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.
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Indices:
PRIME RATE= 3.25%
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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
