click here for the other link

This situation recently came to mind as I spent a weekend at La Jolla’s Sheraton Hotel which is owned by Starwood Hotel (HOT). I remembered a while back it was rumored Sam Zell might buyout Starwood Hotels (HOT). After spending some time researching the company I came to the conclusion that the stock is undervalued. Not bad eh? But then I thought to myself…. Why buy a dollar for .50? When there is another dollar down the street for .30?

These are historic times according to some well known investors. Great investors like Warren Buffett, Bruce Berkowitz, Marty Whitman are calling it an opportunity of a lifetime, so why be satisfied with cheap? And why not invest in REALLY cheap?

Just a thought.

Why Zecco?

• 10 FREE stock trades every month to customers who keep only $2,500 in assets in their account. Stock trades are just $4.50 each otherwise.
• There’s no annual fee.
• There’s no catch.
• Zecco can give away free trades because the cost of executing a trade has become very low. And like other brokerages, Zecco makes money on interest income and options trades.
• Zecco Trading is a fully disclosed broker/dealer and a member of FINRA and SIPC.

And oh yeah, juuuuuuuuuuust in case your wonderin. Im currently in the process of switching to Zecco.

See what Peter Schiff thinks now by clicking here

Disclosure: Long AXP

Gurus what gurus!?

Many “gurus” are down over 50%  and questions have risen whether certain investors should be followed at all. Among the “why” list include Mohnish Pabrai, Bill Miller, Richard Pzena and the contrarian maestro himself David Dreman. These individuals built up above average returns for years and sometimes decades, but were early to the party and have whipped out most of their investors returns.

Who would have thunk I am having a better year than David Dreman? This considering he has access to information I could only dream of and he has a much higher salary than me.

So many choices, time to narrow’em down

I follow a handful myself. As much as I would like to follow Tweedy, Browne and Co. and Ruane Cuniff, their not the same. Here is my list and why:

• Warren Buffett- Pretty obvious. To be the best, one has to learn from the best. “”If I have seen a little further, it is by standing on the shoulders of giants.”Nuff said
• Bruce Berkewitz- I find his holdings easy to understand. Most importantly, their simple. For example,  he appeared on WealthTrack stating that he finds himself driving less due to the high price of gas. That’s about the same time oil peaked
• Seth Klarman- Kind of a doble standard here, but his picks never make sense and I like trying to figure them out
• Bill Ackman - Guys awesome. Has the ability to present his thesis in a clear manner and has all the numbers to back it up. Looking forward for his presentation on target (GT), an assetplay.

The main reason I follow them is they present their investment thesis in a clear and simple manner. Sometimes they do deviate from the norm but I do not follow them blindly. Even Warren Buffett is becoming harder to follow since his picks are mixed in with Lou Simpson’s. Although, many speculate that any bets made over $1  billion dollars is a Warren Buffett pick, nothing is set in stone. So who do you follow?

Small Business

Keep in mind, I am employed in a family business that relies heavily on economic conditions especially the housing industry. Our customers consist primarily of paint and chemical companies. Our vendors mainly consist of steel and aluminum companies.

What happened!!!

About 3-4 weeks ago something happened. The economy froze. Every business I have called or in which my father called agrees that something happened as that is the time frame in which things went from “OK we will stick it out” to ” oh shoot, we might not make it”. Things are ugly out there. Several good friends of mine have not been working or are considering closing up shop. Several large (and small) have begun laying people off and reduce work hour by  20-40% (working 3 or 4 days out of the usual 5). I am not talking about start ups. I am talking about family owned businesses which have been around for 40-50 years. A good friend of mine who has a successful scrap metal business once made around $1200 /ton . Talked to him to see how is doing, getting about $60/ton.He soon told me “If you read in the bible of how things are going to end, this is it, wars, bankruptcies,etc.”

Solution

How do we solve this problem? We will have to spend like never before. Unless consumer psychology switches from “save and not spend” to ” hun, lets go out” this will drag. President Elect-Obama has stated that another stimulus might be in the works. I certainly will not mind an extra check. But, unless the country actually spends it, it will be worthless. the last stimulus check I spent about 20% and saved the rest. I am pretty sure most American did the same. How to get people to spend their “checks”. First, don’t give them a check. Give people prepaid ATM’s with an expiration date on it (3 months). This ensures people will spend the $$ and will allow the government a way to track if the stimulus is working. If it is, reload those ATM’s.(whats another trillion?)

Small Business/Corporations

Lending is still tight even though LIBOR has come down a bit. Nevertheless, companies are still holding off on projects until things start slowing down. It would be nice if small/large business received some sort of stimulus package. I have several customers who need maintenance, want new equipment,etc. but are not willing to spend money right now. Several companies have gone bankrupt and I would love to go in their and purchase machines at fire sale prices. Unfortunately, I’m on the defensive and have to worry if I will be around to see the turnaround. Our business is only surviving because we have a strong market position and I would love to get stronger but I simply can’t.

Final Thoughts

I know my stimulus package (I thought about it myself ) is not the best. I know i’m not the brightest when it comes to economics ( I received a B in micro and macro). I know it has some holes like “some seniors are not familiar with ATM’s’, “What if people pay their credit card debt with this ATM of yours”. Your right. But you know what, its better than a check that people will tuck away under the rug. How about those skeptical about giving more money to small businesses? Shoot, my family business has a better chance of survival than Ford and GM combined. I’m not some politician and my proposals would probably get laughed at. I don’t care. I am in the trenches. I know what’s going on out there. You know things are bad when steel companies are calling me (its usually the other way around). 3 months ago U.S. Steel took 1 month to process an application for credit, after many calls and horrible customer service, I took my business elsewhere. Guess who is calling now?