The SBA and vatic

vatic


VAT-ik

Of or related to a prophet or a prophecy: prophetic.

From Latin vates (prophet)
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TIP OF THE WEEK

A vatic Federal Reserve pledged for the first time to keep its benchmark interest rate at a record low at least through mid-2013.

That means the rates on SBA loans provide borrowers with opportunities that can’t be ignored.
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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate August 2011 = 3.19%
SBA Fixed Base Rate August 2011 = 5.41%
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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%.
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AHEAD OF THE YIELD CURVE

2/3’s of a billion dollars was cut from the deficit last week.

Our government sold $72 billion of notes and bonds last week at extraordinarily low yields. It will save taxpayers $647 million in interest payments during the life of the securities.

The auction produced a yield of 3.750 percent on the 30 year Treasury bond. Yields on 30 year bonds have fallen from this year’s high of 4.79 percent on February 9. The record low yield for a 30-year bond auction is 3.54 percent, reached in February 2009.

Last week’s auction results show investors are thumbing their noses at Standard & Poor’s decision to lower its assessment of the U.S.’s creditworthiness to AA+, and are instead scooping up the debt on signs the economy and inflation are slowing and the near-zero chance the government will default.

The Federal Reserve boosted debt markets last week when it pledged to keep its target rate for overnight loans between banks at a record low of zero to 0.25 percent at least through mid-2013.

Isn’t the Federal Reserve worried that it might have to raise rates sooner if inflation starts to rear its ugly head?

One of the Federal Reserve’s favorite gauges of the economy is the capacity utilization rate. The Federal Reserve watches capacity utilization rates to see if production constraints are threatening to cause inflationary pressures. Bottlenecks or shortages often lead to inflationary pressures that would drive prices even higher. Several analysts have pointed to a rate between 81% and 82% as a tipping point over which inflation is spurred.

Keep your eye on Tuesday's release from the Federal Reserve on Industrial Production and Capacity Utilization.

Here is what capacity utilization rates have done:
1997- 83.6
1998- 83.0
1999- 82.4
2000- 82.6
2001- 77.4
2002- 75.6
2003- 74.6
2004- 79.2
2005- 80.7
2006- 82.4
2007- 81.5
2008- 79.9
2009- 69.9
2010- 74.8
2011- 76.7

What does all this mean?

I don't know.

Last month, the rate of capacity utilization for total industry stagnated at 76.7 percent.

Capacity utilization at 76.7% is still far below normal - and well below the pre-recession levels of 81.2% in November 2007.

That means we still have a long way to go before interest rates really start to go up.
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OFF BASE

Sixty years ago today, August 15th, 1951 Giants rookie center fielder Willie Mays makes a running catch of a drive to deep right centerfield and whirls counterclockwise to throw out the astonished runner from third base at home. The Giants then come up to bat and Dodgers pitcher Ralph Branca gives up a two run homer. The Giants go on to win 3-1.

The game proved to be vatic.

Less than two months later, Ralph Branca would give up another home run to lose a game. In one relief outing on October 3, 1951, he gave up a home run to Bobby Thomson of the New York Giants to cost his team the pennant and allow the Giants to go on to the World Series. The "Shot Heard 'Round the World" completed a monumental collapse by the Dodgers who were leading the league by 13 1/2 games on August 11th.

Three years later, in the 1954 World Series, Willie Mays would make the “Catch”, a sensational running catch snaring a long drive near the outfield wall with his back to the infield.

The ball traveled about 420 feet, which in most stadiums would've been either over the wall or off the wall for extra bases. However the cavernous Polo Grounds, with its rectangular shape, allowed Mays to make a flat-out on-the-run facing-the-bleachers catch to make the out. After catching the ball, he immediately spun and threw the ball with a mighty heave to the infield. The runners on second and first couldn’t score. The play prevented the Indians from taking the lead.

In the stands, sat Yogi Berra. He was asked if he thought the Giants would win. He replied, "It's tough to make predictions, especially about the future."