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U.S Treasuries Are Now "Spread" Product

Time was (not so long ago), when the yield to maturity on U.S. Treasuries was the so-called "risk free" rate. that is to say that it was lowest interest rate on dollar denominated securities with no risk of default.

That all changed earlier this week, when Treasury spreads went "wide of" (higher than) those of Berkshire Hathaway bonds of similar maturity. Although not "risk free," those of Berkhire Hathaway are now the "minimum risk" dollar-denominated instruments. Relative to Berkshire Hathaway, U.S. Treasuries are now (positive) "spread" products.

That stands to reason. First of all American debt levels are at all time highs in absolute amounts, and near all time highs in ratios to GDP, etc. Second, the U.S. Treasury effectively stands behind not only its own debt, but the "subprime" paper of Fannie Mae, Freddie Mac, and major banks under the TARP program. If you mix in such securities with "risk free" paper, then the "blended" paper carries some risk.

It's true that the United States has the power to tax, and Berkshire doesn't. But the United States also has a greater potential to LOSE MONEY than Berkshire.

There is a saying in investments and gambling games: "What you don't lose, you don't have to make back." The comparable saying in politics would be: "What you don't lose, you don't have to TAX back."

Long BRK/A