Commodities & Metals

The Ten Best Investments If The US Defaults

Douglas A. McIntyre

6. Silver

The devil’s metal is attractive as an investment in the case of a government debt default for many of the same reasons that gold is. Additionally, it has the benefit of being the de facto currency on Wall St. in the extreme cases when paper currency can be devalued.  Demand for silver is also high because it has more industrial uses than gold.  Another benefit is that at $40 an ounce, silver is much more within the reach of many who cannot afford gold at $1,600 an ounce. Central banks don’t trade as much in silver as in gold because the market is small. It takes too much bulk weight of silver to add up to real value compared to gold.

7.  Gold & Silver ETFs

Many investors will turn to exchange-traded funds and other exchange-traded products rather than try buying hard gold or hard silver assets. The reason is simple: gold and silver have to be re-certified to be put back into the system. Middlemen take a cut as the metals are bought and sold. The two most common ETF proxies for gold are SPDR Gold Shares (GLD) and iShares Gold Trust (IAU). The SPDR product is highly liquid based on daily share volume and in total dollars traded. If there is a full breakdown in the economy, taking delivery of gold will be nearly impossible. ETFs take away that problem. The iShares Silver Trust (SLV) is by far the top ETF for the metal and it now has a value of more than $12 billion. These ETFs are the easiest way for the public to move in and out of the precious metals. These products also have options that trade actively, allowing investors the ability to make projections for the most extreme cases or for hedging purposes.

8. Singapore Funds: iShares MSCI Singapore Index Fund (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 it was Singapore that had one of the strongest ratings in the world. It is perhaps the most advanced economy of its kind, and this ETF is down less than 3% from its recent highs. This nation was not immune to the recession and would not be immune to future recessions. However, its GDP did recover better than that of almost any other developed nation. The real problem for U.S. investors is that Singapore is small with a population of about 4.7 million and its GDP is only about $292 billion. Amazingly, this ETF is now close to $1.9 billion in market capitalization.

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 that is based upon hard assets, many of which will rise in value with commodities. Mining, minerals, oil and agriculture dominate the economy. 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 close 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 is 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 UK, and France.

Jon Ogg and Douglas A. McIntyre