Monday, August 26, 2019

The SBA and PROspicient



Having foresight.

From Latin prospiciens, from prospicere (to look forward), from pro- (forward) + spicere, from specere (to look).

From FY 2010 to FY 2018, based upon number of SBA 7(a) loans, freight and trucking grew the fastest, up 136%.

Freight and trucking is somewhat prospicient for the economy.

Trucking serves as a barometer of the U.S. economy, representing 70.2% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods.

According to the American Trucking Association for hire truck tonnage increased 6.6% in July.  Compared with July 2018, this is the largest year over year gain since April.




SBA 504 Loan Debenture Rate for August

For 20 year debentures, the debenture rate is only 2.15% but note rate is 2.188% and the effective yield is 3.531%.

For 25 year debentures, the debenture rate is only 2.31% but note rate is 2.241% and the effective yield is 3.62%.


If you can keep your head when all about you are losing theirs and blaming it on the yield curve, you just might be prospicient.

Shortly after 6 a.m. ET on August 14, the 10-year bond yield ticked below the 2-year bond yield by just one basis point. The inversion was brief and the curve ended the day officially un-inverted.

The 3-month Treasury bill sits 41 basis points above the 10-year note yield.  The short-term maturity has traded above 10-year yields since May 22 after briefly inverting back in late March.  An inversion really starts to become worrying if it extends to a multi-month stretch. In the run-up to the financial crisis of 2008, the yield curve had turned upside down for around 10 months.

Adding to the trichotillomania was the sudden disappearance of over ½ million jobs.

The economy had about 501,000 fewer jobs as of March 2019 than the Bureau of Labor Statistics initially calculated in its survey of business establishments. That’s the largest revision since the waning stages of the Great Recession in 2009.  This annual “benchmark” revision is much larger than is typically the case. The preliminary revision in 2018, for example, showed the economy produced 43,000 additional jobs than initially reported.  The government’s employment report each month is compiled from a survey of almost 700,000 work sites, but the BLS updates its numbers every year after rechecking its results against company tax records. In most years the revisions are quite small, reflecting about one-tenth of 1% of total nonfarm employment and attesting to the accuracy of the BLS survey.

Keep your eyes and ears open for next week’s report on jobs.

Here is a summary of net payroll employment and this week’s interesting little table of data:

July             164,000
June            193,000
May                62,000
April            263,000
March        189,000
February     56,000
January    311,000
2018        2,674,000
2017      2,110,000
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.

Last month’s report on jobs was somewhat disappointing.  The economy added 1.156 million jobs through July 2019, down from 1.589 million jobs during the same period of 2018.   So job growth has slowed.  After 30 months of Mr. Trump's presidency, the economy has added 5,736,000 jobs, about 514,000 behind the projection towards the Trump goal of adding 10 million jobs over his 4 year term.  Subtract another 500,000 with the benchmark revision, and the pace is falling short by almost 1 million jobs.

The minutes of the Fed’s meeting last month showed that senior officials preferred to follow a meeting by meeting approach when deciding on interest rate changes. The minutes said the U.S. central bank didn’t want to give the appearance of moving in a “preset course,” and that July’s rate cut was only “part of a recalibration” of policy.

Traders on the fed fund futures market all but expect a rate cut at the Fed’s September meeting,


Apologies obviously to Rudyard Kipling for usurping the opening lines from his poem “If”.

What a lot of people don’t know about that poem is that it was a tribute to Leander Starr Jameson, instigator of the Jameson Raid.  This was an attempt to start an insurrection against the Dutch influence in what would become South Africa.

The third and fourth lines of the second stanza of the poem: "If you can meet with Triumph and Disaster / and treat those two impostors just the same" are written on the wall of the players' entrance to the Centre Court at the All England Lawn Tennis and Croquet Club, where the Wimbledon Championships are held.  These same lines appear at the West Side Tennis Club in Forest Hills, New York, where the US Open was played.

Being prospicient about the calendar, note that a three day weekend approaches!

According to the Federal Reserve statistical release K.8, here are our remaining holidays for 2019:
Labor Day September 2
Columbus Day October 14
Veterans Day November 11
Thanksgiving Day November 28
Christmas Day December 25

Make sure you fill the unforgiving minute!