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The Rise of Supranational Credit

Whose credit would you prefer, that of the United States of America, headed by Barrack Obama? Or that of the "nation" of Berkshire Hathaway, headed by Warren Buffett? This morning, the bond market said, "the latter," by pricing Berkshire's bonds at a lower spread than U.S. obligations of similar maturity.

This goes to highlight a trend that I mentioned earlier: the rise of "supranational" investors that are more powerful than whole countries. With perhaps 300,000 employees, (and twice as many shareholders) the Berkshire "nation" is about one tenth of one percent the size of the USA. It typically pays about 1/500th of the taxes of the whole country. Clearly, the US is a much larger, and by implication, a much "safer" entity.

Except that it isn't. That's because Berkshire is an elite outfit, the corporate equivalent of the Rangers or the Marines. Put another way, Berkshire "punches above its weight." And the U.S., well, it is a collection of citizens of varying qualities.

That must be an embarrassment for politicians of all stripes. To preside over a nation that is in some ways weaker than one of its largest corporations.

Long BRK/A, membership in the "Berkshire nation"