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.
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Indices:
PRIME RATE= 3.25%
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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.
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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.
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