Monday, July 10, 2017

The SBA and peripatetic

1. Moving or traveling from place to place.
2. Of or related to walking, moving, or traveling.
From Latin peripateticus, from Greek peripatetikos, from peripatein (to walk about, to discourse while pacing as did Aristotle), from peri- (around) + patein (to walk).


It sounds like we will be peripatetic.  This summer, Americans will spend a total of $101.1 billion on vacations this year, representing a 12.5% increase from 2016, according to projections from the Vacation Confidence Index released Wednesday by insurance company Allianz Global Assistance. This is the first time in the index’s eight-year history that spending has exceeded $100 billion.

That will be welcomed by the hospitality industry.  The U.S. hotel industry reported mixed year-over-year results.  In comparison with the week of 19-25 June 2016, the industry recorded that during the week of 18-24 June, occupancy fell 1.2% to 75.8%, ADR rose 1.1% to $129.73 and RevPAR was mostly flat (-0.1% to $98.31).

Maybe people are eating out instead of staying out.  Driven by improvements in the current situation indicators, the National Restaurant Association’s Restaurant Performance Index (RPI) registered a moderate increase in May.   The National Restaurant Association’s Restaurant Performance Index is a statistical barometer that measures the overall health of the U.S. Restaurant Industry. This monthly composite index is based on the responses to the National Restaurant Association’s monthly Restaurant Industry Tracking Survey, which is fielded among restaurant operators nationwide on a variety of indicators including sales, traffic, labor and capital expenditures.  Although restaurant operators continued to report mixed same-store sales and customer traffic, the results were an improvement over April’s levels.

If you segregate the number of SBA loans by NAICS codes, restaurants are the leading beneficiaries of SBA guaranteed financial assistance.

Please let me know if you would like a copy of the most recent report from the National Restaurant Association on their Restaurant Performance Index.


SBA LIBOR Base Rate July 2017 =4.23%
SBA Fixed Base Rate June 2017 = 6.39%
SBA 504 Loan Debenture Rate for June
The debenture rate is only 2.81% but note rate is 2.858% and the effective yield is 4.596%.

If you're reading this on a treadmill or while taking a walk, you may know about the peripatetic, or walking, philosopher Aristotle, who talked and taught while strolling around.

Perhaps the Federal Reserve should adopt a peripatetic approach at their meetings.  

A divided Federal Reserve policy committee couldn’t reach an agreement in June on the timing of when to begin shrinking its massive balance sheet.  Inflation has remained almost continuously below the central bank’s 2 percent target for more than five years.  On the other side of the Fed’s dual mandate, the jobless rate is at a 16-year low and beneath most Fed officials’ estimate of the maximum use of labor resources.

Minutes from the central bank’s June confab underscored growing doubts about the efficacy of the Phillips curve, an economic concept named for the late economist A.W. Phillips, which states that as unemployment falls inflation will ultimately rise as workers see wage increases.   Fed officials have justified its recent tightening stance on the Phillips curve.   But inflation is falling below the Fed’s 2% target range despite unemployment falling.

The jobs picture continues to improve.  

Here is a summary of net payroll employment and this week’s interesting little table of data:
June                                     222,000
May                                      152,000
April                                     207,000
March                                    50,000
February                             235,000
January                               216,000
2016        2,160,000
2015     2,740,000
2014     3,116,000
2013     2,074,000
2012     2,193,000
2011      2,103,000
2010     1,022,000
2009     -5,052,000
2008     -3,617,000
2007    1,115,000
2006     2,071,000
2005     2,484,000
2004     2,019,000

What does all this mean?

I don’t know.

The better-than-expected jobs report offers support to the Federal Reserve’s plan to raise interest rates and begin shrinking its bloated balance sheet as early as September.  Bond investors are paying attention to the timing of reductions to the Fed’s bond holdings, as the prospect of a large buyer of Treasuries leaving the market could lift yields for U.S. government paper, further tightening policy.

Not too much should be read into one month’s report.  June has been the strongest month for job growth over the three previous years, followed by July and November.  This is the 4th consecutive solid job gain in June:  304 thousand in June 2014, 206 in June 2015, 297 thousand in June 2016, and now 222 thousand in June 2017. 

Instead keep your eyes and ears open for this Thursday’s sale of 30 year Treasury bonds.  At last month’s sale, the 2.870 percent high yield was 18 basis points below the awarded yield at April’s auction and 30 basis points below the March peak at 3.170 percent, which was the highest yield since September 2014. The flattening of the U.S. Treasury yield curve continues, with long term yields trending lower despite short term yields steadily rising along with hikes in the Fed Funds rate. 

The day after last month’s bond sale, the Federal Reserve raised its benchmark short-term rate by a quarter percentage point.  On the heels of the Fed’s move was the release of capacity utilization data.    Capacity utilization for the industrial sector edged down 0.1 percentage point in May to 76.6 percent.  This is 3.8% below the average from 1972 to 2016 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 next release on capacity utilization comes out on Friday.  The Federal Reserve then meets again two weeks later.

The yield on the 30-year bond saw a weekly jump of more than 10 basis points, marking its largest single-day gain in more than two months on Thursday after the Federal Reserve minutes were released.  On Friday the 30-year Treasury bond’s yield rose 2.2 basis points to 2.925%.

The long end of the yield curve as reflected in 30 year Treasury bond appear to be enervating any splenetic presentiment of a bigly recrudescence in interest rates by being quiescent.

I don’t know if our former President was peripatetic but his name sure sounded like it.  Obambulate (o-BAM-byuh-layt) means to walk about.  It is from Latin ob- (to) + ambulare (to walk).

I won’t take the bait and mention the word trumpery.  It means something showy but worthless; nonsense or rubbish; or deceit; fraud; trickery.  It is from the French tromper (to deceive).

That was a paralipsis (par-uh-LIP-sis) which means to draw attention to something while claiming to be passing over it.  That is from the Latin paralipsis, from Greek paraleipsis (an omission), from paraleipein (to leave on one side), from para- (side) + leipein (to leave).