On Sunday, Bloomberg News reported that bonds issued by Warren Buffett’s Berskshire Hathaway are trading at “3.5 basis points less than Treasuries of similar maturity.”  In laymen’s terms, it is now more expensive for the U.S. Government to borrow money than Warren Buffett.  The implication here is that your money safer at Berkshire than with the government.

Let me get this straight; some citizen, who is bound by U.S. tax laws, runs some corporation, which is subject to U.S. tax laws, and the market is indicating it to be a safer place for your money than the authoritative body that controls the very same tax laws.  Do people really think this makes sense?  The “United States is losing its AAA rating” AKA the “China doesn’t love us anymore” argument is irrelevant here.  This screams arbitrage convergence play!  The gap between the two will close/invert.  Meaning, yields on Berkshire will go up and/or yields on U.S. Treasuries will go down.  Construct accordingly.

Disclaimer: The sooner Obama starts sexing it up, the sooner the gap will close.