Shocking eye witness reports of last week's NFMA seminar suggest some work was actually conducted at the luxurious Lodge at Torrey Pines. In the midst of many great insights, we found the following quote to be a stand out:
“And it never failed that during the dry years the people forgot about the rich years, and during the wet years they lost all memory of the dry years. It was always that way.”
“East of Eden,” John Steinbeck
Of course, we consider this totally out of the context in which it was presented. Remembering this basic human defect is the most important component of underwriting any type of bond in good times. We must consider seemingly impossible scenarios when they are least likely.
It is also important to remember the Steinbeck quote in bad times. When the supply of capital is tightest, it offers the highest returns. That is true of financial and human capital alike.
Treasury reminded us this week that bond and mortgage insurance are still viable products. It also suggested government retrenchment will create more opportunity for the private sector in both industries. While it is still heresy to "the people" to say so, rich years may be coming.
Oh, and don't forget, Steinbeck reminds us to just stay jolly.