Buffett on Investing in Infrastructure

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Insight on the role of government in infrastructure spending, with Warren Buffett, Berkshire Hathaway chairman/CEO.

Video and transcript:

i’m going to ask him one thing. warren, i’m thinking back to the pipeline and to infrastructure in general. i’m trying to figure out how — what you feel about infrastructure. the way you answered that question about the pipeline in that well, you know, they talk about jobs here. they talk about jobs there. see, to me, that seems like just crucial infrastructure that if we’re going to do something, that will be great to bring oil in from our friendly neighbors to the north. it helps with our relations with canada. we’re not going to get off carbon any time soon. it made a lot of sense to me. because of your answer to that, do you think other infrastructure projects are sort of the same? because that seems like one we could actually use. building high speed rail between cities where people don’t even want to go or some of these other ideas, solyndra, i don’t know, that type of infrastructure seems even less — makes less economic sense than the pipeline did. yeah. we will spend bnsf $3.7 billion this year on the railroad. and a lot of that is infrastructure. in fact, that’s by a large margin more than we’ve ever spent. one thing you’ll get a kick out of, you talk about infrastructure, they actually had to build six bridges in connection with — because of the floods that took place. the floods were really tough this year, particularly on our railroad. and matt rose who runs bnsf, knowing how charlie kind of grimmaces whenever he hears about capital expenditures, there is a bridge in iowa, the charles t. monger bridge. so charlie has a bridge named after him. well, how much of a — that’s amazing that — so a private company is building all the infrastructure. but what’s the role of the government in terms of stimulus and the jobs plan? what’s the role there for infrom stru infrastructure? i’m not saying that pipeline — i just don’t know. i don’t know the weight of the two arguments. i don’t know that much about soil. it’s just a subject i don’t know much about. but certainly in terms of stimulus, infrastructure is a very, very logical place to spend real money. if you decide you’re going to run a government deficit and large one and to act as a stimulus and you have the needs we have in this country in terms of all kinds of infrastructure, that’s basically a good idea. now i will say this. we bought the entire bnsf equity. we paid about $33 billion for. about maybe $10 billion of debt. so for that we got 32,000 miles of track. we got 6,000 locomotives. we got 13,000 bridges, all kinds of things. i think in california now the number is up to 90 billion or something for 800 mile of track. so can you do the math. warren, just to change topics real quick. while you’ve been on the broadcast, bank of america announced they sold 10.4 billion shares of china construction bank for a pretax profit of $2.9 billion. you’re an investor in the preferred shares, of course. curious what you think about the future of the company and also more importantly investors who watch you and watch you make she’s investments in she’s investments in preferred shares, should they be following you into the common shares? not necessarily. go back to saeam of the chinese stock. bank of america, you know, went off in 100 different directions. a couple of them will be ungodly expensive. that has nothing to do with the present management. and brian has the job of cleaning up some of problems in the past. not that the chinese bank itself is a problem. but in terms of getting the capital in line with the total assets, he does have a problem that needs working on. and he’s been working on it. one way to do it is to sell assets and bring down the liabilities of some degree. can you bring up the capital but you can also bring down the lie anlts. he is doing both. he is following a very logical path. he can’t could it in a week, a month or even a year. the legacy problems he got handed are significant and they’re not in many cases they’re not capable of immediate resolution. but he is doing the things quite promptly that he can could things about. and i think he’s making a lot of good decisions. the wall street journal i didn’t think sized him in an article for flip-flopping on a lot of issues for deciding to pull back on the atm fees, the $5 atm fees and deciding to buy shares after saying they wouldn’t — or shares after saying they would not issue additional shares. they said in the end it would have been the right decision. he has a dynamic problem. i found a lot of things in the third month that i didn’t know in the first month. when you have problems to clean up, when american express had problems in the 196 o’s, it cleaned up. when geico had problems in the ’70s, they cleaned up. usually the problems are bigger and more longer lasting than you think. but they also are solvable. and it takes time. it takes a lot of effort. it takes a lot of grief. but if you have a wonderful underlying business which the b of a does, which geico does, which american express did, you know, you’ll get them resolved. if you have somebody that puts their nose to the grind stone and does it. in terms of the — i just want to go back quickly to the preferred kman issue. it is very interesting. when you make an investment in preferred shares, it doesn’t necessarily mean that shareholders should rush to go buy the common. is that right? i ask you only because so many people move — do give you these tremendous deals, do it in part to rank the buffet name. i remember my mom saying i should invest in these shares because warren buffett is. i buy several different kinds of shares. i was buying something $5 billion where we have no — where we contractually, we’re not allowed to sell for five years. so in a sense, we were put our money in but couldn’t change our minds. we were putting money in saying in five years we can — this is good. and that is a real vote of confidence. i mean it’s not a vote of confidence to good buy, you know, 100 shares of xyz and sell it the next day. but when you put $5 billion in and can’t take it out, you can’t touch it for five years, i think that is a valid vote of confidence. et doesn’t mean the common is a buyer or seller or holder or anything else. but it does mean that we felt very strongly that the b of a was going to get rid of its legacy problems over time. and it will take plenty of time. and that underlying deposit franchise and business they have is a terrific business.

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