The SBA and captious

captious

KAP-shuhs

Having an inclination to find faults, especially of a trivial nature.

Via French from Latin capere (to seize).

 _______________________________________________

TIP OF THE WEEK 

SBA has decided to not be so captious towards borrowers.

SBA form 912, Statement of Personal History, has been revised.  The most notable revision is question 8. 

It used to ask: Have you EVER been charged with, and/or arrested for, any criminal offense other than a minor motor vehicle violation?

It now asks: Have you BEEN arrested in the past six months for any criminal offense?

_____________________________________

Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate April 2013 = 3.20%

SBA Fixed Base Rate April 2013 = 4.67%
________________________________________

Debenture Rate for April  

The debenture rate is 2.08% but note rate is 2.117% and effective yield is only 4.162%.

 ________________________________________________

AHEAD OF THE YIELD CURVE 

To put this any other way would be captious.

Economic growth in the first quarter of this year soared to a 2.5% annual pace, compared to the anemic 0.4% pace in the last quarter of last year.

That might be overstating it a bit. 

In March, employers added just 88,000 jobs vs. an average 208,000 the previous two months.

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

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

February 268,000

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.

Just before April’s job report comes out, the Federal Reserve meets on monetary policy.

Federal Reserve policy makers have said they will keep interest rates low until the labor market improves “significantly.” 

It would appear that interest rates are never ever going up.

__________________________________________
OFF BASE

Captious critics of Juan Pierre like to point out that he has been caught stealing more times than anyone else playing baseball right now.

Having been thrown out 198 times, Juan is now number seven on the all time caught stealing list.  He is now number eighteen on the all-time stolen base list with 596 steals.

Doing the math for stolen base percentage (SB% = Stolen Bases/(Stolen Bases + Caught Stealing), Juan comes out to just over 75%.

There is a statistic related to stolen base percentage called "Stolen Base Runs" or SBR ((.3 x Stolen Bases) - (.6 x Caught Stealing)).  The break even success rate for steals (the rate at which an attempt to steal is neither helping nor hurting the team in terms of total runs scored) is about 67%. Each successful steal adds approximately .3 runs to a team's total runs scored.

So Juan is doing just fine.

Juan now needs another 20 stolen bases to pass George Davis who has 616 stolen bases.  George began playing for the Cleveland Spiders in 1890.  Fortunately he was traded away after a few years as the 1899 Spiders became the worst team ever wining only 20 games while losing 134.  The Spiders lost 40 of their last 41 games, and finished 84 games behind the 1899 National League champion Brooklyn Dodgers.  The Spiders were so bad that the National League forced them to quit playing.  While they were at it, they forced three other lousy teams to also fold.  The American League soon arose to fill the void.

SBA loans are good for the economy

SBA 7(a) loan volume for the week ending April 19th surged to just over $293,840,000.  

That's a nice little pick up in pace.

Keep in mind that 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 504 loan debenture rate for April

Debenture Rate for April 

The debenture rate is 2.08% but note rate is 2.117% and effective yield is only 4.162%.

The SBA and inosculate

inosculate

in-OS-kyuh-layt

To join or unite.

From Latin in- (within) + osculare (to provide with a mouth), from osculum (little mouth), from os (mouth).

 _______________________________________________

TIP OF THE WEEK 

The President and Congress will hopefully inosculate over the budget when it comes to the Small Business Administration.

President Obama's FY 2014 budget for the SBA decreases by $109 million from the 2012 enacted level, due primarily to the decreased estimated subsidy cost of its 7(a) Business Loan Guarantee Program.  

For the 7(a) program, the return to a zero subsidy rate removes the need to seek appropriations.  It also reduces lender fees.

This will provide $17.5 billion in 7(a) loan guarantees.

Last year SBA approved $15.1 billion in SBA 7(a) loans.

_____________________________________

Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate April 2013 = 3.20%

SBA Fixed Base Rate April 2013 = 4.67%
________________________________________

Debenture Rate for March

The debenture rate is 2.23% but note rate is 2.259% and effective yield is only 4.30%.

 ________________________________________________

AHEAD OF THE YIELD CURVE 

Last week’s auction of 30 year Treasury bonds drew a yield of 2.998 percent.

That’s a significant drop in yield compared to the 3.248 percent at March’s 30 year bond sale.  That rate had been the highest in a year.

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.

This flattening of the yield curve may be signaling weaker growth.  

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 was at 79.6 percent.

79.6 percent is only 0.6 percentage points below its long-run (1972--2012) average.

__________________________________________
OFF BASE

For some inexplicable reason, Monday, April 15^th is not a federal holiday.

It’s Patriots’ Day which is a state holiday in Massachusetts, Maine and a school holiday in Wisconsin.  Patriots’ Day commemorates the anniversary of the Battles of Lexington and Concord, the first battles of the American Revolutionary War.

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

As if that’s not enough of a compelling reason for today to be a national holiday, it’s also Jackie Robinson Day- honoring the day Jackie Robinson made his major league debut.  April 15 was Opening Day in 1947, Robinson's first season in the Major Leagues.

Considered “the father of modern base-stealing’, Jackie accumulated 197 stolen bases, including 19 steals of home.   Jackie’s most famous steal of home plate was in the first game of the 1955 World Series against the Yankees.   After Jackie swipes the run, Yogi Berra rips his mask off and starts screaming at the umpire.

Surprisingly, Rickey Henderson, who stole 1406 bases, only stole home four times in his career. Lou Brock, who stole 938 bases, never stole home.

As far as I can tell, Juan Pierre with 592 stolen bases has never stolen home plate.   

Juan attempted his first steal of the season last week and was thrown out at second.  He has now been caught stealing 198 times.  That puts him sixth on the all time caught stealing stolen base list.

SBA loans are good for the economy

Thanks to improving loan performance, the SBA 7(a) loan program will operate without a subsidy saving tax payers close to $200 million.

$17.5 billion in SBA 7(a) loans are budgeted for the next fiscal year.  

You CAN have your cake and eat it too.

SBA loans are good for the economy

President Obama's FY 2014 budget contains positive news for the nation's job-creating small businesses that will benefit from increased access to capital under SBA's flagship 7(a) business loan program to start, build and grow their businesses.

"Small business loan guarantees are funded at levels above historical demand, but at a greatly reduced subsidy cost from the 2012 enacted level and the 2013 Budget level, largely due to the improving economic forecast and lower estimated loan defaults." 

For the 7(a) program, the return to a zero subsidy rate removes the need to seek appropriations and allows a lowering of the ongoing lender fee to 52 basis points (.52 from .55) for FY 2014.

To encourage economic growth and job creation, the Budget provides $112 million in subsidy for SBA's business loan programs. This funding supports $17.5 billion in 7(a) loan guarantees.

SBA loans are good for the economy

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.

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.

So what caused that initial drop in SBA loan volume?  

The drop in SBA 7(a) loan approvals was attributed to the elimination of a small loan program – LowDoc – and more importantly an increase in the guaranty fee for SBA loans.

SBA loans are good for the economy

Critics contend that SBA loans are a small part of financing for small business and that they are irrelevant. 

 In 2007, the Government Accounting Office reported that SBA’s share of loans guaranteed by the 7(a) program was an estimated 4.1 percent of all outstanding small business loan dollars for loans under $1 million  (GAO 07-769 Small Business Administration: Additional Measures Needed to Assess 7(a) Loan Program’s Performance).

Despite this apparent small slice of the small business financing pie, SBA 7(a) loans account for most long term loans made to small businesses.    When comparing SBA term loans with bank CALL report term loans, SBA loans account for as much as 70% of all long term loans made to small businesses.   The longer term amortization conserves precious cash flow and improves the permanent working capital of small business (Testimony before the U.S. Senate Committee on Small Business and Entrepreneurship by Anthony Wilkinson, President and Chief Executive Office, National Association of Government Guaranteed Lenders, March 29, 2012). 

The Small Business Administration, created in 1953, has become the largest single guarantor of financing to small business in America (The Importance of Financial Market Development on the Relationship between Loan Guarantees for SMEs and Local Market Employment Rates Craig E. Armstrong, Ben R. Craig, William E. Jackson III, and James B. Thomson Working Paper 10-20 Federal Reserve Bank of Cleveland).

SBA 7(a) Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate April 2013 = 3.20%
SBA Fixed Base Rate April 2013 = 4.67%

Lenders can charge up to 2.75% over these indices.

SBA loans are good for the economy

For the six month period ending March 31^st, 2013, SBA 7(a) loan approvals totaled $8,222,936,000.    While that’s an increase of 22% from the same period a year ago, it’s flat from the prior quarter.

As a matter of fact, SBA 7(a) loan volume has been stagnating since early last year.

Here is a breakdown of SBA 7(a) quarterly loan volume for the last year:

1^st quarter 2013               $4,049,146,000

4^TH quarter 2012             $4,173,790,000

3^rd quarter 2012              $4,359,166,000

2^nd quarter 2012              $4,039,042,000

1^st quarter 2012                 $3,443,723,000

Notice how loan volume surged about 17% in the second quarter of 2012?  The third quarter also grew but only at about an 8% pace.  Since then loan volume has been slowly eroding.

This decline in SBA loan volume is rippling across the economy.

Gross domestic product surged at a 3.1% pace in the third quarter of 2012.   The fourth quarter slowed to a 0.4% annual rate.

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.

It will be interesting to see where the first quarter GDP numbers end up when the initial estimate is reported in a few weeks.

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.

It should be everyone’s patriotic duty to get a SBA 7(a) loan.

The SBA and faux

faux

foh

Artificial; fake; false.

From French faux (false), from Old French fals, from Latin falsus (false), past participle of fallere (to deceive).

 _______________________________________________

TIP OF THE WEEK 
The premium on the sale of the guaranteed portion of a fully priced SBA 7(a) loan just went over 125.75%.  

There now is no excuse for a lender to not do a SBA loan.

_____________________________________

Indices:

PRIME RATE= 0.00%

SBA LIBOR Base Rate April 2013 = 0.00%

SBA Fixed Base Rate April 2013 = 0.00%
________________________________________

Debenture Rate for April  

The debenture rate is 0.00% but note rate is 0.00% and effective yield is only 0.00%.

 ________________________________________________

AHEAD OF THE YIELD CURVE 

The United States Treasury just announced the auction of a $1 trillion offering of a new 100 year bond at a 0.00% interest rate.

The bond offering quickly sold out as investors were more concerned with preservation of principal backed by the full faith and credit of the United States government.

With the issuance of this radical new treasury instrument, the federal government’s annual debt service of $359,796,008,919.49 has been eliminated and the debate over deficit spending has ceased.

Congress will now be able to focus on more important issues such as why there is no federal holiday between Washington’s Birthday and Memorial Day.

What does this mean?

I don’t know.

__________________________________________
OFF BASE

As you may have guessed by now, it is April Fool’s Day.

SBA loans, however, are the way to go.  And that’s no fooling.

The SBA and filipendulous

filipendulous

fi-li-PEN-juh-luhs 

Hanging by a thread.

From Latin filum (thread) + pendere (to hang).

 _______________________________________________

TIP OF THE WEEK 
The filipendulous fate of SBA lending got a reprieve as Congress passed a continuing resolution that funds the government through September 30^th.

Passing this continuing resolution avoids the threat of a government shutdown after March 27, the date on which the previous continuing current resolution expires.

The sequester cuts remain in place, but the SBA fared better than most agencies, because Congress had previously increased the subsidy it needs to guarantee loans.

So they went two steps forward and only one back.

_____________________________________

Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate March 2013 = 3.20%

SBA Fixed Base Rate March 2013 = 4.63%
________________________________________

Debenture Rate for March

The debenture rate is 2.23% but note rate is 2.259% and effective yield is only 4.30%.

 ________________________________________________

AHEAD OF THE YIELD CURVE 

So how filipendulous is this economy?

The Federal Reserve recently met on monetary policy and left unchanged its statement that it plans to hold its target interest rate near zero as long as unemployment remains above 6.5 percent and inflation is projected to be no more than 2.5 percent.  They went on to say that recent data suggest “a return to moderate economic growth following a pause late last year.”  The pause late last year?

The Department of Commerce originally said gross domestic product dropped 0.1 percent in the fourth quarter of 2012.   A month later, with their second revision said that gross domestic product grew at a 0.1 percent annual rate.

Now keep your eyes and ears open for this week’s third and final estimate of fourth quarter gross domestic product.  

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

4^th quarter 2012:             0.1%

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.

The pause in fourth quarter gross domestic product and revisions to its numbers are being driven by changes in inventories.   Stockpiles grew at a revised $12 billion annual pace, down from a $20 billion rate estimated last month.   Slow inventory buildup shaved 1.55 percentage points off annualized growth during the quarter.

Depleted inventories may signal a first-quarter pickup in production.

The bond market seems to echo that sentiment.  The Treasury Department recently sold $13 billion in 30-year debt at a yield of 3.248%, the highest in a year.   These higher long term rates make the slope of the yield curve steeper and signal stronger growth ahead.

That does not sound so filipendulous. 

__________________________________________
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.   

How about Good Friday?  It’s a holiday for the stock market.   So why not for everyone else?   The day marks the crucifixion and death of Jesus Christ.  How could that possibly be considered good?  It might be a derivation of "Gute Freitag" which is Germanic in origin and literally means "holy" Friday.

There’s something for anyone filipendulous to hang onto.

SBA 504 Debenture Rate for March

Debenture Rate for March

The debenture rate is 2.23% but note rate is 2.259% and effective yield is only 4.30%.

The SBA and anserine

anserine

AN-suh-ryn, -rin

1. Of or relating to a goose.

2. Stupid; silly.

From Latin anser (goose).

 _______________________________________________

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.

_____________________________________

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.

__________________________________________

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.

____________________________________________________