The U.S. economy got another vote of confidence of sorts Wednesday after Warren Buffett, among the nation's most admired investors, told CNBC that while the economy hasn't improved much, it also "hasn't gotten any worse." Further, he told the cable news network he doesn't expect a double-dip recession and see signs of an improving residential real-estate market.
Barring some horrible event such as the attacks of Sept. 11, 2001, "or worse," he said, the economy has bottomed out. "We're past the critical point," said Buffett, CEO of Berkshire Hathaway (BRK.B) and its largest shareholder.
Buffett's comments follow those of Federal Reserve Chairman Ben Bernanke, who said Tuesday that the U.S. economy had probably exited recession sometime earlier in the current quarter. Speaking after a meeting at the Brookings Institution in Washington, Bernanke said the recession "was very likely over," but he also warned that growth may be too tepid to cut the unemployment rate significantly anytime soon. "It's still going to feel like a very weak economy for some time," he said.
In his CNBC interview, Buffett warned, however, that there are still shoes to drop in the U.S. economy. They include commercial real estate, a market that has seen property values plummet and access to credit diminish.
Commenting on a bid by Kraft Foods (KFT) for Cadbury (CBY), the British-owned chocolatier, Buffett said Kraft's offer is a "pretty full one." Berkshire Hathaway is the largest shareholder in Kraft, the nation's second-largest food maker. The Illinois-based company has offered to pay $16.7 billion in a stock-and-cash deal for Cadbury even as Kraft's own stock is undervalued, in Buffett's estimation. Buffet expressed confidence in Kraft management led by CEO Irene Rosenfeld, but he added, "they have to do a lot of things right to justify this price." Cadbury has rejected the offer.
Buffett also heaped praise on federal officials who last year engineered the $700 billion bailout of the nation's banking system. Calling them heroes, Buffett specifically referred to Bernanke, former Treasury Secretary Henry Paulson and current Treasury Secretary Timothy Geithner, who at the time was president of the New York Federal Reserve Bank.
There are those who will quibble over whether certain things couldn't have been done differently, Buffett said. "But at the time I called it an economic Pearl Harbor and in the end we got through Pearl Harbor. And it could have turned out a lot differently."
On health-care reform legislation that Congress is debating Buffett expressed skepticism that an overhaul of the insurance system is the way to go to keep costs in line. "I'm talking as much about reforming health care as we're talking about reforming the insurance," he told CNBC.
When pressed again about the chance of the U.S. falling into a second recession, Buffett told the CNBC interviewer the economy has stabilized. "We are moving through a recession," he said. "And I see nothing that makes me worry about the fact that it's going to be worse than I would have thought three months ago."
Forex for Beginners
Learn about trading currencies and foreign exchange transactionsView Course »