Monday, June 27, 2011

The SBA and contumacious



Stubborn, insubordinate.

From Latin contumacia, from contumax, contumac- (insolent).


The contumacious recovery in the economy prompted the Federal Reserve last week to reiterate that interest rates will remain low for an “extended period.”

SBA 7(a) loans for real estate purchase, real estate debt refinance, business debt refinance, business acquisition, equipment purchase and working capital provide attractive rates that will persist for some time.

The 504 debenture rate is also attractive for real estate purchase and real estate debt refinance.

For every $1,000,000 dollars borrowed to purchase or refinance real estate, the monthly payment is around $6,000.
SBA LIBOR Base Rate June 2011 = 3.19%
SBA Fixed Base Rate June 2011 = 5.73%
504 Debenture Rate for June
The debenture rate is 3.675% but note rate is 3.729% and effective yield is only 5.521%.


The Federal Reserve Open Market Committee met last week for two days.

When they were done meeting they said that “economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate for an extended period.”

So how long is an extended period? The Fed has kept its target rate locked at zero to 0.25 percent since December 2008.

The futures market gives us a hint that an extended period looks to be a few more years.

Eurodollar futures settle at a three- month lending rate that has averaged about 22 basis points more than the Fed's target over the past 10 years. Here is a summary of what the market expects for Eurodollar futures based upon the pit-traded prices at the Chicago Mercantile Exchange:

DEC11- 0.52
DEC12- 0.91
DEC13- 1.73
DEC14- 2.71
DEC15- 3.59
DEC16- 4.23
DEC17- 4.61
DEC18- 4.77

What does all this mean?

I don’t know.

It would appear that the savings from lower variable rates of interest should persist.


The contumacious owner of the Los Angeles Dodgers forced the team into bankruptcy this morning.

Their only real asset is announcer Vin Scully, who has been painting pictures with his words since 1950 when he joined the Dodgers.

Unfortunately Vin has not announced a World Series game on television since 1988 when the Dodgers last went to the fall classic.

There is now an on-line petition to try and get Fox Sports to bring back Vin Scully for one last World Series.

Go here if you’d like to have Vin Scully announce the World Series one last time:

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