By Justyn Hudson-Swordy

There is no doubt that we are still feeling the effects of “the 2008 melt down.” While the recession may have ended in the United States, it is anything but over in Europe, creating continuing world economic turmoil. Many investors are still extremely wary of US banks and investment firms because it is nearly impossible to know what actual exposure to European debt is among the domestic banking industry. This has  created a culture of fear that is driving the markets.

In 2008, the investment banks said that CDO’s were safe and that they were properly hedged. However, most investors at the time had never heard of a credit swap default. This is a kind of insurance policy, unregulated and created by AIG.

Another example is Morgan Stanley. That investment house has $30 billion in exposure to French banks alone. These French banks, in turn, could easily go under if the  f inancial crisis

in Greece and Italy is not resolved. If Italy and Greece collapses, their downfall could very likely impact the economies of Ireland, Portugal, and Spain.

Since we don’t know how Morgan Stanley is hedging its investments, we don’t have definitive answers. Hopefully it is through secured collateral. They may, however, be using collateral credit swaps. Sound familiar? Now if Morgan Stanley and other US banks are using CCS’s to hedge bets with European banks, we would be in another bail-out situation. However, before that could happen, the global markets would suffer huge losses. That, in turn, would mean that your 401k, IRA, and stock portfolio would likely suffer losses as a direct result. As if you haven’t lost enough already.

So what can you do to protect yourself? Well, first off you need to hedge yourself. The best way to do this is to move a portion of your investments into products that do not risk your principle. Some examples are CD’s, annuities and treasury bonds.

Unfortunately, these types of investments don’t yield high returns. However, I am sure you agree, it is better to gain a little and have no losses.

The second thing you must do is vote. Any candidate that is in favor of repealing Dodd-Frank has the banks interests as their primary concern and not the interests of people like you. Dodd-Frank is the only safe-guard against letting Wall Street police itself. Wall Street bankers have one misson only and that is make money for themselves and their firms. The notion that they are jobs creators is insane. One could argue they are driven solely by year-end bonuses. If you want protect your future, I suggest you follow my advice.

For more financial information contact Justyn Hudson-Swordy at 954-822-3604 or send email to Justyn@jasbfinancial.com. Mr. Swordy has nearly a decade of experience in financial planning strategies.