Tuesday, August 26, 2014

SBA Loans Are Good For the Economy

The third quarter got off to a slightly slower start as $1,696,438,000 in SBA 7(a) loans were approved in the month of July.

Here are the SBA 7(a) loan approvals since the beginning of the calendar year.

July                      $1,696,438,000
June                      $1,832,552,000
May                       $1,782,874,000
April                     $1,591,774,000
March                   $1,590,460,000
February             $1,323,495,000
January               $1,193,005,000

Keep in mind that the correlation coefficient between SBA 7(a) loan approvals and our economy's Gross Domestic Product is a statistically significant 0.86.

Thursday, August 21, 2014

SBA Loans Are Good For the Economy

$1,832,552,000 in SBA 7(a) loans were approved during the month of June.  

That makes it three straight quarters of steadily improving SBA 7(a) loan volume:

2nd quarter 2014:            $5,203,700,000
1st quarter 2014:              $4,106,960,000
4th quarter 2013:             $3,989,696,000
3rd quarter 2013:             $5,371,662,000
2nd quarter 2013              $4,273,683,000
1st quarter 2013               $4,049,146,000

Second loan volume has jumped significantly from the prior quarter.

The correlation of SBA 7(a) loan approvals with our nation's economic performance appears to be quite strong.  Just for fun I calculated the correlation coefficient between SBA 7(a) loan volume and GDP for over six years using the Microsoft CORREL function. 

It came out to a statistically significant 0.86.

Monday, August 18, 2014

The SBA and congeries

kon-JEER-eez, KON-juh-reez
A collection of miscellaneous things.
From Latin congeries (heap), from congerere (to heap up), from con- (with) + gerere (to carry).

Please note our new mailing address

Stultz Financial, Inc.
1200 Quail Street Suite 165
Newport Beach CA 92660

SBA LIBOR Base Rate August 2014 = 3.16%
SBA Fixed Base Rate August 2014 = 5.38%

SBA 504 Loan Debenture Rate for August  
The debenture rate is only 2.88% but note rate is 2.92% and the effective yield is 4.96%.

Do you remember what the Federal Reserve said about interest rates last time they met?

Did you even understand what they said?

Stay tuned for this Wednesday’s release of minutes from the Federal Reserve’s last meeting on monetary policy.

Analysts parse each word looking for clues to policy.  There is actually a statistical method known as Latent Semantic Analysis (LSA) to extract meaning from the FOMC minutes. LSA is an algorithm that identifies common themes across a collection of texts and then characterizes the documents by the relative prevalence of each theme. The first step of LSA is to represent a document as a term-frequency vector, i.e. a list of the words in the document with their relative frequencies.  Latent Semantic Analysis can often extract a complex, multifaceted signal from the minutes and as a result Treasury yield changes around the time of the minutes release depend on the specific themes expressed, the level of monetary policy uncertainty, and the economic outlook.

The bond market keeps things simple.  Last week’s $16 billion sale of 30 year Treasury bonds sold at a yield of 3.224, the lowest auction yield since May 2013.

The long bond yield has dropped more than 50 basis points since the start of the year.  July’s auction sold at a yield of 3.369%.  April’s $13 billion auction of 30 year Treasury bonds sold at a yield of 3.525%.  In March the auction drew a yield of 3.630% compared to February’s yield of 3.69%.  January’s auction sold at a yield of 3.899% compared to December’s 3.90%.  

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 30 year Treasury bond is currently at 3.14 percent.

What does all this mean?

I don’t know.

Traders are betting the Federal Reserve won’t raise interest rates any time soon.

Latent Semantic Analysis can be used to study a problem that has plagued philosophy and science since Plato 24 centuries ago.

(If you are wondering what Latent Semantic Analysis is, you obviously skipped the congeries of information in the above section.  Shame on you).  

One of the deepest, most persistent mysteries of cognition is how people acquire as much knowledge as they do on the basis of as little information as they get. Sometimes called "Plato's problem'' or ' 'the poverty of the stimulus,'' the question is how observing a relatively small set of events results in beliefs that are usually correct or behaviors that are usually adaptive in a large, potentially infinite variety of situations.  Plato's solution, of course, was that people must come equipped with most of their knowledge and need only hints and contemplation to complete it.  Latent Semantic Analysis proved that through the analysis of children’s vocabularies.

In other words, we all deep down know what’s right and wrong.

For example, we all know you can’t steal first base, right?  That’s just wrong.  As a matter of fact it is rule 7.08i in the rules of baseball.  You Can't Steal First Base

The word "travesty" appears only once in the rule book and it has nothing to do with cheating. The offense in question is one that defies logic: stealing first base from second.

On Aug. 4, 1911, Washington Senators infielder Germany Schaefer stole second in an attempt to draw a throw from the catcher that would allow a teammate to score from third. When that failed, according to the Society for American Baseball Research, he went in reverse and stole first, just to elicit a throw.

Schaefer, whose legendary antics made him part-ballplayer, part-vaudeville act, wasn't the only player to attempt to steal first, but he was the last. At some point thereafter, MLB introduced Rule 7.08i, which deems a runner out if he "runs the bases in reverse order for the purpose of confusing the defense or making a travesty of the game."

The rule has upheld the integrity of baseball ever since.

Keep in mind that the root of congeries is heap and this email is definitely a heap of something.

Tuesday, August 5, 2014

SBA 7(a) Loan Rate Update


SBA LIBOR Base Rate August2014 = 3.16%
SBA Fixed Base Rate August 2014 = 5.38%
Lenders can charge up to 2.75% over these indices.