Top Stocks For 2011, Top Stocks To Buy, Best Stock Investments For 2011, Hot Stocks For 2011

The Dow was flat yesterday. Gold rose $9 to $1,226.

Has the dip in gold already come and gone?

We were expecting lower stock prices...and lower gold prices too. Both went down earlier in the summer. But neither went down as much as we expected...nor stayed down.

But it's still fairly early in this correction. The recession began at the end of '07. We're now approaching the last quarter of '10.

By this time in the '30s, top stocks were hitting rock bottom. The market crashed in the autumn of '29...then bounced...and then started down again. It didn't stop until it hit bottom in July of '32 - nearly three years later. By then, top stocks had lost nearly 90% of their value, from 381down to 41.

It can take longer, however. Japanese stocks crashed in '90. But they didn't hit their ultimate bottom until 2008 - 18 years later - with losses of about 90%.

I've often said that my stock-picking approach can be boiled down to this mantra:

Share prices follow earnings.

I challenge you to look back through history and find even a single company that increased its earnings quarter after quarter, year after year, and the stock didn't tag along.

By the same token, try to find a company whose earnings were flat or declining year after year and the shares kept rising. It doesn't happen, even in a roaring bull market.

But is growth in earnings per share all you really need? Could it be that simple?

Of course not.

The White House might be gaping in shock that the US federal court overturned the six-month drilling moratorium, but it really isn't all that surprising. Amid the finger pointing and political posturing, the Obama administration seems to have missed a vital detail - the US oil industry is in a spot of bother.

It's not just America's oil supply and energy security that's in danger after the BP oil spill and the subsequent drilling ban. The Gulf economy is hanging by a thread, and it won't take much to send it over the edge.

Thousands upon thousands of rig workers were effectively laid off when the 33 rigs operating in the Gulf stopped drilling. The full economic impact of the ban is still unrealized, with the layoffs just starting, but estimates put the figure for lost wages as high as US$330 million per month.

Given the potential economic losses, BP's US$100 million compensation fund for rig workers starts to look rather paltry. It doesn't end there either. There's a domino effect in play as well - each rig job supports up to four additional jobs for cooks, supply-ship operators, and those servicing the industry.

And should the drilling ban become permanent, the consequences could be dire. Just like the towns that died in the Upper Midwest after the demise of the auto plants and steel mills, the entire Gulf Coast - where deepwater drilling is crucial to the economy - could fade away.

All in all, not the best news for a country whose economy can be best described as fragile at the moment.

There's also the question of America's energy security. The Gulf accounts for up to 30% of all the oil produced in the country. Should the Gulf be put off limits, that shortfall has to be made up from somewhere. Obama's renewable energy might be the future, but it's not up to the challenge of meeting the needs of the present.

And attractive, viable options are far and few in between. Russia may be a friend now, but its tap-twisting history with gas in Europe does not strike up a positive note. The Middle East is hardly America's best friend, not to mention its royalty structures, which leave much to be desired. And in Venezuela, Hugo Chavez just recently nationalized 11 oil rigs belonging to a US company.

In the end, only two real options are left in the hands of the US - the oil sands of Canada or rethinking the drilling ban.

A revised drilling ban would still see higher taxes on each barrel produced and tighter regulations for companies coming to the Gulf. Any lease application would come under intense scrutiny and face higher insurance rates. For smaller companies interested in the Gulf, the rising production costs mean that the death knell has been sounded.

Option two is the friendly neighbor to the north, Canada. The country already plays a big role in U.S energy. One in every six barrels of oil consumed daily in the US comes from the oil sands in Alberta, Canada. The oil sands are pretty controversial stuff, however, associated with derelict, broken landscapes and carbon emissions.

But this is an image that's going to change very soon. The future of oil sands is here: they are cost effective and their face is green. Steam Assisted Gravity Drainage (SAGD) pumps steam into the ground to liquefy the bitumen and stiff crude oil, making it thin enough to be pulled out of the ground. No giant holes or toxic tail-ponds - just two horizontal pipes, one above the other, puffing away efficiently.

That the Gulf spill is a game-changer for the US oil industry is yesterday's news. For now, it's about making ends meet. And while we expect the US to shift towards renewable energy, and maybe even rethink its energy use, for now there's an unmet demand that's not going anywhere.

As far as an investment portfolio goes, both options bring with them opportunities. If the US federal court allows a somewhat watered-down version of the drilling ban, the long delay means that there's potential to pick up some top stocks for 2011 at a cheap price. On the Canadian side of things, there are some well-run companies perfectly combining cash-flow and SAGD technology. The Gulf spill might be Obama's Waterloo, but for the careful investor, the winds of change could just blow in a fortune.

The wise guys have a secret, and it’s driving me nuts. It’s worse than the mob’s “Omerta” or the cop’s “Thin Blue Line.”

These guys know the bull market is over, and quite frankly, they don’t care, because they know damn well that they will get just as rich come the downturn as they did during the run up – maybe even richer.

I’m sure you’ve seen copies of the memos and e-mails by now detailing as to how traders at Wall Street’s biggest houses were laughing at all those poor rubes who were buying shares and bonds from them.

Gold is still getting up. Hemlines are going down. That's all you need to know.

Gold rose toward $1,230 yesterday. Why? Reports said investors were worried about Europe.

Well...yes...Europe...and Asia...and North America...

The problem in the world economy is debt. There's too much of it. Investors who aren't delusional know that too much debt spells trouble. And when government adds more debt it's not really going to make things better. It's going to make them worse.

What kind of trouble will it cause?

Well, that's what we're going to find out.

Inflation...deflation...bankruptcies...defaults...bear markets...our guess is that we're going to see it all. But not necessarily in that order.

Gold buyers are stocking up on insurance against trouble. They're using GLD - a gold ETF - as a kind of "people's central bank." It's a way of maintaining do-it-yourself monetary reserves. (More on the vernacular gold standard...below...)