Monday, March 25, 2013

The SBA and filipendulous



Hanging by a thread.

From Latin filum (thread) + pendere (to hang).

The filipendulous fate of SBA lending got a reprieve as Congress passed a continuing resolution that funds the government through September 30th.

Passing this continuing resolution avoids the threat of a government shutdown after March 27, the date on which the previous continuing current resolution expires.

The sequester cuts remain in place, but the SBA fared better than most agencies, because Congress had previously increased the subsidy it needs to guarantee loans.

So they went two steps forward and only one back.


SBA LIBOR Base Rate March 2013 = 3.20%
SBA Fixed Base Rate March 2013 = 4.63%

Debenture Rate for March

The debenture rate is 2.23% but note rate is 2.259% and effective yield is only 4.30%.


So how filipendulous is this economy?

The Federal Reserve recently met on monetary policy and left unchanged its statement that it plans to hold its target interest rate near zero as long as unemployment remains above 6.5 percent and inflation is projected to be no more than 2.5 percent.  They went on to say that recent data suggest “a return to moderate economic growth following a pause late last year.”  The pause late last year?

The Department of Commerce originally said gross domestic product dropped 0.1 percent in the fourth quarter of 2012.   A month later, with their second revision said that gross domestic product grew at a 0.1 percent annual rate.

Now keep your eyes and ears open for this week’s third and final estimate of fourth quarter gross domestic product.  

Here is what GDP has been doing and this week’s interesting little table of data:

4th quarter 2012:             0.1%
3rd quarter 2012:             3.1%
2nd quarter 2012:          1.3%
1st quarter 2012:            2.0%
4th quarter 2011:            4.1%
3rd quarter 2011:           1.30%
2nd quarter 2011:           1.30%
1st quarter 2011:             0.4%
4th quarter 2010:           3.1%
3rd quarter 2010:           2.6%
2nd quarter 2010:          1.7%
1st quarter 2010:            3.7%
4th quarter 2009:           5.6%
3rd quarter 2009:          2.2%
2nd quarter 2009:          (0.7)%
1st quarter 2009:            (6.4)%

What does this mean?

I don’t know.

The pause in fourth quarter gross domestic product and revisions to its numbers are being driven by changes in inventories.   Stockpiles grew at a revised $12 billion annual pace, down from a $20 billion rate estimated last month.   Slow inventory buildup shaved 1.55 percentage points off annualized growth during the quarter.

Depleted inventories may signal a first-quarter pickup in production.

The bond market seems to echo that sentiment.  The Treasury Department recently sold $13 billion in 30-year debt at a yield of 3.248%, the highest in a year.   These higher long term rates make the slope of the yield curve steeper and signal stronger growth ahead.

That does not sound so filipendulous. 

Our next three day weekend is not until Memorial Day.   That sure seems like a long ways off.

According to the Federal Reserve, here are the remaining holidays for 2013:

Memorial Day May 27
Independence Day July 4
Labor Day September 2
Columbus Day October 14
Veterans Day November 11
Thanksgiving Day November 28
Christmas Day December 25 

Obviously a holiday needs to be inserted somewhere between now and the end of May.   

How about Good Friday?  It’s a holiday for the stock market.   So why not for everyone else?   The day marks the crucifixion and death of Jesus Christ.  How could that possibly be considered good?  It might be a derivation of "Gute Freitag" which is Germanic in origin and literally means "holy" Friday.

There’s something for anyone filipendulous to hang onto.

Tuesday, March 19, 2013

SBA 504 Debenture Rate for March

Debenture Rate for March

The debenture rate is 2.23% but note rate is 2.259% and effective yield is only 4.30%.

Monday, March 11, 2013

The SBA and anserine

AN-suh-ryn, -rin

1. Of or relating to a goose.

2. Stupid; silly.
From Latin anser (goose).



Have you ever heard a gaggle of geese take to the air in squadron after squadron, covering the sky with a glorious anserine calligraphy?  It sounds kind of silly or stupid.

Sequestration will chop $16.68 million from the SBA's loan-guarantee fund, according to a recent letter sent by outgoing SBA head Karen Mills.  Each dollar that the SBA uses in its loan program guarantees an average of $51 of capital for small businesses. The sequestration is expected to result in 1,928 fewer loans totaling $902 million in capital in the hands of entrepreneurs.

The SBA estimates that the nearly 2,000 loans it expected to make would have supported about 22,600 jobs.



SBA LIBOR Base Rate March 2013 = 3.20%
SBA Fixed Base Rate March 2013 = 4.63%

Debenture Rate for February

The debenture rate is 2.21% but note rate is 2.249% and effective yield is only 4.29%.


The Federal Reserve’s stimulus efforts may be paying off, as employment rose 236,000 last month.  

The change in total nonfarm payroll employment for December was revised from +196,000 to +219,000, and the change for January was revised from +157,000 to +119,000.

Over the past month, the yield curve has moved up, getting somewhat steeper in the process, as long rates moved more than short rates. 

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.

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

Keep your eyes and ears open for this week’s 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
2012- 2.77
2013-  3.25

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.

At last month’s auction, Treasury 30-year bonds rose to the highest yields at an auction since May.  U.S. 30-year bonds are among the securities most sensitive to consumer prices because of their long maturity, as inflation would erode the return on the bonds’ fixed payments for their duration.

The day after the auction, the Federal Reserve will report on industrial production and capacity utilization.  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.  The Federal Reserve watches capacity utilization rates to see if production constraints are threatening to cause inflationary pressures. Bottlenecks or shortages often lead to inflationary pressures that would drive prices even higher.  Several analysts have pointed to a rate between 81% and 82% as a tipping point over which inflation is spurred.   The capacity utilization rate decreased in January to 79.1 percent.  

The Federal Reserve Open Market Committee will begin a two day meeting on March 19th.


”Beware the ides of March"

                -Soothsayer, Julius Caesar Act 1, scene 2

So what in the word are ides?

The word ides comes from a Latin word that means "to divide" and marked the halfway point in Roman months. "The ides", then, is simply the middle of the month.  Roman months originally began at the rise of the full moon.  In 44 BC the plot to assassinate Caesar had already begun to buzz around Rome when the soothsayer famously warned the Emperor.  The terrible forecast, therefore, may have been based more on Rome's worst kept secret than any special psychic powers on the part of the seer.  Alas, at the end of the day it didn't matter. A swaggering, over-confident Julius Caesar met his terrible fate when he ignored the advice.

The ides of March unfortunately is not a holiday.  The next federally recognized holiday is not until Memorial Day.

By then Juan Pierre may have stolen another six bases.  If he does, he will have passed Dummy Hoy on the all-time stolen base list.  "Dummy," was an American center fielder in Major League Baseball who played for several teams from 1888 to 1902, most notably the Cincinnati Reds.  He is noted for being the most accomplished deaf player in major league history.  In Hoy's time, the word "dumb" was used to describe someone who could not speak, rather than someone who was stupid; but since the ability to speak was often unfairly connected to one's intelligence, the epithets "dumb" and "dummy" became interchangeable with stupidity. Hoy himself often corrected individuals who addressed him as William, and referred to himself as Dummy. He was actually one of the most intelligent players of his time, and is sometimes credited with developing the hand signals used by umpires to this day since he could not hear what they said.

Wednesday, March 6, 2013

SBA 7(a) Loan Rate Update


SBA LIBOR Base Rate March 2013 = 3.20%
SBA Fixed Base Rate March 2013 = 4.63%

Lenders can charge up to 2.75% over these indices.