Protecting your home equity and retirement funds in the middle of a worldwide financial meltdown – are you ready?
Deolinda Francisco
Jul. 14, 2007

There are two large bubbles that will affect our well beings in the next several decades. The first one is already affecting us – the real estate and mortgage refinancing bubble. The second one is M&A and share buy back driven stock market bubble.

The two bubbles have created an unprecedented level of risk for a financial meltdown. It is important to recognize the risks. If the meltdown does not happen, we are all saved. But it is necessary to take some precautions in case that happens.

We need to protect two things that are really important for our well being. First our home and more importantly the home equity that we have worked for all our lives. The second is our retirement funds.

Our home equity is the home value less the outstanding mortgage. Given the fact that the home prices will keep sliding for the next several decades, it is wiser to readjust to lower price home. Otherwise you must pay down the mortgage in an accelerated fashion. You may also start looking at the scenario as if you are partially renting and partially owning. The drop in home price accounts for your rent. Otherwise it will be wiser to shift into a more reasonable house to limit the losses.

The retirement funds must be out of real estate and stock market. You ‘must’ take control of your retirement fund. The retirement funds should be in Treasury bills and notes (short term). If you feel it is not enough of a return, then use the arbitrage commodity hedging method. Buy a commodity future at a bottom, write a well in the money call and buy a protective way out of money put.

Protecting your home equity and retirement funds in the middle of a worldwide financial meltdown – are you ready?
Deolinda Francisco
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