Monday, July 25, 2016

The SBA and impecunious

Having little or no money.
From Latin im- (not) + pecunia (money), from pecus (cattle).

You will not be impecunious with SBA loans!

Through the government’s third quarter ending 6/30/2016, SBA 7(a) loan approvals totaled $17,465,543,000.  That’s a 9% increase over the same period last year.  While not as robust as the 20% increase in loan volume the year before, keep in mind that the correlation of SBA 7(a) loan approvals with our nation's economic performance appears to be quite strong. 

Just for fun I calculated the correlation coefficient between SBA 7(a) loan volume and GDP for over six years using the Microsoft CORREL function.  It came out to a statistically significant 0.86.

SBA LIBOR Base Rate July 2016 =3.47%
SBA Fixed Base Rate July 2016 = 4.64%
SBA 504 Loan Debenture Rate for July  
The debenture rate is only 2.04% but note rate is 2.077% and the effective yield is 4.091%.

Impecunious concerns will motivate the Federal Reserve when they meet this week on interest rates.

In a statement after its meeting last month, the Fed didn't rule out a July rate increase but highlighted the recent downturn in job growth, possibly indicating a July move is a long shot. 

The Federal Reserve has concomitant goals.  Its dual mandate is stable prices and maximum employment.   Quiescent inflation has proven to be an intractable challenge to monetary policy makers.  The Fed’s preferred inflation gauge -- the Commerce Department’s personal consumption expenditures measure -- hasn’t reached the central bank’s 2 percent goal since April 2012. 

One of the Fed’s leading indicators on inflation is capacity utilization.  The Federal Reserve recently reported that capacity utilization for June, which measures the amount of a plant that is in use at factories, mines and utilities, increased 0.5 percentage point in June to 75.4 percent.  That increase offsets the prior month's drop when capacity utilization fell to 74.9 percent from 75.3 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
2015- 76.5

What does all this mean?

I don’t know.

Capacity utilization at 75.4% is 4.61% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007.  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. 

Until there is a recrudescence in capacity utilization, it is arrant nonsense that the Fed will be soon raising interest rates as they do not want to enervate the economy.


“I am impecunious” is one response if accosted by a panhandling vagrant.

Why is panhandling called panhandling?

Panhandling supposedly got its name from Okies', slang for people from Oklahoma/Texas panhandle during the 'dust bowl' of the 1930s. Widely displaced, many migrated, notably to California, with nothing. So begging = panhandling.  The problem with that theory was that the word apparently first emerges in the mid to late 1800s. Well before the dust bowl.  The other theory is it was related to 'panning for gold', a-la the 1849-1850s California gold rush. Timing is right as is the image similarity, sitting stooped holding out a pan. And lots of hopeful gold rush participants came and left with nothing.  

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