The SBA and Propagate

 propagate

prop·a·gate

-spread and promote (an idea, theory, etc.) widely -to cause to continue or increase by reproduction

 

from Latin propagatus, past participle of propagare "set forward, extend, spread, increase; multiply plants by layers, breed,"

from pro "forth" + -pag, from PIE root *pag- "to fasten," source of pangere "to fasten"

 

_____________________________________________

TIP OF THE WEEK

 

Has leisure and hospitality propagated past its procumbent pandemic levels?

 

Going into the Memorial Day weekend occupancy rates finally exceeded 2019 levels.   Occupancy at 66.5% was 3.2% higher compared to the same week of May 22-28 in 2019.

 

This was partly due to the timing of Memorial Day this year.

 

Reflecting an expected post-Memorial Day holiday slowdown, occupancy for the week of May 29 through June 4 dropped 12.1% to 63.2% compared to the  comparable week in 2019.

 

Average daily rates are up 11.3%.

 

Hotels and motels continued to be a dominant segment of SBA borrowers based upon NACIS codes.

 

_________________________________________

 

Indices:

PRIME RATE= 4.00%

________________________________________

SBA 504 Loan Debenture Rate for June

For 20 year debentures, the debenture rate is only 3.89% but note rate is 3.95% and the effective yield is 5.132%.

For 25 year debentures, the debenture rate is only 4.01% but note rate is 4.056% and the effective yield is 5.191%.

_______________________________________________

AHEAD OF THE YIELD CURVE

 

What is the Federal Reserve supposed to do?

 

Modifying the original act that established the Federal Reserve in 1913, the Federal Reserve Act of 1977 clarified the roles of the Board of Governors and Federal Open Market Committee (FOMC).

 

Congress explicitly stated the Fed's goals should be "maximum employment, stable prices, and moderate long-term interest rates."

 

It is these goals that came to be known as the Fed's "dual mandate".

 

Wait a minute.   Employment, stable prices, and moderate long-term interest rates are three things.   How could this be a “dual” mandate?

 

Ensuring stable prices and moderate long-term interest rates are interpreted as a single mandate. That's because long-term nominal interest rates are set with inflation expectations in mind. For any given nominal interest rate, rapidly rising prices diminish the real interest rate that lenders receive and debtors must pay. Thus, in an unstable monetary environment with rapidly rising prices, lenders will want to charge much higher interest rates to mitigate the inflation-rate risk.

 

The Fed seems to be doing ok with employment.   Total nonfarm employment rose by 390,000 in May.

 

Here are the latest jobs numbers from the Bureau of Labor Statistics.

 

May       390,000

April      436,000

March     398,000

February  714,000

January  504,000

2021       6,400,000

2020    -9,370,000

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.

 

Excluding leisure and hospitality, the economy has more than added back all the jobs lost at the beginning of the pandemic.  Leisure and hospitality gained 84 thousand jobs in May.  At the beginning of the pandemic, in March and April of 2020, leisure and hospitality lost 8.20 million jobs, and are now down 1.35 million jobs since February 2020.

 

Ok.  What about moderate long term interest rates?

 

At last week’s auction of $19 billion in 30 year Treasury bonds, the high yield was awarded at 3.185 percent, up 18.8 basis points from last month's auction rate and the highest awarded for the bond since November 2018.

 

At 3.185%, this is still well below the long term average of 4.79% for the 30 year Treasury bond.

 

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

 

At its last meeting, they stated “that ongoing increases in the target range will be appropriate.”

 

The fed funds target rate is currently .75% to 1%.

 

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 plus years.

 

The December 2022 implied rate is now at 3.67% up from 3.22% just last month and up from only 0.17% in October.   The December 2023 implied rate is at 3.69%

 

 

__________________________________________

 

OFF BASE

 

The similarity between propagate and propaganda is not coincidental; that word also comes to us from propagare.

 

Propaganda is today most often used in reference to political statements, but the word comes to our language through its use in a religious context. The Congregatio de propaganda fide (“Congregation for propagating the faith”) was an organization established in 1622 by Pope Gregory XV as a means of furthering Catholic missionary activity.

 

The first use of the word propaganda (without the rest of the Latin title) in English was in reference to this Catholic organization. It was not until the beginning of the 19th century that it began to be used as a term denoting ideas or information that are of questionable accuracy as a means of advancing a cause.

 

It is not propaganda when the Federal Reserve promulgates official holidays.    A three day weekend approaches!

 

The Federal Reserve has proscribed banks from being opened on the following days:

Juneteenth      June 19 (observed Monday June 20)

Independence Day July 4

Labor Day September 5

Columbus Day October 10

Veterans Day November 11

Thanksgiving Day November 24

Christmas Day December 25