Monday, December 13, 2021

The SBA and PROpinquity

 propinquity

pro-PING-kwi-tee

Nearness in space, time, or relationship.

 From Latin propinquitas (nearness), from prope (near).

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TIP OF THE WEEK

 

Nothing propinks like propinquity as  U.S. hotel performance came in higher than any other Thanksgiving week on record.

 According to STR‘s latest data through November 27 occupancy came in at 53% which was 4.6% higher than 2019 while RevPAR (Revenue per available room) at $68 was up over 19%.

 Due to the steep, pandemic-driven performance declines of 2020, STR is measuring recovery against comparable time periods from 2019.

 This was the first week with an increase over the same week in 2019.

 Hotels and motels account for a significant piece of all SBA loan activity.

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 Indices:

PRIME RATE= 3.25%

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SBA 504 Loan Debenture Rate for December      

For 20 year debentures, the debenture rate is only 1.65% but note rate is 1.68% and the effective yield is 2.88%.

For 25 year debentures, the debenture rate is only 1.85% but note rate is 1.876% and the effective yield is 3.026%.

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AHEAD OF THE YIELD CURVE

 

The propinquity of prodigious inflation proliferates.   Or does it?

 The Consumer Price Index increased 6.8 percent over the last 12 months.   This is the largest gain since June of 1982.

 Of course it did because prices had dropped during the depths of the  procellous pandemic proditomania.

 Keep in mind that the CPI is based on prices of food, clothing, shelter, fuels, transportation, doctors’ and dentists’ services, drugs, and other goods and services that people buy for day-to-day living.   The index measures price change from a designed reference date. The reference base is 1982-84 and equals 100.

 Now the index level is at 277.948.   That essentially implies that the grocery cart full of stuff that would have cost you $100 in 1984 would now cost you $278. 

 In November of 2019 that index was at 257.208.   We are now at 277.948.  That’s just over a 8% increase in total prices over the last TWO years.

 While that is an average of 4% annually, keep in mind the 0.8% increase in November was a slowdown from the 0.9% increase in October.

 The long term treasury bond market does not seem overly concerned about inflationary threats.   Inflation running hot, in theory, should push up yields for longer dated bonds because rising pricing pressures can erode government debts fixed value.

 At last week’s auction of 30 year treasury bonds the high yield was awarded at 1.895 percent,  down 4.5 basis points from last month's auction rate and the lowest awarded since January.

 One of the Fed’s leading indicators on inflation is capacity utilization which measures the amount of a plant that is in use at factories, mines and utilities.

 Keeps your eyes and ears open for this week’s report on industrial production and capacity utilization.

 

Here is what capacity utilization has been doing and this week's 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

2020- 74.5

2021- 76.4

 

What does all this mean?

 

I don’t know.

 Normally the Fed does not feel there are inflationary pressures until the capacity utilization rate is about 82%.

 At their last meeting on monetary policy, the Federal Reserve changed their description of inflation from “Inflation is elevated, largely reflecting transitory factors” to “Inflation is elevated, largely reflecting factors that are expected to be transitory”.

 So inflation is no longer just transitory, but EXPECTED to be transitory?   The word expect comes from the Latin word expectare which means "await, or look out for”

 In other words, we will just have to wait and see.   We will also have to wait and see what happens at this week’s meeting on monetary policy with the Federal Reserve.

 Prognostications proliferate over the protean slope of the yield curve.

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OFF BASE

 

Nothing propinks like propinquity was Chapter 21 in the James Bond novel Diamonds Are Forever by Ian Fleming.

 

Nothing propinks like propinquity was also called the Ball Rule of Power as American diplomat George Ball often said it.  It means that the more direct access one has to someone powerful, the greater one's power regardless of title.

 

The propinquity effect is the tendency for people to form friendships or romantic relationships with those whom they encounter often, forming a bond between subject and friend.

 

Nothing propinks like propinquity.

Monday, November 8, 2021

The SBA and PROfluent

profluent

PROF-loo-ent

Flowing smoothly; flowing in full stream.

from Latin pro- (forth) + fluere (to flow)

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TIP OF THE WEEK


Procellous not profluent was October for SBA 7(a) loan approvals.

 

SBA loans had propined small business in protean ways with the guarantee fee waiver and SBA payments of P&I through the fiscal year ending September 30th.

 

The prosaic promulgation reducing guarantee percentages and imposing the guarantee fee prompted SBA 7(a) loan approval volume to drop 35%.

 

October 2021 7(a) loan approvals were at $804,764,600 while October 2020 loan approvals for that month were $1,232,723,000.

 

October 2019 7(a) loan approvals for that one month period were $1,602,677,500, consistent with the prior three years.

 

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Indices:

PRIME RATE= 3.25%

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SBA 504 Loan Debenture Rate for October

For 20 year debentures, the debenture rate is only 1.54% but note rate is 1.568% and the effective yield is 3.021%.

For 25 year debentures, the debenture rate is only 1.74% but note rate is 1.765% and the effective yield is 3.157%.

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AHEAD OF THE YIELD CURVE

 

The pronunciamento from the Federal Reserve that later this month they will start to reduce purchases by $15 billion per month -- $10 billion in Treasuries and $5 billion Agency MBS overshadowed the Treasury’s announcement on its anticipated borrowing needs.

 

It turns out the government borrowed $570 billion LESS than they thought they had to last quarter.  A part of that was a greater than anticipated increase in receipts.

 

As a result, the Treasury anticipates decreases in its bond auction sizes.   Overall, these planned changes will reduce by $84 billion the auction sizes during the current quarter from the level in the August-October quarter.

 

Keep your eyes and ears open for this week’s auction of 30 year treasury bonds.

 

Here is what the 30 year Treasury bond has been doing and this week’s interesting little table:

2001- 5.49

2002- 5.43

2003- ND

2004- ND

2005- ND

2006- 4.91

2007- 4.84

2008- 4.18

2009- 3.89

2010- 4.61

2011- 2.89

2012- 2.77

2013- 3.25

2014- 3.97

2015- 2.91

2016- 2.32

2017- 3.16

2018- 3.13

2019- 2.594

2020- 1.216

2021- 1.88

 

Wait a minute, why no numbers for 2003, 2004, and 2005?

 

One month after the 9/11 attacks, the Treasury 30 year bond is discontinued. When the Treasury mothballed the 30-year bond in 2001, experts speculated it was trying to drive down long-term interest rates, which had remained stubbornly high while the Federal Reserve was slashing short-term interest rates to revive the economy. When the Treasury discontinued the 30-year bond in 2001, its yield fell 35 basis points in one day. Why? A shrinking supply of the 30-year Treasury bond caused increased demand to drive rates down.

 

What does all this mean?

 

I don't know.

 

After the job’s announcement of a nice increase of 531,000 in October, the 30 year Treasury bond DROPPED 7.8 basis points to 1.885%.

 

This drop was somewhat confounding, given that the robust payrolls number, lack of improvement in the participation rate, and strong hourly wage growth underlined inflation concerns.

 

Or it could be the carefully choreographed pivot in monetary policy is part of a bigger dance with the Treasury refunding announcement decreasing auction sizes.

 

Prognostications proliferate over the protean slope of the yield curve but it could be profluent.

 

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OFF BASE

 

According to the Federal Reserve, here are our remaining holidays:

 

Veterans Day November 11

Thanksgiving Day November 25

Christmas Day December 25

 

So why is Veterans Day on the 11th instead of a Monday?  Major hostilities of World War I were formally ended at the 11th hour of the 11th day of the 11th month of 1918, when the Armistice with Germany went into effect. It coincides with other holidays such as Armistice Day and Remembrance Day, which are celebrated in other parts of the world.

 

By the way, it is Veterans Day - a simple plural without a possessive apostrophe (Veteran's or Veterans').  The United States government has declared that the attributive (no apostrophe) rather than the possessive case is the official spelling.

Monday, October 4, 2021

The SBA and prow

 prow

(prou)

1. The front of a ship or a boat above the water 2. The projecting front part of something, as a building.

 From the Greek word prōira, from a base meaning “in front.”

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TIP OF THE WEEK

 

The terms Prow and Bow are often used interchangeably, but they’re not exactly the same thing.  The Bow is the forward part of the ship.   The prow however is the forward most part of the bow above the waterline.

 It’s the part you can see.     Often there is a lot of bow under the water.   A lot may go on we don’t see, like a duck calm on the surface but paddling hard underneath.

 What we can see is the new fee structure now in effect for SBA 7(a) loans:

-For loans of $350,000 or less: 0.00%.

-For loans of $350,001 to $700,000: 2.77% of the guaranteed portion.

-For loans of $700,001 to $1,000,000: 3.27% of the guaranteed portion.

-For loans of $1,000,001 to $5,000,000: 3.5% of the guaranteed portion up to $1,000,000, plus 3.75% of the guaranteed portion over $1,000,000.

 The guarantee fee for the Small Business Loan Guarantee Program through IBank is now 2.5% of the guaranteed portion.

 

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Indices:

PRIME RATE= 3.25%

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SBA 504 Loan Debenture Rate for September For 20 year debentures, the debenture rate is only 1.38% but note rate is 1.406% and the effective yield is 2.860%.

For 25 year debentures, the debenture rate is only 1.56% but note rate is 1.58% and the effective yield is 2.977%.

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AHEAD OF THE YIELD CURVE

 

Like the prow of a ship, the most visible aspect of the Federal Reserve is their Federal Open Market Committee Statement.   After their last meeting on monetary policy the Fed presented a slightly more upbeat picture of the US economy.  The FOMC opted to remove "significantly" from the phrase "The path of the economy continues to depend on the course of the virus" which suggests policymakers see less risk of the pandemic worsening and endangering the current robust expansion.

 

The under the water or behind the scenes look will happen on October 13th when minutes from their  last meeting are released.

 

Also keep your eyes and ears open for this week’s announcement on employment for September.

 

Initial jobless claims rose  again in the week ended September 25.  While at a slower pace, this is the third week in a row for higher claims for regular unemployment benefits and will add to the gathering gloom that the September report for nonfarm payrolls may be weak enough to derail anticipation of a start to the tapering of asset purchases after the November 2-3 FOMC meeting.

 

What’s the prognostication 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:

 

DEC21- 0.17

DEC22- 0.17

DEC23- 1.09

DEC24- 1.52

DEC25- 1.79

DEC26- 2.01

 

What does all this mean?

 

I don’t know.

 

The December 2023 Eurodollar rate was at 0.85 four months ago.   It is now up almost 20 basis points.

 

Prognostications proliferate over the protean slope of the yield curve but now a procellous propugnaculum might be prospicient.

 

 

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OFF BASE

 

From the prow of the Pinta, Rodrigo de Triana sighted land on October 12, 1492.   it appeared he had also won himself the Royal Reward of 10,000 silver coins per annum for the rest of his life.

 

The king and queen of Spain had decreed that the man who first sighted land, there would be a Royal Reward of 10,000 silver coins, per year, for the rest of that man’s life.

 

When Rodrigo returned to Spain to claim his reward, Christopher Columbus claimed that the previous evening, he sighted the land first.  He added that the event was so inconsequential that he did not feel the need to tell anyone about it. He noted all of that in his diary however, and used this as a basis to challenge Rodrigo de Triana’s claim to the Royal Reward.   Columbus won, and was awarded 10,000 silver coins for the rest of his life.   Rodrigo sailed off to Africa and obscurity.

 

As a result, a three day weekend approaches.

 

According to the Federal Reserve, here are our remaining holidays:

 

Columbus Day October 11

Veterans Day November 11

Thanksgiving Day November 25

Christmas Day December 25

Monday, September 13, 2021

The SBA and prognathous

 prognathous

PROG-nuh-thuhs, prog-NAY-thuhs

1. Protruding outwards.

2. Having a jaw that protrudes outwards.

 From Greek pro- (before) + gnathos (jaw).

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TIP OF THE WEEK

 

A punch to the jaw for 504 loans.    The SBA 504 loan program has reached its lending cap for the current fiscal year (which ends September 30) which will cause a lapse in issuing loan approvals.

 

SBA is still able to authorize 504 debt refinance projects WITHOUT expansion as there are ample funds available in this part of the 504 program.

 

504 debt refinance WITH expansion will have to wait for the new fiscal year.   Borrowers may want to procrastinate on 504 debt refinance with expansion since the debt to be refinanced may not exceed 100% of the new expansion costs.

 

As Mike Tyson once said, “"Everybody has a plan until they get punched in the mouth."

 

To help borrowers punched in the mouth by the pandemic,  SBA last Thursday announced changes to the COVID-19 Economic Injury Disaster Loans (EIDL) program, including raising the loan cap from $500,000 to $2 million and adding business debt payments to the list of ways businesses can use the loan proceeds.

 

SBA also announced that the guaranty fee on 7(a) loans of $350,000 or less will remain at zero (0.00%) for the next year.

 

__________________________________________

 

Indices:

PRIME RATE= 3.25%

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SBA 504 Loan Debenture Rate for September For 20 year debentures, the debenture rate is only 1.38% but note rate is 1.406% and the effective yield is 2.860%.

For 25 year debentures, the debenture rate is only 1.56% but note rate is 1.58% and the effective yield is 2.977%.

_______________________________________________

AHEAD OF THE YIELD CURVE

 

The pronunciamento from the Bureau of Labor Statistics said that total nonfarm payroll employment rose by 235,000 in August, a drop from the July total of 1,053,000 nonfarm jobs.

 

Do you ever wonder why they do NONFARM payroll employment?  Why aren’t farmers included in monthly jobs data?

 

The collection, dissemination, and use of agricultural labor data is complicated by several factors that relate to the structure of the agricultural industry and the characteristics of its workers. There is also considerable seasonal fluctuation in agricultural employment, with wide variations in peak employment by type of commodity and region.  Agricultural labor data are affected by the unknown number of undocumented workers in the field—literally.

 

But fear not, those farming fanatics who are interested in such jobs statistics. The Department of Agriculture tracks farm labor

 

In the 1950s, there were almost 10 million U.S. farmworkers. But the latest farm labor report from the USDA, released May 2021, showed only 613,000 workers employed on U.S. farms and ranches.

 

That’s just a drop in the bucket from the latest BLS jobs report (released in September 2021), which showed total nonfarm payroll employment at more than 153 million people in the United States.

 

For what it is worth, Here is a summary of net payroll employment and this week’s interesting little table of data:

 

August      235,000

July         1,053,000

June         962,000

May         614,000

April       269,000

March      916,000

February  468,000

January    233,000

December -306,000

November  245,000

October  610,000

September 711,000

August   1,489,000

July         1,761,000

June      4,791,000

May       2,725,000

April       -20,700,000

March     -1,400,000

February  275,000

January   214,000

2019     2,108,000

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.

 

So far, the U.S. has recovered 17 million, or 76%, of the 22.4 million jobs lost in the spring of last year, leaving the nation 5.3 million jobs below its pre-pandemic level.

 

Currently 11,930,415 people are receiving benefits for insured unemployment or Pandemic Unemployment Assistance.

 

The prospicient long term treasury bond market promulgated a procellous prognostication at last week’s auction of $24 billion in 30 year treasury bonds when the high yield was only 1.910 percent, down 13 basis points from the prior month’s auction.

 

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OFF BASE

 

Prognathous promulgations by Charles Darwin where he thought prognathous jaws reflected racial inferiority caused his half cousin Francis Galton to disagree with him.   Darwin being unaware of Gregor Mendel’s experiments with peas prompted Galton to do his own experiments.

 

Galton first discovered regression by experimenting with sweet peas. His sweet peas produced seeds with a (normal) variation of sizes that regressed from the distribution of their parents.

 

The statistical term “regression,” from a Latin root meaning “going back,” was first used by Francis Galton in his paper “Regression towards Mediocrity in Hereditary Stature.”

 

Regression toward the mean simply says that, following an extreme random event, the next random event is likely to be less extreme.

 

For Galton, “regression” referred only to the tendency of extreme data values to "revert" to the overall mean value.

 

A good example is the following series of numbers which could represent anything, economic growth, sales projections or virus outbreaks:

 

2, 4, 6.

 

Quick what should the next number be?   My immediate reaction is to say 8 who do we appreciate, yell out Solons and throw my mitt in the air.

 

A regression to the mean would suggest the correct answer is probably somewhere between 4 and 6.    The mean of 2, 4, 6 is 4.  Mean is given by dividing the sum of observations by the number of observations  (2 + 4 + 6)/3 = 4.

 

Regression to the mean should be understood and appreciated.    That’s why Shohei Ohtani’s season this year is special and we should not worry about the price of lumber or anything else for that matter.

Monday, August 16, 2021

The SBA and PROnunciamento 

 pronunciamento

proh-nun-see-uh-MEN-toh

An official or authoritarian announcement.

From Spanish pronunciamiento (pronouncement, military uprising), from pronunciar (to pronounce), from Latin pronuntiare (to put forth), from pro- (toward) + nuntiare (to announce).

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TIP OF THE WEEK

Be prepared for a pronunciamento from SBA regarding the stimulus provisions for its loan guarantee programs.

So far SBA has approved $25.36 billion in 7(a) loans.

The appropriation that funds the stimulus provisions (90% guaranty and zero fees) could be fully expended by September 15.

Even if the stimulus funds are fully spent, the 7(a) program will continue but under the normal statutory provisions with 75% guaranty with the normal upfront guaranty fees.

Borrowers and lenders feeling no love with a SBA guarantee should consider a guarantee from the California Infrastructure and Economic Development Bank.

Their Small Business Loan Guarantee Program has now increased its guarantee to $2,500,000.

__________________________________________

 

Indices:

PRIME RATE= 3.25%

________________________________________

SBA 504 Loan Debenture Rate for August

For 20 year debentures, the debenture rate is only 1.27% but note rate is 1.29% and the effective yield is 2.748%.

For 25 year debentures, the debenture rate is only 1.45% but note rate is 1.47% and the effective yield is 2.866%.

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AHEAD OF THE YIELD CURVE

 

The pronunciamento about inflation may soon be prorogued.


The CPI increased 5.4 percent over the last 12 months.

 

Of course it did because prices had dropped during the depths of the  procellous pandemic proditomania.

 

Keep in mind that the CPI is based on prices of food, clothing, shelter, fuels, transportation, doctors’ and dentists’ services, drugs, and other goods and services that people buy for day-to-day living.   The index measures price change from a designed reference date. The reference base is 1982-84 and equals 100.

 

In July the index level was at 273.003.   That essentially implies that the grocery cart full of stuff that would have cost you $100 in 1984 would now cost you $273.

 

In April of 2020 that index had declined to 256.389 from 256.571 in July 2019.   We are now at 273.003.  That’s just over a 6% increase in total prices over the last TWO years.

 

The long term treasury bond market does not seem overly concerned about inflationary threats.   Inflation running hot, in theory, should push up yields for longer dated bonds because rising pricing pressures can erode government debts fixed value.

 

At last week’s auction of 30 year treasury bonds the high yield was awarded at 2.040 percent, up only 4.0 basis points from last month's auction rate.

 

One of the Fed’s leading indicators on inflation is capacity utilization which measures the amount of a plant that is in use at factories, mines and utilities.

 

Keeps your eyes and ears open for this week’s report on industrial production and capacity utilization.

 

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

2020- 74.5

2021- 74.4

 

What does all this mean?

 

I don’t know.

 

Normally the Fed does not feel there are inflationary pressures until the capacity utilization rate is about 82%.

 

In June it was at 75.4 percent.

 

Over the last year capacity utilization has languished.  American manufacturing prowess had gone procumbent a while ago.  It was already declining in 2019 as reflected in the drop in capacity utilization in the above chart.

 

It is a propitious time for prospicient borrowers.

 

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OFF BASE

 

The Federal Reserve pronunciamento on holidays means summer is coming to a close.  Labor Day is almost here.

 

The Federal Reserve has promulgated that these are our remaining holidays for 2021:

Labor Day September 6

Columbus Day October 11

Veterans Day November 11

Thanksgiving Day November 25

Christmas Day December 25

Monday, July 12, 2021

The SBA and promontory

promontory

PROM-uhn-tor-ee, -tree

 

1. A point of high land projecting into a body of water.

2. A projecting part of the body, for example, of a bone.

 

From Latin promontorium, alteration of promunturium from prōminēre, to jut out

 

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TIP OF THE WEEK

 

A promontory is just the kind of thing a heroine will threaten to throw herself off of if the love of her life does not return to her.

 

Borrowers and lenders feeling no love with a SBA guarantee should consider a guarantee from the California Infrastructure and Economic Development Bank.

 

Their Small Business Loan Guarantee Program has now increased its guarantee to $2,500,000.

 

__________________________________________

 

Indices:

PRIME RATE= 3.25%

________________________________________

SBA 504 Loan Debenture Rate for July

 

For 20 year debentures, the debenture rate is only 1.22% but note rate is 1.24% and the effective yield is 2.69%.

 

For 25 year debentures, the debenture rate is only 1.40% but note rate is 1.42% and the effective yield is 2.817%.

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AHEAD OF THE YIELD CURVE

 

 

Jobs increased 850,000 in June.

 

Or did they?

 

Local, state and private education added 269,000 jobs but those advances represented a quirk of Labor’s seasonal adjustments.

 

State and local education hired fewer people for the past school year given Covid restrictions, and laid off workers earlier than normal due to school closures. Typically, this sector sees layoffs in the summer, when fewer school employees are needed. But since the numbers were already low due to earlier layoffs, there were fewer people to let go.  The increase in jobs, therefore, is partly a reflection of the fact that fewer people were laid off, not that more were hired.

 

But this is a seasonal quirk - there were actually 413 thousand education jobs lost in June, but that was fewer than normal for June, so seasonally adjusted this showed a gain.

 

No matter the actual number, the U.S. has recovered 15.6 million, or 70%, of the 22.4 million jobs lost last spring, leaving the nation 6.8 million jobs below its pre-pandemic level.   To put that in perspective, 8.7 million jobs were  lost in the Great Recession of 2008-2009.

 

Minutes from last month’s Federal Reserve meeting on monetary policy showed policy makers remained cautious about the economic outlook and willing to remain patient about making any changes to interest rate policy or their asset buying program.

 

Long term treasury bonds reflect a propitious propensity.

 

Keep your eyes and ears open for this week’s auction of 30 year Treasury bonds.

 

Here is what the 30 year Treasury bond has been doing and this week’s interesting little table:

 

2006- 4.91

2007- 4.84

2008- 4.18

2009- 3.89

2010- 4.61

2011- 2.89

2012- 2.77

2013- 3.25

2014- 3.97

2015- 2.91

2016- 2.32

2017- 3.16

2018- 3.13

2019- 2.594

2020- 1.216

2021- 2.172

 

What does all this mean?

 

At last month’s auction, the high yield was awarded at 2.172 percent, down 22.3 basis points from May’s auction rate and the lowest rate awarded for the bond in four months.

 

Since then the 30 year Treasury bond yield has drifted down to 1.987%.

 

Prognostications proliferate over the protean slope of the yield curve.

 

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OFF BASE

 

The classic example of promontory in literature is from John Donne; Devotions upon Emergent Occasions; 1624:

 

“No man is an Island, entire of itself; every man is a piece of the continent, a part of the main; if a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as if a manor of thy friends or of thine own were; any man’s death diminishes me, because I am involved in mankind; And therefore never send to know for whom the bell tolls; It tolls for thee.”

Monday, June 14, 2021

The SBA and PROsopopoeia

 prosopopoeia

pruh-so-puh-PEE-uh

 1. A figure of speech in which an imaginary or absent person is represented as speaking or acting.

2. A figure of speech in which an inanimate object or something abstract is represented as possessing human form: personification.

 From Latin prosopopoeia, from Greek prosopopoiia (personification), from prosopon (face, mask), from pros- (facing) + ops (eye) + poiein (to make).

Literally prosopopoeia is the putting of speeches into the mouths of others.

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TIP OF THE WEEK

Prosopopoeia can be used to take some of the load off the communicator by placing an unfavorable point of view on the shoulders of another person or object.

SBA lenders often do that by blaming SBA when something can’t be done.

In the case of refinancing debt with a SBA 7(a) loan, the debt being refinanced has to have been used for a purpose originally eligible for SBA financial assistance.   Loans used to pay taxes are typically not eligible nor is debt to a shareholder.   Seller financing for the sale of a business must be at least two years old.  If the seller debt had been on standby, the clock does not start for the two year time period until payments to the seller begin.

Seller financing for the sale of owner user real estate has no two year requirement to be eligible for SBA refinancing.

The long awaited pending SBA implementation guidance on 504 debt refinancing is being released.

 

__________________________________________

 

Indices:

PRIME RATE= 3.25%

________________________________________

SBA 504 Loan Debenture Rate for June

For 20 year debentures, the debenture rate is only 1.29% but note rate is 1.31% and the effective yield is 2.770%.

For 25 year debentures, the debenture rate is only 1.47% but note rate is 1.49% and the effective yield is 2.887%.

_______________________________________________

AHEAD OF THE YIELD CURVE

 

Is inflation starting to get out of control?   The markets say otherwise.

 

The Federal Reserve does not plan to raise interest rates any time soon, right?   The markets say otherwise.

 

This prosopopoeia with the market was evidenced as the news came out that the consumer price index rose 0.6 percent for the month of May, the Treasury was selling $24 billion in 30 year Treasury bonds.

 

The 30 year Treasury bond high yield was awarded at 2.172 percent, down 22.3 basis points from last month's auction rate and the lowest rate awarded for the bond in four months.

 

This almost quarter percent drop in long term bond yields seems to concur with the Federal Reserve anticipation that transitory factors will boost inflation readings and there is no need to consider raising interest rates.

 

Keep your eyes and ears open for this week’s Federal Reserve Open Market Committee meeting.

 

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:

 

DEC21- 0.18

DEC22- 0.35

DEC23- 0.85

DEC24- 1.37

DEC25- 1.77

DEC26- 2.08

 

What does all this mean?

 

I don’t know.

 

The December 2023 Eurodollar rate was at 0.665.  It is now up to 0.85.

 

Prognostications proliferate over the protean slope of the yield curve but now a procellous propugnaculum might be prospicient.

 

__________________________________________

 

OFF BASE

 

A classic example of prosopopoeia occurred when Yogi Berra, speaking of a former Yankees manager, said: "If Miller Huggins was alive today, he'd be turning over in his grave"

 

Hopefully there is no spinning in the grave over Juneteenth becoming a national holiday.   Juneteenth is June 19th and has long been celebrated as the end of slavery in the United States.  When the Civil War ended, on June 19, 1865 Union soldiers traveled to Galveston, Texas, to spread the news. There, the troops found Black men, women and children still enslaved, either because news of the Emancipation Proclamation hadn’t reached them or the local white officials simply ignored it.

 

June 14th is Flag Day.  It commemorates the adoption of the flag of the United States on June 14, 1777, by resolution of the Second Continental Congress.

 

June 20th is Father’s Day.    It is actually a national holiday in several countries.

 

June 20th is also the summer solstice- the longest day of the year.   It is also Beach Boy Brian Wilson’s birthday.

 

With our propensity to enjoy days off, it would seem appropriate to lump all these days together into a three day weekend.  Keeping with the spirit of the Uniform Monday Holiday Act, the third Monday in June could be a national holiday.

 

This year the Fourth of July is on a Sunday.  The Federal Reserve Board of Governors is closed on July 5, 2021.

Monday, May 10, 2021

The SBA and PROpensity 

 propensity

pruh-PEN-suh-tee

An inclination to behave in a particular way.

From Latin pro- (toward) + pendere (to weigh).

 _____________________________________________

TIP OF THE WEEK

 

The propensity towards SBA 7(a) loans has increased significantly.

 

For the period ending April 30, 2021 SBA 7(a) volume has increased over 5% from the year ago period.   This reverses a trend of declining loan demand that had begun about THREE years ago.

 

SBA 7(a) loan demand is somewhat prospicient as the correlation coefficient between SBA 7(a) loan volume and GDP is a statistically significant 0.86.

 

Borrowers should not procrastinate however as availability of SBA loans could encounter a procellous prorogue.

 

__________________________________________

 

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 1.39% and the effective yield is 2.849%.

For 25 year debentures, the debenture rate is only 1.52% but note rate is 1.54% and the effective yield is 2.936%.

_______________________________________________

AHEAD OF THE YIELD CURVE

 

The marginal propensity to consume proliferates until profligate ways prognosticate an increase in the marginal propensity to save.

 

Consumption propensity appears to be shifting away from industries that thrived while Americans stayed home during the pandemic as evidenced by the latest report on employment for April.

 

Leisure and hospitality gained 331 thousand jobs.  In March and April of 2020, leisure and hospitality lost 8.2 million jobs, and are now down 2.85 million jobs since February 2020.

 

So leisure and hospitality has now added back about 65% of the jobs lost in March and April 2020.

 

Manufacturing however lost 18,000 jobs last month.

 

Keeps your eyes and ears open for this week’s report on industrial production and capacity utilization.

 

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

2020- 74.5

2021- 74.4

 

What does all this mean?

 

I don’t know.

 

Over the last year capacity utilization has languished.  American manufacturing prowess had gone procumbent a while ago.  It was already declining in 2019 as reflected in the drop in capacity utilization in the above chart.

 

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 Federal Reserve at their last meeting on monetary policy indicated inflation has "risen" on largely "transitory" factors.   They must be looking at capacity utilization rates.

 

Policy stimulus remains at full-throttle with no hint of when it will be eased.

 

It is a propitious time for prospicient borrowers.

 

__________________________________________

 

OFF BASE

 

If you have a propensity to just sit on the couch you have a proclivity towards inertia.

 

What’s the difference between propensity and proclivity?

 

Proclivity is derived from a Latin word “pro” and “clivus.” While “pro” means “forward,” “clivus” means “slope.”

 

Thus the term has derived its meaning as “having an inclination” or “leaning DOWN towards” something.

 

Proclivity is used more when describing a negative inclination while “propensity” is used equally for a negative or positive inclination.

 

A proclivity towards inertia is defined by behavioral economists as a propensity to withdraw effort (PWE) and is evidenced by lackluster employment creation despite jobs being readily available or declining productivity as some people freeload, shirk responsibility, or as the economists put it socially loaf.

 

Propitiate yourself by realizing you may not be in a rut but in a groove.

Monday, April 12, 2021

The SBA and PROpitiate

 propitiate

pruh-PISH-ee-ayt

To gain the favor of someone; to appease.

From Latin propitiare (to make favorable, to appease).

 

_____________________________________________

TIP OF THE WEEK

 

Propitiate the IRS by using the new form 4506-C when verifying income tax returns for SBA loan purposes.

 

The IRS will Continue to Accept Form 4506-T until April 30, 2021

 

Beginning May 1, 2021, all IVES transcript requests must be submitted exclusively on the Form 4506-C.

All Forms 4506-T received but not processed prior to May 1, 2021 will be valid and processed accordingly. Forms 4506-T received on or after May 1, 2021 will be rejected.

 

__________________________________________

 

Indices:

PRIME RATE= 3.25%

________________________________________

SBA 504 Loan Debenture Rate for April

 

For 20 year debentures, the debenture rate is only 1.54% but note rate is 1.569% and the effective yield is 3.021%.

 

For 25 year debentures, the debenture rate is only 1.66% but note rate is 1.68402% and the effective yield is 3.077%.

 

_______________________________________________

AHEAD OF THE YIELD CURVE

 

Prognostications proliferate over the propitious slope of the yield curve as employment proliferates.

 

In March employers added a booming 916,000 jobs.

 

For what it is worth, Here is a summary of net payroll employment and this week’s interesting little table of data:

 

March      916,000

February  468,000

January    233,000

December -306,000

November  245,000

October  610,000

September 711,000

August   1,489,000

July         1,761,000

June      4,791,000

May       2,725,000

April       -20,700,000

March     -1,400,000

February  275,000

January   214,000

2019     2,108,000

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.

 

Keep your eyes and ears open for this week’s auction of 30 year Treasury bonds.

 

Since the beginning of the year, the 30 year Treasury yield has increased over 70 basis points.

 

At last month’s auction the high yield was awarded at 2.295 percent, up 36.2 basis points from last month's auction rate and the highest awarded for the bond since January of last year.

 

While proditmania profilerates on the longer end of the yield curve, the shorter end is procumbent as the Federal Reserve propitiates the bond markets.

 

A review of its Statement on Longer Run Goals and Monetary Policy emphatically declares that the federal funds rate consistent with maximum employment and price stability over the longer run has declined relative to its historical average.

 

It is a propitious time for prospicient borrowers.

 

__________________________________________

 

OFF BASE

 

The young man didn’t propitiate enough.

 

In the Spring a young man's fancy lightly turns to thoughts of love.

 

If you read the poem Locksley Hall with this prolifically quoted prolegomenon it turns out this is not an ode to love but an angry bitter tirade.

 

The protagonist muses on unrequitted love in a somewhat bitter mood.

 

The memories quickly lead to a burst of anger as he relates that the object of his affections abandoned him due to her parents' disapproval.

 

He didn’t propitiate enough and became procellous.

Monday, March 8, 2021

The SBA and PROprietor

 proprietor

pruh-prahy-i-ter

The owner of a business establishment,

A person who has the exclusive right or title to something; an owner, as of real property.

From Latin proprietas (property)

_____________________________________________

TIP OF THE WEEK

 

Proprietors and other schedule C filers can now use line 7 (Gross Income) vs. line 31 (Net Profit/Loss) as the basis for their PPP loan amount. This will likely result in a significantly higher PPP loan amount.

 

SBA is implementing this change with respect to PPP loans that are approved after the effective date of the new rule- March 3, 2021.  Unless extended, the PPP program ends March 31st.

 

Congress authorized an additional $284 billion in funding for this current round of PPP loans.  Right now, after two months, a little more than half of that funding ($156,253,510,068) has been approved.

 

Proprietors and other businesses should also consider the SBA 7(a) loan program.  Until September 30th the SBA guarantee fee has been waived.  SBA will also make your first three months of payments.

 

__________________________________________

 

Indices:

PRIME RATE= 3.25%

________________________________________

SBA 504 Loan Debenture Rate for February 

For 20 year debentures, the debenture rate is only 1.24% but note rate is 1.263% and the effective yield is 2.558%.

For 25 year debentures, the debenture rate is only 1.34% but note rate is 1.36% and the effective yield is 2.602%.

_______________________________________________

AHEAD OF THE YIELD CURVE

 

Prognostications proliferate over the propitious slope of the yield curve.

 

The slope of the yield curve—the difference between the yields on short- and long-term maturity bonds—has achieved some notoriety as a simple forecaster of economic growth.

 

The rule of thumb is that an inverted yield curve (short rates above long rates) indicates a recession while a flat curve indicates weak growth and, conversely, a steep curve indicates strong growth.

 

The 30 year Treasury bond has climbed over 70 basis points.

 

379,000 jobs were added in February.  286,000 of those jobs were at restaurants and bars.   Employment in leisure and hospitality is still down 9.5 million compared to pre-pandemic levels.

 

The nation has recovered 12.9 million, or 58%,  of the 22.4 million in total jobs wiped out.

 

Keep your eye and ears open for this week’s auction of the 30 year Treasury bond.

 

Here is what the 30 year Treasury bond has been doing and this week’s interesting little table:

 

2006- 4.91

2007- 4.84

2008- 4.18

2009- 3.89

2010- 4.61

2011- 2.89

2012- 2.77

2013- 3.25

2014- 3.97

2015- 2.91

2016- 2.32

2017- 3.16

2018- 3.13

2019- 2.594

2020- 1.216

 

What does all this mean?

 

I don’t know.

 

At last month’s auction, the high yield was awarded at 1.933 percent, up 10.8 basis points from the prior month’s auction and the highest awarded auction rate for the bond in a year.

 

A prospicient Federal Reserve promulgates interest rates protracting propitiously.

 

 

__________________________________________

 

OFF BASE

 

So is a proprietor a proprietarian?

 

A proprietarian can be a proponent of proprietarianism which is a belief that property is an absolute right and a philosophy that very small businesses are generally more humane than large corporations.

 

Proprietarianism has deep roots in America.     The Declaration of Independence phrase “Life, Liberty and the pursuit of Happiness” was a modification of 17th Century philosopher John Locke’s claim of the unalienable right to Life, Liberty and Property.   Thomas Jefferson’s imaginative leap replacing property with the pursuit of happiness causes a profligate prolegomenon that the two are synonymous.

 

A proprietarian can also be hung up on propriety.  Propriety is defined as the quality or state of being proper or suitable and conformity to what is socially acceptable in conduct or speech.

 

The word propriety comes from the Latin proprius which means individual, special, particular or characteristic.

 

Thinking about what kind of proprietarian one is could cause procumbence.

Monday, February 8, 2021

The SBA and PROpine

propine

pro-PEEN, PYN

To gift, tip, or pledge.

A gift or tip.

 

From Latin propinare (to drink to someone’s health, to present), from Greek propinein (to drink first, to give), from pro- (for, before) + pinein (to drink).

_____________________________________________

TIP OF THE WEEK

 

SBA loans have propined small business in protean ways.

 

Lender and borrower fees for both the 7(a) and 504 loan programs through September 30, 2021 are waived.  For 7(a) this includes the up-front guaranty fee and the ongoing fee.

 

SBA payments of P&I on the first 6 months of newly approved loans will resume for all loans approved between February 1 and September 30, 2021, capped at $9,000 per month.

 

If however a 7(a) loan is used to refinance an existing 7(a) loan that had previously benefited from a CARES Act payment subsidy, the new loan will NOT receive the P & I payments from SBA for 6 months.

 

__________________________________________

 

Indices:

PRIME RATE= 3.25%

________________________________________

SBA 504 Loan Debenture Rate for January

For 20 year debentures, the debenture rate is only 1.18% but note rate is 1.207% and the effective yield is 2.496%.

For 25 year debentures, the debenture rate is only 1.28% but note rate is 1.299% and the effective yield is 2.540%.

_______________________________________________

AHEAD OF THE YIELD CURVE

 

The Federal Reserve continues to propine borrowers after its last meeting on monetary policy.

 

Policy hasn't changed but the Federal Reserve's economic assessment has been downgraded a notch. In contrast to December's statement that said economic activity and employment had continued to recover, January's statement says these factors have "moderated" in recent months with weakness "concentrated" in sectors most exposed to pandemic effects.

 

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:

 

 

DEC21- 0.21

DEC22- 0.295

DEC23- 0.665

DEC24- 1.08

DEC25- 1.46

DEC26- 1.78

 

What does all this mean?

 

I don’t know.

 

The prognostication appears to reflect  interest rates protracting propitiously.

 

The long end of the yield curve implies that the pace may indeed improve.

 

Keep your eyes and ears open for this week’s auction of the 30 year Treasury bond.

 

The 30-year yield on Friday climbed to levels last seen in March 2020. It was last up 4.9 basis point at 1.957%,

 

At last month’s auction of $24 billion in 30 year Treasury bonds, the high yield was 1.825%.

 

The yield curve is getting steeper.


__________________________________________

 

OFF BASE

 

The calendar propines us with a three day weekend.

 

The Federal Reserve has promulgated that these are our holidays for 2021:

Washington's Birthday February 15

Memorial Day May 31

Independence Day July 4

Labor Day September 6

Columbus Day October 11

Veterans Day November 11

Thanksgiving Day November 25

Christmas Day December 25

Monday, January 11, 2021

The SBA and PROtract

protract

pro-trakt

1: to prolong in time or space : CONTINUE

2: to extend forward or outward

 

From Latin protractus, past participle of protrahere, literally, to draw forward, from pro- forward + trahere to draw

_____________________________________________

TIP OF THE WEEK

 

The Paycheck Protection Program (PPP) has been has been protracted in protean ways.  This propugnaculum for small business will re-open the week of January 11 for new borrowers and certain existing PPP borrowers.


There is also a propitious promulgation that all borrowers with qualifying loans approved by the SBA prior to the CARES Act will receive an additional three months of P&I, starting in February 2021. Going forward, those payments will be capped at $9,000 per borrower per month.  After the three-month period described above, borrowers considered to be hardest-hit by the pandemic will receive an additional five months of P&I payments, also capped at $9,000 per borrower per month.

 

SBA payments of P&I on the first 6 months of newly approved loans will resume for all loans approved between February 1 and September 30, 2021, also capped at $9,000 per month.

 

Lender and borrower fees for both the 7(a) and 504 loan programs through September 30, 2021 are waived.  For 7(a) this includes the up-front guaranty fee and the ongoing fee.

 

__________________________________________

 

Indices:

PRIME RATE= 3.25%

________________________________________

SBA 504 Loan Debenture Rate for January

For 20 year debentures, the debenture rate is only 1.18% but note rate is 1.207% and the effective yield is 2.496%.

For 25 year debentures, the debenture rate is only 1.28% but note rate is 1.299% and the effective yield is 2.540%.

_______________________________________________

AHEAD OF THE YIELD CURVE

 

Protracted profligacy continues as in December the year-over-year change in employment was a negative 9.37 million jobs.

 

Total combined jobs created in 2017, 2018 and 2019 totaled 6.9 million.

 

The overall picture, however, was uneven, as private-sector job losses were concentrated in service.  For the month of December there was a 498,000 drop in leisure and hospitality.

 

Employment in goods-producing sectors, on the other hand, was up 93,000, including a 38,000 gain in manufacturing.

 

Keep your eyes and ears open for this week’s report on Industrial Production and Capacity Utilization from the Federal Reserve.

 

Here is what capacity utilization has been doing and this week’s 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

2020- 72.7

 

What does all this mean?

 

I don’t know.

 

In November capacity utilization crawled up to 73.3 percent.  Back in April it was at an all-time low of 64.9 percent.

 

If this pace doesn't improve, it will be well into next year if not longer before the industrial economy will finally make up Covid's destruction.

 

The long end of the yield curve implies that the pace may indeed improve.   Also keep your eyes and ears open for this week’s auction of the 30 year Treasury bond.

 

At last month’s auction of $24 billion in 30 year Treasury bonds, the high yield was 1.665%.  The yield is now up to 1.877%.


The yield curve is getting steeper.

__________________________________________

 

OFF BASE

 

As the calendar turns to a new year, a three day weekend already approaches!

The Federal Reserve has promulgated that these are our holidays for 2021:

Birthday of Martin Luther King, Jr. January 18 

Washington's Birthday February 15 

Memorial Day May 31 

Independence Day July 4 

Labor Day September 6 

Columbus Day October 11 

Veterans Day November 11 

Thanksgiving Day November 25 

Christmas Day December 25