Chris,
Please note the article below which hit the wire today (3/9). While Buffet's comments are interesting, Rosenberg, I believe, also has a good track record. I am forwarding this because, I, like Rosenberg, do not believe there is a Treasury bubble. My reasoning includes:
1. The Fed will be forced at some point to buy Treasuries to get long term rates down to support mortgage rates
2. The bubble discussion isn't legitimate without a sense of time (how long) and investment term. None of the market pundits advancing the bubble idea do a good job of specifying how each of these are impacted by the potential for a bubble. When the biggest near term risk is deflation, I think it is important to specify when the growing debt burden will in fact cause inflation fears to force rates higher. If, in fact, inflation does not start to become a problem for several years or more, than investors are losing out on much safer higher rates of relative return than are currently available in stocks. I’ve found it rather curious the way this bubble idea has gained so much traction. The cynic in me suspects, certain investors want to make the Treasury market very cheap in an effort to repeat last year’s returns.
I also wanted to point out that it’s important when discussing the impact of a bubble on individuals that specifying investment term is very important. While rates at the short end are low, the impact of a bubble on owners of shorter Treasury investments is also very low. Obviously, that’s very different for someone who wants to buy long-term Treasuries.
On a topic for a future show, you might also want to address the return impact for bond investors between owning individual bonds versus owning bonds through a bond fund. I believe a bond fund, since it is marked to market daily, is really nothing more than an equity-like investment. This difference is especially important when discussing retirement planning. Recent market wisdom, which emphasized a total return strategy at the expense of a cash-matched investment strategy, has done a huge disservice to investors. As investors flounder for a way to make sense of how to save for the future, it seems more attention to the benefits of having a secure cash flow stream might make for a worthy discussion.
PS I am a big fan of yours.

Merrill's Rosenberg: No Bubble In Treasurys, Sees Value 03/09 12:29 PM
NEW YORK (Dow Jones)--Despite ultra-low yields, Treasurys still provide good value to investors and will be an "outperforming asset class" in the longer term, said David Rosenberg, chief North American economist at Merrill Lynch, now part of Bank of America Corp. (BAC:$3.75,00$0.61,0019.43%) .
His bullish call contrasts with that of some big-name investors. Bond king Bill Gross, for example, of Pacific Investment Management Co., has said Treasurys are overvalued, while Warren Buffett, who runs Berkshire Hathaway Inc. (BRK/A:$73,195.00,00$0.00,000.00%) (BRKA,BRKB), has said the Treasury market is in a bubble.
Rosenberg rejected the bubble talk, adding that it is a "bizarre notion" given that investors' "capital is totally guaranteed by the government and (they) get paid a coupon twice a year."
Besides, he noted that Treasurys have been the most under-owned asset class on domestic institutional and household balance sheets.
"You can't just look at the prices to determine whether it (an asset class) is in a bubble," said Rosenberg in a telephone interview Monday. "There is definitely not a bubble in the Treasury market."
Still, Treasury investors need to be on the alert for a brief spike in yields in the second half of this year, he said. That means lower prices as bond prices and yields move inversely. The government's massive economic stimulus could lead to a temporary rebound in growth, which would hit Treasurys.
However, Rosenberg said the such a bout of selling, which will also be aided by rising debt supply, won't reverse the bull market in Treasurys. He expects bond yields to move lower next year as the effect of the stimulus package dissipates, leading to a relapse of economic growth. A deflationary environment with persistently falling consumer prices would add to demand for government debt, he said.
"We are in a secular (long-term) bull market for bonds and in a secular bear market for stocks, but it doesn't mean that they (these trends) are not going to be temporarily interrupted," said Rosenberg. "Near-term caution is the watchword."
Rosenberg expects the 10-year Treasury yield, which traded at 2.92% midday Monday, to rise to 3.25% by mid-year. But the yield will end 2009 at 2.90% and slip to 2.25% at the end of 2010, he said. That will pull the yield down close to the record low of 2.034% set in mid-December last year.
So far this year through Friday, Treasurys have lost 2.45%, after posting more than 10% gains last year, according to data from Barclays (BCS:$3.33,00$-0.18,00-5.13%) . That compares with returns of 1.15% in U.S. mortgage-backed securities and 3.64% in U.S. municipal bonds over the same period.
Rosenberg suggested that investors should buy bonds on dips later this year because "the economy is going to relapse next year and the deflation backdrop will linger for longer."
Despite the Fed and the government's efforts to pump cash into the economy, Rosenberg said the drop in household wealth is offsetting the ballooning of the federal government's and the Fed's balance sheets.
Rosenberg also said that another factor that will cap any rise in bond yields is the prospect of the Fed buying long-dated Treasurys to keep mortgage rates low and revitalize the housing market.
Officials initially floated the idea in December but have recently pushed it to be the back burner. But after the Bank of England said it will start to buy U.K. government debt this month, speculation has increased that the Fed and even the European Central Bank could follow suit.
"I would say that the chance that they actually come in to buy Treasurys is very high this year," said Rosenberg.
-By Min Zeng, Dow Jones Newswires; 201-938-2096; min.zeng@dowjones.com