SBA 504 Debenture Rate for August

504 Debenture Rate for August  

The debenture rate is 2.37% but note rate is 2.41% and effective yield is only 4.45%. 

The SBA and somnolence

somnolence

SOM-nuh-luhns

A state of sleepiness or drowsiness.

From Latin somnus (sleep).

_______________________________________________

TIP OF THE WEEK 

No somnolence with SBA lending!

______________________________________

Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate August 2012 = 3.24%

SBA Fixed Base Rate August 2012 = 3.97%
________________________________________

504 Debenture Rate for July  

The debenture rate is 2.38% but note rate is 2.42% and effective yield is only 4.46%. 

 ________________________________________________

AHEAD OF THE YIELD CURVE 

At the most recent meeting of the Federal Open Market Committee, they said that “economic activity decelerated somewhat over the first half of this year.”

The smart money does not seem to be losing too much sleep however.

At last week’s $16 billion auction of 30 year Treasury bonds, the yield rose to 2.76 percent.

This is an eight week high after it had touched a record low 2.44 percent on July 26.

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- 2.76


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.

Sleep well.

__________________________________________

OFF BASE

Somnolence seems to go hand in hand with the dog days of summer. 

And just what is a dog day?  Is it so hot, you just lay around like a lazy dog on a hot summer day? 

The name comes from the ancient belief that Sirius, also called the Dog Star, was out during the day heating things up during the summer.  This is the bright star you see rising in the east at dawn.  From late July through August it closely tracks the Sun. 

The name "dog star" came from the ancient Egyptians who called Sirius the Dog Star after their god Osirus, whose head in pictograms resembled that of a dog.

Sirius was up in the sky at the same time as the Sun and ancient Egyptians and Romans argued that it was responsible for the summer heat by adding its heat to the heat from the Sun.

SBA 7(a) Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate August 2012 = 3.24%
SBA Fixed Base Rate August 2012 = 3.97%

Lenders can charge up to 2.75% over these indices.

The SBA and doldrums

doldrums

DOHL-druhmz

1. A state or period of stagnation or slump.

2. A region of the ocean near the equator marked by calms and light variable winds.

In the olden days when a sail-powered vessel hit a calm region of the ocean, it could be stuck there for days. Sailors called that area the doldrums. The word is from Old English dol (dull, stupid), the ending influenced by the word tantrum.

_______________________________________________

TIP OF THE WEEK 

No doldrums with SBA lending.

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

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 six years using the Microsoft CORREL function.  It came out to a statistically significant 0.86.

Seriously consider a SBA loan.  It just might save the economy.

______________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate July 2012 = 3.24%
SBA Fixed Base Rate July 2012 = 4.57%

________________________________________

504 Debenture Rate for July  

The debenture rate is 2.38% but note rate is 2.42% and effective yield is only 4.46%. 

 ________________________________________________

AHEAD OF THE YIELD CURVE 

The economy is stuck in the doldrums.

Gross domestic product, the value of all goods and services produced, rose at a 1.5 percent annual rate after a revised 2 percent gain in the prior quarter, Commerce Department data showed on Friday.  

This is barely half the pace the economy hit late last year as the final quarter of 2011 was revised up to a 4.1 percent gain, the best performance in almost six years.

As a result, job growth has really slowed over the last three months with only 225,000 payroll jobs added (a 900,000 annual pace).

Keep your eyes and ears open for Friday’s report on jobs for the month of July.

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

June 80,000

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.

The U.S. economy has never been so sluggish this long into a recovery. The Great Recession officially ended in June 2009.

The economy lost nearly 8.8 million jobs during the slump and reached its lowest total employment level in February 2010. It is still 4.9 million short of its peak, according to the Bureau of Labor Statistics.

The economy has added 902,000 jobs over the first half of the year.  At this pace, the economy would add around 1.9 million private sector jobs in 2012; less than the 2.1 million added in 2011.

We are not even half way there.  

The Federal Reserve’s Fed Open Market Committee meets on Tuesday, July 31^st and Wednesday, August 1^st.  They have no choice but to keep interest rates exceptionally low.

__________________________________________

OFF BASE

For sailors, the doldrums hit the horse latitudes. 

Low pressure caused by the heat at the equator makes the air rise and travel north and south high in the atmosphere, until it subsides again in the horse latitudes between 30 and 35 degrees both north and south.

The term “horse latitudes” derived from the "dead horse" ritual of seamen.  In this practice, the seaman paraded a straw-stuffed effigy of a horse around the deck before throwing it overboard.

Seamen were paid partly in advance before a long voyage, and they frequently spent their pay all at once, resulting in a period of time without income. If they got advances from the ship's paymaster, they would incur debt. The seaman's ceremony was to celebrate having worked off the "dead horse" debt.  As west-bound shipping from Europe usually reached the subtropics at about the time the "dead horse" was worked off, the latitude became associated with the ceremony.

This use of 'dead horse' to refer to pay that was issued before the work was done was an allusion to using one's money to buy a useless thing (metaphorically, "a dead horse"). Most men paid in advance apparently either wasted the money on drink or other such vices, or used it to pay outstanding debts.

The sailors were essentially working for a dead horse.  This is not to be confused with beating a dead horse.

SBA 7(a) Weekly Lending Update

SBA 7(a) loan volume picked up for the month ending June 30.  Approvals totaled $1,513,305,000.  That is an increase over the $1,352,404,000 approved for May.

SBA 7(a) approvals for the quarter totaled $4,039,042,000, a nice  pick up from the prior quarter.

For the quarter ending March 31, SBA had approved $3,311,521,000 in SBA 7(a) loans.

That compares with $3,443,723,000 in 7(a) loan approvals for the quarter ending December 31, 2011. 

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 six years using the Microsoft CORREL function.  It came out to a statistically significant 0.86.

The SBA and countervail

countervail

koun-tuhr-VAYL

To counterbalance or to neutralize.

From Old French contrevaloir, from Latin contra (against) + valere (to be strong).

_______________________________________________

TIP OF THE WEEK 

The recovery in commercial real estate just might countervail this anemic economy.

CoStar indicates that commercial real estate pricing is continuing to recover at a fairly surprising pace despite the disappointing level of U.S. job growth and other economic factors.

If you would like a copy of July’s CoStar Commercial Repeat Sale Indices (CCRSI) report, let me know.

Now might be the time to get a SBA loan to purchase or refinance commercial real estate.

  

______________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate July 2012 = 3.24%
SBA Fixed Base Rate July 2012 = 4.57%

________________________________________

504 Debenture Rate for July  

The debenture rate is 2.38% but note rate is 2.42% and effective yield is only 4.46%. 

 ________________________________________________

AHEAD OF THE YIELD CURVE 

For awhile, manufacturing countervailed the negative economic forces out there.

Manufacturing's rebound had been reflected by a soaring jump in the capacity utilization rate.  This measure of the percent our manufacturing plants are in use is one of the Federal Reserve’s favorite gauges of the economy.

Capacity utilization had increased 11.8 percentage points from the record low set in June 2009.

But last month, the Federal Reserve reported that capacity utilization slumped to 79 percent in May.

Keep your eyes and ears open for the Federal Reserve's July 17th announcement 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.

Capacity utilization at 79% is still 1.3 percentage points below its average from 1972 to 2010 and below the pre-recession levels of 80.6% in December 2007.  While this is 2.7% higher than a year earlier, we still have a ways to go.

Continued drops in capacity utilization rates might prompt the Federal Reserve to consider countervailing measures.

__________________________________________

OFF BASE

A Chicago White Sox World Series just might countervail a Mets World Series recession.

Remember, according to the Mets Recession Theory, every time the Mets go to the World Series, a recession follows.

Now it looks like every time the White Sox make it to the World Series, the economy actually picks up.

Unfortunately, the White Sox have only gone five times (1906, 1917, 1919, 1959 and 2005).

And actually the real reason I like the White Sox is because of Adam Dunn. 

Last year, Adam Dunn was by far the worst player in major league baseball.

His .159 average in 2011 was the lowest batting average since Bill Bergen hit .139 as a starter for the 1909 Brooklyn Superbas.

This year, when he actually hits the ball, it is usually a home run.  Dunn has the fifth-lowest career at bats per home run average in Major-League history. His 13.96 ratio (about one home run every 14 times he comes to bat) is behind only Mark McGwire (10.61), Babe Ruth (11.76), Barry Bonds (12.90), and Jim Thome(13.68).

He currently has 26 home runs, one of the major league leaders.  He also has 134 strikeouts, by far the leader in all of baseball.   Dunn is on pace for 265 strikeouts, 42 more than Mark Reynolds’ major-league record.

His 68 walks also lead the major leagues. 

If this keeps up, he just might have the most home runs, the most strikeouts and the most walks of any hitter in baseball.

SBA 7(a) Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate July 2012 = 3.24%
SBA Fixed Base Rate July 2012 = 4.57%

Lenders can charge up to 2.75% over these indices.

The SBA and homologate

homologate

(huh-MOL-uh-gayt, ho-)

1. To approve officially.

2. To register a specific model of a motor vehicle to make it eligible to take part in a racing competition.

From Latin homologare (to agree), from Greek homologein (to agree or allow).

_______________________________________________

TIP OF THE WEEK 

SBA is about to homologate the use of a 10 tab submission tool for loan requests.  As reflected in a recent policy notice, the use of these tabs will soon be mandatory.  The National Association of Government Guaranteed Lenders will be offering a web based session on this process taught by yours truly.

If you have ever wondered how complicated this process can be, now is your chance.

For more information, go here-

www.naggl.org/AM/Template.cfm?Section=Training_and_Events&Template=/CM/ContentDisplay.cfm&ContentID=17812

______________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate June 2012 = 3.24%
SBA Fixed Base Rate June 2012 = 4.58%

________________________________________

504 Debenture Rate for June  

The debenture rate is 2.47% but note rate is 2.46% and effective yield is only 4.50%. 

 ________________________________________________

AHEAD OF THE YIELD CURVE 

The last time the Federal Open Market Committee met, they said that they would have to keep interest rates exceptionally low for quite awhile longer. 

The primary reason is that, as they said, “growth in employment has slowed in recent months, and the unemployment rate remains elevated.”

The Federal Reserve not only dictates interest rates but holidays. 

They have homologated that the Fourth of July holiday is Wednesday and Wednesday only.

According to them, here are our remaining holidays for the year:

Independence Day         July 4 

Labor Day           September 3   

Columbus Day   October 8       

Veterans Day    November 12  

Thanksgiving Day           November 22  

Christmas Day   December 25

With the Fourth of July holiday breaking up the week, Friday’s report on employment for June may slip through the cracks.   

Last month the Labor Department reported that U.S. employers added only 69,000 jobs in May.  April was also revised down from +115,000 to +77,000.

Job growth over the past three months is less than half the average 200,000-plus jobs added in the three earlier months.  There are a total of 12.7 million Americans still unemployed and 5.4 million have been unemployed for more than 6 months.

In the last 24 months, ONLY 3.45 million jobs have been created.  That’s not even keeping up with population growth.  The United States has added 3 million people a year since the recession began four years ago.  We will add 30 million people in the next 10 years. 

The unemployment rate is at 8.2 percent.  It had peaked at 10.2 percent in October of 2009.

The jobless rate dropped as unemployed workers stopped looking for work and left the labor force.  They've given up.  In other words, a shrinking percentage of our country is looking for work or employed.

Only one president since World War II - - Ronald Reagan -- has been re-elected with a jobless rate above 6 percent. Reagan won a second term in 1984 with 7.2 percent unemployment in the month of the election, after the rate had fallen almost three percentage points in the previous 18 months.

__________________________________________

OFF BASE

You’ve heard of the Pontiac GTO right?  It’s one of the all time classic Great American Muscle cars celebrated in song by Beach Boys sound- alike Ronnie and the Daytonas (Little GTO, you're really lookin' fine).

In 1964, Pontiac borrowed the term from the Italian car maker Ferrari.  Ferrari had been making a GTO racing car for quite a while.  Recently, a 1962 Ferrari 250 GTO just sold for $35 million.  Yes, $35,000,000.

 So what does GTO mean?

Some auto racing competitions require participating vehicles to be available for sale to the general public, and not be custom made for racing. The process of homologation verifies this. The initials GTO listed after some auto names (Ferrari, Pontiac, etc.) mean "Gran Turismo Omologato", Italian for "Grand Touring, Homologated".

The SBA and phlegmatic

phlegmatic

(fleg-MAT-ik)

1. Having a sluggish temperament; apathetic.

2. Calm or composed.

From Latin phlegmaticus, from Greek phlegmatikos, from phlegm (inflammation, the humor phlegm supposedly as a result of heat), from phlegein (to burn).

_______________________________________________

TIP OF THE WEEK 

Don’t be phlegmatic about SBA lending!

According to the FDIC’s quarterly banking profile, there are 7,307 banks still surviving in this country.  Many of them are starting to thrive.

The first quarter of 2012 saw net income in the banking industry rise to its highest level since the second quarter of 2007.  One of the biggest contributors to net revenue has been gains from loan sales, which were up 132 percent from a year ago.

According to the FDIC’s Insights on SBA Lending, the gain from the sale of a SBA guarantee loan can now be recognized as immediate fee income.

If your bank is not a SBA lender, you should ask them why.

If your bank would like to become a SBA lender, ask us how.

If your bank would like to become a better SBA lender, ask us how.

If you would like a copy of either the FDIC’s quarterly banking profile or their insights on SBA lending, send me an email.

______________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate June 2012 = 3.24%
SBA Fixed Base Rate June 2012 = 4.58%

________________________________________

504 Debenture Rate for June  

The debenture rate is 2.47% but note rate is 2.46% and effective yield is only 4.50%. 

 ________________________________________________

AHEAD OF THE YIELD CURVE 

Sooner or later, interest rates are going to go up, right?

More like later or much later.

This phlegmatic attitude was reflected last week when $13 billion of 30 year Treasury bonds were sold to help pay for all the wonderful things the government is doing to us.  The long bonds yielded 2.72 percent which is a record low for a 30 year bond sale.  The previous record low at a long-bond auction was 2.925 percent at the Dec. 14 sale. Last month’s sale drew a yield of 3.09 percent.

Keep your eyes and ears open for this week’s meeting of the Federal Open Market Committee.  The last time the Federal Reserve met they said that they would be keeping interest rates exceptionally low at least through late 2014.

Exceptionally low at least through late 2014.  Those are their exact words, not mine.

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:

DEC12- 0.53
DEC13- 0.60
DEC14- 0.83
DEC15- 1.28
DEC16- 1.82
DEC17- 2.28
DEC18- 2.62

DEC19- 2.85

What does all this mean?

I don’t know.

The market seems to think that interest rates won’t be going up any time soon, and when they do, it won’t be by much.

You can be phlegmatic about interest rates.

__________________________________________

OFF BASE

Talk about phlegmatic; I’ve got nothing.

SBA 504 Debenture Rate for June

504 Debenture Rate for June  

The debenture rate is 2.47% but note rate is 2.46% and effective yield is only 4.50%. 

SBA 7(a) Rate Update

Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate June 2012 = 3.24%

SBA Fixed Base Rate June 2012 = 4.58%


Lenders can charge up to 2.75% over these rates.

SBA 7(a) Weekly Lending Update

SBA 7(a) loan approvals for the month ending May 31 edged up by about $179,071,000 compared to the prior month.

May approvals totaled $1,352,404,000 while April was at $1,173,333,000.

May however had five weeks in it compared to only four for April.

The SBA and stupefy

stupefy

STOO-puh-fy, STYOO-

1. To make someone so bored or tired as unable to think clearly.

2. To amaze.

From French stupéfier (to astound), from Latin stupefacere (to make stupid or senseless), from stupere (to be numb or amazed) + facere (to make).

_______________________________________________

TIP OF THE WEEK 

The endless revisions to SBA rules can stupefy.

The SBA has once again revised its standard operating procedure.

SBA SOP 50-10-5 (E) is now effective. 

Only 116 days until SBA SOP 50-10-5 (F) comes out.

______________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate May 2012 = 3.24%
SBA Fixed Base Rate May 2012 = 4.84%

________________________________________

504 Debenture Rate for May 

The debenture rate is 2.38% but note rate is 2.42% and effective yield is only 4.462%. 

The effective yield for the temporary debt refinancing available with a 504 loan is 4.665%. 

Keep in mind that the temporary debt refinancing provisions expire soon.    

________________________________________________

AHEAD OF THE YIELD CURVE 

The economy continues to stupefy.

Over the past month, the yield curve has flattened, as short rates stayed even and long rates fell.

And long rates really fell.  

The 30 year Treasury bond hit a record low Friday.  It closed at only 2.52%.  At one point it got down to only 2.5089%, below the 2.5090% last seen on December 18^th, 2008. 

This rally in the b0nd market ran when the Labor Department reported that U.S. employers added only 69,000 jobs in May.    April was also revised down from +115,000 to +77,000.

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

May 69,000

April 77,000

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.

Job growth over the past three months is less than half the average 250,000-plus jobs added in the three earlier months.  There are a total of 12.7 million Americans still unemployed and 5.4 million have been unemployed for more than 6 months.

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.

According to the Federal Reserve Bank of Cleveland, the flatter slope was not enough to cause an appreciable change in projected future growth, however. Projecting forward using past values of the yield curve spread and gross domestic product (GDP) growth suggests that real GDP will grow at about a 0.7 percent rate over the next year, equal to the past two months.

Gross domestic product grew at only a 1.9 percent annual rate from January through March, down from a 2.2 percent prior estimate, revised Commerce Department figures revealed last week.   The U.S. economy grew more slowly in the first quarter than previously estimated, reflecting smaller gains in inventories and bigger government cutbacks.

 Interest rates obviously will be remaining low.

__________________________________________

OFF BASE

Stupefied yet?

The New York Mets have played 8,019 games and have lost 4,172 of those games.   Not only do they usually lose, they are one of the greatest losing teams of all time.   Their first year in the major leagues, 1962, they lost 120 games and set the record for modern era baseball futility.

Everyone has come to expect them to lose.  But when they don’t, stupedification sets in with deleterious effects. 


In October of 1969 the Mets finally made it to the World Series.  A recession soon followed.

In October of 1973 the Mets once again went to the World Series.  A recession soon followed.   

In October of 1986 the Mets went to the World Series.   The economy held its breath for as long as it could but when it finally had to gasp for air the stock market crashed. The stock market crash of 1987 was the largest one day stock market crash in history, larger than that of 1929.  The economy would soon slump into recession.

The economy recovered and the nation enjoyed the 1990 boom years.  The party ended when the Mets went to the World Series in 2000.  Soon after the 2000 World Series ended, the economy slid into recession.  That recession would end the longest economic expansion in United States history.1

In 2006 the Mets dominated the National League winning more games than any other team.  The next year they assembled an even stronger team and appeared a certainty to be in the World Series.  They then suffered the greatest collapse in baseball history.  The economy also soon collapsed.

Now they are one of the better teams in baseball and one of their pitchers, Johan Santana, just pitched a no-hitter.  It was the first no-hitter in the Mets 50-plus year history. 

No wonder the stock market is slumping, the yield curve is inverting, and the economy is slowing.  The animal spirits- John Keynes’ infamous forces of economic destiny - are worried that the Mets just might make it back to the World Series. 

Not to worry, while their win-loss record is 29-23; their Pythagorean win-loss is only 24-28.   Pythagorean win-loss?  It is a formula for estimating a team's winning percentage based on the number of runs it scores and allows.   To calculate Pythagorean Winning Percentage, you need a team's run scored, or "RS" (the number of times they scored) and their runs allowed, or "RA" (the number of times the opponent scored). The formula looks like this:

Pythagorean WP = RS x RA / (RS x RS) + (RA x RA)

The Pythagorean Winning Percentage is the percentage of games a team with that number of Runs Scored and Runs Allowed would be expected to win.  It does a pretty good job of predicting the number of wins a team will have when the season is over.

Based upon these Pythagorean calculations, the Mets are playing way over their heads and everything else is stupefying.