"Program Trading is a Science" Quarterly Investment Review and Outlook – April 2007 By Abner, Herrman & Brock Asset Management Each year brings new unexpected events that test the strength of the U.S. economy. Events such as 9/11, the War in Iraq, hurricane Katrina, and the difficulties in the sub prime mortgage market have impacted the financial markets. As each of these events occurred they were met with a chorus of forecasters predicting each would derail the growth of the U.S. economy. The U.S. service economy is less cyclical, more stable and possesses strong underlying growth characteristics. Beyond this economic restructuring, the U.S. participates in the expansion of the global economy. These factors have been instrumental in maintaining above average growth for the U.S. Productivity gains have kept inflation at low levels which in turn has helped keep interest rates low. Low interest rates have enabled businesses to expand and consumers to continue purchasing durable and household goods. Over the past several years, technology has provided more transparency and faster access to information which has created systems to enable securities transactions to be achieved more quickly. In the process the cost of transactions has been reduced. The combination of these factors has provided the ability to develop computer programs to trade securities on a short-term basis. The term for these activities is commonly referred to as “Program Trading”. Today, program trading accounts for approximately 30% of all the trades on the New York Stock Exchange. This is almost five times the amount of trades that were associated with these activities just ten years ago Rather than investing for the short run only, we spend our time researching industries and companies to uncover value and monitor the investments on a regular basis. More and more high net worth individuals and small institutions have turned to us to create customized equity, balanced, and bond portfolios designed to maximize growth and income for the long haul. We are optimistic for the future long term growth of the U.S. and global economies and the stock and bond markets. We do believe that inflation will remain low as will interest rates, which will help increase economic growth. We believe large capitalization U.S. equities are attractively priced when compared to small and medium sized U.S. equities. As the small and medium sized U.S. equities and international securities have rebounded from their sharp decline of 2000 it has left the large capitalization U.S. equities, now offering the best risk/return opportunities. As with all forms of investment, risk and return are closely linked. The higher the potential return the greater the risk and volatility. Nevertheless, investment grade stocks and bonds have provided higher risk adjusted rates of long term after tax returns then what the experience has been in small and medium capitalization equities. Abner, Herrman & Brock Asset Management Founded in 1981, Abner, Herrman & Brock Asset Management manages portfolios individually structured to assist each client in achieving their investment objectives. Stock portfolios are managed utilizing a Core Equity philosophy, investing in both large capitalization value and growth disciplines with an objective of long-term, after-tax appreciation and below market volatility. Portfolios are diversified across economic sectors, industries and companies. Bond portfolios are managed to provide a high rate of current income. Portfolios are invested in staggered maturities of U.S. Treasury, government agency and investment-grade corporate bonds and where appropriate, investment-grade municipal bonds. Portfolio managers are available to meet with clients upon request. For a free portfolio evaluation, please visit their web site at www.ahbi.com or call them directly @ 201-484-2000 for a personal discussion on Investment Philosophy, Process and People.