Thursday, April 21, 2016

The SBA and intractable

Not easily handled, managed, or controlled.
From Latin tractare (to handle),


SBA lending may seem intractable if you don’t know what you are doing.  That’s why many lenders utilize lender service providers such as Stultz Financial to avoid any splenetic presentiment.

The recrudescence in hospitality has been oppugned as occupancies are on a declining trajectory.  This should not come as a surprise because more and more hotels and motels are opening, often with SBA financial assistance.  Supply growth has outpaced demand growth for two consecutive months, but the 61.7% occupancy for February is still the second-highest occupancy ever recorded.

SBA LIBOR Base Rate April 2016 =3.44%
SBA Fixed Base Rate April 2016 = 4.87%
SBA 504 Loan Debenture Rate for April  
The debenture rate is only 2.26% but note rate is 2.30% and the effective yield is 4.311%.

Intractable is the perfect adjective to describe both the economy and the Federal Reserve.  At least the smart money seemed to be saying that.

At last week’s auction of $12 billion in 30-year Treasury bonds there was record demand from so-called buy-side institutions, such as mutual funds, life insurance companies, hedge funds, and pension funds.   The yield on the 30-year bond gained 2.5 basis points to 2.602%.   That compares to last month’s auction where the yield ended up at 2.72%.

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

What does all this mean?

I don’t know.

The day after the 30 year Treasury auction, the Federal Reserve reported that capacity utilization, which measures the amount of a plant that is in use at factories, mines and utilities, fell to 74.8 percent from 75.3 percent.  The yield on the 30 year Treasury bond then tumbled 4.4 basis points to 2.556%.  While up 10.2 percentage points from the record low set in June 2009, capacity utilization at 74.8% is 5.2% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007.  It should be noted however that like the drop in hotel occupancy mentioned above, part of the decline in capacity utilization can be attributed to a 1.2% growth over the last 12 months in capacity.

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. 

It is arrant nonsense that the Fed will be raising interest rates when they meet later this month.

If things seem intractable right now, maybe you need a day off.  Unfortunately according to the Federal Reserve our next holiday is not until Memorial Day.  Here are the officially recognized Federal Reserve holidays:

Memorial Day May 30
Independence Day July 4
Labor Day September 5
Columbus Day October 10
Veterans Day November 11
Thanksgiving Day November 24
Christmas Day December 26

If you need an excuse for day off, Passover starts Friday evening.  The start of Passover, which celebrates the Israelite exodus from Egypt, begins in the evening with the Seder which is a ritual feast. 

So Friday could be a day off.  To put this in perspective: imagine if you had to work during the day of Thanksgiving, then prepare for Thanksgiving dinner after getting home from work. 

That would be intractable.

Monday, April 4, 2016

The SBA and arrant

 Complete; thorough.

Here's a word that has had both its spelling and meaning bent out of shape from use. It's a variant of errant (wandering). Earlier the word was used in the sense of wandering or vagrant, for example, an arrant thief or an arrant knave. Over time the word began to be taken as an intensifier so an arrant fool was no longer a vagrant fool, but a complete fool.


Don’t be so arrant with completing IRS form 4506 with the signatures being in blue ink.

When blue ink is used to complete Form 4506-T requests, the information sometimes does not show up to the IRS.  To alleviate rejections for missing information and to better service the taxpayer the IRS is asking that the use of blue ink be discontinued immediately.

SBA LIBOR Base Rate March 2016 =3.44%
SBA Fixed Base Rate March 2016 = 4.89%
SBA 504 Loan Debenture Rate for March
The debenture rate is only 2.50% but note rate is 2.54381% and the effective yield is 4.553%.

The Federal Reserve meets later this month.  Will they be raising interest rates?

Keep your eyes and ears tuned for this week’s release of the minutes from the Federal Reserve’s last meeting on monetary policy.

FOMC Minutes is a vital piece of information that is released three weeks to the day after the conclusion of each FOMC meeting.    Though the gist of the Fed’s official views are disclosed at the end of each FOMC meeting with a public statement, we can arrantly scrutinize details of the Fed opinions in the minutes for better understanding.

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:

APR 16- 0.63
DEC16- 0.85
DEC17- 1.06
DEC18- 1.32
DEC19- 1.58
DEC20- 1.83
DEC22- 2.24

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.

It is arrant nonsense that they will be raising interest rates.

Spring training is over, play ball.

The Washington Nationals closed spring training with an 18-4 record. That’s a winning percentage of .818, best in the bigs.

Big deal, you’re thinking, it’s spring training. And everybody knows that spring training results don’t matter.  Or do they?  In the past 20 years, only once has a team finished spring training with a winning percentage of .800 or better. That team? The 1997 Miami Marlins, who went 26-5 in Grapefruit League action (.839), then proceeded to win 92 regular-season games, plus another 11 in the postseason, including four in the World Series.

Of the 40 teams that have made the World Series over the past two decades, only 30 percent of them had losing records in spring training that year, and those same 40 teams had a combined winning percentage of .536 in exhibition play during their World Series seasons.

Second in Cactus League play were the Angels.

How’s that for an arrant dissection of nothing?