Monday, March 12, 2018

The SBA and casuistry



-Deceptive or excessively subtle reasoning, especially on moral issues.
-The use of clever but unsound reasoning, especially in relation to moral questions

From Latin casus (case, fall, chance), past participle of cadere (to fall).

The Oxford English Dictionary states that the word "often (and perhaps originally) applied to a quibbling or evasive way of dealing with difficult cases of duty."

It is often characterized as a critique of principle- or rule-based reasoning.
Why did the chicken cross the road?  Apparently to get a SBA loan.

With little casuistry, the SBA Office of the Inspector General reviewed SBA 7(a) loans to poultry farmers.  It found that all the loans were ineligible for SBA financial assistance because the contracts between large chicken companies and the growers created an affiliation issue.

If you would like to see a copy of this report, please let me know.

The new SOP 50-10-5(J) has clarified the guidance regarding affiliation.

Keep in mind that last month’s stop gap funding bill expires March 23rd.


SBA LIBOR Base Rate March =4.69%
SBA Fixed Base Rate March = 7.44%

SBA 504 Loan Debenture Rate for February The debenture rate is only 3.22% but note rate is 3.2735% and the effective yield is 4.940%.

The Federal Reserve meets next week and some casuistry goes into their decision making.

After their last meeting on monetary policy, they changed their policy statement by adding the word “further” twice:

“The Committee expects that, with FURTHER gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will remain strong.”

“The Committee expects that economic conditions will evolve in a manner that will warrant FURTHER gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”

The Fed is expected to raise rates at the next meeting.  A bigger question is whether central bank officials strengthen their resolve for three quarter-point hikes this year, or leave the door open for four.

On Friday, it was reported that U.S. employers added a blockbuster 313,000 jobs in February.

Average hourly earnings rose only 2.6% compared to January’s 2.9%. The drop suggests that January’s big increase was an anomaly. It was caused by a sharp decline in average weekly hours as a result of harsh weather and a nasty flu season.  That’s just over the tepid 2.5% pace of the past couple of years.

One of the Fed’s favorite 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 fell 0.2 percentage point in January to 77.5 percent, a rate that is still 2.3 percentage points below its long-run (1972–2017) average.  This report is not consistent with building inflation pressures.  For the Fed, last month’s capacity utilization report does not turn up pressure for a more hawkish policy on interest rates.

Keep your eyes and ears open for Friday’s report on industrial production and capacity utilization.

On Tuesday, the Treasury will auction 30 year Treasury bonds.  At last month’s auction, the yield ended up at 3.121 percent.  The 3.121 percent high yield was a sharp 25.4 basis points above January’s auction rate and the highest awarded yield at a bond auction since March 2017.

After Friday’s jobs report, the 30 year Treasury bond advanced 3.4 basis points to 3.166%.

According to CME Group data, market participants are expecting the next rate increase by the Fed to occur next week.

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


If you look at the list of holidays observed by the Federal Reserve, you will note that our next holiday is not until Memorial Day:

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

Good grief!  That is almost 2 ½ months.

With some casuistry you might be able to justify taking some of these days off:
St Patrick’s Day Eve- March 16
Opening Day Major League Baseball March 29
Good Friday March 30
Easter Monday April 2