USA: World's No. 1 oil producer...

USA: World's No. 1 oil producer... The shift to NGLs... DYN up 40% on bankruptcy... Tilson on Berkshire... Jeff Clark's new dollar and oil trades... Unemployment bennies running out... Get thee to ND... OWS vandals out of control...

 Get used to hearing about this...

At the World Shale Gas Conference & Exhibition in Houston today, Chesapeake Energy CEO Aubrey McClendon said, "The U.S., now the No. 3 producer, could reclaim the title of No. 1 oil producer in the world."

McClendon wasn't being theatrical. He was being conservative. The U.S. will not only become the No. 1 oil producer in the world… it'll also become the No. 1 exporter.

In addition to large quantities of shale gas, the U.S. also has large amounts of shale oil. That's one reason why ExxonMobil said last month it'll focus on shale oil drilling in the U.S. and other places – like Argentina and Germany – where it has large shale holdings. When the world's biggest private oil company says they're going to do something, investors would be wise to pay attention.

 ExxonMobil is North America's largest gas producer. Canada-based EnCana is its second-largest gas producer. And yes, EnCana is shifting its focus from plays containing only natural gas to those containing oil and other liquid hydrocarbons.

As of mid-September, EnCana had sold about $1 billion of gas properties and acquired $400 million of oil- and liquids-rich properties, according to ShaleDaily.com. The shale industry news and data provider also reports, "EnCana now has prospective liquids and oil prospects in the Collingwood shale in Michigan, Alberta's Duvernay shale, and the Tuscaloosa Marine shale in Mississippi and Louisiana."

 Since August, my research partner, the intrepid Mike Barrett, and I have reported on the huge opportunity to invest in the production of massive new quantities of natural gas liquids. We call it the American Industrial Renaissance because large amounts of cheap hydrocarbons are attracting many industries back to the U.S. The Renaissance is already generating great amounts of new wealth.

We've found two income stocks for 12% Letter readers, including a safe, steady, blue-chip pipeline company that owns the most valuable pipeline in the United States. (Hint: It's NOT Kinder Morgan.) Both companies we've found are making huge new investments in the Marcellus shale and other liquids-rich plays around the United States.

 Natural gas liquids (NGLs) are hydrocarbons found in natural gas. They're called "liquids" because they're gases that are easily condensed into liquid form. You know these substances better than you probably think: They include propane and butane.

Not all natural gas fields are rich in liquids. But you'll find lots of NGLs in the Marcellus Shale in southwestern Pennsylvania. With gas prices dirt-cheap (and set to get cheaper), companies that produce liquids can make even more money by producing natural gas. Companies that produce so-called "dry gas" (no liquids) are losing money right now. That's why the big boys like ExxonMobil and EnCana are shifting from dry gas to oil- and liquids-rich gas. This is a huge sea change in the energy market.

I think investors can double or triple their money investing in NGLs over the next couple years. If you want to know more about how to find income investments in the American Industrial Renaissance, I encourage you to try a subscription to The 12% Letter here.

 I can't remember this happening before. Houston-based energy company Dynegy declared bankruptcy today... And its common stock soared as much as 40%.

Common stocks usually crash when a company files bankruptcy. But news reports say the bankruptcy filing is unusual because it protects common stockholders while creating losses for some bondholders. Normally, the claims of all debt holders are senior to common stock holders' claims. So this is quite different.

Dynegy shareholders include billionaire activist and investor Carl Icahn, who owns about 15% of the stock. Wall Street Journal reporter Mike Spector called the bankruptcy "part of Carl Icahn's diabolical master plan." It seems Icahn helped move more than $3 billion in bond debt into a Dynegy subsidiary that has no claim on Dynegy's assets and poor legal protections of debt holders. It is technically this entity that declared bankruptcy.

 Legendary investor Warren Buffett just released the latest quarterly earnings of his holding company, Berkshire Hathaway. And Buffett's company is gushing forth huge new cash flows for the uber-investor to deploy.

Berkshire Hathaway's operating earnings increased 37% to $3.8 billion. A more-than-fivefold increase in insurance underwriting (from $199 million to $1.089 billion) drove the gains – though $855 million was from a one-time gain, due to reduced liabilities. Operating earnings for noninsurance businesses increased 17% to $2.1 billion. And Berkshire's largest noninsurance business, BNSF railway, saw profits increase 10% year-over-year.

Berkshire also produced an astounding $6 billion in operating cash flow for the quarter. Free cash flow (operating cash flow minus capital expenditures) was $3.8 billion. Cash at the end of the quarter declined by $12.6 billion to $30.6 billion... But that's a good thing. Cash earns nothing. Instead, Buffett put a net $6.2 billion to work in the quarter... The two most notable purchases were the completed acquisition of Lubrizol and a $5 billion investment in Bank of America.

 Our friend Whitney Tilson, one of the most knowledgeable Berkshire Hathaway analysts, sent us an e-mail discussing the company's latest earnings.

In particular, he noted two things. First, some hesitate to buy Berkshire Hathaway, due to the difficulty of valuing Buffett's huge derivatives exposure. (In the midst of the crisis, he sold puts on the S&P 500 and three foreign indices.) Noncash losses on Berkshire's derivative position caused net income to drop 24% for the quarter. Tilson says you can ignore the net income swings. "Berkshire doesn't have to post collateral under any circumstances, the puts can't be exercised before expiration, and the earliest expiration isn't until June 2018 (extending as far as January 2026… the weighted average life of all contracts is 9.25 years)."

Second, Tilson underscored how Berkshire is an unbelievable, cash-gushing machine... It's generating $1.26 billion of free cash flow coming in every month.

This is one of the greatest businesses ever assembled… And it's trading at its cheapest levels ever. The "A" shares are easily worth $170,000 each, and the share price is around $117,000 today… a discount to value of more than 30%. You're not supposed to be able to get a business this good at a price this cheap. 

 Even as we anticipate the ultimate destruction of the U.S. dollar, the greenback remains the money of choice in a world gone haywire. When folks sell just about any financial asset, they get back U.S. dollars. In other words, when speculators get scared, they buy dollars.

Jeff Clark thinks precious metals speculators are about to get a little scared... Gold and silver are overbought, and the U.S. dollar looks poised for a rally, according to Jeff's latest S&A Short Report update. He says it's time to be cautious with precious metals stocks. So today, he closed the second half of his Hecla Mining position for an 80% gain. That's yet another huge winner over the past several months.

 If you haven't yet booked a huge gain trading with Jeff over the last few months, it's not too late. Jeff also just told subscribers it's time to short oil. Headlines say Israel is preparing to attack Iran's nuclear facilities... This should cause oil to spike higher…

And yet, oil is stagnant. And oil stocks fell 2%. When stocks fall in the face of bullish news, it's bad.

Also, one of Jeff's favorite indicators is flashing "sell" for oil. Jeff believes the trade he recommended could return 200% in one week. To learn more about the S&A Short Report, click here...

 In the U.S., the unemployed can receive benefits for nearly two years. But even that isn't long enough... Early last year, 75% of unemployed people were receiving benefits checks. That number is now 48%. According to unemployment data, around 2 million people have collected unemployment for 99 weeks and still can't find work.

Government unemployment benefits weren't created to sustain people for long periods of time... And throughout history, they haven't had to. In the recoveries of the past three recessions, the longest average duration of unemployment was 21 weeks in July 1983. During the Great Recession, it reached 41 weeks – the longest period since records began in 1948. Today, the figure is 39 weeks.

 Meanwhile, the unemployment rate in Williams County, North Dakota (where there's a full-tilt oil boom) is less than 1%. How about we ship all the Occupy Wall Street protesters to North Dakota? These days, nighttime temperatures are below 20 degrees up there.

I'm no fan of Wall Street. But neither am I stupid enough to believe the Wall Street protestors will do anyone any good. The world isn't made by or for politicians, talking heads, or children shouting in the streets. It's made by people who go to work every day and do their damnedest for themselves and their families. If you don't fear hard work or bitter cold and you desperately need a job, maybe it's time to get yourself to North Dakota.

 New 52-week highs (as of 11/7/11): Dominion Resources (D), Exelon (EXC), McDonald's (MCD), Wal-Mart (WMT), Activision Blizzard (ATVI).

 If you or anyone you know is protesting on Wall Street or working in and around Williams County, North Dakota, we'd love to hear your story. Write to us at feedback@stansberryresearch.com.

 "Thank you for presenting a well-reasoned viewpoint, for hiring brilliant people who may or may not agree with you, for making much of it available for very little money. I read your free or nearly free newsletters every day, not because I agree with them, but because I know they're intelligent and well thought out. Sometimes, of course, I do agree, but that is not why I read. How can I ever make a reasoned judgment myself without hearing more than one point of view? I wouldn't dream of cancelling." – Paid-up subscriber Patti

 "I am a 67 year old commercial lobster fisherman residing in Massachusetts. I have no formal financial training but I do have a bit of common sense. As a result I have been purchasing bullion since 1972 when I read an article by a fellow named Kamin who held that 'Bad money drives good money from circulation.' I checked the coins in my pocket and sure enough, even in 1972, the 90% silver coins had already vanished. So since that day I have been a buyer of bullion.

"But even with almost 40 years of interest in precious metals I had never heard of royalty companies until S&A Research brought them to my attention through Stansberry's Investment Advisory…

"I chose to invest in royalty companies over the more traditional companies (miners, explorers etc.) because they just make so much more sense on many different levels. First of all there seems to be a continuing disconnect between the spot prices of precious metals and the share prices of the miners that produce those metals. The royalty companies more closely follow the precious metals spot prices and thus allow me to take more complete advantage of what I believe to be a long term up trend in those prices.

"Also the royalty companies are free from many of the disadvantages that the more traditional producers are prone to. Since the royalty companies do not actually mine the metals they are insulated from increased production costs, strikes, cave-ins, floods, increased foreign taxes, etc. Royalty companies have all the up-side and none of the down-side of the more traditional plays.

"And as for precious metals ETFs. I just don't trust someone else to hold my bullion for me and simply issue me a slip of paper reassuring me that they REALLY DO have sufficient bullion on hand to fulfill all requests for physical delivery. While I am confident the ETFs hold sufficient reserves to meet NORMALLY ANTICIPATED redemption requests, I am much less confident that they could actually produce sufficient bullion to meet the demands brought about by a real crisis. (think A.I.G.)

"As for over all percentage returns, it's too soon to tell. I am a long term investor, not a trader... I'm in it for the long haul. I feel I am getting excellent advice from S&A Research." – Paid-up subscriber Rob

Regards,

Dan Ferris and Sean Goldsmith

Medford, Oregon and New York, New York

November 8, 2011