Friday, February 26, 2016

The SBA and uberous

Abundant; fruitful.

From Latin uber (rich, fruitful, abundant, etc.).


It is an uberous time for hotels and motels.

Even though January is one of the weakest periods of the year, average weekly hotel occupancy in 2016 is already above the average for ALL of 2009 (the worst year for hotels since the Depression)!

2015 was the best year on record for hotels and so far 2016 is tracking 2015.

Hotels and motels are one of the largest categories of SBA borrowers.

SBA LIBOR Base Rate February 2016 =3.43%
SBA Fixed Base Rate February 2016 = 5.00%

SBA 504 Loan Debenture Rate for February
The debenture rate is only 2.27% but note rate is 2.31% and the effective yield is 4.324%.

Are things getting so uberous that interest rates will keep going up?

Minutes from the January Federal Open Market Committee meeting show that officials were worried about a series of drags and disruptions that are likely to derail their December projection of four rate increases this year.

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 rose to 77.1 percent from 76.4 percent in the prior month.   This is the first increase in three months.

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
2015- 76.5

What does all this mean?

I don’t know.

Uberous consumer spending propelled factory production with the biggest gain in the output of consumer goods since July on increases in both durables and nondurables.

Capacity utilization at 77.1% is still 2.9% below the average from 1972 to 2015 and well below the pre-recession level of 80.8% in December 2007.

Keep your eyes and ears open for Friday’s report on jobs for the month of February but don’t over-react.  Many economists expect payroll growth to naturally slow this year as the near-normal unemployment rate leaves a smaller pool of available workers. 

The Federal Reserve does not meet until March 15th and 16th

February 29th is a leap day. 

Leap days are needed to keep our calendar in alignment with the Earth's revolutions around the Sun.
It takes the Earth approximately 365.242189 days – or 365 days, 5 hours, 48 minutes, and 45 seconds – to circle once around the Sun. This called a tropical year. Without an extra day on February 29 nearly every four years, we would lose almost six hours every year. After only 100 years, our calendar would be off by approximately 24 days.

The calendar already seems off as the next official holiday recognized by the Federal Reserve is not until Memorial Day. 

If you need to find some pretense for a holiday before then here are some possibilities:

Saint Patrick’s Day- March 17th
Good Friday- March 25th
Opening Day Major League Baseball- April 4

April 4, 2016 seems appropriate as a holiday as it will also be Square Root Day.  Square Root Day is when both the day of the month and the month are the square root of the last two digits of the year.

The last square root day was 3/3/09 and the next one after 4/4/16 won’t be until 5/5/25.

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