What Retailers Are Saying That Makes Me Believe Economic Growth Is Slowing

Conditions in the U.S. economy are deteriorating fairly quickly. The economic data suggests it’s slowing down. We already saw the U.S. economy decelerate in 2013 compared to 2012; now, investors are asking if this is going to be the case in 2014 as well.

All sorts of businesses in the U.S. economy are worried. This is not a good sign when you are hoping for robust growth.

Homebuilders in the U.S. economy have become very skeptical. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) witnessed a massive drop in February. The index, which looks at the confidence of homebuilders in the U.S. economy, plunged from 56 in the previous month to 46. Any reading below 50 on the HMI means homebuilders expect market conditions to be poor. (Source: “Poor Weather Puts a Damper on Builder Confidence in February,” National Association of Home Builders web site, February 18, 2014.)

Also Read: NYSE holidays 2014

Unfortunately, homebuilders aren’t the only ones who are worried and suggesting the U.S. economy isn’t going in the desired direction.

Retailers with major operations in the U.S. economy are feeling the same. Wal-Mart Stores, Inc. (NYSE: WMT)—one of the largest retailers—lowered its profit guidance for the fiscal fourth quarter, ended on January 31, 2014. The CEO of the company, Charles Holley, said, “We now anticipate that our underlying EPS [earnings per share] for the fourth quarter of fiscal 2014 will be at or slightly below the low end of our range of $1.60 to $1.70.” He added, “For the full year, we expect underlying EPS to be at or slightly below the low end of our range of $5.11 to $5.21.” (Source: “Walmart updates FY14 underlying EPS guidance for fourth quarter and full year,” Wal-Mart Stores, Inc. web site, January 31, 2014.) In other words, the company feels that it will not be earning the same profits as it previously predicted. Wal-Mart’s fourth-quarter results were due out this morning.

We have also heard from other major retailers in the U.S. economy, such as Macy’s, Inc. (NYSE/M), regarding their plans to cut costs by reducing their labor force and closing down their retail outlets.

You see, businesses are good at seeing which direction the U.S. economy is heading because they are closest to the consumers and can tell quickly if the trend changes. If they are worried, it means consumer spending in the U.S. economy—a major portion of the U.S. gross domestic product (GDP)—isn’t as robust.

Looking at the sentiment of businesses in the U.S. economy, I am not convinced in the notion that the economy will grow at a faster pace; to me, it will not be a surprise if the U.S. GDP grows at an even slower rate in 2014 than it did in 2013.

Investors should be looking at what businesses are saying as a sign of caution. It’s also a good time for investors to take some profits off the table if they have any. In addition, if investors are holding a losing position, they may want to consider taking a loss and raising some cash instead.

This article What Retailers Are Saying That Makes Me Believe Economic Growth Is Slowing was originally published at Daily Gains Letter

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Economics Markets

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Snapchat's porn bot problem

  A look at Snapchat's porn bot NEW YORK (CNNMoney) A new type of spam is emerging on popular photo-sharing app Snapchat: porn bots.

Snapchat users are increasingly receiving spam messages with nude photos, according to security researchers at Symantec. The spam messages are automated, but they are designed to look like they are coming from a real person. The nude photos don't appear until a Snapchat user accepts a porn bot as a friend, but that would be an easy mistake for some to make.

The spam messages appear with photo of a nude woman. A caption below asks the recipient to add "her" as a friend on messaging app Kik to receive more nude pictures. If the user follows through with the request, he or she will be prompted to download a mobile application. The mobile applications vary -- many are games. The porn bot then promises more nude pictures in exchange for a screenshot proving the game was installed.

"The idea of using naked pictures or a secret admirer -- that technique has been around forever," said Kevin Haley, director of Symantec's security response team. "How it's going to be used in this particular case is specific to this application, so we're seeing a new twist on an old trick."

Haley says the mobile app developers aren't likely behind the scam. Instead, the perpetrators are the firms the app makers hire to help increase downloads.

"They're getting paid to get users to download this application," Haley speculates. "The vendor of the application doesn't really care how they do it, so they can come up with some creative ways... in essence they fool users or trick them into downloading this application and now the mobile application vendor has a lot of new users."

It's a common tactic, according to Tom Ritte, a researcher at security company iSEC. Though some are aware of the tactics, many app makers don't even know they're partnering with spammers.

"The shady people get a commission for each install they generate, and they turn to spam to do it," he said.

The spam problem is just the latest on a long list of Snapchat's growing pains. The app has come under fire for a security flaw that exposed usernames and phone numbers. Last year, security researchers also found ways for hackers to recover supposedly deleted photos.

But Snapchat usage has exploded. It turned down a reported $3 billion dollar buyout offer from Facebook (FB, Fortune 500).

Apps like Snapchat that quickly grow in popularity! are often in a rush to gain market share without having proper security in place, Haley says.

"Part of their growing pains will be to experience this kind of thing," he said. "Whatever the next application that has a lot of users you're going to have a lot of people trying to figure out how to take advantage."

Leggett & Platt Inc. Dividend Stock Analysis

Linked here is a detailed quantitative analysis of Leggett & Platt Inc. (LEG). Below are some highlights from the above linked analysis:

Company Description: Leggett & Platt Inc. makes a broad line of bedding and furniture components and other home, office and commercial furnishings, as well as products for non-furnishings markets.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

LEG is trading at a discount to only 3.) above. The stock is trading at a 72.5% premium to its calculated fair value of $17.6. LEG did not earn any Stars in this section.

Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

LEG earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. LEG earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1939 and has increased its dividend payments for 42 consecutive years.

Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:

1. NPV MMA Diff.
2. Years to > MMA

The NPV MMA Diff. of the $255 is below the $500 target I look for in a stock that has increased dividends as long as LEG has. The stock's current yield of 3.95% exceeds the 3.68% estimated 20-year average MMA rate.

Memberships and Peers: LEG is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: Hooker Furniture Corp. (HOFT) with a 2.7% yield, Flexsteel Industries Inc. (FLXS) with a 1.8% yield and Ethan Allen Interiors Inc. (ETH) with a 1.6% yield.

Conclusion: LEG did not earn any Stars in the Fair Value section, earned three Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of three Stars. This quantitatively ranks LEG as a 3-Star Hold stock.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $26.04 before LEG's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 42 years of consecutive dividend increases. At that price the stock would yield 4.6%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 3.3%. This dividend growth rate is higher than the 1.7% used in this analysis, thus providing no of safety. LEG has a risk rating of 1.50 which classifies it as a Low risk stock.

In spite of being a highly cyclical company, LEG has a long history of profitability and generating strong free cash flows. Its debt to total capital of 33% provides additional flexibility. The stock's yield makes it appealing to many income investors.

A recovery in the U.S. housing market and LEG's effective cost management will help increase its operating cash flow. Since the company generates more cash than required to fund dividends and capital expenditures, LEG expects to continue its share repurchase program. It has a standing authorization to buy back up to 10 million shares every year.

The stock is trading over 70% above my calculated fair value of $17.60. The low calculated fair value is primarily the result of it anemic dividend growth rate of 1.7%. I will continue to wait for a more favorable time to add to my position.

Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

Full Disclosure: At the time of this writing, I was long in LEG (1.6% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.

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About the author:Dividends4LifeVisit Dividends4Life at:
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Tom Perkins' big idea: The rich should get more votes

HONG KONG (CNNMoney) Tom Perkins suggested Thursday that only taxpayers should have the right to vote -- and that wealthy Americans who pay more in taxes should get more votes.

The venture capitalist offered the unorthodox proposal when asked to name one idea that would "change the world" at a speaking engagement in San Francisco moderated by Fortune's Adam Lashinsky.

"The Tom Perkins system is: You don't get to vote unless you pay a dollar of taxes," Perkins said.

"But what I really think is, it should be like a corporation. You pay a million dollars in taxes, you get a million votes. How's that?"

The audience at the Commonwealth Club reacted with laughter. But Perkins offered no immediate indication that he was joking. Asked offstage if the proposal was serious, Perkins said: "I intended to be outrageous, and it was."

Perkins seemed to be aware that he was courting controversy, saying that his voting proposal would "make you more angry than my letter to the Wall Street Journal."

That letter, published last month, compared the supposed assault on the wealthy to a wave of Nazi attacks on Jews ahead of the Holocaust.

The letter sparked a public firestorm, and the venture capital firm he co-founded -- Kleiner Perkins Caufield & Byers -- distanced itself from his comments. Perkins has since allowed that the comparison went too far, but has not apologized for the overall message and his warning about anti-rich "radicalism."

Related story: The Super Rich are mad as hell - and doing great

  The $350k watch worth 69 Rolexes

The Perkins plan for determining who should be ! allowed to vote is likely to give his critics further ammunition.

For his part, Perkins shows no signs of backing down from his argument that the rich in America are under attack. Perkins said Thursday that the trend has grown since the election of President Obama -- who he described as an "amateur."

Related story: Investor apologizes for Nazi comparison, stands by message

Pressed for examples of how the rich were being demonized, Perkins said that he feared higher taxes.

"The fear is wealth tax, higher taxes, higher death taxes -- just more taxes until there is no more 1%. And that that will creep down to the 5% and then the 10%," he said.