The SBA and doldrums

doldrums

DOHL-druhmz

1. A state or period of stagnation or slump.

2. A region of the ocean near the equator marked by calms and light variable winds.

In the olden days when a sail-powered vessel hit a calm region of the ocean, it could be stuck there for days. Sailors called that area the doldrums. The word is from Old English dol (dull, stupid), the ending influenced by the word tantrum.

_______________________________________________

TIP OF THE WEEK 

No doldrums with SBA lending.

Loan volume is way up compared to the prior quarter as more and more lenders and borrowers seek SBA guaranteed financing.

The correlation of SBA 7(a) loan approvals with our nation's economic performance appears to be quite strong.

Just for fun I calculated the correlation coefficient between SBA 7(a) loan volume and GDP for six years using the Microsoft CORREL function.  It came out to a statistically significant 0.86.

Seriously consider a SBA loan.  It just might save the economy.

______________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate July 2012 = 3.24%
SBA Fixed Base Rate July 2012 = 4.57%

________________________________________

504 Debenture Rate for July  

The debenture rate is 2.38% but note rate is 2.42% and effective yield is only 4.46%. 

 ________________________________________________

AHEAD OF THE YIELD CURVE 

The economy is stuck in the doldrums.

Gross domestic product, the value of all goods and services produced, rose at a 1.5 percent annual rate after a revised 2 percent gain in the prior quarter, Commerce Department data showed on Friday.  

This is barely half the pace the economy hit late last year as the final quarter of 2011 was revised up to a 4.1 percent gain, the best performance in almost six years.

As a result, job growth has really slowed over the last three months with only 225,000 payroll jobs added (a 900,000 annual pace).

Keep your eyes and ears open for Friday’s report on jobs for the month of July.

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

June 80,000

May 77,000

April 68,000

March 143,000

February 240,000

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.

The U.S. economy has never been so sluggish this long into a recovery. The Great Recession officially ended in June 2009.

The economy lost nearly 8.8 million jobs during the slump and reached its lowest total employment level in February 2010. It is still 4.9 million short of its peak, according to the Bureau of Labor Statistics.

The economy has added 902,000 jobs over the first half of the year.  At this pace, the economy would add around 1.9 million private sector jobs in 2012; less than the 2.1 million added in 2011.

We are not even half way there.  

The Federal Reserve’s Fed Open Market Committee meets on Tuesday, July 31^st and Wednesday, August 1^st.  They have no choice but to keep interest rates exceptionally low.

__________________________________________

OFF BASE

For sailors, the doldrums hit the horse latitudes. 

Low pressure caused by the heat at the equator makes the air rise and travel north and south high in the atmosphere, until it subsides again in the horse latitudes between 30 and 35 degrees both north and south.

The term “horse latitudes” derived from the "dead horse" ritual of seamen.  In this practice, the seaman paraded a straw-stuffed effigy of a horse around the deck before throwing it overboard.

Seamen were paid partly in advance before a long voyage, and they frequently spent their pay all at once, resulting in a period of time without income. If they got advances from the ship's paymaster, they would incur debt. The seaman's ceremony was to celebrate having worked off the "dead horse" debt.  As west-bound shipping from Europe usually reached the subtropics at about the time the "dead horse" was worked off, the latitude became associated with the ceremony.

This use of 'dead horse' to refer to pay that was issued before the work was done was an allusion to using one's money to buy a useless thing (metaphorically, "a dead horse"). Most men paid in advance apparently either wasted the money on drink or other such vices, or used it to pay outstanding debts.

The sailors were essentially working for a dead horse.  This is not to be confused with beating a dead horse.