The SBA and bromide

bromide

BRO-myd

1. A tired or meaningless remark.

2. A tiresome or boring person.

From bromine, from Greek bromos (stench).

Bromine got its name from the Greek bromos (stench) due to its strong smell. In earlier times, potassium bromide used to be taken as a sedative. So any statement that was intended to be soothing ("Don't worry, everything will be OK.") acquired the name bromide.  Eventually any commonplace or tired remark and anyone uttering such remarks came to be known as a bromide.

The term was popularized in the title of Gelett Burgess's 1906 book "Are You a Bromide?"  

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TIP OF THE WEEK 

Ignore the bromides about SBA loans.

The SBA has just updated form 1919 which is now needed for all individuals getting a SBA loan.  It updates the personal history questions.   

It used to ask: Have you EVER been charged with, and/or arrested for, any criminal offense other than a minor motor vehicle violation?

It now asks: Have you BEEN arrested in the past six months for any criminal offense?

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate February 2014 = 3.16%
SBA Fixed Base Rate February 2014 = 5.31%

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SBA 504 Loan Debenture Rate for January  

The debenture rate is only 3.46% but note rate is 3.516% and the effective yield is 5.541%

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AHEAD OF THE YIELD CURVE 

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

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.   The rule of thumb is that an inverted yield curve (short rates above long rates) indicates a recession in about a year while a flat curve indicates weak growth and a steep curve indicates strong growth.  The long end of the curve seems to be tilting down.

Last month’s auction of $13 billion of 30 year Treasury bonds sold at a yield of 3.899% compared to December’s 3.90%.   In November the 30 year Treasury bonds drew a yield of 3.81% while in October it was 3.758%.   The 30 Treasury yield has since dropped down to 3.68%.

On Friday, the Federal Reserve will report on capacity utilization.

One of the Fed’s favorite gauges of the economy 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.  The Federal Reserve typically won’t initiate increases in interest rates until then.

Here is what capacity utilization rates have done:

1997- 83.6

1998- 83.0

1999- 82.4

2000- 82.6

2001- 77.4

2002- 75.6

2003- 74.6

2004- 79.2

2005- 80.7

2006- 82.4

2007- 81.5

2008- 79.9

2009- 66.9

2010- 74.8

2011- 76.7

2012- 79.0

2013- 77.8

What does all this mean?

I don’t know.

Last month the Fed reported that capacity utilization for total industry moved up 0.1 percentage point to 79.2 percent.

While capacity utilization is up 12.3 percentage points from the record low set in June 2009, it is still 1.0 percentage point below its long-run (1972-2012) average and still well below the Federal Reserve’s trigger point.

So this week’s bromide on interest rates is that they are not going up.

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OFF BASE

I don’t have any bromides for Valentine’s Day which is this Friday.   It is also the beginning of a three day weekend as we celebrate Washington’s Birthday.

That seems a little strange as Washington’s Birthday is not until the 22^nd while Lincoln’s is on the 12^th.   

Officially it is Washington’s Birthday and NOT “President’s Day.” 

In 1968, Congress passed the Uniform Monday Holidays Act, which moved the official observance of Washington's Birthday from February 22nd to the third Monday in February.  An early draft of the Uniform Monday Holiday Act would have renamed the holiday to "Presidents' Day" to honor the birthdays of both Washington and Lincoln, since Lincoln’s is February 12th.  This proposal however failed in committee and the bill as voted on and signed into law on June 28th 1968, kept the name Washington's Birthday.

Not only is Lincoln not getting his due, but Ronald Reagan is also being shortchanged.  His birthday is February 6th. 

Obviously the only equitable way to remedy this grievous oversight is to give each of these great Presidents their own birthday holidays.   Keeping in the spirit of the Uniform Monday Holidays Act, we could celebrate Reagan’s on the first Monday in February, Lincoln’s on the second Monday in February, and George still gets the third Monday.

Are you a bromide?