As the year came to a close, the U.S. Equity Market was unable to gather any significant momentum on the upside in the face of weaker than expected economic news releases and continued concerns about the credit markets and the state of the economy. The full year returns for the indexes are as follows:

                                                    2007 Market Index Performance
                                                    Dow Jones Industrial Average               8.88%
                                                    S&P 500 Index                                    5.49%
                                                    NASDAQ Composite Index                 9.81%
                                                    Lehman Aggregate Bond                      6.63%

A significant segment of the U.S. Equity market is not represented in these well publicized indexes, notably the small company stocks. A representative index for the small company stocks is the Russell 2000 and it is down for the year at -1.57%. International equities did better with the MSCI World Excluding US returning 12.44% while the emerging markets did substantially better.

The U.S. Equity market started with a good showing for the first half of the year, peaking in mid July when the sub prime mortgage problems came to the forefront, causing widespread concerns regarding the depth and magnitude of potential economic problems that might follow. Given these problems and concerns, stocks retreated. This was further exacerbated by the significant use of leverage among larger institutions and hedge funds that had to liquidate some of their more liquid positions to meet redemptions and reduce their risk, causing certain areas of the market to retreat significantly. A crisis of confidence ensued as much of the newly created types of mortgage backed securities lacked transparency and became difficult to price, posing a wider threat to our credit markets and its ultimate impact on the rest of the economy. Even Fed Chairman Ben Bernanke had to take a refresher course from hedge fund managers on the subject.

The Federal Reserve, which had been more concerned with inflation, was forced to reverse course and cut rates twice to try to keep the economy from heading into a recession. There are numerous risks facing the economy as we stand on the eve of the new year. There are concerns about recession risks given the deepening housing recession, the mortgage related credit crisis, higher oil prices and inflation risks. Also, geo-political risks remain ever present as we were reminded recently with the tragic assassination of Benazir Bhutto of Pakistan. She was the country's best hope for democracy.

Despite all of this, our economy has shown resiliency and there are some bright spots. The U.S. job market remains tight and consumer spending has been strong. We have a backdrop of low and decreasing interest rates which is very positive for stocks. Corporate balance sheets are strong with ample cash to withstand a slowdown. The rest of the world's economies are still in growth mode and given our weak dollar, U.S. companies are positioned to continue to participate in this growth, which should also stimulate capital spending. Despite concerns about inflation, it remains low. With regard to the U.S equity market, valuations are attractive. We remain optimistic for the U.S. equity market and foreign equity markets in general. Although the fog hasn't lifted on the sub prime related mess, when it does the U.S. equity market should respond favorably and forcefully.

On behalf of everyone at Ifrah Financial Services, thank you for your trust, confidence and the opportunity to serve you. We wish you a Happy New Year with good health, happiness and prosperity. Should you have any questions, concerns or comments, please always feel free to contact us.