Some synapse-freaking numbers for you: Buffett spent $26.6bn yesterday, but he already owned 22.5% of Burlington, so the company is now valued at $34bn, plus Buffett has taken on $10bn of the company’s debt. And Berkshire Hathaway, Buffett’s holding company, still has $20bn to play with, and play with it he will. 

It’s a turnaround for Buffett, who was slagging off rail in the middle part of this decade – now, while acknowledging that rail requires constant injections of capital to keep it rolling, Buffett is putting his faith in rail being a growing sector. And away from the pell-mell of the stock markets and debate over whether the economy is going to pick up enough to warrant this investment, the most interesting part of this deal is what it says about America’s environmentally-conscious future.

On the one hand, Buffett is putting his faith in coal with this deal. Burlington hauls enough coal to power one in every ten American homes – it’s their second-largest revenue generator after consumer products. Buffett is keen to point out that coal from the American West, which Burlington serves, is “more competitive, it’s lower-sulfur coal than in the East”, and while he admits that “over time, coal is going to diminish somewhat”, he’s still gone into this deal because he knows America will be running on coal for many years to come. He plays up his green credentials, citing his use of wind power, but he also runs 11 coal-fired power stations through MidAmerican Energy. If the Oracle says coal is profitable, then it’s profitable.

On the other hand, his faith in rail implies a lack of faith in road haulage. With oil prices set to rise, it makes sense for Buffett to invest in the most fuel-efficient means of transportation – he said yesterday that one gallon of diesel can haul a ton of goods for 471 miles with BNSF trains. Lower fuel costs mean lower haulage prices, which means a competitive advantage. Indeed, if oil prices continue to rise, “long haul trucking could be a dinosaur”, as Scott Edward Anderson told Fox News yesterday – Anderson, of Greenskeptic.com, said that a likely scenario is of long-haul rail linking with short-haul hybrid vehicles. Buffett, along with his investment in Chinese auto and electric car battery manufacturer BYD, is clearly shoring up Berkshire for a post-carbon future. Buffett is only following larger trends, but the sums of money he’s spending are so large and his influence so strong, that he himself is accelerating these changes in American energy habits. 

Though of course it could be that the main reason for Buffett buying up the railway is that it’s because he knows about the impending removal of global borders, and is therefore planning to better do business in what were formerly known as Canada and Mexico. Yeah, that’s probably it. 

Photo: Art Comments

It shows that while in America and other countries with a wealthy populace, there are enough people with enough money to fork that little bit more out to get a Prius, thus saving the planet or smugly announcing their green credentials, depending on how cynical you are. But in China, a lot of people are finding they’ve now got just enough money to buy their first ever car, so they’re not going to save or pay for a few more years to get the hybrid version.

Moreover, in America it’s fine to provide subsidies for electrics or hybrids because pretty much everyone can afford to buy some sort of car; in China, as the industry planner Bloomberg spoke to said: “Some may say it’s unfair to offer subsidies using taxpayers’ money for car buyers who are relatively rich even if that helps the industry grow.” Nevertheless, Wang Chuanfu, the head of BYD, talked up the prospects of getting some government help at a conference yesterday.

But obviously America is the place for any hybrid producer to aim at, and BYD have said they’re going to move into the market there next year, starting small with just a few hundred of their “exceptionally superb” e6 all-electric, before expanding. Warren Buffett has also apparently been making noises about wanting to extend his involvement in the company; the merest hint of further investment prompted shares to rise 8%.

So hybrids are still, for the moment, the preserve of the consumer willing to invest in environmental friendliness, which in China currently number approximately zero. While it would be indeed unfair to spend money on subsidies when so many of the countries’ people can’t afford to benefit from them, China nevertheless needs to caution against creating the world’s number one car exhaust pollutant.

Meanwhile, let’s get Alec Baldwin round the BYD hybrid dealerships:

The deal serves to show just how powerful and profitable lithium-ion producers like BYD are going to get in the coming years – VW is having to partner with a number of companies, including BYD, Sanyo and Toshiba, just to be able to source enough batteries for its electric cars. No-one can produce these things fast enough at the moment, but once someone does, they’re clearly going to be unimaginably massive – one estimate puts the 2030 market at $150bn. BYD are well placed to take an early lead, but the US is keen not to be left behind – the government has been courting applications for $2.4bn in federal funding for developing battery production facilities.

BYD’s actual cars have been selling well, with a 143% increase in year-on-year sales of its F3 model. It came to greater Western attention when the twinkly ukulele-wielding investment oracle himself, Warren Buffett, bought 10% of the company last October. It’s a decision that his Berkshire Hathaway partner Charlie Munger defended at the Berkshire shareholder retreat last week (or “Woodstock for capitalists” as Buffett dubbed it), saying it wasn’t a speculative venture capital investment, but in something that was small but with big ambitions.

BYD’s founder and chairman, Wang Chuanfu, certainly has the work ethic to make it a success: “Maybe in the Western world, life is number one and work is number two, but in China, work is number one and life is number two. I enjoy working very much, if you ask me to go sightseeing for a day I probably wouldn’t enjoy it.” He works seven days a week, every week. Suddenly Bad Idea’s bank holiday weekend seems like a personal weakness.

BYD has got embroiled in some mild controversy, with one of their rivals, Taiwanese company Hon Hai, accusing them of stealing trade secrets, but BYD are denying it, and Berkshire’s Munger is relaxed about them: “That set of claims, in my view, has been totally discredited. I don’t have any ethical concerns about BYD.”

BYD use iron-phosphate-based lithium ion batteries, which are safer and mean your car isn’t prone to bursting into hot metallic flames; they will be heartened then to note this bit of research by MIT, who have pioneered a kind of iron-phosphate lithium ion battery that can be charged in 20 seconds, equally without blowing up, hot metallic flames etc. The one thing about petrol is that it works straightaway – no matter how green or cost-effective in the long term the electric car might be, consumers will only get on board if they’re convenient, and so getting recharging times down is surely a key detail.

Something tells me that the UK’s £250m of funding in general electric car-ness won’t go very far towards getting us any of this pie. It’s not like we don’t have either the manufacturers – there’s an association of them in fact – and there’s also some quality research being done, like the air-fuelled battery being researched at St Andrews University. Let’s hope we don’t end up missing out on the manufacturing opportunity of the century.

Gordon Brown said last year that he wants all British vehicles to be hybrid or electric by 2020, and the announcement comes as various major car manufacturers outline their plans for electric cars. Nissan CEO Carlos Ghosn was talking up his company’s prospects yesterday: ”Somebody’s got to invest massively and bring to the market zero emission cars, and we think we can do it”, he said, before slagging off GM’s Chevy Volt for being, at $40,000, way too expensive. Chrysler is developing the Dodge Circuit, an electric sports car, to be the first of five electric or hybrid models to be out by 2012 (that’s if it can negotiate a deal with Fiat to manufacture them). Mitsubishi have recently been showing off the i-Miev, a tiny car that looks like a cheerful robotic hamster storing food in its cheeks, and plans to launch it in 2010. Then there’s the adorably happy little gentleman pictured above, the Peapod, who can only go at 25mph and is designed as a “neighbourhood” vehicle, but which is so goshdarned cute I could just eat it all up.

This month’s Fortune magazine features Warren Buffett alongside the Chinese electric car company he’s invested in, BYD. Don’t underestimate the power of the Oracle – his slavish followers will be on the BYD waiting list before you know it. It only costs $22,000, and looks like a Saab if you squint hard enough, but does have its limitations – its 60-mile range is only good if you’re pootling along at 30mph, while lack of demand in China might be a stumbling block to expansion.

Vauxhall have announced the Ampera, which looks totally evil, the sort of thing the Terminator would take his kids to football practice in. Encouragingly though, it could be built at Ellesmere Port, helping the UK, as Boris Johnson potentially sees it, to be the “electric car capital of Europe”. Ah, and therein lies the rub.

£250m is a drop in the ocean in terms of the investment in infrastructure needed for electric cars to be feasible UK-wide. George Osbourne has  described the plans as “fantasy”, highlighting the lack of preparation for charging points and no mention of a grid to deal with the extra electricity demands created by a nation of electric car drivers. And as John Sauven, chief exec of Greenpeace, told the Telegraph: “electric cars are only as green as the electricity they run on”.

The recent fails concerning renewable energy funding means these cars aren’t going to be running on wind or waves; it looks like Ed Miliband’s next generation of nuclear power plants is going to be sorting out energy in the medium term, but until they’re operational the UK is going to running on carbon-rich gas, right when the electric car revolution is meant to begin.

I scraped a B at GCSE, but let’s do some maths anyway. Assuming you charge your 25kWh car battery from a gas-fired power station emitting 400g of carbon per kilowatt hour, you’ll create 10,000g of carbon dioxide to charge an electric car for a day. An electric car like the Ampera or Volt can generally go about 64km on a charge. A 1.4l diesel Ford Fiesta generates 119g of CO2 per km, or 7616g over 64km; that’s 2,384g less carbon than the electric car, right? (Please tell me in the comments if I’ve really dropped the ball here). OK, so a diesel Fiesta has very low emissions compared with most vehicles, and this doesn’t take into account the carbon created by manufacturing the diesel, but even so, electric cars charged off gas-fired power stations (which aren’t even as bad as coal ones) can’t really claim to be cutting Britain’s carbon emissions substantially. And the above scenario doesn’t take into account the strain that fast-charging batteries will have on a power grid.

There’s also a huge shortfall in Hoon’s proposal in terms of allowing the UK to reap the benefits of the electric car. Sure, the Ampera might be built in the North West, but the batteries will be coming from China. If oil-producing nations were the beneficiaries of the internal combustion engine, then battery-producing nations are set to be richly rewarded in the electric car age – the market for lithium-ion batteries to be used in cars could reach $17bn by just 2012. To say, as Labour are, that your electric car plans are to merely subsidise people to buy them, rather than even attempting to tap into the revenue-generating potential they have, is pretty pathetic.

Obviously the government championing electric cars is a good thing, but they have to be powered by renewables, they have to involve British industry, and they have to have a supporting infrastructure that will stay in place for decades to come. Concentrating on the consumers should be the last on this list of priorities; Labour is currently putting it up at the top.

Cue the cheap soundtrack bed and get Mark Goodier to dust down those creepily boyish tones, because here’s the BAD IDEA billionaire highlights!

- Mikhail Prokhorov, keeper of friends who may or may not be ski-resort whores, is now Russia’s richest man, overtaking Deripaska and Abramovich; Moscow has also lost its crown as world billionaire capital to New York. We saw way back when that he managed to sell off his stake in Norilsk nickel for $13.2bn before it dropped like a stone to less than $4bn – meanwhile his oligarch chums haven’t been so fortunate. He’s single, so any female readers might want to start brushing up on their vacant coked-out stare and feigned interest in Russian basketball.

- Sneaking in at the bottom of the list with $1bn is 5ft tall Mexican drug lord Joaquin “El Chapo” Guzman, who is constantly evading the police, changing his mobile phone every day, and having a lot of people killed. There’s a vast repertoire of songs written about him, known as narcocorridos, or “drug ballads” – check one out below:

Can’t really see Moss Side dealers ever having lyrical odes penned to them, and England is poorer for it.

- Rupert Murdoch has lost the title of Australasia’s richest man – that’s now Graeme Hart, “owner of a packaging empire that includes Carter Holt Harvey” (?), whose personal wealth is $4.5bn. Like so many risers in the list, he didn’t go up by doing well last year, only by doing less badly. He lost $600m, rather than Murdoch’s $4.3bn. Strewth!

- As for the Brits, it was equally gloomy. Branson went down from $4.4bn to $2.5bn, or 236 to 261 in Forbes money; high-street tag team Philip and Christina Green dropped just two places but saw their fortune go, with lovely symmetry, from $8.4bn to $4.8bn. Britain’s richest person is still Lakshmi Mittal, at number 8 and living in that Kensington palace that makes prospective first-time buyers cry; highest British-born is the super-plummy Gerald Cavendish Grosvenor, who is at 29 and probably owns the land you’re stood on, would rather you got off it, and is going to call the hounds.

- Finally, Mark Zuckerberg, that little squirt who looks like he should be masturbating in a darkened room surrounded by pizza boxes instead of running the most popular Web 2.0 enterprise out there, has dropped off the list completely after being last year’s youngest self-made billionaire. Maybe time to get a business plan together, hmm?

After he expressed faith in America’s banks, shares in those banks rose, particularly in Wells Fargo, whose price jumped nearly 25% after Buffett said they would “come out fine”. Meanwhile, he prompted an increase in American Express, of which he owns 151.6m shares, by saying they were “going to be around forever”. The guy is acknowledging his awesome power and wielding it to shore up his portfolio. After announcing record losses last week, he knew something needed to be done – 3 hours of CNBC coverage later, and he’s right back in the game. Add that to his talk of convening with “animal spirits” and I think we may can presume he’s working on a higher plane.

Despite his rosy picture of an America coming together under the unity bred by strong, Buffett-backed banks, some clearly listened mostly to the doom and gloom at the beginning of his interview. Forbes suggests that both American and Asian stocks were adversely affected by his “cliff” comment; Bloomberg suggested it was the cause of disruption in the European stock market. Whether this is news companies trying to jazz up dry stocks stories with a bit of Buffett twinkle, or the stock markets really are aligned with Buffett’s moods, it’s not clear. But just the idea of a 78-year-old ukelele fan and collector of nuns fingerprints, surrounded by acres of soft furnishings, making pronouncements on the world economy that are not only listened to but devotedly acted upon, is so wonderfully weird that I really want it to be the real driving force behind the world economy.

Despite saying that the economy “has fallen off a cliff” and is “close to the worst case”, he’s confident in a way that a man with an bewilderingly diverse portfolio and enough money to buy many small nations can be, even if he is experiencing the hard times first hand.

In brief: the free market system is fine, it just “gets gummed up once in a while”. All we need to do is pull together, like after Pearl Harbour, forget all that “partisan stuff” and listen to our leaders. Forget about the Madoff bashing or any other bashing for that matter. Obama needs to reassure people more. Leverage is “fun” but bad. And private jets are great.

Transcript here, or edited video below:

Buffett unleashes some weapons-grade craziness throughout. “By yearend, investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game”, he notes at the outset. Continuing the bonkers similies, he doesn’t seem too enamoured with the US Treasury – “Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects” – but is looking forward to new clients at car insurers GEICO: “As we view GEICO’s current opportunities, Tony and I feel like two hungry mosquitoes in a nudist camp.” Perhaps best of all is his warning over the dangers of derivatives dealing: “Participants seeking to dodge troubles face the same problem as someone seeking to avoid venereal disease: It’s not just whom you sleep with, but also whom they are sleeping with.”

He repents for his sins in betting on ConocoPhillips when energy prices were at their peak, but he shrugs all this off, talking up Berkshire’s “Gibralter-like position” and saying “America’s best days lie ahead”. He spends a lot of time verbally fellating his various managerial teams, getting especially loved-up at the mention of his insurance managers: “Why do I love them? Let me count the ways.” 

Buffett’s tendency towards gnomic burbling also gets an airing, coining these humdingers: “When investing, pessimism is your friend, euphoria the enemy”; “Our advice: Beware of geeks bearing formulas”; “Beware the investment activity that produces applause; the great moves are usually greeted by yawns”. You can almost hear the sound of chisel on stone as Buffett’s disciples note down this “wisdom”.

He also references Mae West, Jimmy Stewart and Gone With The Wind – I love how you can picture him relaxing in his Omaha homestead, mixing a Snowball and slipping on the Andrews Sisters, before a conference call in the morning explaining what the internet is.

And he finishes up by promoting his “Woodstock for capitalists”, the Berkshire AGM. The whole thing sounds like a creepy Buffett theme park, where you can gorge yourself on Buffett-condoned products, like the “i-house”, Ginsu knives and NetJets planes, and you get a little insight into the fervency of Buffet’s followers when he describes the procedures for his Q&A session: “There has been a mad rush when the doors open at 7 a.m., led by people who wish to be first in line at the 12 microphones available for questioners. This is not desirable from a safety standpoint”. 

He even keeps the entertainment old-school, with a blindfolded chess player, classic cars and, of course, a magician. But he hasn’t forget something for the thrusting young bucks: “The future will be represented by a new plug-in electric car developed by BYD, an amazing Chinese company in which we have a 10% interest”. Buffett’s representative of the future is something that represented the future back in the mid-90s, and yet he’s worth $62bn. Go figure.