Exxon Mobil (NYSE: XOM) and UPS (NYSE: UPS) were among the companies that reported mixed earnings results on Tuesday.

A deeper look into Apple's (Nasdaq: AAPL) monster first-quarter earnings.

There's a simple way to DECREASE your tax bill, INCREASE your gains AND do so without added complexity or volatility in your portfolio.

Are oil operations in Iraq safe in the absence of a U.S. military presence?

Are you familiar with Warren Buffett's recent diatribes against gold, specifically this quote which compares gold to other assets...?

With the U.S. Treasury having its credit rating slashed, Treasury Bonds aren't the low-risk investment they once were. Here are four dividend stocks that are safer, and more profitable, investments.

I don't know when I'll sell my gold for sure, but I know what I'll be looking to buy when I do.

Here’s one bit of good news amid all the talk of European debt fears and high unemployment rates: The U.S. is about to regain its status as the world’s top oil producer.

I'm putting in a Good-til-Cancelled bid at $155 a share on this precious metal ETF.

For income-deprived investors, the oil and gas sector is a great place to search for dividend stocks.

I look at the entire global market for everything, and in doing so it becomes perfectly clear that no other market looks as promising or potentially profitable as the commodity market.

"If you want to buy some boring stocks paying low dividends, just buy a bunch of oil companies."

Before I tell you about the exciting stock story, I have to mention something unusual. As you know, I eat, sleep and breathe commodity investments.

And until recently, I mainly bought gold and silver, as well as regular old commodity stocks like Exxon-Mobil (NYSE: XOM) and Barrick Gold (NYSE: ABX).

But a few weeks ago my co-worker Andy convinced me to do something I've never done before.

The market was slammed yet another time yesterday. Although unlike Thursday and Friday, the indices recovered into the close.

Once again financials led the charge lower and the big banks like JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C) were down 3%. Energy and technology components were also hurt and stocks like Microsoft (NASDAQ:MSFT) and IBM (NYSE:IBM) were down 1% and Exxon Mobil (NYSE:XOM), Apache (NYSE:APA), Continental Resources (NYSE:CLR), which we're short, and Halliburton (NYSE:HAL) were down 2%.

The market rose again yesterday in somewhat of a rocky session, but a gain nonetheless. Volume was once again high as the market recaptured 1155 support and challenged 1175 resistance.

Today we find out just how real the bulls are; because buyers will be up against 1175 resistance and have to overcome the news from Apple yesterday. The 1175 area was a strong support zone last fall and prevented the bears from taking stocks lower in November as troubles brewed across the pond in Europe.

The 1175 support level was not tested again until this month, and if the bulls are not careful 1175 could turn into a strong resistance zone.

In the near term I would expect the market to pull back as it hits 1175, but eventually it should mosey its way higher and up to 1197 resistance.

In 2002, the United States Geological Survey (USGS), America's authority on natural gas, (among other stuff you need to dig up, drill, mine or quarry), released a report saying that the Marcellus Shale of New York and Pennsylvania then had 2 trillion cubic feet of natural gas.

Then in July of 2011, the Department of Energy (DOE) upgraded that estimate to more than 400 trillion cubic feet.

But yesterday, the USGS revised its initial estimate up to 84 trillion feet - or down to 84 trillion feet, depending on which estimate you were looking at.

The market soared higher for a third straight session on Monday. Volume was once again above average as stocks, led by financials and energy, blasted higher by nearly 2%.

Big banks like BAC (up 7%), WFC (up 4%) and C (up 4%) led their index higher. And mega oil and gas companies like XOM, CVX and CHK closed 3% higher to lead the energy industry.

More important than the 2% climb from the indices was that SPX made its second attempt to take out 1197 resistance. In fact, in the final few minutes, the SPX blasted-off to session highs and closed above 1200.

But the index will need to post consecutive closes above 1197 for the bulls to claim victory and consider it a support zone. And it doesn't appear as though that will be an easy feat.

I borrowed the title of today's issue from the Daniel Day Lewis movie of the same name - based on the Upton Sinclair novel, "Oil!"

The novel detailed the oil boom of early 20th Century Southern California.

Today I'm not going to talk much about oil, but the title of the movie is appropriate enough for the markets right now.

Because you could have cut the tension in the markets yesterday with a chainsaw.

If you didn't crack and dump all your stocks as some folks appeared to do, I say congratulations: you passed the first of what will likely be some very trying tests in the markets over the coming months.

Natural gas is so laughably cheap right now and yet most investors are completely clueless about it.

How cheap is it?

Well, right now a barrel of oil costs about $95.

For the equivalent amount of energy, you'll pay just $24 for natural gas.

On an inflation-adjusted basis, oil has NEVER been as cheap as $24 a barrel. Obviously, natural gas is an inferior fuel, but on an energy-to-energy basis, it's almost impossible to find an instance in modern history when fuel was this cheap.

I've said it before, but the debt ceiling is a red herring. The United States will default on its debts for the simple reason that they are too high to get rid of in any other way.

Whether it's an outright default for bond holders or the more likely default of inflationary policy, we'll see the US default on its debt, and all of the terrible things the politicians on either side of the aisle threaten us with will come to pass - regardless of what bill is passed or how high the debt ceiling gets raised.

The problem is that we're talking about an abstraction. The dollar does not exist. It's an idea. There's nothing backing it except for some guns and some printing presses.

Today I'm cooped up in an Alexandria, Virginia hotel room while my wife attends a National Association of Drug Court Professionals conference.

If you're not familiar with drug courts, and how they can save our criminal justice system huge amounts of money every year, you should read this brief article in the Economist about how drug courts keep drug addicted Veterans out of prison - by keeping them clean and sober.

I won't ruin the ending, but basically these courts seek to help people beat their addictions instead of throwing them in jail where they're not likely to get much of any treatment - and their rate of drug abuse is likely to increase. A novel approach...

Yesterday, Federal Reserve Chairman Ben Bernanke announced the potential for a third round of quantitative easing only IF economic conditions continue to decline in the United States. He predicted that “inflation will subside as the effects of past energy and other commodity price increases dissipate”.

The Obama administration decided shortly after Bernanke's press conference that they were not willing to wait for an official third round of easing (QE3). So, in a press release this morning  the International Energy Agency (IEA) announced it would release 60 million barrels of oil from global reserves. Over half of the oil released would come from the U.S. Strategic Petroleum Reserve.

The Strategic Petroleum Reserve is located in a man-made underground salt domes in Louisiana and Texas. The U.S. holds 727 million barrels of oil in the reserves which is enough to cover 85 days worth of U.S. oil imports. The U.S. would release the equivalent of 5 percent of its reserves to the market.

The decision sparked controversy between the Republicans and Democrats. Republicans called the Obama administration’s plan to release the oil a political move, while Democrats said the effort to ease shortages may be too little, too late.

On a global scale, this is the third time that the IEA has released strategic oil reserves. The last time was shortly after the Hurricane Katrina.

Crude oil prices and shares of oil companies plunged after the news was reported. Brent crude oil fell more than $6 to $107 per barrel of oil. Shares of Exxon (NYSE: XOM) and Chevron (NYSE: CVX) were all down 3 percent in mid-morning trading. The Dow was down 200 points, but has pared some of its losses since the announcement.

The timing of the IEA move comes only days ahead of the end of the Federal Reserve’s second quantitative easing program (QE2). In the absence of continued Fed buying of Treasuries, and the liquidity it adds to the financial markets, moving to reduce oil prices will be another helping hand to the U.S. economy. Knocking $20 a barrel off oil prices would reduce America’s annual oil spend by some $150 billion.

The market was hit hard last week. The decline occurred on decent volume and was a direct result of weak economic data. Truth be told, similar data has been tepid for the past few weeks, but the

Today, I’ve invited my esteemed colleague Tyler Laundon to speak out and share his perspective on an emerging investment opportunity in energy. Tyler is the Lead Research Analyst for Small Cap Investor Pro and follows small caps, as well as commodities, on a daily basis.

Thanks Kevin.

Tyler here. Recently the Wall Street Journal reported that Gazprom's 2010 net income surged by 24 percent in 2010.

At 6:00 am this morning I read in the Wall Street Journal that Gazprom's 2010 net income surged by 24 percent in 2010.

This increase didn't come as much of a surprise to me since I've been following the 'Russian Giant' for a while. But for those of you who aren't aware of Gazprom, this headline should make you sit up and think.

That’s because Gazprom is the world's largest supplier of natural gas. Not one of the largest - it is the single biggest natural gas entity on the entire planet. And in 2010 its net profit, not revenues, totaled more than $35 billion.

Investors have done an impressive job of shaking off a litany of negative storylines and jumping back on the bullish trend to higher stock prices. But let's not lose sight of the fact that S&P 500 bounced right where it should have, at 1,250. Today, it is challenging the next resistance/support level, at 1301.

 

The Apple Complex of tech stocks, which I referred to as a measure of investor sentiment, is also rallying. As TradeMaster Daily Stock Alerts' Jason Cimpl told his members this morning:

 

Yesterday's swift turnaround is a constant reminder that buyers still dominate the long term trend. The bulls have been stopped by 1301 resistance this week, but if they take it back, I'm looking for 1335 and then it's off to fresh highs. Today could be a gap and crap scenario, but the bulls have proven their ability to fend off negative ambiance and move the indices higher.

So when I say that you should make a list of stocks to buy, I’m not saying you should jump into the market and buy them just because they’re down a few points. I’m saying you should name your price, have the capital ready, and jump on the opportunity IF it comes.

And if this correction is even half as big as I expect it to be, just about every boat will get sunk as the tide recedes.

Even big, blue chip stocks that every investor should own will get hammered.

Last year, Exxon-Mobil (NYSE: XOM) shares sold for less than $60 – even cheaper than they were during the depths of the 2008-2009 bear market – briefly selling for less than 10 times earnings.

That’s the kind of company that should be on your shopping list at that kind of price.

The point is that it’s tough to get excited about buying stocks on a fundamental basis when they’re much more expensive than they were a year or two ago. With unemployment near multi-decade highs, the price of nearly every commodity on the rise, and a concerted effort to devalue the dollar, the American consumer is getting pinched on all sides. It’s only a matter of if, not when, stocks will correct.

We know that when the broad market falls, many other un-related sectors get creamed as well. Junior gold mining stocks, for instance, typically fall dramatically when the broad market dips.

That’s because many investors pull their riskiest capital out the market soonest. They’ll let the money ride on blue chips, but not on risky micro-cap resource companies.

If Exxon Mobil (NYSE: XOM) catches a cold, you can bet that tiny oil exploration companies will get pneumonia and some will die.

Michael Porter is one of the world's leading authorities on the subjects of corporate strategy and the competitiveness of nations. His books and case studies form the foundation for many business school curriculums. As a Harvard Business School professor he has helped many CEO's position their companies for success.

Right now I believe you have the opportunity to make multiples on your original investment by buying micro-cap oil and gas exploration companies.

Given the market's recent strength I realize I may sound like a market cheerleader - but I'm not. I believe there are huge opportunities in emerging markets for companies, and investors, that have the chutzspah to go after remote oil and gas reserves.

Today there are two huge trends that are about to benefit one small sector more than any other.

First I’ll tell you the trends so you can connect the dots - and I’ll give you one way to invest.

The first trend is somewhat well-known. It goes like this: when interest rates in the United States begin to rise, the Japanese stock market tends to outperform.

You can see this trend in action in the somewhat complicated table below:

In my travels as a daily newsletter editor, I listen, read, watch and seek out a variety of news sources both ordinary and arcane.

Most of the time, I’m simply amazed at the low-caliber quality of reporting in terms of accuracy, tone and general knowledge on the part of the offending reporters.

Usually, the message being relayed is entirely irrelevant, or worse, misleading.

My favorite example is something that I hear some afternoons on National Public Radio’s program “Marketplace.” This program professes to have an “intelligent and sophisticated approach to the subject of business.”

Over the long term it doesn’t matter. The dollar can rise, fall, go to zero - or a billion. It won’t matter. Because the dollar index is really just a mirror, reflecting the dollar’s different exchange rates of a basket of other paper currencies: the Euro, the Japanese Yen, the British Pound, the Canadian Dollar, the Swiss Franc, and the Swedish Krona.

So, it’s entirely possible for all of these currencies to fall in tandem over a long period of time, and although the dollar index would remain flat, the price of gold would rise.

All of these currencies are backed by nothing more than their promises to pay back sovereign debt slower than the rate of inflation.

Europe is already having trouble with this promise, which is why Greece bond rates skyrocketed earlier this year, and it’s why Ireland’s bond rates are soaring today. It’s why Portugal recently threatened to abandon the Euro.

I won’t make the foolish mistake of pushing my personal political views into this letter. My wife calls my ideas crazy, if not offensive and downright unrealistic.

So if my politics elicit disgust and confusion with my own wife, I doubt I’ll have much luck parading them in the pages of the Resource Prospector.

Who you vote for is your business.

But when it comes down to what you should vote for, I have a few things to say on the subject.

I’m talking about the way that we all conduct our personal investment portfolios, as well as the goods and services we buy.

I’ve long believed that these everyday activities are a much more important ongoing vote than any one you cast into a ballot box.

Volatility is good for investors who have patience and a concrete plan to take advantage of it.

At the risk of pointing out the obvious, volatility simply refers to a security's standard deviation of returns - in other words how much variation there is from the average. It's also helpful to consider a securities' volatility relative to the market, and we have a handy metric for this called "beta."

On Yahoo! Finance, for instance, you can find a company's beta by clicking on the "key statistics" tab along the left side of the screen. I've cut and paste some screen-grabs from ExxonMobil (NYSE: XOM) to show you how to find beta.

I'm using Exxon as an example - but you can find almost any company's beta using the same process. (Some companies on foreign exchanges as well as ETFs won't have a beta listed - depending on the stock portal you're using.)

The next payment will go out to shareholders of record as of September 30^th, with the actual check going out on October 15^th. So you still have a few days to pick up shares if you're interested in grabbing the dividend.

As I said, it's a monthly dividend, so if you want to wait for more of a dip, you won't miss out on the income by waiting a few weeks. But with these monthly players, I'd recommend averaging in each month so you collect dividends all the way along. And reinvest those dividends to enjoy the miracle of compounding interest.

I'm still bullish on this stock. The reasons are the same they were six months ago - the downside for a company like this one is somewhat limited when natural gas prices are this low.

If you haven't already, I advise pouring yourself a strong cup of coffee to make it through today's letter.

That's because I'm going to, as briefly as possible, discuss a concept that's somewhat boring.

But it's vital to understand this concept if you hope to have any success with your investments. Understanding this concept will lead you down the road to asking the right questions about where, when and how you invest. It will give you a crystal clear understanding of the difference between investing and speculation.

It won't guarantee success by any mean, but it will put you on the right path.

I remain super bullish on gold - I just bought some more last week. Yesterday I talked about how to buy gold and silver, and how to make sure you don't get ripped off.

I also remain totally engrossed with the price movement of several major commodities, the most important being oil. I've talked recently about the all-encompassing importance of oil with regard to every single investment and asset class. If you don't know how oil supply and price affects every single one of your investments, then you might not be in a good position.

Unfortunately, I also have a good amount of cash on hand. I say 'unfortunately' because like many investors, I feel like I've fallen into the trap of being fearfully inactive. I have little faith in the broad stock market, but I do like some companies in the commodity sector. I've talked at length about owning Exxon (NYSE: XOM), Archer Daniels Midland (NYSE: ADM), and a handful of others. I like companies like Exxon and ADM because they will survive a currency crisis. They have pricing power, they have international reach, and they have products that everyone needs.

There's a lot of buzz in the oil markets these days, and while we've been kind of lulled into complacency with oil in the $75-$80/barrel range, this situation won't last forever.

It might not even last for long, and right now there's a unique opportunity to buy a highly specialized mid-cap oil company. I'll get to this company in a bit...

In the meantime, the United States currently has one of the largest stockpiles of oil it's ever had, with over 1.13 billion barrels of petroleum inventory - or about 60 days worth of supply at current rates of consumption.

The news immediately caused oil futures to dip - briefly below $75 a barrel.

That'sabout the average price for 2010, year to date:

Yesterday I discussed the overwhelming importance of oil and its implications for your investments.

My most important advice in yesterday's issue was buried down at the bottom, so you might have missed it. Here it is to recap:

"if I can leave you with one thing to keep in mind, it's to remember the importance of oil - even for non-commodity investments. You need to look at all of your investments, from stocks even down to bonds and savings accounts, and think about how oil price fluctuations could affect the bottom line of the underlying assets and businesses you're invested in."

I also promised that I would look into some specific oil investments to buy under the assumption that the recession has resumed or is on the horizon.

During a recession, oil prices tend to sag due to decreased demand for oil, which doesn't usually bode well for most types of oil companies.

The parade of positive earnings reports marches on. The number of companies in the S&P 500 that are beating expectations continues to run at a better than 70% clip.

It's interesting how sentiment was so conflicted coming into 2Q earnings season. We discussed at length here in Daily Profit how analysts had lowered estimates and investors appeared to be expecting earnings growth to slow.

At the same time, there were virtually no pre-announcements that earnings would miss. And investors then, like now, were having a hard time getting bullish on the stock market.

Do you own the world's biggest oil company? Of course I'm talking about Exxon (NYSE: XOM) - and odds are if you've invested in a mutual fund or broad index, you do own Exxon.

But what if you could go back in time and buy Exxon in 1996, at under $20 a share?

Nearly 15 years ago, Exxon had yet to merge with Mobil, the largest industrial merger ever.

But they were still a huge company with a long track record of profits.

Buying Exxon Mobil at $20 a share would let you lock in a near-triple at the company's current share price of nearly $60. Okay, so a triple over 15 years isn't going to sail any ships.

Today I want to talk about why I think the next couple weeks will be your last opportunity to buy inexpensive oil stocks this summer, and possibly all year.

The reason? Seasonality. Oil prices tend to hit their yearly highs in the third quarter. That's largely due to increased demand from millions of Americans and Europeans driving more for their summer vacations.

This tendency seems to fly in the face of one of those investor "rules" we've all heard a million times before: past performance does not guarantee future results.

It's a mantra for mutual fund managers, financial advisers and newsletter editors. It has an almost Shakespearean meter to it, and if you say it enough you become numb to opportunities on the basis that all of the information you have is from the past - and therefore, unhelpful when it comes to making decisions about the future.

It finally happened. Yesterday, BP (NYSE:BP) announced that it would suspend its dividend for the remainder of 2010. After that, it will probably depend on how much the oil spill costs as to whether, and at what rate, the dividend is reinstated.

Cost estimates for the spill are rising. One analyst was out with a $63 billion estimate. That’s based on the $7,942 a barrel Exxon paid for clean up and fines for the Valdez spill. To put things in perspective, the Valdez leaked 257,000 barrels of oil. BP’s Gulf of Mexico spill is expected to reach 5.3 million barrels.

BP has annual cash flow around $30 billion. It will also have to lower spending and sell off some assets. And it will hit the bond market to raise cash.

These past two weeks have been incredibly hectic for oil companies.  The biggest oil players all jockeyed for remaining oil scraps - in three separate locations.  I'd be remiss not to mention these oil stories even if there weren't any small cap investment implications - but there are, and I'll get to them in a minute.   

To be brief: 

On March 4, Exxon (NYSE: XOM), Shell (NYSE: RDS) and BP PLC (NYSE: BP) finalized contracts with the Iraqi government to start bringing oil to market from Iraq's massive Rumaila oil fields - the world's third largest. The deal is worth a total of nearly $5 billion per year for these three companies alone.   

Then on March 11 (last Thursday), British oil giant BP completed a deal that will give the company access to some of Brazil's massive offshore oil fields.  These fields were discovered in 2007, and represent some 5 billion to 8 billion barrels of oil. That’s a boatload of oil. In fact, it's the biggest oil discovery in the western hemisphere since 1976. And combined with the growth in Colombia’s oil industry over the last decade, the Brazilian oil fields help to solidify Latin America as a major global player for the indefinite future.   

Stocks were poised to open lower today and but for a brief few minutes in early trade they generally lived up to the prediction. The Dow shaved 34 points to close at 8,439. The S&P 500 sank 1.5 points to 919, while the Nasdaq closed up 9 points to end the day at 1,838.

Stocks in the Russell 2000 Index, a composite of the 2,000 largest small-cap stocks, bucked the downward trend for the index to close at 513, up 0.78%.

While there was good news about a very modest increase in spending rates, investors seemed most concerned about the boost to the U.S. savings rate to 6.9 percent, up from 5.6 percent in April and significantly up from rates below 1 percent for the period 2005 through 2007. While this could bode well for the longer term economic health of the U.S. economy many analysts see it merely as a side effect to consumer concerns about layoffs, cutbacks, and furloughs.

The increase in the savings rate has come at the expense of consumer spending, which accounts for roughly 70 percent of the U.S. economy. Indeed, many retailers have been battered over the past several quarters as Americans concerned they may receive a pink slip any day shut their wallets to defer spending and switch to lower cost brands for necessities.

Among the stand-outs in retailing are Wal-Mart (NYSE:WMT), Target (NYSE:TGT), and Costco (NYSE:COST). Despite more consumers turning to discount retailers, both WMT and COST have seen year to date share price declines. TGT shares are up nearly 20% for the year.

Despite the modest increase in household spending, retailers are girding for continued earnings pressures as American families prepare for unemployment to reach 10% later this year, up from the current 9.4%.

Leading small-cap gainers today was Zion Oil & Gas (AMEX:ZN) up 76%. Zion runs as a development stage oil and gas exploration firm. Based in Dallas, Texas, the firm holds exploration licenses for onshore development in Israel.

Other small-cap leaders included Cardium Therapeutics (AMEX:CXM) up 48%; Schmitt Industries (Nasdaq:SMIT) up 45%; and Caraco Pharmaceutical Laboratories (AMEX:CPD) up 35%.

Decliners were lead by Design Within Reach (Nasdaq: DWRI), a San Francisco-based furniture store, down 41% after announcing that it expects to delist from the Nasdaq on July 16 with trading ceasing July 6. DWRI has had trouble keeping its share price above $1.00 (a key Nasdaq requirement) for most of 2009 and has indicated that it does not have the working capital to meet the Nasdaq's requirements for staying listed.

Besides DWRI, small-cap price decliners were lead by NewBridge Bancorp (Nasdaq:NBBC) down 37%; Cano Petroleum (AMEX:CFW) down 25%; and Cumulus Media (Nasdaq:CMLS), also down 25%.

Yesterday, the Fed scaled back two of its liquidity-providing programs and announced it would let a third one expire on July 1, 2009.  

Each program was designed to provide liquidity to securities dealers and money-market funds that couldn't raise funds in the capital markets. The Fed noted that none of the programs were used anywhere close to capacity. And the improving economy and loosening of credit markets has made the programs less necessary. 

Investors took this as good news because it suggests the economy and financial system is starting to stand on its own. It's also good news because it shows the Fed is willing to be somewhat proactive in shutting off liquidity.  

To me, this is more important. 

*****In one form or another, the U.S. government has made (read:created) something like $11 trillion available to fight this recession. (I'm not sure anyone knows the exact number.) The government has been widely praised for its response to the financial crisis. Its moves are credited with averting a more serious problem.  

But that's only half the job, and it's the easy half, at that. I expect many of you have seen how a toddler reacts when it's time to give up the pacifier. Kicking and screaming is an understatement. And that's exactly how it will happen when the Fed really starts taking away the liquidity pacifier for good.  

Alan Greenspan never had the stones to give the U.S. economy the tough love it needed. And Wall Street became a spoiled bunch of delinquents.  

Will Bernanke have what it takes to guide the U.S. economy from dependent child to responsible adult? We'll see. And we better hope so, because I suspect the stakes are even higher this time around…  

*****While the U.S. is creating debt to support its economy, China is using its currency surplus to secure raw materials. I mentioned yesterday that China's state-run oil company Sinopec (NYSE:SNP) is trying to acquire an oil exploration company for $7.2 billion. And it wasn't that long ago that China tried to take a $19 billion stake in mining giant Rio Tinto (NYSE:RTP).  

When you're an investor, you have to be worried about opportunity cost. That's the cost of profits that you could have made, if your investment capital wasn't tied up in under-performing or illiquid assets.  

Right now, and probably into the future, the U.S. will be suffering opportunity cost as so much of our resources are tied up in simply supporting our economy. 

*****Case in point: Iraq. Iraq is one the verge of opening the deal-making process for international oil companies to upgrade Iraq's oil fields. This promises to be a very convoluted process - the Kurds and Parliament want input and the current oil minister appears ready to bypass them both.  

All Iraqis realize how important oil, and oil revenue, is to their future, and they're all fighting to get a piece of the action and avoid the exploitive situation that occurred before Saddam Hussein kicked Big Oil out of Iraq. 

For this reason, the proposed development contracts are not guaranteed. There is the risk that a subsequent Iraq government could nullify them and there would be no recourse.  

The risks are high enough that Exxon-Mobil (NYSE:XOM) isn't even sure yet if it will enter the bidding process. But I'll bet you dollars to doughnuts that Sinopec's parent company, China National Petroleum & Chemical Corp. will be bidding.  
Now, obviously, the recession has nothing to do with Exxon's uncertainty. But for China's state-run oil companies, national interests are sometimes more important than profits. And that can be a good thing.

*****Now, here's Jason Cimpl's video analysis of this week's action and look ahead to next week. So far he's batting a thousand. You can view the video HERE or go directly to trademasterstocks.com/videoreport. 

 

Today was options expiration and it made for dull trading. The S&P 500 finished up 2.74 at 921, the Dow Industrials finished down 16.85 at 8,538XXX. The Nasdaq was the strong index, it finished the day up 19.75 at 1,827 on a Goldman Sachs (NYSE:GS) upgrade of Microsoft (Nasdaq:MSFT). 

Oil prices fell below $70. But even better, gasoline futures dropped below $2 after inventory data showed a huge surplus. That suggests prices at the pump may start to head lower.

Large cap oil stocks like Exxon-Mobil (NYSE:XOM) and Chevron (NYSE:CVX) were down in the 1% range, but several micro-cap oil & gas exploration stocks were up. Brigham Exploration (Nasdaq:BEXP) was up 4.36%, Kodiak Oil (AMEX:KOG) was up 7% and Cano Petroleum (AMEX:CFW) was up 3.5%.

The Russell 2000 finished much like its large-cap brethren, with a minimal 3.16 point gain.

Top small cap winners for the day included TerreStar (Nasdaq:TSTR) up 30%, Sealy (NYSE:ZZ) up 20.5% and Smith and Wesson (Nasdaq:SWHC) up 21.9%.

Small cap decliners of note include A-Power Energy (Nasdaq:APWR) down 12%, E*Trade (Nasdaq:ETFC) down 11% and Cost Plus (Nasdaq:CPWM) down 13%.

So now the government is actually going to subsidize car sales with up to $4,500 in incentives for car buyers who get rid of cars that get 18 mpg or less.  

I understand that the auto industry is hurting. And I also get that more efficient cars help reduce our dependence on foreign oil. But is it appropriate to use tax payer dollars to fund auto purchases?  

Perhaps if we were talking about something that is a necessity, like farming, subsidies make some sense. After all, we need farmers. I think we have to consider cars a luxury, or at least a discretionary purchase.  

Not only that, but a car subsidy can only create temporary demand. And given the precipitous drop in car sales (10 million vehicles will be sold this year as opposed to 16 million in 2007), it's highly unlikely any momentum can be created. Not with unemployment on the rise. And not with home values still falling.  

*****Increasing demand based on stimulus spending is a temporary fix. The government is just buying time hoping that the economy will recover. But many of the signs of recovery are based in stimulus spending.  

*****Analysts are now acknowledging that oil has been rallying on a falling dollar and on expectations of price inflation. Of course, the potential for price inflation is, once again, directly related to government stimulus spending.  

The massive amounts of Treasury bonds that have been and will be sold are boosting interest rates and driving the value of the U.S. dollar down. So any asset priced in dollars is rising in price. Like oil. Mind you, that doesn't mean its value is rising, just its price.
 
At some point, higher oil prices will affect the prices of other goods. But as I've noted before, it's likely to be a while before producers are able to raise prices in the current economic environment. Remember, it wasn't until 2007 that inflation really started to become an issue.  

*****Another catalyst for commodity prices in general is supply. Global demand is down, credit has been difficult to get, and miners and producers have not been investing in increasing supply.  

That sets the stage for supply/demand imbalances when economic growth returns.  
We'll be discussing these topics and our bullish outlook for commodity stocks in next Wednesday's Video Conference. It's titled Inflation Busters: Discover the Stocks to Grow and Protect Your Wealth and will air on Wednesday, June 24 at 6 pm. It's free to attend, you can sign up HERE.  

*****Jason Cimpl, technical analyst at TradeMaster Daily Stock Alerts, has his latest video chart analysis ready for you. Last Friday, Jason absolutely nailed this week's trading. I hope you find this week's analysis just as useful. Here's the LINK.