Here is how you know the market is totally irrational. Look at the credit spreads on Berkshire Hathaway (BRK.A) credit defaults.
I am quite familiar with Berkshire – about as familiar as you can get by reading stat statements and the like. I can not blow it up. That means I know of no reason whatsoever that it could wind up insolvent in five years.
That does not mean it can not happen. If 9.11 had been nuclear they might have had problems – but as my “Risk Aversion Berkshire Style” post makes clear fat tail risk is not part of the formula.
So why is the five year credit default swap spread on Berkshire over 200bps? I have no idea and it makes no sense to me. Maybe it is just irrational bearishness about everything (ie BUY HARD) or maybe there is something I do not know.
So if anyone wants to post/reply a case for Berkshire CDS please…
Now, personally I have more faith in Warren Buffett and Berkshire than I do the US government at this point. That being said, a 200 point spread defies any and all rational thought.
I also can’t imagine a scenario in which Berkshire becomes insolvent. Perhaps a catastrophe the like of which we cannot imagine? If that is the case, the ability of Berkshire to pay it bills and make good on it’s debt will most likely be pretty low on everyone’s “things to worry about list”.
Insane….it also means “great opportunities”
Disclosure (“none” means no position):None
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