Drops in sales tax collections, commercial bank lending activity cause for concern?

Local angle first: today, New York Comptroller Thomas DiNapoli reported that sales tax collections grew at a slower rate on average in 2011 than in 2010, saying that continued caution with respect to the economy is the flavor of the day. In Westchester County, sales tax collections increased just 2% in 2011, marking a sharp contrast compared to 2010, when local sales tax collections increased 6.4%.

Big picture: according to Beata Caranci, Vice President and Deputy Chief Economist for TD Bank, consumer credit, which largely drives consumer spending (and which in turn largely drives economic output) dropped off in the second half of January, signifying the economy may not be as strong as some are perceiving it to be.

Caranci: “…The largest provider of consumer credit is commercial banks. They account for just over half of all private sector credit disbursement. Unfortunately, the weekly tracking of this credit is showing a reversal of fortunes since the economy-wide monthly data was released two weeks ago. Not only did commercial bank lending activity come to an abrupt halt in January, but it practically fell off a cliff…

“Simply put, for those expecting a strong rebound in consumer spending in the first half of the year based on December’s rebound in credit demand and the recent new job hiring activity, think again.”

 

What does Facebook IPO lead really mean for Morgan Stanley?

Let’s get this out of the way first: Facebook will, without a doubt, have the largest-ever debut for an Internet company. It’s going to blow Google out of the water. It’s going to make last year’s launches of Groupon, LinkedIn and Zynga seem like kids’ stuff. And it’s going to make a select group of people very, very rich.

Aside from all that, it also puts Morgan Stanley on very solid footing at the expense of its biggest rival, Goldman Sachs. Let’s phrase it this way: when it is but Feb. 2 and analysts are already declaring that Morgan Stanley will lead all financial institutions as the top underwriter of U.S. IPOs for the whole of 2012 (which would make the title Morgan Stanley’s for the third straight year), that is a big deal.

It’s not even all about the money (although some might beg to differ). Morgan Stanley and the other banks underwriting Facebook’s IPO (which so far include JPMorgan, Goldman, Bank of America Merrill Lynch, Barclays Capital, and Allen & Co.) will likely take a smaller cut – perhaps 1% or 1.5% – than the traditional 5% that goes to the underwriters. The sheer size of the IPO filing (to put it in perspective, if Facebook gets $5B, it will account for roughly 70% of all 2012 global IPO activity, per ThompsonReuters) will make up for the lower percentage, of course. Where Morgan Stanley really wins here is in its reputation, though.

Think about it – over the last 12+ months, Morgan Stanley has been awarded the lead in IPO filings by LinkedIn, Zynga, and now Facebook, giving the company an enviable position in the market for tech IPOs – one that, mind you, was thought to have been cornered by Goldman. And when Morgan Stanley wins, Westchester wins – lest we forget that the investment banker is among the most important tenants and employers in Westchester County.