First of all, from what I have read there is a split among “gurus” as to where we are in the economy. Some like Warren Buffett, believe tough times are ahead. Others like Ken Heebner, believe we have gone through the worst.

There’s a lot of pessimism about the economy. What’s your take?
My view of the world is quite different. I think people are very concerned about our economy, they’re starting to realize there could be higher inflation to come. The consensus is that we’ll bring the rest of the world into our recession. But my view is we’ve probably seen the weakest period of economic activity. The economy may not be robust in the next year, but it’s seen its low point and at some point will move higher.

I hope so! I have not made public what I do besides going to school and visiting investing sites. About one year ago, my father purchased the business he had worked for the past 25-30 years ago.  My father had always wanted to own his own business and the opportunity was right. Basically, I handle operations, while he provides his knowledge. We are in a business where we are heavily dependent on steel prices and the housing industry. Sounds fun eh? What’s even better is we bought the business at the same time housing peaked. Now, if there’s someone out there who can tell you about the economy and anything related to the chemical business I might be that person.

My Take On The Economy
Its bad out there. March and April were the worst months I have been in. We were in the red (I handle accounting) and cut our working hours by half. If my father and I did not believe in job cuts, without a doubt our employee(s) would not have a job. Starting in late April, things started to pick up and we had our best months in May and June. So far July has started off really bad but that could change as I am close to closing a big job. Now, I have the opportunity to talk with many businesses and delivery drivers and everyone says the same thing; “things are bad and there are no signs of light:. I honestly believe if we did not have outstanding numbers in May and June, we would be out of business. And this is coming from a business with an estimated 90% of the Southern California market.

What The Fed Needs To Do

The Fed needs to lower these [expletive] commodity prices. It’s tough to sell something when the price of steel keeps going up every day! Our monthly fuel bill used to be in the neighborhood of $350. Now its $850-$900. I know its peanuts compared to some other business but the impact is the same. I was considering investing in new machinery but the increase in fuel has put those plans aside. Everything and I mean everything is being affected by rising fuel prices. Everyone I know wants to invest and expand in their business but with high commodity prices, it’s nearly impossible. Its like trying to swim with handcuffs on, you will not go very far.

The Future

Nevertheless, I know from personal observations, Americans are some of the best workers around. Despite every bad headline, we still get up and go to work and do something productive. I hope this slowdown will be over sooner rather than later but we need every help we can get, starting with high commodity prices.

Many shared the views of Contrarian Value Investing reader and commenter Alisa who commented on my Great Value investing Articles post saying:

Thanks for sharing these ‘Great Value Investing Stories”. I read, and really enjoyed Ken Heebner’s CNN Money interview. This is the first time I have been introduced to him and the funds he manages.- Alisa

There are several links online about Ken Heebner but I found a couple that might be of great interest. First, this 2006 Ken Heebner CNN Money interview outlines a bit more of Ken Heebner’s methodology (thanks DaveinHackensack). Also, this Bloomberg interview outlines what Heebner thinks of the real estate market. Caution though, the article is dated April 2007. Next, in this Kipling interview, Ken Heebner outline his favorite sectors. The interview took place late 2007, early 2008. Finally, after being one the top 10 biggest winners of 2007, Morningstar had this to say about CGM Focus (CGMFX) :

Now it’s getting interesting. Ken Heebner made our manager of the year nominees list because he had solid long-term returns to go with an amazing year. His calls were absolutely brilliant. He owned emerging-markets stocks such as Value Overseas, a Brazilian iron ore exporter, and Vimple Communications of Russia. On the flipside, he shorted Countrywide Financial (CFC

Sponsored by:
CFC), which got ensnared in the subprime mess. Heebner is an outstanding manager, but if you buy in remember this is a once-in-a-lifetime year and he sometimes gets it wrong. He’s had losses of more than 20% in a single year at CGM Capital Development and that certainly could happen at this fund, too.

Enjoy

First on the plate is Ken Heebner’s CNN Money interview. For those not familiar with Ken Heebner, he has one of the hottest (if not the hottest) hand in investing right now. His mutual fund (CGMFX) was up an outstanding 80% last year! The first thing that came to mind when I read this was Peter Lynch. Why? In his books, Peter Lynch describes how much time and effort he spent gathering information on companies, often spending holidays in his office listening to conference calls and interviewing CEO’s. On the other hand, Ken Heebner spends his time analyzing macro trends. Indeed, a very tough thing to do as he is trying to stay ahead of thousands/millions trying to do the same thing. The other great value investing story came out canadianbusiness.com.

Basically, the article highlights four candidates that can may be the next Warren Buffett. Out of the four, I follow Ian Cumming of Leucadia National (LUK). For those interested in one of his picks, the insiders at Jefferies Group (JEF) are going crazy buying their own shares. Ian Cumming is loading up at current prices. I have not looked into the story at Jefferies but considering the buying going on, I might build a small position now, and do some reading. One thing I did learn from Peter Lynch, if insiders are buying, it’s usually for a good reason (they think their stock is cheap).

The next great read I found is Robert Rodriguez’s shareholder letter. Not much attention was given to it at valueinvestingnews.com, but it’s better than 90% of the stories submitted this week. Rodriguez earned my respect when he steered clear of the credit crisis and putting a buying halt on his funds last year. Currently, he is sitting at 38% cash and still outperforming the market.