Friday, January 25, 2013

The SBA and retrodiction


retrodiction

ret-roh-DIK-shuhn 

Using present information to make an assertion about the past; an instance of such an assertion.

From Latin retro- (back) + dicere (to say).

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TIP OF THE WEEK 

Loan volume is way up compared to the prior quarter a year ago as more and more lenders and borrowers seek SBA guaranteed financing.

SBA 7(a) loans totaled $4,173,790,000 for the three month period ending December 31, 2012.  That a 21% increase compared to the last calendar quarter of 2011 ($3,443,723,000)!

The correlation of SBA 7(a) loan approvals with our nation's economic performance appears to be quite strong.

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

SBA 7(a) loans can be used for real estate purchase, real estate debt refinance, business debt refinance, business acquisition, working capital, and equipment purchase.

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate January 2012 = 3.21%
SBA Fixed Base Rate January 2012 = 4.59%
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Debenture Rate for January

The debenture rate is 2.13% but note rate is 2.168% and effective yield is only 4.212%.

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AHEAD OF THE YIELD CURVE 
Here is some retrodiction.

I guess the recession was my fault.  I got a little behind in my paperwork.

If you remember, the economy peaked in December of 2007 and then plunged like a rollercoaster.

SBA 7(a) loan volume foreshadowed this drop in gross domestic product. 

SBA 7(a) loan approvals peaked at $15,223,526,000 for the fiscal year ending September 30, 2005. 

They then dropped to $14,525,100,000 for the fiscal year ending September 30, 2006. 

Approvals continued to drop over the next twelve months to $14,292,141,000.  

SBA 7(a) loan approval volume continued to fall by more than 48 percent. 

The drop in economic activity soon followed.

Here is what GDP has been doing and this week’s interesting little table of data:

3rd quarter 2012:             3.1%
2nd quarter 2012:          1.3%
1st quarter 2012:            2.0%
4th quarter 2011:            4.1%
3rd quarter 2011:           1.30%
2nd quarter 2011:           1.30%
1st quarter 2011:             0.4%
4th quarter 2010:           3.1%
3rd quarter 2010:           2.6%
2nd quarter 2010:          1.7%
1st quarter 2010:            3.7%
4th quarter 2009:           5.6%
3rd quarter 2009:          2.2%
2nd quarter 2009:          (0.7)%
1st quarter 2009:            (6.4)%

What does this mean?

I don’t know.

Enhancements to the SBA 7(a) loan program in 2009 caused the volume of SBA 7(a) loans to increase significantly.

With increases in SBA 7(a) loan approvals, the economy soon recovered.

The prescience nature of SBA 7(a) loan volume with respect to the gross domestic product leads one to the inevitable conclusion that SBA 7(a) loans contribute positively to gross domestic product.

Keep in mind that the correlation coefficient between SBA 7(a) loan volume and GDP is a statistically significant 0.86.

Keep your eyes and ears open for Wednesday’s report from the Bureau of Economic Analysis on 4th quarter GDP.  It comes on the same day as the Federal Reserve’s meeting on monetary policy concludes.

Over the past month, the yield curve has gotten noticeably steeper, with long rates moving up and short rates barely budging.

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.  A steeper yield curve indicates strong growth. 

According to the Federal Reserve Bank of Cleveland, projecting forward using past values of the slope of the yield curve and GDP growth suggests that real GDP will grow at about a 0.6 percent rate over the next year.

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OFF BASE
Our next holiday is Washington’s Birthday. 

By the way, officially it is Washington’s Birthday and NOT “President’s Day.” 

In 1968, Congress passed the Uniform Monday Holidays Act, which moved the official observance of Washington's Birthday from February 22nd to the third Monday in February.  An early draft of the Uniform Monday Holiday Act would have renamed the holiday to "Presidents' Day" to honor the birthdays of both Washington and Lincoln, since Lincoln’s is February 12th.  This proposal however failed in committee and the bill as voted on and signed into law on June 28th 1968, kept the name Washington's Birthday.

Not only is Lincoln not getting his due, but Ronald Reagan is also being shortchanged.  His birthday is February 6th. 

Obviously the only equitable way to remedy this grievous oversight is to give each of these great Presidents their own birthday holidays.   Keeping in the spirit of the Uniform Monday Holidays Act, we could celebrate Reagan’s on the first Monday in February, Lincoln’s on the second Monday in February, and George still gets the third Monday.

This trifecta of Presidential birthday holidays would be our last hurrah until the brink of summer. 

According to the Federal Reserve, the next federally recognized holiday is not until Memorial Day.  That’s not until the end of May. 

Three whole months away; one forth of the year. 

Thursday, January 17, 2013

SBA 504 Debenture Rate


Debenture Rate for January

The debenture rate is 2.13% but note rate is 2.168% and effective yield is only 4.212%.

Sunday, January 6, 2013

The SBA and addlepated


addlepated

(AD-l-pay-tid)

Confused; eccentric; flustered.

From addle (to muddle or confuse), from adel (rotten) + pate (head).

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TIP OF THE WEEK 

Don’t be addlepated about SBA loans.

Even with potential fiscal cliff spending cuts, the SBA should fare better than most agencies, because Congress increased the subsidy it needs to guarantee loans to small businesses. 

That means the SBA should be able to back up to $16 billion in loans this year with SBA 7(a) loans.

SBA 7(a) loans can be used for real estate purchase, real estate debt refinance, business debt refinance, business acquisition, working capital, and equipment purchase.

______________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate January 2012 = 3.21%
SBA Fixed Base Rate January 2012 = 4.59%
________________________________________

Debenture Rate for December

The debenture rate is 1.93% but note rate is 1.96% and effective yield is only 4.009%.

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AHEAD OF THE YIELD CURVE 

The addlepated economy ended the year with payrolls rising by 155,000 workers for the month of December.  This follows a revised 161,000 advance in November.

Here is a summary of net monthly payroll employment and this week’s interesting little table of data:

December 155,000
November 161,000
October 137,000
September 114,000
August 142,000
July 181,000
June 45,000
May 77,000
April 68,000
March 143,000
February 240,000
January 243,000
2011
December 203,000
November 157,000
October 112,000
September 158,000
August 104,000
July 127,000
June 20,000
May 25,000
April 232,000
March 194,000
February 235,000
January 68,000
2010
December 121,000
November 93,000
October 210,000
September (41,000)
August (1,000)
July (66,000)
June (175,000)
May 431,000
April 218,000
March 230,000
February (36,000)
January (26,000)
2009
December (150,000)
November (11,000)
October (111,000)
September (215,000)
August (201,000)
July (304,000)
June (443,000)
May (322,000)
April (504,000)
March (699,000)
February (651,000)
January (655,000)
2008
December (681,000)
November (597,000)
October (423,000)
September (403,000)
August (127,000)
July (67,000)
June (100,000)
May (47,000)
April (67,000)
March (88,000)
February- (83,000)
January- (76,000)

What does all this mean?

I don’t know.

1.9 million jobs were added last year compared to 2.1 million the year before. 

8.7 million jobs were lost in the recession and so far 4.7 million jobs have been added in the last three years. 

According to the Bureau of Labor Statistics, there are still well over 4 million workers who have been unemployed for more than 26 weeks and still want a job.

Keep your eyes and ears open for Thursday’s sale of 30 year Treasury bonds.  At last month’s sale, the auction of 30-year bonds drew a yield of 2.917%.  In November, the yield was 2.82%.    

On Friday, the 30 year Treasury yield was up to 3.08%. 

If a 30 year interest rate of 3.08% sounds low, it is.  Adjusted for inflation, it comes in at just over ½ percent. 

The real interest rate for a 10 year Treasury note is -0.55%.

 Yes, that's a negative sign there. Investors are giving us $100 now and only asking for $99.45 a decade from now.  Not too shabby.

Our addlepated political debate misses the point- the risk is we're not borrowing enough now, not that we're borrowing too much.

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OFF BASE

Feeling addlepated about a full work week after taking time off for Christmas and New Year’s?

Another holiday is almost here. 

Monday, January 21th is Martin Luther King’s Birthday. Actually his birthday is January 15th but thanks to the Uniform Monday Holidays Act, we recognize it on the 21th.

According to the Federal Reserve, here are the holidays for 2012:

Birthday of Martin Luther King, Jr. January 21
Washington's Birthday February 18
Memorial Day May 27
Independence Day July 4
Labor Day September 2
Columbus Day October 14
Veterans Day November 11
Thanksgiving Day November 28
Christmas Day December 25