The SBA and PROducent

Producent

pro·du·cent

one that produces (as a witness or a document) from Latin pro "before, forth" + ducere "to bring, lead"

This is really just a fancy way to say producer.   In legal terms it is one that exhibits; one that offers.

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PROTREPTIC OF THE WEEK

 

The new administrator of the SBA was the producent of a policy notice (5000-865754) that now requires ALL owners (100%) of a small business applying for financial assistance must either be US Citizen or Lawful Permanent Resident.

 

In addition, SBA faces a programmatic shutdown on March 14th.   As of March 4, total 7(a) gross volume since October 1 is now $14,988,635,600 leaving only $831,987,688 million available in authority.

 

This allows for about $83.2 million/day.   Last Tuesday saw $193.1 million in gross volume for just that one day.

 

The current Continuing Resolution, which funds the government expires Friday, March 14 at midnight.

 

Another continuing resolution or a government shutdown will occur.

 

SSBCI guarantees are NOT impacted.

 

It would be proficuous to know the difference.

 

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Indices:

PRIME RATE= 7.50%

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SBA 504 Loan Debenture Rate for MARCH

 

For 20 year debentures, the debenture rate is only 4.97% but note rate is 4.82471% and the effective yield is 6.315%.

For 25 year debentures, the debenture rate is only 4.97% but note rate is 5.02251% and the effective yield is 6.246%.

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AHEAD OF THE YIELD CURVE

 

The producents at the Federal Reserve meet on monetary policy March 18 and 19.

 

Prospicient prognostications proliferate with our procurators of interest rates, the Federal Reserve.

 

30-Day Fed Fund futures pricing data have long been relied upon to express the market’s views on the likelihood of changes in U.S. monetary policy.

 

Here are the Futures Implied Fed Funds

Mar-31-2025      4.32750

May-30-2025      4.25000

Aug-29-2025       3.94500

Nov-28-2025      3.70500

Feb-27-2026       3.58000

Aug-31-2026       3.47500

Feb-26-2027       3.36500

 

What does all this mean?

 

I don't know.

 

The current fed funds target rate is 4.25% to 4.50%.

 

The long end of the yield curve usually prognosticates inflationary expectations and ultimately market rate expectations.

 

Last month’s auction of 30 year treasury bonds had a high yield of 4.748 percent versus 4.913 percent a month ago.

 

This week the auction will be on Thursday for $22 billion.    This continues to be a reduced offering compared to a $25 billion average a year ago.

 

As a result, the reduced supply has caused prices to go up causing the yields to go down.

 

On the shorter end of the curve, auction sizes for both the three month and six month weekly auctions are still at near record levels.   Last week the auction size for the three month treasury bill was $76 billion.

 

More procellous promulgations on the yield curve’s slope is profligate.

 

 

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OFF BASE

 

The day after daylight savings is not a holiday.

 

Saint Patrick’s Day isn’t either.

 

Our next holiday is not until Memorial Day.

 

Here are the upcoming Federal Reserve Holidays:

 

Monday, May 26: Memorial Day

Thursday, June 19: Juneteenth

Friday, July 4: Fourth of July

Monday, Sept. 1: Labor Day

Monday, Oct. 13: Columbus Day

Thursday, Nov. 27: Thanksgiving

Thursday, Dec. 25: Christmas

proscription

pro-SKRIP-shuhn

A prohibition or the act of prohibiting, particularly one imposed by law.

Latin proscribere (to publish in writing, to name someone as outlawed), from pro- (front) + scribere (write).

 

Proscription is the opposite of prescription.

Prescription is written instructions on what to do.

Proscription is written instructions on what not to do.

 

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PROTREPTIC OF THE WEEK

 

The proscription for use of proceeds with SBA loans is that you can not repay delinquent taxes.    You also can not use loan proceeds to repay a shareholder note.

 

The same proscription regarding repayment of delinquent taxes also applies to the State Small Business Loan Guarantee Program.

 

Shareholder notes however can be repay with a SBLGP loan.

 

It would be proficuous to know the difference.

 

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Indices:

PRIME RATE= 7.50%

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SBA 504 Loan Debenture Rate for JANUARY

 

For 20 year debentures, the debenture rate is only 5.24% but note rate is 5.31491% and the effective yield is 7.038%.

For 25 year debentures, the debenture rate is only 5.24% but note rate is 5.29403% and the effective yield is 6.517%.

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AHEAD OF THE YIELD CURVE

 

The economy ended the year on a strong note with 256,000 new jobs for December.

 

The current streak of positive job growth of 48 months is now in second place for longest job streaks in US History.

 

The longest streak was 113 months that ended in early 2020.

 

Here are the latest jobs numbers from the Bureau of Labor Statistics.

 

2024      2,230,000

2023     2,700,000

2022      4,810,000

2021       7,270,000

2020    -9,370,000

2019     2,108,000

2018      2,679,000

2017      2,110,000

2016      2,160,000

2015     2,740,000

2014     3,116,000

2013     2,074,000

2012     2,193,000

2011     2,103,000

2010    1,022,000

2009    -5,052,000

2008    -3,617,000

2007    1,115,000

2006    2,071,000

2005    2,484,000

2004    2,019,000

 

What does all this mean?

 

I don't know.

 

Of the total 256,000 new jobs in December, 33,000 were government jobs.

 

How many government employees are there in the United States?

 

There are a little less than 23 million public employees.

 

2.4 million are in the federal government.   What’s striking is that the federal government workforce has remained relatively flat over the last seven decades.

 

Of course, over such a long period, the population of the United States would have increased considerably. So it probably makes more sense to look at the public workforce as a percentage of the population.

 

In 1960 federal employees accounted for 1.07% of all jobs.   It has now declined to 0.7% of all jobs.

 

That makes the federal government the nation’s single largest employer, with even more workers than Walmart, Amazon or McDonald’s.

 

The federal government spent roughly $271 billion last year to compensate all those civilian federal employees.

 

With the budget deficit projected to be $1.9 TRILLION, firing all government workers would barely dent the deficit.

 

As a result, the government continues to borrow.

 

The weekly 3 month treasury bill auction was at a record $84 billion for the second week in a row.    The rate came in at 4.205 percent.

 

Results for the $22 billion 4.50 percent 30-year bond resulted in a high yield awarded at 4.913 percent versus 4.535 percent a month ago.

 

Fed policymakers meet on January 28-29.      There will be little reason to ease the fed funds target rate range and fight the bond market on the longer end of the yield curve.

 

 

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OFF BASE

 

A three day weekend approaches.

 

In addition to setting monetary policy, the Federal Reserve also proscribes what days you can work.

 

Here are the upcoming Federal Reserve Holidays:

 

Monday, Jan. 20: Martin Luther King, Jr.'s Birthday 

Monday, Feb. 17: Washington's Birthday 

Monday, May 26: Memorial Day 

Thursday, June 19: Juneteenth 

Friday, July 4: Fourth of July 

Monday, Sept. 1: Labor Day 

Monday, Oct. 13: Columbus Day 

Tuesday, Nov 11: Veterans Day

Thursday, Nov. 27: Thanksgiving 

Thursday, Dec. 25: Christmas

 

The SBA and PROtreptic

protreptic

pro·trep·tic

an utterance (such as a speech) designed to instruct and persuade from the Greek word protreptikos, which is derived from protrepein, meaning "to turn forward" or "to urge on".

 

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PROTREPTIC OF THE WEEK

Roughly 21% of all SBA 7(a) loans were utilized for business acquisitions.    A growing portion of those are for Employee Stock Ownership Plans (ESOP).

 

A SSBCI guarantee can also be used on those ESOP deals that are too big for a 7(a) loan.   Loan amounts can go up to $20,000,000.

 

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Indices:

PRIME RATE= 7.75%

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SBA 504 Loan Debenture Rate for NOVEMBER

 

For 20 year debentures, the debenture rate is only 5.01% but note rate is 5.08277% and the effective yield is 6.395%.

For 25 year debentures, the debenture rate is only 5.01% but note rate is 5.06275% and the effective yield is 6.325%.

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AHEAD OF THE YIELD CURVE

 

The Federal Reserve no longer has confidence.

 

Its last protreptic on monetary policy left out any mention of the "greater confidence" that the FOMC had been seeking in its fight against inflation.

 

The statement said, "The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance”.

 

Previously it had stated “The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”

 

For inflation, the Federal Reserve looks closely at both industrial production and capacity utilization for prospicient prognostications.

 

The Federal Reserve watches this report closely to see if production constraints are threatening to cause inflationary pressures.

 

Normally the Fed does not feel there are inflationary pressures until the capacity utilization rate is about 82%.

 

Here is what capacity utilization has been doing and this week interesting little table of data:

 

2007- 81.5

2008- 79.9

2009- 66.9

2010- 74.8

2011- 76.7

2012- 79.0

2013- 77.8

2014- 78.8

2015- 76.5

2016- 75.4

2017- 76.2

2018- 78.5

2019- 79.7

2020- 74.5

2021- 76.4

2022- 80.0

2023- 78.5

 

What does all this mean?

 

I don’t know.

 

Last week it was reported capacity utilization moved down to 77.1 percent in October but that drop might be an outlier.

 

The Boeing strike has since been settled and hurricane effects should be more-or-less gone from the data in November.

 

Treasury yields turned higher Friday morning with indications that the Federal Reserve is not looking to cut rates quickly.

 

The November auction of 30 year treasury bonds ended with the high yield awarded at 4.608 percent versus 4.389 percent a month ago and 4.015 percent two months ago.

 

The yield on the 30-year Treasury was 4.639% on Friday, up 5 basis points from 4.589% on Thursday.

 

The long end of the yield curve prognosticates inflationary expectations and ultimately market rate expectations.

 

 

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OFF BASE

 

Thanksgiving is almost here.    The Friday after Thanksgiving however is NOT a federal holiday.

 

Many people mistakenly think it’s because banks can’t be closed more than 3 days straight.

 

The Bank Holiday of 1933 shut down the American banking system.    For an entire week, Americans would have no access to banks or banking services. They could not withdraw or transfer their money, nor could they make deposits.

 

The crisis had been a long time coming. In the three years leading up to it thousands of banks had failed as bank panics proliferated.

 

The Emergency Banking Act of 1933 aimed at restoring public confidence in the nation’s financial system after the weeklong bank holiday.   It promised to not let banks be closed for extended periods.

 

When banks reopened, it was common to see long lines of customers returning their stashed cash to their bank accounts.  Within two weeks the public had redeposited about two-thirds of this cash.

 

Currently there is no law requiring banks to not be closed more than 3 days.

The SBA and PROletariat

proletariat

pro·le·tar·i·at

The class of industrial wage earners who, possessing neither capital nor production means, must earn their living by selling their labor.

The poorest class of working people.

The propertyless class of ancient Rome, constituting the lowest class of citizens.

 

from Latin prōlētārius, belonging to the lowest class of Roman citizens Derived originally from the Latin PROLETARII, the name given in the census of Servius Tullius to those who were of value to the state only as baby makers (PROLES)

 

Proles came from Latin pro- + olēs (“growth”)

 

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TIP OF THE WEEK

 

Workers unite for small business.

 

Small businesses play a disproportionately large role in our labor markets: half the Americans that work for a private business work for a small one.

 

And with entrepreneurship surging since the pandemic, that role is poised to grow further.

 

Small businesses created over 70 percent of net new jobs since 2019. In the previous business cycle, small businesses created 64 percent of net new jobs.

 

An important component of this has been credit to small businesses with government guarantees.

 

Charge-off rates for the SBA’s flagship small business loan guarantee programs are at their lowest on record.

 

I am not making any of this up.   This just came out from the US Treasury analyzing Small Business and Entrepreneurship in the Post-COVID Expansion.

 

 

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Indices:

PRIME RATE= 8.00%

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SBA 504 Loan Debenture Rate for September

 

For 20 year debentures, the debenture rate is only 4.45% but note rate is 4.517% and the effective yield is 5.833%.

For 25 year debentures, the debenture rate is only 4.45% but note rate is 4.499% and the effective yield is 5.765%.

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AHEAD OF THE YIELD CURVE

 

The Federal Reserve was looking out for the proletariat.

 

The recent ½ percent drop in the fed funds rate was driven primarily by employment concerns.

 

In its statement after its last meeting on monetary policy, the Fed said "The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective."

 

This wording regarding employment is new and suggests that the decision for a larger cut was due to the FOMC wanting to signal that they want to avoid further cooling in the labor market.

 

No cooling was reflected in the job numbers for September as employment increased by 254,000.

 

The monthly average in payroll gains for the third quarter is 186,000, somewhat above the monthly average for the second quarter of 147,000, but slower than 267,000 in the first quarter.

 

After the employment numbers came out, the 30 year Treasury bond jumped up to 4.255%.

 

At last month’s auction of 30 year Treasury bonds, the high yield was awarded at 4.015 percent.

 

Keep your eyes and ears open for this week’s auction of 30 year Treasury bonds.

 

Here is what the 30 year Treasury bond has been doing and this week’s interesting little table of data:

 

2014- 3.97

2015- 2.91

2016- 2.32

2017- 3.16

2018- 3.13

2019- 2.594

2020- 1.216

2021- 1.88

2022- 2.375

2023- 3.741

2024- 4.015%

 

 

So what does all this mean?

 

I don’t know.

 

The long end of the yield curve prognosticates inflationary expectations and ultimately market rate expectations.

 

Just after Labor Day the inversion of the yield curve ended with two year treasury rates now below the 10 year yield.

 

The yield curve had been inverted for a staggering 783 consecutive days, the longest such period in U.S. history.

 

More procellous promulgations on the yield curve is profligate.

 

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OFF BASE

 

In George Orwell’s book 1984, Proles were the lowest class of people but made up about 85% of the population of Oceania.

 

While impoverished, powerless and a massive group of people the proles were free, unlike the rest of Oceania. They are not checked by the Party on what they do and think; therefore the proles are the only ones able to take Big Brother down.

 

Something to think about over the upcoming three day weekend.

 

Columbus Day is an official Federal holiday recognized by the Federal Reserve.

 

Originally celebrated on October 12th to celebrate Columbus’s arrival in the Americas on October 12th, 1492, the Uniform Monday Holiday Act moved permanently to a Monday Washington's Birthday, Memorial Day and Columbus Day as  federal holidays.

 

As a result, Columbus Day is always celebrated on the second Monday in October.

The SBA and PROpose

propose

pruh-pohz

 

to make an offer or suggestion, especially of marriage.

to form or consider a purpose or design

 

from Latin proponere to display, propound, from pro- before + ponere to put, place

 

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TIP OF THE WEEK

 

The proposed SBA 7(a) guarantee fees reflect a substantial increase for loans greater than $1,000,001.

 

Effective October 1st the guarantee fee for loans of $1,000,001 to $5,000,000 will be 3.5% of the guaranteed portion of the loan up to and including $1,000,000, plus 3.75% of the guaranteed portion of the loan over $1,000,000.

 

The guarantee fee for SSBCI guarantees remain at 2.5% for guaranteed portions up to $2,500,000 plus 2.25% of the guaranteed portion over that.    The maximum SSBCI guarantee goes up to $5,000,000.

 

It would be proficuous to know the distinctions.

 

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Indices:

PRIME RATE= 8.50%

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SBA 504 Loan Debenture Rate for September

 

For 20 year debentures, the debenture rate is only 4.45% but note rate is 4.517% and the effective yield is 5.833%.

For 25 year debentures, the debenture rate is only 4.45% but note rate is 4.499% and the effective yield is 5.765%.

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AHEAD OF THE YIELD CURVE

 

Prospicient prognostications proliferate with our procurators of interest rates, the Federal Reserve.

 

The Fed’s next meeting on monetary policy concludes September 18th.

 

30-Day Fed Fund futures pricing data have long been relied upon to express the market’s views on the likelihood of changes in U.S. monetary policy.

 

Here are the Futures Implied Fed Funds

Sep-30-2024       5.19000

Nov-29-2024      4.67500

Feb-28-2025       3.81500

May-30-2025      3.28500

Aug-29-2025       2.94500

Feb-27-2026       2.77000

Aug-31-2026       2.81500

 

What does all this mean?

 

I don't know.

 

The current fed funds target rate is 5.25% to 5.50%.   Fed funds futures imply a target rate probability of 55% for a ¼ percent drop in the target rate.

 

The long end of the yield curve prognosticates inflationary expectations and ultimately market rate expectations.

 

Last week’s auction of 30 year treasury bonds the high yield was 4.015 percent versus 4.314 percent a month ago.

 

This lower yield was despite a reduced offering of $22 billion compared to $25 billion a month ago.

 

Non-dealer bids accepted accounted for 84 percent of the total, suggesting OK demand.

 

More procellous promulgations on the yield curve’s continued inversion is profligate.

 

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OFF BASE

 

September 17th is the annual Mid-Autumn Moon Festival on the Chinese calendar.

 

This is one of the first harvest festivals of the year. Its history reaches back to the Tang Dynasty (618-907 AD).

 

The full moon rises at sunset around this date, allowing farmers to harvest well into the evening. It takes place on the 15th day of the 8th month of the Chinese lunisolar calendar, when the moon is at its brightest and fullest, coinciding with harvest.

 

In America, it is called the Harvest Super Moon, when the moon is closest to the Earth, making it appear larger than normal. It is so close that the moon will appear full for three straight nights. This year, that takes place less than a week before the fall equinox on September 22.

 

The word “equinox” comes from Latin aequus, meaning “equal,” and nox, ”night.” On the equinox, day and night are roughly equal in length.

 

After the autumnal equinox, days become shorter than nights as the Sun continues to rise later and nightfall arrives earlier. This ends with the winter solstice, after which days start to grow longer once again.

 

The SBA and PROtagonist

protagonist

 

pro·tag·o·nist

-the principal character in a literary work (such as a drama or story) -the leading actor or principal character in a television show, movie, book, etc.

-an active participant in an event

-a leader, proponent, or supporter of a cause

 

-from Greek protagonistes, a word for the main actor in a play. It is made up of the words protos, meaning “first,” and agonistes, meaning “actor” or “competitor.”

 

The hero is the "first struggler", which is the literal meaning of the Greek word prōtagōnistēs.

A character who opposes the hero is the antagonist, from a Greek verb that means literally "to struggle against".

 

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TIP OF THE WEEK

 

Is the lender or the borrower the protagonist with government guaranteed loans?

 

The borrower needs to be able to demonstrate the ability to repay both SBA and SSBCI guaranteed loans.

 

The lender must explain why credit elsewhere is not available without the SBA or SSBCI guarantee.

 

The similarities end there.

 

It would be proficuous to know the distinctions.

 

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Indices:

PRIME RATE= 8.50%

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SBA 504 Loan Debenture Rate for August

 

For 20 year debentures, the debenture rate is only 4.73% but note rate is 4.80% and the effective yield is 6.115%.

For 25 year debentures, the debenture rate is only 4.73% but note rate is 4.78% and the effective yield is 6.045%.

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AHEAD OF THE YIELD CURVE

 

Employment and inflation are the protagonist and antagonist for Federal Reserve monetary policy.

 

The U.S. Bureau of Labor Statistics on Wednesday revised down its estimate of total employment in March 2024 by a whopping 818,000.

 

Here are the latest jobs numbers from the Bureau of Labor Statistics.

 

July        114,000

June      179,000

May       216,000

April       108,000

March       310,000

Feb        270,000

Jan         256,000

2023       2,700,000

2022      4,810,000

2021       7,270,000

2020    -9,370,000

2019     2,108,000

2018      2,679,000

2017      2,110,000

2016      2,160,000

2015     2,740,000

2014     3,116,000

2013     2,074,000

2012     2,193,000

2011     2,103,000

2010    1,022,000

2009    -5,052,000

2008    -3,617,000

2007    1,115,000

2006    2,071,000

2005    2,484,000

2004    2,019,000

 

What does all this mean?

 

I don't know.

 

No need for proditomania.

 

The numbers are routinely revised each month, but the BLS does a broader revision each year when it gets the results of the Quarterly Census of Employment and Wages.

 

Even with the revisions, the participation rate is still high.   The is the percentage of the population that works.

 

The 25 to 54 years old participation rate increased in July to 84.0% from 83.7% in June to the highest level since 2001.

 

One profligate propaedeutic has been that there is a trade-off between jobs and inflation.

 

At the most recent auction of 30 year treasury bonds, the high yield was awarded at 4.314 percent versus 4.405 percent a month ago, 4.403 percent two months ago and 4.635 percent three months ago.

 

Friday the 30 year treasury bond closed at 4.093%.

 

Will the Federal Reserve be proactive and start lowering interest rates?    Fed funds future imply that it will happen.

 

At its last meeting on monetary policy, the FOMC added a word with inflation now "somewhat" elevated.

 

This suggests that sufficient progress has been made in disinflation to downgrade that risk.

 

In a pivotal move, the word "highly" has been removed from the phrase "highly attentive to inflation risks" that has been present since May 2022.

 

Attention is now shifted to "both sides of its dual mandate".

 

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OFF BASE

 

Today, Monday, Danny Jansen will become the protagonist in one of the strangest statistical oddities ever in baseball.

 

With one more strike he would have been the only player while at bat to also be the catcher.

 

Danny Jansen, who was traded from the Blue Jays to the Red Sox recently, was in the Blue Jays’ starting lineup and played the first two innings as their catcher and was at the plate when the game was suspended because of rain.

 

The makeup game today will force the Blue Jays to pinch-hit for Jansen, who could be catching for the Red Sox that day.

 

Jansen was a member of the Blue Jays on June 26 when the game began. He started at catcher and was batting seventh for Toronto, and he was actually at bat, facing an 0-1 count, when the game was suspended due to rain in the top of the second inning.

 

Jansen is technically still at bat for the Blue Jays -- even though he's on the Red Sox now -- with an 0-1 count, one out.

 

Obviously, he can't finish his at-bat since he's now on the opposing team. So Toronto will have to pinch-hit for Jansen when the game resumes.

 

But the fun part will be if Boston subs Jansen in at catcher right away.

 

That would result in Jansen catching a plate appearance that he started as the batter for the other team.

 

Unfortunately for the historical oddities at play, because there were less than two strikes on Jansen, whoever the Blue Jays use as the pinch-hitter for Jansen will get statistical credit for the result of the at-bat no matter what.

If there were two strikes, and the pinch-hitter struck out, that strikeout would be charged to Jansen, which would mean Danny Jansen caught a strikeout of Danny Jansen.

 

If Jansen does play in the game for the Red Sox after it resumes, he will indeed appear in the final box score for both teams, under the original date of the game. You'd see a statistical line for Jansen on both sides for June 26.

 

If that is making your head spin, a three day weekend approaches!

The SBA and PROactive

proactive

prō-ˈak-tiv

acting in anticipation of future problems, needs, or changes taking action by causing change and not only reacting to change when it happens from Latin pro "on behalf of, in place of, before, plus Latin activus, from actus "a doing"

 

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TIP OF THE WEEK

 

SBA has propounded a new 7(a) Working Capital Pilot (WCP) Program.   The three-year WC Pilot will take effect on August 1, 2024.

 

The WCP promulgates lenders to make both asset-based and transaction-based WCP 7(a) lines of credit (LOCs) in amounts up to $5 million, with the lines available to support both domestic and international transactions.

The maximum LOC term will be 60 months (5 years), and SBA’s standard maximum guaranties of 85% for loans of $150,000 and 75% for loans of $150,000 and over will apply.

 

Proficuously SSBCI guarantees can also be utilized for revolving lines of credit with a higher percent of guarantee and greater loan amounts.

 

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Indices:

PRIME RATE= 8.50%

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SBA 504 Loan Debenture Rate for July

 

For 20 year debentures, the debenture rate is only 4.89% but note rate is 4.96% and the effective yield is 6.277%.

For 25 year debentures, the debenture rate is only 4.89% but note rate is 4.94% and the effective yield is 6.206%.

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AHEAD OF THE YIELD CURVE

 

Will the Federal Reserve be proactive and start lowering interest rates anytime soon?

 

At its last meeting on monetary policy, its assessment of inflation has been upgraded to “modest further progress" from “a lack of further progress" in the prior version.

 

Modest further progress was reflected last week when the Consumer Price Index for June was down 0.1 percent month-over-month after no change in May. This is the first time the CPI has seen a monthly decline since down 0.1 percent in May 2020.

 

For inflation, the Federal Reserve looks closely at both industrial production and capacity utilization for prospicient prognostications.

 

Keeps your eyes and ears open for this week’s release on industrial production and capacity utilization.

 

The industrial sector, together with construction, accounts for the bulk of the variation in national output over the course of the business cycle.

 

The capacity utilization rate provides an estimate of how much factory capacity is in use.

 

The Federal Reserve watches this report closely to see if production constraints are threatening to cause inflationary pressures.

 

Normally the Fed does not feel there are inflationary pressures until the capacity utilization rate is about 82%.

 

Here is what capacity utilization has been doing and this week interesting little table of data:

 

2007- 81.5

2008- 79.9

2009- 66.9

2010- 74.8

2011- 76.7

2012- 79.0

2013- 77.8

2014- 78.8

2015- 76.5

2016- 75.4

2017- 76.2

2018- 78.5

2019- 79.7

2020- 74.5

2021- 76.4

2022- 80.0

2023- 78.5

 

What does all this mean?

 

I don’t know.

 

Last month, total capacity utilization jumped 0.5 percentage points as it moved up to 78.7 percent in May.

 

Durable goods orders have posted strong gains so far this year and are beginning to be reflected in manufacturing volumes which have surged.

 

Fed policymakers will pay close attention to readings for the most persistent sources of upward price pressures. Some of these remain elevated.

 

The report might be enough to get the FOMC to be more inclined to lower interest rates soon, but not enough to prompt them to act at the July 30-31 meeting.

 

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OFF BASE

 

Proactivity was discussed by George F Will in his classic book, Men at Work.

 

One of his comments was something to the effect that “any difficult thing, like marriage or politics, requires compromise and adjustment.”

The SBA and PROnation

pronation

pro-NAY-shuhn

1. Rotation of the forearm so that the palm faces downward or backward.

2. Rotation of the foot such that the weight is borne on its inner edge.

3. The resulting position when the arm or foot is rotated in such a manner.

 

From Latin pronare (to turn or lean forward).  A counterpart is supination in which the palm is facing upward or the weight is borne on the outer edge of the foot.

 

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TIP OF THE WEEK

 

The pronation of one’s hands reveals much.

 

Hands open and your palms at a 45-degree angle: Communicates that you are being honest and open.

Hands open with palms down: Communicates that you are certain about what you are talking about.

Palms facing each other with your fingers together: Communicates that you have expertise about what you are talking about.

 

The SBA has thrown up its hands dealing with bad people.

 

SBA has published Procedural Notice 5000-857477 implementing the recent Criminal Justice Rule.

The restrictions on businesses with an Associate who is on probation or on parole have been removed.

Applicants currently incarcerated, under indictment for a felony or any crime involving or relating to financial misconduct or a false statement are still ineligible.

 

Let me know if you need a copy of this new procedural notice.

 

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Indices:

PRIME RATE= 8.50%

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SBA 504 Loan Debenture Rate for June

 

For 20 year debentures, the debenture rate is only 5.06% but note rate is 5.13% and the effective yield is 6.445%.

For 25 year debentures, the debenture rate is only 5.04% but note rate is 5.09287% and the effective yield is 6.354%.

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AHEAD OF THE YIELD CURVE

 

Pronation is the rotation of your hand towards your thumb.

 

Kind of like when Ceaser gives a thumbs down to a gladiator.

 

The Federal Reserve gave a thumbs down to interest rates coming down anytime soon at its last meeting.

 

Its statement on monetary policy issued June 12 is virtually unchanged from the one published May 1.

 

The assessment of inflation has been upgraded to “modest further progress" from “a lack of further progress" in the prior version.

 

The language related to the change in the balance sheet reduction program has been removed.    The Fed has reduced its reinvestments in US Treasuries by $35 billion a month.    This 1/3 of a trillion dollar reduction did not seem to impact the Treasury bond market.

 

At last week’s auction of $25 billion in 30 year Treasury bonds, the high yield was awarded at 4.403 percent versus 4.635 percent a month ago. The auction high yield was awarded 1.5 basis points below where the when-issued long bond was trading at auction time, indicating very strong demand,

 

Here is what the 30 year Treasury bond has been doing and this week’s interesting little table of data:

 

2014- 3.97

2015- 2.91

2016- 2.32

2017- 3.16

2018- 3.13

2019- 2.594

2020- 1.216

2021- 1.88

2022- 2.375

2023- 3.741

2024- 4.350%

 

 

So what does all this mean?

 

I don’t know.

 

On Friday the 30 year yield closed at 4.350%.

 

Why is the 30 year yield dropping?

 

The long end of the yield curve prognosticates inflationary expectations and ultimately market rate expectations.

 

Keep your eyes and ears open for this week’s report on capacity utilization.

 

Last month capacity utilization had declined to 78.4 percent in April.

 

The decline was offset by a rise in utilities output.

 

Utilities' output rose 2.8 percent higher in April from March. There was a 3.1 percent rise in electric output and 1.1 percent in natural gas. Unusually warm weather in April boosted demand for cooling.

 

 

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OFF BASE

 

There is a thing called premature pronation.    Don’t blush, it is a baseball pitching phrase.

 

Premature Pronation is the pronation of the pitching forearm well before the Release Point

 

It is the twist you see in the wrists of many baseball pitchers who Point the Ball at Second Base or Center Field as part of their throwing motion.

 

This pronation occurs to get the fingers behind the ball so that they can impart the force generated by the body into the ball. It is a natural action in the follow-through.

 

It is also called the Tommy John Twist.     It is named for Dodger pitcher Tommy John who snapped the ligament in his elbow.

 

Tommy John surgery is a surgical graft procedure where the ulnar collateral ligament in the medial elbow is replaced with either a tendon from elsewhere in the patient's body, or with one from a deceased donor.

 

Wednesday June 19th is a bank holiday- Juneteenth.      There is also a full slate of baseball games all that day.

 

 

The SBA and PROprioception

 proprioception

pro-pree-uh/oh-SEP-shuhn

The awareness of location of parts of one’s body.

From Latin proprius (one’s own) + reception, from recipere (to receive), from capere (to take).

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TIP OF THE WEEK

 

Have you ever accidently poked yourself in the eye?     That would be a lack of proprioception.

 

Don’t poke yourself in the eye when it comes to government guaranteed lending.

 

The differences between SBA and SSBCI guarantees are unique.

 

It would be proficuous to know the distinctions.

 

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Indices:

PRIME RATE= 8.50%

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SBA 504 Loan Debenture Rate for May

 

For 20 year debentures, the debenture rate is only 5.27% but note rate is 5.34517% and the effective yield is 6.656%.

For 25 year debentures, the debenture rate is only 5.24% but note rate is 5.29403% and the effective yield is 6.555%.

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AHEAD OF THE YIELD CURVE

 

Proditomania profilerated over inflation at the Federal Reserve’s last meeting on monetary policy.

 

The Fed Open Market Committee added language that said,"In recent months, there has been a lack of further progress toward the Committee's 2 percent inflation objective".

 

It does not look that way if you go into the lumber section of Home Depot.    Douglas Fir 8 foot 2x4s are always at the front by the door at every store in America.

 

This is the most widely used wood in the country.    It was what was used for all the railroad ties and telegraph poles when the west was being settled.

 

Every new home and existing home project uses this 2x4.

 

As far as I could recall, the price of that 2x4 was consistently under $3.

 

Now every time I go into Home Depot, I check the price of this 8 foot 2x4.

 

Here is the price of the Douglas Fir 8 foot 2x4 over the last couple of years:

 

5/15/2024            $3.63

10/31/2023         $3.07

7/22/2023            $3.63

7/16/2023            $3.63

5/6/2023              $3.34

4/1/2023              $2.98

2/18/2023            $2.98

2/12/2023            $2.98

9/24/2022            $3.97

8/12/2022            $4.65

6/4/2022              $5.92

5/22/2022            $6.64

 

What does this mean?

 

I don’t know but my excuse that the price of wood is too high really isn’t working anymore.

 

At the most recent auction of 30 year Treasury bonds, the high yield was awarded at 4.635 percent versus 4.671 percent a month ago.

 

Two months ago the yield was at 4.331 percent.

 

The long end of the yield curve prognosticates inflationary expectations and ultimately market rate expectations.

 

While the auction size of the 30 year Treasury bonds was $25 billion, up from $22 billion in April, the Federal Reserve also announced it is lowering the cap on reinvestments of US treasuries from $60 billion to $25 billion.

 

While a reduction in the cap for US treasuries reinvestments was anticipated, the size was more than expected.

 

It appears that the FOMC feels that a quick reduction in the cap will accomplish their goals of managing the balance sheet better and allows the Fed to smoothly transition from an abundant reserves environment.

 

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OFF BASE

 

A three day weekend approaches!

 

The Federal Reserve has proscribed banks from being open on the following days:

 

Memorial Day May 27

Juneteenth      June 19

Independence Day July 4

Labor Day September 2

Columbus Day October 14

Veterans Day November 11

Thanksgiving Day November 28

Christmas Day December 25

The SBA and PROficuous

proficuous

pruh-FICK-yuh-wuhss

Profitable; advantageous; useful

from Latin proficuus beneficial

 

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TIP OF THE WEEK

 

SBA has propounded a new 7(a) Working Capital Pilot (WCP) Program.   Its effective date will probably coincide with the release of another SBA Standard Operating Procedure.

 

It is promulgated to provide flexibilities bridging the gap between the unique rules and limitations of other SBA 7(a) guaranteed line of credits.

 

Its fee structure will be modeled after SBA’s 7(a) Export Working Capital Program (EWCP).

 

Proficuously SSBCI and SBLGP guarantees can now be utilized for revolving lines of credit.

 

_________________________________________

 

Indices:

PRIME RATE= 8.50%

________________________________________

SBA 504 Loan Debenture Rate for April

 

For 20 year debentures, the debenture rate is only 5.38% but note rate is 5.45619% and the effective yield is 6.767%.

For 25 year debentures, the debenture rate is only 5.38% but note rate is 5.43481% and the effective yield is 6.695%.

_______________________________________________

AHEAD OF THE YIELD CURVE

 

Prospicient prognostications proliferate with our procurators of interest rates, the Federal Reserve.

 

The Fed made no change to the fed funds target rate at its last meeting on monetary policy

 

The only tweak in the language of its policy announcement is concerning job gains which "remained strong" relative to the January assessment and which removes the January reference to moderation relative to 2023.

 

Its next meeting is Tuesday April 30th and concludes May 1st.

 

30-Day Fed Fund futures pricing data have long been relied upon to express the market’s views on the likelihood of changes in U.S. monetary policy.

 

Here are the Futures Implied Fed Funds

Apr-30-2024       5.32750

Jun-28-2024        5.29500

Sep-30-2024       5.16500

Dec-31-2024       4.99000

Mar-31-2025      4.82000

Sep-30-2025       4.50000

Mar-31-2026      4.13500

 

What does all this mean?

 

I don't know.

 

In its statement, the Fed maintained that inflation remains elevated.

 

The long end of the yield curve prognosticates inflationary expectations and ultimately market rate expectations.

 

Last week’s auction of 30 year treasury bonds the high yield was 4.671 percent, up from 4.331 percent a month ago.

 

More procellous promulgations on the yield curve’s continued inversion is profligate.

 

 

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OFF BASE

 

April 22nd is Earth Day.

 

It would be proficuous to hug a tree or catch a wave.

The SBA and PROpulsive

propulsive

pro·pul·sive

having the quality of driving or pushing forward

 

Latin prōpulsus, past participle of prōpellere "to push or thrust forward, compel to go onward"

 

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TIP OF THE WEEK

 

There is a propulsive increase in the alternative size standard for SBA loan applicants.

 

Effective March 18, 2024, under the alternative size standard, a business, including any affiliates, will be considered small if its tangible net worth is not in excess of $20 million (up from $15 million), and its average net income after Federal income taxes (excluding any carry over losses) for the preceding two completed fiscal years is not in excess of $6.5 million (up from $5 million).

 

This is a 34.46 percent adjustment for inflation that has occurred since the establishment of the statutory alternative size standard in 2010.

 

Prodigious.

 

_________________________________________

 

Indices:

PRIME RATE= 8.50%

________________________________________

SBA 504 Loan Debenture Rate for March

 

For 20 year debentures, the debenture rate is only 4.98% but note rate is 5.05255% and the effective yield is 6.365%.

For 25 year debentures, the debenture rate is only 4.97% but note rate is 5.022257% and the effective yield is 6.286%.

_______________________________________________

AHEAD OF THE YIELD CURVE

 

Propulsive and propitious.

 

Jobless claims remain steady and low, indicative of strong demand for labor and posing no threat to restrictive monetary policy.

Initial claims fell 1,000 in the March 14 week to a lower-than-expected 209,000 that pulls the 4-week average slightly lower to 208,000, among the lowest readings so far this year.

 

Total nonfarm payroll employment rose by 275,000 in February.

 

The monthly average for nonfarm payrolls for the first quarter to-date is 252,000 compared to 212,000 for the fourth quarter 2023.

 

Here are the latest jobs numbers from the Bureau of Labor Statistics.

 

2023     2,700,000

2022      4,810,000

2021       7,270,000

2020    -9,370,000

2019     2,108,000

2018      2,679,000

2017      2,110,000

2016      2,160,000

2015     2,740,000

2014     3,116,000

2013     2,074,000

2012     2,193,000

2011     2,103,000

2010    1,022,000

2009    -5,052,000

2008    -3,617,000

2007    1,115,000

2006    2,071,000

2005    2,484,000

2004    2,019,000

 

What does all this mean?

 

I don't know.

 

One profligate propaedeutic has been that there is a trade-off between jobs and inflation.

 

On Thursday, the 30 year Treasury auction high yield was at at 4.331 percent versus 4.360 percent in February and 4.229 percent in January.

 

The Federal Reserve looks closely at both industrial production and capacity utilization for prospicient prognostications.

 

The Federal Reserve watches this report closely to see if production constraints are threatening to cause inflationary pressures.

 

Normally the Fed does not feel there are inflationary pressures until the capacity utilization rate is about 82%.

 

Capacity utilization was unchanged at 78.3 percent in February from January.

 

In February, manufacturing capacity rose to 77.0 percent from 76.4 percent in the prior month, mining to 93.8 percent after 91.7 percent, with utilities down to 67.8 percent after 73.5 percent.

 

Utilities output was lower due to milder weather conditions after colder weather in January. The index for electricity fell 6.5 percent in February with natural gas utilities down 13.0 percent.

 

The Federal Reserve’s next meeting on monetary policy is March 19th and 20th.

 

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OFF BASE

 

One of the most famous prognostications of all time was from the soothsayer in Shakespeare’s Julius Caesar in Act I, scene 2, line 103 when he said “Beware the ides of March.”

 

So what the heck is an ide?

 

The Ides Of March refers to how the Romans kept track of the days in a month, which is quite different from how we do it. While we count the days sequentially from the first day all the way to the last day, the Romans used a different system. They counted backward from three fixed points of the month. For instance, the Nones usually fell on the 7th, the Ides on the 15th and the Kalends was the beginning of the month.

 

It is now known as the day Caesar was assassinated.  After being warned, Caesar took the prophecy very lightly. In fact, as he passed the seer on his way to the Theater of Pompey where he ends being stabbed to death by Brutus and 60 other Senators,  Caesar commented that “The Ides of March have come.” To that, the seer is reported to have replied, “Aye, Caesar; but they have not gone.”

The SBA and Prodromuses

Prodromuses

 

PROH-druh-muhss

 

-A precursor or harbinger; also a warning event.

-An introductory or preliminary book or treatise.

-(medicine) An early sign or symptom (or set of signs and symptoms) warning of the onset of a disease.

 

New Latin, from Greek prodromos precursor

 

 

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TIP OF THE WEEK

 

A prodromuses, in the context of an introductory treatise, for SBA Standard Operating Procedures can be found in the Informational Notices that coincide with the release of the SOP.   Those two notices 5000-852522 and 5000-848663 total 12 pages and nicely summarize the changes to the new SOP that totals 430 pages.

 

Unlike SBA guarantees, the guidance for SSBCI guarantees does not require a prodromuses as the SBLGP Policy Manual is only 22 pages.

 

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Indices:

PRIME RATE= 8.50%

________________________________________

SBA 504 Loan Debenture Rate for February

 

For 20 year debentures, the debenture rate is only 5.11% but note rate is 5.18370% and the effective yield is 6.496%.

For 25 year debentures, the debenture rate is only 5.07% but note rate is 5.12312% and the effective yield is 6.385%.

_______________________________________________

AHEAD OF THE YIELD CURVE

 

A produmuses, in the context of a harbinger or precursor can be the capacity utilization rate.

 

The Federal Reserve looks closely at both industrial production and capacity utilization for prospicient prognostications.

 

The industrial sector, together with construction, accounts for the bulk of the variation in national output over the course of the business cycle.

 

The capacity utilization rate provides an estimate of how much factory capacity is in use.

 

The Federal Reserve watches this report closely to see if production constraints are threatening to cause inflationary pressures.

 

Normally the Fed does not feel there are inflationary pressures until the capacity utilization rate is about 82%.

 

Keeps your eyes and ears open for this week’s release on industrial production and capacity utilization.

 

Here is what capacity utilization has been doing and this week interesting little table of data:

 

2007- 81.5

2008- 79.9

2009- 66.9

2010- 74.8

2011- 76.7

2012- 79.0

2013- 77.8

2014- 78.8

2015- 76.5

2016- 75.4

2017- 76.2

2018- 78.5

2019- 79.7

2020- 74.5

2021- 76.4

2022- 80.0

 

 

Last month, it was reported that capacity utilization was unchanged in December at 78.6 percent

 

What does all this mean?

 

I don’t know.

 

At its last meeting on monetary policy, the Federal Reserve said that they would not be reducing interest rates any time soon.

 

In its statement the paragraph regarding the US banking system is completely excised.

Clearly the Fed feel the troubles in the banking industry of last March and the potential problems with liquidity are no longer a big risk.

 

The statement offered a strong warning that the FOMC is not yet ready to declare victory in achieving price stability.

 

There was new language in the statement that said “The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks."

 

Last week’s auction of 30 year treasury bonds saw the high yield awarded at 4.360 percent versus 4.229 percent a month ago.

 

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OFF BASE

 

Today, February 12th is Abraham Lincoln’s birthday.    It is also Charles Darwin’s birthday as well as the Monday after the Super Bowl.

 

It is not however a holiday.    We only celebrate Washington’s birthday.

 

This upcoming three day weekend is officially referred as Washington’s Birthday.

 

The effort to rename the holiday Presidents Day, intended to honor the birthdays of both Washington and Lincoln, failed in Congressional committee.

The bill, which was then signed into law on June 28, 1968, specified that the Federal holiday would retain the name Washington’s Birthday.

The Uniform Monday Holiday Act of January 1, 1971, established its observance on the third Monday in February.

 

Enjoy the long weekend as the next holiday is not until Memorial Day.