Monday, July 18, 2011

The SBA and laodicean



Lukewarm or indifferent

After Laodicea, a city in Asia Minor, whose Christians were rebuked for their indifference to religion in Revelation 3:16 in the New Testament.


Borrowers and lenders are not being laodicean about the SBA 7(a) loan program. Loan volume has more than doubled, almost tripled from three years ago. Over $15,847,220,000 in SBA 7(a) loans have already been approved out of an authorized total of $17,500,000,000 for SBA’s fiscal year which doesn’t end until September 30th.

SBA 7(a) loan proceeds can be used for real estate purchase, real estate debt refinance, working capital, business debt refinance, equipment purchase, and business acquisitions.



SBA LIBOR Base Rate July 2011 = 3.19%
SBA Fixed Base Rate July 2011 = 5.66%

504 Debenture Rate for July

The debenture rate is 3.74% but note rate is 3.79% and effective yield is only 5.59%.

Note that the effective yield for debt refinance under the 504 program is slightly higher.

It is now 5.947%.


Is the bond market being laodicean about the debt ceiling?

Last week, the government’s $13 billion sale of 30 year bonds attracted higher-than average-demand. Investors downplayed concerns that the country faces the unprecedented situation in 15 days of the government not having enough money to pay all its bills. The government has said it has until August 2nd before its ability to make payment on $14.3 trillion of debt expires.

Demand for bonds is measured by two things: the bid to cover ratio and its yield.

The bid-to-cover ratio on the $13 billion in bonds, which gauges demand by comparing total bids with the amount offered, was 2.80, versus a 2.64 average at the past 10 sales.

The 30 year bond yielded 4.198 percent at the auction. Last month the yield at auction was 4.238 percent. It was up to 4.79 percent back in February. This morning it’s up to 4.25 percent.

Here is what the 30 year bond has been doing:

2001- 5.49
2002- 5.43
2003- ND
2004- ND
2005- ND
2006- 4.91
2007- 4.84
2008- 4.18
2009- 3.89
2010- 4.61

What does all this mean?

I don’t know.

The slope of the yield curve—the difference between the yields on short- and long-term maturity bonds—has achieved some notoriety as a simple forecaster of economic growth. The rule of thumb is that an inverted yield curve (short rates above long rates) indicates a recession in about a year, and yield curve inversions have foreshadowed each of the last seven recessions. One of the recessions predicted by the yield curve was the most recent one. The yield curve inverted in August 2006, a bit more than a year before the current recession started in December 2007.

Over the past month, the yield curve became flatter, as longer term rates have dropped. .

So while the yield curve has become flatter, it has not inverted.

The bond market is obviously discounting concerns about the debt ceiling debate.

The bond market is saying based upon past values of the yield curve spread and GDP growth that the economy will continue to grow albeit at a lackluster, laodicean pace.

The Federal Reserve Open Market Committee does not meet again until August 9th.

Interest rates will continue to remain low for an extended period.


Perhaps most laodicean of all was Nero.

On this day in history in AD 64, Nero supposedly played the fiddle (violin) while Rome burned.

There is a major flaw with this story. There was no such instrument as the fiddle (violin) in first century Rome. There's no definitive date for the invention of the violin, or of its synonym as fiddle, but it certainly wasn't until at least the 16th century.

The point is however we should NOT To occupy ourselves with unimportant matters and neglect priorities during a crisis.

So sign that on-line petition to try and get Fox Sports to bring back Vin Scully for one last World Series.

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

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

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