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.

 

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Indices:

PRIME RATE= 3.25%

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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.

 

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Indices:

PRIME RATE= 3.25%

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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%.

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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.

 

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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).

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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%.

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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.

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).

 

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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.

 

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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%.

 

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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.

 

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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)

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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%

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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.

 

 

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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).

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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.

 

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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

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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

 

Monday, December 14, 2020

The SBA and PROpugnaculum

 propugnaculum

praw-puhg-NAK-yuh-luhm

A fortress; defense; protection.

From Latin propugnaculum (bulwark), from propugnare (to fight in defense of something), from pro- (toward) + pugnare (to fight), from pugnus (fist).

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TIP OF THE WEEK

 

Propugnaculums proliferate in protean ways with SBA 7(a) loans.  Almost $400,000,000 in SBA 7(a) loans were approved in just the one week period ending December 4th.    About half those loans were to existing businesses and about 22 percent were for business acquisitions.   The rest were to new businesses.

 

Don’t go procumbent however with the not so propitious promulgation regarding the tax issues for payments made by the SBA for existing 7(a) borrowers that prompted procellous proditomania.   Lenders are required to issue forms 1099-MISC.

 

In addition, The U.S. Treasury Department and Internal Revenue Service had also released guidance on the Paycheck Propugnaculum Program (PPP) that since businesses are not taxed on the proceeds of a forgiven PPP loan, the expenses are not deductible.

 

If a business reasonably believes that a PPP loan will be forgiven in the future, expenses related to the loan are not deductible, whether the business has filed for forgiveness or not.

 

__________________________________________

 

Indices:

PRIME RATE= 3.25%

________________________________________

SBA 504 Loan Debenture Rate for December For 20 year debentures, the debenture rate is only 1.11% but note rate is 1.13% and the effective yield is 2.427%.

For 25 year debentures, the debenture rate is only 1.21% but note rate is 1.228% and the effective yield is 2.471%.

_______________________________________________

AHEAD OF THE YIELD CURVE

 

The prodigious and promethean propugnaculums attempted by the government may have been profligate.

 

Initial jobless claims soared with a 137,000 increase, reaching 853,000 in the week ended December 5.

 

No larger increase had been recorded since the week ended March 28, when the impact of the pandemic on claims was at its highest.

 

There was a clear slowdown in hiring activity as reflected in the jobs report for November.

 

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

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.

 

Last week’s Treasury sale of 30 year bonds was very strong.

 

The incredibly spiking US national debt has soared by $3.75 trillion since March 1, powered by stimulus and bailouts, and by $4.2 trillion over the past 12 months, to $27.3 trillion.

 

Despite this, the 30 year auction saw a high yield of only 1.665% which is 1.5 basis points below last month’s auction rate.

 

It is a propitious time for prospicient borrowers.

 

 

__________________________________________

OFF BASE

 

What is the propugnaculum for these times?

 

We might want to remember the following from John Barry’s “The Great Influenza”:

 

“The 1918 virus, like all influenza viruses, like all viruses that form mutant swarms, mutated rapidly.  There is a mathematical concept called reversion to the mean; this states simply that an extreme event is likely to be followed by a less extreme event. This is not a law, only a probability.  The 1918 virus stood at an extreme; any mutations were more likely to make it less lethal than more lethal. In general, that is what happened.  Just as it seemed that the virus would bring civilization to its knees, as it would do what the plagues of the Middle Ages had done, would remake the world, the virus mutated toward its mean, toward  the behavior of most influenza viruses.  As time went on, it became less lethal.”

 

If the past is indeed prologue, that’s one prognosis.

 

Monday, December 21st is the darkest and longest night of the year- the Winter Solstice.   After that the days begin to get longer and the hope and promise of Spring approaches.

Monday, November 9, 2020

The SBA and PROsaic

 prosaic

pro-ZAY-ik

1. Dull; unimaginative.

2. Everyday; straightforward; ordinary.

3. Having the character of prose as compared to the feeling of poetry.

 From Latin prosa (prose), from prosa oratio (straightforward speech), from provertere (to turn forward).

 _____________________________________________

TIP OF THE WEEK

 The prosaic proliferating promulgations in the new SOP 50-10-6 (SOP is an acronym for Standard Operating Procedures) has a credit elsewhere test.

 Although a personal resources test was rescinded by CARES Act as of March 27, 2020, lenders are still required to determine that some or all of the loan is not available from the liquidity of the applicant or its owners.

 Lenders may want to use the rescinded personal resources test as a means of determining availability of liquidity.

 __________________________________________

 Indices:

PRIME RATE= 3.25%

________________________________________

SBA 504 Loan Debenture Rate for November For 20 year debentures, the debenture rate is only 1.05% but note rate is 1.07% and the effective yield is 2.364%.

For 25 year debentures, the debenture rate is only 1.14% but note rate is 1.15% and the effective yield is 2.399%.

_______________________________________________

AHEAD OF THE YIELD CURVE

 

A protean Federal Reserve released a prosaic statement on monetary policy virtually repeating the text of its September statement.

 Reflecting a procellous prolepsis they said that economic activity and employment "continued to recover", which is less upbeat perhaps versus "have picked up" in their September statement.

 Keep your eyes and ears open for this week’s auction of 30 year Treasury bonds.  At last month’s auction, results were soft with the high yield at 1.578%.

 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.

 The recent rise in yields has prevented indigestion associated with new issuance, but investors say Treasuries may need to cheapen further to whet the appetite of bond buyers ahead of rising federal budget deficits.

 The auction amount has increased over 30% to $27 billion due to higher borrowing needs.  Last month’s auction was $23 billion.

 It is a propitious time for prospicient borrowers.

 __________________________________________

OFF BASE

 Author F. Scott Fitzgerald was never prosaic.   One of his quotes is perhaps appropriate for these times:

 “The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function.”

 If you are having trouble functioning right now, go ahead and take Wednesday off.  It’s a holiday.

 The Federal Reserve has promulgated that these are our remaining holidays for 2020:

Veterans Day November 11

Thanksgiving Day November 26

Christmas Day December 25

 We can’t quite yet prorogue 2020.

Monday, October 5, 2020

The SBA and PROpitious

 propitious

pruh-PISH-us

favorably disposed : benevolent

being a good omen : auspicious

tending to favor : advantageous

from the Latin word propitius, is a synonym of favorable and auspicious. All three essentially mean "pointing toward a happy outcome,"

Propitious may also apply to beginnings, but it often suggests a continuing promising condition

_____________________________________________

TIP OF THE WEEK

The recently approved Continuing Resolution (CR) to extend current government funding levels through December 11 is propitious for SBA 7(a) loans.

This CR includes $15 million in appropriations to support $30 billion of authorization for the 7(a) program for FY2021 which should be sufficient for 7(a) volume without concern for insufficient funding or authorization.

Proliferating promulgations to PPP, Section 1112 payment extensions, and 7(a) enhancement provisions procrastinate as we approach the general election.

On October 2nd, SBA issued Notice 5000-20057, Paycheck Protection Program Loans and Changes of Ownership.  This notice provides guidance for “changes of ownership” in situations where the borrower has a PPP loan.

The notice makes clear that even after any change of ownership, the PPP borrower remains fully responsible for ALL requirements related to the PPP loan.  An escrow account controlled by the PPP Lender with funds equal to the outstanding balance of the PPP loan prohibits profligacy.

__________________________________________

 

Indices:

PRIME RATE= 3.25%

________________________________________

SBA 504 Loan Debenture Rate for September For 20 year debentures, the debenture rate is only 1.05% but note rate is 1.07% and the effective yield is 2.366%.

For 25 year debentures, the debenture rate is only 1.15% but note rate is 1.167% and the effective yield is 2.410%.

_______________________________________________

AHEAD OF THE YIELD CURVE

 

It is a propitious time for prospicient borrowers.

The probative on interest rates will be apparent with this Wednesday’s  prolegomenon from the Federal Reserve’s last meeting on monetary policy.  Procellous proditmania proliferates across the yield curve.

Also keep your eyes and ears open for this week’s auction of 30 year Treasury bonds.  At last month’s auction, results were solid with the high yield of only 1.473 percent.   The average high yield over the last year was ½ percent higher.

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:

DEC20-0.25

DEC21- 0.22

DEC22- 0.28

DEC23- 0.42

DEC24- 0.62

DEC25- 0.83

 

What does all this mean?

I don’t know.

The Federal Reserve has been very protean.

__________________________________________

OFF BASE

 

With everything going on, take a break next Monday.

 

The Federal Reserve has promulgated that these are our remaining holidays for 2020:

Columbus Day October 12

Veterans Day November 11

Thanksgiving Day November 26

Christmas Day December 25

 

We can’t quite yet prorogue 2020.

Monday, September 14, 2020

The SBA and PROwess

 prowess

PROU-is

Superior skill, ability, strength, etc.

From Middle French prou (valiant), from Old English prud. Earliest documented use: 1300.

_____________________________________________

TIP OF THE WEEK

Proliferating prodigious promulgations can prompt SBA lending prowess to be profligate.

The new version of the SBA Standard Operating Procedures SOP 50-10-6 will be effective October 1st.

A change of ownership is now a new authorized purpose for International Trade Loans.  That means possibly a business acquisition loan could have a 90% guaranty from the SBA.

The SBA Office of International Trade has indicated that to qualify the BUYER must meet International Trade eligibility.   Being adversely impacted by import competition cannot be used as a basis for eligibility with an International Trade Loan for change of ownership.   A change of ownership between existing owners of the Applicant is also NOT eligible as an International Trade Loan.

Hotels and motels, NAICS Industry Subsector Code 721 (Accommodation), are also NO LONGER eligible as an International Trade Loan.

The point here is to not be too fancy with this new provision.  As John Wooden once proclaimed “If you keep too busy learning the tricks of the trade, you may never learn the trade.”

__________________________________________

 Indices:

PRIME RATE= 3.25%

________________________________________

SBA 504 Loan Debenture Rate for September For 20 year debentures, the debenture rate is only 1.05% but note rate is 1.07% and the effective yield is 2.366%.

For 25 year debentures, the debenture rate is only 1.15% but note rate is 1.167% and the effective yield is 2.410%.

_______________________________________________

AHEAD OF THE YIELD CURVE

 

Don’t mistake activity for achievement.  That’s another John Wooden pronouncement.

Last month’s apparent increase in jobs may be like Sisyphus rolling his rock up the hill only for it to roll back down when it nears the top.

About ¼ of the monthly gain in total payrolls was the hiring of temporary 2020 Census workers.  In August, the year-over-year change was negative 10.25 million jobs.

Breaking down payroll gains, manufacturing added only 29,000 jobs in August.

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.

 

Last month capacity utilization rose 2.1 percentage points to 70.6%.  This is 9.2 percentage points below the long run average.   Back in April it was at an all-time low of 64.9 percent.

 

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

 

It marked the worst year for manufacturing since 2015 as the trade war and lackluster global growth hurt America’s industrial economy.

 

Procellous proditmania proliferates but the past is indeed prologue.

 

__________________________________________

OFF BASE

 

Those John Wooden quotes were inspired by my recent reading of his “They Call Me Coach”.

 

His basketball coaching prowess may be overshadowed by some of his aphorisms such as:

 

Things turn out best for the people who make the best of the way things turn out.

 

Do not let what you cannot do interfere with what you can do.

 

It's what you learn after you know it all that counts.

 

Ability may get you to the top, but it takes character to keep you there.

 

If you’re true to yourself, you’re going to be true to everyone else.

 

That last one truly defines probity.

Monday, August 10, 2020

The SBA and PROspero

 Prospero

PROS-puh-roh

Someone who is capable of influencing others' behavior or perceptions without their being aware of it.

 

After Prospero, the deposed Duke of Milan and a magician, in Shakespeare's The Tempest.

 _____________________________________________

TIP OF THE WEEK

 

Wait, someone can influence us without us being aware of it?


The economy had gone procumbent before the pandemic panic.


Like the slope of the yield curve, SBA 7(a) loan approval volume has been prospicient about the direction of the economy.


For the fiscal year ending September 30th, 2018 SBA 7(a) loan volume declined 0.3% while for the last fiscal year ending September 30th, 2019 it was off 9%.


Through February of 2020 it was 10% lower than the similar year ago period.   Distracted by the promethean and profligate Paycheck Protection Program SBA 7(a) loan volume is now off 14% compared to a year ago.

 

Just for fun I calculated the correlation coefficient between SBA 7(a) loan volume and GDP for over nine years using the Microsoft CORREL function.  It came out to a statistically significant 0.86.

As SBA reiterated with SBA Policy Notice 5000-20011, if a potential 7(a) borrower is not operational, no disbursement on their loan can be made until they begin operating again.

According to economists at the National Bureau of Economic Research it was NOT government shutdowns and lockdowns that caused the COVID-19 pandemic panic.  Instead the public’s fear of infection is a stronger influence.

These economists conclude that repealing restrictions is not a particularly powerful tool for restarting growth so long as individuals continue to fear infection.

If you would like a copy of the NBER working paper, FEAR, LOCKDOWN, AND DIVERSION: COMPARING DRIVERS OF PANDEMIC ECNOMIC DECLINE 2020, let me know.

__________________________________________

Indices:

PRIME RATE= 3.25%

________________________________________

SBA 504 Loan Debenture Rate for August

For 20 year debentures, the debenture rate is only 0.90% but note rate is 0.917% and the effective yield is 2.214%.

For 25 year debentures, the debenture rate is only 1.01% but note rate is 1.025% and the effective yield is 2.269%.

_______________________________________________

AHEAD OF THE YIELD CURVE

 

Another 1.763 million jobs were added back to the economy for the month of July.

 

Or were they?

 

The mild improvement in hiring was a bit weaker than it appeared. The government’s process of seasonal adjustments showed an exaggerated increase in school employment.

 

Many school workers such as bus drivers and cafeteria workers who would normally be laid off in July were sent home after schools closed early in the spring. The government’s normal process of seasonal adjustments made it look like hiring rose simply because those layoffs did not take place in July as usual.

 

The seasonal adjustment is estimated with past data. The problem is what happens when the seasonal pattern is thrown off by something like, you know, a pandemic

 

This year the seasonal adjustment factor added 1.12 million jobs in July.  These are not real jobs but just on paper.

 

The true payroll number is much, much closer to zero.

 

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

 

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.

 

The number of employed, at 143.5 million, is still 15.3 million below February in what will be a widely cited assessment of this report and the general status of recovery for the labor market.

 

The U.S. shed more than 22 million jobs during the height of the pandemic. So far it’s only restored about 9.3 million, leaving more than half of the Americans who lost their jobs in the lurch.

 

What’s more, an even larger 31 million people were collecting unemployment benefits in mid-July based on the most recent numbers available.

 

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

 

The auction amount has increased over 30% to $26 billion due to higher borrowing needs.  At last month’s auction, the high yield was awarded at 1.330 percent, down 12 basis points from last month's auction rate and just a basis point above the record low set in March.

 

Procellous proditmania proliferates.

 

__________________________________________

OFF BASE

 

While Prospero is the main character in Shakespeare’s The Tempest, the play’s most famous quote is from his scheming brother Antonio when he states: "What's past is prologue".

 

What’s past is prologue is the idea that history sets the context for the present. The quotation is engraved on the National Archives Building in Washington, DC.

 

Past is indeed prologue as pandemics and plagues have raged throughout history.  Shakespeare’s greatest works happened as the plagues decimated London, Thucydides wrote the Peloponnesian War during the Athenian Plague and Hemingway while quarantined during the Great Influenza wrote The Sun Also Rises.

Monday, July 6, 2020

The SBA and PROsopography


Prosopography
pros-uh-PAH-gruh-fee
A study of people in a group, identifying patterns, connections, etc.: a collective biography.

From German Prosopographie, from Latin prosopographia, from Greek prosopon (face, mask), from pros- (facing) + ops (eye) + -graphy (writing).


_____________________________________________
TIP OF THE WEEK

The prosopography of SBA borrowers and lenders proliferates with protean promulgations.

A Promethean $342,277,999,103 in round 1 of the Payroll Protection Program disappeared seemingly overnight with a profligate lack of being prospicient.

Proditomania with round 2 of PPP caused an extension of the covered period from 8 weeks to 24 weeks and an extension of PPP availability until August 8th.

Last week it was also announced that the California Infrastructure and Economic Development Bank is providing a Disaster Relief Loan Guarantee Program even if a small business borrower had previously obtained a PPP loan or a SBA Economic Injury loan.

__________________________________________

Indices:
PRIME RATE= 3.25%
________________________________________
SBA 504 Loan Debenture Rate for June
For 20 year debentures, the debenture rate is only 1.21% but note rate is 1.23325% and the effective yield is 2.528%.
For 25 year debentures, the debenture rate is only 1.34% but note rate is 1.35995% and the effective yield is 2.602%.
_______________________________________________
AHEAD OF THE YIELD CURVE

The prosopography of the Federal Reserve Board is protean.

Take for example its recent discussion on adopting a yield curve control policy as reflected in its minutes from its last meeting on monetary policy.

Combining a yield-curve-control policy with large-scale asset purchases is not without precedent.

In early 1942, shortly after the United States declared war, the Fed effectively abdicated its responsibility for monetary policy despite its concern about inflation and focused instead on helping the Treasury finance the conflict.

The Fed would maintain a yield curve that was both low and relatively steep. The low rates kept the Treasury’s borrowing costs down, while a firmly harnessed term structure convinced investors that waiting for higher yields was pointless and that the risk of capital loss from holding longer-term securities was small.

The policy was successful in terms of managing the yield curve, and that’s certainly good news for central banks today.  The Fed’s wartime operations, however, proved dangerously difficult to reverse once the war had passed. Yield-curve control gave the Treasury substantial influence over monetary policy and highlighted the major effect that monetary policies had on the cost of financing the government’s huge debts.

Keep your eyes and ears open for this Thursday's $19 billion 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

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.

At last month's auction, results were soft causing the yield to rise to 1.450%.  This was 10.8 basis points higher than May's auction and 12.2 basis points above the record low posted in March.

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


__________________________________________
OFF BASE

Dr. Anthony Fauci used our word "protean" in a news conference on June 26, 2020.

For those of you that don't remember what protean means, it means assuming many forms: variable.   If this is starting to come back to you it was our word for the month back in October.

Dr. Fauci’s actual comment was "I have never seen anything that is so protean in its ability to make people sick or not" as coronavirus.

Let me know if you hear him mention prosopography or proxemics.