The SBA and repletion

repletion

ri-PLEE-shuhn

The condition of being completely filled or satisfied.

Via French, from Latin replere, from re- (back, again) + plere (to fill), from plenus (full).

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TIP OF THE WEEK 

SBA wants repletion with its Standard Operating Procedures, SOP 50-10-5(I) that became effective January 2, 2017.

Not included however in the new SOP just released is even newer guidance on processing affirmative responses for “an Associate of Poor Character”.  That guidance is reflected in a recent procedural notice that came out two weeks BEFORE tehe effective date of the new SOP.  Got that?

Guidance on SBA 504 debt refinance is also not found in the new SOP.  It is instead reflected in a policy notice from last November allowing for the Financing of “Business Operating Expenses” up to an 85% LTV.

Otherwise, SBA expects that the SOP should be arrant and not frustraneous. 

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Indices:

PRIME RATE= 3.75%

SBA LIBOR Base Rate December 2016 =3.63%

SBA Fixed Base Rate December 2016 = 5.71%

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SBA 504 Loan Debenture Rate for January

The debenture rate is only 2.80% but note rate is 2.847% and the effective yield is 4.585%.

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AHEAD OF THE YIELD CURVE 

The bond market felt no repletion to start the New Year.  A splentic presentiment over a recrudescence of interest rates created a little trichotilloania.

On Thursday, the yield for the 30-year Treasury bond dropped eight basis points down to 2.965%, its largest drop since July 5.  Data pointed to lackluster private-sector jobs growth a day ahead of the government’s official December employment report.

When the jobs report came out, Treasury yields rose, reversing the earlier drop, after official data showed average hourly earnings for American workers accelerated sharply last month.  Fixed-income investors focused on hourly earnings, which accelerated more swiftly than economists’ had anticipated. Wages increased by 0.4% last month, raising the yearly rate to 2.9%.

Rising wages are seen as a harbinger of inflation because companies typically raise the price of their goods to offset the increase.

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

December                                                                                          156,000

November                                                                                         204,000

October                                                         135,000

September                                                   208,000

August                                                          167,000

July                                      252,000

June                                     292,000

May                                       11,000

April                                     123,000

March                                   186,000

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.

The latest payrolls tally brought the advance for 2016 to 2.16 million, after a gain of about 2.7 million in 2015. The streak of gains above 2 million is the longest since 1999.

The 30-year T-bond yield rose 4.3 basis points to end the day at 3.01%.

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

The 30 year Treasury bond is very sensitive to inflationary expectations.  Last month’s auction had the highest awarded yield of the year and was 25 basis points above the November auction rate and nearly 1.00 percentage point above the July yearly auction low of 2.172 percent.

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OFF BASE

If time off for the holidays created a sense of repletion, you can look forward to a three day weekend.

According to the Federal Reserve, here are our holidays for 2017:

Birthday of Martin Luther King, Jr. January 16

Washington's Birthday February 20

Memorial Day May 29

Independence Day July 4

Labor Day September 4

Columbus Day October 9

Veterans Day November 11

Thanksgiving Day November 23

Christmas Day December 25

Happy New Year

The SBA and burke

burke

buhrk

1. To murder by suffocation.

2. To silence or suppress.

3. To avoid or bypass.

After William Burke (1792-1829), who killed people to sell their bodies for dissection. His preferred method was smothering so as to leave the body unmarked and suitable for dissection. He was captured, hanged, and on the judge's orders, his body was publicly dissected.

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TIP OF THE WEEK 

A burking  enervation of the guidance on affiliation and franchises is in the new Standard Operating Procedures, effective January 1^st, 2017.  The intractable trichotillomania over eligibility should grow quiescent.

SBA will no longer review franchise and license agreements to determine affiliation.  Instead SBA will require the SBA Addendum to the Franchise Agreement.  Every loan applicant who is subject to a franchise or license agreement will have to have this document executed.  No more franchise registry.  No more franchise findings list.

Additional guidance on credit elsewhere and fee relief for Veterans are in the SOP

SBA expects that the SOP should be arrant and not frustraneous.

In other words, there is no reason to be pervicacious and oppugned to SBA loans.

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Indices:

PRIME RATE= 3.50%

SBA LIBOR Base Rate December 2016 =3.63%

SBA Fixed Base Rate December 2016 = 5.71%

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SBA 504 Loan Debenture Rate for November  

The debenture rate is only 2.57% but note rate is 2.6147% and the effective yield is 4.357%.

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AHEAD OF THE YIELD CURVE 

The latest report on jobs burked any splentic presentiment over a bigly recrudescence of interest rates.

According to the Bureau of Labor Statistics, total nonfarm payroll increased by 178,000 in November.  This follows a 142,000 increase in October.  In November, the year-over-year change was 2.25 million jobs.  Keep in mind over 2.25 million  jobs were lost in just four months in early 2009.

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

October                               142,000

September                         208,000

August                                 167,000

July                                      252,000

June                                     292,000

May                                         11,000

April                                     123,000

March                                   186,000

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.

While jobs continue to grow, there is some weakness.

The change in jobs for October, the last report before the Presidential  election, was revised down from 161,000 to 142,000.

Despite the strong headline number, a lackluster reading on average hourly earnings, which slumped 0.1% in November, helped weigh on Treasury yields by dampening inflation expectations.  The 30 year Treasury bond, which is most sensitive to inflationary expectations, gained in price as its yield dropped 5.2 basis points to 3.057%.  The Federal Reserve meets next week.  Just before their meeting, there will be an auction of 30 year Treasury bonds.  At the last auction in November demand was weak and the yield of 2.902% was a hefty 43.2 basis points above the previous month’s auction rate.  Inflation has generally been moving up, and most of these measures are at or above the Fed's target.

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OFF BASE

Only 20 days until Christmas.  Since Christmas this year falls on a Sunday, the next day, the 26^th will be a bank holiday.

That means we are finally celebrating Boxing Day.  Boxing Day is a holiday celebrated throughout the United Kingdom and Commonwealth nations on the day following Christmas Day, when servants and tradesmen would traditionally receive gifts known as a "Christmas box" from their masters, employers or customers. 

It began as a way of showing others less fortunate that we cared for them.  Sounds like something we should all be doing.

SBA 7(a) Loan Rate Update

PRIME RATE= 3.50%
SBA LIBOR Base Rate November 2016 = 3.53%
SBA Fixed Base Rate November 2016 = 5.04%

Lenders can charge up to 2.75% over these indices.

The SBA and bigly

bigly

big´ly

In a tumid, swelling, blustering manner; haughtily; violently.

Of uncertain origin, possibly from a dialect of Old Norse, bugge meaning big man

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TIP OF THE WEEK 

A bigly enervation of the guidance on affiliation and franchises should be in the new Standard Operating Procedures.  The intractable trichotillomania over eligibility should grow quiescent.

SBA expects that the SOP should be arrant and not frustraneous.

In other words, there is no reason to be pervicacious and oppugned to SBA loans.

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Indices:

PRIME RATE= 3.50%

SBA LIBOR Base Rate October 2016 =3.53%

SBA Fixed Base Rate October 2016 = 4.86%

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SBA 504 Loan Debenture Rate for October

The debenture rate is only 2.21% but note rate is 2.249% and the effective yield is 4.261%.

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AHEAD OF THE YIELD CURVE 

There does not appear to be splentic presentiment over a bigly recrudescence of interest rates.

There was strong demand at the last auction of 30 year Treasury bonds.  The 2.470 percent high yield was just a half of a basis point below the yield awarded at the prior auction and 29.8 basis points higher than the record low set in the July auction.  Long term bond yields continued to climb after comments by Federal Reserve Chair Janet Yellen suggested there may be benefits in letting inflation run higher than the current target of 2% in order to stimulate the economy.

Inflation has for years been dormant in the U.S., which is a key reason the Fed has held off on raising interest rates in 2016. That’s led investors to seek longer-dated debt, which offers higher yields but is more sensitive to inflation expectations. In one sign of investor complacency, the real U.S. 30-year yield -- which subtracts the level of inflation based on the core Consumer Price Index -- is hovering near the lowest level since 1980.

One of the Fed’s leading indicators on inflation is capacity utilization which measures the amount of a plant that is in use at factories, mines and utilities .  The Federal Reserve recently reported that capacity utilization for September edged up 0.1 to 75.4 percent after having dropped in August.

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.

Capacity utilization at 75.4% is 4.61% 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.

The BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.3% (3.6% annualized rate) in September. The CPI less food and energy rose 0.1% (1.4% annualized rate) on a seasonally adjusted basis.  According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.1% annualized rate) in September. The 16% trimmed-mean Consumer Price Index also rose 0.2% (2.1% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Inflation has generally been moving up, and most of these measures are at or above the Fed's target

Keep your eyes and ears open for Friday’s preliminary estimate of third quarter Gross Domestic Product.

Impecunious concerns will motivate the Federal Reserve but they might festinate.

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OFF BASE

Is bigly really a word? 

During the presidential debate, Donald Trump used the word “bigly” several times.  It seemed like he was trying to use it as an adverb of the word big to mean great sized, not huge, but definitely large.  Like his hands or so he claims.

But that’s not the correct usage of the word (unless the Donald meant violently and boastfully) if you look at a brief history of bigly.  This adverb came into use around 1400 and stuck around for roughly 500 years. It has been used two different ways over the centuries.

The first meaning was to mean “with great force or violently or strongly.” It appeared in such fashion in the classic King Arthur tale Le Morte d’Arthur, published way back in 1485: “So roughly and so bigly that none might withstand him,” wrote Sir Thomas Malory.

The second meaning, which has been more popular in recent centuries, means “boastfully, haughtily or proudly.” Thomas Hardy put it to use in his 1874 novel Far From the Madding Crowd: “I don’t see that I deserve to be put upon and stormed out for nothing, concluded the small woman bigly.”

Sorry about my bigly use of words.

The SBA and trichotillomania

trichotillomania

trik-uh-til-uh-MAY-nee-uh

A compulsion to pull out one's hair.

From Greek tricho- (hair) + tillein (to pluck, pull out) + -mania (excessive enthusiasm or craze).

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TIP OF THE WEEK 

SBA is not impecunious.

The SBA began its new fiscal year October 1st with a $27 billion authorization for the SBA 7(a) loan program.  This comes after another record year for SBA 7(a) loans with SBA 7(a) loan approvals hitting just over $23 billion.

The 2017 Budget continues upfront fee waivers on 7(a) loans up to $150 thousand and provides a 50 percent fee waiver on 7(a) loans up to $500 thousand to veteran-owned businesses.

That means there should be plenty of money for SBA borrowers to buy real estate, refinance real estate, buy businesses, start businesses, refinance business debt and obtain working capital.

Last week, the House on Wednesday approved a bill to fund the federal government through December 9, averting a costly shutdown two days ahead of the deadline.   The trichotillomania was enervated.

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Indices:

PRIME RATE= 3.50%

SBA LIBOR Base Rate September 2016 =3.52%

SBA Fixed Base Rate September 2016 = 4.85%

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SBA 504 Loan Debenture Rate for September  

The debenture rate is only 2.03% but note rate is 2.066% and the effective yield is 4.082%.

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AHEAD OF THE YIELD CURVE 

You should not have any trichotillomania over interest rates.

At its last meeting on interest rates, the Federal Reserve kept its benchmark rate at a historically low 0.4%, where it has stood since officials raised it last December for the first time in nearly a decade.  In their statement, they said “Near-term risks to the economic outlook appear roughly balanced,” its first such positive assessment this year. A similar appraisal last year was followed by a rate increase at the next meeting.

After the meeting, short-term Treasury yields rose but long-term yields fell.  A so-called flattening yield curve—describing the shape of Treasury yields moving from short-term to long-term notes—tends to occur when fixed-income investors are betting that the Fed is about to hike rates, which can lead to selling of short-term notes, the most influenced by changes in the federal-funds rate, and purchasing of longer-dated Treasuries. 

Longer term Treasuries, such as the 30 year Treasury note, are the most sensitive to long-term growth and inflation expectations. 

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

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

2016- 2.32

What does all this mean?

I don’t know.

Last month’s auction of new 30-year Treasuries saw weak demand with the yield on the 30-year note advancing 7.3 basis points to 2.469%.  Since then the long bond’s yield has dropped to 2.32%

Impecunious concerns will motivate the Federal Reserve but they might festinate as they don’t want to be oppugned and enervate the economy.  There just might be a recrudescence hortatory with splenetic presentiment amongst ultracrepidarians after Friday’s report on jobs for the month of September.

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OFF BASE

Impecunious?  Festinate?  Oppugn?  Enervate?  Recrudescence?  Hortatory?  Splenetic?  Presentiment?  Ultracredpidarians?  If you are now feeling trichotillomanical, a three day weekend approaches!

Here are the officially recognized Federal Reserve holidays:

Columbus Day October 10

Veterans Day November 11

Thanksgiving Day November 24

Christmas Day December 26 

The SBA and Pangloss

Pangloss

PAN-glos

noun: One who is optimistic regardless of the circumstances.

adjective: Blindly or unreasonably optimistic.

After Dr. Pangloss, a philosopher and tutor in Voltaire's 1759 satire Candide. Pangloss believes that, in spite of what happens -- shipwreck, earthquake, hanging, flogging, and more -- "All is for the best in the best of all possible worlds." The name is coined from Greek panglossia (talkativeness).

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TIP OF THE WEEK 

A Pangloss appetite drives the restaurant industry.

Although same-store sales and customer traffic levels remain somewhat uneven, the National Restaurant Association's Restaurant Performance Index (RPI) registered a modest increase in July.

The PRI is a monthly composite index that tracks the health of and the outlook for the U.S. restaurant industry. Launched in 2002, the RPI is released on the last business day of each month.  The RPI consists of two components – the Current Situation Index (measuring current trends) and the Expectations Index (measuring restaurant operators' six-month outlook) – and tracks the health of and outlook for the U.S. restaurant industry.  Although sales and traffic results softened in recent months, restaurant operators continued to report positive capital spending activity.

Restaurants are the largest recipient of SBA financial assistance based upon SBA loan volume data sorted by NAICS codes.

If you would like a copy of the latest National Restaurant Association's Restaurant Performance Index report, let me know.

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Indices:

PRIME RATE= 3.50%

SBA LIBOR Base Rate September 2016 =3.52%

SBA Fixed Base Rate September 2016 = 4.85%

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SBA 504 Loan Debenture Rate for September  

The debenture rate is only 2.03% but note rate is 2.066% and the effective yield is 4.082%.

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AHEAD OF THE YIELD CURVE 

Only a Pangloss would want to raise interest rates right now.

The Federal Reserve’s next meeting on interest rates will end on September 21^st, the last day of summer.

The $13.6 trillion Treasuries market is sending a signal it hasn’t flashed in years.  Last week’s auction of $12 billion in new 30-year Treasuries saw weak demand.   The yield on the 30-year note advanced 7.3 basis points to 2.469%.  Low end-investor interest meant that dealers had to step in and take down a large 37.5 percent of the $12 billion offered, their biggest share since August last year. The high yield awarded was 20 basis points higher than in the previous auction and matched the highest rate since May.  The extra yield that investors demand to own 30-year rather than five-year obligations, a measure of the yield curve, rose for almost two straight weeks.  That’s the longest streak since 2012. 

A Fed on hold is seen as potentially stoking inflation, which erodes the value of long-term debt. Futures signal barely a one-in-five chance that the Fed will tighten policy this month amid tepid economic growth and restrained inflation.

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:

DEC16- 0.93

DEC17- 1,09

DEC18- 1.23

DEC19- 1.39

DEC20- 1.57

DEC22- 1.931

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.

Impecunious concerns will motivate the Federal Reserve.  They don’t want to enervate the economy. 

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OFF BASE

Did you ever wonder why Oktoberfest occurs in September and not October? 

It goes back to when the Pangloss prince of Bavaria, Ludwig married a princess back in 1810.  The citizens of Munich were invited to attend the festivities held on the fields in front of the city gates to celebrate the royal event.  Everyone had such a good time that the decision to repeat the celebrations in 1811 launched what is now the annual Oktoberfest tradition.

Ludwig would go to become king.  Not understanding anything about his people, Ludwig decreed a tax on beer.  Splenetic presentiment erupted into the beer riots of Bavaria.  Crowds of urban workers beat up police while the Bavarian army showed reluctance to get involved. Civil order was restored only after the King decreed a ten percent reduction in the price of beer.  Friedrich Engels was so appalled that he wrote about it in the Northern Star newspaper and then co-authored the Communist Manifesto with Karl Marx.

The first day of fall is September 22, 2016.  The September equinox marks the moment the Sun crosses the celestial equator – the imaginary line in the sky above the Earth’s equator – from north to south.  The length of day and night is nearly equal but then the days will continue to be shorter and shorter and night will be longer and longer until we plunge into almost eternal darkness.  Eventually the days will then start to get longer again giving the Pangloss in all of us something to look forward to.