The SBA and anserine

anserine

AN-suh-ryn, -rin

1. Of or relating to a goose.

2. Stupid; silly.

From Latin anser (goose).

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TIP OF THE WEEK 

Have you ever heard a gaggle of geese take to the air in squadron after squadron, covering the sky with a glorious anserine calligraphy?  It sounds kind of silly or stupid.

Sequestration will chop $16.68 million from the SBA's loan-guarantee fund, according to a recent letter sent by outgoing SBA head Karen Mills.  Each dollar that the SBA uses in its loan program guarantees an average of $51 of capital for small businesses. The sequestration is expected to result in 1,928 fewer loans totaling $902 million in capital in the hands of entrepreneurs.

The SBA estimates that the nearly 2,000 loans it expected to make would have supported about 22,600 jobs.

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate March 2013 = 3.20%

SBA Fixed Base Rate March 2013 = 4.63%
________________________________________

Debenture Rate for February

The debenture rate is 2.21% but note rate is 2.249% and effective yield is only 4.29%.

 ________________________________________________

AHEAD OF THE YIELD CURVE 

The Federal Reserve’s stimulus efforts may be paying off, as employment rose 236,000 last month.  

The change in total nonfarm payroll employment for December was revised from +196,000 to +219,000, and the change for January was revised from +157,000 to +119,000.

Over the past month, the yield curve has moved up, getting somewhat steeper in the process, as long rates moved more than short rates. 

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.

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

Keep your eyes and ears open for this week’s 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

2012- 2.77
2013-  3.25

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

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

What does all this mean?

I don’t know.

At last month’s auction, Treasury 30-year bonds rose to the highest yields at an auction since May.  U.S. 30-year bonds are among the securities most sensitive to consumer prices because of their long maturity, as inflation would erode the return on the bonds’ fixed payments for their duration.

The day after the auction, the Federal Reserve will report on industrial production and capacity utilization.  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.   The capacity utilization rate decreased in January to 79.1 percent.  

The Federal Reserve Open Market Committee will begin a two day meeting on March 19^th.

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OFF BASE

”Beware the ides of March"

                -Soothsayer, Julius Caesar Act 1, scene 2

So what in the word are ides?

The word ides comes from a Latin word that means "to divide" and marked the halfway point in Roman months. "The ides", then, is simply the middle of the month.  Roman months originally began at the rise of the full moon.  In 44 BC the plot to assassinate Caesar had already begun to buzz around Rome when the soothsayer famously warned the Emperor.  The terrible forecast, therefore, may have been based more on Rome's worst kept secret than any special psychic powers on the part of the seer.  Alas, at the end of the day it didn't matter. A swaggering, over-confident Julius Caesar met his terrible fate when he ignored the advice.

The ides of March unfortunately is not a holiday.  The next federally recognized holiday is not until Memorial Day.

By then Juan Pierre may have stolen another six bases.  If he does, he will have passed Dummy Hoy on the all-time stolen base list.  "Dummy," was an American center fielder in Major League Baseball who played for several teams from 1888 to 1902, most notably the Cincinnati Reds.  He is noted for being the most accomplished deaf player in major league history.  In Hoy's time, the word "dumb" was used to describe someone who could not speak, rather than someone who was stupid; but since the ability to speak was often unfairly connected to one's intelligence, the epithets "dumb" and "dummy" became interchangeable with stupidity. Hoy himself often corrected individuals who addressed him as William, and referred to himself as Dummy. He was actually one of the most intelligent players of his time, and is sometimes credited with developing the hand signals used by umpires to this day since he could not hear what they said.

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SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate March 2013 = 3.20%
SBA Fixed Base Rate March 2013 = 4.63%

Lenders can charge up to 2.75% over these indices.

The SBA and discomfit

discomfit

 

dis-KUHM-fit

 

1. To confuse or embarrass.

2. To thwart the plans of.

 

From Old French desconfit (defeated), past participle of desconfire (to defeat), from des- (not) + confire (to make), from Latin facere (to make).

 

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TIP OF THE WEEK 

Sequestration should not discomfit SBA lenders or borrowers.

 

Unless Congress acts by March 1st, a series of automatic cuts—called sequestration —would reduce Small Business Administration loan guarantees to small businesses by up to $902 million.

 

SBA loans posted the second largest dollar volume ever in fiscal year 2012.  That amount was surpassed only by fiscal year 2011, which was heavily boosted by the loan incentives under the Small Business Jobs Act of 2010.  The totals for fiscal year 2012 included $15.15 billion SBA 7(a) loans. 

 

Based upon current loan volume to date, SBA does not anticipate any interruption to its loan guaranty programs.

_____________________________________

Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate February 2013 = 3.20%

SBA Fixed Base Rate February 2013 = 4.77%
________________________________________

Debenture Rate for February

 

The debenture rate is 2.21% but note rate is 2.249% and effective yield is only 4.29%.

 ________________________________________________

AHEAD OF THE YIELD CURVE 

The economy is either picking up or slowing down.

 

The Federal Reserve recently indicated that the capacity utilization rate decreased in January to 79.1 percent.   But that’s only because the capacity utilization rate for December was revised up from 78.8% to 79.3%.  

 

It’s the revisions that are discomfiting.

 

Just two days after the Department of Commerce said that the U.S. economy shrank slightly in the last quarter of 2012, the Department of Labor announced that payrolls rose 157,000 following a revised 196,000 advance in December and a revised 247,000 surge in November.   Originally it had been estimated that payrolls rose by 155,000 workers in December following a revised 161,000 advance in November.

 

The Labor Department also issued its annual benchmark update, which aligned employment data spanning from April 2011 to March 2012 with corporate tax records. The revision showed payrolls grew by an additional 424,000 workers in that period.   Employment actually improved by almost ½ million people more than we thought.  

 

Now keep your eyes and ears open for the Commerce Department’s second revision to fourth quarter GDP.   They previously said that the economy contracted at an annual rate of 0.1 percent in the fourth quarter.  

 

The Fed for the first time in December linked the outlook for its main interest rate to unemployment and inflation targets. The central bank said the rate would stay close to zero “at least as long” as the jobless rate stays above 6.5 percent and inflation projections are for no more than 2.5 percent.

 

So where then are interest rates going?

 

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:

 

DEC13- 0.39

DEC14- 0.64

DEC15- 1.08

DEC16- 1.76

DEC17- 2.46

DEC18- 2.99

DEC19- 3.325

 

What does all this mean?

 

I don’t know.

 

Interest rates should not discomfit anyone.

 

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OFF BASE

Our next three day weekend is not until Memorial Day.

 

That sure seems like a long ways off.

 

According to the Federal Reserve, here are the remaining holidays for 2013:

Memorial Day May 27
Independence Day July 4
Labor Day September 2
Columbus Day October 14
Veterans Day November 11
Thanksgiving Day November 28
Christmas Day December 25 

 

Obviously a holiday needs to be inserted somewhere between now and the end of May.   

 

One possible candidate could be Evacuation Day.  That’s when George Washington won his first victory in the Revolutionary War.  British General William Howe, surrounded by the colonials, decided to retreat, withdrawing from Boston to Nova Scotia on March 17, 1776.   This was a huge morale boost for the Thirteen Colonies, as the city where the rebellion began was the first to be liberated.   Drunken Irishmen, confusing the celebration over the liberation of Boston with Saint Patrick’s Day joined in causing the day to be celebrated with great fervor.

 

Opening Day for Major League Baseball also beckons as a potential holiday.  

 

Juan Pierre continues his quest to not be discomfited on the base paths.  Last season he stole 37 bases to pass Maury Wills on the all time stolen base list.    Maury Wills first stepped onto the field in Dodger blue on June 6, 1959 replacing a retiring Pee Wee Reese.   Having passed Maury Wills, Juan is now the current active career leader in stolen bases with 591.

 

SBA 504 Loan Debenture Rate

Debenture Rate for February

The debenture rate is 2.21% but note rate is 2.249% and effective yield is only 4.29%.

The SBA and dyspeptic

dyspeptic

dis-PEP-tik 

adjective: 1. Relating to or suffering from dyspepsia (indigestion).

                     2. Having a bad temper; gloomy; irritable.

noun: One suffering from dyspepsia.

Via Latin from Greek dys- (bad) + peptos (digested).

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TIP OF THE WEEK 

This should silence some of the dyspeptics.

Commercial real estate continues its recovery.

The CoStar Commercial Repeat Sale Indices (CCRSI), which looks at more than 100,000 repeat sales, offers the broadest measure of commercial real estate repeat sales activity.

According to CoStar, commercial real has made strong gains over the last year and is now up nearly 10% from its nadir in the first quarter of 2011.

If you would like a copy of the latest CoStar report, let me know.

SBA loans can provide financing with only 10% down for owner-user commercial real estate.

_____________________________________

Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate February 2013 = 3.20%

SBA Fixed Base Rate January 2013 = 4.77%
________________________________________

Debenture Rate for January

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

 ________________________________________________

AHEAD OF THE YIELD CURVE 

A somewhat dyspeptic Federal Reserve argued that "economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors".

The other transitory factors? 

Government spending cuts and slower inventory growth, which can be volatile, subtracted a combined 2.6 percentage points from GDP.  The Commerce Department said that the economy contracted at an annual rate of 0.1 percent in the fourth quarter.  That was a sharp slowdown from the 3.1 percent growth rate in the July-September quarter.

For all of 2012, the economy expanded 2.2 percent, better than 2011's growth of 1.8 percent.

Keep your eyes and ears open for the Federal Reserve’s 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

2012- 79.0

What does all this mean?

I don't know.

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 month’s Fed report showed that capacity utilization, which measures the amount of a plant that is in use, was little changed at 78.8 percent from 78.7 percent.

The cost of living was little changed in December, capping the smallest annual gain in the past decade (1.7%). The unchanged reading in the consumer price index followed a 0.3 percent decrease in November, according to Labor Department figures.

Interest rates will obviously be remaining low for a long, long time.

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OFF BASE

There is nothing to be dyspeptic about.

Pitchers and catchers report.  Spring beckons.   A three day weekend approaches!

The question that will be on everyone’s mind is of course if Juan Pierre will ever, ever again hit another home run.

He hit his very first home run off Jose Lima in 2000.  But every batter who ever faced Jose Lima hit a home run off him.

Since then, Juan has only hit 17 home runs in 7,950 plate appearances.  That’s 467 at bats per home run.  Babe Ruth by comparison went 11.76 at bats per home run.

Juan by far is the active major league leader in home run futility.  His distain for the long ball extends to the outfield.  Pierre robbed Barry Bonds of a career 714th home run, which would have tied Bonds with Babe Ruth, by catching the ball right before it topped the fence.

SBA 7(a) Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate February 2013 = 3.20%
SBA Fixed Base Rate February 2013 = 4.77%

Lenders can charge up to 2.75% over these indices.

The SBA and retrodiction

retrodiction

ret-roh-DIK-shuhn 

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

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

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TIP OF THE WEEK 

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

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

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

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

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

______________________________________

Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate January 2012 = 3.21%

SBA Fixed Base Rate January 2012 = 4.59%
________________________________________

Debenture Rate for January

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

 ________________________________________________

AHEAD OF THE YIELD CURVE 

Here is some retrodiction.

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

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

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

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

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

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

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

The drop in economic activity soon followed.

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

3^rd quarter 2012:             3.1%

2nd quarter 2012:          1.3%

1st quarter 2012:            2.0%

4th quarter 2011:            4.1%

3rd quarter 2011:           1.30%

2nd quarter 2011:           1.30%

1st quarter 2011:             0.4%

4th quarter 2010:           3.1%

3rd quarter 2010:           2.6%

2nd quarter 2010:          1.7%

1st quarter 2010:            3.7%

4th quarter 2009:           5.6%

3rd quarter 2009:          2.2%

2nd quarter 2009:          (0.7)%

1st quarter 2009:            (6.4)%

What does this mean?

I don’t know.

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

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

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

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

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

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

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

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

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OFF BASE

Our next holiday is Washington’s Birthday. 

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

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

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

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

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

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

Three whole months away; one forth of the year. 

SBA 504 Debenture Rate

Debenture Rate for January

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

The SBA and addlepated

addlepated

(AD-l-pay-tid)

Confused; eccentric; flustered.

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

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TIP OF THE WEEK 

Don’t be addlepated about SBA loans.

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

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

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

______________________________________

Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate January 2012 = 3.21%

SBA Fixed Base Rate January 2012 = 4.59%
________________________________________

Debenture Rate for December

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

 ________________________________________________

AHEAD OF THE YIELD CURVE 

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

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

December 155,000

November 161,000

October 137,000

September 114,000

August 142,000

July 181,000

June 45,000

May 77,000

April 68,000

March 143,000

February 240,000

January 243,000

2011

December 203,000

November 157,000

October 112,000

September 158,000

August 104,000

July 127,000

June 20,000

May 25,000

April 232,000

March 194,000

February 235,000

January 68,000

2010

December 121,000

November 93,000

October 210,000

September (41,000)

August (1,000)

July (66,000)

June (175,000)

May 431,000

April 218,000

March 230,000

February (36,000)

January (26,000)

2009

December (150,000)

November (11,000)

October (111,000)

September (215,000)

August (201,000)

July (304,000)

June (443,000)

May (322,000)

April (504,000)

March (699,000)

February (651,000)

January (655,000)

2008

December (681,000)

November (597,000)

October (423,000)

September (403,000)

August (127,000)

July (67,000)

June (100,000)

May (47,000)

April (67,000)

March (88,000)

February- (83,000)

January- (76,000)

What does all this mean?

I don’t know.

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

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

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

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

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

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

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

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

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

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OFF BASE

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

Another holiday is almost here. 

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

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

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

SBA 7(a) Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate December 2012 = 3.22%
SBA Fixed Base Rate December 2012 = 4.44%

Lenders can charge up to 2.75% over these indices.