Hey, how's everybody doing out there? This is Preston Pish and welcome to this week's

In-Bit-Tween-A-Sode. So I originally planned to talk to you about competitive advantages,

but the recent market activities encouraged me to talk about something a little bit different.

The topic for this week's quick discussion is intrinsic value in the rising pressure

in the US Treasury market. So billionaire Warren Buffett says that one of the most fundamental

elements in determining the value of an asset is constantly comparing the expected return

to the 10-year Treasury note. The reason Warren Buffett recommends the 10-year Treasury

is because he views it as a zero risk investment because the Federal Reserve can simply print

more money to service the payments. So the best way to think about Buffett's use of

the 10-year Treasury is to imagine a ruler or a yardstick. When Buffett wants to determine

the value of a stock, a corporate bond, or even a local business, he uses that zero risk

measurement tool to determine the risk versus the reward. So that's how you really need

to think about this when he talks about this 10-year Treasury. It's like a ruler or a measuring

stick for him. So if we estimated that a local business on Main Street would give us a

10% return annually if we bought it at a certain price that would provide that return, Buffett

might say that he's getting a 4x or a 4x the return of the zero risk Treasury note.

So that's how he's really looking at it. He's using that as a tool for determining that

value. Now how I got 4x is because right now the 10-year Treasury is trading for 2.5%.

So what he would do is he would just say, hey, I'm getting a 10% return by owning that

business. If the Treasury is giving me a 2.5%, then this investment could potentially give

me a 4x higher return than that zero risk investment. This is an extremely important concept

to understand because this is how Buffett values all of the assets on his Berkshire balance

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