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By sonnypage
January 14, 2008

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Most of you know that my wife and I are Realtors and associate brokers who practice real estate north of Atlanta. Here is some of what I am seeing and hearing this week, anecdotal evidence, bits and pieces for the jig saw puzzle we continue to try to piece together.

Saturday night of last week we went out to the home of clients who had invited us to dinner. They are a young couple with young kids; we had helped them find a home about three years ago and had not seen them for perhaps a year. The husband is a carpet wholesaler. He represents several of the north Georgia carpet mills and his clients are carpet outlets that sell to both builders and individuals. My question to him and to everyone I meet these days was how is business? He shook his head and said that around August the bottom fell out. Business went from slow to non existent. He talked about finding a second job to bring in some additional income and finally said let's change the subject, this is too depressing.

Monday morning I met a home inspector at a home we will soon list. Our new plan for 2008, in an attempt to help move homes in a slow market, is to ask all of our listings to do two things. First, get an independent appraisal; second, get a pre listing home inspection. If both of these are on their table for potential buyers to review after we list, we think it may reassure those potential buyers. If our clients will do this, we will reimburse them half of this expense out of our commission at closing. The home inspector I met was one of our regulars whom we have used for many years. I asked him about his business compared to say, a year ago. He had eleven inspections in December against twenty in December of last year. He made a comment that was the same as our carpet vendor. His business dropped sharply around August. Eleven inspections a month comes out to about one every other business day. I recall one summer years ago this inspector complained of being exhausted after thirteen inspections in a single week, which was just about all that was physically possible.

The next day I met an appraiser at the same home. In answer to the same question, he said his business is off about twenty five percent from this time last year. Appraisals are normally done when homes are sold, so, this speaks of the activity slowdown we ourselves are seeing. I made the comment that what I was seeing, at least in resales, was a drop in activity but not in prices. He shook his head in partial disagreement. One of their major clients is a mass production national builder who builds in the Atlanta area. They are dropping prices by twenty five percent to unload inventory. Existing homeowners in their neighborhoods are furious at them but can do nothing about it.

Do you remember my mention in previous posts of a mortgage lender friend of ours I called "Amanda"? We met her today at a new Caribbean style restaurant we recently discovered. In answer to my how's business question, she said she actually had a pretty decent December with six deals but so far nothing in January. I gave her Bill Gross of Pimco's new "Investment Outlook", just out, in which he continues to call for a 3% Fed funds by mid year. We both hope it will be so. Amanda has had an interesting year to say the least. If you recall, she was with HomeBanc when they imploded in August, made the jump to Countrywide as did many HomeBanc lenders, but then, at our urging, shortly jumped again to SunTrust.

This brings me to my New Year's resolution. Some of you may recall that two years ago this month, I moved my entire portfolio into "commodity" related stocks. Understand that when I say "commodities", I am casting a pretty wide net. If Petrobras, the Brazilian energy company, is one of the ten largest positions in one of my natural resource mutual funds, but also one of the top ten in one of my emerging market mutual funds, is it an emerging market equity or a commodity play? Obviously it is both.

Anyway, two years ago, I made a very non diversified deployment and put everything into commodities. My return in 2006 was 37%, which was great, but what I noticed was that the larger portion of my portfolio which was in mutual funds outperformed my so called "trading account" where I traded equities. The lesson I learned was that it is one thing for me to make a sector call but quite a different decision to think that I can pick individual winners in the sector. My New Year's resolution a year ago was to stay with my commodity play but mutual funds only, no individual equities. It took me only two months to break my resolution and start trading again in my smaller "trading" account. The results are in for 2007 and they are, surprise, the same as for 2006. My overall return was 32%, but again, my trading pulled down my overall return. So let's try this again. I am sticking with my commodity play but again I am resolved to go with mutual funds only, no stock trading. I am confident that I can stick to my resolve this time, but if I should waver, I am even more confident that the rest of you will quickly remind me of my "resolution".

So here we go again. I still have most of my chips on commodities, but this time seven mutual funds. I am staying with last year's three plus I have added four more plus a final ten percent in gold (GLD). My portfolio is on my Foolish profile if you are interested. I continue to look for aggressive rate cuts from our Fed, possibly very aggressive rate cuts. Hold on tight, folks, here we go. Commodities are still the play. I am today more bullish on commodities than ever.