The SBA and plurisignification

plurisignification

ploo-ri-sig-ni-fi-KAY-shuhn

The use of a word to convey multiple meanings at the same time.

From Latin pluri- (plus) + significare (to signify), from signum (sign).

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TIP OF THE WEEK 

The Standard Operating Procedures for SBA loans seems to be full of plurisignifications.

If and when SOP 50-10-5(F) is released, things will be fine.

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate September 2013 = 3.18%
SBA Fixed Base Rate September 2013 = 5.62%
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SBA 504 loan Debenture Rate for September 

The debenture rate is only 3.62% but note rate is 3.678% and the effective yield is a whopping  5.698%.

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AHEAD OF THE YIELD CURVE 

Is the use of the word moderate an example of plurisignification?

Two months ago at its July meeting on monetary policy, the Federal Reserve said the economy “expanded at a MODEST pace” while back in June it had said that the economy “has been expanding at a MODERATE pace.” 

Last week the Federal Reserve said that we are now back to a MODERATE pace.   Yes, “economic activity has been expanding at a moderate pace!”

What changed?

One of the Fed’s favorite gauges of the economy is the capacity utilization rate which measures how much plants and factories are being used.  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 the Fed reported that capacity utilization for total industry increased 0.2 percentage point in August to 77.8 percent. 

This is the first increase in capacity utilization in SIX months!  It is now only 0.6 percentage point above its level of a year earlier.

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- 66.9

2010- 74.8

2011- 76.7

2012- 79.0

2013- 77.8

What does all this mean?

I don’t know.

While capacity utilization has barely moved up in the last year, it is up 10.9 percentage points from the record low set in June 2009.  It is still 2.4 percentage points below its long-run (1972-2012) average.

After the Fed moved its assessment of the economy’s growth back to “moderate,” from the “modest” language it used in July, Treasury bonds rallied the most in almost two years. 

30 year Treasury bond yields fell eight basis points to 3.75 percent.  This comes on the heels of the 30 year bond auction that drew a bid-to-cover ratio, which gauges demand by comparing total bids with the amount of debt offered, of 2.4, versus 2.11 at the August sale.   The 30 year Treasury yield had climbed to 3.94 percent on August 22, the highest since August 2011.

It would appear that the Federal Reserve thinks that interest rates are fine right now.

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OFF BASE

The word fine is an excellent example of plurisignification.

This is the word women use at the end of any argument when they feel they are right but can't stand to hear you argue any longer.

It means that you should shut up.

Also NEVER use "fine" to describe how she looks. 

SBA Loans Are Good For the Economy

SBA 7(a) loan approvals for the month period ending August 31 totaled $1,566,118,000.   That's a nice uptick from July's total.  Here are the monthly loan approvals for the last few months:

August- $1,566,118,000
July-        1,385,753,000
June-       1,435,709,000
May-       1,484,588,000
April-       1,353,381,000

This uptick in loan approvals for August made it the best month in awhile.

Year to date approvals total $15,448,490,000 which is 13% more than last year which was at the time the second most ever in SBA 7(a) loan history.

This is good for both small business and the economy.

The correlation coefficient between Gross Domestic Product and SBA 7(a) loan approvals are a statistically significant 0.86.


    

SBA 504 Loan Debenture Rate for September

SBA 504 loan Debenture Rate for September  

The debenture rate is only 3.62% but note rate is 3.678% and the effective yield is a whopping  5.698%

The SBA and perspicuous

perspicuous

(puhr-SPIK-yoo-uhs) 

Clearly expressed; easy to understand.

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

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TIP OF THE WEEK 

Let me be perspicuous here:

In just over three weeks (October 1^st), ALL FEES on SBA 7(a) loans of $150,000 or less go to ZERO.

No guarantee fee or on-going lender fee.

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate September 2013 = 3.18%
SBA Fixed Base Rate September 2013 = 5.62%
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SBA 504 loan Debenture Rate for August 

The debenture rate is only 3.16% but note rate is 3.21% and the effective yield is a whopping  5.24%.

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AHEAD OF THE YIELD CURVE 

The Federal Reserve has been anything but perspicuous.

At its last meeting on monetary policy, the Federal Reserve said the economy “expanded at a MODEST pace” while a month before it had said that the economy “has been expanding at a MODERATE pace.”  What was the Federal Reserve really trying to say? 

A look at the minutes from that Federal Open Market Committee meeting as they agonized whether things were modest or moderate didn’t help.

Last week, the Federal Reserve released its “Beige Book” which stated that “national economic activity continued to expand at a modest to moderate pace.”

What is the Beige Book?  It is published eight times per year.  Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources.  Nobody contacted me.

The Beige Book is not a secret codename.   The reason for its name is simply the color of its cover.

When the report was first published in 1970, it was called the Red Book because that was the color of its cover. In 1983, the report was made available to the public.  Fearing confusion and comparison with Chairman Mao’s “Little Red Book” the cover color was changed and its name became the Beige Book.

In preparing for the meetings, FOMC members also receive the "green book," containing the FRB staff forecasts of the U.S. economy. This is coupled with the "blue book," which presents the board staff's analysis of monetary policy alternatives.   Only the beige book is available to the public, and it is released approximately two weeks before each FOMC meeting.

At the next Fed meeting, employment will be a major topic of conversation.

Only 169,000 jobs were added in August.   The government also revised down its estimated job growth for June and July by a combined 74,000 jobs, meaning the net gain from the job’s report is under 100,000 jobs.  That does not even keep up with population growth.

Treasury yields tumbled after the jobs announcement.

Thirty-year bond yields fell three basis points to 3.85 percent.

Keep your eyes and ears open for this week’s auction of 30 year Treasury bonds.  

Last month’s $16 billion auction of the securities drew a yield of 3.652 percent.  That compared with 3.66 percent at a previous auction in July, which was the highest in almost two years.  The June auction had drawn a yield of 3.35% while the May auction saw a yield of only 2.98%.

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

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.

 The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.11, the least since August 2011 and compared with an average of 2.55 for the past 10 sales.  This measure of demand at the U.S. Treasury Department’s debt auctions has fallen this year to the lowest level since 2009 as a drop in bond prices generates the biggest losses on government securities in four years.  Investors have bid $2.87 for each $1 of the $1.257 trillion of notes and bonds sold by the Treasury this year, compared with a record high $3.15 of bids last year. It’s the first decline in demand at the auctions since 2008, when the U.S. government increased note and bond offerings 59 percent to $922 billion as the recession and the financial crisis deepened.

What does all this mean?

I don’t know.

It would appear that the Federal Reserve can be perspicuous about short term interest rates next week.

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OFF BASE

The perspicuous narration of a ballgame by Vin Scully is one of the joys of summer.  

He said something the other night that at first didn’t sound so perspicuous.  With a full count, he said that the “string was out.”

Back in the good old days, before plastic ball/strike counters were invented, the umpires used two pieces of string to count balls and strikes. The string to count strikes had two knots in it, and was held in the right hand. The ball string had three knots, in the left hand.

After each pitch, as appropriate, the umpire played out one knot. The umpire could quickly determine the count by looking at the visible knots in each hand.

So, with a 3-2 count, all the knots were played out, and the "string was out".

SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate September 2013 = 3.18%
SBA Fixed Base Rate September 2013 = 5.62%

Lenders can charge up to 2.75% over these indices.

SBA Loans Are Good for the Economy

$357,346,000 in SBA 7(a) loans were approved for the week ending August 16th, bringing the year to date total to $14,669,453,000.  This is a nice up-tick from the prior week's loan volume of $317,142,000.

Remember, the correlation coefficient between gross domestic product and SBA 7(a) loan approvals is a statistically significant 0.86!

The SBA and confabulate

confabulate

kuhn-FAB-yuh-layt

1. To talk informally.

2. To replace fact with fantasy to fill in gaps in memory.

From confabulari (to talk together), from con- (with) + fabulari (to talk), from fabula (tale).

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TIP OF THE WEEK 

The SBA continues to confabulate over changes to its SOP (Standard Operating Procedures).

As a result, the draft of the latest change to the SOP may not be released in a timely manner.

The effective date for the anticipated changes is also unknown at this time.

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate August 2013 = 3.19%
SBA Fixed Base Rate August 2013 = 5.47%
________________________________________

SBA 504 loan Debenture Rate for August 

The debenture rate is only 3.16% but note rate is 3.21% and the effective yield is a whopping  5.24%.

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AHEAD OF THE YIELD CURVE 

The confabulation over the differences between moderate and modest may soon end.

At its last meeting on monetary policy, the Federal Reserve said the economy “expanded at a MODEST pace” while a month before it had said that the economy “has been expanding at a MODERATE pace.”  What was the Federal Reserve really trying to say? 

Keep your eyes and ears open for this week’s release of the minutes from that Federal Open Market Committee meeting as they agonized whether things were modest or moderate.

FOMC Minutes is a vital piece of information that is released three weeks to the day after the conclusion of each FOMC meeting.    Though the gist of the Fed’s official views are disclosed at the end of each FOMC meeting with a public statement, we can closely scrutinize details of the Fed opinions in the minutes for better understanding.

Short term rates are at historical low levels and prior Fed minutes reiterated that they will keep rates this low until unemployment drops or inflation rises above 2.5% a year.

One of the Fed’s favorite gauges of inflationary pressure is the capacity utilization rate which measures how much plants and factories are being used.  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 the Fed reported that capacity utilization for total industry edged down 0.1 percentage point to 77.6 percent.  That was the FIFTH consecutive monthly decline. 

Employers added only 162,000 jobs in July and job gains for May and June were revised down by a total 26,000.   May's gains were revised to 176,000 from 195,000 and June's to 188,000 from 195,000.

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

July 162,000

June 188,000

May 176,000

April 165,000

March 88,000

February 332,000

January 148,000

2012

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.

It would appear that the Federal Reserve will continue to be con-fabulous about interest rates.

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OFF BASE

We can all soon confabulate on what we did over summer.

The three day Labor Day weekend is almost here!

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

Labor Day September 2

Columbus Day October 14

Veterans Day November 11

Thanksgiving Day November 28

Christmas Day December 25

SBA Loans Are Good for the Economy

Only $317,142,000 in SBA 7(a) loans were approved for the week ending August 9th.  That brings the year to date total to $14,312,107,000.

While that is a 13% increase compared to last year, the pace of SBA 7(a) loan approvals has been moderate.  The six week rolling average of SBA 7(a) loan approvals is now only $302,581,000.

That implies that loan approvals for the third quarter might be less than the approvals for the second quarter.

The modest pace of SBA 7(a) loan approvals ripples throughout the economy.

Remember, SBA 7(a) loan volume is a leading economic indicator as the correlation coefficient between SBA 7(a) loan volume and GDP is a statistically significant 0.86.

SBA 504 Loan Debenture Rate for August

SBA 504 loan Debenture Rate for August  

The debenture rate is only 3.16% but note rate is 3.21% and the effective yield is a whopping  5.24%.

SBA Loans Are Good for the Economy

SBA lenders are trudging through the dog days of summer as $350,585,000 in SBA 7(a) loans were approved for the week ending August 2^nd.

Here are the weekly SBA 7(a) loan approvals since Memorial Day:

$371,108,000- week ending July 26th. 

$302,740,000- week ending 7/19/2013.

$265,871,000- week ending July 12th.  

$208,042,000- week ending July 5^th.

$411,606,000- week ending 6/28/2013.

$361,478,000- week ending June 21^st.  

$362,297,000- week ending June 14^th.  

$300,328,00- week ending June 7th.  

$291,446,000- week ending May 31^st.

$378,585,000- week ending May 24^th. 

July was obviously a slow month as $1,385,753 in SBA 7(a) loans were approved while June’s totaled $1,435,709 and May’s were $1,484,588.

SBA 7(a) loan approvals for the second quarter ending June 30^th had increased $224,537,000 compared to the first quarter.   That’s less than a 6 percent increase.   SBA 7(a) loan approvals are up about 14% year to date.  So, it would appear that SBA loan approvals continue to growth, albeit at a slower pace. 

Remember, SBA 7(a) loan volume is a leading economic indicator as the correlation coefficient between SBA 7(a) loan volume and GDP is a statistically significant 0.86.

The SBA and moderate

moderate 

mod-er-it or  mod-rit (adjective or noun)

mod-uh-reyt (verb)

1. kept or keeping within reasonable or proper limits; not extreme, excessive, or intense

2. of medium quantity, extent, or amount

3. mediocre or fair

4. calm or mild

From Latin moderātus  to restrain, control

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TIP OF THE WEEK 

Do you know the difference between moderate and modest?

I am going to be modest and admit that I did not.

I am also going to be modest and tell you that despite almost 30 years of doing SBA loans, it sometimes feels like one year repeated 30 times.  That’s because the SBA keeps changing the rules.

A draft of the latest change to the SOP (Standard Operating Procedures) for SBA loans is being released.  It will become effective October 1^st.

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate August 2013 = 3.19%
SBA Fixed Base Rate August 2013 = 5.47%
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Debenture Rate for July     

The debenture rate is 3.15% but note rate is 3.20% and effective yield is a whopping  5.232%.

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AHEAD OF THE YIELD CURVE 

So what is the difference between moderate and modest?

The Federal Reserve announced at its last meeting on monetary policy that “Information received since the Federal Open Market Committee met in June suggests that economic activity expanded at a MODEST pace during the first half of the year.”

The announcement prior to that had stated “Information received since the Federal Open Market Committee met in May suggests that economic activity has been expanding at a MODERATE pace.”

So the economy expanded at a MODEST pace.   It had been expanding at a MODERATE pace.  

That’s one way to describe it.  According to the Department of Commerce, gross domestic product, the value of all goods and services produced, rose at a 1.7 percent annualized rate from April through June following a 1.1 percent gain in the first three months of the year. The first-quarter’s reading was revised down from a previously reported 1.8 percent advance.   

For all of 2012, GDP was revised to show a 2.8 percent increase compared with a prior estimate of 2.2 percent.

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

2nd quarter 2013             1.7%

1st quarter 2013              1.1

4th quarter 2012:             0.1%

3rd quarter 2012:             2.8%

2nd quarter 2012:          1.2%

1st quarter 2012:            3.7%

4th quarter 2011:            4.9%

3rd quarter 2011:           1.4%

2nd quarter 2011:           3.2%

1st quarter 2011:             (1.3)%

4th quarter 2010:           2.8%

3rd quarter 2010:           2.8%

2nd quarter 2010:          3.9%

1st quarter 2010:            1.6%

4th quarter 2009:           3.9%

3rd quarter 2009:          1.3%

2nd quarter 2009:          (0.4)%

1st quarter 2009:            (5.4)%

The third quarter has also started out at a modest pace.   

Employers added only 162,000 jobs in July and job gains for May and June were revised down by a total 26,000.   May's gains were revised to 176,000 from 195,000 and June's to 188,000 from 195,000.

So what does this mean?

I don’t know.

Keep your eyes and ears open for this week’s auction of 30 year Treasury bonds.   At last month’s auction, the U.S. sold $13 billion in 30-year bonds at 3.66% the highest yield in almost two years.   The June auction had drawn a yield of 3.35% while the May auction saw a yield of only 2.98%.  

Thirty-year bond yields are now around 3.70%, after touching 3.78% last week, the highest since August 2011.

The difference between two- and 30-year yields increased to 340 basis points.  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 steep curve indicates strong growth.

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OFF BASE

So what is the difference between moderate and modest?

The word moderate comes from the Latin moderātus which means to restrain or control.   The word modest comes from the Latin modestus which means restrained or decorous.      

So based upon the etymology of the words, modest means you are restrained while moderate means you have to restrain yourself. 

To put it another way, you are a slow runner (modest) rather than running slow.  Moderate implies that it is deliberate while modest is just the way it is.  So I think what the Fed is saying is that the economy is crawling along despite its efforts while a month ago it was saying it was crawling along thanks to its efforts.

Am I getting carried away?  Should I remember “moderation in all things?”  That’s from the Bible right?  WRONG.  There is absolutely NO direct quotation matching that proverb.  

The phrase, “Moderation in all things,” is common extrapolation of Aristotle’s Doctrine of the Mean as presented in his Nicomachean Ethics.  His ethic works around finding the mean, or middle ground, between excess and deficiency. An example of this would be his presentation of courage being the happy medium between the extreme of rash action and the deficiency of cowardice, in respect to a person’s possible action in the face of danger.

It should be noted that Aristotle’s ethic is often misunderstood by its summary: moderation in all things. It is frequently reasoned by those unfamiliar with context that the common phrase means that a person should approach all things (whether healthy or unhealthy) with moderation; therefore, reasoning that a moderate amount of a bad thing can be indulged is not uncommon to find. This is an inaccurate representation of the perspective summarized in the popular phrase.

SBA Loans Are Good for the Economy

SBA 7(a) loan volume faded just a bit for the month of July as $1,385,753 in SBA 7(a) loans were approved.

In June SBA had approved $1,435,709 in 7(a) loans while for the one month period ending May 31^st, SBA 7(a) loan approvals totaled $1,484,588.    In April $1,353,386,000 in SBA 7(a) loans were approved.

SBA 7(a) loan volume is a leading economic indicator as the correlation coefficient between SBA 7(a) loan volume and GDP is a statistically significant 0.86.