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.

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