Buffett buying Burlington Northern rail for $34 billion

Legendary investor Warren Buffett is making what he calls an "all-in wager" on the U.S. economy -- $34 billion to buy a major railroad that hauls everything from corn to cars across the country.

Burlington Northern, the nation's second-largest railroad, is the biggest hauler of food products like corn, and coal for electricity, making it an indicator of the country's economic health. The railroad also ships a large amount of consumer goods -- including items imported from Asia -- from big Western ports like Los Angeles and Seattle.

Analysts say Buffett is planting both feet in an industry that is poised to grow as the economy gets back on solid ground. It would be the biggest acquisition ever for Berkshire Hathaway Inc.

Berkshire Hathaway already owns about 22 percent of Burlington Northern, and will pay $100 a share in cash and stock for the rest of the company. That was 31.5 percent premium on Burlington Northern's closing price Monday. The stock shot up 27.5 percent, or $20.93, to close at $97 yesterday.

Analysts say Buffett is looking for an investment that will reap rewards for many years into the future. Buffett is "buying at the trough -- things aren't going to get much worse. He's getting in at a good time," said Art Hatfield, an analyst with Morgan Keegan.

Buffett thinks railroads are a key economic indicator because of the amount of retail and manufactured goods they haul across the country.

"They do it in a cost-effective way and extraordinarily environmentally friendly way," he told CNBC. "I basically believe this country will prosper and you'll have more people moving more goods 10 and 20 and 30 years from now, and the rails should benefit."