Why Buffett Is Smiling

February's just getting started but it's already a bonanza for legendary investor Warren Buffett. His stakes in Gillette (G - commentary - Cramer's Take) and American Express (AXP - commentary - Cramer's Take) have appreciated about $1 billion in the past few days.

Buffett even lent his name and credibility to the Gillette acquisition, saying he'd be increasing his stake. All the M&A activity, along with a bevy of good economic data, have surely helped stocks pick up some ground lost in January. And Buffett's not the only winner. Amex was the top holding of Chris Davis' Davis Financial Fund and Berkshire Hathaway (BRK.A - commentary - Cramer's Take) was No. 7, as of the end of September. The fund, up 1% in the past few days, also owns a slug of insurance divesting Citicorp (C - commentary - Cramer's Take), which rose 0.9% to $49.48 Tuesday.

Citi's rise helped the Dow Jones Industrial Average gain 62 points, or 0.6%, to 10,551.94, while fellow financial component American Express gained 6% after it announced it would spin off its financial advisory unit. The S&P 500 rose 0.7% to 1189.41 and the Nasdaq Composite added 0.3% to close at 2068.70.

Among other deals coming together over the past week, MetLife (MET - commentary - Cramer's Take) agreed to buy Citicorp's life insurance and annuity business for $11.5 billion; SBC (SBC - commentary - Cramer's Take) agreed to pick up its former parent, AT&T (T - commentary - Cramer's Take) for $16 billion, and; Eastman Kodak (EK - commentary - Cramer's Take) snapped up Canadian printer Creo for $1 billion.

The deal surge is putting downward pressure on the corporate bond market, where prices are considered historically rich when compared with Treasury bonds. Credit-rating agencies are reviewing bond ratings of Procter & Gamble, Kodak and SBC for possible downgrades in the wake of their announced acquisitions. SBC's bonds due in 30 years, for example, yielded 5.83% on Tuesday, up from 5.76% at the beginning of January, according to the Nasdaq Trace database. Over the same period, the yield on the 30-year Treasury note has decreased to 4.59% from 4.82%.

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In keeping with TSC's editorial policy, Pressman doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback.