Monday, February 10, 2020

The SBA and PROleptic 


proleptic
pro-LEP-tic

Of a calendar, extrapolated to dates prior to its first adoption Describes an event as having been assigned too early a date Anticipating and answering objections before they have been raised

From Greek prolepsis + ic  (see SBA and PROlepsis June 17, 2019) from prolambanein (to anticipate), from pro- (before) + lambanein (to take).
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TIP OF THE WEEK

The promulgation of SOP 50-10-6 has been proleptic.

On Monday, February 10, the SBA is publishing an Interim Final Rule that will become effective in 30 days.

The rules address when the owners of a small business Applicant are required to inject excess liquid assets into the project;

amend certain regulations setting forth the affiliation principles applicable to SBA financial assistance programs;

and limit certain fees payable by loan Applicants to amounts deemed reasonable by SBA;

The big change on affiliation will be if a small business Applicant derived more than 85 percent of its revenue from another business over the previous three fiscal years, SBA would find that the small business Applicant is economically dependent on the other business and, therefore, that the two businesses are affiliated.

Compliance with two of the regulatory changes on fees will not be required until October 1, 2020.


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Indices:
PRIME RATE= 4.75%
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SBA 504 Loan Debenture Rate for January

For 20 year debentures, the debenture rate is only 2.32% but note rate is 2.361% and the effective yield is 3.644%.

For 25 year debentures, the debenture rate is only 2.45% but note rate is 2.48% and the effective yield is 3.714%.
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AHEAD OF THE YIELD CURVE

The Federal Reserve proleptically downgraded its assessment of the economy at the last meeting on monetary policy and interest rates.   The wording on inflation was changed, as policy is now consistent with "returning" inflation to the 2 percent target from running "near" the 2 percent target in the prior statement.

The Federal Reserve’s procellous proditomania might be prospicient despite the Labor Department reporting that the US created a robust 225,000 new jobs in January to get off to a good start in 2020.

Employment in manufacturing, however, fell for the third time in the past four months as another 12,000 jobs were lost.

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

Last month capacity utilization fell to 77% in December, the second lowest reading in 27 months.

Here is what capacity utilization has been doing and this week interesting little table of data:

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- 78.5
2019- 77%

What does all this mean?

I don’t know.

Last month’s report was not all doom and gloom.  Output at utilities, perhaps reflecting unseasonable weather, fell a sharp 5.6 percent, which offset a small rise for manufacturing.  The modest net gain for manufacturing is a definite positive for the economic outlook. The sector, and its vulnerability to foreign demand, is a chief concern of the Federal Reserve and a major reason behind last year's three consecutive rate cuts.  Fourth quarter GDP was dragged down by a 1.09 point negative contribution from inventories where growth slowed very sharply. Whether businesses begin accelerating their inventory build, amid what is moderate demand, is another question for the ongoing quarter.

The Federal Reserve’s prolegomenon after their last meeting on monetary policy indicated a probative approach as their interest rate projections indicate that rates will stay at current levels this year.

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OFF BASE
The proleptic Gregorian calendar is produced by extending the Gregorian calendar backward to dates preceding its official introduction in 1582.  The Gregorian calendar, named after Pope Gregory XIII, shortened the average year by 0.0075 days to stop the drift of the calendar with respect to the equinoxes.  That way spring would remain around March 21.  The calendar further adjusts by adding a leap year, meaning we have 29 days for February this year.

Great Britain and its possessions did not adopt the Gregorian calendar until 1752.  George Washington was originally born on February 11, 1731.    After the switch, that day became February 22, 1732, which is the date commonly given as Washington's birthday.

This year we celebrate Washington’s Birthday on February 17th to comply with the Uniform Monday Holiday Act enacted in 1968.

The point is that a three day weekend is coming!

Monday, January 13, 2020

The SBA and PROcellous 


Procellous
pro-SEL-uhs
Stormy, as the sea.
From Latin procellosus (stormy), from procella (storm)

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TIP OF THE WEEK

A procellous prolepsis proliferates over the promulgation of SOP 50-10-6 despite prodigious prodnosing for an official prolegomenon from the SBA.

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Indices:
PRIME RATE= 4.75%
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SBA 504 Loan Debenture Rate for December For 20 year debentures, the debenture rate is only 2.26% but note rate is 2.30% and the effective yield is 3.582%.
For 25 year debentures, the debenture rate is only 2.38% but note rate is 2.41% and the effective yield is 3.643%.
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AHEAD OF THE YIELD CURVE

Procellous and profligate pronouncements ended at the Federal Reserve’s last meeting on interest rates.

After dropping interest rates three times last year, the Fed kept rates the same and removed the phrase "uncertainties about this outlook" which was part of the statements in the prior three meetings all of which produced incremental 25-basis-point rate cuts.

On Friday, the Labor Department reported that the economy added 145,000 jobs in December, down from the 256,000 added in November.

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

December   145,000
November  256,000
October   152,000
September 180,000
August    219,000
July      166,000
June      193,000
May        62,000
April     263,000
March     189,000
February   56,000
January   311,000
2018      2,679,000
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.

In 2019 the economy added 2.108 million jobs, down from 2.679 million jobs during 2018.  So job growth has slowed to an average 176,000 jobs a month in 2019 from the 223,000 average the previous year.

On Friday the Federal Reserve will report on industrial production and capacity utilization.  It is anticipated that this report will reflect further erosion in manufacturing.  One of the Fed’s favorite leading indicators on the economy 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.  The Fed last month reported that capacity in use is at a still moderate 77.3 percent.

Federal Reserve interest rate projections indicate that rates will stay at current levels this year.

Things remain procellous.

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OFF BASE
If after finally working for a full week makes you feel a little proditomanic, a three day weekend approaches!
The Federal Reserve has promulgated that these are our holidays for 2020:
Birthday of Martin Luther King, Jr. January 20 Washington's Birthday February 17 Memorial Day May 25 Independence Day July 4 Labor Day September 7 Columbus Day October 12 Veterans Day November 11 Thanksgiving Day November 26 Christmas Day December 25

Note that Valentine’s Day is the Friday of a three day weekend.  4th of July is a Saturday, and Halloween is a Saturday.