The SBA and affectious

affectious

uh-FEK-shuhs

Affectionate or cordial.

Via French, from Latin afficere (to affect or influence)

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TIP OF THE WEEK 

Affectious is not an adjective normally associated with the IRS, but the IRS has finally figured out how to photo shop the SBA logo onto its IRS form 4506. 

The new Form 4506-T with the SBA logo in the upper-right corner is now available and must be used when requesting tax transcripts from the IRS Service Centers for SBA loan purposes. The Form has been updated to reflect minor changes made by the IRS earlier this fall.  It is important that anyone signing this form also checks the new attestation box above the signature line.

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate December 2015 = 3.24%

SBA Fixed Base Rate December 2015 = 5.01%

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SBA 504 Loan Debenture Rate for December

The debenture rate is only 2.70% but note rate is 2.746% and the effective yield is 4.778%.

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AHEAD OF THE YIELD CURVE 

It’s hard to be affectious with the Federal Reserve when you really look into how they go about things.

According to minutes from their last meeting on monetary policy: “It was also noted that a decision to defer policy firming could be interpreted as signaling lack of confidence in the strength of the U.S. economy or erode the Committee's credibility.”

Huh?  So they have to raise interest rates because they think they have to?

Employers added 211,000 jobs in November as the labor market turned in a solid showing for the second straight month, likely cementing a decision by the Federal Reserve to raise interest rates this month for the first time in nearly a decade.

The second part of the central bank’s dual mandate -- stable prices -- has been more elusive. The Fed’s 2 percent target for inflation hasn’t be met since April 2012.

Just before they begin their meeting, they will be releasing their report on industrial production and capacity utilization for the month of November.

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.

Last month the Federal Reserve reported that capacity utilization declined 0.2 percentage point in October to 77.5 percent

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

2014- 78.8

What does all this mean?

I don’t know.

Capacity utilization is actually 1 percent lower than it was a year ago.

The Federal Reserve’s report on capacity utilization comes out just before their announcement on monetary policy. Federal Reserve policy makers will take the manufacturing data into consideration as they debate whether the economy is strong enough to withstand higher tighter monetary policy.

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

The yield curve is getting flatter.  That means the spread, or yield differential, between short- and long-term Treasuries has recently tightened. Short-term Treasury yields have risen in anticipation of a rate hike while long-term yields have fallen on declining inflation expectations.  At last month’s auction, there was strong demand as the bidding was tight with the high yield coming in at only 3.07%.  After the jobs report, the 30 year treasury yield was at 3.00%.  The 30 year Treasury yield is at historic lows implying a lack of concern over escalating interest rates. 

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OFF BASE

There's an upside to a steady-but-slow-rising economy: The cost of buying your true love all the gifts from "The 12 Days of Christmas" rose just 0.6% this year.

The combined cost for the dozen gifts featured in the final verse of the famed Christmas carol totals $34,130.99 in 2015, up $198 from last year's pricetag and in-line with the government's Consumer Price Index, according to the 32nd annual PNC Christmas Price Index issued Monday.

This is the time of year to be affectious!    

MERRY CHRISTMAS!

SBA 504 Debenture Rate

SBA 504 Loan Debenture Rate for November      

The debenture rate is only 2.70% but note rate is 2.746% and the effective yield is 4.778%.

SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate November 2015 = 3.19%
SBA Fixed Base Rate November 2015 = 5.00%

Lenders can charge up to 2.75% over these indices.

The SBA and veteran

Veteran

vet-er-uh n, ve-truh n

a person who has had long service or experience in an occupation, office, or the like:

-a person who has served in a military force, especially one who has fought in a war:

-experienced through long service or practice; having served for a long period:

of, pertaining to, or characteristic of veterans.

  From Latin veterānus mature, experienced, equivalent to veter- (stem of vetus) old

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TIP OF THE WEEK 

Loans to veterans saw an increase of 101 percent in dollar amount and 45 percent in number of loans over last year.

One of the reasons for the increase is that U.S. military veterans can now save up to $69,062.50 on the SBA 7(a) loan guarantee fee.

SBA Policy Notice5000-1319 declares that the SBA guarantee fee on SBA 7(a) loans is now reduced by 50% for small businesses that are 51% or more owned and controlled by a veteran.

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate October 2015 = 3.19%

SBA Fixed Base Rate October 2015 = 4.19%

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SBA 504 Loan Debenture Rate for October

The debenture rate is only 2.72% but note rate is 2.76% and the effective yield is 4.801%.

 ________________________________________________
AHEAD OF THE YIELD CURVE 

Veteran interest rate observers should have fun over the next month leading up to the next Federal Reserve meeting on interest rates.

On Friday, the Labor Department said that said the U.S. economy created 271,000 new jobs in October marking the largest monthly employment gains of the year.   Total employment is now 4.3 million above the previous peak and is also up 13.0 million from the employment recession low.

The jobs report sparked a sell off in the Treasury market as it was taken by investors as an indication that the Federal Reserve had sufficient reason to raise interest rates in its December meeting.

The yield on the 30-year Treasury bond gained 6.7 basis point to 3.079%.

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

2014- 3.97

2015- 2.91

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.

Keep your eyes and ears open for this week’s auction of 30 year Treasury bonds.  At last month’s auction, there was strong demand as the bidding was tight with the high yield coming in 1/2 basis point below expectations at 2.914 percent.

The 30 year Treasury yield is at historic lows implying a lack of concern over escalating interest rates. 

The Federal Reserve will also have one more jobs report to digest before its meeting on December 15^th and 16^th. 

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OFF BASE

Veterans Day is November 11^th and it is a Federal holiday.

According to the Federal Reserve, here is our remaining holidays for 2015:

Veterans Day November 11
Thanksgiving Day November 26
Christmas Day December 25 

So why is it on the 11^th instead of a Monday?  Major hostilities of World War I were formally ended at the 11th hour of the 11th day of the 11th month of 1918, when the Armistice with Germany went into effect. It coincides with other holidays such as Armistice Day and Remembrance Day, which are celebrated in other parts of the world  

By the way, it is Veterans Day - a simple plural without a possessive apostrophe (Veteran's or Veterans').  The United States government has declared that the attributive (no apostrophe) rather than the possessive case is the official spelling.

To all our Veterans, THANK YOU.

The SBA and poppycock

poppycock

POP-ee-kok 

Nonsense.

From Dutch dialect pappekak (soft dung) or poppekak (doll’s excrement). Ultimately from the Indo-European root kakka-/kaka- (to defecate)

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TIP OF THE WEEK 

Some poppycock from the IRS:

There is a revised Form 4506-T, Request for Transcript of Tax Return, dated 09-2015 that is available for use on IRS.GOV.  There will be an adjustment period until December 7, 2015 to start using the revised form.  Starting December 7, 2015 the Sites will be rejecting requests that are not submitted on the revised form and if the attestation box above the signature line is not checked.

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate October 2015 = 3.19%

SBA Fixed Base Rate October 2015 = 4.91%

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SBA 504 Loan Debenture Rate for October

The debenture rate is only 2.72% but note rate is 2.76688% and the effective yield is 4.801%.   

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AHEAD OF THE YIELD CURVE 

More poppycock keeps coming out of Washington.

The Treasury Department said Thursday it would postpone an auction of two-year notes because of worries that the debt limit impasse in Congress would prevent the sale from going through.

The move is the latest warning from the Treasury Department that the looming Nov. 3 deadline for raising the $18.1 trillion debt ceiling is already having an adverse effect on the economy.  The five year and seven bond auctions will proceed.  If for some reason the 30 year Treasury bond auction were cancelled, interest rates could actually decline.  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.  Over the past several weeks, demand for U.S. Treasuries has been strong, pulling yields to their lowest level in five months. 

Don’t believe all the poppycock about interest rates going up.

The Federal Reserve meets this week and Friday afternoon the market was pricing no real probability of a rate increase at that meeting.

Eurodollar futures settle at a three- month lending rate that has averaged about 22 basis points more than the Fed's target over the past 10 years.

Here is a summary of what the market expects for Eurodollar futures based upon the pit-traded prices at the Chicago Mercantile Exchange:

DEC15- 0.39

DEC16- 0.76

DEC17- 1.44

DEC18- 1.77

DEC19- 2.25

DEC20- 2.57

What does all this mean?

I don’t know.

Eurodollar futures currently imply a federal funds rate that really is not going to be moving up all that much any time soon.

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OFF BASE

This might be poppycock but every time the New York Mets have gone to the World Series, a recession soon follows. 

In October of 1969 the Mets went to the World Series.  A recession soon followed.   

In October of 1973 the Mets went to the World Series.  A recession soon followed.   

In October of 1986 the Mets once again went to the World Series.   The economy held its breath for as long as it could but when it finally had to gasp for air the stock market crashed. The stock market crash of 1987 was the largest one day stock market crash in history, larger than that of 1929.  The economy would soon slump into recession.

The economy recovered and the nation enjoyed the 1990 boom years.  The party ended when the Mets went to the World Series in 2000.  Soon after the 2000 World Series ended, the economy slid into recession.  That recession would end the longest economic expansion in United States history.   The second longest expansion had ended when the Mets had gone to the World Series in 1969. 

In 2006 the Mets dominated the National League winning more games than any other team.  The next year they assembled an even stronger team and appeared a certainty to be in the World Series.  They then suffered the greatest collapse in baseball history.  The economy also soon collapsed. 

The Mets are in the World Series starting Tuesday might.

SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate October 2015 = 3.19%
SBA Fixed Base Rate October 2015 = 4.19%

Lenders can charge up to 2.75% over these indices.

The SBA and crapehanger

crapehanger

KRAYP-hang-guhr

A gloomy person; a pessimist.

A crapehanger was one who hung up black bands of crape as a symbol of mourning. The word is from English crape, from Latin crispus (curled or wrinkled).

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TIP OF THE WEEK 

No crapehangers amongst SBA lenders.

Effective October 1, 2015, lender’s annual service fee for SBA 7(a) loans has been reduced to 0.473 percent.  That means 7(a) loans are slightly more profitable for lenders.

Lenders however as of October 1, 2015,can no longer use the sale of the guaranteed portion as a credit elsewhere justification.  SBA will only guarantee a 7(a) loan if the lender determines that the borrower is unable to obtain credit elsewhere.

For loans of $150,000 or less, both the annual service fee and the guarantee fee are ZERO.

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate September 2015 = 3.20%

SBA Fixed Base Rate September 2015 = 5.09%

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SBA 504 Loan Debenture Rate for September

The debenture rate is only 2.82% but note rate is 2.87% and the effective yield is 4.902%.   

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AHEAD OF THE YIELD CURVE 

Nobody could possibly still be a crapehanger over interest rates.

Especially after Friday’s report on jobs for September.

Employment growth slowed for the second straight month in September as employers added 142,000 jobs, weakening the case for the Federal Reserve to raise interest rates later this year.

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

September                          142,000

August                                 136,000

July                                       245,000

June                                      245.000

May                                       260,000

April                                     223,000

March                                      85,000

February                             266,000

January                               239,000

2014     3,116,000

2013     2,074,000

2012     2,193,000

2011      2,103,000

2010     1,022,000

2009     -5,052,000

2008     -3,617,000

2007    1,115,000

2006     2,071,000

2005     2,484,000

2004     2,019,000

What does all this mean?

I don’t know.

Traders pared bets on a 2015 hike and subsequent increases after the surprisingly weak labor data for September. The probability the futures market assigns for a boost at or before the Fed’s March meeting is now slightly better than a coin flip, at 53 percent, down from 66 percent Thursday.

The Federal Reserve meets October 28^th and 29^th.

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OFF BASE

Crapehangers rejoice!  A three day weekend approaches.

According to the Federal Reserve, here are our remaining holidays for 2015:

Columbus Day October 12

Veterans Day November 11

Thanksgiving Day November 26

Christmas Day December 25 

Columbus Day first became an official state holiday in Colorado in 1906, and became a federal holiday in the United States in 1937, though people have celebrated Columbus's voyage since the colonial period.

SBA 504 Loan Debenture Rate

SBA 504 Loan Debenture Rate for September     

The debenture rate is only 2.82% but note rate is 2.87% and the effective yield is 4.902%.

The SBA and presentiment

presentiment

pri-ZEN-tuh-ment

A sense that something is going to happen, especially something bad.

From Latin pre- (before) + sentire (to feel).

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TIP OF THE WEEK 

Some presentiment came from the FDIC recently.

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported the highest quarterly income on record as reflected in the latest FDIC Quarterly Banking Profile.

The head of the Federal Deposit Insurance Corp. says banks have responded to low margins by extending long-term assets more than long-term liabilities, setting the stage for vulnerability if interest rates were to grow.  Net interest margins continue to shrink, down by nearly 80 basis points since 2009.  In response, banks have been extending asset maturities — but not longer-term funding at the same rate.

The secondary market premiums for the guaranteed portion of SBA 7(a) loans are well in excess of 10%.  This is one way lenders can offset compressed net interest margins. 

Let me know if you’d like a copy of the latest FDIC Quarterly Banking Profile.

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate September 2015 = 3.20%

SBA Fixed Base Rate September 2015 = 5.09%

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SBA 504 Loan Debenture Rate for August

The debenture rate is only 2.82% but note rate is 2.87% and the effective yield is 4.909%.   

 ________________________________________________
AHEAD OF THE YIELD CURVE 

Do you have any presentiment about the Federal Reserve’s meeting this week on monetary policy and interest rates?

Just before they begin their meeting, they will be releasing their report on industrial production and capacity utilization for the month of August.

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.

Last month the Federal Reserve reported that capacity utilization had increased 0.3 percentage point to 78%.

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

2014- 78.8

What does this mean?

I don’t know.

Capacity utilization is actually 0.3 percent lower than it was a year ago.  On the plus side, capacity has actually grown 1.7 percent over the last year.

Weaker capacity utilization might be interpreted as a sign that the Federal Reserve’s 2% inflation target is still out of reach and interest rates may not be going up anytime soon.

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OFF BASE

Any presentiment on this?

Andrew Heaney, the sole bright spot on the Angels pitching staff has agreed to sell 10 percent of his future earnings to Fantex, a publicly traded company, in exchange for $3.34 million, the company announced on Thursday.

Shares of Heaney aren’t yet for sale, but once they are he would become the first player in major league history to sell a portion of his earnings in that way. 

In order for investors to make a profit from Heaney, he would need to earn more than $33.4 million in his career, including endorsements and other sources of income.

Heaney is making just above the major league minimum of $500,000 this year. He will make approximately the same amount in 2016 and 2017, but once he’s eligible for arbitration, his salaries will jump significantly. He could make about $4 million his first year of arbitration, followed by about $6 million and about $9 million.

For Heaney, he is giving up a portion of his future earnings in exchange for the guarantee of cash up front, which presumably he can invest and earn more than he would if he’d waited to earn the money himself. He also protects himself from an injury that could derail his earnings potential.  He could also just be a flash in the pan.