CALLS   Volume    OpInt
$35.00    28,828    582,770
$37.50    10,340    27,810
$40.00    15,000    15,000

PUTS    Volume    OpInt
$35.00    28,791    585,697
$37.50    10,340    48,557
$40.00    15,340    15,340

If you look at the article above you will see how much the openinterest has gone through the roof.  580,000 options contracts represents 58 millionshares on a fully diluted basis.

Some of this options volume is actually non-directional trading that ismeant as a form of arbitrage that was capturing an inefficiency, but bynow you have to bet some of the newer volume is also speculatorsgetting in.  This was under $30.00 at the close of last week and thestock now sits at $32.00 mid-day this Friday.

Who knows, maybe traders are betting that Warren Buffett is using someof his Budweiser gains to buy more shares on top of the 9.12% stake healready owns.

Jon C. Ogg
August 1, 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

While we did not get a list of these, the two obvious ones are MBIA inc. (NYSE: MBI) and Ambac Financial Group, Inc. (NYSE: ABK).  Presumably the third one would be FGIC, or likely it could be Security Capital Assurance Ltd. (NYSE: SCA).  Most shares are higher after Buffett came on CNBC with his plan:
SCA +9% at $2.24; MBI +3% at $14.00; ABK +4.5% at $10.96.

• We previous noted, "Would Buffett Save The Insurers?"
• Berkshire Hathaway shares are also up about 3% since we noted that "The Barron’s Sell-Off Could Be Your Gain"

Mr. Buffett did note that this was initially a $5 Billion proposition and that he would keep all earnings inside the entities for a period of 10-years.  He also noted that one rebuffed his offer and two he has not heard back from.

What is important here is that this will at least take care of the municipal bond side even if those other bond insurance operations in mortgages, CDO’s, and CLO’s were to fail.  But Buffett is drawing his line in the sand on what risks he will take and which he will not take.  These plans would not include insuring mortgages, CDO’s and CLO’s.  That is why the bond insurers are not jumping at this offer.  They’d be giving away their top operations to feed their leeches.

He even made a note about how his new municipal bond insurance unit received a 2% premium merely to reinsure a muni that had already been insured so it could maintain its triple-A rating even if the bond insurer failed.  No wonder he’s willing to step up.  If you have a few billion dollars lying around and have a solid insurance holding company operations this sounds like a layup when you consider the fact that it takes the worst scenarios to cause municipal defaults.   

Perhaps the most important issue at hand is that this will at least put a floor on the blood-letting that has been seen in the municipal bond arena.  It won’t help the mortgage and CDO insurance operations, although there is an obvious tertiary benefit in that this at least in theory saves part of those businesses.

Jon C. Ogg
February 12, 2008

Keep in mind that these positions have a longer lookback date.  The "as of" date here was listed as June 30, 2007, so that is quite a long lookback.  Berkshire Hathaway gets an extended filing because of its position and its confidentiality period ended in these reduced positions.

As energy costs rise, the first place you see the impact is usually in the transportation stocks. Union Pacific shares are indicated down slightly by 0.5% and Norfolk Southern shares are indicated down 1% in thin pre-market volume.

• Here’s Buffett and his stock performance on Forbes Richest list
• Maybe Warren Buffett Is The Buyer of Last Resort in Financials
• Buffet said he’d love a whale of a deal.
• Buffett nickel & diming railroads, no whale there.

Jon C. Ogg
October 16, 2007

Shares of Burlington Northern closed at $80.33 on Monday, and shares are indicated at $81.00 to $82.00 in early pre-market indications on Tuesday.  This is actually still in the middle of the $64.75 to $95.47 trading range seen over the last 52-weeks.   

With just over 52 million shares now held, this latest transaction at an implied $81.00 stock value would have an implied market value of over $4.2 Billion.  We still have yet to see a ‘whale of a deal’ from Buffett, and the total market cap of this one is north of $28 Billion.  Warren & Co. had nearly $50 Billion in purely cash and liquidity in its arsenal as of June 30, and that is before looking at its other assets that could be converted to cash or equivalents in a few days if it sold off some of its publicly traded stocks.

Jon C. Ogg
August 28, 2007

In reality, Eddie Lampert is a true mystery to many "retail analysts" on Wall Street because they are having to evaluate a retail company that is now worth $28 Billion since the combination of Sears and K-Mart that is not merely a large retailer.  In fact, the retail efforts have recently been mixed instead of the turnarounds seen in prior quarters.  The wildcard for just analyzing this as a retailer is that this is still a large real estate holder that is deemed as undervalued on the books versus what the remaining dirt might really fetch in a true sale lease-back, and when you culminate the real estate with the point that this is really a hidden hedge fund it is mystifying. 

As long as Eddie Lampert doesn’t start to AND then continue to consistently make costly errors quarter after quarter, no one is going to say anything.  Even if they did, they don’t have the votes or shares to influence a change.  Shareholders have been so rewarded that any major hit to the stock might just make investors think there is a shot to go back in.  As long as investors feel like he is potentially the next Warren Buffett, he is virtually immune from any criticism or efforts against him. 

With the potentiality that he has been mentioned (via rumors and occasional holdings) as potentially rolling up numerous other retail related efforts, and seeing those stocks rise, he is well-heeled there AND wherever else he wants to go.  Much more money has been made investing with Eddie Lampert than against him.

Jon C. Ogg
April 5, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.