The SBA and quiescent

quiescent

kwee-ES-uhnt, kwy

Still; inactive; not showing symptoms.

From Latin quiescere (to rest), from quies (quiet).

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TIP OF THE WEEK 

Things remain quiescent for small businesses according to the National Federation of Independent Business’ (NFIB) monthly economic survey.

According to the NFIB monthly report, loan demand remains historically weak as owners can’t find many good reasons to borrow to invest when expectations for growth are not very positive.

Interest rates are low, but prospects for putting borrowed money profitably to work have not improved enough to induce owners to step up their borrowing and spending.

This is being reflected in SBA 7(a) loan volume as it up only 9% through April 29th compared to the 23% growth a year ago.

If you would like a copy of the NFIB monthly report, let me know.

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Indices:

PRIME RATE= 3.50%

SBA LIBOR Base Rate May 2016 =3.44%

SBA Fixed Base Rate May 2016 = 4.97%

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SBA 504 Loan Debenture Rate for May  

The debenture rate is only 2.27% but note rate is 2.31% and the effective yield is 4.32%.

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AHEAD OF THE YIELD CURVE 

Quiescent inflation is keeping interest rates low.

On Friday, the yield on the 30-year Treasury bond fell 5.1 basis points to 2.552% and was down 8 basis points over the week.

Last week the $15 billion auction of the 30 year Treasury bond saw lackluster demand, after two auctions earlier this week — $23 billion in 10-year Treasuries on Wednesday and $24 billion in 3-year Treasuries on Tuesday—experienced stellar demand, driving yields to their lowest level in a month on Wednesday and perhaps reflecting a market preference for shorter maturities given economic uncertainty.

Keep your eyes and ears open for Tuesday’s report from the Federal Reserve 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- 66.9

2010- 74.8

2011- 76.7

2012- 79.0

2013- 77.8

2014- 78.8

2015- 76.5

What does all this mean?

I don’t know.

Last month, the Federal Reserve reported that capacity utilization, which measures the amount of a plant that is in use at factories, mines and utilities, fell to 74.8 percent from 75.3 percent.  While up 10.2 percentage points from the record low set in June 2009, capacity utilization at 74.8% is 5.2% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007.  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. 

Until there is a recrudescence in capacity utilization, it is arrant nonsense that the Fed will be soon raising interest rates.

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OFF BASE

If splenetic presentiment is creating a need to be quiescent, a holiday soon approaches. 

According to the Federal Reserve our next holiday is Memorial Day.  Here are the officially recognized Federal Reserve holidays:

Memorial Day May 30

Independence Day July 4

Labor Day September 5

Columbus Day October 10

Veterans Day November 11

Thanksgiving Day November 24

Christmas Day December 26 

SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.50%
SBA LIBOR Base Rate May 2016 = 3.44%
SBA Fixed Base Rate March 2016 = 4.97%

Lenders can charge up to 2.75% over these indices.

The SBA and intractable

intractable

in-TRAK-tuh-buhl

Not easily handled, managed, or controlled.

From Latin tractare (to handle),

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TIP OF THE WEEK 

SBA lending may seem intractable if you don’t know what you are doing.  That’s why many lenders utilize lender service providers such as Stultz Financial to avoid any splenetic presentiment.

The recrudescence in hospitality has been oppugned as occupancies are on a declining trajectory.  This should not come as a surprise because more and more hotels and motels are opening, often with SBA financial assistance.  Supply growth has outpaced demand growth for two consecutive months, but the 61.7% occupancy for February is still the second-highest occupancy ever recorded.

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Indices:

PRIME RATE= 3.50%

SBA LIBOR Base Rate April 2016 =3.44%

SBA Fixed Base Rate April 2016 = 4.87%

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SBA 504 Loan Debenture Rate for April  

The debenture rate is only 2.26% but note rate is 2.30% and the effective yield is 4.311%.

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AHEAD OF THE YIELD CURVE 

Intractable is the perfect adjective to describe both the economy and the Federal Reserve.  At least the smart money seemed to be saying that.

At last week’s auction of $12 billion in 30-year Treasury bonds there was record demand from so-called buy-side institutions, such as mutual funds, life insurance companies, hedge funds, and pension funds.   The yield on the 30-year bond gained 2.5 basis points to 2.602%.   That compares to last month’s auction where the yield ended up at 2.72%.

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

2015- 2.91

What does all this mean?

I don’t know.

The day after the 30 year Treasury auction, the Federal Reserve reported that capacity utilization, which measures the amount of a plant that is in use at factories, mines and utilities, fell to 74.8 percent from 75.3 percent.  The yield on the 30 year Treasury bond then tumbled 4.4 basis points to 2.556%.  While up 10.2 percentage points from the record low set in June 2009, capacity utilization at 74.8% is 5.2% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007.  It should be noted however that like the drop in hotel occupancy mentioned above, part of the decline in capacity utilization can be attributed to a 1.2% growth over the last 12 months in capacity.

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. 

It is arrant nonsense that the Fed will be raising interest rates when they meet later this month.

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OFF BASE

If things seem intractable right now, maybe you need a day off.  Unfortunately according to the Federal Reserve our next holiday is not until Memorial Day.  Here are the officially recognized Federal Reserve holidays:

Memorial Day May 30

Independence Day July 4

Labor Day September 5

Columbus Day October 10

Veterans Day November 11

Thanksgiving Day November 24

Christmas Day December 26

If you need an excuse for day off, Passover starts Friday evening.  The start of Passover, which celebrates the Israelite exodus from Egypt, begins in the evening with the Seder which is a ritual feast. 

So Friday could be a day off.  To put this in perspective: imagine if you had to work during the day of Thanksgiving, then prepare for Thanksgiving dinner after getting home from work. 

That would be intractable.

The SBA and arrant

arrant

AR-uhnt

 Complete; thorough.

Here's a word that has had both its spelling and meaning bent out of shape from use. It's a variant of errant (wandering). Earlier the word was used in the sense of wandering or vagrant, for example, an arrant thief or an arrant knave. Over time the word began to be taken as an intensifier so an arrant fool was no longer a vagrant fool, but a complete fool.

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TIP OF THE WEEK 

Don’t be so arrant with completing IRS form 4506 with the signatures being in blue ink.

When blue ink is used to complete Form 4506-T requests, the information sometimes does not show up to the IRS.  To alleviate rejections for missing information and to better service the taxpayer the IRS is asking that the use of blue ink be discontinued immediately.

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Indices:

PRIME RATE= 3.50%

SBA LIBOR Base Rate March 2016 =3.44%

SBA Fixed Base Rate March 2016 = 4.89%

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SBA 504 Loan Debenture Rate for March

The debenture rate is only 2.50% but note rate is 2.54381% and the effective yield is 4.553%.

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AHEAD OF THE YIELD CURVE 

The Federal Reserve meets later this month.  Will they be raising interest rates?

Keep your eyes and ears tuned for this week’s release of the minutes from the Federal Reserve’s last meeting on monetary policy.

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 arrantly scrutinize details of the Fed opinions in the minutes for better understanding.

Friday afternoon the market was pricing no real probability of a rate increase at that meeting.

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:

APR 16- 0.63

DEC16- 0.85

DEC17- 1.06

DEC18- 1.32

DEC19- 1.58

DEC20- 1.83

DEC22- 2.24

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.

It is arrant nonsense that they will be raising interest rates.

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OFF BASE

Spring training is over, play ball.

The Washington Nationals closed spring training with an 18-4 record. That’s a winning percentage of .818, best in the bigs.

Big deal, you’re thinking, it’s spring training. And everybody knows that spring training results don’t matter.  Or do they?  In the past 20 years, only once has a team finished spring training with a winning percentage of .800 or better. That team? The 1997 Miami Marlins, who went 26-5 in Grapefruit League action (.839), then proceeded to win 92 regular-season games, plus another 11 in the postseason, including four in the World Series.

Of the 40 teams that have made the World Series over the past two decades, only 30 percent of them had losing records in spring training that year, and those same 40 teams had a combined winning percentage of .536 in exhibition play during their World Series seasons.

Second in Cactus League play were the Angels.

How’s that for an arrant dissection of nothing?

SBA 504 Debenture Rate

SBA 504 Loan Debenture Rate for March      

The debenture rate is only 2.500% but note rate is 2.54381% and the effective yield is 4.553%.

The SBA and recrudescence

recrudescence

(ree-kroo-DES-uhns) 

A renewed activity after a period of dormancy.

From Latin recrudescere (to become raw again), from re- (again) + crudescere (to get worse), from crudus (raw).

When something that's bad comes back to haunt you, call it a recrudescence. It's not a word you'll hear often, but it's useful. As a bonus, it lets you say "crud" while sounding really smart.

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TIP OF THE WEEK 

A recrudescence of notices with deadlines has come out from the IRS and the SBA.

The original implementation date for the new IRS Form 4506-T with the attestation box was to be March 1, 2016.  The implementation date has been moved to March 28, 2016.

Versions of the Form 4506-T with a date other than 09-2015 will be rejected.  The attestation box must be checked.

Lenders and borrowers should make sure they are using the correct form.

SBA One use will become mandatory for GP loan submissions to the Loan Guaranty Processing Center by Delegated Lenders effective July 1, 2016 (non-delegated loans) and for non-Delegated Lenders beginning FY17 (October 1, 2016).

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Indices:

PRIME RATE= 3.50%

SBA LIBOR Base Rate March 2016 =3.44%

SBA Fixed Base Rate March 2016 = 4.89%

________________________________________

SBA 504 Loan Debenture Rate for February

The debenture rate is only 2.27% but note rate is 2.31% and the effective yield is 4.324%.

 ________________________________________________
AHEAD OF THE YIELD CURVE 

Federal Reserve recrudescence on monetary policy is causing some splenetic presentiment.

The $12 billion auction of 30 year Treasury bonds last week however saw strong demand with the yield ending at 2.72%.  The yield curve is staying flat.  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.

This comes after a strong jobs report for the month of February that saw 242,000 jobs being added.  Also encouraging is that job gains for December and January were revised up by a total 30,000.

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

February                             244,000

January                               172,000

2015     2,740,000

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.

Total employment is now 5.1 million above the previous peak.  Total employment is up 13.8 million from the employment recession low. 

Yet despite the robust recovery in jobs, economic growth remains sluggish.  How can that be? 

U.S. gross domestic product would have been about $3 trillion higher in real, inflation-adjusted terms in 2015 if productivity hadn’t slowed over the last decade. 

It’s a paradox that’s been puzzling economists for a while. How can U.S. productivity growth be slowing down at the same time that innovation in everything from smartphones to 3D printing seems to be speeding up?  But that doesn’t translate into more economic output.  From the early 1970s through 1995, productivity rose about 1½% per year. Between 1995 and 2003, that pace more than doubled to a rate that was comparable to its fast pace before 1973. Considerable evidence suggests this acceleration in the late 1990s reflects the production and use of information technology (IT).   Over the past decade, however, the exceptional pace of productivity growth has disappeared, returning to roughly its pre-1995 pace.  

You can’t deny that technological innovation has made Americans’ lives easier and more enjoyable in many ways, from calling up directions on Google Maps to trading cat videos on Facebook. 

For example, instead of really working, you are reading this email.

The Federal Reserve meets this week on March 15^th and 16^th. 

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OFF BASE

Doesn’t it seem like spring is coming early? 

It is and a recrudescence of global warming has nothing to do with it.

Remember our LEAP day just a few weeks ago?   It all happens because the number of days in a year isn’t even. A year lasts 365 days, 5 hours, 48 minutes, and 46 seconds.   That’s the actual length of time it takes for the Earth to complete one orbit around the Sun.   The Earth's elliptical orbit is changing its orientation relative to the Sun (it skews), which causes the Earth's axis to constantly point in a different direction.  Since the seasons are defined as beginning at strict 90-degree intervals, these positional changes affect the time Earth reaches each 90-degree location in its orbit around the Sun. 

As a result, spring is currently being reduced by approximately one minute per year and winter by about one-half minute per year. Summer is gaining the minute lost from spring, and autumn is gaining the half-minute lost from winter. Winter is the shortest astronomical season and its seasonal duration is continuing to decrease.

But the Earth spins a hair less than 365 ¼ times per year (365 days, 5 hours, 48 minutes, and 46 seconds) . Call it 365.2422 days.  If only the year were 11 minutes longer, or 365.25000 days, we could simply add one day every fourth year and take care of the fraction forever.

As a result, the calendar seems to think spring is coming earlier and earlier. 

While it's true that we've traditionally celebrated the beginning of spring on March 21, astronomers now say that the spring season starts earlier.  Unheard of? Not if you look at the statistics. In fact, did you know that during the 20th Century, March 21 was actually the exception rather than the rule?  The vernal equinox landed on March 21, only 36 out of 100 years. And from 1981 to 2102, Americans will celebrate the first day of spring no later than March 20.

And in 2016, it will start on March 19 for the entire United States.  To conclude? This will be the earliest spring since 1896!

SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.50%
SBA LIBOR Base Rate March 2016 = 3.44%
SBA Fixed Base Rate March 2016 = 4.89%

Lenders can charge up to 2.75% over these indices.

The SBA and uberous

uberous

YOO-buhr-uhs

Abundant; fruitful.

From Latin uber (rich, fruitful, abundant, etc.).

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TIP OF THE WEEK 

It is an uberous time for hotels and motels.

Even though January is one of the weakest periods of the year, average weekly hotel occupancy in 2016 is already above the average for ALL of 2009 (the worst year for hotels since the Depression)!

2015 was the best year on record for hotels and so far 2016 is tracking 2015.

Hotels and motels are one of the largest categories of SBA borrowers.

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Indices:

PRIME RATE= 3.50%

SBA LIBOR Base Rate February 2016 =3.43%

SBA Fixed Base Rate February 2016 = 5.00%

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SBA 504 Loan Debenture Rate for February

The debenture rate is only 2.27% but note rate is 2.31% and the effective yield is 4.324%.

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AHEAD OF THE YIELD CURVE 

Are things getting so uberous that interest rates will keep going up?

Minutes from the January Federal Open Market Committee meeting show that officials were worried about a series of drags and disruptions that are likely to derail their December projection of four rate increases this year.

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 month the Federal Reserve reported that capacity utilization rose to 77.1 percent from 76.4 percent in the prior month.   This is the first increase in three months.

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

2015- 76.5

What does all this mean?

I don’t know.

Uberous consumer spending propelled factory production with the biggest gain in the output of consumer goods since July on increases in both durables and nondurables.

Capacity utilization at 77.1% is still 2.9% below the average from 1972 to 2015 and well below the pre-recession level of 80.8% in December 2007.

Keep your eyes and ears open for Friday’s report on jobs for the month of February but don’t over-react.  Many economists expect payroll growth to naturally slow this year as the near-normal unemployment rate leaves a smaller pool of available workers. 

The Federal Reserve does not meet until March 15^th and 16^th. 

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OFF BASE

February 29^th is a leap day. 

Leap days are needed to keep our calendar in alignment with the Earth's revolutions around the Sun.

It takes the Earth approximately 365.242189 days – or 365 days, 5 hours, 48 minutes, and 45 seconds – to circle once around the Sun. This called a tropical year. Without an extra day on February 29 nearly every four years, we would lose almost six hours every year. After only 100 years, our calendar would be off by approximately 24 days.

The calendar already seems off as the next official holiday recognized by the Federal Reserve is not until Memorial Day. 

If you need to find some pretense for a holiday before then here are some possibilities:

Saint Patrick’s Day- March 17^th

Good Friday- March 25^th

Opening Day Major League Baseball- April 4

April 4, 2016 seems appropriate as a holiday as it will also be Square Root Day.  Square Root Day is when both the day of the month and the month are the square root of the last two digits of the year.

The last square root day was 3/3/09 and the next one after 4/4/16 won’t be until 5/5/25.