SBA 7(a) Weekly Lending Update

SBA 7(a) loan volume dropped for the week ending February 24th to $216,124,000.  So far year to date SBA has approved $5,261,871,000 in SBA 7(a) loans.

The SBA and caitiff

caitiff

KAY-tif

noun: A cowardly and despicable person.

adjective: cowardly, despicable.

Via French from Latin captivus (captive), from capere (to seize).

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TIP OF THE WEEK 

Don’t be caitiff about commercial real estate.

The CoStar Commercial Repeat Sale Indices (CCRSI) National Composite index ended the fourth quarter of 2011 up 5.5% from its low point in March 2011. 

This month's CCRSI provides the market's first look at December 2011 commercial real estate pricing.   

The CoStar indices are constructed using a repeat sales methodology, widely considered the most accurate measure of price changes for real estate.  If you would like a copy of CoStar’s February 2012 report, let me know.

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate February 2011 = 3.26%
SBA Fixed Base Rate February 2011 = 4.72%

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504 Debenture Rate for February   

The debenture rate is 2.63% but note rate is 2.68% and effective yield is only 4.711%. 


The effective yield for the temporary debt refinancing available with a 504 loan is 4.91%.

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AHEAD OF THE YIELD CURVE 

On Wednesday, LEAP DAY, the Bureau of Economic Analysis will release their second or “preliminary” estimate for fourth quarter 2011 GDP.  Their first or “advance” estimate for fourth quarter GDP was an increase of an annual rate of 2.8%.  This was an improvement over the 1.8% third and “final” estimate for third quarter GDP.  

GDP for the third quarter was initially put at 2.5%, with subsequent downward revisions to 2.0% and finally 1.8%.

These revisions to the GDP numbers were caused primarily by inventory changes.

This is worth noting because more than the entire difference between the third quarter growth rate and the fourth quarter growth rate can be explained by the movement in inventories. Inventories subtracted 1.35 percentage points from growth in the third quarter, when they rose at just a $5.5 billion annual rate. Inventories then added 1.95 percentage points to growth in the fourth quarter when they rose at a strong $63.6 billion annual rate.

Unfortunately, this speedup in the rate of inventory accumulation will not continue. In future quarters inventories are likely to grow at a somewhat slower pace.

In the absence of this inventory growth we would have been looking at only a 0.9 percent growth rate in the fourth quarter. 

GDP is market value of all final goods and services produced within the USA where money is used in the transaction.  GDP counts monetary expenditures.  It is designed to count value added so that goods are not counted over and over as they move through the manufacture – wholesale – retail chain.

Consider that GDP includes the costs of suing your neighbor or McDonalds for hot coffee spilled in your lap, or even the replacement of your house if it burns down – yet little of these activities are real economic growth.  GDP does not include home costs (other than new home purchase prices), interest rates, or the money spent buying anything used.

It does not measure wealth, disposable income, or employment.  In short, GDP does not measure the change of the economic environment for you and me.

So what does that mean for job growth this year?

Keep your eyes and ears open for next Friday’s report on jobs for February.

Here is a summary of net monthly payroll employment and this week’s interesting little table of data:

January 243,000

2011

December 203,000
November 157,000
October 112,000
September 158,000
August 104,000
July 127,000
June 20,000
May 25,000
April 232,000
March 194,000
February 235,000
January 68,000
2010
December 121,000
November 93,000
October 210,000
September (41,000)
August (1,000)
July (66,000)
June (175,000)
May 431,000
April 218,000
March 230,000
February (36,000)
January (26,000)
2009
December (150,000)
November (11,000)
October (111,000)
September (215,000)
August (201,000)
July (304,000)
June (443,000)
May (322,000)
April (504,000)
March (699,000)
February (651,000)
January (655,000)
2008
December (681,000)
November (597,000)
October (423,000)
September (403,000)
August (127,000)
July (67,000)
June (100,000)
May (47,000)
April (67,000)
March (88,000)
February- (83,000)
January- (76,000)

What does all this mean?

I don’t know.

We added 157,000 jobs in November, 203,000 in December, and 243,000 in January.  Even with the awful summer of 2011, the economy added 1.95 million jobs in the last 12 months, the best figure in five years. 

This is a better pace of payroll job creation than in 2010, but the economy still has 6.0 million fewer payroll jobs than at the beginning of the 2007 recession. There are a total of 13.1 million Americans unemployed and 5.6 million have been unemployed for more than 6 months.

We still have a way to go before rates will start to really go up.

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OFF BASE

A caitiff is a contemptible or cowardly person. It’s archaic, so if you say it with a straight face you might even get away with the insult.   It started out, sometime before 1300, to mean a captive.  As captives were not in the best of circumstances, caitiff began to mean a wretched or miserable person. 

The leap day baby Frederic the pirate apprentice in Gilbert and Sullivan's 1879 comic opera The Pirates of Penzance was a caitiff in the original sense of the word.  His apprenticeship indenture stated that he remained legally and morally indentured to the pirates until his 21st birthday.   Frederic was born on February 29th, and so, technically, he only has a birthday each leap year, and so he must serve for another 63 years.

Leap Years are needed to keep our calendar in alignment with the Earth's revolutions around the sun.   Because seasons and astronomical events do not repeat in a whole number of days, a calendar that had the same number of days in each year would, over time, drift with respect to the event it was supposed to track like the winter solstice, vernal equinox, summer solstice and autumnal equinox.  By occasionally inserting an additional day or month into the year, the drift can be corrected.  If we didn't add a day on February 29th nearly every 4 years, we would lose almost six hours every year. After only 100 years, our calendar would be off by approximately 24 days!

Another famous leap day baby was Dickey Pearce.  Dickey played baseball back with the Brooklyn Atlantics in 1856.  Dickey is most famous for introducing his "tricky hit" to baseball, known today as the bunt.

Many people think baseball batters who bunt are caitiffs. 

One of the best bunters in all of baseball is Angel Erick Aybar. 

Last season against the Tigers and the best pitcher in all of baseball Justin Verlander,  Aybar stepped up to the plate.  It was the top of the eighth inning and Verlander had a no-hitter going through seven innings. With his team trailing 3-0,  Aybar dropped down a bunt.   Verlander fielded the bunt but rushed the throw which ended up in right field.  With Verlander rattled, the Angels would go on to score two runs that inning, making it close. 

Aybar attempted quite a few bunts last season.  He 42 attempts were second in the major leagues.  Joining him was Angel center fielder Peter Peter Bourjos who bunted 17 times in 29 attempts for a   .586 batting average.   Their new teammate, Albert Pujols, has attempted a sacrifice bunt just once, on June 16^th, 2001.  He also has two career bunt hits, one in 2003 and another in 2004.

SBA 7(a) Weekly Lending Update

More and more businesses are turning to the SBA 7(a) loan program as $322,060,000 in SBA 7(a) loans were approved for the week ending February 17th.   SBA 7(a) volume has been somewhat lackluster and last week's number is a jump in approvals.

So far this year SBA has approved $5,043,747,000 in SBA 7(a) loans.

504 Debenture Rate for February

504 Debenture Rate for February   


The debenture rate is 2.63% but note rate is 2.68% and effective yield is only 4.711%.


The effective yield for the temporary debt refinancing available with a 504 loan is 4.91%.

SBA 7(a) Weekly Lending Update

SBA 7(a) loan volume is off 53% from last year.  So far the SBA has approved $4,721,687,000 in SBA 7(a) loans.  Last year at this time, the SBA had approved $9,988,144,000 in SBA 7(a) loans.   Many people attribute the drop to the reduction in the percent of guarantee from 90 now down to 75.  With lenders assuming a greater share of the risk of the loan, they have become a little more selective.   Borrowers now need to figure out which lender is out there still willing to do their loan.  There are many lenders still out there doing SBA loans.

The SBA and limpet

limpet

LIM-pit

1. Any of various low conical-shelled marine mollusks that adhere tightly to rocks.

2. One that clings stubbornly.

From Middle English lempet, from Latin lampreda (lamprey) usually explained as literally "lick-rock," from lambere "to lick" + petra "rock."

The animals attach themselves to things with their sucker-like mouths..

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TIP OF THE WEEK 

Hotel occupancy rates are back to pre-recession levels.  Smith Travel Research’s preliminary performance numbers for January reveal another strong month for the U.S. hotel industry.   Occupancy overall was up 3% to 5% while revenue per available room was up 7% to 9%.

Loans to hotels are one of the single biggest industry categories of SBA borrower.

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate February 2011 = 3.26%
SBA Fixed Base Rate February 2011 = 4.72%

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504 Debenture Rate for January 

The debenture rate is 2.76% but note rate is 2.81% and effective yield is only 4.839%. 

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AHEAD OF THE YIELD CURVE 

The government had a little trouble selling $16 billion of 30 year Treasury bonds last week.  

The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.47, compared with 2.6 at the January offering and an average of 2.66 for the previous 10 sales. 

The 30 year Treasury bond yield reached 3.23 percent, the most since October 31^st.  The difference between yields on Treasuries maturing in two and 30 years, our friend the yield curve, widened to 2.94 percentage points, the most since October 28^th when the difference was 3.08 percentage points. 

Short term rates remain exceptionally low because of, as the Federal Reserve put it, “low rates of resource utilization”.

In the Federal Reserve's eyes, resource utilization is gauged by capacity utilization which measures how much plants and factories are being used. 

Keep your eyes and ears open for Wednesday's Federal Reserve report 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- 67.3
2010- 74.8
2011- 76.7

What does all this mean?

I don't know.

Last month capacity utilization for total industry stepped up to 78.1 percent.  This is up 10.8 percentage points from the record low set in June 2009.  It is still however 2.3 percentage points below its long term average and the pre-recession levels of 81.3% in December 2007. 

We still have a way to go before rates will start to really go up.

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OFF BASE

Valentine’s Day is Tuesday, February 14^th. 

You ever wonder how this whole crazy ritual started?

It turns out there really was a St. Valentine who was thrown in prison by Roman Emperor Claudius II.  Claudius attempted to get him to convert to Roman paganism in order to save his life. Valentine refused and tried to convert Claudius to Christianity instead. Because of this, Valentine was executed.

On the evening before Valentine was to be executed, he wrote a note - the first "valentine" card – to a lady friend.  It was a note that read "From your Valentine."

Ever since then, also sensing impeding doom if they don't, men have been compelled to do the same thing.  

The SBA and ululate

ululate

UHL-uh-layt, or YOOL-uh-layt

To howl or wail.

From Latin ululare (to howl or shriek) 
 

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TIP OF THE WEEK 

Restaurateurs must be happily ululating.

The National Restaurant Association just reported that their Restaurant Performance Index rose to highest level in nearly six years in December.  Building on a solid November performance that saw the strongest same-store sales results in more than four years, restaurant operators reported even better numbers in December.  In addition to positive sales and traffic levels, capital spending activity among restaurant operators continues to trend upward.

Loans to restaurants, both full service and limited service, are the single biggest industry category of SBA borrower.

______________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate February 2011 = 3.26%
SBA Fixed Base Rate February 2011 = 4.72%

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504 Debenture Rate for January 

The debenture rate is 2.76% but note rate is 2.81% and effective yield is only 4.839%. 

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AHEAD OF THE YIELD CURVE 

Joyful ululation echoed on Friday when the Department of Labor reported that 243,000 jobs were added to start the year off.    We added 157,000 jobs in November, 203,000 in December, and now 243,000 in January.  Even with the awful summer of 2011, the economy added 1.95 million jobs in the last 12 months, the best figure in five years. 

The Federal Reserve Open Market Committee had just said that they planned to maintain “exceptionally low levels for the federal funds rate at least through late 2014.”

 The federal funds rate dictates short term rates, but what about longer term rates?

After the jobs report on Friday, a drop of more than three points in the price of 30 year bonds pushed yields up as much as 16 basis points to 3.16 percent. 

The 30-year Treasury bond yield finished 2011 at 2.89 percent.   

Keep your eyes on Thursday’s $16 billion auction of 30 year Treasury bonds.

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

2011- 2.89


Wait a minute, why no numbers for 2003, 2004, and 2005?

One month after the 9/11 attacks, the Treasury 30 year bond is discontinued. When the Treasury mothballed the 30-year bond in 2001, experts speculated it was trying to drive down long-term interest rates, which had remained stubbornly high while the Federal Reserve was slashing short-term interest rates to revive the economy. When the Treasury discontinued the 30-year bond in 2001, its yield fell 35 basis points in one day. Why? A shrinking supply of the 30-year Treasury bond caused increased demand to drive rates down.

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.

A flat curve indicates weak growth, and conversely, a steep curve indicates strong growth.

The yield curve is getting a little steeper.

Now that’s something to ululate about.

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OFF BASE


Ululating about having to work on Super Bowl Monday?

You are not alone as a survey conducted by Harris Interactive for the Workforce Institute at Kronos indicated that 1.5 million people could call in sick and an additional 4.4 million could be late to work the day after the Super Bowl.  According to the latest Bureau of Labor Statistics numbers that just came out on Friday, there are about 141 million employed people in the United States. So, to put those national loss productivity numbers in perspective, just over 4 percent of the American work force won’t be very productive as they are going to either be missing work or dragging through the day.

Hang in there.  Our next holiday is in only two weeks as we observe Washington’s Birthday. 

By the way, officially it is Washington’s Birthday and NOT “President’s Day.” 

In 1968, Congress passed the Uniform Monday Holidays Act, which moved the official observance of Washington's Birthday from February 22nd to the third Monday in February.  An early draft of the Uniform Monday Holiday Act would have renamed the holiday to "Presidents' Day" to honor the birthdays of both Washington and Lincoln, since Lincoln’s is February 12th.  This proposal however failed in committee and the bill as voted on and signed into law on June 28th 1968, kept the name Washington's Birthday.

Not only is Lincoln not getting his due, but Ronald Reagan is also being shortchanged.  His birthday is February 6th. 

Obviously the only equitable way to remedy this grievous oversight is to give each of these great Presidents their own birthday holidays.   Keeping in the spirit of the Uniform Monday Holidays Act, we could celebrate Reagan’s on the first Monday in February, Lincoln’s on the second Monday in February, and George still gets the third Monday.

Now before some prig goes off on exclaiming that would be allowing too much time off for frivolity amongst the hoi polloi, this trifecta of Presidential birthday holidays would be our last hurrah until the brink of summer. 

According to the Federal Reserve, the next federally recognized holiday is not until Memorial Day.  That’s not until the end of May.  Three whole months away; one forth of the year. 

Fortunately Opening Day for baseball is only 57 days from now and pitchers and catchers report for spring training next week.

Now there is something to joyfully ululate about.