Back at his apartment at 700 Laguna Street (described in an earlier post) Caul turns to his saxophone to distract his churning mind. While playing along to a Gerry Mulligan track his unlisted phone interrupts ...
It's Stett. By now it's clear he was part of the plot to kill the Director. "We know that you know, Mr. Caul ... For your own sake don't get involved any further ... we'll be listening to you."
Then ... The bugger is now the bugged. The very thought drives him nuts and sends him scouring his apartment for the bug. Behind drapes, inside lamps, the phone, everywhere.
... and Now, the window view looks west across Laguna along Birch towards distant apartments on Buchanan Street. Viewed at street level, below, the matching top story of those apartments can be seen above a newer building (map, red marker on the apartments, blue marker at Caul's place). The building across Laguna has since been built on the newly cleared empty lot visible above.
Caul is rapidly losing it. Everything in sight is ripped apart, even the floorboards.
His meltdown leaves the apartment demolished without revealing the bug. Perhaps it exists only in his imagination. He seeks solace the only way he knows how and as the movie's end credits slowly pass on by to the plaintive sound of his sax it is left to us to unravel the unanswered questions.