SBA Loans Are Good for the Economy

$357,346,000 in SBA 7(a) loans were approved for the week ending August 16th, bringing the year to date total to $14,669,453,000.  This is a nice up-tick from the prior week's loan volume of $317,142,000.

Remember, the correlation coefficient between gross domestic product and SBA 7(a) loan approvals is a statistically significant 0.86!

The SBA and confabulate

confabulate

kuhn-FAB-yuh-layt

1. To talk informally.

2. To replace fact with fantasy to fill in gaps in memory.

From confabulari (to talk together), from con- (with) + fabulari (to talk), from fabula (tale).

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TIP OF THE WEEK 

The SBA continues to confabulate over changes to its SOP (Standard Operating Procedures).

As a result, the draft of the latest change to the SOP may not be released in a timely manner.

The effective date for the anticipated changes is also unknown at this time.

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate August 2013 = 3.19%
SBA Fixed Base Rate August 2013 = 5.47%
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SBA 504 loan Debenture Rate for August 

The debenture rate is only 3.16% but note rate is 3.21% and the effective yield is a whopping  5.24%.

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AHEAD OF THE YIELD CURVE 

The confabulation over the differences between moderate and modest may soon end.

At its last meeting on monetary policy, the Federal Reserve said the economy “expanded at a MODEST pace” while a month before it had said that the economy “has been expanding at a MODERATE pace.”  What was the Federal Reserve really trying to say? 

Keep your eyes and ears open for this week’s release of the minutes from that Federal Open Market Committee meeting as they agonized whether things were modest or moderate.

FOMC Minutes is a vital piece of information that is released three weeks to the day after the conclusion of each FOMC meeting.    Though the gist of the Fed’s official views are disclosed at the end of each FOMC meeting with a public statement, we can closely scrutinize details of the Fed opinions in the minutes for better understanding.

Short term rates are at historical low levels and prior Fed minutes reiterated that they will keep rates this low until unemployment drops or inflation rises above 2.5% a year.

One of the Fed’s favorite gauges of inflationary pressure is the capacity utilization rate which measures how much plants and factories are being used.  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.

Last week the Fed reported that capacity utilization for total industry edged down 0.1 percentage point to 77.6 percent.  That was the FIFTH consecutive monthly decline. 

Employers added only 162,000 jobs in July and job gains for May and June were revised down by a total 26,000.   May's gains were revised to 176,000 from 195,000 and June's to 188,000 from 195,000.

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

July 162,000

June 188,000

May 176,000

April 165,000

March 88,000

February 332,000

January 148,000

2012

December 155,000

November 161,000

October 137,000

September 114,000

August 142,000

July 181,000

June 45,000

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.

It would appear that the Federal Reserve will continue to be con-fabulous about interest rates.

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OFF BASE

We can all soon confabulate on what we did over summer.

The three day Labor Day weekend is almost here!

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

Labor Day September 2

Columbus Day October 14

Veterans Day November 11

Thanksgiving Day November 28

Christmas Day December 25

SBA Loans Are Good for the Economy

Only $317,142,000 in SBA 7(a) loans were approved for the week ending August 9th.  That brings the year to date total to $14,312,107,000.

While that is a 13% increase compared to last year, the pace of SBA 7(a) loan approvals has been moderate.  The six week rolling average of SBA 7(a) loan approvals is now only $302,581,000.

That implies that loan approvals for the third quarter might be less than the approvals for the second quarter.

The modest pace of SBA 7(a) loan approvals ripples throughout the economy.

Remember, SBA 7(a) loan volume is a leading economic indicator as the correlation coefficient between SBA 7(a) loan volume and GDP is a statistically significant 0.86.

SBA 504 Loan Debenture Rate for August

SBA 504 loan Debenture Rate for August  

The debenture rate is only 3.16% but note rate is 3.21% and the effective yield is a whopping  5.24%.

SBA Loans Are Good for the Economy

SBA lenders are trudging through the dog days of summer as $350,585,000 in SBA 7(a) loans were approved for the week ending August 2^nd.

Here are the weekly SBA 7(a) loan approvals since Memorial Day:

$371,108,000- week ending July 26th. 

$302,740,000- week ending 7/19/2013.

$265,871,000- week ending July 12th.  

$208,042,000- week ending July 5^th.

$411,606,000- week ending 6/28/2013.

$361,478,000- week ending June 21^st.  

$362,297,000- week ending June 14^th.  

$300,328,00- week ending June 7th.  

$291,446,000- week ending May 31^st.

$378,585,000- week ending May 24^th. 

July was obviously a slow month as $1,385,753 in SBA 7(a) loans were approved while June’s totaled $1,435,709 and May’s were $1,484,588.

SBA 7(a) loan approvals for the second quarter ending June 30^th had increased $224,537,000 compared to the first quarter.   That’s less than a 6 percent increase.   SBA 7(a) loan approvals are up about 14% year to date.  So, it would appear that SBA loan approvals continue to growth, albeit at a slower pace. 

Remember, SBA 7(a) loan volume is a leading economic indicator as the correlation coefficient between SBA 7(a) loan volume and GDP is a statistically significant 0.86.

The SBA and moderate

moderate 

mod-er-it or  mod-rit (adjective or noun)

mod-uh-reyt (verb)

1. kept or keeping within reasonable or proper limits; not extreme, excessive, or intense

2. of medium quantity, extent, or amount

3. mediocre or fair

4. calm or mild

From Latin moderātus  to restrain, control

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TIP OF THE WEEK 

Do you know the difference between moderate and modest?

I am going to be modest and admit that I did not.

I am also going to be modest and tell you that despite almost 30 years of doing SBA loans, it sometimes feels like one year repeated 30 times.  That’s because the SBA keeps changing the rules.

A draft of the latest change to the SOP (Standard Operating Procedures) for SBA loans is being released.  It will become effective October 1^st.

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate August 2013 = 3.19%
SBA Fixed Base Rate August 2013 = 5.47%
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Debenture Rate for July     

The debenture rate is 3.15% but note rate is 3.20% and effective yield is a whopping  5.232%.

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AHEAD OF THE YIELD CURVE 

So what is the difference between moderate and modest?

The Federal Reserve announced at its last meeting on monetary policy that “Information received since the Federal Open Market Committee met in June suggests that economic activity expanded at a MODEST pace during the first half of the year.”

The announcement prior to that had stated “Information received since the Federal Open Market Committee met in May suggests that economic activity has been expanding at a MODERATE pace.”

So the economy expanded at a MODEST pace.   It had been expanding at a MODERATE pace.  

That’s one way to describe it.  According to the Department of Commerce, gross domestic product, the value of all goods and services produced, rose at a 1.7 percent annualized rate from April through June following a 1.1 percent gain in the first three months of the year. The first-quarter’s reading was revised down from a previously reported 1.8 percent advance.   

For all of 2012, GDP was revised to show a 2.8 percent increase compared with a prior estimate of 2.2 percent.

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

2nd quarter 2013             1.7%

1st quarter 2013              1.1

4th quarter 2012:             0.1%

3rd quarter 2012:             2.8%

2nd quarter 2012:          1.2%

1st quarter 2012:            3.7%

4th quarter 2011:            4.9%

3rd quarter 2011:           1.4%

2nd quarter 2011:           3.2%

1st quarter 2011:             (1.3)%

4th quarter 2010:           2.8%

3rd quarter 2010:           2.8%

2nd quarter 2010:          3.9%

1st quarter 2010:            1.6%

4th quarter 2009:           3.9%

3rd quarter 2009:          1.3%

2nd quarter 2009:          (0.4)%

1st quarter 2009:            (5.4)%

The third quarter has also started out at a modest pace.   

Employers added only 162,000 jobs in July and job gains for May and June were revised down by a total 26,000.   May's gains were revised to 176,000 from 195,000 and June's to 188,000 from 195,000.

So what does this mean?

I don’t know.

Keep your eyes and ears open for this week’s auction of 30 year Treasury bonds.   At last month’s auction, the U.S. sold $13 billion in 30-year bonds at 3.66% the highest yield in almost two years.   The June auction had drawn a yield of 3.35% while the May auction saw a yield of only 2.98%.  

Thirty-year bond yields are now around 3.70%, after touching 3.78% last week, the highest since August 2011.

The difference between two- and 30-year yields increased to 340 basis points.  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.  A steep curve indicates strong growth.

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OFF BASE

So what is the difference between moderate and modest?

The word moderate comes from the Latin moderātus which means to restrain or control.   The word modest comes from the Latin modestus which means restrained or decorous.      

So based upon the etymology of the words, modest means you are restrained while moderate means you have to restrain yourself. 

To put it another way, you are a slow runner (modest) rather than running slow.  Moderate implies that it is deliberate while modest is just the way it is.  So I think what the Fed is saying is that the economy is crawling along despite its efforts while a month ago it was saying it was crawling along thanks to its efforts.

Am I getting carried away?  Should I remember “moderation in all things?”  That’s from the Bible right?  WRONG.  There is absolutely NO direct quotation matching that proverb.  

The phrase, “Moderation in all things,” is common extrapolation of Aristotle’s Doctrine of the Mean as presented in his Nicomachean Ethics.  His ethic works around finding the mean, or middle ground, between excess and deficiency. An example of this would be his presentation of courage being the happy medium between the extreme of rash action and the deficiency of cowardice, in respect to a person’s possible action in the face of danger.

It should be noted that Aristotle’s ethic is often misunderstood by its summary: moderation in all things. It is frequently reasoned by those unfamiliar with context that the common phrase means that a person should approach all things (whether healthy or unhealthy) with moderation; therefore, reasoning that a moderate amount of a bad thing can be indulged is not uncommon to find. This is an inaccurate representation of the perspective summarized in the popular phrase.

SBA Loans Are Good for the Economy

SBA 7(a) loan volume faded just a bit for the month of July as $1,385,753 in SBA 7(a) loans were approved.

In June SBA had approved $1,435,709 in 7(a) loans while for the one month period ending May 31^st, SBA 7(a) loan approvals totaled $1,484,588.    In April $1,353,386,000 in SBA 7(a) loans were approved.

SBA 7(a) loan volume is a leading economic indicator as the correlation coefficient between SBA 7(a) loan volume and GDP is a statistically significant 0.86.