Monday, June 17, 2013

The SBA and temerarious



Presumptuously or recklessly daring or bold.

From Latin temere (rashly).


The SBA might be getting a little temerarious.

A draft of its Standard Operating Procedures will be released soon. 

Significant changes to personal liquidity, affiliations and collateral requirements have already been announced.

This new SOP will take effect October 1, 2013.


SBA LIBOR Base Rate June 2013 = 3.19%
SBA Fixed Base Rate June 2013 = 4.96%

Debenture Rate for June    

The debenture rate is 2.45% but note rate is 2.49% and effective yield is only 4.529%.


The Federal Reserve meets this week and they won’t be temerarious.

The unemployment rate is at 7.6% and inflation is falling.

Inflation is falling?   

Tuesday the consumer price index will be released for the month of May.  Last month, Consumer prices climbed 1.1 percent in the 12 months through April, according to a measure watched by the Fed that excludes food and fuel -- matching the smallest increase since records began in 1960. That’s down from 1.9 percent in the year ended April 2012.

On Friday it was reported that capacity utilization for total industry edged down 0.1 percentage point to 77.6 percent.  This is the second consecutive monthly decline.  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.

Despite all this, last week’s Treasury auction of $13 billion in 30 year bonds went off at a yield of 3.355 percent, the highest since March 2012.    

What a difference a month makes.   At May’s sale of 30 year bonds, the yield was only 2.98%, the lowest yield since December.

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.

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.

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. 

It will be interesting to hear what the Federal Open Market Committee has to say.

It would appear that interest rates are going to remain the same, go up, or go down.
Juan Pierre’s temerarious ways on the base paths are not hurting the Marlins.   They are hurting themselves. 

They are on pace for a 47-115 season, a level of losing topped only twice in the last 70 years.  With a little bit of luck, they just might beat the Mets’ record for futility of 120 losses.

Speaking of luck, almost half of their losses are by one or two runs in extra innings — none worse than a recent 11-inning game at the Philadelphia Phillies in which John Mayberry erased a Miami lead with a 10th-inning homer and then won it with a grand slam.

The Marlins manufactured the go-ahead run in the 10th inning on the speed of Juan Pierre, who drew a leadoff walk. Pierre fell behind two strikes in the count, but he capped the nine-pitch showdown with a walk. He advanced to second on a sacrifice bunt, and then stole third.  Juan then dashed home with the decisive run on a wild-pitch on a 2-2 slider that bounced away from the catcher.

The lead was short lived as Mayberry belted the game-tying home run in the 10th followed by his grand slam an inning later.

Juan is now 18th on the all-time stolen base list and 6th on the all-time caught stealing bases list.   He now has more stolen bases than anyone else playing baseball right now.

It might be a long summer for Juan and the Marlins. 

The first day of summer is Friday, June 21st.

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