The SBA and caitiff

caitiff

KAY-tif

noun: A cowardly and despicable person.

adjective: cowardly, despicable.

Via French from Latin captivus (captive), from capere (to seize).

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TIP OF THE WEEK 

Don’t be caitiff about commercial real estate.

The CoStar Commercial Repeat Sale Indices (CCRSI) National Composite index ended the fourth quarter of 2011 up 5.5% from its low point in March 2011. 

This month's CCRSI provides the market's first look at December 2011 commercial real estate pricing.   

The CoStar indices are constructed using a repeat sales methodology, widely considered the most accurate measure of price changes for real estate.  If you would like a copy of CoStar’s February 2012 report, let me know.

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate February 2011 = 3.26%
SBA Fixed Base Rate February 2011 = 4.72%

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504 Debenture Rate for February   

The debenture rate is 2.63% but note rate is 2.68% and effective yield is only 4.711%. 


The effective yield for the temporary debt refinancing available with a 504 loan is 4.91%.

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AHEAD OF THE YIELD CURVE 

On Wednesday, LEAP DAY, the Bureau of Economic Analysis will release their second or “preliminary” estimate for fourth quarter 2011 GDP.  Their first or “advance” estimate for fourth quarter GDP was an increase of an annual rate of 2.8%.  This was an improvement over the 1.8% third and “final” estimate for third quarter GDP.  

GDP for the third quarter was initially put at 2.5%, with subsequent downward revisions to 2.0% and finally 1.8%.

These revisions to the GDP numbers were caused primarily by inventory changes.

This is worth noting because more than the entire difference between the third quarter growth rate and the fourth quarter growth rate can be explained by the movement in inventories. Inventories subtracted 1.35 percentage points from growth in the third quarter, when they rose at just a $5.5 billion annual rate. Inventories then added 1.95 percentage points to growth in the fourth quarter when they rose at a strong $63.6 billion annual rate.

Unfortunately, this speedup in the rate of inventory accumulation will not continue. In future quarters inventories are likely to grow at a somewhat slower pace.

In the absence of this inventory growth we would have been looking at only a 0.9 percent growth rate in the fourth quarter. 

GDP is market value of all final goods and services produced within the USA where money is used in the transaction.  GDP counts monetary expenditures.  It is designed to count value added so that goods are not counted over and over as they move through the manufacture – wholesale – retail chain.

Consider that GDP includes the costs of suing your neighbor or McDonalds for hot coffee spilled in your lap, or even the replacement of your house if it burns down – yet little of these activities are real economic growth.  GDP does not include home costs (other than new home purchase prices), interest rates, or the money spent buying anything used.

It does not measure wealth, disposable income, or employment.  In short, GDP does not measure the change of the economic environment for you and me.

So what does that mean for job growth this year?

Keep your eyes and ears open for next Friday’s report on jobs for February.

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

January 243,000

2011

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

What does all this mean?

I don’t know.

We added 157,000 jobs in November, 203,000 in December, and 243,000 in January.  Even with the awful summer of 2011, the economy added 1.95 million jobs in the last 12 months, the best figure in five years. 

This is a better pace of payroll job creation than in 2010, but the economy still has 6.0 million fewer payroll jobs than at the beginning of the 2007 recession. There are a total of 13.1 million Americans unemployed and 5.6 million have been unemployed for more than 6 months.

We still have a way to go before rates will start to really go up.

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OFF BASE

A caitiff is a contemptible or cowardly person. It’s archaic, so if you say it with a straight face you might even get away with the insult.   It started out, sometime before 1300, to mean a captive.  As captives were not in the best of circumstances, caitiff began to mean a wretched or miserable person. 

The leap day baby Frederic the pirate apprentice in Gilbert and Sullivan's 1879 comic opera The Pirates of Penzance was a caitiff in the original sense of the word.  His apprenticeship indenture stated that he remained legally and morally indentured to the pirates until his 21st birthday.   Frederic was born on February 29th, and so, technically, he only has a birthday each leap year, and so he must serve for another 63 years.

Leap Years are needed to keep our calendar in alignment with the Earth's revolutions around the sun.   Because seasons and astronomical events do not repeat in a whole number of days, a calendar that had the same number of days in each year would, over time, drift with respect to the event it was supposed to track like the winter solstice, vernal equinox, summer solstice and autumnal equinox.  By occasionally inserting an additional day or month into the year, the drift can be corrected.  If we didn't add a day on February 29th nearly every 4 years, we would lose almost six hours every year. After only 100 years, our calendar would be off by approximately 24 days!

Another famous leap day baby was Dickey Pearce.  Dickey played baseball back with the Brooklyn Atlantics in 1856.  Dickey is most famous for introducing his "tricky hit" to baseball, known today as the bunt.

Many people think baseball batters who bunt are caitiffs. 

One of the best bunters in all of baseball is Angel Erick Aybar. 

Last season against the Tigers and the best pitcher in all of baseball Justin Verlander,  Aybar stepped up to the plate.  It was the top of the eighth inning and Verlander had a no-hitter going through seven innings. With his team trailing 3-0,  Aybar dropped down a bunt.   Verlander fielded the bunt but rushed the throw which ended up in right field.  With Verlander rattled, the Angels would go on to score two runs that inning, making it close. 

Aybar attempted quite a few bunts last season.  He 42 attempts were second in the major leagues.  Joining him was Angel center fielder Peter Peter Bourjos who bunted 17 times in 29 attempts for a   .586 batting average.   Their new teammate, Albert Pujols, has attempted a sacrifice bunt just once, on June 16^th, 2001.  He also has two career bunt hits, one in 2003 and another in 2004.

SBA 7(a) Weekly Lending Update

More and more businesses are turning to the SBA 7(a) loan program as $322,060,000 in SBA 7(a) loans were approved for the week ending February 17th.   SBA 7(a) volume has been somewhat lackluster and last week's number is a jump in approvals.

So far this year SBA has approved $5,043,747,000 in SBA 7(a) loans.

504 Debenture Rate for February

504 Debenture Rate for February   


The debenture rate is 2.63% but note rate is 2.68% and effective yield is only 4.711%.


The effective yield for the temporary debt refinancing available with a 504 loan is 4.91%.

SBA 7(a) Weekly Lending Update

SBA 7(a) loan volume is off 53% from last year.  So far the SBA has approved $4,721,687,000 in SBA 7(a) loans.  Last year at this time, the SBA had approved $9,988,144,000 in SBA 7(a) loans.   Many people attribute the drop to the reduction in the percent of guarantee from 90 now down to 75.  With lenders assuming a greater share of the risk of the loan, they have become a little more selective.   Borrowers now need to figure out which lender is out there still willing to do their loan.  There are many lenders still out there doing SBA loans.

The SBA and limpet

limpet

LIM-pit

1. Any of various low conical-shelled marine mollusks that adhere tightly to rocks.

2. One that clings stubbornly.

From Middle English lempet, from Latin lampreda (lamprey) usually explained as literally "lick-rock," from lambere "to lick" + petra "rock."

The animals attach themselves to things with their sucker-like mouths..

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TIP OF THE WEEK 

Hotel occupancy rates are back to pre-recession levels.  Smith Travel Research’s preliminary performance numbers for January reveal another strong month for the U.S. hotel industry.   Occupancy overall was up 3% to 5% while revenue per available room was up 7% to 9%.

Loans to hotels are one of the single biggest industry categories of SBA borrower.

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate February 2011 = 3.26%
SBA Fixed Base Rate February 2011 = 4.72%

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504 Debenture Rate for January 

The debenture rate is 2.76% but note rate is 2.81% and effective yield is only 4.839%. 

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AHEAD OF THE YIELD CURVE 

The government had a little trouble selling $16 billion of 30 year Treasury bonds last week.  

The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.47, compared with 2.6 at the January offering and an average of 2.66 for the previous 10 sales. 

The 30 year Treasury bond yield reached 3.23 percent, the most since October 31^st.  The difference between yields on Treasuries maturing in two and 30 years, our friend the yield curve, widened to 2.94 percentage points, the most since October 28^th when the difference was 3.08 percentage points. 

Short term rates remain exceptionally low because of, as the Federal Reserve put it, “low rates of resource utilization”.

In the Federal Reserve's eyes, resource utilization is gauged by capacity utilization which measures how much plants and factories are being used. 

Keep your eyes and ears open for Wednesday's Federal Reserve report on Industrial Production and Capacity Utilization.

Here is what capacity utilization rates have done:
1997- 83.6
1998- 83.0
1999- 82.4
2000- 82.6
2001- 77.4
2002- 75.6
2003- 74.6
2004- 79.2
2005- 80.7
2006- 82.4
2007- 81.5
2008- 79.9
2009- 67.3
2010- 74.8
2011- 76.7

What does all this mean?

I don't know.

Last month capacity utilization for total industry stepped up to 78.1 percent.  This is up 10.8 percentage points from the record low set in June 2009.  It is still however 2.3 percentage points below its long term average and the pre-recession levels of 81.3% in December 2007. 

We still have a way to go before rates will start to really go up.

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OFF BASE

Valentine’s Day is Tuesday, February 14^th. 

You ever wonder how this whole crazy ritual started?

It turns out there really was a St. Valentine who was thrown in prison by Roman Emperor Claudius II.  Claudius attempted to get him to convert to Roman paganism in order to save his life. Valentine refused and tried to convert Claudius to Christianity instead. Because of this, Valentine was executed.

On the evening before Valentine was to be executed, he wrote a note - the first "valentine" card – to a lady friend.  It was a note that read "From your Valentine."

Ever since then, also sensing impeding doom if they don't, men have been compelled to do the same thing.  

The SBA and ululate

ululate

UHL-uh-layt, or YOOL-uh-layt

To howl or wail.

From Latin ululare (to howl or shriek) 
 

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TIP OF THE WEEK 

Restaurateurs must be happily ululating.

The National Restaurant Association just reported that their Restaurant Performance Index rose to highest level in nearly six years in December.  Building on a solid November performance that saw the strongest same-store sales results in more than four years, restaurant operators reported even better numbers in December.  In addition to positive sales and traffic levels, capital spending activity among restaurant operators continues to trend upward.

Loans to restaurants, both full service and limited service, are the single biggest industry category of SBA borrower.

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate February 2011 = 3.26%
SBA Fixed Base Rate February 2011 = 4.72%

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504 Debenture Rate for January 

The debenture rate is 2.76% but note rate is 2.81% and effective yield is only 4.839%. 

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AHEAD OF THE YIELD CURVE 

Joyful ululation echoed on Friday when the Department of Labor reported that 243,000 jobs were added to start the year off.    We added 157,000 jobs in November, 203,000 in December, and now 243,000 in January.  Even with the awful summer of 2011, the economy added 1.95 million jobs in the last 12 months, the best figure in five years. 

The Federal Reserve Open Market Committee had just said that they planned to maintain “exceptionally low levels for the federal funds rate at least through late 2014.”

 The federal funds rate dictates short term rates, but what about longer term rates?

After the jobs report on Friday, a drop of more than three points in the price of 30 year bonds pushed yields up as much as 16 basis points to 3.16 percent. 

The 30-year Treasury bond yield finished 2011 at 2.89 percent.   

Keep your eyes on Thursday’s $16 billion auction of 30 year Treasury bonds.

Here is what the 30 year bond has been doing:

2001- 5.49
2002- 5.43
2003- ND
2004- ND
2005- ND
2006- 4.91
2007- 4.84
2008- 4.18
2009- 3.89
2010- 4.61

2011- 2.89


Wait a minute, why no numbers for 2003, 2004, and 2005?

One month after the 9/11 attacks, the Treasury 30 year bond is discontinued. When the Treasury mothballed the 30-year bond in 2001, experts speculated it was trying to drive down long-term interest rates, which had remained stubbornly high while the Federal Reserve was slashing short-term interest rates to revive the economy. When the Treasury discontinued the 30-year bond in 2001, its yield fell 35 basis points in one day. Why? A shrinking supply of the 30-year Treasury bond caused increased demand to drive rates down.

What does all this mean?

I don’t know.

The slope of the yield curve—the difference between the yields on short- and long-term maturity bonds—has achieved some notoriety as a simple forecaster of economic growth.

A flat curve indicates weak growth, and conversely, a steep curve indicates strong growth.

The yield curve is getting a little steeper.

Now that’s something to ululate about.

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OFF BASE


Ululating about having to work on Super Bowl Monday?

You are not alone as a survey conducted by Harris Interactive for the Workforce Institute at Kronos indicated that 1.5 million people could call in sick and an additional 4.4 million could be late to work the day after the Super Bowl.  According to the latest Bureau of Labor Statistics numbers that just came out on Friday, there are about 141 million employed people in the United States. So, to put those national loss productivity numbers in perspective, just over 4 percent of the American work force won’t be very productive as they are going to either be missing work or dragging through the day.

Hang in there.  Our next holiday is in only two weeks as we observe Washington’s Birthday. 

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

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

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

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

Now before some prig goes off on exclaiming that would be allowing too much time off for frivolity amongst the hoi polloi, this trifecta of Presidential birthday holidays would be our last hurrah until the brink of summer. 

According to the Federal Reserve, the next federally recognized holiday is not until Memorial Day.  That’s not until the end of May.  Three whole months away; one forth of the year. 

Fortunately Opening Day for baseball is only 57 days from now and pitchers and catchers report for spring training next week.

Now there is something to joyfully ululate about.

SBA 7(a) Weekly Lending Update

For the week ending January 27, 2012, SBA approved $4,257,467,000 in SBA 7(a) loans.  That's an increase of $254,393,000 from the prior week.

SBA Loan Basics- What is a small business?

To be eligible for SBA financial assistance, which is a fancy way of saying to get a SBA loan, your company has to be considered a small business. Remember, SBA means SMALL BUSINESS Administration.

SBA uses what they call a size standard.


Currently the SBA defines a small business as one which has net profit after taxes less than $5 million averaged over the last three years and a BUSINESS net worth less than $15 million.

SBA 7(a) Weekly Lending Update

SBA ended its first calender quarter with $3,443,723,000 in approvals for the SBA 7(a) loan program.  If you annualized that pace, it would end up way off from the record setting $19,637,889,000 in SBA 7(a) loan approvals for the fiscal year ending 9/30/11.

Right now loan approvals are averaging about $191,873,000 a week.  Last year it was well in excess of $300,000,000 per week.

That means funding is readily available for borrowers.

The SBA and nugacity

Nugacity


noo-GAS-i-tee

Triviality; futility

From Latin nugax (trifling), from nugari (to trifle).

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TIP OF THE WEEK

Our oasis of nugacity looks at SBA loans for debt refinance.

A SBA 504 loan can be used to refinance debt as long as 85% of the loan proceeds from the debt being refinanced were originally used to purchase or build real estate.

A SBA 7(a) loan can also refinance real estate debt as well as business debt used for other purposes. It can be amortized for 25 years if at least 51% of the loan proceeds for the debt being refinanced were originally used for a real estate purpose. Debt refinance with a SBA 7(a) loan requires that the debt being refinanced has a balloon or there is a 10% improvement in cash flow.

Keep in mind that refinancing with a SBA 504 loan is for a limited time only.

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate January 2011 = 3.30%
SBA Fixed Base Rate January 2011 = 5.00%

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504 Debenture Rate for January

The debenture rate is 2.76% but note rate is 2.81% and effective yield is only 4.839%.

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AHEAD OF THE YIELD CURVE

The Federal Reserve Open Committee meets this week.

Federal Reserve officials will for the first time make public their own forecasts for the federal funds rate at their January 24 and 25 meeting, according to minutes from last month’s Federal Open Market Committee.

By releasing their forecasts, central bankers are likely to alter expectations for the timing of the first increase in their benchmark rate, which has been kept near zero since December 2008.

Last month, Fed Officials repeated their view that economic conditions would warrant "exceptionally low levels for the federal funds rate at least through mid-2013.”

So what happens after 2013?

Eurodollar futures settle at a three- month lending rate that has averaged about 22 basis points more than the Fed's target over the past 10 years.

Here is a summary of what the market expects for Eurodollar futures based upon the pit-traded prices at the Chicago Mercantile Exchange:

DEC12- 0.58
DEC13- 0.73
DEC14- 1.28
DEC15- 2.00
DEC16- 2.60
DEC17- 3.05
DEC18- 3.34

What does all this mean?

I don’t know.

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OFF BASE

Happy New Year!

Or as our Chinese friends would say “Kung Hei Fat Choi.” Loosely translated, it means “Congratulations and be prosperous.”

Today is the first day of the Chinese New Year. Why today? Chinese New Year falls on the second new moon after the winter solstice.

The Chinese New Year tradition is to reconcile, forget all grudges and sincerely wish peace and happiness for everyone.

Reconcile, forget all grudges and sincerely wish peace and happiness for everyone. Not a bad way to start the year. Or restart your year.

504 Debenture Rate for January

504 Debenture Rate for January 


The debenture rate is 2.76% but note rate is 2.81% and effective yield is only 4.839%.

The SBA and sedulous

sedulous


SEJ-uh-luhs

Involving great care, effort, and persistence.

From Latin se (without) + dolus (trickery, guile).
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TIP OF THE WEEK

Be sedulous in choosing your financing options.

SBA loans are readily available as Congress passed and the President signed an omnibus-spending bill that appropriates $918.7 million to the SBA for fiscal year 2012.

Both the 7(a) and 504 programs should receive sufficient funding for the balance of the fiscal year.

This gives the 7(a) program $17.5 billion in commitments for this fiscal year.

______________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate January 2011 = 3.30%
SBA Fixed Base Rate January 2011 = 5.00%
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504 Debenture Rate for December

The debenture rate is 2.87% but note rate is 2.918% and effective yield is only 4.95%.

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AHEAD OF THE YIELD CURVE

The 30-year Treasury bond yield finished 2011 at 2.89%, after starting the year at 4.5%.

This drop in yield is noteworthy.

That means the yield curve moved flatter. Long rates fell, and short rates stayed the same, because they can go no lower.

The slope of the yield curve—the difference between the yields on short- and long-term maturity bonds—has achieved some notoriety as a simple forecaster of economic growth.

A flat curve indicates weak growth, and conversely, a steep curve indicates strong growth.

According to the Federal Reserve Bank of Cleveland, projecting forward using past values of the treasury yield curve spread and GDP growth suggests that real GDP will grow at about a 0.7 percent rate over the next year.

That’s a slow down from last year.

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.8 percent in the third quarter of 2011 according to the "third" estimate released by the Bureau of Economic Analysis just before Christmas.

This does not bode well for job growth next year.

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

December 200,000
November 100,000
October 112,000
September 158,000
August 104,000
July 127,000
June 20,000
May 25,000
April 232,000
March 194,000
February 235,000
January 68,000
2010
December 121,000
November 93,000
October 210,000
September (41,000)
August (1,000)
July (66,000)
June (175,000)
May 431,000
April 218,000
March 230,000
February (36,000)
January (26,000)
2009
December (150,000)
November (11,000)
October (111,000)
September (215,000)
August (201,000)
July (304,000)
June (443,000)
May (322,000)
April (504,000)
March (699,000)
February (651,000)
January (655,000)
2008
December (681,000)
November (597,000)
October (423,000)
September (403,000)
August (127,000)
July (67,000)
June (100,000)
May (47,000)
April (67,000)
March (88,000)
February- (83,000)
January- (76,000)

What does all this mean?

I don’t know.

In 2011, the economy added 1.64 million total non-farm jobs or just 137 thousand per month. This is a better pace of payroll job creation than in 2010, but the economy still has 6.0 million fewer payroll jobs than at the beginning of the 2007 recession. There are a total of 13.1 million Americans unemployed and 5.6 million have been unemployed for more than 6 months.

Interest rates will obviously have to remain low for a long time.

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OFF BASE

Did everybody get spoiled by all the time off for Christmas and New Year’s?

If the thought of a full work week is terrifying, don’t despair. Another three day weekend is just ahead.


Monday, January 16th is Martin Luther King’s Birthday. Actually his birthday is January 15th but thanks to the Uniform Monday Holidays Act, we recognize it on the 16th.

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

Birthday of Martin Luther King, Jr. January 16
Washington's Birthday February 20
Memorial Day May 28
Independence Day July 4
Labor Day September 3
Columbus Day October 8
Veterans Day November 12
Thanksgiving Day November 22
Christmas Day December 25

Notice that long stretch of no holidays between Washington ’s Birthday and Memorial Day?

That’s ridiculous. We could neatly wedge in there as a holiday opening day for Major League Baseball. It’s only 86 days away.

Banks and borrowers missing out on SBA loans

Banks and borrowers are missing out on SBA loans.

What's going on here?

Fewer SBA 7(a) loans are being approved this year than they were during the previous two years.


Through December 16th , the SBA approved $2.8 billion in government-guaranteed loans though its flagship 7(a) program this fiscal year, which began October 1st. During the same period a year ago, the SBA had approved $6 billion in 7(a) loans. Two years ago, the SBA had approved $3.1 billion.

The spike in volume was driven by stimulus act incentives such as the higher guarantee and guarantee fee waivers which has expired.

Even without the enhanced guarantee and guarantee fee waiver, SBA 7(a) loans still offer lenders a very profitable lending platform and borrowers long term, fully amortizing loans that can be used for real estate purchase, real estate debt refinance, business debt refinance, business acquisition, equipment purchase and working capital.

An early Christmas for SBA loans

Christmas came early for SBA loans as the $1 trillion omnibus spending bill was passed. 

Not only did this avert a government shutdown it also means both the 7(a) and 504 programs should receive sufficient funding for the balance of the fiscal year.

This omnibus-spending bill appropriates $918.7 million to the SBA for fiscal year 2012


This gives the 7(a) program $17.5 billion in commitments for this fiscal year.

504 debenture rate

504 Debenture Rate for December 


The debenture rate is 2.87% but note rate is 2.92% and effective yield is only 4.95%.

The SBA and divagate

divagate
DY-vuh-gayt
To wander or digress.
From Latin divagatus, past participle of divagari (to wander off), from dis- (away) + vagari (to wander).
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TIP OF THE WEEK

Let’s divagate. The window is starting to close on opportunities in commercial estate.

According to Moody’s, things are picking up as September saw the third highest post-financial crisis level of repeat-sales.

The Moody’s/REAL Commercial Property Price Indices (CPPI) measure the change in actual transaction prices for commercial real estate assets based on the repeat-sales of the same assets at different points in time.

While pricing remains stagnant, September transaction volume was relatively high at 255 repeat-sales observations. The average monthly transaction count for 2011 is 192 compared with 144 for 2010 and 96 for 2009. Moody’s report for November also projects that within the next few years property prices should be just shy of where they were in August 2006.

Let me know if you would like a copy of the Moody’s/REAL Commercial Property Price Indices report for November.

SBA loans are especially well suited for commercial real estate purchase and refinance.
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Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate December 2011 = 3.27%
SBA Fixed Base Rate December 2011 = 5.09%
________________________________________
504 Debenture Rate for November
The debenture rate is 2.76% but note rate is 2.807% and effective yield is only 4.94%.
For debt refinance with a 504 loan, the effective yield is 5.234%
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AHEAD OF THE YIELD CURVE

The Federal Open Market Committe meets on Tuesday and it is widely expected that they will continue to state that:

"The Committee ... currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013."

In the Federal Reserve's eyes, resource utilization is gauged by capacity utilization which measures how much plants and factories are being used.

Keep your eyes and ears open for Thursday's Federal Reserve report on Industrial Production and Capacity Utilization.

Here is what capacity utilization rates have done:
1997- 83.6
1998- 83.0
1999- 82.4
2000- 82.6
2001- 77.4
2002- 75.6
2003- 74.6
2004- 79.2
2005- 80.7
2006- 82.4
2007- 81.5
2008- 79.9
2009- 67.3
2010- 74.8
2011- 76.7

What does all this mean?

I don't know.

Last month capacity utilization for total industry stepped up to 77.8 percent, a rate 2.1 percentage points above its level from a year earlier. This is up 10.5 percentage points from the record low set in June 2009. It is still however 2.6 percentage points below its long term average and the pre-recession levels of 81.3% in December 2007.

The day after the FOMC meeting the government plans to sell $13 billion of 30 year bonds. Last month’s sale of $16 billion of 30 year bonds drew a yield of 3.199 percent. Long term rates remain low thanks to Operation Twist. Last week the Federal Reserve purchased another $2.512 billion of Treasuries due from February 2036 to August 2041. The Fed plans to replace $400 billion of shorter maturities in its holdings with longer-term debt. The idea is that this will support the economy by keeping borrowing costs low.

The Federal Reserve will obviously be keeping both short term and long term rates low for quite awhile

__________________________________________

OFF BASE

It’s the most wonderful time of the year!

The commercial college football bowl season starts this weekend!

Commercial college football bowl season? Every college bowl game has a title sponsor.

It starts Saturday with the Gildan New Mexico Bowl.

Gildan makes Gold Toe Socks. Why the gold on the toe?

During the Great Depression it began manufacturing men's dress socks with a toe made from high quality Irish linen, which made the their product more resistant to holes and fraying than ordinary socks. A department store buyer informed company management that these durable socks were popular, but customers had difficulty distinguishing the product from its competitors. The manufacturer added gold acetate thread to the toes of its socks in order to make it visually distinctive on store shelves.

Speaking of socks, there was nothing more important to coach John Wooden than putting them on right. His first practice always began with a lesson on how to put your socks on right.

Hold up the sock and work it around the little toe area and the heel area so that there are no wrinkles. Smooth it out good. Then hold the sock up while you put the shoe on. You must not permit your socks to have wrinkles around the little toe--where you generally get blisters--or around the heels.

The SBA and corrigible

corrigible

(KOR-i-juh-buhl)
Capable of being corrected.
From Latin corrigere (to correct).
________________________________________________

TIP OF THE WEEK

SBA lending is definitely corrigible.

For 7(a) loans, the 90 percent guarantee and no guarantee fee are once again available. To qualify applicant must be involved in international trade and be located in an area adversely affected by NAFTA based upon job losses and unemployment rate.


A reimbursement of the 504 debenture fee is also available for those applicants located in areas adversely affected by NAFTA.
______________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate November 2011 = 3.25%
SBA Fixed Base Rate November 2011 = 4.95%
________________________________________

504 Debenture Rate for November

The debenture rate is 2.76% but note rate is 2.807% and effective yield is only 4.94%.

For debt refinance with a 504 loan, the effective yield is 5.234%
________________________________________________


AHEAD OF THE YIELD CURVE

Corrigible or incorrigible?

47 million people actually lost their jobs in the last twelve months.

That’s not a misprint. Job losses totaled 47 million people in the last twelve months. Fortunately 48.3 million people were also hired in the last twelve months. Doing the math, that means the economy created a net 1.3 million jobs.

Most people don’t understand how vast and complicated our economy is as it’s the net number that makes the headlines.

For example, September reflected “only” 158,000 new jobs. But in reality employers took on 4.25 million workers in September. Through the first ten months of 2011, the economy has added 1.256 million total non-farm jobs or just 125 thousand per month. This is a better pace of payroll job creation than last year, but the economy still has 6.47 million fewer payroll jobs than at the beginning of the 2007 recession.

Keep your eyes opened for Friday’s report on jobs.

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

October 80,000
September 158,000
August 104,000
July 127,000
June 20,000
May 25,000
April 232,000
March 194,000
February 235,000
January 68,000
2010
December 121,000
November 93,000
October 210,000
September (41,000)
August (1,000)
July (66,000)
June (175,000)
May 431,000
April 218,000
March 230,000
February (36,000)
January (26,000)
2009
December (150,000)
November (11,000)
October (111,000)
September (215,000)
August (201,000)
July (304,000)
June (443,000)
May (322,000)
April (504,000)
March (699,000)
February (651,000)
January (655,000)
2008
December (681,000)
November (597,000)
October (423,000)
September (403,000)
August (127,000)
July (67,000)
June (100,000)
May (47,000)
April (67,000)
March (88,000)
February- (83,000)
January- (76,000)

What does all this mean?

I don’t know.

Don’t be misled by the headlines.

There were only 80,000 jobs added in October. 104,000 private sector jobs were added, and 24,000 government jobs lost. However the change in total employment was revised up for August and September. Gains in the prior two months were revised up by 102,000.

Must ado was made last week that the economy in the U.S. expanded less than previously estimated in the third quarter. Gross domestic product climbed at a 2 percent annual rate from July through September, down from a 2.5 percent prior estimate.


Inventories were a greater drag on the economy last quarter than first estimated. They were cut at an $8.5 billion annual rate, subtracting 1.6 percentage points from growth, compared with a 1.1 percent previous estimate. It was the first time stockpiles were trimmed since the last three months of 2009.

But that is actually good news! Fewer inventories put producers on track to ramp up output heading into the holiday season. Restocking should boost growth by another 0.8 percentage points in the fourth quarter

Be corrigible.
__________________________________________

OFF BASE

As if Black Friday wasn’t bad enough, today is Cyber Monday.

Millions of otherwise productive working Americans, fresh off a Thanksgiving weekend of window shopping, are returning to high-speed Internet connections at work Monday and buying what they liked. The term “Cyber Monday” was coined based on research showing that 78% of online retailers reported a significant increase in sales on the Monday after Thanksgiving in 2004. In 2006, online spending on Cyber Monday jumped 25% to $608 million, 21% to $733 million in 2007, and 15% to $846 million in 2008. In 2009, online spending increased 5 percent on Cyber Monday to $887 million and that more than half of dollars spent online at US Web sites originated from work computers (52.7 percent). Last year Cyber Monday topped the $1 billion mark.

The whole point of the season seems to have been missed.

In case you have not noticed, the days have been getting shorter and shorter. The sun will rise about a minute later tomorrow and set a minute earlier. In just 24 days, it will be the shortest day of the year, the winter solstice.

Centuries ago in some cultures, elaborate festivals were held on the winter solstice. Alarmed by the colder weather, shorter days with less and less sunlight, and long, dark nights, some were convinced that they had done some terrible wrong and as punishment, the sun was leaving the sky never to return. Large bonfires were lit with rituals held pleading to whatever god they believed in to make the sun return.

These solstice festivals evolved into Christmas as we now know it.

Jesus probably was not even born on December 25th. The reality is that it would have simply been far too cold for shepherds to be out with their sheep at night in Israel. Don’t forget that Mary and Joseph came to Bethlehem to register in a Roman census. Such censuses were not taken in winter, when temperatures often dropped below freezing and roads were in poor condition. Taking a census under such conditions would have been self-defeating.

Only 27 days until Christmas.

SBA 7(a) Rate Update

Indices:


PRIME RATE= 3.25%

SBA LIBOR Base Rate November 2011 = 3.25%

SBA Fixed Base Rate November 2011 = 4.95%


Lenders charge up to 2.75% over these indices.

504 debenture rate

The November Effective Rate* for SBA 504 Loans is 4.94%

For Debt Refinance with a 504 loan it's 5.234%

*Effective rate includes SBA fee, central servicing agent fee, and a 5/8% CDC fee

The SBA and asperity

asperity


ah-SPER-i-tee

Harshness or roughness.

Via French from Latin asper (rough).
________________________________________________

TIP OF THE WEEK

Asperity in commercial real estate is easing, at least according to Moody’s.

The Moody’s/REAL Commercial Property Price Indices (CPPI) measure the change in actual transaction prices for commercial real estate assets based on the repeat sales of the same assets at different points in time. The National — All Property Type Aggregate Index (CPPI) recorded a 2.4% increase in August, bringing it to 15.3% above the post-peak low recorded in April 2011.

The share of distressed transactions included within this month’s CPPI was 21.7%, down 5.9% from last month and the lowest level since January 2010. Prices for distressed transactions were down by 3.5% from the last month and are 6.9% above their post peak low set in August 2010. The reduced share of distressed transactions helped drive this month’s overall price increase.

If you would like a copy of the Moody’s October 2011 report, let me know.

A SBA loan is well suited for commercial real estate purchase or refinance.

The refinance provisions with a 504 loan expire in less than a year.

_____________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate October 2011 = 3.24%
SBA Fixed Base Rate October 2011 = 4.848%
________________________________________

504 Debenture Rate for October

The debenture rate is 2.76% but note rate is 2.807% and effective yield is only 4.609%.

________________________________________________



AHEAD OF THE YIELD CURVE

In case you missed it, the economy has now recovered from the great recession.

According to the Department of Commerce, the value of goods and services produced in the U.S. last quarter surpassed its pre-recession level after 15 quarters, taking three times longer than the average for 10 previous recoveries since World War II.

Gross domestic product expanded at a 2.5 percent annual rate in the period from July through September, the fastest pace in a year and up from 1.3 percent in the prior three-month period. After adjusting for inflation, GDP climbed to $13.35 trillion last quarter, topping the $13.33 trillion peak reached in the last three months of 2007.

Left behind however are the ones who lost their jobs.

The number of Americans with jobs last month, 131.3 million, was lower than the 138 million workers in December 2007, when the 18-month recession began.

Only 80,000 jobs were created in October. Through the first ten months of 2011, the economy has added 1.256 million total non-farm jobs or just 125 thousand per month. This is a better pace of payroll job creation than last year, but the economy still has 6 ½ million fewer payroll jobs than at the beginning of the 2007 recession. There are a total of 13.9 million Americans unemployed and 5.9 million have been unemployed for more than 6 months.

So what does the bond market think about all of this?

Keep your eyes on Thursday’s $16 billion auction of 30 year Treasury bonds.


Here is what the 30 year bond has been doing:

2001- 5.49
2002- 5.43
2003- ND
2004- ND
2005- ND
2006- 4.91
2007- 4.84
2008- 4.18
2009- 3.89
2010- 4.61


What a minute, why no numbers for 2003, 2004, and 2005?

One month after the 9/11 attacks, the Treasury 30 year bond is discontinued. When the Treasury mothballed the 30-year bond in 2001, experts speculated it was trying to drive down long-term interest rates, which had remained stubbornly high while the Federal Reserve was slashing short-term interest rates to revive the economy. When the Treasury discontinued the 30-year bond in 2001, its yield fell 35 basis points in one day. Why? A shrinking supply of the 30-year Treasury bond caused increased demand to drive rates down.

What does all this mean?

I don’t know.

Yields on 30 year bonds have fallen from this year’s high of 4.79 percent on February 9 down to about only 3.04 percent.

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 foreshadowed each of the last seven recessions. One of the recessions predicted by the yield curve was the most recent one. The yield curve inverted in August 2006, a bit more than a year before the current recession started in December 2007.

According to the Federal Reserve Bank of Cleveland, projecting forward using past values of the yield curve spread and GDP growth suggests that real GDP will grow at about a 0.8 percent rate over the next year

Asperity continues and interest rates will remain low.



__________________________________________



OFF BASE

The sun came up nice and early this morning.

That’s because Daylight Saving Time just ended.

The official spelling is Daylight Saving Time, not Daylight SavingS Time.

Saving is used here as a verbal adjective (a participle). It modifies time and tells us more about its nature; namely, that it is characterized by the activity of saving daylight. It is a saving daylight kind of time. Because of this, it would be more accurate to refer to DST as daylight-saving time. Saving is used in the same way as saving a ball game, rather than as a savings account.

So NO S for Daylight Saving Time and NO apostrophe for Veterans Day which is this Friday.

The holiday is commonly printed as Veteran's Day or Veterans' Day in calendars and advertisements. While these spellings are grammatically acceptable, the United States government has declared that the attributive (no apostrophe) rather than the possessive case is the official spelling.

Because it is a federal holiday, many American people have the day off from school or work for Veterans Day. Non-essential federal government offices are closed. Banks are closed and no mail is delivered. The holiday is often celebrated by having a ravioli meal. This tradition dates back to the ending days of World War I when President Woodrow Wilson, aware that the returning soldiers would be longing for home cooked meals, invited 2,000 soldiers to the White House and helped his staff chefs cook them ravioli, which had just become a mainstay in mainstream American kitchens due to commercial canning. In his Armistice Day address to Congress, Wilson was sensitive to the psychological toll of the lean War years. "Hunger," he remarked, "breeds madness."

The SBA and perspicaciousness

perspicaciousness

puhr-spi-KAY-shuhs-nes

Keenness of perception and discernment.

From Latin perspicere (to see through), from per- (through) + -spicere, combining form of specere (to look).

________________________________________________



TIP OF THE WEEK

Perspicacity is needed when trying to figure out SBA loans.

A thorough understanding of the SBA Standard Operating Procedure, which changed on October 1st, is also important.

Recent changes now allow SBA loans to refinance owner-user real estate debt including lender’s REO properties.

Other changes now make SBA loans the preferred choice of both lenders and borrowers.

______________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate October 2011 = 3.24%
SBA Fixed Base Rate October 2011 = 4.848%

_______________________________________

504 Debenture Rate for October

The debenture rate is 2.76% but note rate is 2.807% and effective yield is only 5.067%.

________________________________________________

AHEAD OF THE YIELD CURVE

If you don’t think the economy is recovering, your perspicaciousness is lacking.

Just look at the capacity utilization rate. It has climbed 10.1 percentage points from the record low set in June 2009.

The capacity utilization rate, which measures how much plants and factories are being used, is one of the Federal Reserve’s favorite gauges of the economy.

The Federal Reserve watches capacity utilization rates to see if production constraints are threatening to cause inflationary pressures. Bottlenecks or shortages often lead to inflationary pressures that would drive prices even higher. Several analysts have pointed to a rate between 81% and 82% as a tipping point over which inflation is spurred.

Last week it was reported that capacity utilization increased to 77.4 percent from 77.3 percent in August. The gauge compares with the average of 79.5 percent over the past 20 years.

Here is what capacity utilization rates have done:

1997- 83.6
1998- 83.0
1999- 82.4
2000- 82.6
2001- 77.4
2002- 75.6
2003- 74.6
2004- 79.2
2005- 80.7
2006- 82.4
2007- 81.5
2008- 79.9
2009- 67.3
2010- 74.8
2011- 76.7

What does all this mean?

I don't know.

Capacity utilization at 77.4% is still 3.0 percentage points below its average from 1972 to 2010 and below the pre-recession levels of 81.3% in December 2007.

One implication is that there is very little inflationary pressure in the economy.

Keep your eyes on Thursday’s advance estimate of third quarter Gross Domestic Product. GDP represents the total value of the country's production and consists of the purchases of domestically-produced goods and services by individuals, businesses, foreigners and government entities. Gross domestic product is the country's most comprehensive economic scorecard.

When the report comes out, look at final sales -- GDP less the change in business inventories. When final sales are growing faster than inventories, this points to increases in production in months ahead. Conversely, when final sales are growing more slowly than inventories, they signal a slowdown in production.

Economic growth for the second quarter remained anemic. The Commerce Department's final estimate for second quarter GDP growth was 1.3 percent annualized, compared to first quarter growth of 0.4 percent.

Interest rates will continue to remain low.

__________________________________________

OFF BASE

The Cardinals are in the World Series.

Don’t say so what!

Keep in mind that when the Cardinals win the World Series, the stock market rises 13% the following year.

That`s more than any other team which has won the series at least four times.

In fact the Cardinals win in 1982 preceded the biggest bull market in decades. Since 1926, the Cardinals have won 10 World Series titles. In 9 of those occasions, the Dow posted a gain the following year, with an average return of 13 percent. It is the Dow’s best return for any Major League Baseball team with four or more titles. The best result was a 38.5 percent gain for the Dow in 1935, a year after the Gas House Gang* won the title. Most recently, the Dow hit a record high about a year after the Cardinals' 2006 win, but closed 2007 with a gain of just 6.4 percent.

The New York Yankees are the second-best-performing team for investors. Their 27 World Series titles have been followed by an average stock-market gain of 9.6 percent the following year.

The Texas Rangers have never won a World Series, but baseball has had eight first-time winners in the past 45 years. Following those Series, the most recent of which was the Angels' "rally monkey" title in 2002, the Dow has risen an average of 8.97 percent.

*The Cardinals nickname is the Gashouse Gang given to them by Leo Durocher. The phrase "gas house" referred to plants that produced town gas for lighting and cooking from coal, which were common fixtures in US cities prior to the widespread use of natural gas. The plants were noted for their foul smell and were typically located near railroad yards in the poorest neighborhood in the city.

Enough of this perspicaciousness.

504 debenture rate

504 Debenture Rate for October 


The debenture rate is 2.76% but note rate is 2.807% and effective yield is only 5.067%.
 
While debenture rate and note rates declined, effective yield is up due to an increase in fees.

The SBA and columbarium

columbarium

kol-uhm-BAR-ee-uhm
1. A vault with niches for storing urns.
2. A dovecote or pigeon house.
From Latin columbarium, from columba (pigeon, dove).

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TIP OF THE WEEK

A commercial columbarium or dovecote is used for pigeons in the production of squab. Squab has been commercially raised in North America since the early 1900s. Usually considered a delicacy, squab is tender, moist and richer in taste than many commonly-consumed poultry meats and is very lean, easily digestible, and rich in proteins, minerals, and vitamins. Squab grace the menus of American haute cuisine restaurants such as The French Laundry and has enjoyed endorsements from some celebrity chefs.

Unique properties such as a columbarium are eligible for SBA financial assistance for purchase, construction or debt refinance.
______________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate October 2011 = 3.24%
SBA Fixed Base Rate October 2011 = 4.848%
________________________________________

504 Debenture Rate for September

The debenture rate is 2.85% but note rate is 2.89% and effective yield is only 4.709%.
________________________________________________

AHEAD OF THE YIELD CURVE

It turns out the dog days of summer really didn’t go to the dogs.

Last month the Labor Department had reported that ZERO jobs were created in the month of August. Making matters worse, the government had also revised down job growth figures for July, to 85,000 from 117,000 and said employers added just 20,000 jobs in June, not 46,000.

September’s payroll numbers just came out and it now reports that the month of August payroll numbers have been revised up to 57,000. From ZERO to 57,000. July has been revised one more time to 127,000. These revisions to previous reports added a total of 99,000 jobs to payrolls in July and August.

September’s payrolls rose by 103,000.

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

September 103,000
August 57,000
July 127,000
June 20,000
May 25,000
April 232,000
March 194,000
February 235,000
January 68,000
2010
December 121,000
November 93,000
October 210,000
September (41,000)
August (1,000)
July (66,000)
June (175,000)
May 431,000
April 218,000
March 230,000
February (36,000)
January (26,000)
2009
December (150,000)
November (11,000)
October (111,000)
September (215,000)
August (201,000)
July (304,000)
June (443,000)
May (322,000)
April (504,000)
March (699,000)
February (651,000)
January (655,000)
2008
December (681,000)
November (597,000)
October (423,000)
September (403,000)
August (127,000)
July (67,000)
June (100,000)
May (47,000)
April (67,000)
March (88,000)
February- (83,000)
January- (76,000)

What does all this mean?

I don’t know.

Thirty-year bond yields dropped 20 basis points on September 2nd, when the government reported zero job growth in August. Yields had increased 18 basis points on August 5th, when the payrolls report showed the job market had gained traction.

Keep your eyes on Thursday’s $13 billion auction of 30 year Treasury bonds.

Yields on 30-year bonds decreased 146 basis points in the third quarter, the most since falling 164 basis points in the last three months of December 2008. The biggest bond rally in three years has repudiated Standard & Poor’s downgrade of our government’s AAA credit rating. These rates should continue to remain low as the Federal Reserve just purchased $2.5 billion of longer-term debt through its Operation Twist.

Even as the yield curve flattens, it has not inverted. Projecting forward using past values of the yield curve spread and GDP growth, the Reserve Bank of Cleveland suggests that real GDP will grow at about a 0.8 percent rate over the next year. It is quite optimistic about the recovery continuing.
__________________________________________


OFF BASE

If you didn’t notice, yesterday banks were closed in observance of Columbus Day, which is tomorrow.

On October 12, 1492 Columbus landed in the New World. Celebrations of the event, most notably starting in 1869 by Italians in San Francisco, become official in 1937 when President Franklin Roosevelt proclaimed every October 12 as Columbus Day. That's where it remained until 1971 when Congress declared it a federal public holiday on the second Monday in October.

The amazing thing about Columbus and his voyage was how it was financed. Many people think the King and Queen of Spain, Ferdinand and Isabella, bankrolled it. Not quite. Ferdinand and Isabella made the city of Palos pay back a debt to the crown by providing Columbus with two of the ships. The balance came from some Italian investors Columbus had lined up. The crown had to put up very little money from the treasury.

SBA lending works pretty much the same way. Our treasury department puts up very little money as fees collected by the Small Business Administration ends up subsidizing the program. Factor in taxes paid by successful borrowers and this ends up being a net revenue generator for us all.

SBA 7(a) Rate Update

Indices:


PRIME RATE= 3.25%

SBA LIBOR Base Rate October 2011 = 3.24%

SBA Fixed Base Rate October 2011 = 4.84%

Lenders charge up to 2.75% over these indices.

SBA Announces Record Loan Approval Volume in FY 2011

From the SBA:
During the fiscal year, which ended Sept. 30, SBA loan approvals supported $30.5 billion (61,689 loans) in lending to small businesses and start-ups through its two largest loan programs, compared to $22.6 billion (60,771 loans) in FY 2010 and $17.9 billion (50,830 loans) in FY2009.


The FY2011 total is the highest volume fiscal year in the agency’s history, surpassing the $28.5 billion mark established in FY2007. The first quarter of the year, at over $12 billion supported, was the most active single quarter ever for SBA-backed loans, with more than four times the dollar volume of the same quarter in 2009 – the first three months of the recession – and more than double the volume of any quarter over the past four years.

The totals for FY2011 include 53,706 loans $19.63 billion under the agency’s largest loan program, the 7(a) General Business Loan program, and 7,983 loans for a total approval of $4.84 billion, supporting $10.34 billion in small business lending under the 504 Certified Development Company loan program. The “supported” amount for 504 loans includes the SBA share and third party loans that are made by commercial lenders as part of the funding package.


Those numbers compare with 7(a) totals for FY 2010 of 52,938 loans for $12.46 billion, and 504 program totals of 7,833 loans for a total supported dollar amount of $9.97 billion.

The SBA and vade mecum

vade mecum


VAY/VAH-dee MEE/MAY-kuhm

A book for ready reference, such as a manual or guidebook.

From Latin vade mecum (go with me), from vadere (to go) + me (me) + cum (with).
________________________________________________

TIP OF THE WEEK

The vade mecum for SBA loans is the SOP- Standard Operating Procedures.

SBA has once again re-written its SOP. These changes in the rules will be effective on October 1st.

One of the changes is that SBA lenders selling OREO are no longer limited to the liquidation value or their cost in the property.

Both SBA 504 and 7(a) loans offer high loan to value financing for owner-user real estate.
______________________________________
Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate September 2011 = 3.22%
SBA Fixed Base Rate September 2011 = 4.99%
________________________________________

504 Debenture Rate for September

The debenture rate is 2.85% but note rate is 2.89% and effective yield is only 4.709%.
________________________________________________

AHEAD OF THE YIELD CURVE

The Federal Reserve doesn’t really have a vade mecum. Or does it?

With short term interest rates as low as they can go, the Federal Open Market Committee announced last week that it wanted to push down longer term rates by buying more longer term Treasuries.

The Fed would mimic a policy in 1961 known as “Operation Twist” for its goal of bending the yield curve.

While Fed staff called it Operation Nudge, it became known as Operation Twist, after Chubby Checker’s hit, The Twist.

The bond market began dancing almost immediately after the Fed announcement as the 30 year Treasury bond dropped 45 basis points last week, the most since the midst of the global financial crisis in December 2008.

The Fed also left unchanged its pledge to keep the benchmark interest rate near zero through at least mid-2013. The central bank has kept the target federal funds rate for overnight interbank loans in a range of zero to 0.25 percent since December 2008.

So what happens after 2013?

Eurodollar futures settle at a three- month lending rate that has averaged about 22 basis points more than the Fed's target over the past 10 years. Here is a summary of what the market expects for Eurodollar futures based upon the pit-traded prices at the Chicago Mercantile Exchange:

DEC11- 0.55
DEC12- 0.53
DEC13- 0.79
DEC14- 1.50
DEC15- 2.17
DEC16- 2.64
DEC17- 2.94
DEC18- 3.10

What does all this mean?

I don’t know.

It would appear that interest rates will remain low for an extended period.
__________________________________________

OFF BASE

The vade mecum for anyone who likes baseball is www.baseball-reference.com

If you check it out, you will discover that only two players--Jose Bautista and Curtis Granderson--will hit 40 home runs this season. Three other players--Albert Pujols, Matt Kemp and Mark Teixeira--are close with a handful of games to play.

Way back when, it used to be impressive get 40 homers in a season. But then things got crazy and 40-home run hitters became commonplace.

Now, it's back to the future time. For the third time in the last four years, we're going to have only two guys break the 40-homer barrier.

Many people might think it’s because steroids are out of baseball.

It’s actually because Jose Lima died. In 2000, Lima gave up a National League record 48 home runs.

Now Cincinnati Reds pitcher Bronson Arroyo is challenging Lima Time.

Arroyo has served up 44 dingers this season.

Bronson’s 2.18 homers per nine innings is the second-highest mark ever among pitchers who qualified for the ERA title, according to Baseball Reference. Only the late Jose Lima (2.20 per nine in 2000) got taken deep more often.

Jose’s birthday by the way is this Friday, September 30th. He would have been 38 years old.

SBA 504 debenture rate

504 Debenture Rate for September

The debenture rate is 2.85% but note rate is 2.89% and effective yield is only 4.709%.

SBA 7(a) Rate Update

Indices:


PRIME RATE= 3.25%

SBA LIBOR Base Rate September 2011 = 3.22%

SBA Fixed Base Rate September 2011 = 4.99%

Lenders charge up to 2.75% over these indices.

The SBA and estival

estival


ES-ti-vuhl

Relating to or occurring in summer.

Via French from Latin aestivus (of or relating to summer).
________________________________________________
TIP OF THE WEEK

Summer is coming to an end and so is the government’s fiscal year.

The New Year looks good for SBA lending.

Total credit subsidy appropriations are proposed to go from $83 million in FY 2011 to $215 million in FY 2012. Of course, using the governments’ calculator the $215 million proposed for FY 2012 will be a DECREASE from the actual FY 2011 appropriation when considering the $505 million in Jobs Act money. As a result, funding is increasing while at the same time decreasing.

Our new SBA 7(a) loan servicing center is expanding.

We are now able to provide all SBA lender services (packaging, submission, documentation, closing, servicing, guaranty purchases and liquidation) at NO fixed cost to lenders.
______________________________________
Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate August 2011 = 3.19%
SBA Fixed Base Rate August 2011 = 5.41%
________________________________________
504 Debenture Rate for August
The debenture rate is 3.29% but note rate is 3.34% and effective yield is only 5.142%.
Note that the effective yield for debt refinance under the 504 program is slightly higher.
It is now 5.501%.
________________________________________________

AHEAD OF THE YIELD CURVE

So where is the economy going?

Keep your eye what happens when the government has to borrow more money this week. The U.S. will offer $32 billion of three-year notes, $21 billion of 10-year debt and $13 billion of 30-year bonds in three daily auctions beginning September 12th.

The economy has never contracted with the difference between 10- and 30-year Treasury yields as wide as the current 1.34 percentage points, or 134 basis points, since the so-called long bond was first issued in 1977. The gap, which is more than double the 49 basis-point average of the past 20 years, has ranged from negative 56 to positive 41.9 at the start of the last five recessions, beginning in January 1980.

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 foreshadowed each of the last seven recessions. One of the recessions predicted by the yield curve was the most recent one. The yield curve inverted in August 2006, a bit more than a year before the current recession started in December 2007.

Here is what the 30 year bond has been doing:

2001- 5.49
2002- 5.43
2003- ND
2004- ND
2005- ND
2006- 4.91
2007- 4.84
2008- 4.18
2009- 3.89
2010- 4.61


What a minute, why no numbers for 2003, 2004, and 2005?

One month after the 9/11 attacks, the Treasury 30 year bond is discontinued. When the Treasury mothballed the 30-year bond in 2001, experts speculated it was trying to drive down long-term interest rates, which had remained stubbornly high while the Federal Reserve was slashing short-term interest rates to revive the economy. When the Treasury discontinued the 30-year bond in 2001, its yield fell 35 basis points in one day. Why? A shrinking supply of the 30-year Treasury bond caused increased demand to drive rates down.

What does all this mean?

I don’t know.

Yields on 30 year bonds have fallen from this year’s high of 4.79 percent on February 9 down to about 3.27 percent, which is a historical low.

As might be expected, the flatter slope has increase the probability of recession. Using the yield curve to predict whether or not the economy will be in recession in the future, the Federal Reserve Bank of Cleveland estimates that the expected chance of the economy being in a recession next August at 4.8 percent, up noticeably from June and July’s 1.7 percent, albeit still a fairly low number. While their approach is somewhat pessimistic as regards the level of growth over the next year, it is quite optimistic about the recovery continuing.

The Federal Reserve’s Federal Open Market Committee meets on September 20 and 21. The next day is the last day of summer.

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OFF BASE

Estival joy ends in just ten days on September 22nd.

The next day, the first day of autumn, has equal hours of sunlight and daylight. The sun rises exactly due east and sets exactly due west that day. The days will continue to get shorter and shorter every day until the first day of winter which is the shortest day of the year.

This year ends in 110 days.

As the events of September 11th remind us and as echoed in the Book of James 4:14 “Why, you do not even know what will happen tomorrow. What is your life? You are a mist that appears for a little while and then vanishes.”

The SBA and esurient

esurient

i-SOOR-ee-uhnt
Hungry; greedy.
From Latin esurire (to be hungry), from edere (to eat).
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TIP OF THE WEEK

Esurient buyers of commercial real estate will be disappointed if they think recessionary bargains still abound.

According to the Moody’s/Real Commercial Property Price Index, commercial real estate prices rose another 0.9 percent in June. This is the second month in a row that prices have gained. This index measures the change in actual transaction prices for commercial real estate based on the repeat-sales of the same assets at different points in time.

Most notably, prices of industrial buildings in the Western United States are only 5.5% below the peak which occurred in the fourth quarter of 2007. Industrial prices in the West have rebounded 29.5% since their post peak low in third quarter of 2009.

If you would like a copy of the Moody’s August 2011 special report on the Moody’s/Real Commercial Property Price Index, let me know.
_______________________________________
Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate August 2011 = 3.19%
SBA Fixed Base Rate August 2011 = 5.41%
________________________________________

504 Debenture Rate for August
The debenture rate is 3.29% but note rate is 3.34% and effective yield is only 5.142%.
Note that the effective yield for debt refinance under the 504 program is slightly higher.
It is now 5.501%.
________________________________________________

AHEAD OF THE YIELD CURVE

Esurience in the jobs market?

The number of people continuing to receive jobless benefits dropped by 80,000 in the week ended August 13th to 3.64 million. This is the fewest since September 2008. This continuing claims figure does not include the number of Americans receiving extended benefits under federal programs. Extended benefits and emergency payments recipients total another 3.64 million. The number recently decreased by about 20,400.

Add those two numbers together and you get just OVER 7 million people receiving some form of jobless benefit. The economy still has just UNDER 7 million fewer payroll jobs than at the beginning of the 2007 recession.

On the Friday before the long weekend celebrating LABOR will be the payroll report from the Department of Labor.

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

July 117,000
June 46,000
May 25,000
April 232,000
March 194,000
February 235,000
January 68,000
2010
December 121,000
November 93,000
October 210,000
September (41,000)
August (1,000)
July (66,000)
June (175,000)
May 431,000
April 218,000
March 230,000
February (36,000)
January (26,000)
2009
December (150,000)
November (11,000)
October (111,000)
September (215,000)
August (201,000)
July (304,000)
June (443,000)
May (322,000)
April (504,000)
March (699,000)
February (651,000)
January (655,000)
2008
December (681,000)
November (597,000)
October (423,000)
September (403,000)
August (127,000)
July (67,000)
June (100,000)
May (47,000)
April (67,000)
March (88,000)
February- (83,000)
January- (76,000)

What does all this mean?

I don’t know.

Payroll increases of around 125,000 a month are needed to keep the unemployment rate steady, while about 200,000 a month would bring it down a percentage point over a year. Through the first six months of 2011, the economy has added 757,000 total non-farm jobs or just 126,000 per month.

Interest rates will continue to remain low for an extended period.

___________________________________________

OFF BASE

Monday is Labor Day.

For many people, this marks the end of summer.

In high society, Labor Day is considered the last day of the year when it is fashionable to wear white. The post–Labor Day moratorium on white clothing and accessories has long ranked among etiquette hard-liners' most sacred rules.

So then if white is out, what color works?

Success has a color, and the color is red. In fact, a recent study confirms previous reports that athletes wearing red uniforms win competitions more often than opponents dressed in other colors.

When opponents of a game are equally matched, the team dressed in red is more likely to win.

British anthropologists Russell Hill and Robert Barton of the University of Durham reached that conclusion by studying the outcomes of one-on-one boxing, tae kwon do, Greco-Roman-wresting, and freestyle-wrestling matches at the 2004 Summer Olympics in Athens, Greece. In each event Olympic staff randomly assigned red or blue clothing or body protection to competitors. When otherwise equally matched with their opponent in fitness and skill, athletes wearing red were more likely to win the bout. In equally matched bouts, the preponderance of red wins was great enough that it could not be attributed to chance, the anthropologists say.

The advantage of red may be intuitively known, judging from the prevalence of red uniforms in sports.

In 2002 the Angels changed from their dark blue and periwinkle to their current red. They ended up winning the World Series that year.

In 2006, the Diamondbacks ditched the purple, teal and copper for Sedona red. The Diamondbacks are now four games up in the NL West with 28 games left.

So it is the change to red that is helping the Diamondbacks? Arizona has rallied behind its starting pitching- mainly Ian Kennedy. Kennedy has been on a roll, allowing no more than three runs in his previous nine starts while moving toward the top of the NL Cy Young favorites list. And now the Diamondback’s pitching is about to get better once Trevor Bauer is called up from the minor leagues. Trevor was the best pitcher in all of college baseball this year for UCLA. In just 15 innings of pitching for the minor league AA Baybears he has struck out 23 batters. At UCLA he had 460 career strikeouts. His career strikeout total ranks second on the Pac-10 list behind Tim Lincecum, who had 491 strikeouts for Washington from 2004-06.

Trevor’s UCLA Bruins team color is a baby blue. It does not strike fear into opponents like red does. It may just lull them to sleep. But if opponents are caught flatfooted this year, the UCLA Bruin football pistol offense just might work. Their first game is this Saturday against Houston.

Color probably doesn’t really matter. Usually the esurient team wins.

SBA 504 debenture rate

SBA 504 debenture rate for August

The debenture rate is 3.29%, the note rate is 3.34% and the effective yield is 5.142%.

Note that the effective yield for debt refinance under the 504 program is slightly higher. It is now 5.501%.