The S&P closed higher on Tuesday after Warren Buffett stunned the Street and said his company, Berkshire Hathaway, will pay $26 billion to buy out railroad Burlington Northern Santa Fe in what the billionaire investor called a bet on the U.S. economy.
"It's an all-in wager on the economic future of the United States," Buffett said in a statement, adding that railroads are key to the U.S. economy and will benefit as recovery takes hold. "I love these bets."
The deal, Buffett's biggest-ever acquisition, is priced at a premium of 31.5 percent over BNSF's closing stock price on Monday and values the railroad at $34 billion.
What must you know?
Strategy Session with the Fast Money traders
Nothing changed on Tuesday. Buffett’s move is a long-term play, reminds Tim Seymour. I don’t think his BNI purchase changes short-term trades for anyone. But it did generate positive sentiment. The S&P futures were sharply negative before the news hit.
I ‘do’ think Warren Buffett is telling investors something, muses Joe Terranova. I find it bullish commentary not only on transports, but also on energy and infrastructure. To me it also bodes well for FedEx, he adds.
And there’s drill down, adds Pete Najarian. Investors seem to be more bullish on coal because of Buffett. Or look at other railroads, Najarian adds. I've got Union Pacific on my radar.
Buffett is known for buying high quality businesses that generate stable cash flows, reminds Whitney Tilson of T2. I think it’s a good deal and I expect it to work out nicely for shareholders. Remember he has lower cost of capital than almost anyone else in the world. If the alternative is sitting on a lot of cash and bonds, it's a very good deal, despite the premium he's paying.
GOLD SURGES TO NEW RECORD
Gold futures hit an all-time high $1,081.70 an ounce on Tuesday, surpassing the previous record set Oct. 14, boosted by technical buying and news of a gold sale by the International Monetary Fund (IMF) to India.
What’s the trade?
The move makes India’s central bank the 8th largest holder of gold, explains Tim Seymour. I see this not as an IMF sale, but a purchase by India to diversify away from dollars. That’s bullish for gold.
When it comes to metals I’m more focused on copper , adds Pete Najarian. If it holds above $3, I’d find that bullish commentary on the global economy.
BREAKING NEWS – GM TO RETAIN CONTROLLING STAKE IN OPEL
In breaking news, CNBC’s Phil Lebeau explained that GM’s board decided to make a major change to its footprint and retain controlling stake at Opel.
What’s the trade?
I’d go long Ford, says Tim Seymour. They’re doing it all right.
I’d be a buyer of Toyota , adds Joe Terranova.
SCHIFF: HOW TO REALLY MAKE AMERICA GREAT
Leave it to Euro Pacific Capital president and perma-bear Peter Schiff to rain on Warren Buffett’s bull parade.
Schiff says Buffett's vision won't come true without some fundamental changes. What are they? Watch the video and find out for yourself!
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Trader disclosure: On November 3rd, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Finerman's Firm Owns (BCR): Finerman Is Long (BAC) Calls: Finerman's Firm Is Long (BAC) Call Spreads: Finerman's Firm Owns (BAC) Preferred: Finerman's Firm Owns (FLS); Finerman's Firm Is Short (FLS)Calls; Finerman's Firm Owns (MSFT); Finerman's Firm Owns(NOK); Finerman's Firm Owns (PBR); Finerman's Firm Owns (PDE); Finerman Owns (PDE); Finerman's Firm Owns (RIG); Finerman Owns (RIG); Finerman's Firm Owns (WFC) Preferred; Finerman's Firm Is Long (TGT); Finerman's Firm Is Long (WMT); Finerman's Firm Is Short (IJR); Finerman's Firm Is Short (MDY); Finerman's Firm Is Short (SPY); Finerman's Firm Is Short (IWM); Finerman's Firm Is Short (UNG); Finerman's Firm Is Short (USO); Seymour Owns (AA); Seymour Owns (AAPL); Seymour Owns (BAC); Seymour Owns (EEM); Seymour Owns (SBUX); Seymour Owns (F); Seymour Is Short (FXI); Seymour Owns (POT); Terranova Owns (GS); Terranova Owns (RIMM; Terranova Owns Dec. Gold Futures; Najarian Owns (HGSI) Call Spread; Najarian Owns (INTC) & Short (INTC) Calls; Najarian Owns (LAZ) & Short (LAZ) Calls; Najarian Owns (RIMM) Call Spread; Najarian Owns (TEVA) & (TEVA) Call Spread; Najarian Owns (WFR) Calls; Najarian Owns (YHOO) & (YHOO) Puts
For Cliff Gallant
Gallant Owns Shares of (BRK.A)
KBW expects to Receive Compensation From (BRK.A)
For Pete Schiff
Schiff is Short the Dollar
Schiff Owns Gold
For Whitney Tilson
Funds Managed By Whitney Tilson Are Long (BRK.a) & (BRK.b)
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