To Our Clients, Colleagues and Friends:   

· We wrote about this a few months ago, and we tell it to clients constantly:  Do due diligence on your investors!  How many of you honestly, truly do this?  When you apply for approval with an investor, do you have a file on them that shows you checked references, analyzed their financial statements, possibly read analyst reports on them?  Now, maybe Thornburg looked clean as a whistle a month or two ago, but you knew (or should have known) that they finance themselves with short-term repo lines - so you should have known they had  potential liquidity risk.  Look, all we’re saying is treat investor approval with some degree of seriousness. Just because you can get approved, it doesn’t mean you should do business with someone.  Although not exactly applicable, Groucho Marx said, when he was asked to join the Hillcrest Country Club, “I wouldn’t want to belong to a club that would admit someone like me.”

· A lot of our clients tell us that their warehouse lenders are really tightening.  Several are having their lines terminated because they are in violation of a covenant.  When we hear the details, they turn out to be very important covenants, but they also are kind that warehouse lenders seemed to live with before.  

· If only because of this new tightening, you absolutely, positively have to get profitable.  We thought everyone had figured this out already, but if you’re not making at least $1 a month, you just have to make more cuts.  There’s a limit to what you can do on the revenue side, and waiting for volume to pick up isn’t a business plan.  Eliminate some positions, cut back salaries by 20%, and then cut some more if you’re still not profitable.  Just do it!

· Didn’t all of us have to read Democracy in America by De Tocqueville at least once during our school years?  And didn’t we all find it terribly boring?  Well, we just re-read all 869 pages and found it knock-down amazing. Instead of boring you with observations, here are three factoids:  His full name was Alexis Charles-Henri Clerel de Tocqueville (2) he was only 26 when he toured America and wrote the book, and (3) his real purpose in seeing America was to do a study for the French government on the American prison system. He completely understood the American character and what makes us so unique, and so much of it still applies today.  This time, skip the Cliff Notes and read the real thing.

· Ever wonder where advertising dollars get spent?  No?  Well, here’s where they went in 2007.