10 Smart Investments to Hold in Case the U.S. Defaults

The odds that the U.S. will default on its debt on or after Aug. 2 increase each day. Some credit analysts now believe the chances are better than even that insolvency could become a reality. In the event of default, credit rating agencies like Standard & Poor's and Moody's will most likely downgrade the country's credit rating from AAA or Aaa, the highest ratings given to borrowers.

1. Stocks with High Dividends and Cash Balances

AT&T (T), with a yield of 5.7%, will not default on its dividend obligations. Neither will General Electric (GE), which pays a yield of 3.1%. McDonald's not only pays a high dividend, it has bought back billions of dollars of its own shares in the last five years, which has had the effect of lifting the stock price. Each of these firms has significant cash on hand. Each has strong earnings. There are at least a dozen public companies that meet these criteria. None of these have any chance of default or a suspension of their dividend payouts.

2. Gold

3. T-Bills

4. Swiss Francs
The balance sheet of Switzerland is among the best in the world, which is why billions of dollars have already poured into the franc this year. This has sent its value up from $0.95 to $1.25 in a year, and from $1.15 just a month ago. Investors have to worry that the value of the franc could fall if the logjam over the American budget is solved. But once again, the solution to the US debt problem is not a solution to the world's financial and economic difficulties, nor the deficit problems in smaller E.U. nations. As long as those continue, the Swiss franc will remain attractive.

5. Triple-A Corporate Bonds

6. Silver

7. Gold and Silver ETFs

8. Singapore Funds: iShares MSCI Singapore IndexFund (EWS)
Singapore may be one of the safest markets for U.S. investors who want international exposure in the event of trouble with U.S. debt. When we covered the nations with AAA ratings earlier this year, we noticed Singapore had one of the strongest ratings in the world.

9. Canadian Funds
CurrencyShares Canadian Dollar Trust (FXC) is the easiest investment for most U.S. citizens to make into a North American nation. Canada has an economy based upon hard assets, many of which will rise in value with commodities. Mining, minerals, oil and agriculture dominate. Canada is still the top trading partner of the U.S. The nation is also English-speaking for the most part, and its corporate law is very similar to that of America.

10. International Bond Funds
One stand-out international bond fund is the T. Rowe Price International Bond Fund (RPIBX). The average maturity is between 5 and 10 years, so it's not an international money-market fund. Its performance and its holdings could easily make it one of the more focused funds if U.S. investors decide to begin looking for safer opportunity outside U.S. stocks or government debt. It is a $5.6 billion fund with minimal U.S. exposure (4%) and has more than 56% of its weighting tied to the debt of Germany, Japan, the U.K., and France.

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