Sunday, March 25, 2012

The SBA and lucubrate



To work (such as study, write, discourse) laboriously or learnedly.

Here's a word that literally means "to burn the midnight oil".

It's derived from Latin lucubrare (to work by lamplight), from lucere (to shine).



Lucubrate over commercial real estate opportunities.

CoStar’s monthly National Composite Index of commercial real estate prices opened 2012 with a 1.5% increase.   The index is now 1.9% above the same period last year, reflecting the ongoing recovery in commercial real estate fundamentals.  Pricing for commercial real estate remains low relative to recent history. The National Composite Index ended January 2012 down 31.9% from its previous peak in August 2007.

If you would like a copy of CoStar’s March report, let me know.



SBA LIBOR Base Rate March 2012 = 3.24%
SBA Fixed Base Rate March 2012 = 4.88%


504 Debenture Rate for March

The debenture rate is 2.51% but note rate is 2.55% and effective yield is only 4.591%.

The effective yield for the temporary debt refinancing available with a 504 loan is 4.793%.



The yield curve has gotten steeper, noticeable steeper.

Long term rates began to jump after the Federal Reserve announced at their last monetary policy meeting on March 13 that the economy was doing better. 

Two days after the Fed announcement, a $13 billion auction of 30-year bonds was sold at a yield of 3.383 percent, the highest since August.   This was a jump of 23 basis points.  

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 steeper curve indicates stronger growth.

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
2012- 3.30

So what does this mean?

I don’t know.

The surge in longer term yields stalled on Friday.

Treasury 30-bond yields dropped below their 200-day moving average, indicating this month’s slump in bond prices and surge in yields may be drawing to a close.  The yields dropped as low as 3.2958 percent, less than Friday’s 200-day moving average of 3.3343 percent. 

The steeper slope of the yield curve is also not enough to significantly change projected future growth.

Projecting forward using past values of the yield spread and GDP growth, the Federal Reserve Bank of Cleveland thinks that real GDP will grow at about a 0.7 percent rate over the next year, equal to the past two months.

Thursday the Bureau of Economic Analysis will release their third and FINAL 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%.   Their second and “preliminary” was then bumped up to 3%.

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%. 

So rates obviously are going to go up, stay the same, or go down.



In the Spring a young man's fancy lightly turns to thoughts of love.

Now before you go and think that the poem Locksley Hall is some beautiful sonnet about love and birds chirping, maybe you ought to read the whole thing.    It turns out that the theme of the poem is the bitterness of unrequited love. The speaker first recalls the happy times at Locksley Hall with Amy, the woman he loved. But after Amy left him, he became extremely bitter and angry. He heaps curses on her and the man she chose. He ends the poem by hoping that a storm destroys Locksley Hall.

As unbalanced as that is, things are even weirder.  Turns out the woman he was obsessed with was his COUSIN.  

Perhaps our fancy ought to turn to the fact that Opening Day for Major League Baseball is in just over a week.

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