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A Stinging Loss – And a Reminder Why We Still Don’t Like Financials


Large investment banks and brokerage firms are in the news again, with word that one of the largest suffered a $2 billion loss while trading for its own investment portfolio.

Awesome! (Inject sarcasm here.)

Amid the calls (AGAIN) for new regulations and declarations that banks are too big to fail, there is something that needs to be heard loud and clear.  The hidden truth is that once again, a large brokerage firm was making huge bets and advising customers on their investments.

Awesome! (Inject sarcasm here.)

Here’s the problem – when a large institution trades in the marketplace for its own profit, it sets up the most basic potential conflict of interest for dealing with the investors who are receiving the advice of its brokers.

This is why we became an independent financial advisory firm.  We accomplished this by affiliating with a partner who does not have or maintain an inventory of anything, does not have its own asset management arm, and does not create and sell proprietary products.

Don’t like it?  Thank the industry lobbyists who convinced our elected representatives that it was a bad idea to stop large financial organizations from speculating in exotic securities. Instead, they should simply just give good investment advice to their customers.

It would have been nice to see the banks lend their money to businesses and consumers instead of making wild bets with it.

For all the news last week, the markets COULD have done a lot worse.  In fact, it was interesting to note that the small caps did better than the large caps (see data below).

For the week, the Dow Jones Industrial Average (DJIA) lost 1.67% to 12821, the Standard & Poor’s (S&P) 500 lost 1.15% to 1353, and the Nasdaq Composite Index lost 0.76% to 2934.  The Russell 2000 Index, which tracks the performance of small capitalization stocks, lost 0.22% to finish at 790.

Last week saw a lot of good economic data.  Stronger housing, employment, credit expansion, and consumer confidence reports were all but lost in the news of Greece, France and Spain.

While on the topic, I was in NYC on our Monument Wealth Management quarterly press tour, and all of the questions were very similar, “What do you think about France and Greece?”

My response?

“France is about to prove to the world, again, that an economy that taxes profits and work to fund leisure and laziness does not work.”  I learned that from my parents, by the way.

“As for Greece – This is all of a sudden a surprise? Jeezz — it’s like Ground Hog Day!”

So far, I have not been quoted.

IMPORTANT NOTE: Due to industry regulations, comments are not permitted on this blog. If you would like to contact the author, please email us at info@monumentwm.com.

Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index. The Russell 2000 is an unmanaged index generally comprised of companies with lower price-to-book ratios and lower forecasted growth values.


David B. photo

David B. Armstrong, CFA

President & Co-Founder

Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....

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Please remember that past performance is no guarantee of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Monument Capital Management, LLC [“Monument”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Monument. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. No amount of prior experience or success should be construed that a certain level of results or satisfaction will be achieved if Monument is engaged, or continues to be engaged, to provide investment advisory services. Monument is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice.

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