二季的净总资产值较○七年年底跌百分之十七，加拿大的同类数字只减百分之五；同一来源估计加拿大家庭九月底可动用的净资产值在六千三百五十亿至一万亿美元之间，「机会」一旦来临，加拿大经济将有不错的表现。
对于与加拿大银行往来的香港人来说，由于加银行业无资不抵债的难题，因此银行存款远较安全，Scotia的资料显示二十国集团的政府平均负债为ＧＤＰ的百分之八，加拿大的只在百分之三至四之间；在经合组织（ＯＥＣＤ）中，加拿大银行最稳健；标准的一级资本负债比率为百分之七，但加拿大六大银行达百分之八点五……。在投机活动热火朝天的时候，加拿大银行的业绩表现肯定「滞后」，但在比较淡静的市场情况下，加拿大银行显然较为可取！
比较健康的经济表现，充分反映在加元滙价上，昨天加元兑零点九三美元（三月底只兑零点七七美元），这种趋势令「顺藤摸瓜」式论者指出美元加元平兑快现，对此笔者不敢表态，笔者知道的只是比起美国政府，加拿大政府更乐见其滙价趋强。加拿大物产丰富，人所共知，加元因而是所谓「商品货币」（commodity currency），天然资源特别是能源有价，加上经济表现不俗，加元滙价（相对美元及陪葬的港元）上扬，情理中事；虽然加国央行行长加尼（M. Carney）去周表示，近期加元滙价上升可能抵销了经济及金融市场改善带来的好处，但他同时认为加拿大经济已有力在中止刺激经济方案后仍增长。在当前的经济环境，加拿大央行步澳洲央行加息后尘的可能性大大存在。
投读者所好，亦谈谈加拿大股票。由于油价在经济增长似有若无之下依然上升，令人进一步看好油价；万一经济复苏较明显的增长，油价无法不大幅弹升，不少分析者因而看淡货车及空运业，以不断上升的能源开支会使它们的利润增长有限。这种形势令人看好铁道股。加拿大地大路长，铁道纵横，铁道股占相当比重，但哪种铁道股值得投资？笔者是门外汉，惟看「股圣」毕非德的公司持有大量加拿大贝灵顿北方（股市编号ＢＮＩ）的股票，大家不妨加以留意。截至六月底，巴郡持有该公司七千六百八十多万股（为其股票发行量百分之二十二点六），当时值五十六亿美元；据巴郡年报，其购入价在七十二至八十四美元之间，现价在七十六至七十七美元升沉，其价偏软皆因该公司刚公布去年业绩大倒退……。毕非德无宝不落，巴郡「揸重货」的原因是看好铁路运输而ＢＮＩ是佼佼者。笔者并非建议入货，但有余资者不妨和投资顾问商量并评估毕非德的正误。（林行止 文）
Iterview with Warren Buffett by FOX Business Network's Liz Claman
This is the transcript of the interview with Warren Buffett by FOX Business Network's Liz Claman. You can also watch the video below.
LIZ CLAMAN, FOX BUSINESS NETWORK ANCHOR: Let's get to the story of the day. Berkshire Hathaway making this huge bet on the railroads. One in particular, acquiring Burlington Northern Santa Fe in a deal worth about $44 billion. Let's talk to the man behind the deal. It was all his idea. On the phone, Warren Buffett, chairman and CEO of Berkshire Hathaway. Hello, Warren, how are you?
WARREN BUFFETT, CHAIRMAN/ CEO, BERKSHIRE HATHAWAY: Hi, Liz.
CLAMAN: What did you do? Did you wake up one day and say, " I think I'll spend another $26 billion in cash and stock for a railroad."? How did this come about?
BUFFETT: It came about because our board had a meeting (ph) scheduled for a year down in Fort Worth. The reason we have three different businesses we own in Fort Worth. And my Debbie Ballsonnick (ph), my assistant said, "Let's do the next one in Fort Worth and check out those companies." So, we went down there a week ago last Thursday. And I went down a couple of hours earlier -- early because there were two people I wanted to see. One, my friend John Roach and then the other one was Matt Rose over at BNSF. And while I was over there, we had about ten minutes alone after some vice presidents made a presentation. And I said, "Matt, if you're ever looking for a home for the railroad, Berkshire would make a good one." And he didn't throw me out of the office, so the next day I made him an offer, and he said he would take it to the directors and the rest is history.
CLAMAN: So, it's a ten-minute meeting and then a week. That's awfully fast, but this is how you operate. You had already owned, of course, about 24 percent of Burlington Northern. What was it that crystalized your belief in that 10 minutes or the vice president's presentation that you ought to buy the whole thing?
BUFFETT: It wasn't -- it wasn't -- you know, I felt good about it from the time we bought our first stock in 2006. But if we hadn't scheduled the meeting down there, probably wouldn't have happened. At least it wouldn't have happened now. But I -- you know, I like the business very much. I think the management is the best there is, and, like I say, when I didn't get thrown out of the office, I made it specific, and it was a good offer from their standpoint. And they decided to accept it. And now we're going to own a railroad. And we never fool around on things, Liz. I mean, I tell the lawyers, get this thing done, you know.
CLAMAN: I think Debbie Ballsonnick, your assistant who thought it best to put the meeting down there should get the big high five. No doubt at all.
BUFFETT: Well, yes, you'll see we didn't have an investment banker on the deal, but maybe we should have put her down.
CLAMAN: She's smart enough to do it. What is it, Warren, you see in the railroad transport area versus trucking or air cargo?
BUFFETT: Well, the rails move a freight at a much more environmentally friendly way than the truckers do. And they also only use about a third of the fuel. So, it's helping -- it helps our trade balance in the long run. It helps in terms of the atmosphere. It is a very, very efficient, effective, environmentally friendly way of moving freight. And, you know, our rail system is a huge asset to the country.
CLAMAN: BNI, of course, hauls about 10 percent of the nation's electricity-generating coal. Is this, Warren, a bet somehow on coal?
BUFFETT: Well, they haul a lot of coal and coal from the Powder River Basin in the West -- is more competitive, it's lower-sulfur coal than in the East. So, it will be around a long time. But coal, over the long run, coal will diminish in relative importance.
CLAMAN: There's a growing anti-rail lobby in Washington right now. I know you know because you do your homework on this stuff with a push by the shippers to re-regulate the rails -- the Railroad Antitrust Enforcement Act, if you will. Do you have any friends in Washington who assured you that railroads would not be re-regulated? Because I would imagine if the Obama administration went along with the shippers to regulate the rails, that might hurt your investment.
BUFFETT: Well, I would say since the Staggers Act back in 1980, which diminished the regulation substantially, you've had enormous progress with the rail system. You've decreased prices on inflation-adjusted terms significantly. So, I would say that the deregulation that took place starting in starting in 1980 is actually benefited the shippers enormously. And we're moving far, far more freight with using far less fuel, very efficiently. My guess is that people will see the rail for what they are, really an outstanding way of moving freight around the country.
CLAMAN: Cheapest, best way. But then there's cap-and-trade, Warren. Some analysts are very skittish about coal and a possible backlash if cap-and-trade goes through. You mentioned now -- you said, we're going to see a diminishing of coal use. But what do you think cap-and-trade would do to the business if that went through?
BUFFETT: It won't change the composition of what utilities are doing tomorrow or next week or next year. The utilities over time are going to use less coal and probably more nuclear. Our own utility, for example, uses wind very substantially in Iowa. So, over time, coal is going to diminish somewhat. Now, I think that will hit Eastern coal more than Western coal, but that's a fact of life over a considerable period of time. And that's true whether there's cap-and-trade or not, yes.
CLAMAN: The way you structured this deal, you're using some Berkshire stock for this and then $16 billion, I believe, in cash to pull it off. The Berkshire board approved a what? -- 50-to-1 split for the Class B(ph) shares. Why not all cash, Warren? Are you trying to preserve your cash at this point?
BUFFETT: I like to have a very comfortable level of cash. This is also the minimum amount of stock we can give and still have people be able to elect a tax-free deal that own BNSF stock currently. If we were going to use -- I don't like using stock, I can tell you that. I don't like issuing Berkshire shares.
CLAMAN: Is this the first time you've used stock?
BUFFETT: No. No, we've used it before. In fact, if you go back to (INAUDIBLE) deal, that was an all-stock deal. But generally speaking, I'm not enthused about using stock. But using 40 percent and considering the fact we already own some, which we also bought for cash, we're mostly using cash in this transaction.
CLAMAN: You just mentioned the tax-free aspect. Can you clarify a little bit on that?
BUFFETT: Well, 40 percent of the deal will be stock, and everybody will be able to opt whether they want stock or cash. And if less than 40 percent opt for stock, they get an all-stock allocation. And if more than 40 percent, still, people who opt for stock will get mostly a stock allocation. And to the extent they get stock, it will be a tax-free exchange.
CLAMAN: To acquire a company of this size when transportation demand is down, of course, as you said, is really a bet on the U.S. economy. In fact, in the release you called it an all-out wager on the economic future of the United States. When do you see the total recovery taking hold?
BUFFETT: I don't know. But it doesn't really make any difference in terms of this acquisition. If we're going to hold something for a hundred years, the next week or month or year doesn't really make any difference. If we hold it a hundred years, I guarantee you there will be some recessionary years in that period. And it really doesn't make any difference whether it's the first year or the fifth year or the eighteenth year. We're in for keeps.
CLAMAN: It's funny you did this with the rails because just two weeks ago we had Bob Oldstein of the Oldstein Funds on saying the rails are overstating their earnings and underdepreciating their equipment. Do you see it that way? Did you look into that?
BUFFETT: It's true. I didn't have to listen to that, but it's true any company that has long-life assets is replacing assets that they bought many years ago with things that cost more money now. That's true of our utility business, that's true of any business. It's true -- if you build a plant that 30 years ago had a 30-year life. When you go to replace that same plant, it's going to cost you more money. That's a fact of life in an inflationary economy.
CLAMAN: One year ago in September, we were all so nervous, and that's when President Bush and Hank Paulson pushed through T.A.R.P. Since then, we've had the stimulus. You have said when you treat a patient with such a huge amount of medicine, the likes of which we've never done before, somewhere down the line, we're going to see the ramifications. What do you think those ramifications will be, and aren't you worried to make such a huge purchase knowing that that may come to pass
BUFFETT: I'd be more worried holding cash. I think that if you look at the side effects of the incredible dosage that we've had to give -- and I think that dosage has been 100 percent appropriate; I'm not knocking that. But when you apply the kind of medicine we've applied, you may have sort of unprecedented aftereffects, too. But the one thing about those unprecedented aftereffects is they're going to be very bad for cash. I would much rather own working assets than have cash in a period that well could become inflationary down the road.
CLAMAN: But that's with the headwinds, though. You told me back in May and repeat in June the commercial real estate would, quote, "hit the skids big-time," and now we see that it is. What makes you think the businesses would ship more goods by a railroad when that kind of headwind is blowing in dark clouds? Or is this such a long-term bet at this point that you're not looking the next two years out?
BUFFETT: OK. Thank you, Liz.
BUFFETT: I don't know what will ship next year, but I would bet a lot of money -- in fact, we have bet a lot of money -- ten years from now there will be more people in the United States and they will be consuming more things than they consume now. And that will be more so 20 years from now and 30 years from now. So, there's going to be goods moving around for more and more people who are going to be consuming more and more of them, and certainly, rails should not only get a share but probably should probably get a little more than their share. It's a bet on the American economy essentially continuing to prosper over time just as it's prospered every since 1776.
CLAMAN: A lot of employers you're taking on here. Universal healthcare is at the forefront of a lot of people's minds. Do you think as you look what the government is attempting to do and Congress, now is the time to tackle such an expensive problem?
BUFFETT: Well, I think it's long past the time we tackle health care. But one of the real problems is the incentives in the system, and they’re very tough to get to. But we do spend 16 percent or so GDP on health care in the United States. And we have to figure out some way to slow down that particular engine.
CLAMAN: Do you think the wealthy should be taxed to pay for healthcare for all?
BUFFETT: I think the wealthy overall should be taxed more relative to the poor and the middle class.
CLAMAN: Here's a worry, though. The House bill calls for that 5 percent surtax on the wealthy, but it’s not indexed for inflation. Could that end up mimicking the alternative minimum tax which originally was supposed to tax only the rich, and now, as you know, police officers and teachers have to pay it?
BUFFETT: Well, I haven't read the 1,900 some pages in their entirety. I do know they have the 5 percent tax -- I think it's on incomes of over $500,000 or something. You're right, the way I read it, it's not index. But as a practical matter, I think that the wealthy have had their share of overall taxes, counting payroll taxes diminish significantly in the last 20 years. So I think that if you're looking for more revenue from the citizenry, I think the rich are the place to look.
CLAMAN: And that's you.
BUFFETT: That's me, right!
CLAMAN: You're okay with it?
BUFFETT: Absolutely.
CLAMAN: I always take your temperature each time we speak when it comes to President Pbama. Back in June, the last time you spoke you were very happy with all he's done. Does that sentiment continue?
BUFFETT: I am very, very glad I worked for and voted for President Obama, and I think he's the right man to have in the job.
CLAMAN: You're not concerned about all the spending that's going on at the moment?
BUFFETT: I think it's been -- I think it's necessary. I think a lot of the things we've done in of the last year or 15 months will have aftereffects. But I think they've been very important. We came very close to going into the abyss a year ago. And, you know, they've had to do some very unusual things, and some will have later costs. But they still were the right things to do.
CLAMAN: You wrote in back in August in the "Times" "the dollar's destiny lies with Congress." And with the deficit for 2009 -- listen, the numbers keep changing but $1.4 trillion, 10 percent of GDP high since 1945. Are you buying foreign currencies now or at least playing that carry trade since the dollar's so weak and there are other currencies with better yield? And I know you don't like to talk about what you're doing but, you know, as you see the dollar.
BUFFETT: You're seeing us get rid of a lot of dollars today in exchange for a lot of assets. So, I would rather own physical assets than own dollars.
CLAMAN: OK. As we finish up here, I have to ask, is this Burlington Northern purchase really just a chance to beef up your Lionel Train collection you have in the attic?
(LAUGHTER)
BUFFETT: I've got -- I’ve got a pretty good railroad on the third floor, but it’s nothing compared to the Burlington Northern...
CLAMAN: Yes. Matt Rose of Burlington Northern just said he's getting thousands and thousands of railcars to add to that collection.
BUFFETT: Yes. Right! Right! (LAUGHTER)
CLAMAN: Thank you so much, Mr. Buffett.
LIZ CLAMAN, FOX BUSINESS NETWORK ANCHOR: Let's get to the story of the day. Berkshire Hathaway making this huge bet on the railroads. One in particular, acquiring Burlington Northern Santa Fe in a deal worth about $44 billion. Let's talk to the man behind the deal. It was all his idea. On the phone, Warren Buffett, chairman and CEO of Berkshire Hathaway. Hello, Warren, how are you?
WARREN BUFFETT, CHAIRMAN/ CEO, BERKSHIRE HATHAWAY: Hi, Liz.
CLAMAN: What did you do? Did you wake up one day and say, " I think I'll spend another $26 billion in cash and stock for a railroad."? How did this come about?
BUFFETT: It came about because our board had a meeting (ph) scheduled for a year down in Fort Worth. The reason we have three different businesses we own in Fort Worth. And my Debbie Ballsonnick (ph), my assistant said, "Let's do the next one in Fort Worth and check out those companies." So, we went down there a week ago last Thursday. And I went down a couple of hours earlier -- early because there were two people I wanted to see. One, my friend John Roach and then the other one was Matt Rose over at BNSF. And while I was over there, we had about ten minutes alone after some vice presidents made a presentation. And I said, "Matt, if you're ever looking for a home for the railroad, Berkshire would make a good one." And he didn't throw me out of the office, so the next day I made him an offer, and he said he would take it to the directors and the rest is history.
CLAMAN: So, it's a ten-minute meeting and then a week. That's awfully fast, but this is how you operate. You had already owned, of course, about 24 percent of Burlington Northern. What was it that crystalized your belief in that 10 minutes or the vice president's presentation that you ought to buy the whole thing?
BUFFETT: It wasn't -- it wasn't -- you know, I felt good about it from the time we bought our first stock in 2006. But if we hadn't scheduled the meeting down there, probably wouldn't have happened. At least it wouldn't have happened now. But I -- you know, I like the business very much. I think the management is the best there is, and, like I say, when I didn't get thrown out of the office, I made it specific, and it was a good offer from their standpoint. And they decided to accept it. And now we're going to own a railroad. And we never fool around on things, Liz. I mean, I tell the lawyers, get this thing done, you know.
CLAMAN: I think Debbie Ballsonnick, your assistant who thought it best to put the meeting down there should get the big high five. No doubt at all.
BUFFETT: Well, yes, you'll see we didn't have an investment banker on the deal, but maybe we should have put her down.
CLAMAN: She's smart enough to do it. What is it, Warren, you see in the railroad transport area versus trucking or air cargo?
BUFFETT: Well, the rails move a freight at a much more environmentally friendly way than the truckers do. And they also only use about a third of the fuel. So, it's helping -- it helps our trade balance in the long run. It helps in terms of the atmosphere. It is a very, very efficient, effective, environmentally friendly way of moving freight. And, you know, our rail system is a huge asset to the country.
CLAMAN: BNI, of course, hauls about 10 percent of the nation's electricity-generating coal. Is this, Warren, a bet somehow on coal?
BUFFETT: Well, they haul a lot of coal and coal from the Powder River Basin in the West -- is more competitive, it's lower-sulfur coal than in the East. So, it will be around a long time. But coal, over the long run, coal will diminish in relative importance.
CLAMAN: There's a growing anti-rail lobby in Washington right now. I know you know because you do your homework on this stuff with a push by the shippers to re-regulate the rails -- the Railroad Antitrust Enforcement Act, if you will. Do you have any friends in Washington who assured you that railroads would not be re-regulated? Because I would imagine if the Obama administration went along with the shippers to regulate the rails, that might hurt your investment.
BUFFETT: Well, I would say since the Staggers Act back in 1980, which diminished the regulation substantially, you've had enormous progress with the rail system. You've decreased prices on inflation-adjusted terms significantly. So, I would say that the deregulation that took place starting in starting in 1980 is actually benefited the shippers enormously. And we're moving far, far more freight with using far less fuel, very efficiently. My guess is that people will see the rail for what they are, really an outstanding way of moving freight around the country.
CLAMAN: Cheapest, best way. But then there's cap-and-trade, Warren. Some analysts are very skittish about coal and a possible backlash if cap-and-trade goes through. You mentioned now -- you said, we're going to see a diminishing of coal use. But what do you think cap-and-trade would do to the business if that went through?
BUFFETT: It won't change the composition of what utilities are doing tomorrow or next week or next year. The utilities over time are going to use less coal and probably more nuclear. Our own utility, for example, uses wind very substantially in Iowa. So, over time, coal is going to diminish somewhat. Now, I think that will hit Eastern coal more than Western coal, but that's a fact of life over a considerable period of time. And that's true whether there's cap-and-trade or not, yes.
CLAMAN: The way you structured this deal, you're using some Berkshire stock for this and then $16 billion, I believe, in cash to pull it off. The Berkshire board approved a what? -- 50-to-1 split for the Class B(ph) shares. Why not all cash, Warren? Are you trying to preserve your cash at this point?
BUFFETT: I like to have a very comfortable level of cash. This is also the minimum amount of stock we can give and still have people be able to elect a tax-free deal that own BNSF stock currently. If we were going to use -- I don't like using stock, I can tell you that. I don't like issuing Berkshire shares.
CLAMAN: Is this the first time you've used stock?
BUFFETT: No. No, we've used it before. In fact, if you go back to (INAUDIBLE) deal, that was an all-stock deal. But generally speaking, I'm not enthused about using stock. But using 40 percent and considering the fact we already own some, which we also bought for cash, we're mostly using cash in this transaction.
CLAMAN: You just mentioned the tax-free aspect. Can you clarify a little bit on that?
BUFFETT: Well, 40 percent of the deal will be stock, and everybody will be able to opt whether they want stock or cash. And if less than 40 percent opt for stock, they get an all-stock allocation. And if more than 40 percent, still, people who opt for stock will get mostly a stock allocation. And to the extent they get stock, it will be a tax-free exchange.
CLAMAN: To acquire a company of this size when transportation demand is down, of course, as you said, is really a bet on the U.S. economy. In fact, in the release you called it an all-out wager on the economic future of the United States. When do you see the total recovery taking hold?
BUFFETT: I don't know. But it doesn't really make any difference in terms of this acquisition. If we're going to hold something for a hundred years, the next week or month or year doesn't really make any difference. If we hold it a hundred years, I guarantee you there will be some recessionary years in that period. And it really doesn't make any difference whether it's the first year or the fifth year or the eighteenth year. We're in for keeps.
CLAMAN: It's funny you did this with the rails because just two weeks ago we had Bob Oldstein of the Oldstein Funds on saying the rails are overstating their earnings and underdepreciating their equipment. Do you see it that way? Did you look into that?
BUFFETT: It's true. I didn't have to listen to that, but it's true any company that has long-life assets is replacing assets that they bought many years ago with things that cost more money now. That's true of our utility business, that's true of any business. It's true -- if you build a plant that 30 years ago had a 30-year life. When you go to replace that same plant, it's going to cost you more money. That's a fact of life in an inflationary economy.
CLAMAN: One year ago in September, we were all so nervous, and that's when President Bush and Hank Paulson pushed through T.A.R.P. Since then, we've had the stimulus. You have said when you treat a patient with such a huge amount of medicine, the likes of which we've never done before, somewhere down the line, we're going to see the ramifications. What do you think those ramifications will be, and aren't you worried to make such a huge purchase knowing that that may come to pass
BUFFETT: I'd be more worried holding cash. I think that if you look at the side effects of the incredible dosage that we've had to give -- and I think that dosage has been 100 percent appropriate; I'm not knocking that. But when you apply the kind of medicine we've applied, you may have sort of unprecedented aftereffects, too. But the one thing about those unprecedented aftereffects is they're going to be very bad for cash. I would much rather own working assets than have cash in a period that well could become inflationary down the road.
CLAMAN: But that's with the headwinds, though. You told me back in May and repeat in June the commercial real estate would, quote, "hit the skids big-time," and now we see that it is. What makes you think the businesses would ship more goods by a railroad when that kind of headwind is blowing in dark clouds? Or is this such a long-term bet at this point that you're not looking the next two years out?
BUFFETT: OK. Thank you, Liz.
BUFFETT: I don't know what will ship next year, but I would bet a lot of money -- in fact, we have bet a lot of money -- ten years from now there will be more people in the United States and they will be consuming more things than they consume now. And that will be more so 20 years from now and 30 years from now. So, there's going to be goods moving around for more and more people who are going to be consuming more and more of them, and certainly, rails should not only get a share but probably should probably get a little more than their share. It's a bet on the American economy essentially continuing to prosper over time just as it's prospered every since 1776.
CLAMAN: A lot of employers you're taking on here. Universal healthcare is at the forefront of a lot of people's minds. Do you think as you look what the government is attempting to do and Congress, now is the time to tackle such an expensive problem?
BUFFETT: Well, I think it's long past the time we tackle health care. But one of the real problems is the incentives in the system, and they’re very tough to get to. But we do spend 16 percent or so GDP on health care in the United States. And we have to figure out some way to slow down that particular engine.
CLAMAN: Do you think the wealthy should be taxed to pay for healthcare for all?
BUFFETT: I think the wealthy overall should be taxed more relative to the poor and the middle class.
CLAMAN: Here's a worry, though. The House bill calls for that 5 percent surtax on the wealthy, but it’s not indexed for inflation. Could that end up mimicking the alternative minimum tax which originally was supposed to tax only the rich, and now, as you know, police officers and teachers have to pay it?
BUFFETT: Well, I haven't read the 1,900 some pages in their entirety. I do know they have the 5 percent tax -- I think it's on incomes of over $500,000 or something. You're right, the way I read it, it's not index. But as a practical matter, I think that the wealthy have had their share of overall taxes, counting payroll taxes diminish significantly in the last 20 years. So I think that if you're looking for more revenue from the citizenry, I think the rich are the place to look.
CLAMAN: And that's you.
BUFFETT: That's me, right!
CLAMAN: You're okay with it?
BUFFETT: Absolutely.
CLAMAN: I always take your temperature each time we speak when it comes to President Pbama. Back in June, the last time you spoke you were very happy with all he's done. Does that sentiment continue?
BUFFETT: I am very, very glad I worked for and voted for President Obama, and I think he's the right man to have in the job.
CLAMAN: You're not concerned about all the spending that's going on at the moment?
BUFFETT: I think it's been -- I think it's necessary. I think a lot of the things we've done in of the last year or 15 months will have aftereffects. But I think they've been very important. We came very close to going into the abyss a year ago. And, you know, they've had to do some very unusual things, and some will have later costs. But they still were the right things to do.
CLAMAN: You wrote in back in August in the "Times" "the dollar's destiny lies with Congress." And with the deficit for 2009 -- listen, the numbers keep changing but $1.4 trillion, 10 percent of GDP high since 1945. Are you buying foreign currencies now or at least playing that carry trade since the dollar's so weak and there are other currencies with better yield? And I know you don't like to talk about what you're doing but, you know, as you see the dollar.
BUFFETT: You're seeing us get rid of a lot of dollars today in exchange for a lot of assets. So, I would rather own physical assets than own dollars.
CLAMAN: OK. As we finish up here, I have to ask, is this Burlington Northern purchase really just a chance to beef up your Lionel Train collection you have in the attic?
(LAUGHTER)
BUFFETT: I've got -- I’ve got a pretty good railroad on the third floor, but it’s nothing compared to the Burlington Northern...
CLAMAN: Yes. Matt Rose of Burlington Northern just said he's getting thousands and thousands of railcars to add to that collection.
BUFFETT: Yes. Right! Right! (LAUGHTER)
CLAMAN: Thank you so much, Mr. Buffett.
11.03.2009
Berkshire Hathaway acquire Burlington Northern Santa Fe
http://online.wsj.com/article/SB125728541512726273.html
Berkshire Hathaway Inc.'s acquisition of Burlington Northern Santa Fe Corp. is classic Warren Buffett: A bet on an easily understandable company with high barriers to entry and a dependable, if economically sensitive, business.
What makes it different from some recent investments by Mr. Buffett is that he isn't acquiring the railroad at a steep discount.
"It doesn't look like he got this on the cheap," compared to more "opportunistic" financial deals he did with Goldman Sachs and General Electric Co., said Catherine Seifert, an equity analyst with Standard & Poor's.
Mr. Buffett's bet on Burlington Northern values the entire company at $34 billion, plus $10 billion in debt, and offers shareholders the option of trading in their Burlington shares for shares of Berkshire Hathaway. The deal, structured with 60% in cash and 40% in Berkshire Hathaway stock, is his biggest deal ever, and the first in more than 10 years to include stock.
Mr. Buffett said Tuesday the deal is an "all-in wager on the economic future of the United States," given how rail shipping is heavily influenced by the economy. In an interview with The Wall Street Journal, Mr. Buffett said the investment, though "a huge bet and one that I'm very happy to make," still isn't "a bet on next month or next year," but rather a long-term play.
The deal also provides a benefit to Burlington Northern, in that it reduces its cost of capital as it becomes part of Berkshire Hathaway.
Once the acquisition closes in early 2010, it should immediately boost Berkshire Hathaway's earnings by roughly 10% annually, said Cliff Gallant, an analyst with Keefe, Bruyette & Woods.
Burlington Northern, of which Berkshire Hathaway already owned 23%, represents an investment by Mr. Buffett in the simpler, old-fashioned businesses he has said he likes.
"If there's lots of technology, we won't understand it," Mr. Buffett said in his 2008 shareholder letter of his wish list for preferred acquisitions.
The deal potentially changes the profile of Berkshire Hathaway from an insurance-based conglomerate heavy on financial-services investments to more of an industrial manufacturer, Ms. Seifert said.
"What is this telling us about his feeling about investing in financial services, when his big bet is outside financial services?" she said.
Berkshire Hathaway already has rail-related holdings, besides its prior stake in Burlington Northern. Last year, it acquired a majority stake in Marmon Holdings Inc., which manufactures railroad tank cars and other heavy equipment, among other businesses, and operates 250 manufacturing, distribution and service facilities.
Berkshire Hathaway also owns a majority stake in MidAmerican Energy Holdings, an energy distributor that uses coal transported mostly by train for about half its generation capacity.
The deal comes as Berkshire Hathaway is expected to post strong earnings Friday, after the market closes, buoyed by returns in its insurance and reinsurance businesses. Last year the company's net worth dropped by $11.5 billion, driven by a $7.5 billion loss on its derivatives holdings.
Last year, "people were worried" about Mr. Buffett's financial strength and the liquidity of his company, said Mr. Gallant. Now, "a statement is being made about his own position."
Write to Lavonne Kuykendall at lavonne.kuykendall@dowjones.com
Warren Buffett read on recession
http://money.cnn.com/video/fortune/2009/09/15/f_mpw_buffett_recession.fortune
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