President Obama signs H.R. 2499 into law using autopen

President Obama signed H.R. 2499  into law this morning effective immediately. The Office of Management & Budget (OMB) has apportioned the additional authority to SBA and the 7(a) program should be back up and running very shortly. 

Because he is out of the country, the President had to authorize the use of the autopen -- for only the sixth time during his presidency. The autopen is used only when legislation must be urgently signed into law. The reopening of the SBA 7(a) loan program is now among an elite few pieces of legislation that qualified for autopenning, including the extension of The Patriot Act provisions; to fund the federal government under a Continuing Resolution; the American Taxpayer Relief Act to avoid the fiscal cliff, and two others. 

The SBA and ultracrepidarian

ultracrepidarian

uhl-truh-krep-i-DAYR-ee-uhn

adjective: Giving opinions beyond one’s area of expertise.

noun: One who gives opinions beyond one’s area of expertise.

From Latin ultra (beyond) + crepidarius (shoemaker), from crepida (sandal). Earliest documented use: 1819.

The story goes that in ancient Greece there was a renowned painter named Apelles who used to display his paintings and hide behind them to listen to the comments. Once a cobbler pointed out that the sole of the shoe was not painted correctly. Apelles fixed it and encouraged by this the cobbler began offering comments about other parts of the painting. At this point the painter cut him off with “Ne sutor ultra crepidam” meaning “Shoemaker, not above the sandal” or one should stick to one’s area of expertise.

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TIP OF THE WEEK 

The ultracrepidarian cries of the SBA running out of money are just that- the cries of ultracrepidarians.  NAGGL has successfully lobbied Congress for an increase in its authorized lending levels.

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate July 2015 = 3.19%

SBA Fixed Base Rate July 2015 = 5.37%

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SBA 504 Loan Debenture Rate for July  

The debenture rate is only 2.88% but note rate is 2.93% and the effective yield is 4.96%.   

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AHEAD OF THE YIELD CURVE 

Ultracrepidarians are crying out that interest rates are going up.

The Federal Reserve meets this week and short-term interest rate markets imply a zero probability that the committee will raise policy rates, but show a high likelihood of at least one hike before the end of the year.

Treasury yields finished lower for a second week on Friday, recording the largest two-week decline since March 27.  The yield on the 30-year bond declined 12.1 basis points over the week to end at only 2.96%.

A flattening yield curve has been another theme throughout the week, with long maturities leading the move, as 30-year yields crossed below 2.960%—the lowest point since early June.

When the yield curve flattens, it means that the spread, or yield differential, between long-term and short-term Treasury bonds is decreasing.

It might also might a little bit more.

The slope of the yield curve—the difference between the yields on short- and long-term maturity bonds—has achieved some notoriety as a simple forecaster of economic growth. The rule of thumb is that an inverted yield curve (short rates above long rates) indicates a recession in about a year.  More generally, a flat curve indicates weak growth and conversely, a steep curve indicates strong growth.

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.  The Federal Reserve typically won’t initiate increases in interest rates until then.

Last week the Federal Reserve reported that capacity utilization had increased 0.2 percentage point in June to 78.4 percent.

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

2014- 78.8

What does this mean?

I don’t know.

Weaker capacity utilization might be interpreted as a sign that the Federal Reserve’s 2% inflation target is still out of reach and interest rates may not be going up anytime soon.

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OFF BASE

I guess the only way I can keep from being an ultracrepidarian is by keeping my mouth shut.

SBA 504 Loan Debenture Rate

SBA 504 Loan Debenture Rate for July         

The debenture rate is only 2.88% but note rate is 2.93% and the effective yield is 4.96%.

The SBA and groundswell

groundswell

GROUND-swell

1. A surge of opinion or feeling about someone or something.

2. A broad deep swell of the ocean, caused by a distant storm or an earthquake.

Groundswell was the term sailors used for a swelling of the ocean. Why ground? Originally, ground referred to the bottom of anything, especially an ocean

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TIP OF THE WEEK 

The groundswell continues with SBA 7(a) loans as $16,201,582 in loans have been approved as of July 4^th, 2015.

This is the most ever for the SBA 7(a) loan program.

Now a groundswell of support is needed from Congress to make sure the SBA loan program is fully funded.

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate July 2015 = 3.19%

SBA Fixed Base Rate July 2015 = 5.37%

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SBA 504 Loan Debenture Rate for June

The debenture rate is only 2.98% but note rate is 3.03% and the effective yield is 5.062%.   

 ________________________________________________
AHEAD OF THE YIELD CURVE 

Interest rates are going up.  At least that seems to be the groundswell of opinion.

Minutes from the Federal Open Market Committee’s last meeting on interest rates released last week indicated that most participants judged that the conditions for policy firming had not yet been achieved and  a number of them cautioned against a premature decision.  All members but one “indicated that they would need to see more evidence that economic growth was sufficiently strong.” 

The slope of the yield curve—the difference between the yields on short- and long-term maturity bonds—has achieved some notoriety as a simple forecaster of economic growth. The rule of thumb is that an inverted yield curve (short rates above long rates) indicates a recession in about a year.  More generally, a flat curve indicates weak growth and conversely, a steep curve indicates strong growth.

Last week’s $13 billion of 30 year Treasury bonds sold at a yield of 3.084 percent.  This compares to last month’s auction yield of 3.138%.

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

2014- 3.97

What does all this mean?

I don’t know.

Keep your eyes and ears open for this week’s report from the Federal Reserve on industrial production and capacity utilization.  

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 Federal Reserve typically won’t initiate increases in interest rates until then.

Last month the Federal Reserve reported that capacity utilization had actually decreased 0.2 percentage points in May to 78.1 percent.  

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OFF BASE

Groundswells in a nautical or surfing sense are typically dangerous.

The same is true of most other groundswells.

Extraordinary Popular Delusions and the Madness of Crowds is a history of popular folly by Scottish journalist Charles Mackay, first published in 1841

Among the bubbles or financial manias described by Mackay is the Dutch tulip mania of the early seventeenth century. According to Mackay, during this bubble, speculators from all walks of life bought and sold tulip bulbs and even futures contracts on them. Allegedly some tulip bulb varieties briefly became the most expensive objects in the world during 1637.

The groundswell continues.

Leading up to 1929, it was a well-known fact that stocks were a great place to put your money.  In the 1950s, it became common knowledge that if a nuclear bomb went off in your city that you’d be safe if you simply learned to “duck and cover.”  Up until 2007, it was a well-known fact that real estate was a great investment where you would never lose money.  Today’s movies give most young people the idea that anyone can jump from a car going 30 mph, roll a few times, and be fine.

So much for the wisdom of crowds.

SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate July 2015 = 3.19%
SBA Fixed Base Rate July 2015 = 5.37%

Lenders can charge up to 2.75% over these indices.

The SBA and cowabunga

cowabunga

kou-uh-BUHNG-guh

interjection: An expression of surprise, joy, or enthusiasm.

The word was the cry of Chief Thunderthud, a character in the children's television program Howdy Doody. The word was later adopted by surfers. It was popularized by its use on the animated show Teenage Mutant Ninja Turtles.

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TIP OF THE WEEK 

Cowbunga!  The SBA will be closed on Friday, July 3^rd in observance of Independence Day.

That means it should be a holiday for everyone else.

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate June 2015 = 3.18%

SBA Fixed Base Rate June 2015 = 5.16%

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SBA 504 Loan Debenture Rate for June

The debenture rate is only 2.98% but note rate is 3.03% and the effective yield is 5.062%.   

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AHEAD OF THE YIELD CURVE 

The Bureau of Labor Statistics is probably also yelling out cowabunga as they too are taking Friday, July 3^rd off.

As a result, their report on jobs for the month of June will come out on Thursday, July 2^nd.

Last month’s report showed that the U.S. economy gained 280,000 jobs in May.  That was the best month so far this year.  March was the worst month of job growth, but the Labor Department revised up March's job gains from 85,000 to 119,000.  April's job gains were revised down slightly to 221,000.

A few weeks later, the Federal Reserve met and they didn’t exactly yell out cowabunga.

Federal Reserve policymakers are coming around to the bond market's wisdom about where interest rates are headed.

Futures traders have been signaling for more than a year that when the Fed begins raising target rates for the first time since 2006, the increases won't be fast or reach the levels central bank officials predicted. For the second time this year, the Fed's policymakers lowered their rate projections in official forecasts.  Officials reduced their median estimate for the funds rate at the end of 2016 to 1.625 percent, from 1.875 percent in their March forecast, and to 2.875 percent for the end of 2017, down from 3.125 percent in March.

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:

DEC15- 0.56

DEC16- 1.42

DEC17- 2.12

DEC18- 2.60

DEC19- 2.97

DEC20- 3.25

What does all this mean?

I don’t know.

Eurodollar futures currently imply a federal funds rate that really is not going to be moving up all that much any time soon.

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OFF BASE

The Federal Reserve affects our lives in many ways.  Not only do they call the shots on interest rates, more importantly, they are the official arbitrator of holidays.   

For July 3^rd, they declared that the Board of Governors would be closed.   Like all Federal Reserve pronouncements, the devil is in the details.  They go on say that while the Board of Governors get that day off, for holidays falling on Saturday, Federal Reserve Banks and Branches will be open the preceding Friday.  Had the Fourth of July fallen on a Sunday, all Federal Reserve Banks and Branches would be closed the following Monday.

As a result, there is some confusion as to whether or not July 3^rd is a holiday.  According to the U.S. OFFICE OF PERSONNEL MANAGEMENT, for most Federal employees, Friday, July 3, will be treated as a holiday for pay and leave purposes

Most banks will be open on Friday, July 3^rd.  Here is a handy dandy guide as to who is open and who is closed: http://www.theholidayschedule.com/bank-holidays.php

I will be taking the day off.  Cowabunga!

SBA 504 Loan Debenture Rate

SBA 504 Loan Debenture Rate for June         

The debenture rate is only 2.98% but note rate is 3.03% and the effective yield is 5.062%.

SBA Financial Services Champion of the Year

The SBA and apricate

apricate

AP-ri-kayt

To bask in the sun.

To expose to the sun.

From Latin apricari (to bask in the sun).

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TIP OF THE WEEK 

The SBA 7(a) loan program will soon apricate before Congress as the Senate’s Small Business and Entrepreneurship Committee has submitted a proposed bill that would increase the authorized limit for the SBA 7(a) loan program by two billion dollars.   SBA loan volume is on track to surpass the authorized SBA funds approved for the 2015 fiscal year which ends September 30^th.  

Both borrowers and lenders are obviously embracing the program.

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate June 2015 = 3.18%

SBA Fixed Base Rate June 2015 = 5.16%

________________________________________
SBA 504 Loan Debenture Rate for May  

The debenture rate is only 2.77% but note rate is 2.817% and the effective yield is 4.850%.   

 ________________________________________________
AHEAD OF THE YIELD CURVE 

The Federal Reserve has its moment of aprication as it meets this week on interest rates.  

At its last meeting, the Fed said that it would not increase interest rates until it “is reasonably confident that inflation will move back to its 2 percent objective.”

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.  The Federal Reserve typically won’t initiate increases in interest rates until then.

This morning the Federal Reserve reported that capacity utilization had actually decreased 0.2 percentage points in May to 78.1 percent.  

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

2014- 78.8

What does this mean?

I don’t know.

Weaker capacity utilization might be interpreted as a sign that the Federal Reserve’s 2% inflation target is still out of reach and interest rates may not be going up anytime soon.

The bond market seems to agree.  The 30 year Treasury bond, which is very sensitive to inflationary fears, saw strong demand at last week’s $13 billion auction as the 30-year bond yield fell 10 basis points to 3.108%.  The 30 year Treasury bond yield had been pushed to its highest level since early September pressured by a sustained sell off in Euro zone government bonds acerbated by the Greek debt saga which in turn was caused by too much apricating by the Aegean Sea.

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OFF BASE

The season to apricate is upon us as the first day of summer is this Sunday!  The day of the summer solstice is the longest day of the year. The length of time elapsed between sunrise and sunset on this day is a maximum for the year.   There are about 14½ hours of daylight on this day for most of us. 

For those up in Alaska, that means its time for the Midnight Sun Game.  This is a baseball game played every summer solstice in Fairbanks.  Because the sun is out for almost 24 hours a day, the game starts at about 10:30 at night and completes around 1:30 the next morning.  The first game was in 1906 and artificial light has never been used.  The game is considered one of the highlights of the Alaska Baseball League season and Baseball America declared it one of the "10 Must-See Baseball Events."

SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate June 2015 = 3.18%
SBA Fixed Base Rate June 2015 = 5.16%

Lenders can charge up to 2.75% over these indices.

The SBA and inculcate

inculcate

in-KUHL-kayt

To instill something into the mind of a person by repetition.

From Latin inculcare (to tread on), from in- (in) + calcare (to tread), from calx (heel).

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TIP OF THE WEEK 

SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy. 

SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy. 

SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy. 

SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy. 

Keep in mind that the correlation coefficient between SBA 7(a) loan approvals and our economy's Gross Domestic Product is a statistically significant 0.86.

SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy. 

SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy. 

SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy. 

SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy.  SBA loans are good for the economy. 

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate May 2015 = 3.18%

SBA Fixed Base Rate May 2015 = 5.11%

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SBA 504 Loan Debenture Rate for May  

The debenture rate is only 2.77% but note rate is 2.817% and the effective yield is 4.850%.   

 ________________________________________________
AHEAD OF THE YIELD CURVE 

Interest rates will not be going up any time soon.

Interest rates will not be going up any time soon.

Interest rates will not be going up any time soon.

Interest rates will not be going up any time soon.

Interest rates will not be going up any time soon.

Interest rates will not be going up any time soon.

Keep your eyes and ears open for this week’s report on employment for the month of May.

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

April                                  223,000

March                                   85,000

February                             266,000

January                               239,000

2014     3,116,000

2013     2,074,000

2012     2,193,000

2011      2,103,000

2010     1,022,000

2009     -5,052,000

2008     -3,617,000

2007    1,115,000

2006     2,071,000

2005     2,484,000

2004     2,019,000

What does all this mean?

I don’t know.

Last month’s report on jobs for April sparked a small rally in the bond market, driving Treasury prices higher and yields down. 

For years, the $12.6 trillion U.S. Treasury market has signaled -- correctly -- that the Federal Reserve was too optimistic in its outlook for the economy and interest rates.  Regardless of when the first increase comes, futures show traders don’t see rates exceeding 1 percent by the end of 2016, versus the Fed’s estimate of 1.875 percent.

They took a June hike off the table, but buried in the minutes of the Federal Reserve's April meeting released last week showed policy makers are likely to keep interest rates lower for longer.

Interest rates will not be going up any time soon.

Interest rates will not be going up any time soon.

Interest rates will not be going up any time soon.

Interest rates will not be going up any time soon.

Interest rates will not be going up any time soon.

Interest rates will not be going up any time soon.

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OFF BASE

It’s normal to not immediately inculcate subliminal messages in your mind.

Subliminal messages have the ability to become a part of yourself, and since they don’t require logic and decision, you tend to believe and act them out almost instantly, as soon as you can perceive them.

Self hypnosis is one of the best ways to receive subliminal messages.   The first step is to be dulled into a stupor which should have occurred by now if you have actually read all this.

Just remember, SBA loans are good for the economy and interest rates are not going up anytime soon.