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article imageIs Warren Buffett a safer investment than Barack Obama?

By Andrew Moran     Mar 22, 2010 in Business
New York - Two-year notes sold by billionaire Warren Buffett's Berkshire Hathaway Inc. in February yielded 3.5 basis points less than United States Treasuries, which prompted the markets to ask the question: Is Warren Buffett a safer investment than the U.S.?
Bonds that are currently being sold by Berkshire Hathaway and other big corporations are paying less interest than bonds sold by the United States government, according to data compiled by Bloomberg News. Procter & Gamble, Lowe’s Cos. and Johnson & Johnson also traded at lower yields, which have been called “exceedingly rare.”
This news is scratching the heads of many investors and analysts because Treasuries are thought to be the safest bonds in the world. However, the market is telling the experts that the U.S. is a riskier investment than Berkshire Hathaway.
NPR reports that the astronomical U.S. debt and deficits are creating considerable and justified concerns about the nation’s ability to pay off its long-term debt, which prompted Moody’s to warn that countries like the U.S. and Great Britain are on the verge of losing their AAA credit rating status.
“It's a slap upside the head of the government. It could be the moment where hopefully you realize that risk is beginning to creep into your credit profile and the costs associated with that can be pretty scary,” said the Chief Fixed-Income Officer at Fifth Third Asset Management, Mitchell Stapley, reports the Sydney Morning Herald.
As the national debt of the U.S. government continues to grow, many companies are attempting to cut their debt levels in order to reduce risk to bondholders. A lot of companies in the S&P 500 slashed their debts by less than $300 billion down to $7.1 trillion in the fourth quarter of last year.
At the present time, the U.S. faces a $12.6 trillion national debt and $1.6 trillion national deficit. With the recent passage of health care reform, a new Congressional Budget Office report shows that $59 billion will be added to budget deficits between 2010 and 2019.
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