5 Questions Buffett Must Answer

Follow the Inside Value team's real-time coverage of the Berkshire Hathaway meeting at www.Berkshire2010.fool.com!

OMAHA -- Better known as Woodstock for Capitalists, the Berkshire annual meeting is full of starry-eyed capitalists eager to glean insight into the many questions and challenges facing this proud company from Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) Chairman and CEO Warren Buffett and his partner, Vice Chairman and Wesco Financial (NYSE: WSC  ) head honcho Charlie Munger. 

The past year has been a mighty one for Berkshire, and things are just heating up. Not only did the company sacrilegiously split its Class B shares 50:1, but it also finally bagged its elephant in acquiring rail ringer Burlington Northern. And as if this stuff could get anymore Orwellian, one of Berkshire's biggest winners of the year was none other than BYD, a high-growth Chinese maker of batteries, cell phones, and electric cars. No, you are not hallucinating.

Those 5 questions
You can be sure Buffett and Munger will field plenty of questions on those subjects during their marathon question-and-answer session on Saturday. Frankly, those are layups compared to the five blunt questions that will absolutely, positively be asked in one form or another:

1. How do you feel about Goldman Sachs supposedly ripping its clients' tails off?
Unless you haven't kept up with the news because a bond trader ate your soul for breakfast, you know that Goldman Sachs (NYSE: GS  ) is under intense scrutiny for potentially screwing over its clients. This is exactly the kind of Wall Street behavior Buffett has long criticized, which puts him in an awkward spot given that Berkshire invested $5 billion in Goldman during the financial crisis. Will Buffett stand by Goldman, or take it out to the woodshed?

2. How are those derivatives going to shake out?
Buffett has been an outspoken critic of the lack of oversight for many types of under-the-radar derivatives trades. Ironically, Berkshire might itself be financially railroaded by a provision in the financial reform plan that would require the company and other derivatives counterparties to increase the collateral held against their contracts. Should the provision ultimately make its way into law and the courts not intervene, Berkshire might have to shell out billions in cash as collateral against its $63 billion in notional contract value. How much are we talking about here, big fella?

3. How concerned are you over the sovereign debt crisis?
Greece is in dire financial straits, while Portugal and Spain are the next contestants in the "Name That Eurozone Bailout!" Challenge. What are the potential global knock-on effects if one of these countries defaults? What is Berkshire's exposure, both directly and indirectly?

4. Who are your successors?
Buffett rightly fawns over the crown jewel of Berkshire's reinsurance business, Ajit Jain, though our read is that the next likely CEO of Berkshire is operator extraordinaire Dave Sokol, whom Buffett recently tapped to turn around the flailing NetJets business. Will Buffett inch any closer toward tipping his hand? And for that matter, any updates on the handful of candidates he's been eyeing to serve as Berkshire's next chief investment officer?

5. The market is pretty hot and heavy right now. Should we still buy American?
Buffett famously recommended buying American stocks 18 months ago. But with the market up 33% since then, unemployment at 10%, instability in the Eurozone, and underwater homeowners as far as the eye can see, are America and key Berkshire holdings American Express (NYSE: AXP  ) and Wells Fargo (NYSE: WFC  ) still a buy?

Follow along
The Motley Fool Inside Value team is eager to hear Buffett's thoughts on these topics and more. And we're just as eager to deliver that news to you in real time. We've built a special website for the experience -- Berkshire 2010 -- featuring dynamic tweets, photos, videos, blog posts, and articles, all aimed at making you feel as though you're right here with us. 

And for you Inside Value members, keep your eyes peeled for a new Berkshire-themed special report hitting www.insidevalue.fool.com late next week. 

Buffett will answer lots of questions this weekend. But if you could ask Buffett or Munger one key question, what would it be? Let us know in the comments box below. Then follow along with our Berkshire 2010 real-time coverage throughout the weekend. 

Senior Analyst Joe Magyer cannot afford NetJets. He doesn't own shares of any companies mentioned in this article. American Express is an Inside Value selection. The Motley Fool owns shares of Berkshire Hathaway, which is a recommendation of both Inside Value and Stock Advisor. The Motley Fool's disclosure policy has nothing to add.


Read/Post Comments (10) | Recommend This Article (28)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 30, 2010, at 4:37 PM, TMFCop wrote:

    Hey Joe,

    One question I'd like to see Buffett have to answer is why he thinks her should be exempt from the proposed derivatives regulations?

    http://online.wsj.com/article/SB1000142405274870344140457520...

    At Buffett's urging, Sen. Ben "Cornhusker Kickback" Nelson is pushing to have current derivative contracts exempt from the new regs. No doubt that would give him a huge competitive advantage, particularly since he has around $63 billion worth of derivatives.

    I love Buffett as much as the next Fool, and goodness knows I hate ANY regulation, but carving out government-sanctioned niches ain't exactly fair play either.

    Buffett has many times tried to exempt himself from regulations that apply to others. Remember when he wanted exemption from having to report his trades in a timely manner?

    What's good for the goose is good for the gander. Buffett often doesn't mind government intrusion when it's someone else bull getting gored and if he's not going to oppose the derivative regulations outright, then he should be able to carve out special treatment for himself.

    Have fun! And don't eat too much Dairy Queen!

    Rich

  • Report this Comment On April 30, 2010, at 6:20 PM, Boslie69 wrote:

    Goldman and Morgan Stanley can always give up their commercial-banking licenses----which they took our only in 2008, to secure funding from the Fed---knowing that the government would certainly still bail them out.

    The Senate(all drama Queens) appears to be moving toward approving a financial-reform bill. Here we go with another agency to protect the consumers from bad financial institutions. Hmmmm. I wonder what the lobbyists are going to say about that.

    We need more Paul Volkckers.

    Didnt' President Obama point out that free market was never meant to be a free license to take whatever you can get, however you can get it?

    Bad Bad Banks

  • Report this Comment On April 30, 2010, at 8:03 PM, profittkr wrote:

    What I would like to see him answer is "Can't we sack your boy Jeffy now"? Sure GE has surged - up 3 fold from its lows - but only after falling 90% from when Immelt took over. Welch or Jones or Edison, he ain't. Even Welch said he would have shot him by now. Imagine spending $200 mill fighting accounting rules they broke - which padded his and his henchmen's salaries - only to be fined anyway. No giveback clauses there? And the clown has the kayun's to claim GE has the most governance of any company? Guess that's what happens when you have your own network touting your virtues. Get a noose.

  • Report this Comment On April 30, 2010, at 10:41 PM, afzalraza wrote:

    the question i would ask - if you were not a brka shareholder, what price would you offer for its stock

  • Report this Comment On May 01, 2010, at 12:01 PM, TMFRhino wrote:

    An hour into the meeting and I think they've hit all 5 questions, not bad.

  • Report this Comment On May 01, 2010, at 3:04 PM, TMFJoeInvestor wrote:

    Yeah, five-for-five on this one. Anyone looking for the real-time version should check out our ongoing coverage at http://www.fool.com/events/berkshire2010/

  • Report this Comment On May 01, 2010, at 4:14 PM, omahabizman wrote:

    TMF:

    I hope you were there to hear Mr. Buffett's answer to your chiding about derivatives. In true form, he stated that his problem with security on the derivatives is related to the "retroactive" provisions. He explained that if you sold your house without furniture (but had a furniture-included option), and then a few years later someone said you now had to go ahead and furnish the house (at your expense), it wouldn't exactly be fair, right? Most rational people would agree. Warren typically has two prices for insuring these instruments - with and without furniture, but don't ask him to furnish the ones who "passed" on the furniture. OBM

  • Report this Comment On May 02, 2010, at 9:44 AM, plange01 wrote:

    buffetts ties to goldman need to be looked at to see his level of involment in these illegal deals..

  • Report this Comment On May 03, 2010, at 8:51 AM, theboz123 wrote:

    There isno moral compass on Wall STREET. APPARENTLY AMORALITY REIGNS on the Street ERYWHERE INCLUDING WarrenBuffett is little different than Blankenfein! This really gets to the point that the whole game is really controlled by those who make the Golden Rules and own the Gold.

    Warren should be embarrassed about his recent comments and having Uncle Ben is his pocket in Nebraska. I am not surpirsised but diappointed about his comments!

  • Report this Comment On May 06, 2010, at 11:39 AM, mikecart1 wrote:

    1. Buffet how does it feel to be the luckiest investor of all time?

    2. Buffet why do people bow down to you like you are some genius?

    3. Buffet you are overrated and I respect someone like Jim Cramer far more than you. You don't help the average investor and proved it for the many years you kept BRK-A from ever splitting off. You are a lousy spokesperson for the investing community. I used to bow down to you too until I found how you made your billions.

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