Freedom Lawyers of America

> An important issue for Stock Options Alert has just been posted.
> You can access the issue on the Internet in Acrobat PDF format at
> http://www.stock-options-alert.com/soaspec0729.pdf
> or you can read the issue in its entirety in text format below.
>
> --------------------------------------------------------------------------
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>
> July 29, 2003
>
> The party's over -- consumers are calling it quits!
>
> Sometimes we feel sorry for Wall Street's cheerleaders.
> They're all set to pop the champagne and party at the first
> sign of economic improvement. But consumers aren't
> coming -- and without them, the party is over before it
> starts. It's a bitter slap in the face for the bulls, who are
> left to cry in their bubbly and dream of what might have
> been.
>
> Here's the scoop on why consumers aren't buying what
> the bulls are selling -- and what it means for stock prices ...
>
> * Consumer confidence plummets. The Conference
> Board's Consumer Confidence Index fell 8% to 76.6 in
> July from 83.5 in June. Not only is this way below
> expectations, but it's also the lowest reading in
> four months.
>
> (Chart Not Available in Text Format)
>
> Take a look at this chart -- consumer confidence is sliding
> despite the fact that the major combat in Iraq ended on
> May 2, that we've had no more terrorist attacks, that Uday
> and Qusay are dead -- what are consumers afraid of? In a
> word, the economy!
>
> * Job outlook is grim. Unemployment claims hit a
> nine-year high of 6.4% in June, and has consistently
> remained above the 400,000 threshold, signaling weakness.
> And despite dipping under the 400,000 mark last week, July
> data is always shaky due to seasonal auto-manufacturer
> shutdowns and startups.
>
> Furthermore, the weak job market will continue to weigh
> on consumer confidence for months to come. In fact,
> the consumer confidence report showed consumers are
> concerned about future economic trends. The present-
> conditions index fell to 61.9 from 64.2, while the
> expectations index fell to 86.4 from 96.4.
>
> Plus, the number of consumers anticipating an increase in
> jobs in the next six months dropped to 16.8% from 18.9%.
> Those expecting fewer jobs increased to 19.8%. People
> are terrified they'll lose their jobs as companies ship more
> and more work overseas.
>
> As we told you in last week's issue, computer professionals
> are rapidly being replaced by cheaper employees in India
> and China. According to market researchers at Gartner,
> 500,000 information technology (IT) jobs -- that's 1 out of 20 --
> will be transferred overseas in the next 18 months.
>
> And it's not just IT -- everything from call centers to human
> resources is also being outsourced overseas.
>
> In this kind of job environment, no wonder consumers feel
> nervous. Pessimism reigns, and since consumer spending
> accounts for two-thirds of ALL economic activity in the
> United States, curtailed spending is a massive stumbling
> block for the tripping economy.
>
> * Rising interest rates will crush debt-heavy households!
> The economic doldrums of the past three years have been
> marked by historically low interest rates that fueled rising
> home prices. But now, 30-year fixed-rate mortgages are
> soaring. They rose a fourth consecutive week to hit 5.99%
> on Friday, according to Bankrate.com. And rates are just
> lifting off the launch pad!
>
> With mortgage rates rising, this is slamming the door on
> the housing boom. The Mortgage Bankers Association
> also reported the mortgage applications fell 31% during
> the week ending July 18.
>
> * Bankruptcy looms for more and more consumers. In
> every recession since WWII, the ratio of household debt to
> assets has fallen! But in the most recent official recession,
> the household debt-to-asset ratio rocketed to more than
> 18% in the first quarter of this year. US households are
> not prepared for a rising interest-rate environment, and
> that spells bad news for the economy.
>
> In most recessions, bankruptcy rates fall because people
> tighten their purse strings and stop spending. But during
> this recession, bankruptcy filings have surged to record
> levels, rising 9.5% from last year. Take a look at this chart ...
>
> (Chart Not Available in Text Format)
>
> As interest rates continue to rise, debt-heavy Americans
> are going to feel the pinch. And when they go bankrupt,
> consumer lenders -- banks and loan companies -- will foot
> the bill.
>
> What's more, nearly every company depends on consumers
> in one way or another. If consumers sit on their wallets,
> corporate earnings will head south. Speaking of which ...
>
> * Better-than-expected corporate earnings aren't as sweet
> as they seem! About 65% of the top 500 US companies
> have reported earnings, with 66% beating analyst
> expectations, 22% met expectations and 12% fell short.
> Sounds great, doesn't it? But these earnings increases
> have little to do with top-line growth and more to do with
> cost-cutting efforts and the fact that the dollar is tanking
> against foreign currencies -- boosting the revenues of US
> companies that do business overseas.
>
> Dazzled by these superficially high earnings, analysts
> have jacked up their forecasts for the second half of the
> year. They expect third-quarter earnings to increase
> 13.6% and fourth quarter earnings are expected to rise
> by 21.6%, according to Thomson First Call. It's time for
> a reality check!
>
> The bottom line is that wishful thinking can't fool the
> economy into a recovery, and the indicators we are looking
> at say we have a long way to go before the long-awaited
> upturn. But this disconnect between the market and reality
> is an excellent set-up for profits in options. So stay tuned --
> we'll send more recos your way soon.
>
> Best wishes,
>
> Larry and Martin
>