Caterpillar's (NYSE: CAT) fourth-quarter earnings were strong. But the future could be even brighter.

Agriculture stocks are one place that I'll be looking for profits in the year ahead.

It has been a rough year for uranium stocks, but demand for the controversial metal is starting to resurface.

I don't want to get overly excited to be a bull here, but for the time being, I think yesterday could be a key swing low.

That wasn’t the first call for the end of the commodities bull market, nor was it the most serious.

We heard it proclaimed that 2008 was the official end of the bull market – no ifs ands or buts.

“Bull Market In Commodities at an End, For Now” – New York Times

The proof? Well, you might recall that gold, oil and nearly every other commodity on the planet was on the receiving end of a huge uptrend until early 2008, when the “bubble” began to deflate a bit. As the New York Times said in October of that year:

“Since July, when prices for many commodities peaked amid fears of a permanent shortage, the prices of wheat and corn - two cereals at the base of the human food chain - have dropped 70 percent. Oil prices have dropped 55 percent. Important metals like aluminum, copper, nickel and platinum have declined more than half.”

Again, I’ll use a chart of gold as a proxy for the “commodity bubble”:

Nearly a month ago, after the last Fed meeting, we started to discuss the likelihood that the U.S. economic recovery was slowing down. After all, the Fed had just lowered its GDP forecast for 2011 and acknowledged that inflation was picking up as a result of QE2.

The S&P 500 was above 1,360 at the time.

Twelve years ago, at the infancy of the current bull market in gold, a small group of folks started buying up gold and gold securities.

They didn’t ring a bell or tell their friends. They probably felt a little foolish doing so. They might have felt a little crazy.

Gold had been in a two-decade bear market.

Today, there’s a commodity that’s commonly used, extremely cheap and arguably in a 50 or 60 year bear market.

It’s a commodity that people probably don’t even think about as very investment-worthy – but it’s completely vital to the modern world. Significantly more important than gold even.

And I’m going to tell you how to invest in three companies involved in this commodity today that should see strong gains in the coming years, as well as solid dividends in the meantime.

Is buying now too early? I can’t say for sure. But what I can say is that a bull market in this commodity is as inevitable as the tides. Perhaps literally so…

The word "inflation" is appearing in the headlines more and more. For emerging markets, inflation is getting a bit scary. China is expected to show 5% inflation for the first two months of the year. That's clearly a big problem for China. And the situation is similar in other emerging economies, like Brazil and India.

Each of these three countries has raised interest rates to fight inflation. They will certainly have to do more. Especially China. China's currency is undervalued, kept that way by an artificially imposed exchange value known as a "peg." China pegs its yuan to the U.S. dollar.

I am very curious to see how investors will react to the possibility that QE2 may be ending. The policy is set to conclude in June, anyway. And I would suspect that the Fed will continue until then, regardless of growth.

The rioting in Egypt has calmed down substantially. The military has stated that it will not fire upon protesters, which would seem to be a tacit vote of no confidence for the Mubarak government.

Not that shooting people is the only way to show support for the government. But the statement by the military seems like a pre-emptive move.

There’s little doubt that the world’s superpowers are now fighting a new war. It’s not a cold one, or a hot one. No tanks, bombs or poison gas. At least not yet.

But open hostility between Europe, Brazil, China, India and the United States blanket the headlines nearly every day.

It’s a long-awaited answer to the question, “Do deficits matter?”

And the answer is a resounding, “Yes of course they do, don’t be silly - why in the world wouldn’t they matter?”

Whenever I write about uranium, I receive a flood of reader mail asking about uranium supply, reactor openings/closings, uranium explorers, different uranium isotopes for fuel, etc.

I rarely get many questions about gold, silver, oil or anything else I write about on a regular basis, but uranium always seems to do it.

So when I wrote about Cameco Corp. (NYSE: CCJ) last week, I knew what I was getting myself into.

Before I answer some specific reader questions, I’d like to explore the reasons why you and I seem to find uranium so compelling. (By the way, if you want to ask me about uranium, or any other commodity you can email me at editorial@resourceprospector.com)

The most obvious reason might be the worst one: the high-flying gains from uranium’s last bull-run are still fresh in our minds. Uranium quadrupled in price between January 2006 and August 2007. Many rather ordinary uranium stocks quadrupled - or more - in the same span of time. Picking a losing uranium stock in that period was really difficult, if not impossible.

Gold is entering a tenth straight year of gains, and if we're going to be honest with ourselves, that trend should give us pause before we add to a position in gold.

But don't sell your gold just yet. According to recent article from Bloomberg, there's still plenty of upside.

From the article:

"Dan Brebner, an analyst at Deutsche Bank in London who is the most accurate forecaster so far this year, says the metal may reach $1,550."

Listen, I just bought some gold a couple weeks ago, and I'll likely buy some more over the coming weeks and months, but I'm looking out over the horizon for the asset to buy today, to benefit from the next decade long uptrend.

I think I've found what I'm looking for.

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.

Right now, I'm bullish on many things - but lead might be the most contrarian commodity I'm bullish on.

That's why it pays to be a commodity investor, because we're still ahead of the crowds; we're contrarian.

Most, if not all investors, are heavily into broad index mutual funds. They've been buying the market, and hoping that it will turn around.

I'll keep my 'hope' for my favorite sports teams (go Philadelphia!), and instead use my brain to find investments that are forward looking. What has worked in the past might again work in the future - but not simply because it worked in the past.

And since we're coming up on 4^th of July weekend, I'm looking for patriotic investments, like lead.

I hope this 6^th of May is finding you in good spirits, and that you’re not experiencing the downside of tequila over-enjoyment. Nothing against Mexican independence, but a foreign national holiday, partly concocted for American consumption by shrewd liquor companies, is not a good enough excuse for me to tie one on in the middle of the week.

And this time of year in Vermont, it’s just too nice out to want to risk ruining the next day with a tequila and sugar borne hangover. (By the way, if you know of a good hangover cure, please send it to me at editorial@resourceprospector.com)

Too much of a good thing is almost always no fun. Likewise, a bumper crop of sugar from Brazil and India is causing some severe consequences for prices.

The average American uses 156 pounds of sugar every year. At current price levels of about 15 cents a pound, that comes to only $23 and change.

The financial media is jumping to the conclusion that recent weakness for stock prices is related to the ongoing Greek bailout saga. But considering that Greece would prefer to have the IMF involved in its bailout plans because emergency loans would be cheaper, I’d suggest we need to look elsewhere for the real cause of the recent mini-sell-off.  

The Indian rate hike is certainly a more likely candidate. Not because India’s economy is driving the global economy, but because this move is another sign that central banks around the world are ending their stimulus policies.   

India’s move comes a full month ahead of the next scheduled central bank meeting. The timing suggests that perhaps inflation is becoming problematic. And it also raises the possibility that India will hike rates again when it meets next month.   

Smallcapinvestor.com sat down with Donald H. Straszheim, vice chairman of Roth Capital, to talk about the outlook for the economy. Straszheim served as chief economist at Merrill Lynch for 12 years and also served as president of the Milken Institute. He is an expert on China and global emerging markets.
 
Q: What is your take on the subject of decoupling? Is the link between world economies — globalization — causing complications for investors who are looking to park their money in appreciating markets?

A: Decoupling is preposterous. Increasingly the economy is becoming global. Market activity is becoming increasingly integrated.

Investors increasingly think and behave globally, not locally. The idea that the economies were decoupled five to 20 years ago makes some sense, but not anymore. The current recession in the United State — I think we’re in a recession now — is the first time economic activity outside China, for example, is going to have a real impact inside China and accordingly on its markets. The decline in the economy now is transmitted more and more around the world and the equity markets are down in most places. China is down 20% from its peak a few months ago, India is down a similar amount, just like here.

Q: What is your outlook for China’s markets?

A: As long as the turmoil continues in the U.S. credit markets, China’s markets will struggle. I cannot imagine China’s market really taking off as long as the credit market questions in America and Europe and in the global financial institutions remain front and center.

Q: The Federal Reserve slashed the fed funds rate by 125 basis points in total in January and 225 basis points since September. Do you think the rate cuts will be meaningful for this credit crunch if banks are more risk averse and more concentrated on cleaning up their balance sheets?

A: The rate cuts will help. They’re part of the repair process. They’re also not over. I think the Fed will keep cutting rates and I think they’ll cut another 50 basis points at the next FOMC meeting — perhaps more than that.

Q: How low do you think the Fed will cut rates?

A: I would not be at all surprised to see 2.5%, maybe even as low as 2%. One of the things that worries me is that we will take rates so low and leave them there too long as I believe we did in the aftermath of 9/11, and the 2001 and 2002 recession.

SmallCapInvestor.com reporter Jennifer Schonberger is reporting from the 20th Roth Capital Partners Annual OC Growth Stock Conference this week in Dana Point, Calif. The conference features presentations from more than 300 small-cap companies.

Selectivity amid lower growth expectations is key in profiting from small-cap stocks in today’s environment, said Jeff Martin, assistant director of research at Roth Capital.

“A small cap to me is about finding growth opportunities,” said Martin, in an interview at the 20th annual Roth OC Growth Stock Conference this week in Dana Point, Calif.  Martin said he considers a growth company as one that has 20% or greater revenue increases. In the current tempered economic environment, however, Martin said he has downwardly revised his expectations for revenue growth to 10% to 15%

“There will be pockets of value within the small-cap universe that fair well,” Martin said. “You’ve got to be selective based on your opinion of the economy and the direction of the economy.”

“You have to ask yourself: does [the company’s] strategy in the intermediate to long term offer a three- to five-year growth rate within that 12% or greater range?” he said. “You start by picking the right sectors: health care, energy, defense … and then you pick the best companies within those sectors.”

Outside of the domestic market, Martin’s favorite growth countries are China and India. Martin says investing in India is only going to become easier as Indian regulatory bodies are looking to enable foreign investment moreso than they were five years ago.

Vietnam is also a spot that some investors are dipping into, according to Martin. He said Vietnam is currently an investment destination for investors looking to play on outsourcing.

“India was a big (outsourcing) trend 10 years ago,” said Martin. “China will be more and more a trend in outsourcing — and not just outsourcing of manufacturing, but outsourcing of services.”

SmallCapInvestor.com reporter Jennifer Schonberger is reporting from the 20th Roth Capital Partners Annual OC Growth Stock Conference this week in Dana Point, Calif. The conference features presentations from more than 300 small-cap companies.

The SENSEX 30, which accounts for the 30 largest companies on the Bombay Stock Exchange, has been soaring since 2003 to a level of just over 20,000 from 5,000 and long-term growth in India doesn’t look to be dwindling.

“We don’t think the growth in India is anywhere near over for a time to come,” said Donald Straszheim, vice chairman of Roth Capital Partners, LLC.

India has the second fastest growing economy compared to China. Over the past five years, India’s GDP has grown at an average rate of 8%. For the 2008 calendar year, real GDP in India is expected to grow at a rate of 8.7%, according to the Indian government.

According to Jeff Feinberg, founder and portfolio manager of JLF Asset Management, LLC., the Indian economy should maintain this level of growth going forward, which should be welcome news for U.S. investors suffering from the latest bouts of the credit crisis that continue to plague U.S. markets.
 
“Given the state of the U.S. economy — how stretched the U.S. consumer is — the U.S. economy will not be there for the next three to five years,” Feinberg said. “What the U.S. economy is currently experiencing is not a short-term six-month phenomenon.”

The panelists made their remarks in a presentation at the 20th annual Roth OC Growth Stock Conference this week in Dana Point, Calif.

While the average domestic company’s growth has been tempered since the height of the U.S. bull market just last October, the average company in India is growing at a rate of 12% to 14%. Roads, ports, power and infrastructure are some of Feinberg’s favorite spaces in India to invest, as India embarks on industrialization. With 6,000 publicly traded companies in India, Feinberg favors the following companies within India — all of which trade on the Bombay stock exchange.

From his ChangeWave newsletter and regular appearances on Fox TV's "Bulls & Bears," Toby Smith is one of the most popular and widely followed investment newsletter advisors. And for growth investors, he has one of the most interesting market strategies – seeking stocks poised to benefit from enduring trends, which he calls "ChangeWaves."

To help isolate these trends, Smith turns to his ChangeWave Alliance, a group of thousands of business leaders in a wide range of fields who respond to ongoing surveys regarding industry trends.

Three such trends, which he considers among his favorite macroeconomic ChangeWaves, are clean energy, carbon credits, and Chindia (China-India) infrastructure. And one of his latest stock recommendations, Fuel Tech Inc. (Nasdaq: FTEK) – with a $600 million market cap – plays into all three of these growth waves.

The advisor explains, “Coal is the fuel of choice for power generation. It's a cheap-and-abundant fuel that produces more than 40% of the world's electricity, including about 75% of China's and more than 50% of U.S. fuel.”

However, Smith adds, “Coal is not the cleanest way to provide energy.” According to the International Energy Agency, he points out, China's carbon dioxide emissions will surpass those from the United States in 2009. Smith says, “The need for China (and the rest of the world) to clean up its emissions in their coal-fired plants is the opportunity.”

Fuel Tech, according to Smith, has a solution that's “spreading like wildfire.” He explains, “It developed proprietary air-pollution-control technologies that utilities and industrial facilities can use to cut nitrogen-oxide (NOx) emissions.” Its NOx system, he notes, is installed in more than 400 plants worldwide, including China and India.