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Cramer: Get Your Portfolio Into the Bunker

NEW YORK ( Real Money) -- Sure, it's rough out there. We hear whispers of a deal, the market goes higher. We hear intransigence, the market goes lower. How in the heck do you immunize yourself against that?

I think one way to do it is to focus on dividends. Let's puzzle through this. First, I don't think the government is going to stop paying interest on U.S. Treasury bonds. I think it will prioritize and do anything to avoid that default. I also think that the Federal Reserve is in a terrific position to buy all of the debt that's issued, because the central bank hasn't declared that it will taper quantitative easing. The Fed could make a killing on this debt, because it doesn't care about the yield. Of course, there will come a time when the government will either have to issue debt or default, but I am hearing this won't happen until the end of the month.

Despite the seeming lack of concern right now about the debt, and given the orderly rise in bonds and decline in yield, it seems like everything's hunky dory. Remember, though, that there are actual owners of debt who aren't going to be as calm. They are going to be furious -- and that's particularly so for foreign debt-holders. The Chinese, for example, are said to own about $1.2 trillion of U.S. debt. Why would you ever own U.S. debt if you thought you weren't going to be paid? That would be insane. So it is likely that they will become sellers.

However, if we don't pay our debt, or if we prioritize and only pay our debt, then the gross domestic product will collapse. So you have this ironic situation. On the one hand, you would want to buy Treasuries because you would have to presume we'd be going into a very serious depression that would cut in favor of U.S. bonds on a flight to safety. Yet you would also have sellers, especially from overseas, because Treasury would be unsafe.

So what the heck could work in that crazy universe? How about stocks with good yields and rising dividends? You have to figure that stocks would get totally clocked on a default, or as we get closer to the default deadline -- or, worse, the day after the deadline. So you are talking about bounce-back candidates.

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Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

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