By Dan Ferris in the S&A Digest:

Warren Buffett might be the world's investing hero, but he's no match for the barrel of a gun (the source of all political power, according to Mao Tse-tung)...

Buffett's Berkshire Hathaway is now paying more in the bond market than Fannie Mae and Freddie Mac (which collectively lost $108.8 billion last year), Citigroup, and Bank of America.

Berkshire paid 4% on its $750 million offering of the firm's triple-A-rated debt last week. Fannie, Freddie, Citi, and Bank of America all found buyers for notes paying 2.375% or less.

"Highly-rated companies, such as Berkshire, are experiencing borrowing costs that, in relation to Treasury rates, are at record levels," Buffett wrote in his latest annual letter. "At the moment, it is much better to be a financial cripple with a government guarantee than a Gibraltar without one." Makes you wonder how long such a moment can last. I doubt forever. Meantime, I guess it's Cripples 1, Gibraltars 0.

The U.S. government's gun barrel isn't the only one the world likes better than Berkshire Hathaway. As we noted once before, default insurance on Berkshire Hathaway's debt was recently priced higher than the same type of insurance for the sovereign debt of Vietnam.

So here we are, with all the governments getting better deals than the greatest businesses on Earth... Berkshire A shares are selling for $90,000 each, giving you its one-of-a-kind, Buffett-built investment portfolio and assigning an absurdly cheap single-digit earnings multiple to its 67 noninsurance businesses.

Aside from the recent downgrading of Berkshire's credit rating from triple-A, the stock is also cheap because some people, like short seller Doug Kass, think Buffett's investing style has drifted too far outside his area of expertise with his "exotic" bets on derivatives. But Buffett's stock-index options and other derivatives are well within his area of expertise. They're insurance-like, and Buffett is certainly the pre-eminent insurance mogul in the world today.

Back in 1999-2000, when Buffett refused to participate in the Internet mania, everyone said he'd finally lost it. Berkshire's share price was cut in half. Then the Nasdaq crashed, and Berkshire doubled in less than three years.

Last year, the market crashed, then Berkshire's share price fell just below half its December 2007 high of $151,000 per share. It could easily double off its panicky March bottom of a bit more than $70,000 per share.

...The stock is already 29% off its recent panic bottom, outperforming the S&P 500 by about 3%. Not bad for a company with a $140 billion market cap.

Berkshire Hathaway pounds out cash profits like few other companies and has the greatest financial fortress of a balance sheet of perhaps any large company in the world. When it's cheap, you buy it. Period.

Crux note: Dan Ferris is the editor of Extreme Value, a value-focused newsletter. To learn more about Extreme Value, click here...