The Chinese character for crisis is itself a combination of two other Chinese characters: danger and opportunity. That’s food for thought as we live through the ongoing trials and tribulations of the US financial system and their exaggerated impact on vital resource stocks.

All eyes now are on Congress, where lawmakers in both houses are debating a landmark $700 billion bailout bill. At this time, details are still being hammered out, and there are opponents of any deal on both sides of the aisle. But as President Bush’s speech last night confirmed, the White House and at least the Democratic leaders of Congress are committed to hammering something out to prevent a wider catastrophe from unfolding. And where there’s a strong will in Washington, there’s usually a way.

Given the dramatic action in the market last week, failure to pass the bailout bill would almost certainly trigger a new downward spiral for the stock market. As we pointed out last week, gold and gold stocks are generally beneficiaries from such chaos. And we strongly recommend you buy and hold positions in Goldcorp (NYSE: GG), Lihir Gold (NSDQ: LIHR) and SPDR Gold Trust (NYSEL GLD).

Our more growth-dependent resource stocks, however, would almost surely suffer more damage from the lack of a bailout, as worries about a global depression would intensify. That’s the clearly marked danger. What’s less obvious is the opportunity presented in this crisis.

First, things as they stand now are nowhere close to the dire conditions that prevailed during the Great Depression. In fact, authorities have been acting for well over a year to prevent one by giving the system all the money it needs to weather the crisis.

When Wall Street crashed and the economy began contracting in earnest during the 1930s, the Fed actually tightened the money supply. In contrast, Federal Reserve Chairman Ben Bernanke–who has studied the Depression intensely as an economist–has done precisely the opposite from the beginning.

The Fed, for example, opened the discount window more than a year ago to financial institutions, and slashed the federal funds rate quite dramatically in the early stages of the stock market selloff. Now, Treasury Secretary Henry Paulson has taken over in a dynamic way, doing what was unthinkable only a few years ago in bailing out Fannie Mae (NYSE: FNM), Freddie Mac (NYSE: FRE) and American International Group (NYSE: AIG) and pushing a global effort.

Much of the regulation enacted in the ’30s to ensure against banking collapses has been dismantled in recent years. But one thing that wasn’t is bank deposit insurance. That’s basically prevented the bank runs that undermined confidence so severely during the Depression. And the lack of such a threat to deposits has given the US central bank infinitely more flexibility to deal with this crisis by injecting liquidity.

With assets of around USD900 billion, the Fed has plenty in the tank, contrary to arguments of some. Moreover, it has the full cooperation of the rest of the world, which knows full well a US financial crisis is bad news for the global financial system and economy and has the financial muscle to take action.

Our guess is a bailout bill will pass. That will speed the turnaround for the global economy, and reignite the bull market in natural resource stocks. We’ve already seen flashes of this in recent days. And once there’s real visibility for a bottom in the financial system, we’ll see it in earnest.

One reason is the US dollar. Flooding the system with money means more dollars in circulation, which lifts the value of hard assets. More importantly, however, investors will again focus on the insatiable demand for raw materials in the developing world, particularly from China, where the government remains committed to an aggressive infrastructure buildout over the next decade.

Our Portfolio picks have been hit hard the past several months, some more than others. But as we saw in spots over the past week, recovery can come equally quickly for these volatile stocks.

We have over the past year advised taking profits at times in our favorites. In retrospect, we wish we’d done so more often. But at current prices, that opportunity is long since past. Rather, now is an ideal time to pick up shares of strong resource companies, particularly if you’ve been looking for a good point to get in.

There’s still a great deal of potential danger from this crisis. That’s why we advise focusing on the five resource stocks highlighted below, which are essentially the best of the biggest.

Size matters in the resource industry for many reasons. Access to capital and the ability to reach around the world for markets and new reserves are ever-more critical for the business. And dealing with nascent resource nationalism requires having the size to pull up stakes if necessary.

That’s why we’ve seen so many mergers in this industry, and it’s why we’ll see many more in coming years. Despite the credit crisis and crash in commodity stocks, for example, Australia’s BHP Billiton (NYSE: BHP) is still in hot pursuit of its Down Under rival Rio Tinto (NYSE: RTP). Brazil’s Companhia Vale do Rio Doce (NYSE: RIO) is also in a heavy expansion mode.

Obviously, superior size doesn’t immunize a company from stock market losses. But it does ensure that company will survive even the most severe downturns, such as what we’ve just lived through. And it also ensures the stock will be at the head of the pack when the buyers come back.

The Here and Now

Rio Tinto remains our most favorite diversified resource company we continue to view it as the cornerstone of any metals-related portfolio.

Uranium performance should surprise, as we expect strong prices will again become the norm. We continue to recommend leveraged exposure through Australia-based Paladin Energy (Australia: PDN, OTC: PALAF). Paladin is one of the most leveraged plays in the industry with only 1.1 million pounds per year hedged out to 2012.

The company has projects in Africa and Australia, but it’s currently focusing on its African projects, Langer Heinrich in Namibia and Kayelekera in Malawi. We recommended gaining exposure to uranium in late May, and we still believe that this is a solid, long-term investment.

Switzerland-based Xstrata (London: XTA; OTC: XSRAF) is the world’s fourth-largest copper producer. It also has substantial positions in nickel, thermal and metallurgical coal, zinc, aluminum and an alloys division for chrome, vanadium and platinum group metals. The project pipeline includes further investment in all of these areas and extends to six continents.

We expect the company will benefit from the surge in global power generation. A recent International Energy Agency report suggests a 3.5 percent combined annual growth rate in global power generation from 2005 to 2015, with China accounting for 40 percent of the demand growth.

On the chemicals/agricultural front, Monsanto (NYSE: MON) tops the list.

The company is the undisputed leader in the genetically modified (GM) seed industry. Its business consists of two segments: Seeds/Genomics and Agricultural Productivity. The Seeds/Genomics segment consists of the company’s global seeds and traits business, and genetic technology platforms, including biotechnology, breeding and genomics. The Agricultural Productivity segment consists primarily of crop protection products, residential lawn-and-garden herbicide products, and the company’s animal agricultural businesses.

Monsanto shares have been also affected by the weakness in the market, but the underlying business is extremely healthy. In fact, the seed business is currently in a sweet spot as global food demand changes dramatically.

The upshot is industry leader Monsanto is virtually guaranteed greater earnings growth and solid pricing power. This, in turn, means high cash flows and enhanced financial strength, a condition that gives the company the opportunity to allocate more funds toward research and to strengthen its product pipeline.

Finally, we also advocate some exposure to food growers; integrated grower and processor of fruits and vegetables China Green Holdings (Hong Kong: 904, OTC: CIGEF) is the favorite.

The company sells its products both domestically and internationally through a highly integrated business, operating large-scale standardized plantations, food processing units and a distribution network of supermarket and retail outlets. Its ownership of every segment ensures stable supplies and a rare degree of control over raw material price fluctuations.

The current milk scandal in China should also work to the company’s advantage, as it long advocated high production standards. The company continues to inform consumers on the issues and is boosting its reputation as a safe, healthy, green company. That consumers are becoming more quality-conscious represents a great opportunity for China Green.

China Green has 100 percent of its milk powder sourced from New Zealand. The company also has a decade-long record in exporting to Japan, where food safety standards are extremely high.

We expect that China Green will be the supplier of choice for the big foreign retailers operating in China, such as Carrefour (Paris: CA, OTC: CRERF) and Wal-Mart (NYSE: WMT).

China Green has transformed itself from an export-oriented vegetable supplier into a company with a growing presence in domestic China, and management remains committed to a balance between domestic and export businesses. It’s also improved its profitability because it put more weight behind its processed business, which offers higher margins.