Heh, the first warning sign… the government only provides data going back to 2006  

 
According to the Government Accountability Office, state governments are already facing pension deficits over $750 billion. And after a little homework, that number looks incredibly conservative. The government has authoritative data back to only the beginning of 2007, not long before the housing bust/credit crisis.

On top of that, many pensions are using outdated models to project earnings. Long story short: People are living longer, dying isn’t as cheap as it used to be, and assuming the Dow will return 10% annually -- well, that’s a shot in the dark these days. (Never before has it been more important to "Buy low and sell high" on a regular basis).

If you are buying longer-term investments like Pepsico (NYSE:PEP) or JP Morgan Chase (NYSE:JPM) you might want to consider "averaging down". Maybe buy some shares on the big sell-off days or in the sell-off seasons like Sept-Oct, January-March months.

Speaking of JP Morgan Chase, according to the Associated Press, JPMorgan Chase & Co.'s chief executive said Monday that while the crisis in the credit markets appears to be three-quarters over, he believes a U.S. recession is just beginning.

"Even if the capital markets crisis resolves, it does not mean that this country will not go into a bad recession," said CEO James Dimon, whose bank saw its first-quarter profit fall by half due to the recent collapse of the U.S. mortgage market. "The recession just started."

The AP report went on to quote Mr. Dimon as saying, "We don't know if it's going to be mild or severe," he continued, speaking at a conference in New York hosted by Swiss bank UBS AG. "We're thinking there's a third of a chance that it's going to be pretty bad ... closer to the 1982 recession than the very mild recessions we had in 2001 and 1990."

Also incomplete is JPMorgan's acquisition of Bear Stearns Cos., the toppling investment bank that JPMorgan offered to buy in March.

"I want to make it perfectly clear: Mission not accomplished," Dimon said. He warned investors that while he still believes the deal was a good decision, "we are bearing an awful lot of risk" by taking on Bear Stearns' assets." 

We don't know if Mr. Dimon is "blowing smoke" or whether he sees more nasty financial surprises on the economic horizon. No wonder the risk factors are considered greater now then the early part of the year 2000 when it comes to the downward potential for the stock market averages and indices.

In this “credit crisis,” the private equity world is drying up… sort of. In the first quarter of 2008, private equity firms raised $164 billion in investment capital -- the second best quarter on record. But actual buyout volume fell to $82 billion worldwide… a 68% crash from the same period last year.
 
So the money is flowing in, but there’s nowhere to put it. Look for the private equity kings to start snatching up smaller businesses and putting that capital to work outside of the U.S.A such as  KHD HUMBOLDT WEDAG INTL LTD (NYSE:KHD) . No wonder I'm interested in the Canadian Resource Stocks like Advantage Energy Income Fund (NYSE:AAV) and Provident Energy (NYSE:PVX).

Other good names outside of the USA, or so we are told, is Toyota Motors (NYS:TM), Anglo American (Nasdaq:AAUK) , and Guangshen Railway Co. Ltd. (NYSE:GSH). Do some research on these companies to see why we think there is potential here, especially when purchased during corrections.