The SBA and PROxemics

Proxemics

prok-SEE-miks

The study of physical proximity between people, for example, typical space between two friends.

From proximity (nearness), from Latin proximus (nearest)

_____________________________________________

TIP OF THE WEEK

Proxemics prognosticates profligacy.

A proxemic look at a small business model should coincide with an analysis of small business EBITDA on BC DC PC basis.

BC is Before Covid, DC is During Covid and PC is Post Covid.   The DC period is currently the months of April and May.

Equally weighting BC and DC EBITDA and then regressing to the mean would be prospicient of PC prospects.

A SBA 7(a) could make sense as borrower payments of principal and interest are paid by SBA for the next six months assuming that the loan closes prior to September 27, 2020.

Keep in mind that while the PPP Flexibility Act extends the “covered period” to December 31, 2020 SBA will not be able to approve any new PPP loans after June 30, 2020.

__________________________________________

Indices:

PRIME RATE= 3.25%

________________________________________

SBA 504 Loan Debenture Rate for May

For 20 year debentures, the debenture rate is only 1.37% but note rate is 1.396% and the effective yield is 2.688%.

For 25 year debentures, the debenture rate is only 1.50% but note rate is 1.521% and the effective yield is 2.761%.

_______________________________________________

AHEAD OF THE YIELD CURVE

As proxemic promulgations proliferated, $342,277,999,103 in round 1 of the Payroll Protection Program trickled down to only 2.5 million jobs being added back to the economy for the month of May.

The math does not add up as average hourly earnings was $29.75 with the average work week being 34.7 hours.  For 2.5 million jobs that would mean about $10 billion in monthly payroll.  That’s a long ways off from the hundreds of billions with PPP.

What the employment results do for the economic outlook are uncertain as they were not at all signaled by initial jobless claims which have been continuing to rise by the millions each week.   Initial jobless claims remain enormously high though they do continue to slow, to 1.877 million in the May 30 week. Since mid-March when virus effects first started to hit the labor market, nearly 43 million Americans have filed initial claims.

It will be interesting to hear what the Federal Reserve will have to say.  Keep your eyes and ears open for their announcement after their two day meeting on monetary policy ends on Wednesday.

So what’s the prognosis on interest rates?

Eurodollar futures settle at a three- month lending rate that has averaged about 22 basis points more than the Fed's target over the past 10 years.

Here is a summary of what the market expects for Eurodollar futures based upon the pit-traded prices at the Chicago Mercantile Exchange:

DEC20-0.335

DEC21- 0.315

DEC22- 0.480

DEC23- 0.705

DEC24- 0.93

DEC25- 1.155

What does all this mean?

I don’t know.

The yield curve is getting steeper.  Last week the 30 year Treasury bond hit a 21/2 month high.  On Thursday the Treasury will auction $19 billion in 30 year Treasury bonds.

May’s 30 year auction had a high yield of 1.342 percent, which was 1.7 basis points above last month's rate and 2.2 basis points higher than the record low posted in the March auction.

A wider gap, or steeper yield curve, can reflect when investors are anticipating economic growth and inflationary pressures.

At the same time, the yield-curve steepening could reflect growing expectations that the Federal Reserve will enact some type of yield-targeting policies like those seen in Japan. Such measures can steepen the yield curve by fixing short-term rates at a low level through bond purchases.

A little proditomania is prompting the Federal Reserve to be protean.

__________________________________________

OFF BASE

In 1963, Edward T. Hall coined the term “proxemics” to describe the perception of the physical space around us.

Often referred to as personal space, proxemics is the amount of distance that people are comfortable putting between themselves and others.

Examples of proxemics are all around us: The armrest that separates us from the person sitting next to us at the theater; park benches that face the same direction and let us sit like birds on a wire; coffee shops with furniture arranged in intimate settings. The list goes on.

Many businesses are aware of proxemics and the science of space, and they use this knowledge to create spaces that sell product.

Now proxemics comes into play for more than just selling products.