To Our Clients, Colleagues and Friends:   

· Don’t you find it fascinating to see how a free-market economy improvises as it goes, destroying old, less efficient ways and rewarding new and better ideas?  We just saw yet one more example of this.  Wal-Mart leads the nation in music sales, but coming in at a strong #2 was Apple’s i-tunes. Just a few years ago, wasn’t Apple really just a computer company? And now they’re the nation’s second biggest music seller!

· We get asked all the time when the mortgage problems will subside.  We just don’t know, but we think a good leading indicator is Indy Mac’s asset quality in their securitized mortgage portfolio. The 60+ delinquency rate on the Alt-A first mortgage portfolio was 8.6% in February 2008, up from 6.0% three months earlier and 2.43% in the year-ago period.  When their numbers start to turn around, that will probably represent the turning in the cycle.

· Here’s something to think about: Sometime in the next few quarters, Countrywide will cease to exist as a stand-alone company.  Guess who will be the nation’s largest independent mortgage lender?  Think again.  It will be Indy Mac.  

· The Federal Home Loan Bank of Dallas is buying the FHLB of Chicago.  Yes, yes we realize these are private corporations now, but we still remember them from their days as part of the government. So it just seems weird.  Kind of as if the Dept. of the Treasury bought the Dept. of Commerce.

· We recently watched a few John Waters films, the most outrageous being A Dirty Shame.  Although not up to his usual standards, this