4 questions for Warren Buffett

By Colin Barr, senior writer

(Fortune) -- Value investors are descending on Omaha this weekend for "Woodstock for Capitalists" -- also known as Berkshire Hathaway's annual meeting.

CEO Warren Buffett and his longtime investing partner, vice chairman Charlie Munger, will take questions from shareholders Saturday morning. More than 35,000 visitors are expected at the meeting, and a few dozen will get a chance to ask questions through a panel of journalists including Fortune's Carol Loomis.

Here are some of the topics they may broach with the world's most acclaimed investor.

Buffett praised Goldman Sachs (GS, Fortune 500) as "an exceptional institution" when making a $5 billion investment two years ago. Does the SEC's civil fraud suit change that assessment at all?

Despite Goldman's recent run of bad press, it seems unlikely Buffett would distance himself from the firm. Goldman's results continue to be strong, and the investment bank has insisted it will prevail in the SEC case.

At the same time, Buffett surely enjoys getting $500 million in annual dividends on Berkshire's (BRKA, Fortune 500) preferred stock. In March, he called Goldman a "very, very strong, well-run business," and said of chief Lloyd Blankfein, "you cannot find a better manager.''

Buffett famously called derivatives "financial weapons of mass destruction." Why is he now trying to fight regulations that would make them safer?

Buffett's well known for his criticism of derivatives. Yet Berkshire in recent years has become a big player, with some $60 billion in derivatives contracts.

Under any new derivatives regulation, Berkshire would be likely to have to produce collateral for new derivatives contracts it writes. This would limit the attractiveness of new derivatives deals for Buffett, who has boasted that Berkshire rarely does a deal that calls for it to produce collateral.

But that's not why Buffett has been pushing back against the financial reform bill in the Senate. Instead, Buffett says he's concerned that the legislation would impose collateral requirements on existing contracts -- which he says would be illegal. Sen. Ben Nelson, D-Neb., made the same case this week as he defected from the Democrats backing the financial reform bill.

Whatever his logic, pushing back on derivatives reform has the interesting side effect of aligning Buffett, with his sterling reputation, with the widely derided Wall Street banks.

Buffett warned at last year's meeting about the dangers of inflation. Is he still concerned about an inflationary outbreak?

The threat of inflation, driven by federal government deficit spending, has long been one of Buffett's worries. In his 1984 letter to shareholders, he noted that "we believe substantial inflation lies ahead" and that "there is a small, but not insignificant, chance of runaway inflation."

Runaway inflation didn't develop in that instance, but there's always tomorrow. Buffett returned to the inflation theme last year, in a review of the government's efforts to restart the economy following the financial meltdown of 2008 and 2009. He warned that inflation may rise sharply in coming years, as policymakers resort to printing money to pay off huge debts.

Of course, the Federal Reserve continues to hold interest rates near zero with employment weak and the economy showing signs of slack. But with activity slowly picking up and commercial banks sitting on $1 trillion of excess reserves thanks to the easy money policies of the Fed, it is likely that Buffett continues to fret about an inflationary spike.

And as hedge fund manager and Buffett watcher Jeff Matthews points out on his blog, some signs of inflation are already emerging at manufacturer Leggett & Platt (LEG, Fortune 500), which said on its earnings conference call this week that rising prices are becoming "a challenge" for its customers.

Is Berkshire Hathaway just too big?

The company climbed to No. 5 on this year's Fortune 500 list from 11th last year, thanks largely to its acquisition of railroad giant Burlington Northern. The Burlington purchase was widely publicized as Buffett's "bet on America," but he has justified the deal as an opportunity to "deploy $22 billion of cash in a business we understood and liked for the long term."

Some fans see this as a sign of Berkshire shifting its focus toward operating businesses from investments. But others argue that the company's various parts are so vast and disparate that Berkshire won't survive as a single entity once Buffett leaves, whenever that might be.

Indeed, Stephen Foley argued in February in the Independent newspaper that the Burlington deal could hasten the company's breakup. Berkshire, which has two classes of stock, split its less expensive B shares following the issuance of shares to Burlington investors. That allowed the company to be added to the S&P 500 index, and may attract even more investors.

Buffett's "options for running Berkshire as a quasi-private company might become more limited and speculators will be able to get a toehold," Foley wrote. "I wonder if the endgame may come sooner than anyone expects."

You won't hear much of that sort of sentiment in Omaha this weekend, though. To top of page