Monday, August 13, 2018

The SBA and Procrustes

A person imposing conformity without concern for individuality.

After Procrustes, a giant in Greek mythology, who stretched or cut his victims to make them fit his bed. He was killed by Theseus. From Greek Procroustes (stretcher). The word is more often used in its adjective form procrustean.


The SBA has revised and updated SBA form 413, the personal financial statement.  The new form itself clarifies the guidance on who must sign it, including spouses.

SBA is very procrustean about having the spouse sign the personal financial statement.  Spouses, even if they have nothing to do with the business must sign the personal financial statement.  Keep in mind that the SBA’s lending programs qualify as “Special-Purpose Credit Programs” under the Equal Credit Opportunity Act (ECOA). This regulation stipulates that information pertaining to the Applicant’s marital status, sources of personal income, alimony, child support, and spouse’s financial resources can be obtained and considered in determining program eligibility.

Lenders should be using the new form now.  Let me know if you need a copy of it.





SBA 504 Loan Debenture Rate for July
For 20 year debentures, the debenture rate is only 3.54% but note rate is 3.597% and the effective yield is 5.259%.

For 25 year debentures, the debenture rate is only 3.68% but note rate is  3.724% and the effective yield is 5.320%.

The Federal Reserve is not being a Procrustes about raising interest rates at every meeting on monetary policy.

Two weeks ago the Federal Open Market Committee voted unanimously to hold rates at a range between 1.75% and 2%, after raising rates in June.  In their statement, the Fed said the inflation was near their symmetric 2% objective over the medium term.  Whatever that means.

So what is inflation doing?  The Bureau of Labor Statistics reported on Friday that headline inflation was up 2.9% over the past 12 months. Core prices, excluding volatile food and energy prices, were up 2.4%, the fastest pace since Sept. 2008. Housing, specifically rent, had a lot to do with that acceleration. If rents were excluded, headline CPI would have been up a cooler 1.7% over the past 12 months.  Prices of some essentials have declined over the past year.  In the 12 months ending in July, the cost of coffee fell 2.4%, and the cost of nonprescription drugs were down 1.6%.  The decline with the biggest impact of the year-over-year rate of inflation are the cost of golf clubs, tennis rackets and other sporting equipment, down 2.7%%. This trimmed about .05% from the inflation rate.  The problem with my game is not my clubs so that won’t help.

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.

Keep your eyes and ears open for Wednesday’s report on Industrial Production and Capacity Utilization.

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- 76.2
2018- 78.0

What does all this mean?

I don’t know.

Last month capacity utilization edged up to 78% from 77.7%.  While that’s about 1.8 percentage points below the historic average, the rate of utilization is still at a multi-year high.  Interestingly enough, capacity utilization is actually up 1.8 percentage points over the last year.

Some probity from the Federal Reserve will need some probative to enervate any splenetic presentiment of a bigly recrudescence in interest rates.


If you want to be a Procrustes about this, don’t let anyone say we are in the dog days of summer.   They just ended.

It does not have anything to do with it being so hot that dogs just lay around.  Instead, the dog days refer to the Dog Star, Sirius, and its position in the heavens.

To the Greeks and Romans, the “dog days” occurred around the day when Sirius appeared to rise just before the sun, in late July.

 Sirius is the brightest star visible from any part of Earth.  It is part of the constellation Canis Major, the Greater Dog. This is why Sirius is sometimes called the Dog Star.

In the summer, Sirius rises and sets with the Sun. On July 23rd, specifically, it is in conjunction with the Sun, and because the star is so bright, the ancient Romans believed it actually gave off heat and added to the Sun’s warmth, accounting for the long stretch of sultry weather. They referred to this time as diēs caniculārēs, or “dog days.”

Thus, the term Dog Days of Summer came to mean the 20 days before and 20 days after this alignment of Sirius with the Sun—July 3 to Aug. 11.