To Our Clients, Colleagues and Friends:  

· Remember our asking what the rate of annual inflation was for Super Bowl tickets since it started in 1967?  A friend (and uber-economist from UC Davis) told us how to calculate it with prices rising from $6 to $900 since 1967. Subtract the starting year from the current year (2008-1967 = 41).  Then take the 41st root of 900/6 (or 150) which is 1.13, so 13 % is the compound rate of price inflation in Super bowl tickets. Got that?

· Boy, do we have vigilant readers!  We screwed up on the conversion of Polish Zloty to Euros and then to dollars, and we had a few dozen people (like 57 people at last count) write us about our error.  How embarrassing.  But we still think Zloty is a fun word to say.

• How bad is California ’s Inland Empire ?  One of the very best Street analysts recently looked at a major thrift there and assumed the following for their construction portfolio: A loss rate  of 50% for un-entitled land as well as developed lots, 30% for single family, 40% for multifamily and condominium loans, and 25% loss on commercial construction loans.  It looks kind of high, but the area really is that bad.
• How’s this for a title for an article on mortgage bankers today? Yearnings for Earnings.  Or maybe a song that Irving Berlin could have written during The Depression.
• In many cases, it makes more sense to sell directly to FNMA than to investors who just turn around and sell your loans to FNMA themselves. Loans get off your line faster, you just ship a note and not the whole file, and you often can get better execution.  If you’re interested in getting FNMA approval, we can handle this for you.  Contact Corky ([email protected]) to pursue this.
• There is only one bank in the U.S. with a Triple-A rating (Wells Fargo), and there is only one in Europe . Who do you think it is?  Guess again.  It’s Rabobank, the Dutch bank which is also growing its business in California ’s agricultural markets.
• It gets uglier.  The Attorney General of New York has granted immunity to due diligence firm Clayton Holdings in their investigation into the Sub-Prime mess.  Being told you can avoid prison by testifying is a powerful tool.  We’re sure Clayton will have some interesting stories to tell.
• When you see a company trading at a huge discount to book value, look twice and check out the price to tangible book value. Franklin Bank in Texas is trading at 40% of book value - but at 102% of tangible book.  
• Where were you 34 years ago this week?  On February 4, 1974, newspaper heiress Patty Hearst was a teen aged student at UC Berkeley.  Late that night she was kidnapped by a gang of self-styled urban terrorists with the absurd name of the Symbionese Liberation Army, a group of losers and misfits with delusions of starting a revolution in America . They demanded as ransom that her family spend $400 million to feed the poor people of San Francisco , and food riots broke out when the family tried. Patty was kept in a dark closet for weeks and raped repeatedly and, ultimately, brainwashed into joining her kidnappers. She denounced her parents as “fascist pigs and enemies of the people” and participated in bank robberies in which innocent people were murdered.  Most SLA members were killed in a huge shoot-out with the police in L.A. , and Patty was later captured in a safe-house in San Francisco .  The once-pampered heiress served a number of years in jail, and is now a suburban house wife and soccer mom in Connecticut .  If you think the O.J. Simpson saga was fascinating, look up some articles on Patty Hearst’s kidnapping.  This one was a hundred times more spell-binding.
• If you’re confident that the Countrywide deal will close with the BofA, the Countrywide 3.25’s of May 21, 2008 are trading at a discount to yield 14.3%.  Not bad for less than four months.  The interesting twist is that May 21 is probably before the deal will close, so Countrywide will presumably have to come up with the cash on its own to redeem the bonds.
• Have you ever been so bored that you start looking at maps and Atlases?  Here are some interesting towns in Texas that we just found on a slow, rainy day:  Los Angeles , San Diego , Memphis , and South Bend , all in Texas , along with Jot ‘em Down and Cut and Shoot, both also in Texas .   New Mexico has a Las Vegas , New York , San Francisco and a Sacramento , and our favorite, Truth or Consequences.  There’s a Detroit in Maine , and finally, there’s a Rough and Ready in California .

Joe Garrett and Corky Watts       Garrett, Watts & Co.