Don’t you love how financial writers are so quick to anoint Warren Buffett as “The Oracle of Omaha”? As if they are amazed that a rube from the middle of nowhere could turn the business world on its ear simply by employing common sense.
I don’t know that there’s anything that Mr. Buffett does that is truly “contrarian” in nature. He does his homework, he collects his facts relentlessly, and then does what all investors wish they could do: He buys low . . . and sells high (if at all).
Finance is kind of like crime. There is a premise that is so basic that many fail to follow its precepts. In crime fiction the saying is cherche la femme, French for “follow the woman.” Behind every criminal act there is (nearly always) a woman whose wiles are the motivating forces that drive the criminal to social corruption.
In finance, the saying is “follow the money.” Talk is cheap and trends are dangerous. When all is said and done, it’s the money that talks, it’s the cash that speaks thunderously. In a recent piece in the Wall Street Journal, Holman W. Jenkins Jr. highlights Buffett’s supposed contrarianism, pointing to Buffett’s purchase of a controlling share in Pilot Flying J, the truck stop chain. You know, food, fuel and showers for the long-haul boys and girls.
Jenkins suggests that Buffett is playing for suckers those who are banking on robots replacing drivers and electric replacing diesel any time soon. He cites Buffett’s recent appearance on Bloomberg TV, where he said, “Who knows when driverless trucks are going to come along and what level of penetration they have?”
Exactly. Follow the money. Buy low.
Jenkins notes that electric car producers are currently [small pun intended] losing some serious dinero on their gas-free vehicles: “Fiat admits to losing $20,000 on every electric vehicle it sells in Europe. General Motors loses $9000 on every Chevy Bolt. Even Tesla is partly sustained by selling zero-emissions credits to conventional car companies that actually make money (unlike Tesla).”
The conundrum he raises is this: “In banning gasoline-powered cars, then, California and other jurisdictions would be banning the very product whose profits allow electric cars to exist in the marketplace today.”
Plug into the equation the fact that long-haul truck trips (1000 miles or more) account for less than a quarter of all truck trips, the suggestion is that more drivers and support folk (warehouse hands, dispatchers) are going to be needed to support the likes of Amazon and other e-commerce operatives. Which means more reliance on truck stops. See where we’re going with this. (Add this shocking factoid into the equation: This country’s average households have more cars than licensed drivers!)
Buffett seems to have no problem in staying on top of that debate, and making hay from the fallout. He has followed the money and sees which way the wind is blowing. When it starts to blow back in the other direction, I’m going to bet that he’ll be ahead of that curve, too. Probably time to tuck a little more Berkshire-Hathaway stock into the old portfolio.
©2017 Richard Paul Hinkle