Monday, October 24, 2011

The SBA and perspicaciousness



Keenness of perception and discernment.

From Latin perspicere (to see through), from per- (through) + -spicere, combining form of specere (to look).



Perspicacity is needed when trying to figure out SBA loans.

A thorough understanding of the SBA Standard Operating Procedure, which changed on October 1st, is also important.

Recent changes now allow SBA loans to refinance owner-user real estate debt including lender’s REO properties.

Other changes now make SBA loans the preferred choice of both lenders and borrowers.



SBA LIBOR Base Rate October 2011 = 3.24%
SBA Fixed Base Rate October 2011 = 4.848%


504 Debenture Rate for October

The debenture rate is 2.76% but note rate is 2.807% and effective yield is only 5.067%.



If you don’t think the economy is recovering, your perspicaciousness is lacking.

Just look at the capacity utilization rate. It has climbed 10.1 percentage points from the record low set in June 2009.

The capacity utilization rate, which measures how much plants and factories are being used, is one of the Federal Reserve’s favorite gauges of the economy.

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.

Last week it was reported that capacity utilization increased to 77.4 percent from 77.3 percent in August. The gauge compares with the average of 79.5 percent over the past 20 years.

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- 67.3
2010- 74.8
2011- 76.7

What does all this mean?

I don't know.

Capacity utilization at 77.4% is still 3.0 percentage points below its average from 1972 to 2010 and below the pre-recession levels of 81.3% in December 2007.

One implication is that there is very little inflationary pressure in the economy.

Keep your eyes on Thursday’s advance estimate of third quarter Gross Domestic Product. GDP represents the total value of the country's production and consists of the purchases of domestically-produced goods and services by individuals, businesses, foreigners and government entities. Gross domestic product is the country's most comprehensive economic scorecard.

When the report comes out, look at final sales -- GDP less the change in business inventories. When final sales are growing faster than inventories, this points to increases in production in months ahead. Conversely, when final sales are growing more slowly than inventories, they signal a slowdown in production.

Economic growth for the second quarter remained anemic. The Commerce Department's final estimate for second quarter GDP growth was 1.3 percent annualized, compared to first quarter growth of 0.4 percent.

Interest rates will continue to remain low.



The Cardinals are in the World Series.

Don’t say so what!

Keep in mind that when the Cardinals win the World Series, the stock market rises 13% the following year.

That`s more than any other team which has won the series at least four times.

In fact the Cardinals win in 1982 preceded the biggest bull market in decades. Since 1926, the Cardinals have won 10 World Series titles. In 9 of those occasions, the Dow posted a gain the following year, with an average return of 13 percent. It is the Dow’s best return for any Major League Baseball team with four or more titles. The best result was a 38.5 percent gain for the Dow in 1935, a year after the Gas House Gang* won the title. Most recently, the Dow hit a record high about a year after the Cardinals' 2006 win, but closed 2007 with a gain of just 6.4 percent.

The New York Yankees are the second-best-performing team for investors. Their 27 World Series titles have been followed by an average stock-market gain of 9.6 percent the following year.

The Texas Rangers have never won a World Series, but baseball has had eight first-time winners in the past 45 years. Following those Series, the most recent of which was the Angels' "rally monkey" title in 2002, the Dow has risen an average of 8.97 percent.

*The Cardinals nickname is the Gashouse Gang given to them by Leo Durocher. The phrase "gas house" referred to plants that produced town gas for lighting and cooking from coal, which were common fixtures in US cities prior to the widespread use of natural gas. The plants were noted for their foul smell and were typically located near railroad yards in the poorest neighborhood in the city.

Enough of this perspicaciousness.

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