Buffett sees uneven recovery, craves big deals

Warren E. Buffett ,Chairman and Chief Executive Officer of Berkshire Hathaway, testifies before the Financial Crisis Inquiry Commission during a public hearing in New York, June 2, 2010.

NEW YORK (Reuters) - Billionaire Warren Buffett said the U.S. economy is "coming back" and does not need more stimulus, despite an uneven recovery that mirrors the fortunes of businesses at his company, Berkshire Hathaway Inc.

Buffett also said he remains on the prowl for a big acquisition, having lost a sizable one in the last day or two, but that there is not a "high probability" of one soon.

Speaking on CNBC television, Buffett maintained his "enormous respect" for the efforts of Federal Reserve Chairman Ben Bernanke to move the economy forward.

He said improvement in the business environment is likely in future months to be reflected by a decline in the U.S. unemployment rate, probably to the low 7 percent range by the November 2012 elections from 9 percent now.

He said such gains suggest no need for more stimulus.

"In the end, I don't think we need more of that," he said.

Activity is probably "inching" ahead in most businesses at Berkshire and in much of the economy, while others are "moving forward" and others are "stuck," he said.

Housing remains a problem, and Buffett said it might take a year to have "sopped up the excess supply" of homes.

In contrast, he said Tuesday's purchase by Berkshire's NetJets unit of up to 120 aircraft from Canada's Bombardier Inc for a possible $6.7 billion based on list prices reflected expected higher demand for luxury business travel.

He also said he expects Berkshire's roughly 80 operating units to add at least 3,000 employees in 2011, after ending last year with 260,519.

Berkshire sells such things as Geico car insurance, Dairy Queen ice cream, Fruit of the Loom underwear, bricks and industrial parts.

"The economy is coming back," Buffett said.

"There is a resiliency to the American system," he added. "It does work. It sputters from time to time, it will sputter from time to time, but you don't want to get worried."

Buffett said the U.S. dollar will "become less important over time" as other economies grow faster.

He also fretted over a U.S. budget deficit equal to roughly 10 percent of gross domestic product, projecting "lots of inflation down the road" unless tough choices are made.

Buffett said these could include higher taxes, or requiring politicians to go back on promises they made to voters.

ELEPHANTS AND A FLEETING ZEBRA

Over the weekend, Omaha, Nebraska-based Berkshire said full-year 2010 profit rose 61 percent to $13 billion.

Sitting on $38.2 billion of cash, Berkshire is eager for large acquisitions, which Buffett calls "elephants."

But Buffett said they were hard to find, including the sizable acquisition -- a "zebra" -- that fell through.

"There aren't many elephants out there, and not all of the elephants want to be in my zoo," he said. "It's going to be rare that we find something in the tens of billions of dollars where I understand the business, where the management wants to join Berkshire, where the price makes the deal feasible."

It is "rational to worry" that Middle East unrest could result in wider oil supply disruptions, Buffett said, although he is not now concerned about the impact on Berkshire.

He also maintained that stocks are a better investment over the long term than bonds, saying "it's a terrible mistake to buy into fixed-dollar investments" at current rates.

Buffett expressed comfort with Berkshire's second-largest stock investment, Wells Fargo & Co, whose chief financial officer, Howard Atkins, departed suddenly last month.

He said that while Wells Fargo could have done a better job handling Atkins' departure, he spent four hours on Saturday reading the bank's annual report, and concluded: "I feel very good about the whole Wells operations."

Berkshire Class A shares closed Tuesday at $128,050. A day earlier, they reached a 52-week high of $131,463. (Reporting by Ben Berkowitz and Jonathan Stempel in New York; Editing by Derek Caney, Lisa Von Ahn and John Wallace)