Monday, January 8, 2018

The SBA and penelopize

To delay or gain time to put off an undesired event.

From Penelope, the wife of Odysseus and mother of Telemachus in Greek mythology. She waited 20 years for her husband’s return from the Trojan War (ten years of war, and ten years on his way home). She kept her many suitors at bay by telling them she would marry them when she had finished weaving her web, a shroud for her father-in-law. She wove the web during the day only to unravel it during the night.


The SBA did not penelopize with the release of its new Standard Operating Procedure.

Cunctation may have worked to their advantage as there are now different versions of the new SOP 50-10-5(J).

There were several technical corrections and an updated SOP was issued with the technical corrections.

Make sure you are using the new version of the SOP that incorporates these changes.  The easy way to determine if you have the correct SOP 5010 5 (J) is the first version consists of 410 pdf pages, while the updated version is 413 pdf pages.

SBA LIBOR Base Rate January =4.56%
SBA Fixed Base Rate January = 6.92%


SBA 504 Loan Debenture Rate for December
The debenture rate is only 2.78% but note rate is 2.82766% and the effective yield is 4.499%.


The Federal Reserve continues to penelopize over interest rates.

Minutes from their last meeting on interest rates highlighted some division over the central bank’s forecast for three rate increases in 2018.

The current slope of the yield curve was brought up and some expressed concern that a possible future inversion of the yield curve, with short-term yields rising above those on longer-term Treasury securities, could portend an economic slowdown, noting that inversions have preceded recessions over the past several decades.

But then on Friday, the Department of Labor reported that jobs increased 148,000 for the month of December and the yield curve grew slightly steeper with the yield on the 30-year Treasury bond up 2.9 basis points at 2.815%.

Here is a summary of net payroll employment and this week’s interesting little table of data:
December     148,000
November     252,000
October      211,000
September     18,000
August       208,000
July         138,000
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.

This is the 87th straight month of U.S. job growth, the longest such streak on record.

Keep your eyes and ears open for Thursday’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:
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
2016- 2.32

What does all this mean?

I don’t know.

At the December auction of 30 year Treasury bonds, the flattening of the Treasury yield curve is illustrated by the 2.804 percent high yield, which in a period when short term rates rose steadily, was just 0.3 basis points above the November auction rate and 36.6 basis points below the long term high yield peak set in March, the highest since September 2014.

If you look at the Federal Reserve website, they indicate that one of their principal economic indicators is industrial production and capacity utilization.  One of the Fed’s leading indicators on inflation is capacity utilization which measures the amount of a plant that is in use at factories, mines and utilities.  Several analysts have pointed to a rate between 81% and 82% as a tipping point over which inflation is spurred.

Here is what capacity utilization rates have done:
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
2016- 75.4
2017- 76.1

What does all this mean?

I don’t know.

Last month it was reported that capacity utilization rose to a 2½ year high of 77.1%.   This is still 2.8% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007.

The Federal Reserve will report on capacity utilization on January 17th.

The Federal Reserve next meets on interest rates on January 30-31.

According to CME Group data, market participants are expecting the next rate increase, after the Fed’s recent quarter-percentage point increase to a range between 1.25% and 1.5%, to occur in March.

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.

Keep in mind that Congress penelopized and passed a stopgap spending bill just before Christmas, averting a partial government shutdown but pushing into January showdowns on spending, immigration, health care and national security.  The stopgap extends federal funding through Jan. 19


Many of us might penelopize about a full work week but a three day weekend approaches.

According to the Federal Reserve, here are our holidays for 2018:

Birthday of Martin Luther King, Jr. January 15
Washington's Birthday February 19
Memorial Day May 28
Independence Day July 4
Labor Day September 3
Columbus Day October 8
Veterans Day November 11
Thanksgiving Day November 22
Christmas Day December 25

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