Recently several articles and podcasts have been forecasting nothing but gloom and doom for the later part of this year.  Historically markets due worse in the fall, particularly September – October.  There are even investment strategies that are built completely around this theory like the October Strategy.  Here is a quote from Dale Rathgeber of the October Strategy site.

I’m Dale Rathgeber and I’ll explain how subscribers to my investment newsletter, The October Strategy, have earned above average equity mutual fund and ETF returns by following two simple practices.

First, every year, I advise my subscribers to sell their equity mutual funds and Exchange Traded Funds (ETFs) in early September, and then park their money in a safe money market fund for the months of September and October.

Why? Because the stock market is quite predictable in one way: in most years, the stock market (and equity mutual funds and ETFs) fall in September and October. They do so because most of the great Market Crashes throughout history have happened in the month of October, – (1929, 1987, 1999, and 2008 for eg.) – and therefore many investors get skittish, and pull all or much of their money out of the stock-market in September and October, in anticipation of “scary October.” For this reason October (and now September) thereby become negative most years — (because too many sellers flood the market, and prices thereby tend to fall). Summer vacations, for both governments and investors, also mean that bad economic news tends to “fly under the radar”, in the summer, only to be acted upon with sell orders when everyone gets back from vacation in September. Accordingly, we always sell all of our equities just after Labor-Day, and buy back in, in late October.

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The strategy listed above is a yearly ordeal but the coming crisis could be sudden and longer than normal.  A recent post from the Economic Collapse Blog states 25 signs that a collapse is near.

Here are a couple signs that have been noticed recently.

#1) The Conference Board’s Consumer Confidence Index declined sharply to 52.9 in June.  Most economists had expected that the figure for June would be somewhere around 62.  To get an idea of how bad this is, the index was at 100 back during the baseline year of 1985.

#2) Major banks are being instructed to hoard cash in preparation for the next financial crisis.

#3) French bank Societe Generale is forecasting that gold could reach $1,430 an ounce in the third quarter of this year due to fears of a double-dip recession.

#4) Paul Krugman of the New York Times declared in a recent column that we are about to enter “the third depression”.

#5) According to one recent poll, about eight out of every 10 Americans expect the Gulf of Mexico oil spill to damage the U.S. economy and drive up the cost of gas and food.

Read the entire list

In the Disciplined Investor podcast 165 Andrew interviewed Harry Dent who has been very accurate in predicting the boom from the 1990′s into the 2000′s and the collapse of 2007/2008.  He claims that certain indicators paint a very bleak picture for the end of this year.

I’m not trying to spread the pessimism porn but the public should be made aware of these signs so they can protect their wealth in these uncertain times.

For sometime now the media has been obsessed with the Greek debt problems and the protests over the government’s proposed austerity measures.  This news has affected stock markets around the world on fear the Greek’s will default on their debt causing a wave of sovereign debt issues.  We need to keep in mind that Greece has the world’s 28th largest GDP with a population of almost 11 million.  In the grand scheme of things this really does not mean much.  So what if they default.  They cooked their books in order to join the EU and boast one of the youngest retirement ages in Europe.  Much of the anger over the government’s austerity measures was the change in retirement age from 61 to 63.  There are articles that state you can retire even earlier than 61 under certain circumstance.

One of the major issues Eurozone countries face is once they get into debt they can no longer rely on their own central banks to bail them out (basically printing money).  Long term this is good since creating money out of thin air leads to inflation.  This will also ensure governments are more fiscally responsible knowing full well they may not receive a bail out from other countries.  Think as an investor how you feel if you held German bonds which carry a much lower interest because of their good financial situation vs the investor the holds the Greek bonds which have a much higher return due to their risk.  If Greece defaulted on their debt the investor would lose everything and the German bond holder would be safe.  Now instead of being rewarded  for holding safe investments the German bond holder now gets to watch as the Greek bond holders are bailed out ensuring  their risky investment do not fail.  Why would anyone want the low paying German bonds if they know the EU will just bail out the countries with high interest, high risk bonds.

What we should be paying attention too is the fact that California is bankrupt.  With a population of 36 million and a GDP of 1.84 trillion California is the world’s 8th largest economies.  This is five times larger than Greece and nobody really seems to care or even notice it’s going down the drain.  The one advantage California does have over Greece is the US Federal Reserve.  When California needs a bail out the Fed will provide plenty of money to the US government to hand out to the state.  This will just lead to inflation and larger federal debt which the taxpayer is on the hook for anyways.  Back in 2008 California began warning the federal government about its debt problems.  Funny to see that this does not get much media play even though this is a larger larger issue than Greece.

List of Countries by GDP

California Debt More Riskier Than  Kazakhstan’s

The US government is spending money like a drunken sailor.  No offence to any sailor’s.

President Obama’s fiscal 2011 budget will generate nearly $10 trillion in cumulative budget deficits over the next 10 years, $1.2 trillion more than the administration projected, and raise the federal debt to 90 percent of the nation’s economic output by 2020, the Congressional Budget Office reported Thursday.

In its 2011 budget, which the White House Office of Management and Budget (OMB) released Feb. 1, the administration projected a 10-year deficit total of $8.53 trillion. After looking it over, CBO said in its final analysis, released Thursday, that the president’s budget would generate a combined $9.75 trillion in deficits over the next decade.

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Here is a widget showing the National Debt clock ticking away.

I hold Gerald Celente in high regard and have become a fan of his predictions and his true, honest opinion on current events and future trends. Recently he spoke to Russia Today on what to expect in the markets going forward. They touch on the recent wave of surprise earnings and how it revolves around production cuts and staff reduction. This is not the formula for GDP growth even though large corporations will continue to make money by keeping prices high and reducing the workforce. Even though I am bearish on the North American stock markets for the near future I am a bit shocked by the October performance of the major indexes. Historically the month of October is generally a down month compared to the rest of the year. I encourage you to watch this 5 minute video which uncovers news outside of mainstream media.