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DealBook: Warren Buffett Explains His Positions on Taxes and Economy

September 30, 2011 by Leave a Comment

Few billionaire investors possess the influence of Warren E. Buffett, chief executive of Berkshire Hathaway. With his company’s stock buybacks making waves and a tax proposal dubbed the “Buffett Rule” aimed at the wealthy, Mr. Buffett has thrust himself in the headlines.

DealBook’s Andrew Ross Sorkin spoke to Mr. Buffett and Cathy Baron Tamraz, chief executive of Business Wire, at the New York Stock Exchange in an interview for CNBC.

Article source: http://feeds.nytimes.com/click.phdo?i=43e5ab86d5d27d29a9f2c1c0ed7cb257

Filed Under: Business News Tagged With: , ,

DealBook: Buffett Invests $5 Billion in Bank of America

August 25, 2011 by Leave a Comment

Brian Moynihan, Bank of America's chief, and Warren Buffett of Berkshire Hathaway.Chuck Burton/Associated Press and Pablo Martinez Monsivais/Associated PressBrian T. Moynihan, left, Bank of America’s chief, and Warren E. Buffett of Berkshire Hathaway

1:04 p.m. | Updated Warren E. Buffett comes to the rescue, again.

On Thursday, Berkshire Hathaway, run by Mr. Buffett, announced plans to invest $5 billion in Bank of America, a vote of confidence for the beleaguered financial firm.

While investors initially cheered the news bidding up bank stocks in trading this morning, the sector settled down in the afternoon as the market digested the deal.

Shares of Bank of America, which spiked more than 25 percent on Thursday, is currently at $7.55, up roughly 8 percent. Citigroup and Morgan Stanley, both up which jumped nearly 10 percent in the morning, gave back much of their early gains, too. JPMorgan Chase was off slightly in the afternoon.

The pullback reflects the continued trepidation about the industry, which is clouded by economic concerns, regulatory uncertainty, and legal liabilities.

Still, the Berkshire investment has helped allay concerns about Bank of America. Shares of the financial firm have been battered of late over fears the company lacks sufficient capital. The stock has fallen by nearly 30 percent since the beginning of August.

“I remain confident that we have the capital and liquidity we need to run our business,” Bank of America chief executive Brian Moynihan said in a statement. “At the same time, I also recognize that a large investment by Warren Buffett is a strong endorsement in our vision and our strategy.”

The Berkshire investment comes at a pivotal time for Bank of America. Its troubled mortgage division has racked up billions of dollars in legal bills, and the financial firm faces a nationwide investigation into its foreclosure practices. Last quarter, Bank of America reported an $8.8 billion loss, owing in large part to a settlement with mortgage investors.

Mr. Moynihan has taken steps to cut costs and improve its capital cushion. He put the European credit card operation up for sale and sold off the Canadian card division, making it clear non-core assets would be on the block.

Last week, the bank announced plans to cut 3,500 jobs. In a memo to employees, Mr. Moynihan said that “we owe it to our customers and our shareholders to remain competitive, efficient and manage our expenses carefully.”

But the embattled chief stopped short of raising capital, reiterating that the financial firm was on solid footing. The assertions did little to soothe investors.

Then on early Wednesday, Mr. Buffett called Mr. Moynihan to discuss a potential deal. At first, Bank of America’s chief balked at the proposal, saying the bank didn’t need a capital injection. But Mr. Buffett emphasized it would be a long-term investment, not a short-term fix. Over the course of the day and multiple calls, they hammered out the investment, finalizing the details late on Wednesday.

Under the terms of the deal, Berkshire will buy $5 billion of prefer red stock that pay a 6 percent annual dividend, and receives warrants for 700 million shares that he can exercise over the next 10 years. Bank of America has the option to buy back the preferred shares at any time for a 5 percent premium.

It is the sort of move industry insiders had been expecting. In May, Morgan Stanley chief executive James Gorman told reporters at his firm’s annual meeting that a big name investor was bound to jump into financials, prompting the “the malaise to lift.”

“We think this news is clearly a positive for the entire group as Buffett’s investment injects confidence into the system and Bank of America in particular following its consistent erosion in recent trading,” Nomura analyst Glenn Schorr said in a research note, adding that it should help dampen volatility in the stock.

Mr. Buffett has played the role of savior before.

In the depths of the financial crisis, Berkshire Hathaway gave Goldman Sachs a $5 billion lifeline, which came with a hefty 10 percent dividend. The investment bank paid back the money earlier this year after getting the greenlight from regulators.

When shares of General Electric got hit, Mr. Buffett stepped in with a $3 billion investment. The deal also came with a 10 percent annual payout.

With Bank of America, Mr. Buffett is once again jumping in at a point of weakness. Since the beginning of the year, the bank’s shares have dropped to less than $7, from $15. Last year, it was trading at more than $19.

“Bank of America is a strong, well-led company, and I called Brian to tell him I wanted to invest in it,” Mr. Buffett said in a statement. “I am impressed with the profit-generating abilities of this franchise, and that they are acting aggressively to put their challenges behind them. Bank of America is focused on their customers and on serving them well. That’s what customers want, and that’s the company’s strategy.”

Mr. Buffett is a fan of financial companies that he thinks have a strong franchise and brand. Berkshire owns Wells Fargo, gradually upping his stake over the past year. In the latest quarter, he bought nearly 10 million shares of the lender.

He has also counted Bank of America among his past holdings. In the midst of the subprime crisis in 2007, Berkshire bought 8.7 million shares, quickly increasing the stake to 9.1 million shares.

But Mr. Buffett was critical of management at the time. He told Financial Crisis Inquiry Commission that Bank of America paid a “crazy price” to acquire Merrill Lynch in the midst of the disaster. Mr. Buffett sold off his remaining shares in Bank of America at the end of 2010.

Article source: http://dealbook.nytimes.com/2011/08/25/buffett-to-invest-5-billion-in-bank-of-america/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

You’re the Boss: This Week in Small Business: We’re Watching Japan, Libya and Hugo Chávez

March 28, 2011 by Leave a Comment

Dashboard

What’s affecting me, my clients and other small-business owners this week.

THE QUAKE IN JAPAN, A GOOFBALL IN VENEZUELA Japanese earthquake damage is estimated at $310 billion and could be the costliest natural disaster ever. Japanese exports suffer. Kate Rogers of Fox revisits how to protect your business from catastrophe. “Small-business owners can determine if they should be seeking disaster coverage by weighing their investment in the business itself, among other factors. If the business is the sole form of income, the risk is much greater than if it is a hobby or part-time project.” Elsewhere around the world, the war industry gets a boost in Libya. And Hugo Chávez of Venezuela says capitalism may have destroyed life on Mars.

REAL ESTATE FALLS, JOBS RISE Mark Thoma says commodity prices are increasing because of world demand. A small-business owner in Georgia is trying not to pass on the cost of high gas prices. Detroit’s population declines 25 percent. Existing-home sales fall to the lowest on record. Meredith Whitney, an investment adviser, says, “Unless the government comes out with a 50-year mortgage, this market is in trouble longer term.” Gallup’s job-creation index is the highest since September 2008. Durable goods orders fall.

ANNE HATHAWAY AND WARREN BUFFETT The Fed earns $79 billion and predicts that the recovery is taking hold. Nonetheless, one of its officials warns that the United States is approaching insolvency. Meanwhile, Warren E. Buffett predicts growth but some think his company’s stock is buoyed by Anne Hathaway. Household balances sheets continue to improve. Scott Grannis says “the Philadelphia Fed Business Outlook Survey came in very strong. It hasn’t been this strong since the economic boom times of the early 1980s. It’s very difficult to ignore the mounting evidence of a strong economic recovery.” Architect billings increased slightly in February.

DEFICIT THRILLS The Committee for a Responsible Federal Budget is thrilled to see 64 senators calling for comprehensive deficit reduction. But Stan Collender, a budget expert, isn’t thrilled at all: “Does a letter that is so vanilla that it could have been written at any time over the past 40 years really indicate any movement on the current budget debate?” James Pethokoukis of Reuters says he thinks President Obama’s budget is wildly dangerous.

A NEW DEFINITION OF SMALL BUSINESS Timothy F. Geithner says that American small businesses need greater access to capital to spur innovation. The Small Business Administration, facing even more cuts, is for the first time in more than 25  years proposing to change the way it defines small businesses. JPMorgan Chase says it will cease its debit card rewards program because of new legislation that would restrict fees. Missouri gets $27 million in incentives for small-business growth. The Small Business Savings Account Act makes its way through Congress.

TAKING CREDIT The health care legislation celebrates its first anniversary and Ezra Klein defends it by saying, “Is it a perfect piece of legislation? Not even close. Will everything work as expected? Almost certainly not. But for all its flaws, it’s a good law. And it’s worth trying.” Many small businesses are still not taking advantage of the health care tax credit.

TECHNOLOGY UPGRADES A Google project manager pitches cloud computing: “Web-based software is much less costly for buyers than traditional software, and programmers can be so much more innovative, that it’s worthwhile for an entrepreneur to say, O.K., let’s start from scratch.” Paul Mah, an information technology expert, gives us eight reasons to upgrade to Internet Explorer 9. Firefox 4 is released. Microsoft jumps to second in video search and introduces a new PC tool for small business. Netflix suffers an outage. BlackBerry’s tablet is scheduled to arrive in April. ATT buys T-Mobile but not for the reason you think. And boy. has computer technology come a long way in 10 years.

THE GROWING APPS MARKET Information Week reports that 38 percent of small- and medium-size businesses depend on mobile apps. Amazon introduces an Android app store, and Apple is not pleased. Minda Zetlin of Inc. asks if you should make a tablet app for your business: “The answer is likely a yes if one, your product or service is one where having tablet access could benefit customers; and two, your customers are the type who use tablets.” Just in time: a flood of royal wedding apps.

SPEAKING OF THE BIG WEDDING General Electric releases a much-needed William and Kate refrigerator. Jack Daniels introduces a new product — perhaps to help us forget the royal wedding. Danny Wong gives us three winning ideas to consider. A dating site features a new single man every day. Score plans an e-business learning Web site for small business. Small Business Television is rebranding itself and has introduced a new Web site. Small Business Opportunities magazine is doing the same. A small business introduces its first electric car. Sales of e-books have doubled. The group buying industry is projected to grow to $2.7 billion this year.

TWITTER’S TAX BREAKS Casey Hibbard explains how one company used social media to make $300,000 in a weekend. Robert Scoble discovers the future of work: “Just when we thought we figured out the new ’social enterprise’ market along comes Convofy.” Twitter shows San Francisco’s businesses how to save a bundle on taxes. A one-legged wrestler shows us how to become a national champ.

IT’S GOOD TO BE GREEN A woman in Canada gets a standing ovation for being green. The Manhattan Chamber of Commerce holds its green marketing event on Wednesday. The Clinton Global Initiative holds its university conference this week with a focus on entrepreneurship and a live webcast.

ADVICE FOR SXSW: HAND OUT PILLOWS The Global Entrepreneurship Congress meets in Shanghai this week. April 2 is International Pillow Fight Day. The South By Southwest conference: as seen from a bunch of social media video bloggers — which is yet another reason I won’t attend next year. American Airlines offers a big promo for California business travelers. John Jantsch wants to know the worst business advice you ever received. A third-base coach gives life advice.

SEARCHING FOR HELP WITH SEARCH An American Express survey finds that more than half of small-business owners say they need help with search-engine marketing. A video about why it’s not important to go viral goes viral. Dharmesh Shah shares a few low-cost advertising ideas for start-ups and cautions readers to “think of advertising not as a long-term traffic strategy but as a testing tool to improve your Web site and find out more about your ideal visitor.” An advertising blog discusses how to develop a relationship with the media. Lucy Thornton comes up with a few good marketing themes for April.

A 100-MILLION-MEMBER NETWORK LinkedIn officially reaches 100 million members. Seems like a good time to read the co-founder’s 10 rules for entrepreneurial success.

TRIED TALKING? Whitson Gordon of Lifehacker gives us his top 10 tricks for working while on the go. Example: “Whether it’s that old, dead iPod or the smartphone you’re already carrying with you, you probably have gigs of unused storage lying around waiting to be filled with portable apps, files and other digital travel necessities.” Melanie Brooks of Workawesome.com explains why she uses a leather day planner instead of a smartphone. Greg Schinkel warns against hiding behind our keyboards: “Before you hit ‘reply to all’ and send back a zinger to someone who maligned you, stop and go talk to the person.”

THIS WEEK’S AWARDS

BEST WAY TO GET YOUR CUSTOMERS TO LOVE YOU Ben Yoskovitz talks about the benefits of delighting your customers: “The rewards are immense. Loyal, rabid fans tweet shamelessly about how incredible you are, how valuable your Web application is and how successful your start-up will be.”

BEST WAY TO MARKET WITHOUT A BUDGET Shisha Dublin-Green explains how to market without a marketing budget: “Form an alliance: if you have a hair salon that’s mostly frequented by women with young children and elderly women, you can offer a service whereby you arrange to do their grocery shopping whilst they’re in the salon. You may decide to form an alliance with a local reputable grocer or delivery service to provide this for your customers. This could also be a way to reach out to new customers via your local grocer.”

BEST ADVICE FOR BOOTSTRAPPERS The Smart Bear says that the things money cannot buy are still the most valuable things: “Show proof of your ability to master the things money cannot buy — your ability to learn, change and improve.”

THIS WEEK’S QUESTION: How do you bring in customers without spending a lot? We do free webinars every month.

Gene Marks owns the Marks Group PC, a Bala Cynwyd, Pa., consulting firm that helps clients with customer relationship management. You can follow him on Twitter.

Article source: http://feeds.nytimes.com/click.phdo?i=063441d74bc12fe3942c9e2c46366c7f

Filed Under: Small Business Tagged With: , ,