Once upon a time in a far away land lived a community of farmers. They work the land for its fruits and most farmers raised one or two cows and enjoyed the milk they provided. Everybody was happy and generally prosperous. The farms were passed on from generation to generation and life was a long and quiet river…

Within this village, there was a cow merchant who would usually maintain one cow in stock at a time. As you may expect, this was not the busiest shop in town as Jamie the owner, usually sold a few cows a year, buying his supply from old farmers without family and selling the cows to other farmers who lost theirs to disease or old age. Jamie made a good living but nothing out of the ordinary. As a matter of fact, "ORDINARY" pretty much described everyone's life in town.

Within the village, lived a poor young man named Lloyd. Lloyd did not like being poor and most of all he hated anything ordinary. He did not really enjoy working the field and raising cattle, which explains his state of poverty. Lloyd spent most of his days wondering how he could become rich rapidly. He had nothing in his pocket and sadly did not inherit a cow from his late father. One day Lloyd had an idea and requested a meeting with the cow merchant, his friend Jamie. Lloyd had he finally found a way to become rich…

Here is how the meeting went: "Dear Jamie, thanks for taking the time to meet with me, I have an idea which will make us both rich. Today you will sell me your cow. I am ready to pay you $1050, which is $50 more then the going rate for the last ten years." (Cows always sold for $1000, as demand and supply did not really change much over time. "I can't pay you today, so you will have to give me credit" said Lloyd, "but tomorrow you will come to me and I will sell you your cow back for $1100 and pay you with the profit generated. I also promise to buy the same cow back from you at $1150 the following day. By doing this every day, we will become rich." The sky was the limit and future profit was unlimited.

So the following day Simon officially became the second cow merchant in town. The business was good and the going price for cows kept rising every day. Most villagers were really happy with the rise in the price of cows since their own herd value kept going up and that made them feel good and richer as well. Their confidence toward the future began to increase, making them spend more at the general store. The only victims of the new trade were the poor farmers who happen to lose their cows and could not afford to buy another one or the poor for who's dreams of owning cattle was becoming impossible. After one year, cows were valued at $5000, an amazing fact as the demand for milk and the number of cows through birth and death had not changed.

This situation went unchanged until Brian, one of the largest farmers in town, decided that he had enough of this "cow wealth" and wanted real money in the bank. He had many cows in his herd, and put one up for sale asking for $4950 in order to sell it quickly and move forward with his plan to liquidate his horde. Seeing this, Lloyd told Jamie that he was sorry but the later had to drop his price to $4900 or else he would buy Brian's cow. "Ok" said Jamie, knowing that tomorrow, he would get revenge and resell the cow to Simon for $4850 to get his money back. As the price of cattle started to drop, all the villagers joined into the selling trying to capture some of the wealth experienced during the last year. One month later, the market price for a cow was $600, leaving the villagers in a far worse financial position than they were a few years ago. Life wasn't ordinary anymore, it was miserable.

The large brokerage houses, which account for most of the volume in the stock markets, are behaving like Jamie and Lloyd. The stock market volume of transactions is today 30 % to 40% lower than it was 3 years ago and we estimate that 70% of all transactions are computer generated. Today's trade consist of an algorithm in a bank computer selling a stock .001% higher to an algorithm in another bank computer, which in return sells it back to the first computer for an extra .001% and this at nauseam… No wonder the market goes up on low volume days and drops on high volume ones. Most investors enjoy the wealth creation and are convince that they will leave before the music stops.

Today large financial institutions are too powerful to fight. Betting against them or staying on the side line will generate losses or damage your growth especially in these times of stealth inflation. The best thing to do is to play the game and understand that price inflation of securities will not last forever. Use stop losses and focus your investments toward sectors of activities where growth will be present for years to come. We recommend sectors such as agriculture or healthcare and we avoid sector built on hype and leverage such as banks.