Berkshire Hathaway, run by Warren E. Buffett, released its annual report on Saturday, disclosing a record profit in 2013 of $19.5 billion, a 32 percent increase from $14.8 billion in 2012. Berkshire’s book value per share â€" the measure Mr. Buffett uses to assess the company’s performance â€" rose 18.2 percent in 2013, much less than the 32.4 percent rise in the Standard & Poor’s 500-stock index. But even as Berkshire posts handsome results, it remains to be seen whether it can continue to make large acquisitions that will help it sustain its reputation as the nation’s savviest investor, Peter Eavis and Rachel Abrams write in DealBook.
For his part, Mr. Buffett seems unconcerned. In the annual report, he highlighted the large deals Berkshire made last year, including the acquisition of H. J. Heinz, saying it allowed the company to create a “partnership template that may be used by Berkshire in future acquisitions of size.†But it wasn’t all rosy. Mr. Buffett said Berkshire had taken an $873 million loss on $2 billion of debt in Energy Future Holdings, a Texas energy company, and said he expected the energy company to go bankrupt this year unless natural gas prices rose substantially.
From Quartz: “Should difficulty beating the market over the last five years be worrying? Probably not. There’ve been other periods when Berkshire has underperformed. Mr. Buffett famously sat out the technology stock boom of the late 1990s, resulting in Berkshire’s worst-ever relative performance in 1999.â€
“Berkshire typically tends to hold up exceptionally well when the broader stock market tanks suddenly, wiping out tons of shareholder wealth. Indeed, the conglomerate has only suffered two episodes of outright declines in book-value-per share in 2001 and 2008.â€
TURMOIL IN UKRAINE SPOOKS MARKETS  | Tensions in Ukraine continued to rise over the weekend, with Russia deploying troops across the Crimean Peninsula. In response, President Obama embarked on a strategy intended to isolate Moscow and prevent it from seizing even more Ukrainian territory. Meanwhile, as the situation became more dire, the new government in Ukraine’s capital began to recruit the country’s wealthy businessmen, known as oligarchs, to serve as governors of the eastern provinces, Andrew E. Kramer writes in The New York Times.
The escalating crisis is rocking global financial markets, prompting a flight to the perceived safety of commodities and gold and away from equities. Oil prices were up significantly, and the Bank of Russia raised interest rates on Monday after the Russian ruble hit a record low against the dollar and euro, The Wall Street Journal writes. The Nikkei 225 in Japan fell 1.3 percent, the Hang Seng index in Hong Kong dropped 1.47 percent and Standard & Poor’s 500-stock index futures were down 1 percent, The Financial Times reports.
CITIGROUP UNCOVERS FRAUD IN MEXICO Â |Â Citigroup said on Friday that its Mexican banking unit, Banamex, was defrauded of as much as $400 million, leading the bank to restate its 2013 earnings, Michael Corkery and Elisabeth Malkin write in DealBook. The activity centered on the oil services company OceanografÃa. At least one Banamex employee is said to be suspected of enabling the fraud.
Getting to the bottom of how the fraud occurred is Citigroup’s focus at the moment, but a larger question looms over the bank: Why was it doing business with OceanografÃa in the first place. OceanografÃa, which supplies marine engineering services and derives nearly all of its business from Mexico’s government-owned oil monopoly Pemex, is well known among Mexican investors as being politically connected but financially shaky. Indeed, one investor described the company as “toxic.â€
Here’s a brief overview on the mess: Citigroup, through Banamex, provided credit to OceanografÃa in several ways. One involved Banamex extending $585 million of short-term credit to OceanografÃa to provide services to Pemex, which would then pay back Banamex and verify invoices provided by OceanografÃa to confirm that the work was completed. But a review found that invoices from OceanografÃa were falsified to represent that Pemex had approved them. The Banamex employee who processed them is suspected of being involved in the fraud.
TOO BIG TO VOTE ON A BREAKUP?  | A JPMorgan Chase shareholder has introduced a proposal to be put to a vote at the bank’s annual shareholder meeting that recommends separating the bank’s commercial bank operations from its investment banking and asset management units, bringing to the fore once again the problem of financial institutions that may be too big to fail. The threat was supposed to have been eliminated by the Dodd-Frank Act of 2010, but, alas, it was not, Gretchen Morgenson writes in the Fair Game column.
Not surprisingly, JPMorgan does not want the proposal to appear on the company’s proxy, arguing that the proposal involves “ordinary business†or “routine matters,†which under the Securities and Exchange Commission’s rule can be exempted from a shareholder vote. Now, the S.E.C. must decide whether to allow the proposal to be put to a shareholder vote.
Ms. Morgenson writes: “Given some of the management missteps at JPMorgan in recent years â€" most notably the London Whale mess â€" and its regulatory run-ins, it certainly seems appropriate to ask shareholders whether they think the institution is too big to manage. Even as simply a point of information, such a vote could be revealing.â€
THE NIGHT AT THE OSCARS  | “12 Years a Slave†took home the top prize at the 86th Academy Awards Sunday night, beating out the likes of “Gravity†and “American Hustle†for best picture. The award was the first time Hollywood bestowed its top honor to the work of a black director. Meanwhile, despite going into the night with five nominations, including for best picture, “The Wolf of Wall Street†came home empty-handed. Here is a full list of the Oscar winners.
Also of note, Ellen DeGeneres, the night’s host, may have broken Twitter after she tweeted a “selfie†that included Meryl Streep, Kevin Spacey and Jennifer Lawrence. Twitter’s website went down soon after she posted the picture, with early reports indicating that it failed to handle the explosion in traffic. As of Monday morning, the “selfie†had been retweeted more than two million times, breaking Twitter’s previous record, which was set by President Obama after his re-election.
MT. GOX POST-MORTEM  | A steady erosion of faith in the Bitcoin community “ultimately served as the death knell for Mt. Gox,†the prominent Bitcoin exchange that filed for bankruptcy on Friday, Rachel Abrams, Matthew Goldstein and Hiroko Tabuchi write in DealBook. As the exchange hurdled toward collapse, even the virtual currency’s advocates were losing confidence in the exchange because it was becoming increasingly associated with criminal activity. And now, any lingering trust in the exchange has almost certainly evaporated, disappearing alongside the more than $450 million worth of Bitcoin holdings that the exchange lost (according to its bankruptcy filing).
From Wolfgang Münchau in The Financial Times: “If global instability persists it will produce more crises. Whether the next Bitcoin or its successors can succeed is impossible to forecast. But the environment is one in which an alternative decentralized system could flourish.
“For those running such a system and especially those who advocate its development into a global monetary unit, it would be a good idea to develop at least a cursory interest in monetary economics. I suspect the challenge for the economics profession would be incomparably larger.â€
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Foreign Buyers Pursuing Forbes Magazine  | All good things come to an end, even for the rich, and sometime this month, Forbes will probably pass out of family control and into the hands of a foreign owner, David Carr writes in the Media Equation column. NEW YORK TIMES
Uniqlo’s Parent Said to Seek Deal for J. Crew  | Talks between Fast Retailing and J. Crew’s owners, the private equity firms TPG Capital and Leonard Green & Partners, are in early stages and could still fall apart. DealBook »
Comcast Nears $320 Million Deal for FreeWheel  | Comcast is said to have agreed to a deal to acquire the video advertisement company FreeWheel for about $320 million, TechCrunch reports, citing unidentified people familiar with the situation. TECHCRUNCH
A Scorecard on Jos. A. Bank’s Latest Moves  | Jos. A. Bank’s rejection of the new bid from Men’s Wearhouse was expected. But what was surprising was that Jos. A. Bank laid out parameters for future talks over a deal, Steven M. Davidoff writes in the Deal Professor column. DealBook »
China’s Geely Acquires British Electric Car Start-Up  | The Zhejiang Geely Holding Group, a Chinese automaker, said on Saturday that it had acquired the British electric vehicle start-up Emerald Automotive for an undisclosed amount, The Wall Street Journal writes. Emerald said Geely had committed to investing at least $200 million over the next five years to help develop Emerald’s electric vehicles. WALL STREET JOURNAL
Britain’s ITV Looks to Expand  | The British media company ITV said that its production arm was looking to expand, as higher revenue bolstered profit last year, The Wall Street Journal writes. WALL STREET JOURNAL
R.B.S. to Cut U.S. Assets to Meet Regulations  | The Royal Bank of Scotland is planning to reduce assets in its broker-dealer operation in New York to meet the $50 billion threshold set by the Federal Reserve for foreign lenders, The Financial Times reports. FINANCIAL TIMES
An Over-the-Top Wall Street Blog Returns  | Leveraged Sell-Out, a blog that parodied the musings of young Wall Street bankers, is back with new postings, five years after the financial crisis. DealBook »
Fed to Release Annual Stress Test Results  | With the Federal Reserve’s publication this month of the results of its annual stress tests, it will for the first time describe how rising interest rates could affect the health of the nation’s biggest banks, Bloomberg News writes. BLOOMBERG NEWS
Schwarzman of Blackstone Made $375 Million in 2013  | Stephen A. Schwarzman, the co-founder and chief executive of Blackstone, made a total of $374.5 million in 2013, mostly from the cash dividends he received on his partnership units. DealBook »
Apollo Chief Questions Effort to Limit Banks’ Exposure to Buyout Deals  | Leon D. Black, the head of Apollo Global Management, said on Friday that regulators instructing banks to avoid providing financing above a certain level of debt were “micromanaging.†DealBook »
The Best of Last Week’s eBay Barbs  | “The C.E.O. seems to be completely asleep,†“Mr. Icahn’s attacks are false and misleading†and other highlights from the war of words between Carl C. Icahn and eBay. DealBook »
Riverbed Rejects Updated Elliott Takeover Bid  | Riverbed Technology rejected the latest takeover proposal from the hedge fund Elliott Management on Friday, calling the $3.3 billion offer too low. The move was disclosed just three days after Elliott raised its takeover bid to $21 a share from $19. DealBook »
Winton Capital Plans Expansion  | Winton Capital, the fourth-largest hedge fund in Europe, is planning to hire 100 employees this year as part of an expansion that includes starting five funds and opening new offices in New York, Tokyo and Sydney, The Wall Street Journal reports. WALL STREET JOURNAL
Fortress Discloses a Paper Loss on Bitcoin  | The Fortress Investment Group is the first large public company to disclose a stake in Bitcoin. It had an unrealized loss of $3.7 million at the end of the year. DealBook »
GrubHub Files for an I.P.O.  | The company published a prospectus for its initial public offering on Friday, outlining the financial performance of divisions like Seamless and its namesake delivery service. DealBook »
Square I.P.O. Postponed  | Square, the mobile payments start-up created by the Twitter co-founder Jack Dorsey, has postponed its initial public offering indefinitely, Fox Business reports, citing unidentified people familiar with the situation. The company had been discussing a 2014 I.P.O. as recently as the fourth quarter of 2013. FOX BUSINESS
Corporate Software Tops List of I.P.O.’s  | Six companies that lead a list of the top-performing initial public offerings since Jan. 1, 2013, sell software used in corporations, which could encourage corporate boards and bankers to take more of these types of companies public, The Wall Street Journal reports. WALL STREET JOURNAL
Pabst Brewing Owner Exploring Exit Options  | C. Dean Metropoulos, the veteran food investor, is looking to sell the Pabst Brewing Company, one of the oldest breweries in the United States, Reuters writes. Pabst is also exploring a potential initial public offering. REUTERS
NJOY, an E-Cigarette Maker, Attracts New Funding  | The electronic cigarette maker NJOY received a $70 million capital injection from a group of investors, the latest vote of confidence for a fast-growing industry. DealBook »
The Housing Market With Nowhere to Go (but Up) Â |Â An influx of tech-sector money in San Francisco, where new construction is difficult, is driving up prices and making options scarce for those not earning Silicon Valley salaries, Nick Bilton writes in the Economix blog. NEW YORK TIMES ECONOMIX
Watson Head’s Departure Raises Questions  | Manoj Saxena, who oversaw IBM’s Watson initiative, left his team at IBM to join The Entrepreneurs’ Fund, a venture capital fund in Silicon Valley, raising questions about Watson’s future, The Wall Street Journal writes. WALL STREET JOURNAL
Mashable Raises Funding From Tribune  | Mashable, the technology news website, said on Sunday that it had raised $700,000 from the Tribune Company as part of its latest round of funding, ReCode writes. The move comes as Tribune is planning to spin off its newspaper group, which includes The Los Angeles Times and The Chicago Tribune. RECODE
High-Interest Web Banks Are on the Rise in China  | The growth of high-interest web banks is intensifying competition for deposits and putting pressure on the country’s state-run banks, which are struggling with a severe cash squeeze, The New York Times writes. NEW YORK TIMES
Fed Searches for a New Method of Offering Guidance  | The rapid decline of measured unemployment has outpaced improvement in other economic indicators, leaving the Fed looking for a new yardstick, Binyamin Appelbaum writes in the Economix blog. NEW YORK TIMES ECONOMIX
Mt. Gox Bitcoin Exchange Sued for Fraud  | Mt. Gox, a prominent Bitcoin exchange that filed for bankruptcy protection on Friday, was sued for fraud by a United States customer within hours of its bankruptcy filing, Bloomberg News writes. BLOOMBERG NEWS
U.S. Growth at End of 2013 Revised Downward  | The Commerce Department announced revised growth estimates on Friday, saying that the economy grew at a weaker pace of 2.4 percent, not the 3.2 percent first announced, The New York Times reports. NEW YORK TIMES
Concern Grows as Investors Exit Bond Holdings in Emerging Markets  | Four influential economists with roots in Wall Street, academia and the Federal Reserve will warn that regulators have to date done little to prepare for a possible system-rattling “bond market tantrum.†DealBook »
Why the Bank Leverage Ratio Is Important  | The Federal Deposit Insurance Corporation has proposed the ratio at 5 percent for bank holding companies and 6 percent for insured bank depositories. The time has come to put this into effect, writes Mayra RodrÃguez Valladares in the Another View column. DealBook »
