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

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

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

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

Ameriprise was not in the holdings listed. today.  It was really a small position anyhow.

Jon C. Ogg
May 15, 2008

There are two important coverage pieces that Buffett fans and financial viewers will want to see today and this weekend.  CNBC has been airing bits of a Becky Quick interview with Warren Buffett on and off today from Omaha ahead of the meeting.  This weekend and on Monday, Fox Business will also be showing some interviews of their own and a live weekend blogging from Liz Claman there in Omaha as well.  But one interview is going to stand out sharply today that is different than others, as Fox Business gets a chance to interview John Freund from Citigroup (NYSE: C) around 3:00 PM EST (media times always subject to change).  This is said to "Buffett’s stock broker."  You can bet money he won’t be giving up any of the Oracle of Omaha’s secrets, but this may be a real first as far as a close Buffett industry source.

This annual meeting We are probably not that far away from seeing the latest round of Berkshire Hathaway’s quarter-end holdings, but here were his last holdings broken down in alphabetical order in 3 groups:

• A-G…. H-P… and S-Z. 

The current climate is actually more of the sort of market that Buffett can thrive in since his buyouts time frame deals with a projected hold time of FOREVER.  He’s plunked down $11 Billion over the last couple months between Marmon Holdings and on his share of the Wm Wrigley Jr Co. (NYSE: WWY).  Earlier this week, Warren Buffett already noted "We are in a recession", noting the difference from the man in the streets versus what the National Bureau of Economic Research gets around to saying.

The real question people may be asking for this weekend is "Will Warren announce a successor?"  While we hope so, we doubt it.  This may stay just as "the four replacements" (three of whom are internal).

Lastly, Mr. Buffett will be heading to Europe mid-month to go tour closely-held companies that can be rolled up or where opportunities are.  He never did do his true "Whale of a deal," but that doesn’t mean it’s ever entirely off the table.

Jon C. Ogg
May 2, 2008

The call in the last few minutes also noted that the classic definition of a recession being negative GDP for two consecutive quarters and a 0.1% growth may keep the classic definition from being there.  He also noted that the National Bureau of Economic Research is the one who officially calls the classic recession, and that definition is far different "from the man in the streets."

He also noted that the current trade policies will weaken the dollar, although he noted how he was also surprised that inflation hasn’t been higher from commodity costs. Warren Buffett also said he thinks this will deeper and longer than many people think.

We have been in "recession mode" according to our own internal readings for the entire part of 2008.  Whether or not GDP will show a true negative number or not is immaterial.  Things started heading south ahead of Christmas, and the wings were ripped off the plane mid-flight starting in January to February.

The Fed interventions and actions to save the financial institutions have done more than the rate cuts, and we’ve noted that the FOMC should maybe take that throttle off of rate cuts now.  The rates get advertised in the windows for lower rates, but you can’t qualify.

Berkshire Hathaway’s holdings for the end of Q1 are not yet out, but here is a partial list of his most recent holdings as of the last filing date.

Jon C. Ogg
April 28, 2008

Warren Buffett & Co. will get 100% of a White Mountains subsidiary, which will hold Commercial Casualty Insurance Company, International American Group, Inc., and $751 million in cash before adjustments. 

This group had combined gross assets of about $435 million and shareholder’s equity of $58 million.  This will act to reduce the outstanding common shares of White Mountains would be reduced to approximately 8.8 million shares and also allows White Mountains to exit runoff businesses with potentially volatile reserves.  It also allows it to reduce undeployed capital and to redeem about one-sixth of the company’s shares at a small premium to GAAP book value. 

The value of the transaction is listed roughly $836 million at $485 per share.  White Mountains and Berkshire Hathaway expect no substantial taxable gains in the exchange and this has been approved by both companies.  White Mountains closed at $478.00 per share on Friday.

This is one of the more odd transactions out there, but Berkshire Hathaway has been making more difficult financial transactions and new businesses in the new markets that can capitalize off of the liquidity and credit crunch that has affected the markets and the economy.

Jon C. Ogg
March 10, 2008

His annual investor letter is always an important read, although investors should really note that this should be viewed and interpreted as a "macrocosm" of Microcosms.  Warren Buffett will be the first to tell you he cannot predict the stock market, cannot exactly predict the economy, cannot predict the weather, and cannot predict the short-term implications on every stock out there.  But he smooths out all the news and noise from the long-term vision.  That is what a long-term value and income manager is supposed to do, particularly if his holding period is "Forever." If you look over his latest public stock investment holdings, you’ll see he still goes for the simple and easy to understand. We gave a list of candidates that could fall under his ambitions of a "whale of a deal," although this seems more like the past rather than the present or future.

So what are the implications of the Oracle of Omaha panning the insurance sector.  Of his $2.35 Billion in net earnings for the last quarter, $1.44 Billion of the total $2.35 Billion came from insurance underwriting and insurance investment income (61%).  For Q4 2006, the percentage of insurance-tied numbers was 60% of the $2.868 Billion in operating earnings.  For all of 2007, the percentage of insurance-tied numbers was 59% of the $9.634 Billion in operating income.

In his annual letter to shareholders, Mr. Buffett noted specifically that margins in insurance were going to be lower even if we had another disaster free year.  He even noted, “If the winds roar or the earth trembles, results could be far worse.”  In the past two years he has joked about having the foresight to benefit from no disasters.  If that prediction isn’t harsh enough, try this one: “It is a certainty that insurance-industry profit margins, including ours, will fall significantly in 2008. Prices are down, and exposures inexorably rise.”  Or better yet, "That party is over." 

Mr. Buffett has even gone out on a limb to predict the future Berkshire Hathaway as a whole will have breakeven or positive earnings.  He admitted the law of large numbers has caught up with Berkshire Hathaway.  But what happens if you are an executive or bean counter at OTHER insurance companies?

Berkshire Hathaway from best we can tell has not gotten mixed up with all of the leveraged and crazy CDO structures that couldn’t be explained.  That isn’t true elsewhere.  But every portfolio manager talks his or her own book.  There are many things that have yet to be resolved and there are likely to still be at least some failures from all this fallout.  Insurance companies will be in that boat too as their financial bets are frequently much farther out than that of banks. 

• Mr. Buffett has already made a backstop offer for the bond insurers to pick up their municipal assets on the cheap, which were rebuffed faster than the offers were made.  MBIA (NYSE: MBI) and Ambac Financial (NYSE: ABK) are still a "pending situation" as far as ultimate long-term viability, and Berkshire Hathaway decided to open a competing municipal bond insurance operation to compete.
• American International Group (NYSE: AIG) has been hamstrung by leveraged loan and CDO exposure that was first disclosed as immaterial and somehow has grown to a quarterly loss of some $5 Billion.  It also has noted a total of $42.2 Billion of exposure to the troubled bond insurers, and it has written roughly $61 Billion of credit default swaps on CDO’s with some subprime collateral.  They are far from immune, AIG stock fell some 6.5% Friday alone to $46.86, and its 52-week trading range is $44.10 to $72.97.
• Everest Re Group, Ltd. (NYSE: RE) is one of the largest pure-play reinsurers out there, another arena in which Berkshire Hathaway is a giant.  It only fell 1% Friday to $96.88, and its 52-week trading range is $90.27 to $115.86.  They would not at all be immune, particularly after its profits fell some 90%.
• Hartford Financial Services (NYSE: HIG) is another insurance monster that saw shares fall another 3.75% to $69.91, and its 52-week trading range is $65,76 to $106.23.  Chubb (NYSE: CB) is yet another that saw a 3.1% drop Friday to $50.90, while its 52-week trading range is
• $45.65 to $55.99.
• Progressive Corp. (NYSE: PGR) competes head to head with GEICO and it too saw a 3% drop on Friday to $18.33, while its 52-week trading range is $16.98 to $25.16.

Realistically, this list could just go on and on.  There is no reason to.  Most of the reports out there merely just cover his comments in case everyone doesn’t have the time to read through his endless letter.  We have one solid rule when we question anything in the financial markets, and the answer is almost always "FOLLOW THE MONEY."  Mr. Buffett is a great manager, and those who bash him based only upon the "today" really look like clowns.  Regardless, it’s almost like he is trying to prepare his holders for the worst again after two years of no catastrophes.  Maybe he is trying to talk down other insurance operations so he can buy them on the cheap or show how Berkshire Hathaway insurance subsidiaries have better balance sheets.  Either way, he’s talking up his book even if it was meant to sound cautious.

The fact that we noted "Buffett’s Loss Could Be Your Gain" after Barron’s panned this one change nothing about the situation.

Jon C. Ogg
March 1, 2008