Sunday, April 22, 2012

The SBA and scuttlebutt



1. Rumor, gossip.
2. A drinking fountain or a cask of drinking water on a ship.

From scuttle (a small opening in the deck or hull of a ship) + butt (cask).  

The word arose from the sailors' habit of gathering around the scuttlebutt on a ship's deck. Things haven't changed much with time. Now we have water cooler gossip in modern offices.



The scuttlebutt is that commercial real estate is the place to be.

Costar’s Commercial Repeat-Sale Indices are up 4% from the same period last year.  While their U.S. Composite Index is still 33.6% below the peak before the recession, slow but stable pricing growth is signaling that the recovery is becoming broader.

If you would like a copy of the Costar Commercial Repeat Sale Indices April report, let me now.

SBA loans are perfect for financing and re-financing OWNER-USER commercial real estate.


SBA LIBOR Base Rate April 2012 = 3.24%
SBA Fixed Base Rate April 2012 = 5.02%


504 Debenture Rate for April 

The debenture rate is 2.67% but note rate is 2.72% and effective yield is only 4.749%. 



The scuttlebutt is that the economy is sputtering.

Last week the Federal Reserve reported that capacity utilization, which measures the amount of a plant in use, dropped to 78.6 percent last month from 78.7 percent in February.

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

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
2012- 78.6

What does all this mean?

I don't know.

We are no where close to any real inflation in the economy.

The Labor Department just said that consumer prices increased 2.7 percent in the 12 months ended in March, the smallest 12-month gain in a year.

Capacity utilization at 78.6% is still 1.7 percentage points below its average from 1972 to 2010 and below the pre-recession levels of 81.3% in December 2007.   While capacity utilization has increased 11.8 percentage points from the record low set in June 2009 and is up 2.1 percentage points above its level from a year earlier it still has a ways to go. 

It’s like losing those last five pounds.

Keep your eyes and ears open for Friday’s report on the first quarter Gross Domestic Product.

Gross Domestic Product, or GDP, is a measure of a country's industrial output.  Some people are high-fiving each other now that the Fed is predicting growth of 2.0-2.3% this year, which is up from the 1.7% growth recorded in 2011.

This is not something to cheer about.

How bad are we doing? If our economy's projected growth rate doubles to 4% it would still be 30% behind its growth rate from before the recession and half of what it was back in the '80s.

Federal Open Market Committee meets this week and will on Wednesday announce their intentions with respect to interest rates.

Interest rates will obviously have to remain low for some time.



You may have heard the scuttlebutt that Jamie Moyer became the oldest pitcher to ever win a major league game.  Jamie was 49 years and 150 days old when he won the game last week.

The second oldest pitcher is Jack Quinn who was 49 years and 70 days old when he won a game for the Brooklyn Dodgers back in 1932.

Jack Quinn is also the second oldest player to ever hit a home run.   He did it when he was 46 years old while playing for the Philadelphia A’s. 

The secret to Quinn’s longevity was the spitball.   It had become an illegal pitch.

In August 1920, Ray Chapman was famously struck in the temple and killed by a spitball thrown by pitcher Carl Mays.  Following the 1920 season, the spitball was banned, except for existing spitballers who were allowed to keep throwing the pitch legally until they retired.

One of the most famous spitballers was Preacher Roe, who played for the Brooklyn Dodgers in the 1950s and was featured in Roger Kahn’s classic “The Boys of Summer”.

While Quinn was grandfathered in and could legitimately throw the spitter, Preacher had to use some subterfuge. 

The nickname preacher?  When an uncle who had never seen the boy before asked him his name, he replied “preacher” because he was fond of a Methodist minister and his wife who took him on horse-and-buggy rides. 

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