(The following story by Jacqueline Thorpe, Duncan Mavin and Carrie Tait appeared on the Financial Post website on February 7.)
OTTAWA — Warren Buffett said Wednesday he made “several hundred million dollars” on the loonie but wished he kept the holding because he believes the currency will likely continue to strengthen.
The chairman and chief executive of Berkshire Hathaway Inc. also said Canada’s oilsands were a valuable asset for a fuel-hungry world but indicated he does not have the technical expertise to invest in the area.
Although he owns no stakes outright in any Canadian companies — and declined to say if he was interested in buying any — he is certainly pleased with the Northern exposure he has.
“We owned the Canadian dollar,” Mr. Buffett said in an exclusive interview with the Financial Post. “We made several hundred million dollars…. I wish I kept them.”
Mr. Buffett, in Toronto for the Canadian launch of Business Wire — a corporate news release service that will be available on all Canwest Web sites, including the Financial Post — made a well-publicized bet against the U.S. dollar several years ago. Although he has since unwound much of the position he still believes the greenback will continue to be weighed down by huge U.S. trade and current account deficits.
“I think it is more likely that we will continue our present polices in the U.S. and the Canadian dollar, over time, would strengthen even further.”
One of Mr. Buffett’s more recent purchases — a 60% stake in Marmon Holdings Inc. for US$4.5-billion late last year — has operations in Canada. The company, makes such things as railroad tank cars, plumbing pipes and metal fasters in the old-fashioned easy-to-understand businesses that Mr. Buffett loves to buy.
“We lease many of the cranes that are being used, for example, in the tar sands,” he said. “We have a rail equipment operation here. Lots of businesses here. Many of our American companies that are based in the United States have operations here, including, I might mention Business Wire, which is kicking off right now.”
Marmon was privately held by the Pritzker family of Chicago — owners of the Hyatt hotel chain. The business will be able to provide Berkshire with earnings in Canadian dollars.
“I like the fact that if we buy a business such as Marmon that has earnings in Canada, I like having earnings [in Canadian dollars.],” Mr. Buffett said.
“I think those Canadian dollars are very likely, even from this level, to be worth more than the U.S. dollar five or 10 years from now than they are today.
But he remained typically coy on whether he would invest in particular
Canadian companies, saying “that is where my mouth is not connected to my brain.”
He clearly sees the value of the oil sands as the world’s demand for energy continues to grow.
“The world will be using more oil 15 or 20 years from now,” Mr. Buffett said. “We are on a course that cannot be changed. It would surprise me if the world doesn’t want to use 100-million barrels a day in 15 or 20 years.” At the same time supply remains elusive.
“You need some … elephant fields and we haven’t found any elephant fields in the last 15 or 20 years. So the sands are huge.”
But Mr. Buffett famously stays away from industries he does not fully understand.
The oil sands “require some abilities I don’t have, that’s an engineering project,” he said. “I would not have the faintest idea what I was doing compared to tens of thousands of people that have spent their lives figuring out how to squeeze and cook that stuff out of the ground. That is a game that somebody else can play a lot better than I can.”
Mr. Buffett has been buying railroad stocks in recent years but said the market has probably recognized their value now. He was particularly impressed with Canadian National Railway.
“You’ve got some good railways,” he said. “Canadian National probably has the best record of any railroad I know of. The railroad business can’t be a great business but it can be a decent business. It takes too much capital to be a great business. if you have a big railroad you have to put billions of dollars in every year just to stay where you are.” He added as the price of oil goes up it becomes more efficient relative to trucking.
“It’s got a lot of things going for it which will make it a decent business which has now been recognized in the market pretty much. It does not have an incredible future.”
He added: “My friend Bill Gates bought a lot of that [CN], but he’s smarter than me.”