Saturday, March 10, 2012

The SBA and stenotopic



Able to adapt only to a small range of environmental conditions.

From Greek steno- (narrow, small) + topos (place). Opposite is eurytopic.



Are borrowers being stenotopic about SBA loans?

SBA 7(a) loan approval volume is down by over 50% from a year ago. 

SBA 7(a) loan demand has historically been a leading economic indicator.

Lenders are now aggressively seeking new SBA 7(a) loan opportunities.



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


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%.



The Federal Reserve Open Market Committee meets this week and it is widely expected that they will once again state that they plan to maintain “exceptionally low levels for the federal funds rate at least through late 2014.”

So what happens after 2014?

Minutes from the last Fed meeting show that some six committee members (out of 17) "anticipated that the target rate would need to be increased to around 1½ to 2¾ percent at the end of 2014."  Moving out to 2015 and 2016, the target rate expectations for the committee were "in a range from 3¾ to 4½ percent”.

Then again they could very well revise their numbers.  

The Fed just last month revised their estimate of capacity utilization up from 78.1 percent to 78.6 percent for December.  They then said capacity utilization “fell” in January to 78.5 percent.  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.    Several analysts have pointed to a rate between 81% and 82% as a tipping point over which inflation is spurred.

The Fed next reports Capacity Utilization figures on Friday.     

The Department of Labor also revised their job growth numbers.  The change in December payroll employment was revised up from +203,000 to +223,000, and January was revised up from +243,000 to +284,000.   Revisions added a total of 61,000 jobs to payrolls in December and January.  The February jobs number came in at 227,000. 

Not to be left out, the Department of Commerce also revised their fourth quarter estimate of economic growth up to 3 percent from 2.8 percent.  

So where then are interest rates going?

Eurodollar futures settle at a three- month lending rate that has averaged about 22 basis points more than the Fed's target over the past 10 years.

Here is a summary of what the market expects for Eurodollar futures based upon the pit-traded prices at the Chicago Mercantile Exchange:

DEC12- 0.52
DEC13- 0.76
DEC14- 1.20
DEC15- 1.87
DEC16- 2.46
DEC17- 2.96
DEC18- 3.33
DEC19- 3.50

What does all this mean?

I don’t know.

The bond market remains skeptical.  Over the past month, the yield curve has flattened somewhat, as short rates moved up while longer rates barely budged.   A flatter curve telegraphs weaker growth. 

Keep your eye on Wednesday’s $13 billion auction of 30 year Treasury bonds.

The government had a little trouble selling $16 billion of 30 year Treasury bonds last month.    The 30 year Treasury bond yield reached 3.23 percent, the most since October 31st.   The 30 year bond yield is now at 3.18 percent.

One obviously can’t be stenotopic.



Daylight saving time has begun.  By the way, it's daylight SAVING time, not SAVINGS time.  Remember we are saving daylight.  It's an adjective, as in labor saving device. 

How is daylight saved?  Most people are tied to the tyranny of a clock and use standard time instead of solar time for their schedules.  As the days get longer and longer drifting towards the summer solstice, most people fail to let the sun wake them.  So that daylight is "lost".  People could simply wake up earlier to take advantage of the sunlight, but this is evidently impractical because of the supposed inflexibility of clock based schedules.

So instead we have to spring forward and then fall back.  The alternative would of course be to throw out our clocks and watches and use sundials.

Someone who is totally disregarding time is Colorado Rockies pitcher Jamie Moyer.

Jamie is now 49 years old.  49 years old!  Only three pitchers have played at this age or older.  Satchel Paige (59, in a one-time special appearance), Jack Quinn (50) and Hoyt Wilhelm (49).  And Jamie has only 33 wins to go to make it to 300 wins.  He might be the last pitcher to do it for quite awhile.  The next closest active pitcher is Roy Halladay with 188 wins. 

On Wednesday, in the Rockies' spring training debut, Jamie threw two innings and allowed only one hit.  On Sunday, against the White Sox, Jamie started the game and lasted three innings giving up one run on three hits with two strike outs.   Not bad.

Now none of us have an excuse for being late getting out of bed.

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