Monday, September 9, 2013

The SBA and perspicuous

Clearly expressed; easy to understand.
From Latin perspicuus (transparent), from perspicere (to see through), from per- (through) + -spicere, combining form of specere (to look).


Let me be perspicuous here:

In just over three weeks (October 1st), ALL FEES on SBA 7(a) loans of $150,000 or less go to ZERO.

No guarantee fee or on-going lender fee.



SBA LIBOR Base Rate September 2013 = 3.18%
SBA Fixed Base Rate September 2013 = 5.62%

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%.


The Federal Reserve has been anything but perspicuous.

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? 

A look at the minutes from that Federal Open Market Committee meeting as they agonized whether things were modest or moderate didn’t help.

Last week, the Federal Reserve released its “Beige Book” which stated that “national economic activity continued to expand at a modest to moderate pace.”

What is the Beige Book?  It is published eight times per year.  Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources.  Nobody contacted me.

The Beige Book is not a secret codename.   The reason for its name is simply the color of its cover.

When the report was first published in 1970, it was called the Red Book because that was the color of its cover. In 1983, the report was made available to the public.  Fearing confusion and comparison with Chairman Mao’s “Little Red Book” the cover color was changed and its name became the Beige Book.

In preparing for the meetings, FOMC members also receive the "green book," containing the FRB staff forecasts of the U.S. economy. This is coupled with the "blue book," which presents the board staff's analysis of monetary policy alternatives.   Only the beige book is available to the public, and it is released approximately two weeks before each FOMC meeting.

At the next Fed meeting, employment will be a major topic of conversation.

Only 169,000 jobs were added in August.   The government also revised down its estimated job growth for June and July by a combined 74,000 jobs, meaning the net gain from the job’s report is under 100,000 jobs.  That does not even keep up with population growth.

Treasury yields tumbled after the jobs announcement.

Thirty-year bond yields fell three basis points to 3.85 percent.

Keep your eyes and ears open for this week’s auction of 30 year Treasury bonds.  

Last month’s $16 billion auction of the securities drew a yield of 3.652 percent.  That compared with 3.66 percent at a previous auction in July, which was the highest 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%.

Here is what the 30 year Treasury bond has been doing and this week’s interesting little table:

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.

 The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.11, the least since August 2011 and compared with an average of 2.55 for the past 10 sales.  This measure of demand at the U.S. Treasury Department’s debt auctions has fallen this year to the lowest level since 2009 as a drop in bond prices generates the biggest losses on government securities in four years.  Investors have bid $2.87 for each $1 of the $1.257 trillion of notes and bonds sold by the Treasury this year, compared with a record high $3.15 of bids last year. It’s the first decline in demand at the auctions since 2008, when the U.S. government increased note and bond offerings 59 percent to $922 billion as the recession and the financial crisis deepened.

What does all this mean?

I don’t know.

It would appear that the Federal Reserve can be perspicuous about short term interest rates next week.
The perspicuous narration of a ballgame by Vin Scully is one of the joys of summer.  

He said something the other night that at first didn’t sound so perspicuous.  With a full count, he said that the “string was out.”

Back in the good old days, before plastic ball/strike counters were invented, the umpires used two pieces of string to count balls and strikes. The string to count strikes had two knots in it, and was held in the right hand. The ball string had three knots, in the left hand.

After each pitch, as appropriate, the umpire played out one knot. The umpire could quickly determine the count by looking at the visible knots in each hand.

So, with a 3-2 count, all the knots were played out, and the "string was out".

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