The SBA and PROficuous

proficuous

pruh-FICK-yuh-wuhss

Profitable; advantageous; useful

from Latin proficuus beneficial

 

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TIP OF THE WEEK

 

SBA has propounded a new 7(a) Working Capital Pilot (WCP) Program.   Its effective date will probably coincide with the release of another SBA Standard Operating Procedure.

 

It is promulgated to provide flexibilities bridging the gap between the unique rules and limitations of other SBA 7(a) guaranteed line of credits.

 

Its fee structure will be modeled after SBA’s 7(a) Export Working Capital Program (EWCP).

 

Proficuously SSBCI and SBLGP guarantees can now be utilized for revolving lines of credit.

 

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Indices:

PRIME RATE= 8.50%

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SBA 504 Loan Debenture Rate for April

 

For 20 year debentures, the debenture rate is only 5.38% but note rate is 5.45619% and the effective yield is 6.767%.

For 25 year debentures, the debenture rate is only 5.38% but note rate is 5.43481% and the effective yield is 6.695%.

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AHEAD OF THE YIELD CURVE

 

Prospicient prognostications proliferate with our procurators of interest rates, the Federal Reserve.

 

The Fed made no change to the fed funds target rate at its last meeting on monetary policy

 

The only tweak in the language of its policy announcement is concerning job gains which "remained strong" relative to the January assessment and which removes the January reference to moderation relative to 2023.

 

Its next meeting is Tuesday April 30th and concludes May 1st.

 

30-Day Fed Fund futures pricing data have long been relied upon to express the market’s views on the likelihood of changes in U.S. monetary policy.

 

Here are the Futures Implied Fed Funds

Apr-30-2024       5.32750

Jun-28-2024        5.29500

Sep-30-2024       5.16500

Dec-31-2024       4.99000

Mar-31-2025      4.82000

Sep-30-2025       4.50000

Mar-31-2026      4.13500

 

What does all this mean?

 

I don't know.

 

In its statement, the Fed maintained that inflation remains elevated.

 

The long end of the yield curve prognosticates inflationary expectations and ultimately market rate expectations.

 

Last week’s auction of 30 year treasury bonds the high yield was 4.671 percent, up from 4.331 percent a month ago.

 

More procellous promulgations on the yield curve’s continued inversion is profligate.

 

 

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OFF BASE

 

April 22nd is Earth Day.

 

It would be proficuous to hug a tree or catch a wave.

The SBA and PROpulsive

propulsive

pro·pul·sive

having the quality of driving or pushing forward

 

Latin prōpulsus, past participle of prōpellere "to push or thrust forward, compel to go onward"

 

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TIP OF THE WEEK

 

There is a propulsive increase in the alternative size standard for SBA loan applicants.

 

Effective March 18, 2024, under the alternative size standard, a business, including any affiliates, will be considered small if its tangible net worth is not in excess of $20 million (up from $15 million), and its average net income after Federal income taxes (excluding any carry over losses) for the preceding two completed fiscal years is not in excess of $6.5 million (up from $5 million).

 

This is a 34.46 percent adjustment for inflation that has occurred since the establishment of the statutory alternative size standard in 2010.

 

Prodigious.

 

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Indices:

PRIME RATE= 8.50%

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SBA 504 Loan Debenture Rate for March

 

For 20 year debentures, the debenture rate is only 4.98% but note rate is 5.05255% and the effective yield is 6.365%.

For 25 year debentures, the debenture rate is only 4.97% but note rate is 5.022257% and the effective yield is 6.286%.

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AHEAD OF THE YIELD CURVE

 

Propulsive and propitious.

 

Jobless claims remain steady and low, indicative of strong demand for labor and posing no threat to restrictive monetary policy.

Initial claims fell 1,000 in the March 14 week to a lower-than-expected 209,000 that pulls the 4-week average slightly lower to 208,000, among the lowest readings so far this year.

 

Total nonfarm payroll employment rose by 275,000 in February.

 

The monthly average for nonfarm payrolls for the first quarter to-date is 252,000 compared to 212,000 for the fourth quarter 2023.

 

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

 

2023     2,700,000

2022      4,810,000

2021       7,270,000

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.

 

One profligate propaedeutic has been that there is a trade-off between jobs and inflation.

 

On Thursday, the 30 year Treasury auction high yield was at at 4.331 percent versus 4.360 percent in February and 4.229 percent in January.

 

The Federal Reserve looks closely at both industrial production and capacity utilization for prospicient prognostications.

 

The Federal Reserve watches this report closely to see if production constraints are threatening to cause inflationary pressures.

 

Normally the Fed does not feel there are inflationary pressures until the capacity utilization rate is about 82%.

 

Capacity utilization was unchanged at 78.3 percent in February from January.

 

In February, manufacturing capacity rose to 77.0 percent from 76.4 percent in the prior month, mining to 93.8 percent after 91.7 percent, with utilities down to 67.8 percent after 73.5 percent.

 

Utilities output was lower due to milder weather conditions after colder weather in January. The index for electricity fell 6.5 percent in February with natural gas utilities down 13.0 percent.

 

The Federal Reserve’s next meeting on monetary policy is March 19th and 20th.

 

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OFF BASE

 

One of the most famous prognostications of all time was from the soothsayer in Shakespeare’s Julius Caesar in Act I, scene 2, line 103 when he said “Beware the ides of March.”

 

So what the heck is an ide?

 

The Ides Of March refers to how the Romans kept track of the days in a month, which is quite different from how we do it. While we count the days sequentially from the first day all the way to the last day, the Romans used a different system. They counted backward from three fixed points of the month. For instance, the Nones usually fell on the 7th, the Ides on the 15th and the Kalends was the beginning of the month.

 

It is now known as the day Caesar was assassinated.  After being warned, Caesar took the prophecy very lightly. In fact, as he passed the seer on his way to the Theater of Pompey where he ends being stabbed to death by Brutus and 60 other Senators,  Caesar commented that “The Ides of March have come.” To that, the seer is reported to have replied, “Aye, Caesar; but they have not gone.”

The SBA and Prodromuses

Prodromuses

 

PROH-druh-muhss

 

-A precursor or harbinger; also a warning event.

-An introductory or preliminary book or treatise.

-(medicine) An early sign or symptom (or set of signs and symptoms) warning of the onset of a disease.

 

New Latin, from Greek prodromos precursor

 

 

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TIP OF THE WEEK

 

A prodromuses, in the context of an introductory treatise, for SBA Standard Operating Procedures can be found in the Informational Notices that coincide with the release of the SOP.   Those two notices 5000-852522 and 5000-848663 total 12 pages and nicely summarize the changes to the new SOP that totals 430 pages.

 

Unlike SBA guarantees, the guidance for SSBCI guarantees does not require a prodromuses as the SBLGP Policy Manual is only 22 pages.

 

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Indices:

PRIME RATE= 8.50%

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SBA 504 Loan Debenture Rate for February

 

For 20 year debentures, the debenture rate is only 5.11% but note rate is 5.18370% and the effective yield is 6.496%.

For 25 year debentures, the debenture rate is only 5.07% but note rate is 5.12312% and the effective yield is 6.385%.

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AHEAD OF THE YIELD CURVE

 

A produmuses, in the context of a harbinger or precursor can be the capacity utilization rate.

 

The Federal Reserve looks closely at both industrial production and capacity utilization for prospicient prognostications.

 

The industrial sector, together with construction, accounts for the bulk of the variation in national output over the course of the business cycle.

 

The capacity utilization rate provides an estimate of how much factory capacity is in use.

 

The Federal Reserve watches this report closely to see if production constraints are threatening to cause inflationary pressures.

 

Normally the Fed does not feel there are inflationary pressures until the capacity utilization rate is about 82%.

 

Keeps your eyes and ears open for this week’s release 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- 79.7

2020- 74.5

2021- 76.4

2022- 80.0

 

 

Last month, it was reported that capacity utilization was unchanged in December at 78.6 percent

 

What does all this mean?

 

I don’t know.

 

At its last meeting on monetary policy, the Federal Reserve said that they would not be reducing interest rates any time soon.

 

In its statement the paragraph regarding the US banking system is completely excised.

Clearly the Fed feel the troubles in the banking industry of last March and the potential problems with liquidity are no longer a big risk.

 

The statement offered a strong warning that the FOMC is not yet ready to declare victory in achieving price stability.

 

There was new language in the statement that said “The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks."

 

Last week’s auction of 30 year treasury bonds saw the high yield awarded at 4.360 percent versus 4.229 percent a month ago.

 

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OFF BASE

 

Today, February 12th is Abraham Lincoln’s birthday.    It is also Charles Darwin’s birthday as well as the Monday after the Super Bowl.

 

It is not however a holiday.    We only celebrate Washington’s birthday.

 

This upcoming three day weekend is officially referred as Washington’s Birthday.

 

The effort to rename the holiday Presidents Day, intended to honor the birthdays of both Washington and Lincoln, failed in Congressional committee.

The bill, which was then signed into law on June 28, 1968, specified that the Federal holiday would retain the name Washington’s Birthday.

The Uniform Monday Holiday Act of January 1, 1971, established its observance on the third Monday in February.

 

Enjoy the long weekend as the next holiday is not until Memorial Day.

The SBA and PRObabilism

probabilism

prob·a·bi·lism ˈprä-bə-bə-ˌli-zəm

a theory that certainty is impossible especially in the sciences and that probability suffices to govern belief and action from Latin probare, to test, approve

 

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TIP OF THE WEEK

 

Probalilism proliferates with the protean promulgations proscribing procedures with SBA guarantees.

 

Prodition with any SBA 7(a) or 504 loan delayed because of an ETRAN error code that cannot be resolved in a timely manner can instead utilize a SSBCI guarantee.

 

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Indices:

PRIME RATE= 8.50%

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SBA 504 Loan Debenture Rate for December

 

For 20 year debentures, the debenture rate is only 5.23% but note rate is 5.30472% and the effective yield is 6.707%.

For 25 year debentures, the debenture rate is only 5.28% but note rate is 5.33413% and the effective yield is 6.594%.

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AHEAD OF THE YIELD CURVE

 

Propitious prognostications.

 

The U.S. economy added more than 2.6 million jobs for the third consecutive year—a feat that hasn't been accomplished since the most recent soft landing in the 1990s.

 

Employers added 2.7 million jobs last year. That was down from 4.8 million in 2022 as a post-COVID surge in the economy faded.

 

At last month’s auction of 30 year treasury bonds, the high yield was awarded at 4.344 percent, down from 4.769 percent last month and from 4.837 percent two months ago.

 

On Friday, the 30 year Treasury bond closed at 4.20 percent.

 

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:

 

Here is what the 30 year Treasury bond has been doing and this week’s interesting little table:

2014- 3.97

2015- 2.91

2016- 2.32

2017- 3.16

2018- 3.13

2019- 2.594

2020- 1.216

2021- 1.88

2022- 2.375

2023- 3.741

 

 

So what does all this mean?

 

I don’t know.   Probabilism.

 

Why is the 30 year yield dropping?

 

The offering of $21 billion is less than the record high of $27 billion in August 2021, over two years ago, when rates were half their current level.

 

This is consistent with  a prior Treasury Department announcement that it would slow the pace of increases in its longer-dated debt auctions in the November 2023 to January 2024 quarter.

 

This slightly reduced supply of longer term debt could drive down longer term rates.   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.

 

Minutes from the Fed’s last meeting also said: "The easing in financial conditions reversed some of the tightening that occurred over the summer and much of the fall."

 

Easier financial conditions were in part due to declines in nominal Treasury securities yields, "more so at longer maturities", "as investors appeared to interpret incoming data as reducing risks of prolonged inflation pressures.”

 

The Federal Reserve’s next meeting starts on January 30th.

 

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OFF BASE

 

How to deal with probabilism?

 

In his 1936 essay “The Crack-Up,” F. Scott Fitzgerald writes that “the test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.”

 

Here is something that is certain.   A three day weekend approaches.

 

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

 

Birthday of Martin Luther King, Jr. January 15 Washington's Birthday February 19 Memorial Day May 27

Juneteenth      June 19

Independence Day July 4

Labor Day September 2

Columbus Day October 14

Veterans Day November 11

Thanksgiving Day November 28

Christmas Day December 25