tag:blogger.com,1999:blog-46912936944009530192024-03-18T08:33:40.481-07:00The SBA and PROJim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.comBlogger583125tag:blogger.com,1999:blog-4691293694400953019.post-20460452071261319832024-03-18T08:33:00.000-07:002024-03-18T08:33:03.920-07:00The SBA and PROpulsive<p>propulsive</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">pro·pul·sive<o:p></o:p></p>
<p class="MsoPlainText">having the quality of driving or pushing forward<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Latin prōpulsus, past participle of prōpellere "to
push or thrust forward, compel to go onward"<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">There is a propulsive increase in the alternative size
standard for SBA loan applicants.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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).<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This is a 34.46 percent adjustment for inflation that has
occurred since the establishment of the statutory alternative size standard in
2010.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Prodigious.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 8.50%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for March<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 4.98%
but note rate is 5.05255% and the effective yield is 6.365%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 4.97%
but note rate is 5.022257% and the effective yield is 6.286%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Propulsive and propitious.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Jobless claims remain steady and low, indicative of
strong demand for labor and posing no threat to restrictive monetary policy.<o:p></o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Total nonfarm payroll employment rose by 275,000 in
February.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The monthly average for nonfarm payrolls for the first
quarter to-date is 252,000 compared to 212,000 for the fourth quarter 2023.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here are the latest jobs numbers from the Bureau of Labor
Statistics.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">2023<span style="mso-spacerun: yes;"> </span>2,700,000<o:p></o:p></p>
<p class="MsoPlainText">2022<span style="mso-spacerun: yes;"> </span>4,810,000<o:p></o:p></p>
<p class="MsoPlainText">2021<span style="mso-spacerun: yes;">
</span>7,270,000<o:p></o:p></p>
<p class="MsoPlainText">2020<span style="mso-spacerun: yes;"> </span>-9,370,000<o:p></o:p></p>
<p class="MsoPlainText">2019<span style="mso-spacerun: yes;"> </span>2,108,000<o:p></o:p></p>
<p class="MsoPlainText">2018<span style="mso-spacerun: yes;"> </span>2,679,000<o:p></o:p></p>
<p class="MsoPlainText">2017<span style="mso-spacerun: yes;"> </span>2,110,000<o:p></o:p></p>
<p class="MsoPlainText">2016<span style="mso-spacerun: yes;"> </span>2,160,000<o:p></o:p></p>
<p class="MsoPlainText">2015<span style="mso-spacerun: yes;"> </span>2,740,000<o:p></o:p></p>
<p class="MsoPlainText">2014<span style="mso-spacerun: yes;"> </span>3,116,000<o:p></o:p></p>
<p class="MsoPlainText">2013<span style="mso-spacerun: yes;"> </span>2,074,000<o:p></o:p></p>
<p class="MsoPlainText">2012<span style="mso-spacerun: yes;"> </span>2,193,000<o:p></o:p></p>
<p class="MsoPlainText">2011<span style="mso-spacerun: yes;"> </span>2,103,000<o:p></o:p></p>
<p class="MsoPlainText">2010<span style="mso-spacerun: yes;"> </span>1,022,000<o:p></o:p></p>
<p class="MsoPlainText">2009<span style="mso-spacerun: yes;"> </span>-5,052,000<o:p></o:p></p>
<p class="MsoPlainText">2008<span style="mso-spacerun: yes;"> </span>-3,617,000<o:p></o:p></p>
<p class="MsoPlainText">2007<span style="mso-spacerun: yes;"> </span>1,115,000<o:p></o:p></p>
<p class="MsoPlainText">2006<span style="mso-spacerun: yes;"> </span>2,071,000<o:p></o:p></p>
<p class="MsoPlainText">2005<span style="mso-spacerun: yes;"> </span>2,484,000<o:p></o:p></p>
<p class="MsoPlainText">2004<span style="mso-spacerun: yes;"> </span>2,019,000<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don't know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">One profligate propaedeutic has been that there is a
trade-off between jobs and inflation.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve looks closely at both industrial
production and capacity utilization for prospicient prognostications.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve watches this report closely to see if
production constraints are threatening to cause inflationary pressures.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Normally the Fed does not feel there are inflationary
pressures until the capacity utilization rate is about 82%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Capacity utilization was unchanged at 78.3 percent in
February from January.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve’s next meeting on monetary policy is
March 19th and 20th.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.”<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">So what the heck is an ide?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">It is now known as the day Caesar was assassinated.<span style="mso-spacerun: yes;"> </span>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,<span style="mso-spacerun: yes;"> </span>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.”<o:p></o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-68146693580762371052024-02-12T08:09:00.000-08:002024-02-12T08:09:26.863-08:00The SBA and Prodromuses<p>Prodromuses</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">PROH-druh-muhss<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">-A precursor or harbinger; also a warning event.<o:p></o:p></p>
<p class="MsoPlainText">-An introductory or preliminary book or treatise.<o:p></o:p></p>
<p class="MsoPlainText">-(medicine) An early sign or symptom (or set of signs and
symptoms) warning of the onset of a disease.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">New Latin, from Greek prodromos precursor<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<span style="mso-spacerun: yes;"> </span>Those two notices 5000-852522 and
5000-848663 total 12 pages and nicely summarize the changes to the new SOP that
totals 430 pages.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Unlike SBA guarantees, the guidance for SSBCI guarantees
does not require a prodromuses as the SBLGP Policy Manual is only 22 pages.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 8.50%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for February<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 5.11%
but note rate is 5.18370% and the effective yield is 6.496%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 5.07%
but note rate is 5.12312% and the effective yield is 6.385%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">A produmuses, in the context of a harbinger or precursor
can be the capacity utilization rate.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve looks closely at both industrial
production and capacity utilization for prospicient prognostications.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The industrial sector, together with construction,
accounts for the bulk of the variation in national output over the course of
the business cycle.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The capacity utilization rate provides an estimate of how
much factory capacity is in use.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve watches this report closely to see if
production constraints are threatening to cause inflationary pressures.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Normally the Fed does not feel there are inflationary
pressures until the capacity utilization rate is about 82%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Keeps your eyes and ears open for this week’s release on
industrial production and capacity utilization.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is what capacity utilization has been doing and this
week interesting little table of data:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">2007- 81.5<o:p></o:p></p>
<p class="MsoPlainText">2008- 79.9<o:p></o:p></p>
<p class="MsoPlainText">2009- 66.9<o:p></o:p></p>
<p class="MsoPlainText">2010- 74.8<o:p></o:p></p>
<p class="MsoPlainText">2011- 76.7<o:p></o:p></p>
<p class="MsoPlainText">2012- 79.0<o:p></o:p></p>
<p class="MsoPlainText">2013- 77.8<o:p></o:p></p>
<p class="MsoPlainText">2014- 78.8<o:p></o:p></p>
<p class="MsoPlainText">2015- 76.5<o:p></o:p></p>
<p class="MsoPlainText">2016- 75.4<o:p></o:p></p>
<p class="MsoPlainText">2017- 76.2<o:p></o:p></p>
<p class="MsoPlainText">2018- 78.5<o:p></o:p></p>
<p class="MsoPlainText">2019- 79.7<o:p></o:p></p>
<p class="MsoPlainText">2020- 74.5<o:p></o:p></p>
<p class="MsoPlainText">2021- 76.4<o:p></o:p></p>
<p class="MsoPlainText">2022- 80.0<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Last month, it was reported that capacity utilization was
unchanged in December at 78.6 percent<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don’t know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">At its last meeting on monetary policy, the Federal
Reserve said that they would not be reducing interest rates any time soon.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">In its statement the paragraph regarding the US banking
system is completely excised.<o:p></o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The statement offered a strong warning that the FOMC is
not yet ready to declare victory in achieving price stability.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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."<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Today, February 12th is Abraham Lincoln’s birthday.<span style="mso-spacerun: yes;"> </span>It is also Charles Darwin’s birthday as
well as the Monday after the Super Bowl.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">It is not however a holiday.<span style="mso-spacerun: yes;"> </span>We only celebrate Washington’s birthday.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This upcoming three day weekend is officially referred as
Washington’s Birthday.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The effort to rename the holiday Presidents Day, intended
to honor the birthdays of both Washington and Lincoln, failed in Congressional
committee.<o:p></o:p></p>
<p class="MsoPlainText">The bill, which was then signed into law on June 28,
1968, specified that the Federal holiday would retain the name Washington’s
Birthday.<o:p></o:p></p>
<p class="MsoPlainText">The Uniform Monday Holiday Act of January 1, 1971,
established its observance on the third Monday in February.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Enjoy the long weekend as the next holiday is not until
Memorial Day.<o:p></o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-40427041452271924652024-01-08T09:03:00.000-08:002024-01-08T09:03:17.257-08:00The SBA and PRObabilism<p>probabilism</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">prob·a·bi·lism ˈprä-bə-bə-ˌli-zəm<o:p></o:p></p>
<p class="MsoPlainText">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<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Probalilism proliferates with the protean promulgations
proscribing procedures with SBA guarantees.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 8.50%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for December<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 5.23%
but note rate is 5.30472% and the effective yield is 6.707%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 5.28%
but note rate is 5.33413% and the effective yield is 6.594%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Propitious prognostications.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">On Friday, the 30 year Treasury bond closed at 4.20
percent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Keep your eyes and ears open for this week’s auction of
30 year treasury bonds.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is what the 30 year treasury bond has been doing:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is what the 30 year Treasury bond has been doing and
this week’s interesting little table:<o:p></o:p></p>
<p class="MsoPlainText">2014- 3.97<o:p></o:p></p>
<p class="MsoPlainText">2015- 2.91<o:p></o:p></p>
<p class="MsoPlainText">2016- 2.32<o:p></o:p></p>
<p class="MsoPlainText">2017- 3.16<o:p></o:p></p>
<p class="MsoPlainText">2018- 3.13<o:p></o:p></p>
<p class="MsoPlainText">2019- 2.594<o:p></o:p></p>
<p class="MsoPlainText">2020- 1.216<o:p></o:p></p>
<p class="MsoPlainText">2021- 1.88<o:p></o:p></p>
<p class="MsoPlainText">2022- 2.375<o:p></o:p></p>
<p class="MsoPlainText">2023- 3.741<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">So what does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don’t know.<span style="mso-spacerun: yes;">
</span>Probabilism.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Why is the 30 year yield dropping?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This is consistent with<span style="mso-spacerun: yes;">
</span>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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This slightly reduced supply of longer term debt could
drive down longer term rates.<span style="mso-spacerun: yes;"> </span>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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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."<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.”<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve’s next meeting starts on January
30th.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">How to deal with probabilism?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.”<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is something that is certain.<span style="mso-spacerun: yes;"> </span>A three day weekend approaches.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve has proscribed banks from being open
on the following days:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Birthday of Martin Luther King, Jr. January 15
Washington's Birthday February 19 Memorial Day May 27<o:p></o:p></p>
<p class="MsoPlainText">Juneteenth<span style="mso-spacerun: yes;">
</span>June 19<o:p></o:p></p>
<p class="MsoPlainText">Independence Day July 4<o:p></o:p></p>
<p class="MsoPlainText">Labor Day September 2<o:p></o:p></p>
<p class="MsoPlainText">Columbus Day October 14<o:p></o:p></p>
<p class="MsoPlainText">Veterans Day November 11<o:p></o:p></p>
<p class="MsoPlainText">Thanksgiving Day November 28<o:p></o:p></p>
<p class="MsoPlainText">Christmas Day December 25<o:p></o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-20378129656025925882023-12-18T09:09:00.000-08:002023-12-18T09:09:51.265-08:00The SBA and PROCURATOR <p class="MsoPlainText">Procurator<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">proc·u·ra·tor<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">a person who acts or does business for another<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Latin procurator ‘administrator, finance agent’, from
procurat- ‘taken care of’, from the verb procurare ‘take care of, manage’, from pro- ‘on behalf
of’ + curare ‘see to’.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">With its new Risk Mitigation Framework, SBA has now
become the procurator for all SBA 7(a) lenders, even PLP lenders.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">As a result SBA, not lenders, determine whether an
applicant meets primary eligibility requirements.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">SBA Applicants who obtained an EIDL loan or PPP loan will
often be flagged for potential fraud creating an ETRAN error code.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Any SBA 7(a) loan delayed because of an ETRAN error code
that cannot be resolved in a timely manner can instead utilize a SSBCI
guarantee.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">There is NO guidance on amortization with a SSBCI
guarantee. Lenders can use any
amortization they want.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Amortizing a SSBCI guaranteed loan with a balloon payment
would then be eligible for a subsequent SBA refinance if the ETRAN error code
is eventually resolved.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 8.50%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for December<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 5.23%
but note rate is 5.30472% and the effective yield is 6.707%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 5.28%
but note rate is 5.33413% and the effective yield is 6.594%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Our procurators of interest rates, the Federal Reserve at
their last meeting on monetary policy kept the fed funds rate in its range of
5.25 to 5.50 percent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The most notable change is the insertion of
"any" in the policy outlook which now reads, "In determining the
extent of ANY additional policy firming that may be appropriate to return
inflation to 2 percent over time, the Committee will take into account the
cumulative tightening of monetary policy, the lags with which monetary policy
affects economic activity and inflation, and economic and financial
developments."<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This would strongly suggest that the current tightening
cycle has peaked unless there is something that would prompt policymakers to
rethink it.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here are the Futures Implied Fed Funds<o:p></o:p></p>
<p class="MsoPlainText">Dec-29-2023
5.33000<o:p></o:p></p>
<p class="MsoPlainText">Feb-29-2024
5.29500<o:p></o:p></p>
<p class="MsoPlainText">May-31-2024
4.90500<o:p></o:p></p>
<p class="MsoPlainText">Aug-30-2024
4.44000<o:p></o:p></p>
<p class="MsoPlainText">Nov-29-2024
4.07500<o:p></o:p></p>
<p class="MsoPlainText">May-30-2025
3.42500<o:p></o:p></p>
<p class="MsoPlainText">Nov-28-2025
3.21000<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don't know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">In its statement, the Fed maintained that inflation
remains elevated.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The long end of the yield curve prognosticates
inflationary expectations and ultimately market rate expectations.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Last week’s auction of 30 year treasury bonds the high
yield was 4.344 percent, down from 4.769 percent last month and from 4.837
percent two months ago.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">On Friday the 30 year Treasury yield closed at 4.012.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The drop in yield reflects the month-long easing of
inflation risk.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">More procellous promulgations on the yield curve’s
continued inversion is profligate.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">An inversion of the 3 month treasury bill and 10 year
treasury note began in late October of 2022.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">That makes this one of the deepest and longest inversions
going back to 1982.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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 in about a
year, and yield curve inversions have preceded each of the last eight
recessions (as defined by the NBER).<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Of course, it might not be advisable to take these
numbers quite so literally.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The underlying determinants of the yield spread today are
materially different from the determinants that generated yield spreads during
prior decades.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Differences could arise from changes in international
capital flows and inflation expectations, for example. The bottom line is that
yield curves contain important information for business cycle analysis, but,
like other indicators, should be interpreted with caution.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Christmas this year is on Monday December 25th . It is an official bank holiday according to
the Federal Reserve.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The next Monday is New Year's Day, also a bank holiday.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Happy Holidays!<o:p></o:p></p>
<p> </p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-9894790547928615032023-11-06T08:18:00.001-08:002023-11-06T08:18:02.789-08:00The SBA and PROfess<p>Profess</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">proh-fes</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">-to say or declare (something) openly</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">- to say that you are, do, or feel something when other
people doubt what you say -old-fashioned : to believe in (a particular
religion)<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">from Latin profess- ‘declared publicly’, from the verb
profiteri, from pro- ‘before’ + fateri ‘confess’<o:p></o:p></p>
<p class="MsoPlainText"><br /></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Professed SBA 7(a) lenders can also utilize SSBCI
guarantees.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The U.S. Small Business Administration’s (“SBA”) release
of SOP 50 10 7, effective November 15th, clarifies that<span style="mso-spacerun: yes;"> </span>when loan proceeds are used for multiple
purposes and if 51% or more of the proceeds are used for real estate then the
maximum maturity may be up to 25 years.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Lenders should note that the new SOP does not allow the
51%<span style="mso-spacerun: yes;"> </span>rule to be used when the loan
finances a complete partner buyout or a partial change of ownership, regardless
of whether the business owns real estate.<span style="mso-spacerun: yes;">
</span>This appears to primarily impact an Eligible Passive Company partner
buyout, where the real estate is the primary asset, but the 25 year term will
not be available for these transactions.<span style="mso-spacerun: yes;">
</span>SBA expressly limits the term for partner buyouts to 10 years.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">There is NO guidance on amortization with a SSBCI
guarantee.<span style="mso-spacerun: yes;"> </span>Lenders can use any
amortization they want.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Any SBA 7(a) loan delayed because of an ETRAN error code
that cannot be resolved in a timely manner can instead utilize a SSBCI
guarantee.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 8.50%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for October<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 5.80%
but note rate is 5.879% and the effective yield is 7.276%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 5.82%
but note rate is 5.876% and the effective yield is 7.221%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">At their last meeting on monetary policy and interest
rates, the Federal Reserve professed that “job gains have moderated since
earlier in the year but remain strong.”<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The post-meeting statement was little changed from the
one issued September 20. There were a few tweaks to the language.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Job gains are now said to "have moderated since
earlier in the year" from "slowed in recent months".<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What is the difference between moderated and slowed?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Two days after the Federal Reserve met, the report on
employment for October came out.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here are the latest jobs numbers from the Bureau of Labor
Statistics.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">October<span style="mso-spacerun: yes;"> </span>150,000<o:p></o:p></p>
<p class="MsoPlainText">September 297,000<o:p></o:p></p>
<p class="MsoPlainText">August<span style="mso-spacerun: yes;"> </span>165,000<o:p></o:p></p>
<p class="MsoPlainText">July<span style="mso-spacerun: yes;"> </span>236,000<o:p></o:p></p>
<p class="MsoPlainText">June<span style="mso-spacerun: yes;"> </span>209,000<o:p></o:p></p>
<p class="MsoPlainText">May<span style="mso-spacerun: yes;"> </span>306,000<o:p></o:p></p>
<p class="MsoPlainText">April<span style="mso-spacerun: yes;"> </span>217,000<o:p></o:p></p>
<p class="MsoPlainText">March<span style="mso-spacerun: yes;"> </span>217,000<o:p></o:p></p>
<p class="MsoPlainText">February<span style="mso-spacerun: yes;"> </span>311,000<o:p></o:p></p>
<p class="MsoPlainText">January<span style="mso-spacerun: yes;"> </span>504,000<o:p></o:p></p>
<p class="MsoPlainText">2022<span style="mso-spacerun: yes;"> </span>4,810,000<o:p></o:p></p>
<p class="MsoPlainText">2021<span style="mso-spacerun: yes;">
</span>7,270,000<o:p></o:p></p>
<p class="MsoPlainText">2020<span style="mso-spacerun: yes;"> </span>-9,370,000<o:p></o:p></p>
<p class="MsoPlainText">2019<span style="mso-spacerun: yes;"> </span>2,108,000<o:p></o:p></p>
<p class="MsoPlainText">2018<span style="mso-spacerun: yes;"> </span>2,679,000<o:p></o:p></p>
<p class="MsoPlainText">2017<span style="mso-spacerun: yes;"> </span>2,110,000<o:p></o:p></p>
<p class="MsoPlainText">2016<span style="mso-spacerun: yes;"> </span>2,160,000<o:p></o:p></p>
<p class="MsoPlainText">2015<span style="mso-spacerun: yes;"> </span>2,740,000<o:p></o:p></p>
<p class="MsoPlainText">2014<span style="mso-spacerun: yes;"> </span>3,116,000<o:p></o:p></p>
<p class="MsoPlainText">2013<span style="mso-spacerun: yes;"> </span>2,074,000<o:p></o:p></p>
<p class="MsoPlainText">2012<span style="mso-spacerun: yes;"> </span>2,193,000<o:p></o:p></p>
<p class="MsoPlainText">2011<span style="mso-spacerun: yes;"> </span>2,103,000<o:p></o:p></p>
<p class="MsoPlainText">2010<span style="mso-spacerun: yes;"> </span>1,022,000<o:p></o:p></p>
<p class="MsoPlainText">2009<span style="mso-spacerun: yes;"> </span>-5,052,000<o:p></o:p></p>
<p class="MsoPlainText">2008<span style="mso-spacerun: yes;"> </span>-3,617,000<o:p></o:p></p>
<p class="MsoPlainText">2007<span style="mso-spacerun: yes;"> </span>1,115,000<o:p></o:p></p>
<p class="MsoPlainText">2006<span style="mso-spacerun: yes;"> </span>2,071,000<o:p></o:p></p>
<p class="MsoPlainText">2005<span style="mso-spacerun: yes;"> </span>2,484,000<o:p></o:p></p>
<p class="MsoPlainText">2004<span style="mso-spacerun: yes;"> </span>2,019,000<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don't know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">One profligate propaedeutic has been that there is a
trade-off between jobs and inflation.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Some of the softer gain in October can be attributed to a
decline of 33,200 in manufacturing of motor vehicles and parts while the UAW
strike is active. These jobs will come back once the strike is settled.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Payrolls among service-providers rose 110,000 reflecting
strong gains among education and health services of 89,000.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">In October, the year-over-year change was 2.97 million
jobs.<span style="mso-spacerun: yes;"> </span>Employment was up solidly
year-over-year but has slowed to more normal levels of job growth recently.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">In its statement, the Fed maintained that inflation
remains elevated.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The long end of the yield curve prognosticates
inflationary expectations.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">At the last auction of 30 year treasury bonds, the high
yield was awarded at 4.837 percent, way up from 4.345 percent a month ago and
4.189 percent in August.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Keep your eyes and ears open for the next auction of 30
year treasury bonds this Thursday.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The 30 year treasury bond is currently at yields not seen
since June of 2007.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">So what is the difference between one who professes and a
professor?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Literally, professor derives from Latin as a "person
who professes".<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Their job is to profess what they believe after years of
study and thought on an issue.<o:p></o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-9590386150426377352023-10-02T08:28:00.002-07:002023-10-02T08:29:10.276-07:00The SBA and PROlong<p>Prolong</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">proh-lawng</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">to make something last a longer time</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">from Latin pro "forth" + longus
"long"</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">A continuing resolution prolongs funding the federal
government through November 17, 2023.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Then another continuing resolution or a full year funding
package will need to be passed or the government will profligately go
procumbent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">There is also a propitious promulgation that now the
guarantee fee for SBA 7(a) loans of $1,000,000 or less is 0.00%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For loans over $2,000,000 the State Small Business Credit
Initiative (SSBCI) and State Small Business Loan Guarantee Program offers a
higher percent of guarantee and a lower guarantee fee.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 8.50%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for September<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 5.39%
but note rate is 5.466% and the effective yield is 6.867%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 5.41%
but note rate is 5.464% and the effective yield is 6.812%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve protended interest rates at the fed
funds target rate range at 5.25 percent to 5.50 percent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve description of economic conditions
was described as "solid" which was an upgrade from
"moderate" in their previous release on monetary policy.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Job gains are downgraded slightly as "slowed"
but remaining "strong".<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Employment for the month of September will be released on
Friday.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Keep your eyes and ears open for the Federal Reserve
release on Industrial Production and Capacity Utilization.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve watches manufacturing closely.<span style="mso-spacerun: yes;"> </span>One of the Federal Reserve’s preferred
measures of inflation is the capacity utilization rate.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Normally the Fed is concerned about inflationary
pressures when the capacity utilization rate is about 82%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is what capacity utilization has been doing and this
week interesting little table of data:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">2007- 81.5<o:p></o:p></p>
<p class="MsoPlainText">2008- 79.9<o:p></o:p></p>
<p class="MsoPlainText">2009- 66.9<o:p></o:p></p>
<p class="MsoPlainText">2010- 74.8<o:p></o:p></p>
<p class="MsoPlainText">2011- 76.7<o:p></o:p></p>
<p class="MsoPlainText">2012- 79.0<o:p></o:p></p>
<p class="MsoPlainText">2013- 77.8<o:p></o:p></p>
<p class="MsoPlainText">2014- 78.8<o:p></o:p></p>
<p class="MsoPlainText">2015- 76.5<o:p></o:p></p>
<p class="MsoPlainText">2016- 75.4<o:p></o:p></p>
<p class="MsoPlainText">2017- 76.2<o:p></o:p></p>
<p class="MsoPlainText">2018- 78.5<o:p></o:p></p>
<p class="MsoPlainText">2019- 79.7<o:p></o:p></p>
<p class="MsoPlainText">2020- 74.5<o:p></o:p></p>
<p class="MsoPlainText">2021- 76.4<o:p></o:p></p>
<p class="MsoPlainText">2022- 80.0<o:p></o:p></p>
<p class="MsoPlainText">2023- 79.7<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don’t know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Last month capacity utilization moved up to 79.7 percent,
in line with its long-run (1972–2022) average.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Durables manufacturing nearly ¾ of all manufacturing is
up 0.1 percent in August with some small gains nearly offset by a 5.0 percent
drop in motor vehicles production.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve does not meet again on monetary
policy until Halloween.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This weekend is prolonged!<span style="mso-spacerun: yes;"> </span>A three day weekend comes up thanks to
Columbus Day on October 9th.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Columbus Day is an official Federal holiday recognized by
the Federal Reserve.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Originally celebrated on October 12th to celebrate
Columbus’s arrival in the Americas on October 12th, 1492, the Uniform Monday
Holiday Act moved permanently to a Monday Washington's Birthday, Memorial Day
and Columbus Day as<span style="mso-spacerun: yes;"> </span>federal holidays.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">As a result, Columbus Day is always celebrated on the
second Monday in October.<o:p></o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-42253706702402077652023-09-11T09:55:00.004-07:002023-09-11T09:55:30.119-07:00The SBA and PROtend <p>Protend</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">proh-tend</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">verb (used with object)</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">to stretch forth.<o:p></o:p></p>
<p class="MsoPlainText">to extend in duration; postpone; defer<o:p></o:p></p>
<p class="MsoPlainText">verb (used without object)</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">to stretch forward.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Latin protendere, from pro- + tendere to stretch<o:p></o:p></p>
<p class="MsoPlainText">_____________________________________________</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">SBA has not protended on SBA 7(a) guarantee fees
effective October 1st, 2023.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The new guarantee fees are:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For loans of $1,000,000 or less: 0.00%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For loans of $1,000,001 to $2,000,000: 1.45% of the
guaranteed portion of the loan up to and including $1,000,000, plus 1.70% of
the guaranteed portion of the loan over $1,000,000.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For loans $2,000,001 and greater: 3.50% of the guaranteed
portion of the loan up to and including $1,000,000, plus 3.75% of the
guaranteed portion of the loan over $1,000,000.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The State Small Business Credit Initiative (SSBCI) and
State Small Business Loan Guarantee Program guarantee fee is 2.5% of the
guarantee portion.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 8.50%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for September<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 5.39%
but note rate is 5.466% and the effective yield is 6.867%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 5.41%
but note rate is 5.464% and the effective yield is 6.812%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Will the Federal Reserve protend interest rate increases when
it meets on monetary policy on September 19th and 20th?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Fed policymakers might find the August employment report
in line with their expectations for a cooling labor market.<span style="mso-spacerun: yes;"> </span>The numbers could support a decision to
pause in hiking rates at the September meeting.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Interpreting the August increase there are other factors
to take into account.<span style="mso-spacerun: yes;"> </span>The bankruptcy at
Yellow Corp. led to a 36,700 decline in truck transportation. This will be a
one-off and many of these workers could find jobs elsewhere due to a reported
shortage of drivers.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">On Wednesday the Bureau of Labor Statistics will report
on the consumer price index for last month.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Also on the same day, keep your eyes and ears open for
the Treasury’s auction of $20 billion in 30 year Treasury bonds.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This auction provides the bond market interpretation of
the CPI data.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is what the 30 year Treasury bond has been doing and
this week’s interesting little table:<o:p></o:p></p>
<p class="MsoPlainText">2001- 5.49<o:p></o:p></p>
<p class="MsoPlainText">2002- 5.43<o:p></o:p></p>
<p class="MsoPlainText">2003- ND<o:p></o:p></p>
<p class="MsoPlainText">2004- ND<o:p></o:p></p>
<p class="MsoPlainText">2005- ND<o:p></o:p></p>
<p class="MsoPlainText">2006- 4.91<o:p></o:p></p>
<p class="MsoPlainText">2007- 4.84<o:p></o:p></p>
<p class="MsoPlainText">2008- 4.18<o:p></o:p></p>
<p class="MsoPlainText">2009- 3.89<o:p></o:p></p>
<p class="MsoPlainText">2010- 4.61<o:p></o:p></p>
<p class="MsoPlainText">2011- 2.89<o:p></o:p></p>
<p class="MsoPlainText">2012- 2.77<o:p></o:p></p>
<p class="MsoPlainText">2013- 3.25<o:p></o:p></p>
<p class="MsoPlainText">2014- 3.97<o:p></o:p></p>
<p class="MsoPlainText">2015- 2.91<o:p></o:p></p>
<p class="MsoPlainText">2016- 2.32<o:p></o:p></p>
<p class="MsoPlainText">2017- 3.16<o:p></o:p></p>
<p class="MsoPlainText">2018- 3.13<o:p></o:p></p>
<p class="MsoPlainText">2019- 2.594<o:p></o:p></p>
<p class="MsoPlainText">2020- 1.216<o:p></o:p></p>
<p class="MsoPlainText">2021- 1.88<o:p></o:p></p>
<p class="MsoPlainText">2022- 2.375<o:p></o:p></p>
<p class="MsoPlainText">2023- 3.741<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Wait a minute, why no numbers for 2003, 2004, and 2005?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">So what does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don’t know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The offering of $20 billion is slightly less than the $23
billion last month.<span style="mso-spacerun: yes;"> </span>It had been $18
billion the prior two months.<o:p></o:p></p>
<p class="MsoPlainText">The offering size remains below its record high of $27
billion in August 2021, exactly two years ago, when rates were half their
current level.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Results were good for last month’s 30-year bond auction
as the market continues to show a hearty appetite for Treasury paper.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The high yield was awarded at 4.189 percent, up from
3.910 percent in July.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The 30 year Treasury closed at a yield of 4.34% on
Friday.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Summer protends until the fall equinox on September 22nd.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The word “equinox” comes from Latin aequus, meaning
“equal,” and nox, ”night.” On the equinox, day and night are roughly equal in
length.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">After the autumnal equinox, days become shorter than
nights as the Sun continues to rise later and nightfall arrives earlier. This
ends with the winter solstice, after which days start to grow longer once
again.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-53680942145749301082023-08-14T09:33:00.001-07:002023-08-14T09:33:19.417-07:00The SBA and PROclivity<p>Proclivity</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">proh-kliv-i-tee<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">an inclination or predisposition toward something
especially : a strong inherent inclination toward something objectionable<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">From Latin prōclīvitās tendency, literally, a steep
descent, steepness, equivalent to prōclīv(is) sloping forward, steep (prō-pro-1
+ clīv(us) slope + -is adj. suffix<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">SBA has a proclivity to change things up.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">SBA SOP 50-10-7 was effective August 1st, 2023.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">A technical update has not yet been released clarifying
some issues that arose in the initial version of the SOP.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For example, the new SOP did not include language that
allows a maximum maturity of 25 years when the loan is for mixed purposes and
51% or more of the proceeds is used for real estate.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The State Small Business Credit Initiative (SSBCI) and
State Small Business Loan Guarantee Program has a propensity to keep it
simple.<span style="mso-spacerun: yes;"> </span>Amortization is not based upon
use of proceeds but instead on the cash flow of the borrower.<o:p></o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 8.50%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for August<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 5.13%
but note rate is 5.2039% and the effective yield is 6.609%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 5.15%
but note rate is 5.20364% and the effective yield is 6.554%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What’s the difference between proclivity and propensity?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">More importantly, what’s the difference between modest
and moderate?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve at their last meeting on monetary
policy changed their assessment of the economy from modest to moderate.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Otherwise, the Fed’s statement on monetary policy was
virtually unchanged outside of the language regarding the rate move.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The change was “Recent indicators suggest that economic
activity has been expanding at a moderate pace.”<span style="mso-spacerun: yes;"> </span>Previously everything was at a modest pace.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">“Moderate” is a bit stronger growth than “modest” in the
Federal Reserve's idiosyncratic lexicon.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Does that mean the Federal Reserve will continue to raise
rates at their next meeting in late September?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Fed Fund futures can be prospicient.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Fed Fund futures are a direct reflection of collective
marketplace insight regarding the future course of the Federal Reserve’s
monetary policy.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is a summary of what the market expects for Fed
Funds futures based upon the pit-traded prices at the Chicago Mercantile
Exchange:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">DEC23- 5.41<o:p></o:p></p>
<p class="MsoPlainText">DEC24- 4.25<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don’t know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Results were good for last week’s 30-year bond auction as
the market continues to show a hearty appetite for Treasury paper in the face
of much bigger offerings.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The auction was upsized to $23 billion from $18 billion
in the last two months. The offering size remains below its record high of $27
billion in August 2021, exactly two years ago, when rates were half their
current level.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The high yield was awarded at 4.189 percent, up from
3.910 percent in July.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Keep your eyes and ears open for Wednesday’s release of
the minutes from the Federal Reserve’s last meeting on monetary policy.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The propounding profundity over promulgating moderate or
modest could be procacious prolix.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What’s the difference between propensity and proclivity?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Propensity is an inclination to behave in a particular
way.<span style="mso-spacerun: yes;"> </span>It is from Latin pro- (toward) +
pendere (to weigh).<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Proclivity is derived from a Latin word “pro” and
“clivus.” While “pro” means “forward,” “clivus” means “slope.”<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Thus the term has derived its meaning as “having an
inclination” or “leaning DOWN towards” something.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Proclivity is used more when describing a negative
inclination while “propensity” is used equally for a negative or positive
inclination.<o:p></o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-85995029100501892522023-07-17T09:10:00.002-07:002023-07-17T09:10:25.430-07:00The SBA and PROtocol<p>protocol</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">pro·to·col -ˌkōl,<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">the customs and regulations dealing with diplomatic
formality, precedence, and etiquette.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">an original draft, minute, or record from which a
document, especially a treaty, is prepared.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">from Medieval Latin prōtocollum, from Late Greek
prōtókollon originally, “a leaf or tag attached to a rolled papyrus manuscript
and containing notes as to contents<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">SBA has broken protocol by correcting and clarifying a
new version of its Standard Operating Procedure before it goes into effect.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">SBA SOP 50-10-7 will be effective August 1st, 2023.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">A technical update to SOP 50-10-7 is being released
clarifying some issues that arose in the initial version of the SOP.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">SBA is indicating that any seller carry utilized as a
portion of an equity injection in a business acquisition can not have a balloon
payment.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">In the case of a partial purchase of a business, any
remaining seller that had at least a 20% ownership interest PRIOR to the
transaction must personally guarantee the loan.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The guidance for SSBCI guarantees has also changed
providing more flexibility with debt refinance.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 8.25%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for July<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 5.16%
but note rate is 5.23% and the effective yield is 6.637%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 5.18%
but note rate is 5.23% and the effective yield is 6.583%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What’s the protocol for the Federal Reserve?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Employment rose by another 209,000 in June.<span style="mso-spacerun: yes;"> </span>Or did it?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Employment for April was revised down by 77,000, from
+294,000 to +217,000.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Originally, employment in April was estimated at 253,000
new jobs.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">A month later, April was revised up by 41,000, from
+253,000 to +294,000.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Now, its been knocked down to 217,000 new jobs.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The change for May was revised down by 33,000, from
+339,000 to +306,000.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">With these revisions, employment in April and May
combined is 110,000 lower than previously reported.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here are the latest jobs numbers from the Bureau of Labor
Statistics.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">June<span style="mso-spacerun: yes;"> </span>209,000<o:p></o:p></p>
<p class="MsoPlainText">May<span style="mso-spacerun: yes;"> </span>306,000<o:p></o:p></p>
<p class="MsoPlainText">April<span style="mso-spacerun: yes;"> </span>217,000<o:p></o:p></p>
<p class="MsoPlainText">March<span style="mso-spacerun: yes;"> </span>217,000<o:p></o:p></p>
<p class="MsoPlainText">February<span style="mso-spacerun: yes;"> </span>311,000<o:p></o:p></p>
<p class="MsoPlainText">January<span style="mso-spacerun: yes;"> </span>504,000<o:p></o:p></p>
<p class="MsoPlainText">2022<span style="mso-spacerun: yes;"> </span>4,810,000<o:p></o:p></p>
<p class="MsoPlainText">2021<span style="mso-spacerun: yes;">
</span>7,270,000<o:p></o:p></p>
<p class="MsoPlainText">2020<span style="mso-spacerun: yes;"> </span>-9,370,000<o:p></o:p></p>
<p class="MsoPlainText">2019<span style="mso-spacerun: yes;"> </span>2,108,000<o:p></o:p></p>
<p class="MsoPlainText">2018<span style="mso-spacerun: yes;"> </span>2,679,000<o:p></o:p></p>
<p class="MsoPlainText">2017<span style="mso-spacerun: yes;"> </span>2,110,000<o:p></o:p></p>
<p class="MsoPlainText">2016<span style="mso-spacerun: yes;"> </span>2,160,000<o:p></o:p></p>
<p class="MsoPlainText">2015<span style="mso-spacerun: yes;"> </span>2,740,000<o:p></o:p></p>
<p class="MsoPlainText">2014<span style="mso-spacerun: yes;"> </span>3,116,000<o:p></o:p></p>
<p class="MsoPlainText">2013<span style="mso-spacerun: yes;"> </span>2,074,000<o:p></o:p></p>
<p class="MsoPlainText">2012<span style="mso-spacerun: yes;"> </span>2,193,000<o:p></o:p></p>
<p class="MsoPlainText">2011<span style="mso-spacerun: yes;"> </span>2,103,000<o:p></o:p></p>
<p class="MsoPlainText">2010<span style="mso-spacerun: yes;"> </span>1,022,000<o:p></o:p></p>
<p class="MsoPlainText">2009<span style="mso-spacerun: yes;"> </span>-5,052,000<o:p></o:p></p>
<p class="MsoPlainText">2008<span style="mso-spacerun: yes;"> </span>-3,617,000<o:p></o:p></p>
<p class="MsoPlainText">2007<span style="mso-spacerun: yes;"> </span>1,115,000<o:p></o:p></p>
<p class="MsoPlainText">2006<span style="mso-spacerun: yes;"> </span>2,071,000<o:p></o:p></p>
<p class="MsoPlainText">2005<span style="mso-spacerun: yes;"> </span>2,484,000<o:p></o:p></p>
<p class="MsoPlainText">2004<span style="mso-spacerun: yes;"> </span>2,019,000<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don't know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">One profligate propaedeutic has been that there is a
trade-off between jobs and inflation.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Fed likes to gauge inflationary pressure by looking
at capacity utilization rates.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Normally the Fed does not feel there are inflationary
pressures until the capacity utilization rate is about 82%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Last month capacity utilization moved down to 79.6
percent in May.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The decline in however may not be because manufacturing
and utility production has slowed.<span style="mso-spacerun: yes;">
</span>Instead capacity has grown.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">One of the bright spots in the economy right now is
investment in plants and fixed assets.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Manufacturing capacity expanded about 3/4 percent in 2022
and is expected to grow by 1-1/4 percent in 2023.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Since capacity utilization rates measures output as a
percentage of capacity, if capacity grows faster than output, the capacity
utilization rate would decline.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Keep your eyes and ears open for this week’s Federal
Reserve release on Industrial Production and Capacity Utilization.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve meets on monetary policy next week.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p> </p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Protocol ultimately comes from Late Greek prōtókollon, a
compound noun meaning “the first kóllēma (sheet) on a papyrus roll,”<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">It was formed from prōto-, a combining form of prôtos
“first” and the noun kóllēma “something bound or glued together”.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The plural kollēmata means “sheets of papyrus glued
together to form a roll,”.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">These rolls were usually 20 sheets, averaging 20–26 feet
in length.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">In Medieval Latin prōtocollum acquired the meaning “draft
(of a document), minutes (of a meeting), public register, a document bearing an
official seal.”<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">In the 19th century, it began to be used in reference to
the etiquette observed by the Head of State of France in ceremonies and
relations with other dignitaries and the accepted and customary codes of
behavior in polite society.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">In late 19th-century Russia, protocol ( protokól ) meant
“an official police record of a case or incident,” its meaning in the infamous
“Protocols [ protokóly ] of the Elders of Zion,” first published in Russia in
1903.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">It has since extended in meaning to cover any code of
proper conduct.<o:p></o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-29581623101316825462023-06-12T08:37:00.004-07:002023-06-12T08:37:34.482-07:00The SBA and PROfundity <p>profundity</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">pro·fun·di·ty<o:p></o:p></p>
<p class="MsoPlainText">intellectual depth<o:p></o:p></p>
<p class="MsoPlainText">something profound or abstruse<o:p></o:p></p>
<p class="MsoPlainText">the quality or state of being profound or deep<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">from Latin profunditat-, profunditas depth, from
profundus<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Some profundity with SBA 7(a) loan volume.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Through April 30th SBA 7(a) loan approvals totaled
$14,797,717,000.<span style="mso-spacerun: yes;"> </span>That is almost an 11%
increase from the same period a year ago.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">SBA 7(a) loan approval volume has been prospicient about
the direction of the economy.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<span style="mso-spacerun: yes;"> </span>It came out to a
statistically significant 0.86.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Business acquisitions had accounted for almost 25% of all
7(a) loans three years ago but now account for 20% of the total.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 8.25%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for June<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 4.91%
but note rate is 4.98196% and the effective yield is 6.388%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 4.93%
but note rate is 4.98238% and the effective yield is 6.334%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Profundity from the Federal Reserve’s last statement on
monetary policy when they eliminated the previous language that said, "The
Committee anticipates that some additional policy firming may be
appropriate."<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">They meet this week on June 13 – 14.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Their inflation-fighting patience however is being tested
by the strength of job growth.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Total nonfarm payroll employment increased by 339,000 in
May.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Manufacturing, which has contracted for six straight
months, cut 2,000 jobs.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve watches manufacturing closely.<span style="mso-spacerun: yes;"> </span>One of the Federal Reserve’s preferred
measures of inflation is the capacity utilization rate.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Normally the Fed does not feel there are inflationary
pressures until the capacity utilization rate is about 82%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is what capacity utilization has been doing and this
week interesting little table of data:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">2007- 81.5<o:p></o:p></p>
<p class="MsoPlainText">2008- 79.9<o:p></o:p></p>
<p class="MsoPlainText">2009- 66.9<o:p></o:p></p>
<p class="MsoPlainText">2010- 74.8<o:p></o:p></p>
<p class="MsoPlainText">2011- 76.7<o:p></o:p></p>
<p class="MsoPlainText">2012- 79.0<o:p></o:p></p>
<p class="MsoPlainText">2013- 77.8<o:p></o:p></p>
<p class="MsoPlainText">2014- 78.8<o:p></o:p></p>
<p class="MsoPlainText">2015- 76.5<o:p></o:p></p>
<p class="MsoPlainText">2016- 75.4<o:p></o:p></p>
<p class="MsoPlainText">2017- 76.2<o:p></o:p></p>
<p class="MsoPlainText">2018- 78.5<o:p></o:p></p>
<p class="MsoPlainText">2019- 79.7<o:p></o:p></p>
<p class="MsoPlainText">2020- 74.5<o:p></o:p></p>
<p class="MsoPlainText">2021- 76.4<o:p></o:p></p>
<p class="MsoPlainText">2022- 80.0<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don’t know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Keep your eyes and ears open for this week’s release on
capacity utilization.<span style="mso-spacerun: yes;"> </span>It is the day
after the Federal Reserve meets on monetary policy.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Capacity utilization edged up to 79.7 percent last month,
a rate that is equal to its long-run (1972–2022) average.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">A three day weekend approaches.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Yes, June 19th is a holiday.<span style="mso-spacerun: yes;"> </span>Juneteenth.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve has proscribed banks from being open
on the following days:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Juneteenth<span style="mso-spacerun: yes;">
</span>June 19<o:p></o:p></p>
<p class="MsoPlainText">Independence Day July 4<o:p></o:p></p>
<p class="MsoPlainText">Labor Day September 4<o:p></o:p></p>
<p class="MsoPlainText">Columbus Day October 9<o:p></o:p></p>
<p class="MsoPlainText">Veterans Day November 11<o:p></o:p></p>
<p class="MsoPlainText">Thanksgiving Day November 23<o:p></o:p></p>
<p class="MsoPlainText">Christmas Day December 25<o:p></o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-8915423210790692822023-05-15T08:34:00.000-07:002023-05-15T08:34:06.607-07:00The SBA and PROpound<p>propound</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">pro·pound<o:p></o:p></p>
<p class="MsoPlainText">to offer for discussion or consideration<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">from Latin proponere to display, propound, from pro-
before + ponere to put, place<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The new SOP propounds that the liquidity of small
business owners does not matter anymore.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">It is now promulgated that lenders are not required to
consider the personal resources of owners of the Applicant, and SBA will not
evaluate the personal liquidity of owners.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">SBA propines that personal resources from owners enhance
SBA’s ability to mitigate loan losses to the taxpayer due to the personal
guaranty required of all owners of the small business Applicant.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This is reflected in the new SBA Standard Operating
Procedure 50-10-7 effective August 1, 2023.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The old SOP provision that a determination that some or
all of the loan is not available from the liquidity of owners has been deleted.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 8.25%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for May<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 4.60%
but note rate is 4.669% and the effective yield is 6.079%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 4.62%
but note rate is 4.67% and the effective yield is 6.026%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Propounding that the slope of the yield curve—the
difference between the yields on short- and long-term maturity bonds—is
prospicient may be<span style="mso-spacerun: yes;"> </span>profligate prodition.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The rule of thumb is that an inverted yield curve (short
rates above long rates) indicates a recession in about a year, and yield curve
inversions have preceded each of the last eight recessions.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">One of the recessions predicted by the yield curve was
the most recent one: The yield curve inverted in May 2019, almost a year before
the most recent recession started in March 2020.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The spread between 90 day treasury bills and the 10 year
treasury bond turned negative in October of 2022.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">It has since remained negative with one of the deepest
inversions ever peaking at a minus 1.89 on May 4th.<span style="mso-spacerun: yes;"> </span>Driving this inversion is the long end of
the curve.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">At last week’s auction of 30 year treasury bonds, the
high yield was awarded at 3.741 percent compared with 3.661 percent last month
and 3.877 percent two months ago.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The auction amount rose to $21 billion from $18 billion
last month. The increase contrasted with smaller offering sizes for shorter
term bills with higher rates.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is what the 30 year Treasury bond has been doing and
this week’s interesting little table:<o:p></o:p></p>
<p class="MsoPlainText">2010- 4.61<o:p></o:p></p>
<p class="MsoPlainText">2011- 2.89<o:p></o:p></p>
<p class="MsoPlainText">2012- 2.77<o:p></o:p></p>
<p class="MsoPlainText">2013- 3.25<o:p></o:p></p>
<p class="MsoPlainText">2014- 3.97<o:p></o:p></p>
<p class="MsoPlainText">2015- 2.91<o:p></o:p></p>
<p class="MsoPlainText">2016- 2.32<o:p></o:p></p>
<p class="MsoPlainText">2017- 3.16<o:p></o:p></p>
<p class="MsoPlainText">2018- 3.13<o:p></o:p></p>
<p class="MsoPlainText">2019- 2.594<o:p></o:p></p>
<p class="MsoPlainText">2020- 1.216<o:p></o:p></p>
<p class="MsoPlainText">2021- 1.88<o:p></o:p></p>
<p class="MsoPlainText">2022- 2.375<o:p></o:p></p>
<p class="MsoPlainText">2023- 3.741<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">So what does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don’t know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The extreme inversion of the yield curve on May 4th was
the day after the last meeting of the Federal Reserve on monetary policy when
they raised the fed funds rate another ¼.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">In their statement after the meeting, it eliminated the
previous language that said, "The Committee anticipates that some
additional policy firming may be appropriate."<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The shift likely means that the FOMC is prepared to pause
for a time.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">On Tuesday, the Federal Reserve will release its report
on Capacity Utilization for April.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Last month capacity utilization moved up to 79.8 percent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The month-over-month gain in March is entirely due to an
8.4 percent jump in utilities production.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Manufacturing capacity is down 5 tenths to 78.1 percent,
mining down 5 tenths to 91.1 percent, and utilities up to 75.3 percent from
69.7 percent in the prior month.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve does not meet again on monetary
policy until June 13 – 14.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Memorial Day is Monday, May 29th.<o:p></o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-71297745132720018762023-04-10T08:38:00.001-07:002023-04-10T08:38:09.896-07:00The SBA and PROdition<p>prodition</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">pro·di·tion<o:p></o:p></p>
<p class="MsoPlainText">prōˈdishən<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">betrayal, treason<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">From Latin proditio, from prodere to give forth, betray<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Final Rule on<span style="mso-spacerun: yes;">
</span>regulations on use of proceeds for partial changes of ownership, lending
criteria, loan conditions, reconsiderations, and affiliation standards has been
published.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">It is now available on the Federal Register.<span style="mso-spacerun: yes;"> </span>These changes will be in the next SOP.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Borrowers should no longer feel a sense of prodition with
being unable to obtain a subordination on their EIDL loans.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The EIDL loans have been consolidated into a new
servicing center which should make these requests flow better in the future
with a goal of eleven business days to turn them around.<o:p></o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 8.00%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for April<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 4.48%
but note rate is 4.547% and the effective yield is 5.956%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 4.48%
but note rate is 4.529% and the effective yield is 5.884%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Prodition from the Federal Reserve and the economy?<span style="mso-spacerun: yes;"> </span>A profligate proliferation.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">U.S. employers added 236,000 jobs last month, a solid
gain but the weakest showing since December 2020.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">At least through the March data, Fed policymakers will be
able to characterize the labor market as strong enough to withstand another
rate hike to combat persistent inflation.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Eurodollar futures can be prospicient.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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 several decades.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is a summary of what the market expects for
Eurodollar futures based upon the pit-traded prices at the Chicago Mercantile
Exchange:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">DEC23- 4.55<o:p></o:p></p>
<p class="MsoPlainText">DEC24- 3.22<o:p></o:p></p>
<p class="MsoPlainText">DEC25- 3.07<o:p></o:p></p>
<p class="MsoPlainText">DEC26- 3.12<o:p></o:p></p>
<p class="MsoPlainText">DEC27- 3.23<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don’t know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The December 2023 implied rate is now at 4.55% down from
5.03% just four months ago.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Keep your eyes and ears open for three big things.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">On Wednesday, the Bureau of Labor Statistics will release
the Consumer Price Index.<span style="mso-spacerun: yes;"> </span>Last month
the CPI was up 0.4 percent in February from January and up 6.0 percent year-over-year.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">On Thursday, Treasury will auction $18 billion in
Treasury bonds.<span style="mso-spacerun: yes;"> </span>At last month’s
auction, the high yield was awarded at 3.877 percent, down from a high of 4.080
percent in November.<span style="mso-spacerun: yes;"> </span>The 30 year is
currently at 3.623%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">On Friday, the Federal Reserve will release its report on
Capacity Utilization for March.<span style="mso-spacerun: yes;">
</span>Capacity utilization was unchanged in February at 78.0 percent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Fed meets again on monetary policy May 2nd and 3rd.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Proditiophobia is the fear of being betrayed by someone
you love.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">It can be cured by remembering the words of perhaps Dr.
Suess which were also the last comment by Vin Scully as he retired as the voice
of the Dodgers:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">“Don't cry because it's over. Smile because it happened.”<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-87984330698068283902023-03-13T08:32:00.004-07:002023-03-13T08:32:57.883-07:00The SBA and PROem<p>proem</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">PRO-uhm, -em<o:p></o:p></p>
<p class="MsoPlainText">An introduction, preface, or preamble.<o:p></o:p></p>
<p class="MsoPlainText">from Latin prooemium, from Greek prooimion, from pro-
(before) + oime (song).</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The proem on the future of the SBA is a one page overview
in the President’s budget request for the next fiscal year.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Only $987 million is being requested in discretionary
budget authority for 2024.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">With less than a billion dollars, this will support
almost $58 billion in lending through mainly the SBA 7(a) and 504 loan programs.<o:p></o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 7.75%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for March<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 4.86%
but note rate is 4.931% and the effective yield is 6.338%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 4.93%
but note rate is 4.98% and the effective yield is 6.334%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">A proem for the Federal Reserve’s next meeting on interest
rates is the latest on jobs.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Bureau of Labor Statistics reported that total
nonfarm payroll employment rose by 311,000 in February.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">105,000 of those new jobs were in leisure and
hospitality.<span style="mso-spacerun: yes;"> </span>At the beginning of the
pandemic, in March and April of 2020, leisure and hospitality lost 8.2 million
jobs, and are now down 410 thousand jobs since February 2020.<o:p></o:p></p>
<p class="MsoPlainText">So, leisure and hospitality has now added back about 95%
all of the jobs lost in March and April 2020.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">US employment has largely returned to pre-pandemic levels
but this recovery hasn’t been even across the labor market.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">You can use data from the Federal Reserve Bank of Saint
Louis to illustrate the recovery in employment according to establishment size:
1-19, 20-49, 50-249, 250-499, and 500+ employees.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Before the pandemic, employment across all establishment
sizes had been slowly increasing. Predictably, employment dropped in March 2020
for all size categories.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For the smallest establishments (1-19 employees),
employment dropped the least and recovered the fastest; however, employment in
these establishments has fallen slightly since the end of 2021.<o:p></o:p></p>
<p class="MsoPlainText">For establishments with 20-49 employees, 250 to 499
employees, and 500+ employees, employment has followed a similar pattern,
increasing above employment levels from 2020.<o:p></o:p></p>
<p class="MsoPlainText">For mid-range establishments with 50 to 249 employees,
employment dropped the most and recovered the slowest.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The smallest establishments obviously benefited from PPP
financial assistance<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here are the latest jobs numbers from the Bureau of Labor
Statistics.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">February<span style="mso-spacerun: yes;"> </span>311,000<o:p></o:p></p>
<p class="MsoPlainText">January<span style="mso-spacerun: yes;"> </span>504,000<o:p></o:p></p>
<p class="MsoPlainText">2022<span style="mso-spacerun: yes;"> </span>4,810,000<o:p></o:p></p>
<p class="MsoPlainText">2021<span style="mso-spacerun: yes;">
</span>7,270,000<o:p></o:p></p>
<p class="MsoPlainText">2020<span style="mso-spacerun: yes;"> </span>-9,370,000<o:p></o:p></p>
<p class="MsoPlainText">2019<span style="mso-spacerun: yes;"> </span>2,108,000<o:p></o:p></p>
<p class="MsoPlainText">2018<span style="mso-spacerun: yes;"> </span>2,679,000<o:p></o:p></p>
<p class="MsoPlainText">2017<span style="mso-spacerun: yes;"> </span>2,110,000<o:p></o:p></p>
<p class="MsoPlainText">2016<span style="mso-spacerun: yes;"> </span>2,160,000<o:p></o:p></p>
<p class="MsoPlainText">2015<span style="mso-spacerun: yes;"> </span>2,740,000<o:p></o:p></p>
<p class="MsoPlainText">2014<span style="mso-spacerun: yes;"> </span>3,116,000<o:p></o:p></p>
<p class="MsoPlainText">2013<span style="mso-spacerun: yes;"> </span>2,074,000<o:p></o:p></p>
<p class="MsoPlainText">2012<span style="mso-spacerun: yes;"> </span>2,193,000<o:p></o:p></p>
<p class="MsoPlainText">2011<span style="mso-spacerun: yes;"> </span>2,103,000<o:p></o:p></p>
<p class="MsoPlainText">2010<span style="mso-spacerun: yes;"> </span>1,022,000<o:p></o:p></p>
<p class="MsoPlainText">2009<span style="mso-spacerun: yes;"> </span>-5,052,000<o:p></o:p></p>
<p class="MsoPlainText">2008<span style="mso-spacerun: yes;"> </span>-3,617,000<o:p></o:p></p>
<p class="MsoPlainText">2007<span style="mso-spacerun: yes;"> </span>1,115,000<o:p></o:p></p>
<p class="MsoPlainText">2006<span style="mso-spacerun: yes;"> </span>2,071,000<o:p></o:p></p>
<p class="MsoPlainText">2005<span style="mso-spacerun: yes;"> </span>2,484,000<o:p></o:p></p>
<p class="MsoPlainText">2004<span style="mso-spacerun: yes;"> </span>2,019,000<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don't know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">One profligate propaedeutic has been that there is a
trade-off between jobs and inflation.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">At last week’s auction of $18 billion in 30 year Treasury
bonds, the high yield was awarded at 3.877 percent, up from 3.686 percent last
month but down from a high of 4.080 percent in November.<o:p></o:p></p>
<p class="MsoPlainText">Non-dealer bids accepted accounted for 91 percent of the
total, indicating excellent demand from investors.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">On Tuesday, the Consumer Price Index will be released.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Core prices in February are expected to hold steady at an
elevated 0.4 percent monthly gain with overall prices also expected to rise 0.4
percent after January's 0.5 percent rise.<o:p></o:p></p>
<p class="MsoPlainText">Annual rates, which in January were 6.4 percent overall
and 5.6 percent for the core, are expected at 6.0 and 5.5 percent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">On Friday, the Federal Reserve will report on capacity
utilization.<o:p></o:p></p>
<p class="MsoPlainText">Last month capacity utilization dropped 0.1 percentage
point in January to 78.3 percent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Neither of these reports should provoke procacious
proceleusmatics on the Federal Reserve’s next meeting March 21 and 22.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">A glance at the Federal Reserve calendar of bank holidays
reveals the next day off is not until May 29th Memorial Day.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">If that is too long, the following excuses could be used:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">-St Patrick’s Day Friday March 17th<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">-Opening Day Major League Baseball March 30th<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">-Good Friday April 7th<o:p></o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-32038445597574356682023-02-13T08:51:00.001-08:002023-02-13T08:51:16.931-08:00The SBA and PROceed<p>proceed</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">pro·ceed<span style="mso-spacerun: yes;"> </span>prō-ˈsēd<o:p></o:p></p>
<p class="MsoPlainText">begin or continue a course of action</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">move forward, especially after reaching a certain point
or after a pause or interruption<o:p></o:p></p>
<p class="MsoPlainText">from Latin procedere, from pro- forward + cedere to go</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">As you can tell from the etymology of this word, proceed
and procedure are closely related.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">Procedure however refers to not just going on but to go
on in an orderly regulated way<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The SBA will soon proceed with the release of a new
version of its Standard Operating Procedures.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This new version of the SOP promulgates changes from two
pending Proposed Rules once finalized addressing affiliation and lending
criteria.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 7.75%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for February<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 4.51%
but note rate is 4.578% and the effective yield is 5.988%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 4.61%
but note rate is 4.66% and the effective yield is 6.015%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">How will the Federal Reserve proceed?<span style="mso-spacerun: yes;"> </span>There is no procedure.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Bureau of Labor Statistics reported an unbelievable
517,000 new jobs in January.<span style="mso-spacerun: yes;"> </span>That
compares to an average monthly gain of 401,000 in 2022.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Seasonal adjustments, always big in January, had an even
larger than usual upward impact, likely adding over 200,000 to the jobs figure.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Keep your eyes and ears open for this week’s release on
the capacity utilization rate.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">One of the Federal Reserve’s preferred measures of
inflation is the capacity utilization rate.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is what capacity utilization has been doing and this
week interesting little table of data:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">2007- 81.5<o:p></o:p></p>
<p class="MsoPlainText">2008- 79.9<o:p></o:p></p>
<p class="MsoPlainText">2009- 66.9<o:p></o:p></p>
<p class="MsoPlainText">2010- 74.8<o:p></o:p></p>
<p class="MsoPlainText">2011- 76.7<o:p></o:p></p>
<p class="MsoPlainText">2012- 79.0<o:p></o:p></p>
<p class="MsoPlainText">2013- 77.8<o:p></o:p></p>
<p class="MsoPlainText">2014- 78.8<o:p></o:p></p>
<p class="MsoPlainText">2015- 76.5<o:p></o:p></p>
<p class="MsoPlainText">2016- 75.4<o:p></o:p></p>
<p class="MsoPlainText">2017- 76.2<o:p></o:p></p>
<p class="MsoPlainText">2018- 78.5<o:p></o:p></p>
<p class="MsoPlainText">2019- 79.7<o:p></o:p></p>
<p class="MsoPlainText">2020- 74.5<o:p></o:p></p>
<p class="MsoPlainText">2021- 76.4<o:p></o:p></p>
<p class="MsoPlainText">2022- 80.0<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don’t know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Capacity utilization dropped 0.6 percentage point in
December to 78.8 percent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The drop would have been even greater but Utilities
capacity use was up 2.7 points to 76.8 percent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">A bout of extreme cold weather in December is likely
behind the rise in utilities output. Electric production was up 2.9 percent in
December and natural gas up 8.2 percent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">At last week’s auction of 30 year treasury bonds the high
yield was awarded at 3.686 percent, up from 3.585 percent last month but down
from a high of 4.080 percent in November.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve does not meet again until March 21
and 22.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">A three day weekend approaches.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve has proscribed banks from being open
on the following days:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Washington's Birthday February 20<o:p></o:p></p>
<p class="MsoPlainText">Memorial Day May 29<o:p></o:p></p>
<p class="MsoPlainText">Juneteenth<span style="mso-spacerun: yes;">
</span>June 19<o:p></o:p></p>
<p class="MsoPlainText">Independence Day July 4<o:p></o:p></p>
<p class="MsoPlainText">Labor Day September 4<o:p></o:p></p>
<p class="MsoPlainText">Columbus Day October 9<o:p></o:p></p>
<p class="MsoPlainText">Veterans Day November 11<o:p></o:p></p>
<p class="MsoPlainText">Thanksgiving Day November 23<o:p></o:p></p>
<p class="MsoPlainText">Christmas Day December 25<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This upcoming three day weekend is officially referred as
Washington’s Birthday.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The effort to rename the holiday Presidents Day, intended
to honor the birthdays of both Washington and Lincoln, failed in Congressional
committee.<o:p></o:p></p>
<p class="MsoPlainText">The bill, which was then signed into law on June 28,
1968, specified that the Federal holiday would retain the name Washington’s
Birthday.<o:p></o:p></p>
<p class="MsoPlainText">The Uniform Monday Holiday Act of January 1, 1971,
established its observance on the third Monday in February.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-59796062358194598942023-01-09T08:21:00.002-08:002023-01-09T08:21:09.092-08:00The SBA and PROsateur<p>prosateur</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">pro-zuh-TUHR<o:p></o:p></p>
<p class="MsoPlainText">A writer of prose.<o:p></o:p></p>
<p class="MsoPlainText">From French prosateur (a prose writer), from Italian
prosatore, from Latin prosator, from prosa (straightforward).<o:p></o:p></p>
<p class="MsoPlainText">_____________________________________________</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Prolix prosateurs procrastinate over promulgations in a
new version of the SBA Standard Operating Procedures.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The comment period for two pending Proposed Rules have
ended.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">SBA will then revise the SOP to incorporate any changes
to program requirements made by the Final Rules.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The prosaic propaedeutic on these Final Rules pertain to
Small Business Lending Companies, the SBA loan authorization, affiliation and
lending criteria.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">In the meantime, a Fiscal Year 2023 funding bill has been
approved by Congress which includes $35 billion in authorization for 7(a)
lending.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This should be more than enough to meet anticipated
demand even with the significantly reduced guarantee fees for 7(a) loans.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 7.50%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for December<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 4.56%
but note rate is 4.63% and the effective yield is 6.037%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 4.714%
but note rate is 4.769% and the effective yield is 6.114%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Inflation has stepped down.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">That was the pronunciamento from the prosateurs for the
Federal Reserve’s Fed Open Market Committee's last meeting on monetary policy.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Not once, but twice they used the phrase "stepped
down" in the minutes from the December 2022 meeting.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">In the staff review of the economic situation they stated
" Consumer price inflation—as measured by the 12-month percent change in
the price index for personal consumption expenditures (PCE)—STEPPED DOWN in
October but continued to be elevated."<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">They then later stated that " In November, the
12-month change in the CPI STEPPED DOWN to 7.1 percent and core CPI inflation
dropped to 6.0 per-cent."<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">So what does stepped down mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText">The index measures price change from a designed reference
date. The reference base is 1982-84 and equals 100.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is what the index has done over the last two years:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">2021-01-01<span style="mso-tab-count: 1;"> </span>262.200<o:p></o:p></p>
<p class="MsoPlainText">2021-02-01<span style="mso-tab-count: 1;"> </span>263.346<o:p></o:p></p>
<p class="MsoPlainText">2021-03-01<span style="mso-tab-count: 1;"> </span>265.028<o:p></o:p></p>
<p class="MsoPlainText">2021-04-01<span style="mso-tab-count: 1;"> </span>266.727<o:p></o:p></p>
<p class="MsoPlainText">2021-05-01<span style="mso-tab-count: 1;"> </span>268.599<o:p></o:p></p>
<p class="MsoPlainText">2021-06-01<span style="mso-tab-count: 1;"> </span>270.955<o:p></o:p></p>
<p class="MsoPlainText">2021-07-01<span style="mso-tab-count: 1;"> </span>272.184<o:p></o:p></p>
<p class="MsoPlainText">2021-08-01<span style="mso-tab-count: 1;"> </span>273.092<o:p></o:p></p>
<p class="MsoPlainText">2021-09-01<span style="mso-tab-count: 1;"> </span>274.214<o:p></o:p></p>
<p class="MsoPlainText">2021-10-01<span style="mso-tab-count: 1;"> </span>276.590<o:p></o:p></p>
<p class="MsoPlainText">2021-11-01<span style="mso-tab-count: 1;"> </span>278.524<o:p></o:p></p>
<p class="MsoPlainText">2021-12-01<span style="mso-tab-count: 1;"> </span>280.126<o:p></o:p></p>
<p class="MsoPlainText">2022-01-01<span style="mso-tab-count: 1;"> </span>281.933<o:p></o:p></p>
<p class="MsoPlainText">2022-02-01<span style="mso-tab-count: 1;"> </span>284.182<o:p></o:p></p>
<p class="MsoPlainText">2022-03-01<span style="mso-tab-count: 1;"> </span>287.708<o:p></o:p></p>
<p class="MsoPlainText">2022-04-01<span style="mso-tab-count: 1;"> </span>288.663<o:p></o:p></p>
<p class="MsoPlainText">2022-05-01<span style="mso-tab-count: 1;"> </span>291.474<o:p></o:p></p>
<p class="MsoPlainText">2022-06-01<span style="mso-tab-count: 1;"> </span>295.328<o:p></o:p></p>
<p class="MsoPlainText">2022-07-01<span style="mso-tab-count: 1;"> </span>295.271<o:p></o:p></p>
<p class="MsoPlainText">2022-08-01<span style="mso-tab-count: 1;"> </span>295.620<o:p></o:p></p>
<p class="MsoPlainText">2022-09-01<span style="mso-tab-count: 1;"> </span>296.761<o:p></o:p></p>
<p class="MsoPlainText">2022-10-01<span style="mso-tab-count: 1;"> </span>298.062<o:p></o:p></p>
<p class="MsoPlainText">2022-11-01<span style="mso-tab-count: 1;"> </span>298.349<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don't know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">It appears that price increases have gone procumbent over
the last few months.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Back in February and March of 2021 the monthly difference
in prices was about 0.65% (265.028 compared to 263.346) or roughly 7.8%
annualized.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Now it is only about 0.1% (298.349 compared to 298.062).<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Keep your eyes and ears open for this week's report on the
CPI.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">On the same day, there will also be an $18 billion
auction of 30 year Treasury bonds.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">At last month's auction of 30 year treasury bonds, rates
actually dropped by roughly 1/2 percent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The high yield of 3.513 percent compares with 4.080
percent in November's auction.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The drop in yield reflects the month-long easing of
inflation risk.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The final report on jobs for 2022 reflected an increase
of 223,000 in December.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">With 4.50 million jobs added, 2022 was the 2nd best year
for job growth in US history behind only 2021 with 6.74 million.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve next meets January 31-February 1.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">A three day weekend approaches.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve has proscribed banks from being open
on the following days:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Birthday of Martin Luther King, Jr. January 16 </p><p class="MsoPlainText">Washington's Birthday February 20 </p><p class="MsoPlainText">Memorial Day May 29<o:p></o:p></p>
<p class="MsoPlainText">Juneteenth<span style="mso-spacerun: yes;">
</span>June 19<o:p></o:p></p>
<p class="MsoPlainText">Independence Day July 4<o:p></o:p></p>
<p class="MsoPlainText">Labor Day September 4<o:p></o:p></p>
<p class="MsoPlainText">Columbus Day October 9<o:p></o:p></p>
<p class="MsoPlainText">Veterans Day November 11<o:p></o:p></p>
<p class="MsoPlainText">Thanksgiving Day November 23<o:p></o:p></p>
<p class="MsoPlainText">Christmas Day December 25<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-38844973027790170112022-12-19T08:48:00.005-08:002022-12-19T08:48:49.535-08:00The SBA and PROdrome<p> prodrome</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">PROH-drohm<o:p></o:p></p>
<p class="MsoPlainText">An early symptom that indicates the onset of a disease or
an episode of something such as a migraine.<o:p></o:p></p>
<p class="MsoPlainText">From Latin prodromus, from Greek prodromos, from pro-
(before) + dromos (running)<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">A prodrome with the new version of the SBA Standard
Operating Procedures.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">SBA had previously indicated that it expected to release
the SOP revision in November with a mid-January 2023 effective date.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">SBA now intends to defer issuance of the SOP revision
until two pending Proposed Rules are finalized.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This will allow SBA to further revise the SOP to
incorporate any changes to program requirements made by the Final Rules.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This SOP is a propaedeutic prolusion for upcoming
changes.<o:p></o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 7.50%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for December<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 4.56%
but note rate is 4.63% and the effective yield is 6.037%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 4.714%
but note rate is 4.769% and the effective yield is 6.114%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">As prognosticated, the Federal Reserve’s Fed Open Market
Committee raised the fed funds rate target by another 50 basis points to
4.25-4.50 percent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">That means interest rates will keep going up, right?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The protervity over increasing interest rates is
profluent proditomania.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">At last week's auction of 30 year treasury bonds, rates
actually dropped by roughly 1/2 percent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The high yield of 3.513 percent compares with 4.080
percent in November's auction.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is what the 30 year Treasury bond has been doing and
this week’s interesting little table:<o:p></o:p></p>
<p class="MsoPlainText">2010- 4.61<o:p></o:p></p>
<p class="MsoPlainText">2011- 2.89<o:p></o:p></p>
<p class="MsoPlainText">2012- 2.77<o:p></o:p></p>
<p class="MsoPlainText">2013- 3.25<o:p></o:p></p>
<p class="MsoPlainText">2014- 3.97<o:p></o:p></p>
<p class="MsoPlainText">2015- 2.91<o:p></o:p></p>
<p class="MsoPlainText">2016- 2.32<o:p></o:p></p>
<p class="MsoPlainText">2017- 3.16<o:p></o:p></p>
<p class="MsoPlainText">2018- 3.13<o:p></o:p></p>
<p class="MsoPlainText">2019- 2.594<o:p></o:p></p>
<p class="MsoPlainText">2020- 1.216<o:p></o:p></p>
<p class="MsoPlainText">2021- 1.88<o:p></o:p></p>
<p class="MsoPlainText">2022- 2.375<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">So what does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don’t know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Demand was soft for the reopening of November's 30-year
bond, at a 2.25 bid to cover which is the lowest in a full year for this issue
and down from 2.42 last month.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The drop in yield reflects the month-long easing of
inflation risk.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">More procellous promulgations on the yield curve
inverting is profligate.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">An inversion of the 3 month treasury bill and 10 year
treasury note began in late October and became more pronounced in
mid-November.<span style="mso-spacerun: yes;"> </span>It is now at roughly -90
basis points with the three month at roughly 4.34% and the ten year at 3.52%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">That makes this one of the deepest inversions going back
to 1982.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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 in about a
year, and yield curve inversions have preceded each of the last eight
recessions (as defined by the NBER).<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">One measure of slope, the spread between 10-year Treasury
bonds and 3-month Treasury bills, bears out this relation, particularly when
real GDP growth is lagged a year to line up growth with the spread that
predicts it.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve Bank of Cleveland uses past values of
the slope of the yield curve and GDP growth to provide predictions of future
GDP growth and the probability that the economy will fall into a recession over
the next year.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Right now they are saying the probability of a recession
in 1 year is less than 50/50 at 41.8%.<span style="mso-spacerun: yes;">
</span>That's up from 26.5% back in October.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Procacity over the slope of the yield curve can be
prosaic.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">With Christmas December 25th being a Sunday, Federal
Reserve Banks will be closed on Monday December 26th.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">That will allow us all to observe Boxing Day.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Boxing Day originated as a holiday the day after
Christmas to give gifts to the poor<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">One idea is that December 26 was the day centuries ago
when lords of the manor and aristocrats typically distributed “Christmas boxes”
often filled with small gifts, money and leftovers from Christmas dinner to
their household servants and employees, who were required to work on December
25, in recognition of good service throughout the year. These boxes were, in
essence, holiday bonuses.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-16194502008793617852022-11-07T08:47:00.001-08:002022-11-07T08:47:50.331-08:00The SBA and PROlusion<p class="MsoPlainText">prolusion<o:p></o:p></p>
<p class="MsoPlainText">prōˈ lo͞o zhan</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">a preliminary action or event; a prelude. To warm up.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">an introductory and often tentative discourse<o:p></o:p></p>
<p class="MsoPlainText">From Latin prolusion-, prolusio, from proludere to play
beforehand, from pro- before + ludere to play</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">A new version of the SBA Standard Operating Procedures
will be released soon and be effective around January 15, 2023.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">SOP 50-10-6.1 will reflect changes in equity injection
verification requirements, credit elsewhere, collateral requirements, and an
overhaul of debt refinance requirements.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This SOP is a propaedeutic prolusion for upcoming changes
reflected in recent Notices of Proposed Rulemaking on Affiliation and
restrictions on loans for changes of ownership.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The notices are only proposed rule changes with the
comment period ending on December 27, 2022.
Those changes won’t happen until well after the new SOP is released and
effective.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 7.00%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for October<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 4.89%
but note rate is 4.96% and the effective yield is 6.13%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 5.04%
but note rate is 5.09% and the effective yield is 6.219%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">As prognosticated, the Federal Reserve’s Fed Open Market
Committee raised the fed funds rate target by 75 basis points to 3.75-4.00
percent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The FOMC statement for November 2 was the same as the one
from September 21 with the exception that it added forward guidance on the
cumulative impact of prior hikes to its anticipation of further rate hikes.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This is a fairly good signal that the FOMC may not pause
on rate hikes.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Eurodollar futures can be prospicient.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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 several decades.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is a summary of what the market expects for
Eurodollar futures based upon the pit-traded prices at the Chicago Mercantile
Exchange:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">DEC22- 5.117<o:p></o:p></p>
<p class="MsoPlainText">DEC23- 5.03<o:p></o:p></p>
<p class="MsoPlainText">DEC24- 4.26<o:p></o:p></p>
<p class="MsoPlainText">DEC25- 3.96<o:p></o:p></p>
<p class="MsoPlainText">DEC26- 3.97<o:p></o:p></p>
<p class="MsoPlainText">DEC27- 4.09<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don’t know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The December 2022 implied rate is now at 5.12% up from
4.73% just last month and up from only 0.17% a year ago.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This week on Thursday there will be an auction of 30 year
Treasury bonds. At last month’s auction
of 30 year Treasury bonds, the high yield was awarded at 3.930 percent, up from
3.511 percent at last month’s auction.
The 30 year Treasury yield is now at 4.253%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For all the protervity of an inverted yield curve, the 3
month and 10 year yields have not maintained a sustained inversion. The last time they inverted for any length
of time was back in 2019.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The procacity over the yield curve is profluent
proditomania.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Don’t forget to vote.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Ever wonder why elections are always a Tuesday in
November?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The answer stems from the agrarian makeup of 19th-century
America. In the 1800s, most citizens worked as farmers and lived far from their
polling place. Since people often traveled at least a day to vote, lawmakers
needed to allow a two-day window for Election Day. Weekends were impractical,
since most people spent Sundays in church, and Wednesday was market day for farmers.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">With this in mind, Tuesday was selected as the first and
most convenient day of the week to hold elections. Farm culture also explains
why Election Day always falls in November. Spring and early summer elections
were thought to interfere with the planting season, and late summer and early
fall elections overlapped with the harvest. That left the late fall month of
November—after the harvest was complete, but before the arrival of harsh winter
weather—as the best choice.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">It is not propaganda when the Federal Reserve promulgates
official holidays. A three day weekend
approaches!<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve has proscribed banks from being
opened on the following days:<o:p></o:p></p>
<p class="MsoPlainText">Veterans Day November 11<o:p></o:p></p>
<p class="MsoPlainText">Thanksgiving Day November 24<o:p></o:p></p>
<p class="MsoPlainText"><o:p></o:p></p><p>Christmas Day December 25 </p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-22986674419395698122022-10-03T08:50:00.000-07:002022-10-03T08:50:09.745-07:00The SBA and PROpaedeutic<p> propaedeutic</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">pro-pi-du-tik<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">preceding and preparing for something<o:p></o:p></p>
<p class="MsoPlainText">a course that provides an introduction to an art or
science (or to more advanced study generally)<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">You don't have to be a walking encyclopedia to use it,
but "propaedeutic" does tend to occur mostly in scholarly discussions
of learning and education.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">"Propaedeutic" might be a "hard"
word, but one easy thing to remember about it is that it is closely related to
"encyclopedia."<o:p></o:p></p>
<p class="MsoPlainText">"Encyclopedia" is from Greek paideia, meaning
"education," plus enkyklios, meaning "general."
"Propaedeutic" is from Greek paideuein, meaning "to teach,"
plus "pro-," which means "before."<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">A propaedeutic promulgation.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Like the slope of the yield curve, SBA 7(a) loan approval
volume has been prospicient about the direction of the economy.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<span style="mso-spacerun: yes;"> </span>It came out to a
statistically significant 0.86.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">SBA 7(a) loan approvals were profluent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Through September 16th $24,101,763,300 in SBA 7(a) loans
had been approved.<span style="mso-spacerun: yes;"> </span>While below the
levels of the prior year that had a 90% guarantee and no guarantee fee, SBA
7(a) loan volume did exceed fiscal years 2017 through 2020.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The new fiscal year starting October 1st has an
authorization level of $30 billion which is more than sufficient lending
authority.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The SBA program for this new fiscal year sets the 7(a)
loan program at a ZERO subsidy rate.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">That means the fees collected from borrowers and lenders
are sufficient to cover the projected costs of the loan guarantee.<span style="mso-spacerun: yes;"> </span>No tax payer subsidy is needed.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Effective October 1st, the guarantee fee for SBA 7(a)
loans are:<o:p></o:p></p>
<p class="MsoPlainText">-loans of $500,000 or less: 0.00%:<o:p></o:p></p>
<p class="MsoPlainText">-loans of $500,001 to $700,000: 0.55% of the guaranteed
portion.<o:p></o:p></p>
<p class="MsoPlainText">-loans of $700,001 to $1,000,000: 1.05% of the guaranteed
portion.<o:p></o:p></p>
<p class="MsoPlainText">-loans $1,000,001 to $5,000,000: 3.5% of the guaranteed
portion up to $1,000,000, plus 3.75% of the guaranteed portion over $1,000,000.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 6.25%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for September<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 4.10%
but note rate is 4.16% and the effective yield is 5.343%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 4.26%
but note rate is 4.30% and the effective yield is 5.44%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">One profligate propaedeutic is that there is a trade-off
between jobs and inflation.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Phillips Curve, named after New Zealand economist A.
W. Phillips, misconstrues a supposed correlation between unemployment and
inflation as a causal relation.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">When he won the Nobel Prize in economics in 1976, Milton
Freidman in his acceptance speech titled Inflation and Unemployment made it
clear there is no tradeoff between inflation and unemployment.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Freidman had promulgated that “inflation is always and
everywhere a monetary phenomenon,” and said central bankers should prevent the
supply of money from growing faster than economic output.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The growth rate of all the dollars in circulation (“M2
Money Supply”) soared a historic record 27% in 2020.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">To put that in perspective, this increase in M2 Money
Supply is the biggest jump in America’s history. That is bigger than the
Financial Crisis of 2007-2008 (10%), bigger than World War II (18%), and bigger
than FDR’s stimulus to fight the Great Depression (10%).<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The recent increases by the Federal Reserve in the fed
funds rate has moderated the changes in the M2 money supply.<span style="mso-spacerun: yes;"> </span>M2 actually decreased by over $300 billion
in May with nominal increases in June and July and no increase in August.<span style="mso-spacerun: yes;"> </span>As a result month by month changes in the
consumer price index over the last quarter has also plateaued.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">As for jobs, initial claims for unemployment fell again
last week, rapidly approaching the lowest levels seen early this year. Overall,
claims remain historically low, and are headed lower again after trending
higher from May through July. Claims suggest the labor market remains
tight.<span style="mso-spacerun: yes;"> </span>All signs point to continued
tightness in the labor market, despite weaker growth.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Keep your eyes and ears open for this week’s report on
employment for the month of September.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here are the latest jobs numbers from the Bureau of Labor
Statistics.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">August<span style="mso-spacerun: yes;"> </span>315,000<o:p></o:p></p>
<p class="MsoPlainText">July<span style="mso-spacerun: yes;"> </span>526,000<o:p></o:p></p>
<p class="MsoPlainText">June<span style="mso-spacerun: yes;"> </span>293,000<o:p></o:p></p>
<p class="MsoPlainText">May<span style="mso-spacerun: yes;"> </span>386,000<o:p></o:p></p>
<p class="MsoPlainText">April<span style="mso-spacerun: yes;"> </span>368,000<o:p></o:p></p>
<p class="MsoPlainText">March<span style="mso-spacerun: yes;"> </span>398,000<o:p></o:p></p>
<p class="MsoPlainText">February<span style="mso-spacerun: yes;"> </span>714,000<o:p></o:p></p>
<p class="MsoPlainText">January<span style="mso-spacerun: yes;"> </span>504,000<o:p></o:p></p>
<p class="MsoPlainText">2021<span style="mso-spacerun: yes;">
</span>6,400,000<o:p></o:p></p>
<p class="MsoPlainText">2020<span style="mso-spacerun: yes;"> </span>-9,370,000<o:p></o:p></p>
<p class="MsoPlainText">2019<span style="mso-spacerun: yes;"> </span>2,108,000<o:p></o:p></p>
<p class="MsoPlainText">2018<span style="mso-spacerun: yes;"> </span>2,679,000<o:p></o:p></p>
<p class="MsoPlainText">2017<span style="mso-spacerun: yes;"> </span>2,110,000<o:p></o:p></p>
<p class="MsoPlainText">2016<span style="mso-spacerun: yes;"> </span>2,160,000<o:p></o:p></p>
<p class="MsoPlainText">2015<span style="mso-spacerun: yes;"> </span>2,740,000<o:p></o:p></p>
<p class="MsoPlainText">2014<span style="mso-spacerun: yes;"> </span>3,116,000<o:p></o:p></p>
<p class="MsoPlainText">2013<span style="mso-spacerun: yes;"> </span>2,074,000<o:p></o:p></p>
<p class="MsoPlainText">2012<span style="mso-spacerun: yes;"> </span>2,193,000<o:p></o:p></p>
<p class="MsoPlainText">2011<span style="mso-spacerun: yes;"> </span>2,103,000<o:p></o:p></p>
<p class="MsoPlainText">2010<span style="mso-spacerun: yes;"> </span>1,022,000<o:p></o:p></p>
<p class="MsoPlainText">2009<span style="mso-spacerun: yes;"> </span>-5,052,000<o:p></o:p></p>
<p class="MsoPlainText">2008<span style="mso-spacerun: yes;"> </span>-3,617,000<o:p></o:p></p>
<p class="MsoPlainText">2007<span style="mso-spacerun: yes;"> </span>1,115,000<o:p></o:p></p>
<p class="MsoPlainText">2006<span style="mso-spacerun: yes;"> </span>2,071,000<o:p></o:p></p>
<p class="MsoPlainText">2005<span style="mso-spacerun: yes;"> </span>2,484,000<o:p></o:p></p>
<p class="MsoPlainText">2004<span style="mso-spacerun: yes;"> </span>2,019,000<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don't know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Next week on Thursday there will be an auction of 30 year
Treasury bonds.<span style="mso-spacerun: yes;"> </span>At last month’s auction
of 30 year Treasury bonds, the high yield was awarded at 3.511 percent, up from
3.106 percent at last month’s auction.<span style="mso-spacerun: yes;">
</span>The 30 year Treasury yield is now at 3.77%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For all the talk of an inverted yield curve, the 3 month
and 10 year yields have not inverted.<span style="mso-spacerun: yes;">
</span>The last time they inverted was back in 2019.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">On the same day, the consumer price index will also come
out.<span style="mso-spacerun: yes;"> </span>While year over year price
increases will be reflected, it is important to actually note the month to
month change.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The December 2022 implied rate is now at 4.73% up from
4.454% just last month and up from only 0.17% in October.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">It is not propaganda when the Federal Reserve promulgates
official holidays.<span style="mso-spacerun: yes;"> </span>A three day weekend
approaches!<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve has proscribed banks from being
opened on the following days:<o:p></o:p></p>
<p class="MsoPlainText">Columbus Day October 10<o:p></o:p></p>
<p class="MsoPlainText">Veterans Day November 11<o:p></o:p></p>
<p class="MsoPlainText">Thanksgiving Day November 24<o:p></o:p></p>
<p class="MsoPlainText">Christmas Day December 25<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-3784496658289258952022-09-19T08:53:00.006-07:002022-09-19T08:53:45.982-07:00The SBA and PROvoke<p> Provoke</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">prəˈvoʊk<o:p></o:p></p>
<p class="MsoPlainText">to call forth (a feeling, an action, etc.) to stir up
purposely to provide the needed stimulus for<o:p></o:p></p>
<p class="MsoPlainText">from Latin provocare ‘challenge’, from pro- ‘forth’ +
vocare ‘to call’.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This might provoke SBA lenders and borrowers<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Effective October 1st, the guarantee fee for SBA 7(a)
loans are:<o:p></o:p></p>
<p class="MsoPlainText">-loans of $500,000 or less: 0.00%:<o:p></o:p></p>
<p class="MsoPlainText">-loans of $500,001 to $700,000: 0.55% of the guaranteed
portion.<o:p></o:p></p>
<p class="MsoPlainText">-loans of $700,001 to $1,000,000: 1.05% of the guaranteed
portion.<o:p></o:p></p>
<p class="MsoPlainText">-loans $1,000,001 to $5,000,000: 3.5% of the guaranteed
portion up to $1,000,000, plus 3.75% of the guaranteed portion over $1,000,000.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 5.50%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for September<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 4.10%
but note rate is 4.16% and the effective yield is 5.343%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 4.26%
but note rate is 4.30% and the effective yield is 5.44%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Will the Federal Reserve provoke protervity?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The procacity over the Federal Open Market Committee
meeting this week is profligate proditomania.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">It is all but certain that the fed funds rate will be
increased.<span style="mso-spacerun: yes;"> </span>The only question is by how
much.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">That will depend on where they think we are at with
inflation.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Last week it was widely reported that the consumer price
index was up over 8% from a year ago.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Of course it is up because prices had dropped during the
depths of the<span style="mso-spacerun: yes;"> </span>procellous pandemic.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText">The index measures price change from a designed reference
date. The reference base is 1982-84 and equals 100.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is what the index has done over the last year:<o:p></o:p></p>
<p class="MsoPlainText">2021-08-01<span style="mso-spacerun: yes;">
</span>273.092<o:p></o:p></p>
<p class="MsoPlainText">2021-09-01<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span>274.214<o:p></o:p></p>
<p class="MsoPlainText">2021-10-01<span style="mso-spacerun: yes;">
</span>276.590<o:p></o:p></p>
<p class="MsoPlainText">2021-11-01<span style="mso-spacerun: yes;">
</span>278.524<o:p></o:p></p>
<p class="MsoPlainText">2021-12-01<span style="mso-spacerun: yes;">
</span>280.126<o:p></o:p></p>
<p class="MsoPlainText">2022-01-01<span style="mso-spacerun: yes;">
</span>281.933<o:p></o:p></p>
<p class="MsoPlainText">2022-02-01<span style="mso-spacerun: yes;">
</span>284.182<o:p></o:p></p>
<p class="MsoPlainText">2022-03-01<span style="mso-spacerun: yes;">
</span>287.708<o:p></o:p></p>
<p class="MsoPlainText">2022-04-01<span style="mso-spacerun: yes;">
</span>288.663<o:p></o:p></p>
<p class="MsoPlainText">2022-05-01<span style="mso-spacerun: yes;">
</span>291.474<o:p></o:p></p>
<p class="MsoPlainText">2022-06-01<span style="mso-spacerun: yes;">
</span>295.328<o:p></o:p></p>
<p class="MsoPlainText">2022-07-01<span style="mso-spacerun: yes;">
</span>295.271<o:p></o:p></p>
<p class="MsoPlainText">2022-08-01<span style="mso-spacerun: yes;">
</span>295.620<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">It appears that price increases have gone procumbent over
the last three months.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">One of the Federal Reserve’s preferred measures of
inflation is the capacity utilization rate.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is what capacity utilization has been doing and this
week interesting little table of data:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">2007- 81.5<o:p></o:p></p>
<p class="MsoPlainText">2008- 79.9<o:p></o:p></p>
<p class="MsoPlainText">2009- 66.9<o:p></o:p></p>
<p class="MsoPlainText">2010- 74.8<o:p></o:p></p>
<p class="MsoPlainText">2011- 76.7<o:p></o:p></p>
<p class="MsoPlainText">2012- 79.0<o:p></o:p></p>
<p class="MsoPlainText">2013- 77.8<o:p></o:p></p>
<p class="MsoPlainText">2014- 78.8<o:p></o:p></p>
<p class="MsoPlainText">2015- 76.5<o:p></o:p></p>
<p class="MsoPlainText">2016- 75.4<o:p></o:p></p>
<p class="MsoPlainText">2017- 76.2<o:p></o:p></p>
<p class="MsoPlainText">2018- 78.5<o:p></o:p></p>
<p class="MsoPlainText">2019- 79.7<o:p></o:p></p>
<p class="MsoPlainText">2020- 74.5<o:p></o:p></p>
<p class="MsoPlainText">2021- 76.4<o:p></o:p></p>
<p class="MsoPlainText">2022- 80.0<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don’t know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Normally the Fed is concerned about inflationary
pressures when the capacity utilization rate is about 82%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Capacity utilization declined 0.2 percentage point in
August to 80.0 percent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The overall reading was pulled down by a decline in
utilities output.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Utilities capacity usage fell to 72.8 percent in August
from 74.7 percent in July.<span style="mso-spacerun: yes;"> </span>Capacity
use for manufacturing was unchanged.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Cooler weather in August relative to July eased demand
for utilities and electricity for air conditioning. Electricity output fell 2.9
percent<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">At last week’s auction of 30 year Treasury bonds, the
high yield was awarded at 3.511 percent, up from 3.106 percent at last month’s
auction.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The December 2022 implied rate is now at 4.454% up from
3.96% just last month and up from only 0.17% in October.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The fall equinox arrives on Thursday, September 22, 2022.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The word “equinox” comes from Latin aequus, meaning
“equal,” and nox, ”night.” On the equinox, day and night are roughly equal in
length.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">After the autumnal equinox, days become shorter than
nights as the Sun continues to rise later and nightfall arrives earlier. This
ends with the winter solstice, after which days start to grow longer once
again.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-69988630068217497952022-08-08T09:48:00.002-07:002022-08-08T09:48:10.364-07:00The SBA and PROfuse<p>profuse</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">pruh-fyoos, proh‐fyoos<o:p></o:p></p>
<p class="MsoPlainText">-spending or giving freely and in large amount, often to
excess; -made or done freely and abundantly:<o:p></o:p></p>
<p class="MsoPlainText">-abundant; in great amount.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">from Latin profūsus, past participle of profundere “to
pour out or forth”;<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Profuse is a word for a lot of something or even way too
much — a profuse rainfall is a serious amount of rain.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Profuse and perhaps procellous is the DEREG regulation
effective August 1st from the Small Business Administration.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The prosaic promulgation most prominent is the provision
for variable interest rates.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Effective August 1st, the maximum variable interest rates
for all 7(a) loans is now:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">$350,001 and greater:<span style="mso-spacerun: yes;">
</span>PRIME + 3%<o:p></o:p></p>
<p class="MsoPlainText">$250,001 - $350,000:<span style="mso-spacerun: yes;">
</span>PRIME + 4.5%<o:p></o:p></p>
<p class="MsoPlainText">$50,001 - $250,000:<span style="mso-spacerun: yes;">
</span>PRIME + 6%<o:p></o:p></p>
<p class="MsoPlainText">$50,000 or less:<span style="mso-spacerun: yes;">
</span>PRIME + 6.5%<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Most SBA 7(a) loans adjust on a calendar quarterly basis.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Prolix profligate promulgations proliferate over variable
interest rates.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Because 7(a) loans are fully amortizing over long terms,
increases in interest rates do not dramatically increase the monthly payment.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For example, a $100,000 SBA loan with a variable rate of
PRIME plus 3.00 resulting in an interest rate of 8.50% amortized over 10 years
would have a monthly payment of<span style="mso-spacerun: yes;"> </span>$1,240.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">If interest rates rise another 1% resulting in a rate of
9.50% the monthly payment is now $1,293, an increase of only $53.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 5.50%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for July<o:p></o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 3.81%
but note rate is 3.87% and the effective yield is 5.05%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 3.93%
but note rate is 3.97% and the effective yield is 5.11%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The procacity over the yield curve inverting is
profligate proditomania.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The widely followed spread between 2- and 10-year
Treasury yields is negative and prognostications proliferated that this
inversion of the yield curve meant a recession was now on the way.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">However, there is nothing “magical” about the “10/2”
spread.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The spread between the 3 month Treasury bill and the 10
year Treasury bond is considered an even better indicator.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The last time the 3 month Treasury bill and the 10 year
Treasury bond spread had inverted was in late May of 2019.<span style="mso-spacerun: yes;"> </span>That inversion lasted until October of
2019.<span style="mso-spacerun: yes;"> </span>As if on cue, the economy began
to slump in the spring of 2020.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">At last week’s auction of the 3 month Treasury bill,<span style="mso-spacerun: yes;"> </span>the bill rate edged down from 2.520 percent
last week to 2.49 percent but remains elevated from 1.850 four weeks ago.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The recent July employment numbers reflecting that all
the jobs lost during the pandemic have now come back<span style="mso-spacerun: yes;"> </span>has now caused longer term yields to tick up
and the 3 month 10 year spread has increased positively even more.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Keep your eyes and ears open for this week’s auction of
30 year Treasury bonds.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is what the 30 year Treasury bond has been doing and
this week’s interesting little table:<o:p></o:p></p>
<p class="MsoPlainText">2010- 4.61<o:p></o:p></p>
<p class="MsoPlainText">2011- 2.89<o:p></o:p></p>
<p class="MsoPlainText">2012- 2.77<o:p></o:p></p>
<p class="MsoPlainText">2013- 3.25<o:p></o:p></p>
<p class="MsoPlainText">2014- 3.97<o:p></o:p></p>
<p class="MsoPlainText">2015- 2.91<o:p></o:p></p>
<p class="MsoPlainText">2016- 2.32<o:p></o:p></p>
<p class="MsoPlainText">2017- 3.16<o:p></o:p></p>
<p class="MsoPlainText">2018- 3.13<o:p></o:p></p>
<p class="MsoPlainText">2019- 2.594<o:p></o:p></p>
<p class="MsoPlainText">2020- 1.216<o:p></o:p></p>
<p class="MsoPlainText">2021- 1.88<o:p></o:p></p>
<p class="MsoPlainText">2022- 2.375<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">So what does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don’t know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">At last month’s auction of 30 year Treasury bonds, the
high yield was awarded at 3.115 percent, down 7 basis points from the prior
auction rate. Lower long-term rates reflect diminished long-term inflation
expectations as the growth outlook has cooled.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">On Friday’s close, the 30 year Treasury bond yield was at
3.072 percent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The December 2022 implied rate is now at 3.96% up from
3.87% just last month and up from only 0.17% in October.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The December 2023 implied rate is at 3.29% down from
3.69% a month ago.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">August 10th is the anniversary of the greatest moment in
baseball history.<span style="mso-spacerun: yes;"> </span>At least when it
comes to three true outcomes.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">A profusion of home runs, a strike out or a walk is known
as a three true outcome.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">It’s called that because the at bat comes down to the
pitcher or the hitter.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The greatest three true outcome batter is Adam Dunn.<span style="mso-spacerun: yes;"> </span>If you add up all his home runs, walks and
strike outs it comes to 4,158, which includes 462 home runs, 1,317 walks and
2,379 strikeouts.<span style="mso-spacerun: yes;"> </span>He only had 8,328
plate appearances.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">No other than Jose Lima is the epitome of a three true
outcome pitcher.<span style="mso-spacerun: yes;"> </span>He would throw a lot
a strike outs, not walk very many, but holds the all-time record for most home
runs given up in the National League in one season.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">On August 10th 2004, Adam Dunn faced Jose Lima at the
Great American Ball Park .<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">After he successfully fought off seven pitches, Dunn
connected on one of Lima's fastballs and sent it out of the park and into the
Ohio River.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Not only was it one of the longest home runs ever hit but
it landed onto a piece of driftwood that was floating on the Kentucky side of
the Ohio River.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">It is the only home run in baseball history that landed
in another state.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">After Jose Lima had died of a sudden heart attack while
he slept, Vin Scully had this to say:<o:p></o:p></p>
<p class="MsoPlainText">“Young and Old, we all will get our time and it was
Lima’s time”<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Vin’s wit and wisdom still echoes.<o:p></o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-91378539489829269262022-07-18T08:51:00.002-07:002022-07-18T08:51:11.193-07:00The SBA and PROvision<p>Provision</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">pruh-vizh-uhn<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">- the activity of supplying or providing something<o:p></o:p></p>
<p class="MsoPlainText">- a store or supply of something (especially of food or
clothing or arms) -a stipulated condition; a clause in a legal instrument, a
law, etc., providing for a particular matter -the cognitive process of thinking
about what you will do in the event of something happening<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">from Latin pro, meaning “forward, outward,” and vidēre
“to see, observe, take care.”<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Thus, its meaning is “to see or act forward.”<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Provision can also describe the planning you do for
"when something happens."<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">SBA borrowers should provision for interest rates being
higher than they thought.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Effective August 1st, the maximum variable interest rates
for all 7(a) loans is now:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">$350,001 and greater:<span style="mso-spacerun: yes;">
</span>PRIME + 3%<o:p></o:p></p>
<p class="MsoPlainText">$250,001 - $350,000:<span style="mso-spacerun: yes;">
</span>PRIME + 4.5%<o:p></o:p></p>
<p class="MsoPlainText">$50,001 - $250,000:<span style="mso-spacerun: yes;">
</span>PRIME + 6%<o:p></o:p></p>
<p class="MsoPlainText">$50,000 or less:<span style="mso-spacerun: yes;">
</span>PRIME + 6.5%<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Most SBA 7(a) loans adjust on a calendar quarterly basis.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Prolix profligate promulgations proliferate over variable
interest rates.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Because 7(a) loans are fully amortizing over long terms,
increases in interest rates do not dramatically increase the monthly payment.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For example, a $100,000 SBA loan with a variable rate of
PRIME plus 3.00 resulting in an interest rate of 7.75% amortized over 10 years
would have a monthly payment of<span style="mso-spacerun: yes;"> </span>$1,200.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">If interest rates rise another 1% resulting in a rate of
8.75% the monthly payment is $1,253, an increase of only $53.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 4.75%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for July<o:p></o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 3.81%
but note rate is 3.87% and the effective yield is 5.05%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 3.93%
but note rate is 3.97% and the effective yield is 5.11%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don’t see anyone provisioning for WIN buttons in the
fight against inflation.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Whip Inflation Now (WIN) was a 1974 attempt to spur a
grassroots movement to combat inflation in the US, urged by U.S. President
Gerald Ford.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Ford had taken office in August 1974 amidst one of the
worst economic crises in US history.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Despite rate hikes increasing the federal funds rate by 6
percentage points, from 4.8 percent to 10.8 percent, inflation continued to
rise until December 1974, when it reached a peak of 12.3 percent.<span style="mso-spacerun: yes;"> </span>The economy had also slid into a recession.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">President Ford rolled out the WIN button campaign and by
mid-November, orders for WIN buttons passed the 15 million mark. It was the
best-selling button since 1971, when more than 50 million smiley face buttons
were sold.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">By the first half of 1976, the inflation rate was down to
4.6 percent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve meets next week on monetary policy.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">At its last meeting, they stated “that ongoing increases
in the target range will be appropriate.”<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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 several decades.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">A Eurodollar by the way is simply a U.S. dollar on
deposit in commercial banks outside of the United States.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is a summary of what the market expects for
Eurodollar futures based upon the pit-traded prices at the Chicago Mercantile
Exchange:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">DEC22- 3.87<o:p></o:p></p>
<p class="MsoPlainText">DEC23- 3.19<o:p></o:p></p>
<p class="MsoPlainText">DEC24- 2.83<o:p></o:p></p>
<p class="MsoPlainText">DEC25- 2.81<o:p></o:p></p>
<p class="MsoPlainText">DEC26- 2.87<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don’t know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The December 2022 implied rate is now at 3.87% up from
3.67% just last month and up from only 0.17% in October.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The fed funds target rate is currently 1.50% to 1.75%.<span style="mso-spacerun: yes;"> </span>Fed funds futures for December 2022 imply a
fed funds rate of 3.51% consistent with the prognostication from the Eurodollar
futures market.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">At last week’s auction of 30 year Treasury bonds, the
high yield was awarded at 3.115 percent, down 7 basis points from last month's
auction rate. Lower long-term rates reflect diminished long-term inflation
expectations as the growth outlook has cooled.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">We may not need to pull out the WIN buttons after all.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Ford’s top economic adviser, Alan Greenspan, later
described the WIN idea as “unbelievable stupidity.”<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">In November, reporters spotted what looked like a
distress signal from White House press secretary Ron Nessen, who wore his
button upside down. It spelled NIM.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Nessen said it stood for “No Immediate Miracles.”<o:p></o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-63111991021909015762022-06-13T08:16:00.002-07:002022-06-13T08:16:31.524-07:00The SBA and Propagate<p> propagate</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">prop·a·gate<o:p></o:p></p>
<p class="MsoPlainText">-spread and promote (an idea, theory, etc.) widely -to
cause to continue or increase by reproduction<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">from Latin propagatus, past participle of propagare
"set forward, extend, spread, increase; multiply plants by layers,
breed,"<o:p></o:p></p>
<p class="MsoPlainText">from pro "forth" + -pag, from PIE root *pag-
"to fasten," source of pangere "to fasten"<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Has leisure and hospitality propagated past its
procumbent pandemic levels?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Going into the Memorial Day weekend occupancy rates
finally exceeded 2019 levels.<span style="mso-spacerun: yes;"> </span>Occupancy
at 66.5% was 3.2% higher compared to the same week of May 22-28 in 2019.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This was partly due to the timing of Memorial Day this
year.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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<span style="mso-spacerun: yes;"> </span>comparable week in
2019.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Average daily rates are up 11.3%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Hotels and motels continued to be a dominant segment of
SBA borrowers based upon NACIS codes.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 4.00%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for June<o:p></o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 3.89%
but note rate is 3.95% and the effective yield is 5.132%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 4.01%
but note rate is 4.056% and the effective yield is 5.191%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What is the Federal Reserve supposed to do?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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).<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Congress explicitly stated the Fed's goals should be
"maximum employment, stable prices, and moderate long-term interest
rates."<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">It is these goals that came to be known as the Fed's
"dual mandate".<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Wait a minute.<span style="mso-spacerun: yes;">
</span>Employment, stable prices, and moderate long-term interest rates are
three things.<span style="mso-spacerun: yes;"> </span>How could this be a
“dual” mandate?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Fed seems to be doing ok with employment.<span style="mso-spacerun: yes;"> </span>Total nonfarm employment rose by 390,000 in
May.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here are the latest jobs numbers from the Bureau of Labor
Statistics.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">May<span style="mso-spacerun: yes;"> </span>390,000<o:p></o:p></p>
<p class="MsoPlainText">April<span style="mso-spacerun: yes;"> </span>436,000<o:p></o:p></p>
<p class="MsoPlainText">March<span style="mso-spacerun: yes;"> </span>398,000<o:p></o:p></p>
<p class="MsoPlainText">February<span style="mso-spacerun: yes;"> </span>714,000<o:p></o:p></p>
<p class="MsoPlainText">January<span style="mso-spacerun: yes;"> </span>504,000<o:p></o:p></p>
<p class="MsoPlainText">2021<span style="mso-spacerun: yes;">
</span>6,400,000<o:p></o:p></p>
<p class="MsoPlainText">2020<span style="mso-spacerun: yes;"> </span>-9,370,000<o:p></o:p></p>
<p class="MsoPlainText">2019<span style="mso-spacerun: yes;"> </span>2,108,000<o:p></o:p></p>
<p class="MsoPlainText">2018<span style="mso-spacerun: yes;"> </span>2,679,000<o:p></o:p></p>
<p class="MsoPlainText">2017<span style="mso-spacerun: yes;"> </span>2,110,000<o:p></o:p></p>
<p class="MsoPlainText">2016<span style="mso-spacerun: yes;"> </span>2,160,000<o:p></o:p></p>
<p class="MsoPlainText">2015<span style="mso-spacerun: yes;"> </span>2,740,000<o:p></o:p></p>
<p class="MsoPlainText">2014<span style="mso-spacerun: yes;"> </span>3,116,000<o:p></o:p></p>
<p class="MsoPlainText">2013<span style="mso-spacerun: yes;"> </span>2,074,000<o:p></o:p></p>
<p class="MsoPlainText">2012<span style="mso-spacerun: yes;"> </span>2,193,000<o:p></o:p></p>
<p class="MsoPlainText">2011<span style="mso-spacerun: yes;"> </span>2,103,000<o:p></o:p></p>
<p class="MsoPlainText">2010<span style="mso-spacerun: yes;"> </span>1,022,000<o:p></o:p></p>
<p class="MsoPlainText">2009<span style="mso-spacerun: yes;"> </span>-5,052,000<o:p></o:p></p>
<p class="MsoPlainText">2008<span style="mso-spacerun: yes;"> </span>-3,617,000<o:p></o:p></p>
<p class="MsoPlainText">2007<span style="mso-spacerun: yes;"> </span>1,115,000<o:p></o:p></p>
<p class="MsoPlainText">2006<span style="mso-spacerun: yes;"> </span>2,071,000<o:p></o:p></p>
<p class="MsoPlainText">2005<span style="mso-spacerun: yes;"> </span>2,484,000<o:p></o:p></p>
<p class="MsoPlainText">2004<span style="mso-spacerun: yes;"> </span>2,019,000<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don't know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Excluding leisure and hospitality, the economy has more
than added back all the jobs lost at the beginning of the pandemic.<span style="mso-spacerun: yes;"> </span>Leisure and hospitality gained 84 thousand
jobs in May.<span style="mso-spacerun: yes;"> </span>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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Ok.<span style="mso-spacerun: yes;"> </span>What about
moderate long term interest rates?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">At 3.185%, this is still well below the long term average of
4.79% for the 30 year Treasury bond.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Keep your eyes and ears open for this week’s meeting of
the Federal Reserve’s Federal Open Market Committee.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">At its last meeting, they stated “that ongoing increases
in the target range will be appropriate.”<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The fed funds target rate is currently .75% to 1%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<span style="mso-spacerun: yes;"> </span>The December 2023 implied rate is at 3.69%<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The similarity between propagate and propaganda is not
coincidental; that word also comes to us from propagare.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">It is not propaganda when the Federal Reserve promulgates
official holidays.<span style="mso-spacerun: yes;"> </span>A three day weekend
approaches!<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve has proscribed banks from being
opened on the following days:<o:p></o:p></p>
<p class="MsoPlainText">Juneteenth<span style="mso-spacerun: yes;">
</span>June 19 (observed Monday June 20)<o:p></o:p></p>
<p class="MsoPlainText">Independence Day July 4<o:p></o:p></p>
<p class="MsoPlainText">Labor Day September 5<o:p></o:p></p>
<p class="MsoPlainText">Columbus Day October 10<o:p></o:p></p>
<p class="MsoPlainText">Veterans Day November 11<o:p></o:p></p>
<p class="MsoPlainText">Thanksgiving Day November 24<o:p></o:p></p>
<p class="MsoPlainText">Christmas Day December 25<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-18779381901267449332022-05-09T08:32:00.005-07:002022-05-09T08:32:49.084-07:00The SBA and PROlix<p>prolix</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">pro-LIKS, PRO-liks<o:p></o:p></p>
<p class="MsoPlainText">Tediously wordy.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">From Latin prolixus (extended, poured), from liquere (to
flow),<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Prolix profligate promulgations proliferate over variable
interest rates.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">A SBA 7(a) loan with a variable rate tied to prime should
adjust on a calendar quarterly basis.<span style="mso-spacerun: yes;">
</span>That benefits both the borrower and the lender.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Because 7(a) loans are fully amortizing over long terms,
increases in interest rates do not dramatically increase the monthly payment.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For example, a $100,000 SBA loan with a variable rate of
PRIME plus 2.75 resulting in an interest rate of 6.75 amortized over 10 years
would have a monthly payment of<span style="mso-spacerun: yes;"> </span>$1,148.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">If interest rates rise another 1% resulting in a rate of
7.75% the monthly payment is $1,200, an increase of $52.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Another 1% rise in rates would cause the monthly payment
to now be $1,253, an increase of roughly $53.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">A 2% increase in interest rates is a 30% jump but
payments only went up 9%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The impact is more pronounced with 7(a) loans with 25
year terms since more of the monthly payment goes towards interest and not
principal.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">In the above examples, if the loan had a 25 year amortization,
payments would have increased by almost 20%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 4.00%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for May<o:p></o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 3.82%
but note rate is 3.88% and the effective yield is 5.061%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 3.94%
but note rate is 3.98% and the effective yield is 5.119%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">With no prolixity, the Federal Reserve Open Market
Committee announced that it raised its key short-term interest rate by a half
percentage point Wednesday, its largest hike since 2000.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Its official statement came in at 366 words.<span style="mso-spacerun: yes;"> </span>The January statement after its prior
meeting was at a prolix 420 words.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Most prospicient was its prognostication that “ that
ongoing increases in the target range will be appropriate.”<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Nobel Prize winning economist Milton Freidman had
promulgated that “inflation is always and everywhere a monetary phenomenon,”
and said central bankers should prevent the supply of money from growing faster
than economic output.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The growth rate of all the dollars in circulation (“M2
Money Supply”) soared a historic record 27% in 2020.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">To put that in perspective, this increase in M2 Money
Supply is the biggest jump in America’s history. That is bigger than the
Financial Crisis of 2007-2008 (10%), bigger than World War II (18%), and bigger
than FDR’s stimulus to fight the Great Depression (10%).<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Most of the damage occurred in the spring and summer of
2020.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is a new chart reflecting the M2 Money Supply
percent change quarterly:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">2019-04-01<span style="mso-spacerun: yes;">
</span>4.3<o:p></o:p></p>
<p class="MsoPlainText">2019-07-01<span style="mso-spacerun: yes;">
</span>5.2<o:p></o:p></p>
<p class="MsoPlainText">2019-10-01<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span>6.7<o:p></o:p></p>
<p class="MsoPlainText">2020-01-01<span style="mso-spacerun: yes;">
</span>7.9<o:p></o:p></p>
<p class="MsoPlainText">2020-04-01<span style="mso-spacerun: yes;">
</span>20.6<o:p></o:p></p>
<p class="MsoPlainText">2020-07-01<span style="mso-spacerun: yes;">
</span>23.4<o:p></o:p></p>
<p class="MsoPlainText">2020-10-01<span style="mso-spacerun: yes;">
</span>24.4<o:p></o:p></p>
<p class="MsoPlainText">2021-01-01<span style="mso-spacerun: yes;">
</span>25.7<o:p></o:p></p>
<p class="MsoPlainText">2021-04-01<span style="mso-spacerun: yes;">
</span>15.3<o:p></o:p></p>
<p class="MsoPlainText">2021-07-01<span style="mso-spacerun: yes;">
</span>13.3<o:p></o:p></p>
<p class="MsoPlainText">2021-10-01<span style="mso-spacerun: yes;">
</span>12.7<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">To put that into perspective, here is another chart
reflecting monthly change in M2 in billions of dollars:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">2019-12-01<span style="mso-spacerun: yes;">
</span>69.0<o:p></o:p></p>
<p class="MsoPlainText">2020-01-01<span style="mso-spacerun: yes;">
</span>82.4<o:p></o:p></p>
<p class="MsoPlainText">2020-02-01<span style="mso-spacerun: yes;">
</span>57.3<o:p></o:p></p>
<p class="MsoPlainText">2020-03-01<span style="mso-spacerun: yes;">
</span>530.4<o:p></o:p></p>
<p class="MsoPlainText">2020-04-01<span style="mso-spacerun: yes;">
</span>1014.7<o:p></o:p></p>
<p class="MsoPlainText">2020-05-01<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span>833.8<o:p></o:p></p>
<p class="MsoPlainText">2020-06-01<span style="mso-spacerun: yes;">
</span>296.5<o:p></o:p></p>
<p class="MsoPlainText">2020-07-01<span style="mso-spacerun: yes;">
</span>149.5<o:p></o:p></p>
<p class="MsoPlainText">2020-08-01<span style="mso-spacerun: yes;">
</span>82.2<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">In March, April and May of 2020, the supply of money
increased roughly $2.4 trillion.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">It is not all the Federal Reserve’s fault.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Most of the increase came from fiscal stimulus, not
Federal Reserve policy moves.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Treasury Department pitched in by borrowing trillions
to send stimulus checks to most Americans.<span style="mso-spacerun: yes;">
</span>Stimulus spending sent both the FY 2020 deficit and the national debt to
all-time highs.<span style="mso-spacerun: yes;"> </span>Spending represented a
jump of more than $2 trillion from the previous year, a 47% increase.<span style="mso-spacerun: yes;"> </span>The increased government spending combined
with declining revenue resulted in more than $3.1 trillion added to the
national debt.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">So what does this all mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">How much higher will interest rates go?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The December 2022 implied rate is now at 3.22% up from
3.00% just last month and up from only 0.17% in October.<span style="mso-spacerun: yes;"> </span>The December 2023 implied rate is at 3.45%<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Keep your eyes and ears open for this week’s auction of
30 year Treasury bonds.<span style="mso-spacerun: yes;"> </span>Last month’s
auction was considered average, with demand for the debt at 2.3 times the bonds
on sale even with the average of the past 12 months but well short of the 2.46
in the March auction.<span style="mso-spacerun: yes;"> </span>The yield on the
30-year Treasury bond was down 2.7 basis points to 2.800%.<span style="mso-spacerun: yes;"> </span>As of last Friday, the 30 year yield was
3.23%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The yield curve is not close to inverting.<span style="mso-spacerun: yes;"> </span>According to the Federal Reserve Bank of
Cleveland, using past values of the slope of the yield curve and GDP growth to
predict future growth and the probability of recession, the odds of a
recession<span style="mso-spacerun: yes;"> </span>have actually decreased.<span style="mso-spacerun: yes;"> </span>The probability of a recession in 1 year is
at only 2.7%.<o:p></o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">There's no way to talk about prolix without being
redundant, verbose, and wordy. That's because the word is a synonym of all of
those long-winded terms. Of those words, prolix is the one most likely to
suggest unreasonable and tedious dwelling on details. It derives from prolixus,
a Latin term meaning "extended" or "copious." Prolixus
originated from a combination of the prefix pro- (which means
"forward") and the past participle of liquēre, a verb meaning
"to be fluid." True to that history, something that is prolix flows
on and on.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Liquere is also the source of words such as liquid,
liquor, licorice.<span style="mso-spacerun: yes;"> </span>Now you see the
connection -- why consuming liquor makes people prolix.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">All this brings to mind the proverb that even fools are
thought wise if they keep silent.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Maybe I should shut up.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-32546161956129501982022-04-11T09:12:00.001-07:002022-04-11T09:12:07.415-07:00The SBA and PROcacious <p> Procacious</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">prō-kei-us</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">Insolent or arrogant in attitude or tone; forward,
cheeky; provocative.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">From Latin procax- “bold, impudent”</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">_____________________________________________<o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText">No need to be procacious about the SBA 7(a) loan program.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">The SBA program for next fiscal year sets the 7(a) loan
program at a ZERO subsidy rate.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">That means the fees collected from borrowers and lenders
are sufficient to cover the projected costs of the loan guarantee. No tax payer subsidy is needed.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">The guarantee fee for loans of $350,000 or less is ZERO.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">_________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 3.50%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for April<o:p></o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 3.38%
but note rate is 3.43% and the effective yield is 4.620%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 3.50%
but note rate is 3.54% and the effective yield is 4.680%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The procacity over the yield curve inverting is profluent
proditomania.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Driven by a weak auction of 2 year treasury notes almost
three weeks ago, the 2 year treasury yield jumped to over 2.365%, up a whopping
81.2 basis points from the prior month's auction rate and the highest awarded
since February 2019.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">That caused the widely followed spread between 2- and
10-year Treasury yields to become negative and prognostications proliferated
that this inversion of the yield curve meant a recession was now on the way.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">However, there is nothing “magical” about the “10/2”
spread.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The spread between the 3 month Treasury bill and the 10
year Treasury bond is considered an even better indicator.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Right now, the current Treasury yield curve is
historically very steep from 3-months to 2-years a bit flatter than normal from
2- to 3-years, and slightly inverts from 3- to 10-years. Spreads between the 3 year Treasury and the
Fed funds rate is at its widest since 1994.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">This procellous slope of the yield curve is driven by
concerns on what the Federal Reserve is going to do about inflation.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Keeps your eyes and ears open for this week’s report on
industrial production and capacity utilization.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Here is what capacity utilization has been doing and this
week interesting little table of data:<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">2007- 81.5<o:p></o:p></p>
<p class="MsoPlainText">2008- 79.9<o:p></o:p></p>
<p class="MsoPlainText">2009- 66.9<o:p></o:p></p>
<p class="MsoPlainText">2010- 74.8<o:p></o:p></p>
<p class="MsoPlainText">2011- 76.7<o:p></o:p></p>
<p class="MsoPlainText">2012- 79.0<o:p></o:p></p>
<p class="MsoPlainText">2013- 77.8<o:p></o:p></p>
<p class="MsoPlainText">2014- 78.8<o:p></o:p></p>
<p class="MsoPlainText">2015- 76.5<o:p></o:p></p>
<p class="MsoPlainText">2016- 75.4<o:p></o:p></p>
<p class="MsoPlainText">2017- 76.2<o:p></o:p></p>
<p class="MsoPlainText">2018- 78.5<o:p></o:p></p>
<p class="MsoPlainText">2019- 79.7<o:p></o:p></p>
<p class="MsoPlainText">2020- 74.5<o:p></o:p></p>
<p class="MsoPlainText">2021- 76.4<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">What does all this mean?<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">I don’t know.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Normally the Fed does not feel there are inflationary
pressures until the capacity utilization rate is about 82%.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Last month capacity utilization was up 0.3 percent to
77.6 percent. This still almost 2
percentage points below the long run average dating back to 1972.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve Open Market Committee next meets May
3rd and 4th.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">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.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The December 2022 implied rate is now at 3.00% up from
2.06% just last month and up from only 0.17% in October.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">If you happen to watch a major league baseball game on
Friday, April 15th you might notice that all the players are wearing number
42. It is the only day you will see any
player with that number on their jersey.
In 1997, MLB retired number 42 across all major league teams.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">That is in honor of Jackie Robinson. 42 was his jersey number. April 15 was Opening Day in 1947, Robinson's
first game in the major leagues with the Brooklyn Dodgers.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">For some strange reason it is not a national
holiday. We are now in the longest
stretch of the year without a holiday.<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The Federal Reserve has proscribed banks from being
opened on the following days:<o:p></o:p></p>
<p class="MsoPlainText">Memorial Day May 30<o:p></o:p></p>
<p class="MsoPlainText">Juneteenth
June 19<o:p></o:p></p>
<p class="MsoPlainText">Independence Day July 4<o:p></o:p></p>
<p class="MsoPlainText">Labor Day September 5<o:p></o:p></p>
<p class="MsoPlainText">Columbus Day October 10<o:p></o:p></p>
<p class="MsoPlainText">Veterans Day November 11<o:p></o:p></p>
<p class="MsoPlainText">Thanksgiving Day November 24<o:p></o:p></p>
<span style="font-family: "Calibri",sans-serif; font-size: 11.0pt; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">Christmas Day December 25</span>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0tag:blogger.com,1999:blog-4691293694400953019.post-4207441103666224032022-03-14T08:36:00.008-07:002022-03-14T08:36:46.973-07:00The SBA and PROtervity<p>Protervity</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">prō-ter′vi-ti</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">The state or quality of being irritable; quick
excitability; petulance; fretfulness; as, irritability of temper.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">From Latin pro, forth, terĕre, to bruise</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">_____________________________________________</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">TIP OF THE WEEK<o:p></o:p></p>
<p class="MsoPlainText">Sensing protervity over the verification of tax returns
for SBA loans, SBA Lenders may instead obtain tax return information by fully
completing and submitting IRS Form 8821.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">SBA Lenders may use either IRS Form 4506-C or IRS Form
8821. Use of Form 4506-T has been
discontinued.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">Putting aside its protervity, Congress has passed both
the short term Continuing Resolution (CR) that keeps the government operating
to March 15, and also the full year FY22 funding package.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">Both the SBA 7(a) and 504 loan programs have more than
adequate resources to support small business through the end of the fiscal year
which is in about 197 days.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">_________________________________________</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">Indices:<o:p></o:p></p>
<p class="MsoPlainText">PRIME RATE= 3.25%<o:p></o:p></p>
<p class="MsoPlainText">________________________________________<o:p></o:p></p>
<p class="MsoPlainText">SBA 504 Loan Debenture Rate for March<o:p></o:p></p>
<p class="MsoPlainText">For 20 year debentures, the debenture rate is only 2.53%
but note rate is 2.57% and the effective yield is 3.766%.<o:p></o:p></p>
<p class="MsoPlainText">For 25 year debentures, the debenture rate is only 2.75%
but note rate is 2.78% and the effective yield is 3.929%.<o:p></o:p></p>
<p class="MsoPlainText">_______________________________________________<o:p></o:p></p>
<p class="MsoPlainText">AHEAD OF THE YIELD CURVE<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">The protervity of the bond market continued at the
government’s last auction of 30 year treasury bonds.<o:p></o:p></p>
<p class="MsoPlainText">The high yield was awarded at 2.375 percent, up 3.5 basis
points from last month's auction rate and the highest awarded for the bond
since May of last year.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">The shorter end of the yield curve has the pressure as
reflected in the earlier 3 year auction where the high yield was awarded at
1.775 percent, up 18.3 basis points from last month's auction rate and the
highest yield awarded for the note since July 2019.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">The yield curve going procumbent is no need for
proditomania.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">Here is what the 30 year Treasury bond has been doing and
this week’s interesting little table:</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">2010- 4.61<o:p></o:p></p>
<p class="MsoPlainText">2011- 2.89<o:p></o:p></p>
<p class="MsoPlainText">2012- 2.77<o:p></o:p></p>
<p class="MsoPlainText">2013- 3.25<o:p></o:p></p>
<p class="MsoPlainText">2014- 3.97<o:p></o:p></p>
<p class="MsoPlainText">2015- 2.91<o:p></o:p></p>
<p class="MsoPlainText">2016- 2.32<o:p></o:p></p>
<p class="MsoPlainText">2017- 3.16<o:p></o:p></p>
<p class="MsoPlainText">2018- 3.13<o:p></o:p></p>
<p class="MsoPlainText">2019- 2.594<o:p></o:p></p>
<p class="MsoPlainText">2020- 1.216<o:p></o:p></p>
<p class="MsoPlainText">2021- 1.88<o:p></o:p></p>
<p class="MsoPlainText">2022- 2.375<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">So what does all this mean?<o:p></o:p></p>
<p class="MsoPlainText">I don’t know.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">The Federal Reserve meets March 15th and 16th on monetary
policy.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">At the Semiannual Monetary Policy Report to the Congress,
the chairman of the Federal Reserve said that they would probably raise the
target range for the federal funds rate.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">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.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">The December 2022 implied rate is now at 2.06% up from
1.18% at the beginning of the year and up from only 0.17% in October.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">Protervity comes with a procellous prognostication.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">__________________________________________<o:p></o:p></p>
<p class="MsoPlainText"><o:p> </o:p></p>
<p class="MsoPlainText">OFF BASE<o:p></o:p></p>
<p class="MsoPlainText"><br /></p><p class="MsoPlainText">The protervity caused by daylight saving time began with
Germany during World War I. The
rationale was to minimize the use of artificial lighting to save fuel for the
war effort.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">In the US, “Fast Time,” as it was called then, was first
introduced in 1918. Only seven months
later, daylight saving time was repealed.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">In 1942, at the height of World War II, President
Franklin D. Roosevelt reintroduced the measure, instituting year-round Daylight
Saving Time in the US and referred to it as “War Time,”<o:p></o:p></p>
<p class="MsoPlainText">The protervity of the Irish peoples is celebrated this
Thursday, March 17th which is the day Saint Patrick died.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">The first day of Spring is Sunday March 20th.</p><p class="MsoPlainText"><o:p></o:p></p>
<p class="MsoPlainText">The next proscribed Federal holiday is not until Memorial
Day May 30th. This is the longest
stretch of the year between three day weekends.
Protervity.</p><p class="MsoPlainText"><o:p></o:p></p>Jim Ely the sbaprohttp://www.blogger.com/profile/02777007901984401261noreply@blogger.com0