First Warren Buffett and now his international counterpart, George Soros. In the last week, they have caused more speculation in the US container shipping world than events of the last six months. (Slumping volumes asides). Soros has stepped in with a 14 percent chunk of Global Ship Lease, which does business at the moment almost solely with CMA CGM.
Most of the speculation is optimistic, with one industry source describing the two acquisitions as "a pincer movement." Market chatter leans heavily to the view that Soros went ahead only after seeing the Sage of Omaha make his move. Almost everyone reckons the two actions are linked.
From there, the speculation says that oil prices are a factor in the decisions, specifically rising prices. That's easier to follow in Buffett's case – trains use far less fuel than zillions of trucks – but with Soros it is to do with the fixed rate, long-term contracts that Global Ship deals in. The company gets its money no matter what happens. As with Buffett, Soros is reckoned to be taking just a first step and will get more embedded in shipping.
More important, it is being bandied about that the two adventurous financiers agree that US maritime commerce has to be supported and revitalized.
"Forget about the notion that Buffett is putting his future in coal", said one source. "It's a cash cow for the moment – but he knows that clean power will come along and that rail will again become the main transportation mode." The 60-40 split in volumes between truck and railroad, a legacy of the massive financial muscle of Detroit during the last 50 years, is forecast to be reversed within the next 10 years.
What's more, this turnaround is likely to be possible only with a rise in international trade through the ports and not through domestic traffic – the further that goods have to go, the more cost and carbon efficient rail becomes.
A common feature of both men's strategy is a belief in a public-private partnership in utilities and infrastructure. It's common currency around the ports that the railroads have been hanging back on capital spending (as opposed to capital replacement) until the time the federal government has to shell out to stop the system falling apart.
Buffett is seen as likely to tell the railroads that they must take more of the burden, with the government also playing a part. Die-hards might not like it, but that is the future of national development.