The same case can be made for water. And the companies that treat water to make it safe to drink, and safe to dispose of, are compelling investments. In fact, depending upon your perspective, the case for water could even be stronger. While I could get by for a while without oil, I haven't got a shot without water.

Water demand is growing for use in agriculture, industry, cooking, energy production - the list goes on and on. And we use a lot of it. While you may only drink half a gallon a day, you used around 25 gallons during your last shower. And it takes 1,857 gallons to produce a pound of beef.   

In my world, this growing demand for water means looking for small-cap companies that can alleviate the problem, and investing in the best ones.  Just yesterday, I recommended a Chinese water stock to subscribers of my SmallCapInvestor PRO advisory service. That stock is poised to increase by more than 50% on growing demand for its suite of water treatment products.

If you were to read Samuel Coleridge's entire poem, you would follow the tale of a mariner who has returned from a long adventure at sea. Despite the abundance of water, the ship's crew has no method by which to remove the salt and make the water potable.

Thankfully, technology has advanced considerably in the last 210 years. Today, the desalination process removes solids like salt and other contaminants from seawater and makes it safe to drink. It is a burgeoning industry of $30 billion today, and according to FORTUNE Magazine, it will double by 2016...

That's what I've been doing in my SmallCapInvestor PRO portfolio. So far this year, nine of eleven positions have been closed with a gain, one greater then 140%.

In small-caps, the drop is typically greater than in large-caps, and the recent market action has born this out once again. Last week the Russell shed 2.7% while the S&P 500 only lost 0.7%. But the reverse is also true, and history has shown that small-caps consistently outperform large caps on the upside. Investors who purchased the Russell 2000 small-cap index ten years ago would have enjoyed returns around 40%, versus a 20% loss for investors in the S%P 500.

I often look to overseas markets like China and India in search of attractive small-cap investments. And why not? For its part, China just reported 8.9% Thrid Quarter growth while the U.S. has stalled. India is growing GDP growth at around 6%. 

This morning, many Asian indices were trading higher after South Korea reported excellent quarterly GDP growth. We also heard encouraging news from India's Tata Motors (NYSE:TTM). The nation's largest auto maker doubled profits on increasing sales, and the stock is responding with a 6% gain. 

Today we heard online retailer Amazon's (Nasdaq:AMZN) results. The aptly named company crushed analyst EPS estimates which had called for $0.33 per share. Amazon beat by 36%, delivering $0.45 a share on $5.04 billion in revenue. What's more, the company raised Q4 guidance. Shares are surging 25%.

Talk about exploring opportunities for trade and commerce. It would have been nearly impossible for the average citizen in 1841 to invest in the opportunities Herndon found in the South American Jungle. But there are plenty of ways for investors to benefit from the trends in e-commerce. And small-caps are the way to do it.

Small-cap companies are overlooked and underappreciated by many investors because it's not economical for analysts to follow them. Until the companies start to break-out, and then they are all the rage. Find them when they are taking-off, and you can ride them for handsome gains...

The rise in oil prices, and many other commodities prices for that matter, has many wondering if the market is too bullish given that economic growth is uncertain. Plus, much of the rise in oil has come on the back of a falling dollar.

You’ve probably heard that renewably energy sources like wind and solar will reduce the demand for oil. Government programs that incentivize their use have worked in places like Brazil. But overall, they haven’t slowed the relentless rise of oil prices.

While these factors might make the rise in oil prices seem unsustainable, it’s more likely that normal supply and demand relationships will resume when the economy gets back on track. In other words, higher prices are coming. Peak oil (the point when the world reaches a maximum rate of petroleum extraction, after which production will always be declining) adds an interesting dimension as well. Some experts think we’re past this point, some think it won’t arrive until 2020...

So bear with me as we set the stage...

This morning Morgan Stanley (NYSE:MS) reported that it returned to profitability after three consecutive quarterly losses. While the bank reported strong results from its investment banking and growing brokerage businesses, it said real estate investments are still a drag.

Wells Fargo (NYSE:WFC) sang a similar tune. The third-largest U.S. bank by market cap recorded $3.2 billion in Q3 net income, but expects loan losses to rise further, and to peak next year. Their acquisition of Wachovia is not helping matters. Those loan losses rose over 70%.   

We're hearing the same story from nearly all the big American banks, whether they made money or not. "Profits are positive, or at least less negative, but we're still loosing money on bad real estate and consumer loans." This was the news from Bank of America (NYSE:BAC), US Bancorp (NYSE:USB), Citigroup (NYSE:C), and JPMorgan Chase (NYSE:JPM).

No doubt we're all growing weary of the stream of bearish news on the housing front. The Commerce Department said Tuesday that September New Home Construction and New Building Permit applications were lower then expected. Foreclosure filings hit a record high. Another report stated that national median home prices will drop more than 10% by June 2010.

Technology stocks rose Monday as the market prepares for more earnings reports. Apple (Nasdaq:AAPL) is expected to beat analyst EPS estimates of $1.42 when the company reports after the bell. Chip-maker Texas Instruments (Nasdaq:TXN) is also on deck. I'm looking to Texas Instruments for more signs that semiconductor demand is increasing for businesses and that this recovery has legs. 

Last week I looked at two small-caps on the Top Daily Gainers list that are worth taking a second look at: Autochina International (Nasdaq:AUTC), and Brooks Automation (Nasdaq:BRKS). Autochina International is a recently listed stock that finances commercial vehicles and operates a network of after-sales service stations in China. The stock added another 10% today.

Don't expect the Dow to advance too much more from here though, at least in the short-term. I expect 10,000 will act as psychological resistance for a while. But longer-term  I'm expecting more upside this year and think the Dow has a shot at 10,500.

And that means there is still opportunity in the stock market: especially among small cap stocks.

Intel's earnings are especially important because the company beat revenue expectations. As we know, investors want to see revenue growth. Costs have been cut, and if the economy is truly turning around, sales should grow.

*****JP Morgan (NYSE:JPM) destroyed expectations, posting $0.82 in per share earnings when analysts were expecting $0.52. Investment banking was the biggest contributor to JP Morgan's result. But I'm impressed by the gains the company made in bond trading. Revenues for fixed income went form $800 million last year to $5 billion this year.

BioFuel Energy (Nasdaq:BIOF) was up 18% and Clean Diesel Technologies (Nasdaq:CDTI) was up 15%. But by far the big winner was Ocean Power Technologies (Nasdaq:OPTT). Ocean Power shares were up as much as 85% after it announced a joint venture with Lockheed Martin (NYSE:LMT) to develop its PowerBuoy for utility-scale power generation.