Merry Christmas from the Société Générale

I followed up on a note from Irene:

"Société Générale has advised clients to be ready for a possible ‘global economic collapse’ over the next two years,” reported the UK Telegraph in a recent story...."

Click on the title to read a pdf of the Societies' worst case scenario.  I didn't want to just hand over someone's summary.  It is a 61 page worst case scenario, sure, but I bet you would prefer to know that and plan accordingly. Of note, the bank nearly collapsed recently, taken by surprise, but you saved it through money from AIG.  I suspect they do not want to be surprised again and are providing a warning to customers. 

I don't know how to grab pdfs, so let me repeat what the terrifying front page shows in a red graph.

Worst-case debt scenario

Protecting yourself against economic collapse

(not the central scenario)

2001     $18,000,000,000,000

2003     $23,000,000,000,000

2005     $26,000,000,000,000

2007     $30,000,000,000,000

2009e   $35,000,000,000,000

2011e   $45,000,000,000,000

I wonder what comes after "trillion."

So, upfront, here were the recommendations:

1.  SELL DOLLAR

2.  BUY Government bonds (my recommendation is TIPS)

3.  Cherry pick:  equities and commodities

My take on this for most of us normals is, as I have been concerned with: get out of the dollar.  That is the basic, survival mode.  Part two is to go into TIPS NOW.  Bob recommends this and he is the professional in asset investment.  He also eats muffins every day to mock me.

Does getting out of the dollar mean gold or silver?  To a degree.  If all hell breaks out, gold will likely be confiscated, especially if there will be a new currency.  Since silver is lagging gold anyway, I recommend "junk silver" which is former U.S. currency (I guess it still is).  But this stuff on the coming dip.  Buy several thousand dollars worth if you are normal.  If you have a little money, buy, what 20% of your investment. It will float on the top of inflation and chaos. Also, everyone will know the value of an old silver quarter, unlike that of a candelabra.

Then buy TIPS.  These Treasury notes are in dollars, but they will increase in value to reflect inflation, which is more than likely (except if things are really screwed up and we go into deflation).  Don't think of this as an investment, think of it as a bank account that just may keep its value. Bob thinks these are curiously under priced. Probably, there is too much interest in running with the stock market.  Of course, TIP account will be on big brother's  radar.

Stocks.  Who knows.  If you are interested, you should wait.  Things will collapse eventually.  Right now there may be a dip, there is year end selling and fatigue, but next year, when the interest rates go up, stocks, the theory goes, will collapse along with gold.  Stocks will be good for the long term, but don't start betting on the long term now.  I suggest betting on survival.

Stocks sort of keep up with inflation and will do fine as business picks up, but who knows when that is and what companies are going to do well?

The Society suggest oil is a good protection, but sees the price going down to the 50s as short term demand will fall (they may be planning on global warming.)  At that point, a fat cat, evil capitalist pig company like Mobile would be interesting.  A dividend would be nice.