Monday, June 29, 2015

The SBA and cowabunga

cowabunga

kou-uh-BUHNG-guh

interjection: An expression of surprise, joy, or enthusiasm.

The word was the cry of Chief Thunderthud, a character in the children's television program Howdy Doody. The word was later adopted by surfers. It was popularized by its use on the animated show Teenage Mutant Ninja Turtles.
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TIP OF THE WEEK 

Cowbunga!  The SBA will be closed on Friday, July 3rd in observance of Independence Day.

That means it should be a holiday for everyone else.

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate June 2015 = 3.18%
SBA Fixed Base Rate June 2015 = 5.16%
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SBA 504 Loan Debenture Rate for June

The debenture rate is only 2.98% but note rate is 3.03% and the effective yield is 5.062%.   

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AHEAD OF THE YIELD CURVE 

The Bureau of Labor Statistics is probably also yelling out cowabunga as they too are taking Friday, July 3rd off.

As a result, their report on jobs for the month of June will come out on Thursday, July 2nd.

Last month’s report showed that the U.S. economy gained 280,000 jobs in May.  That was the best month so far this year.  March was the worst month of job growth, but the Labor Department revised up March's job gains from 85,000 to 119,000.  April's job gains were revised down slightly to 221,000.

A few weeks later, the Federal Reserve met and they didn’t exactly yell out cowabunga.

Federal Reserve policymakers are coming around to the bond market's wisdom about where interest rates are headed.

Futures traders have been signaling for more than a year that when the Fed begins raising target rates for the first time since 2006, the increases won't be fast or reach the levels central bank officials predicted. For the second time this year, the Fed's policymakers lowered their rate projections in official forecasts.  Officials reduced their median estimate for the funds rate at the end of 2016 to 1.625 percent, from 1.875 percent in their March forecast, and to 2.875 percent for the end of 2017, down from 3.125 percent in March.

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- 0.56
DEC16- 1.42
DEC17- 2.12
DEC18- 2.60
DEC19- 2.97
DEC20- 3.25

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
The Federal Reserve affects our lives in many ways.  Not only do they call the shots on interest rates, more importantly, they are the official arbitrator of holidays.   
For July 3rd, they declared that the Board of Governors would be closed.   Like all Federal Reserve pronouncements, the devil is in the details.  They go on say that while the Board of Governors get that day off, for holidays falling on Saturday, Federal Reserve Banks and Branches will be open the preceding Friday.  Had the Fourth of July fallen on a Sunday, all Federal Reserve Banks and Branches would be closed the following Monday.
As a result, there is some confusion as to whether or not July 3rd is a holiday.  According to the U.S. OFFICE OF PERSONNEL MANAGEMENT, for most Federal employees, Friday, July 3, will be treated as a holiday for pay and leave purposes

Most banks will be open on Friday, July 3rd.  Here is a handy dandy guide as to who is open and who is closed: http://www.theholidayschedule.com/bank-holidays.php


I will be taking the day off.  Cowabunga!

Monday, June 22, 2015

SBA 504 Loan Debenture Rate

SBA 504 Loan Debenture Rate for June         

The debenture rate is only 2.98% but note rate is 3.03% and the effective yield is 5.062%.

Monday, June 15, 2015

The SBA and apricate

apricate

AP-ri-kayt

To bask in the sun.
To expose to the sun.

From Latin apricari (to bask in the sun).

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TIP OF THE WEEK 

The SBA 7(a) loan program will soon apricate before Congress as the Senate’s Small Business and Entrepreneurship Committee has submitted a proposed bill that would increase the authorized limit for the SBA 7(a) loan program by two billion dollars.   SBA loan volume is on track to surpass the authorized SBA funds approved for the 2015 fiscal year which ends September 30th.  

Both borrowers and lenders are obviously embracing the program.

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate June 2015 = 3.18%
SBA Fixed Base Rate June 2015 = 5.16%
________________________________________
SBA 504 Loan Debenture Rate for May  

The debenture rate is only 2.77% but note rate is 2.817% and the effective yield is 4.850%.   

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AHEAD OF THE YIELD CURVE 

The Federal Reserve has its moment of aprication as it meets this week on interest rates.  

At its last meeting, the Fed said that it would not increase interest rates until it “is reasonably confident that inflation will move back to its 2 percent objective.”

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.

This morning the Federal Reserve reported that capacity utilization had actually decreased 0.2 percentage points in May to 78.1 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 this mean?

I don’t know.

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.

The bond market seems to agree.  The 30 year Treasury bond, which is very sensitive to inflationary fears, saw strong demand at last week’s $13 billion auction as the 30-year bond yield fell 10 basis points to 3.108%.  The 30 year Treasury bond yield had been pushed to its highest level since early September pressured by a sustained sell off in Euro zone government bonds acerbated by the Greek debt saga which in turn was caused by too much apricating by the Aegean Sea.

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OFF BASE
The season to apricate is upon us as the first day of summer is this Sunday!  The day of the summer solstice is the longest day of the year. The length of time elapsed between sunrise and sunset on this day is a maximum for the year.   There are about 14½ hours of daylight on this day for most of us. 

For those up in Alaska, that means its time for the Midnight Sun Game.  This is a baseball game played every summer solstice in Fairbanks.  Because the sun is out for almost 24 hours a day, the game starts at about 10:30 at night and completes around 1:30 the next morning.  The first game was in 1906 and artificial light has never been used.  The game is considered one of the highlights of the Alaska Baseball League season and Baseball America declared it one of the "10 Must-See Baseball Events."

Monday, June 8, 2015

SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate June 2015 = 3.18%
SBA Fixed Base Rate June 2015 = 5.16%
Lenders can charge up to 2.75% over these indices.

Monday, June 1, 2015

The SBA and inculcate

inculcate

in-KUHL-kayt

To instill something into the mind of a person by repetition.

From Latin inculcare (to tread on), from in- (in) + calcare (to tread), from calx (heel).

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TIP OF THE WEEK 

SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy. 
SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy. 
SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy. 
SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy. 

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.

SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy. 
SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy. 
SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy. 
SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy. 


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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate May 2015 = 3.18%
SBA Fixed Base Rate May 2015 = 5.11%
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SBA 504 Loan Debenture Rate for May  

The debenture rate is only 2.77% but note rate is 2.817% and the effective yield is 4.850%.   

 ________________________________________________
AHEAD OF THE YIELD CURVE 

Interest rates will not be going up any time soon.
Interest rates will not be going up any time soon.
Interest rates will not be going up any time soon.
Interest rates will not be going up any time soon.
Interest rates will not be going up any time soon.
Interest rates will not be going up any time soon.

Keep your eyes and ears open for this week’s report on employment for the month of May.

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

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.

Last month’s report on jobs for April sparked a small rally in the bond market, driving Treasury prices higher and yields down. 

For years, the $12.6 trillion U.S. Treasury market has signaled -- correctly -- that the Federal Reserve was too optimistic in its outlook for the economy and interest rates.  Regardless of when the first increase comes, futures show traders don’t see rates exceeding 1 percent by the end of 2016, versus the Fed’s estimate of 1.875 percent.

They took a June hike off the table, but buried in the minutes of the Federal Reserve's April meeting released last week showed policy makers are likely to keep interest rates lower for longer.

Interest rates will not be going up any time soon.
Interest rates will not be going up any time soon.
Interest rates will not be going up any time soon.
Interest rates will not be going up any time soon.
Interest rates will not be going up any time soon.
Interest rates will not be going up any time soon.

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OFF BASE
It’s normal to not immediately inculcate subliminal messages in your mind.
Subliminal messages have the ability to become a part of yourself, and since they don’t require logic and decision, you tend to believe and act them out almost instantly, as soon as you can perceive them.
Self hypnosis is one of the best ways to receive subliminal messages.   The first step is to be dulled into a stupor which should have occurred by now if you have actually read all this.

Just remember, SBA loans are good for the economy and interest rates are not going up anytime soon.