Stories about debt downgrades and sovereign-debt defaults are dominating the headlines.
And it's no longer just Europe that we have to be worried about. On Friday, Standard and Poor's warned that there was a 50-50 chance that the United States would lose its AAA debt rating in the next 90 days - even if the debt ceiling didn't result in a U.S. default.
When you get right down to it, we're all asking the same urgent question: Just where the hell can I go for a really safe investment?
Fortunately, I have an answer for you.
S&P put us on notice back in April, when the ratings agency affirmed the country's AAA/A-1+ sovereign credit ratings - but also cut its outlook on the United States' long-term debt rating from "stable" to "negative." The last time that happened to the United States was 70 years ago - right after the attack on Pearl Harbor.
What S&P is talking about now, though, is a reduction of the country's actual credit rating. For years, investors throughout the world have viewed U.S. government debt as the "safe haven" of last resort.
With a cut in the country's credit rating, those days would be over.
If you're searching for alternatives to U.S. debt, the good news is that Standard & Poor's has granted 18 other countries that top AAA credit rating. The bad news is that the selection isn't as luxuriant as it first appears.
It's important to separate the prospects from the suspects.
[mm-toolbar]For example, S&P granted the Isle of Man that top AAA rating. Unlike many folks, I have actually been to the Isle of Man - my first wife won a weekend vacation there in a magazine promotion. Although it's a lovely spot and affords wildlife watchers lots of interesting opportunities, I can report that the cold, rain-swept resort has very little economy - other than a casino full of Liverpool grannies with accents incomprehensible to an outsider.
Casinos are supposed to be highly lucrative, but when you think of the Isle of Man casino, don't think of Macao or Las Vegas. Picture instead the lonely Indian reservation casino in remote Salamanca, NY - host to the occasional half-empty tour bus from Pittsburgh. The Isle of Man has a population of 80,000 - which is much larger than I would have guessed. It also has the world's oldest continuously existing parliament, the Tynwald - which was established way back in 979 AD.
But I still don't think that I'd buy its bonds.
Given the lesson we've learned from our close look at the Isle of Man, I think it's worth taking a quick sovereign-debt safari. This is one trip around the world that won't cost you a dime. Indeed, in an era of spiraling fears about sovereign-debt defaults, it should actually bolster your bottom line.
Let's take a spin through the list of Standard & Poor's AAA-rated countries - in alphabetical order:
So there you have it. As I warned, there's not all that much to choose from - although the choice selections (Canada, Norway, Switzerland and Singapore) all look pretty solid.
As you assemble your safe-haven investments, keep in mind a couple of Asian countries that aren't AAA-rated, but also aren't overly indebted. And they're run by grownups. I'm talking about Taiwan (AA-minus) and South Korea (A).
At a juncture in which sovereign-debt defaults are a very real possibility, it's clear bond safety isn't what it used to be.
Stocks are too volatile, dependable high dividend yields are as rare as hen's teeth, and U.S. Treasury yields are anemic (not to mention the associated growing risk of a cut in the U.S. credit rating).
Most investors are watching as the threat of sovereign debt defaults around the world gut their portfolios. Others have retreated to the sidelines.
But Money Morning's Martin Hutchinson has developed a strategy that combines safety and profits - and that will enable you turn these "negatives" to your advantage. Click here to learn how you, too, can use these techniques to build a lifetime of wealth, safety and security.]
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