Asia markets were down 0.5% to 0.7%. The major European indices were down even less in most cases. The U.S. markets may have a similarly muted reaction today.

Investors have only a few reasons not to sell down equities in the face of a potential government default, which is only eight days away. One is that Wall St. does not want to dump shares in a plunging market only to find that a last minute compromise brings stocks right back to where they are now. A panic sale is often one done at a large loss.

Another reason is that investors could believe a default is only a default on paper. The government may be effectively closed for a few days as it was when a similar political battle took place in 1995. Congress and the White House realized then that weeks of debate would indeed cause long term economic damage. Once that was clear, a compromise was reached quickly. But Clinton and Congress were right. The world did not collapse when they could not meet the deadline.

Politicians and investors alike may also have decided that a downgrade of U.S. debt by Moody’s, Standard & Poor’s, and Fitch will not mean much. Debt issued by the U.S. will still be considered among the safest in the world. The interest rates that the American government pays will stay very low. The fear of a sharp rise in what the Treasury will have to offer on U.S. paper will barely go up at all. Investors, in essence, will reject the idea that American sovereign debt is any more or less risky than before. There is certainly precedent, even if it is among corporate debt. Wall St. did not care one bit when Warren Buffett’s Berkshire Hathaway (NYSE: BRK) was downgraded from Aaa. Buffett was still Buffett and the bond markets supported the overall strength of his businesses over credit agency opinions.

The reaction to the debt cap debate may not roil the markets at all. August 2 may not effect the value of equities much. Investors may look at a brief default as a small bump in the economic road. The dire warnings will not have meant a thing.

Douglas A. McIntyre

Reuters reports that Madoff pleaded guilty of 11 charges of fraud.

Reuters reports that US lawmakers are looking at pay for performance legislation which would apply to corporate executives.

Reuters reports that China’s premier said that the nation’s growth target would be hard to meet.

Reuters reports that Citigroup (C) will nominate new board members.

Reuters reports that GM (GE) would survive March with no US aid.

Reuters reports that many Americans remain optimistic even in the recession according to a poll.

Reuters writes that the chairman of Citigroup (C) says the company does not need more government capital.

Reuters reports that China says it can spend more to help its economy.

Reuters reports that Fitch cut its top ranking on Berkshire Hathaway (BRK).

Reuters reports that Time Warner (TWX) named a new head for AOL.

Reuters reports that News Corp (NWS) restructured its Fox division.

The Wall Street Journal reports that Americans lost 18% of their net worths last year.

The Wall Street Journal reports that Cuomo and some members of Congress are looking at regulating long-term pay for Wall St. managements.

The Wall Street Journal reports that China expressed concerns over US Treasuries and urged Washington to do more to help the economy.

The Wall Street Journal reports that retail sales ticked up slightly last month.

The Wall Street Journal reports that IBM (IBM) is getting into water ventures.

The Wall Street Journal reports that grain prices are down but grocery prices are not.

The Wall Street Journal reports that Obama said he is open to cutting corporate income tax rates.

The Wall Street Journal reports that GE (GE) lost its AAA rating.

The Wall Street Journal reports that Apple (AAPL) will preview new iPhone software.

The Wall Street Journal reports that the head of Sirius (SIRI) says “doom and gloom” hurt that company.

The Wall Street Journal reports that consumer spending is starting to stabilize.

The Wall Street Journal reports that venture capitalists are starting to invest in distressed debt and public companies.

The Wall Street Journal reports that an activist investor is trying to replace directors at Bank of America (BAC).

The Wall Street Journal reports that Japanese insurance companies are rushing to consolidate.

The Wall Street Journal reports that Six Flags has hired bankruptcy counsel.

The Wall Street Journal reports that Icahn raised his bid to get control of Lions Gate.

The Wall Street Journal reports that car registration in Europe dropped sharply.

The New York Times reports that Europe’s way of encouraging solar power is being adopted in the US.

The New York Times reports that BMW and VW reported results that show the difficulties car companies face.

The FT reports that Jack Welch says there is too much focus on short term share prices.

The FT reports that Bank of America (BAC) said it would make money this year.

Bloomberg reports that Berkshire Hathaway was approached by AIG (AIG) for help before the government stepped in.

Bloomberg reports the European car makers find that a $3.8 billion aid package is falling short.

Douglas A. McIntyre

According to Bloomberg, AEP sees difficulty in financingand getting approval for new coal-fired power plants. But new powertransmission lines will deliver electricity more efficiently fromexisting plants, and, the big plus, enable renewable generationprojects with wind and solar in more remote areas of the US.

In Texas, AEP and MidAmerican have proposed spending $1.2 billion tobuild 745 kilovolt lines from the Panhandle, where T. Boone Pickens,among others, have proposed building new wind farms. New windgeneration is also being built in the Dakotas and eastern Montana. Solargeneration expansion is also being planned in the southwest. Withouttransmission lines, none of these projects will be constructed because themarkets for the power lie hundreds, if not thousands, of miles fromthe generation point.

AEP already owns and operates more than 39,000 miles of high-voltagetransmission lines in the US. The US Energy Policy Act of 2005guaranteed, among other things, a return on equity for new powertransmission lines at the high end of regulated rates and full recoveryof construction costs in rates. That’s a pretty sweet deal.

There are a few issues. Right-of-way is one. High-voltage lines goingthrough populated areas are expensive and usually generate some publichub-bub. In remote areas, wildlife migration corridors can become anissue as power lines criss-cross unpopulated regions. Neither of theseis usually a show-stopper, though, and AEP knows it.

Combined with the Obama administration’s economic stimulus proposals,which include electricity generation infrastructure renewal,electricity transmission could prove to be a winner. Upgrading the USelectricity grid could cost up to a trillion dollars. And a journeyof a trillion dollars has to start somewhere.

Paul Ausick
January 26, 2009

The company said that it terminated the facility because it "is anappropriate way to address any possible issues that might be raisedregarding compliance with this covenant." Yeah, like Reliant is likelyto miss the EBITDA target again.

Reliant noted that it has $1.6 billion in liquidity, about $421 millionof which is credit not including the terminated facility. Reliant hasalready said that it is pulling of of its wholesale and commercialmarkets, and that the company’s board is exploring "strategicalternatives" including selling of part or all of the company.

This story has been going on for a while now, but Reliant does not seemto be having any luck selling itself. Maybe once the Constellation(NYSE:CEG) deal with either Berkshire Hathaway (NYSE:BRK.A) or EDF is settled, a line will begin to form for Reliant.

Paul Ausick
December 8, 2008

The State of New York is letting AIG access about $20 billion fromunits that is essentially a bridge loan to itself.  AIG is alsolikely to sell off businesses including annuities, autos, and aircraft leasing foranother $10 billion.  That meansthat there is still about $10 billion that needsto be infused into the company for that full $40 billion.Warren Buffett can do a deal if he wants to, but the question is whathe will get versus what he’ll be risking.  These financial giants haveblack holes all over their balance sheets.  It also is starting to feellike even in 2009 we’ll be getting announcements about assetwrite-downs.  If the economy continues sliding then, that is almostassured.

In a sense, this use of the $20 billion is like borrowing against your own 401/k or I.R.A. to make mortgage and credit card payments.  The difference here is thatthere may be no way for AIG to get that money from asset sales nor from future income over the next 60 days after it does this.  Shrinking themselves, though, is not going make them stronger.

Warren Buffett may want this company.  He’d definitely like to have atleast some of the operations.  He’d be getting a huge business overseasin Asia where he wants to expand.  He’d get property and casualty,workers’ compensation, and more.  Again, it boils down to just whatsort of risk he’s willing to take.  Very few Monopoly players win bymortgaging their cheap properties when they still have to go throughthe last quarter of the board.

AIG is still down over 50% at $5.76, but it has traded under $4.00 at the worst part before the New York plan was announced.   This situation is a very fluid one. By the time this posts, there may likely another game-changing development.  Stay tuned….If you can stomach it.

Jon C. Ogg
September 15, 2008

The first thing we ant to advise readers about is that there are very few estimates on Wall Street out of analysts, so the actual numbers are generally thought of as a hint or a nod rather than a formal bar.  Guidance is also not formally given so traders have to listen to the inferences made for internal projections.

The three estimates out of First Call show $1370.00 (rounded) as the EPS target and we only have one revenue target.

What is interesting about the report this time around is that the stockhas had a dismal performance compared to years of the past.  Its52-week trading range is $109,800.00 to $151,650.00.  With a$114,000-ish level today, you can see it has been dead money.  In fact,if you bought and have just held without any profit taking, then thishas actually been a dead money stock for over 18 months.  Even when wesaid Barron’s was being too critical, it turns out we should have beenjust as critical.

Unfortunately, we won’t get to see the Berkshire Hathaway holdings foranother week or so.  But here is a full link list of the most recent data on Buffett’s portfolio public stock holdings.

What will be interesting to see here inside the invidual holdings arethe stances on Kraft Foods Inc. (NYSE: KFT) and on Anheuser-BuschCompanies Inc. (NYSE: BUD).  There have been highly unusual optionstrading activity in Kraft options with August expirations and somechatting that his 9% stake may be added to or at least was part of thelogic behind that unusual trading.  The other issue is whether or nothe will still hold Anheuser-Busch Companies since the stock is so closeto the buyout price from InBev.

Regardless of the actions and regardless of the final holdings,Berkshire Hathaway has started changing its face.  At some point thecompany will have a new face man besides Warren Buffett.  He’s alsobeen financing mega-deals of late and has been doing more deals reminiscent of private equity investing than true public companybuyouts.

As insurance and reinsurance has been such a large portion of thecompany, the trend in storms will matter in Q2 and Q3 more than otherquarters.  We won’t make any predictions on that front.  Stay tuned.

Here was a 360-degree review of Berkshire Hathaway we gave going into the annual meeting.

Jon C. Ogg
August 7, 2008

Interestingly enough, Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) and the Kuwaiti Investment Authority are investing in the deal.  Rohm & Haas is more diversified than mere chemicals but a 74% premium deal has interest likely falling into other key chemical players and ones to watch would be Air Products (NYSE: APD), Celanese (NYSE: CE), Eastman Chemicals (NYSE: EMN), Ashland (NYSE: ASH) and in particular Huntsman Corp. (NYSE: HUN).

The deal is subject to shareholder approval, but this is likely a done deal so long as no anti-trust issues crop up.  The 52-week trading range is $44.13 to $62.68 and shares have never traded that high, so it seems no  one will fight this.   

There are more than 30% of the shares owned or controlled by Haas family trusts and they have indicated their support of the merger.  Rounding up the other votes should be easy at this point.

Jon C. Ogg
July 10, 2008

According to the most recent filings, Warren Buffett’s holding and operating company owns a combined amount of 35,563,200 shares as of March 31, 2008, which is roughly a 4.99% stake.

With a $62.00 share price this morning this represents a stake worth some $2.2 Billion.  That ought to allow Buffett and friends to recapture some cash to either make more acquisitions or to add to the cash arsenal for future deals.

You can see the full list of Warren Buffett and Berkshire Hathaway holdings.

This was one of our "brands that could disappear" as far as US ownership is concerned.  Recently we ran "Top US Brands Foreigners Could Buy With Cheap Dollars (SKS, HSY, WFMI, STZ, BUD, ETFC, S, LEAP, X, AA, LAMR)" which you can see.

Jon C. Ogg
June 12, 2008

The truth is that even after those "Aaa" ratings to the "Aa" levels on growing concerns that their losses from mortgage-backed debt will be higher than expected and based upon the significantly constrained prospects for each of these to get new business.

Based upon how late to the party, how wrong the ratings were, and even how conflicted their models are… Every brokerage firm on Wall Street should just adopt the policy of dropping coverage on the independent ratings agencies like Moody’s (NYSE: MCO) and McGraw Hill (NYSE: MHP) for its S&P unit.  Shutting them out of the ratings agency game as far as Wall Street covering them would let the independent ratings agencies see how irrelevant they have become.  That won’t ever happen, but it would be an interesting battle to see.

This action from Moody’s today is a score for Warren Buffett and Berkshire Hathaway Inc. (NYSE: BRK.A) as the new bond insurer gets to cherry pick and charge higher rates to insure.

Jon C. Ogg
June 4, 2008

Ingersoll Rand (NYSE: IR) small position

Iron Mountain (NYSE: IRM) small position

Johnson & Johnson (NYSE: JNJ)

• $280M for 4,322,500 shares
• $1.314 BIL for 20,266,300 shares
• $1.711 BIL for 26,386,148 shares
• $21M for 325,300 shares
• $589M for 9,087,200 shares
• $51 for 792,000 shares
• $37M for 575,000 shares

Kraft Foods (NYSE: KFT) 

• $2.766 BIL for 89,222,400 shares
• $954.8M for 30,790,300 shares
• $310M for 10,000,000 shares
• $8M for 259,800 shares
• $248M for 8,000,000 shares

M & T Bank (NYSE: MTB)

• $483.1M for 6,003,360 shares
• $43.9M for 546,000 shares
• $13.3M for 165,700 shares

Moody’s (NYSE: MCO)

• $1.124 BIL for  32,280,600 shares
• $547.5M for 15,719,400 shares

Nike (NYSE: NKE)

• $519.5M for 7,641,000 shares

Norfolk Southern (NYSE: NSC)

• $105M for 1,933,000 shares

Procter & Gamble (NYSE: PG)

• $4,099 BIL for 58,500,000 shares
• $1.524 BIL for 21,752,000 shares
• $437M for 6,240,000 shares
• $501M for 7,154,500 shares
• $54,655 for 780,000 shares
• $109,309 for 1,560,000 shares
• $384,369 for 5,485,500 shares
• $306,556 for 4,375,000 shares

Sanofi-Aventis (NSE: SNY)

• $18.3M for 488,500 shares
• $96.8M for 2,578,933 shares
• $6.3M for 169,300 shares
• $13.1M    350,000 shares

SunTrust Banks (NYSE: STI)

• $129.2M for 2,344,600 shares
• $47.4M for 860,000 shares

Very Small Position defined as "under $100 Million."  That may be anempire for the rest of us, but it isn’t worth nothing on Mr. Buffett’sscale.

You can join our open email distribution list hear about specialfinancings, M&A, IPO’s, secondary offerings, and other specialsituations.

Buffett & Berkshire Hathaway Holdings A – H

Buffett & Berkshire Hathaway Holdings T – W

Jon C. Ogg
May 15, 2008