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By Jason Stipp and Jeremy Glaser | 05-03-2012 04:00 PM

Top 5 Issues on Buffett's Plate

Berkshire's cash stake, Buffett's politics, the housing market, succession, and more will be on the menu at this weekend's annual shareholder meeting.

Jason Stipp: I'm Jason Stipp for Morningstar, and welcome to The Friday Five. Saturday marks the annual Berkshire Hathaway shareholders meeting, these so-called "Woodstock for Capitalists."

Morningstar markets editor Jeremy Glaser is going to be on the scene, but before we get there, he's going to tell us five things this week that might be on Warren Buffett's buffet.

Jeremy, thanks for joining me.

Jeremy Glaser: You're welcome, Jason. I can't wait to get to what Warrant Buffett calls 'The Cradle of Capitalism.'

Stipp: So, what do you have for The Friday Five this week?

Glaser: This week we're going to talk about Berkshire's cash stake, politics, housing, Bank of America, and finally succession.

Stipp: So, number one, there is always lots of talk about what is Buffett going to do next with all of that money? Where is he going to put it to work? Some people feel like they have some clues, and they have some direction on that. What do you think? Are we going to get some answers here?

Glaser: This is one of those perennial questions, because as Berkshire's cash stake just gets larger, and larger and larger, it's not getting any easier for them to put a lot of this cash to work. And it's just made a lot of shareholders clamor to get some of that back, either through share buybacks or a dividend.

We finally did get share buybacks, as long as Berkshire is trading for about 110% of book value or less, Buffett said he'd be in the market, he'd be buying those shares, he sees that as somewhat of a no-brainer. But right now, Berkshire is trading for above that, and really there haven't been that many share buybacks.

He seems very reticent to put a dividend into place. He really thinks that he can deploy that capital in a more profitable way, and he doesn’t want to commit to making that kind of payout year-in and year-out.

So, I don't think we're going to get a lot of new clarity as to exactly what's going to happen with these billions and billions of dollars on the balance sheet. I think Buffett is still going to stick to his story, that he thinks he can do a better job with that capital than the shareholders can. So far, historically, he's been right, but certainly I think that as he gets on in years, and I think as people think about the future of the company, there's going to be just more and more pressure for them to really get that cash back down to a more manageable level.

Stipp: So, Jeremy, Warren Buffett has never been a stranger to the political arena, but this year his involvement in politics has been much more elevated. What do think the kinds of questions are going to be on that front?

Glaser: Well, Buffett has certainly never been a stranger of letting his opinion be known, either. And I think that this year he's talked a lot about the Buffett Rule, which is the idea that Warren Buffett talks a lot about, that he should be paying at least as high of a tax rate as his secretary, who is of much more modest means.

And I think that shareholders are going to have a few questions for Buffett. The first is going to be, does it really make sense for him to be wading into these political waters? I think that with the country so split politically that basically taking a position that's going to potentially anger half of the population of the country probably doesn't make a ton of business sense, and you really wonder what he expects to gain from this.

I think the answer is likely that at this point in his life and in his career, he feels like he doesn't have a lot to lose personally, so he's willing to go out and make these more public, political stances, even if it's not necessarily in the absolute best interest of general Berkshire shareholders.

So, I think we'll hear a couple questions about it, but I have a strong feeling that no matter what people say in Omaha, he's not going to all of a sudden shy away from the political advocacy that he's been doing over the last year or so.

Stipp: Ahead of the Berkshire Hathaway annual shareholders' meeting, we always get Buffett's annual letter to investors. We got that in February. He made some statements about the housing market. What kind of follow-up questions do you think he'll get?

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