Monday, July 11, 2016

The SBA and enervate

EN-uhr-vayt, adj.: i-NUHR-vit
verb tr.: To deprive of strength or vitality.
adjective: Deprived of strength; Weakened.

From Latin enervare (to weaken), from ex- (out) + nervus (sinew).  

The SBA will enervate on July 27th its rules on affiliates.

As was true for the prior rule, the final rule frames affiliation in terms of control.

With respect to the affiliation analysis of a franchise or licensing agreement, SBA has made two significant changes. The first is that the presence of a license agreement will not be deemed to create affiliation as long as the small business applicant "has the right to profit from its efforts and bears the risk of loss commensurate with ownership." The second major change is that lenders must now only consider the franchise agreement of the small business applicant (and not franchise agreements of the small business's affiliates) in its franchise affiliation analysis.

Both of these changes will streamline the affiliation analysis process and allow better access to financing to small business franchisees.

SBA LIBOR Base Rate July 2016 =3.47%
SBA Fixed Base Rate July 2016 = 4.64%
SBA 504 Loan Debenture Rate for June  
The debenture rate is only 2.18% but note rate is 2.219% and the effective yield is 4.232%.

A recrudescence of hiring did little with the splenetic presentiment dominating interest rates.

Payrolls climbed by 287,000 last month, after a revised 11,000 gain in May, a Labor Department report showed Friday.

But long-term yields wavered, inching higher shortly after the release but tumbling later to trade unchanged on the day.  The 30-year Treasury bond yield was down less than a basis point at 2.139, after falling earlier as low as 2.112%, its lowest level in history.

Traditionally, lower yields and a flatter yield curve in the U.S. are strong signals of an approaching recession -- and, in this particular case, they would be signaling a painful downturn, given how far yields have dropped and how flat the curve has become.

Yet that reading doesn't apply in this case: Rather than being driven by U.S. conditions, the Treasury yield curve has been captured by developments in Europe and, to a lesser extent, Japan -- specifically, the prospects for yet another economic slowdown and the likelihood of additional central bank stimulus (including lower rates in the U.K. and an expansion of the European Central Bank’s large-scale program of security purchases).

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

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.

The yield differential between long-term U.S. government debt and similar government bonds in Europe and Japan, where nearly $12 trillion in government bonds sport negative yields, is sparking foreign demand for U.S. Treasuries.

The moment yields tick higher, demand pushes yields down again.

It is arrant nonsense that the Fed will be raising interest rates.  If you are a borrower, this is a frabjous time! 

Hot weather seems to enervate all of us, unless you are a home run hitter.

Home runs increase with temperature, and really begin to take off when temperatures go above 90  One of the main reasons is that cold air molecules are closer to each other than warm air molecules.  This means that a baseball traveling through cold air must push through more molecules than when it travels through warm air, thus it experiences more wind resistance.  In warmer air, a baseball is able to travel faster and farther.  According to "The Physics of Baseball" by Robert K Adair, a 10 degree increase in air temp causing a ball to travel an extra 4 feet. 

This June was the warmest since 1895 in the U.S., surpassing the 1933 record, the National Centers for Environmental Information, a division of the National Oceanic and Atmospheric Administration, said in a report Thursday.   Global temperatures were the highest in the 20th century for the first five months of the year after the world posted its two hottest years in 2014 and 2015. There is so much heat in the atmosphere following the El Nino that began last year that there could well be a new all-time high for 2016.

Right now Major League Baseball is on pace to hit 5,562 home runs, which would be an amazing 1,376 more than in 2014 -- a 32 percent increase.

Leading the pack is the Orioles.  The O’s have officially hit more home runs in June than any other team in MLB history.  They could make a run at the single-season mark of 264 home runs, set by the Seattle Mariners in 1997.  The Mariners had broken the previous record of 257 set by the Orioles just one season earlier.  Leading the Mariners that year was Ken Griffey Jr. who had hit 56 home runs.  The Kid would end his career with 630 home runs, sixth most in baseball history.  Just this year Junior was elected to the Baseball Hall of Fame.  He received a record 99.32 percent of the vote, breaking pitcher Tom Seaver's record of 98.84 percent.

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