Zacks Analyst Blog Highlights: Ford, Home Depot, Wal-Mart, Chesapeake and EnCana

CHICAGO--(BUSINESS WIRE)--Zacks.com Analyst Blog features: Ford (NYSE: F), Home Depot (NYSE: HD), Wal-Mart (NYSE: WMT), Chesapeake (NYSE: CHK) and EnCana (NYSE: ECA).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=4579

Here are highlights from Thursday’s Analyst Blog:

Trade Deficit Falls to “Just” $42.8B

The trade deficit is a far more serious economic problem -- particularly in the short to medium term -- than is the budget deficit. In the second quarter, the increase in the trade deficit subtracted a full 3.37 points from the economic growth rate. If we had somehow managed to keep the trade deficit at the same level as in the first quarter, then second quarter growth would have been 5.0%, not 1.6%.

The trade deficit is directly responsible for the increase in the country’s indebtedness to the rest of the world, not the budget deficit. That is not just a matter of opinion, that is an accounting identity.

Think about it this way: during WWII the federal government ran budget deficits that were FAR larger as a percentage of GDP than we are running today, but we emerged from the war the biggest net creditor to the rest of the world that the world had ever seen up to that point. Then, the federal government owed a lot of money, but it owed it to U.S. citizens -- not to foreign governments.

Slowly but surely, the trade deficit is bankrupting the country. While most of the foreign debt is in T-notes, try thinking of it as if we were selling off companies instead of T-notes. This month’s trade deficit is the equivalent of the country selling off Ford (NYSE: F), while last month’s deficit was the equivalent of selling off Home Depot (NYSE: HD). How long would it take before every major company in the U.S. was in foreign hands if this keeps up?

The Two Major Parts

The goods deficit has two major parts, that which is due to our oil addiction and that which is due to all the stuff that lines the shelves of Wal-Mart (NYSE: WMT). Of the total goods deficit of $55.23 billion, $20.91 billion -- 37.9% -- is due to our oil addition.

The monthly improvement in the overall deficit in July was mostly due to the non-oil side, where the deficit fell to $33.20 billion from 39.73 billion in June. That is an improvement of $6.53 billion, or 16.4%. In contrast, the oil deficit fell only slightly from $21.30 billion to $20.91 billion, a 1.8% improvement. Relative to a year ago, the non-oil side of the deficit rose by 31.2% while the oil side rose by 16.6%.

Still, the oil side should be the low-hanging fruit to bring down the overall trade deficit and thus help spur economic growth. Oil is primarily used as a transportation fuel. The technology exists and is widely used abroad for natural gas to power cars and trucks. Thanks to the emerging shale plays, we have ample domestic supplies of natural gas, and on a per BTU basis, natural gas is selling for the equivalent of oil at $22.44 per barrel.

We need to get past the "chicken and the egg" problem of nobody wanting to buy a natural gas-powered vehicle because there are no convenient places to refuel, and gas stations' reluctance to install refueling stations for natural gas-powered vehicles since there are not many of them on the road. Not only would such a move save money for drivers in the long run (there is an upfront capital cost as natural gas-powered engines are more expensive than regular gasoline powered engines), but it would substantially reduce our trade deficit.

Natural gas is also a much cleaner fuel and emits far less CO2 than does gasoline. Thus it would be a very useful step towards stopping global warming. Doing this, especially breaking the chicken and the egg problem, will take federal government leadership. The benefits for the economy, however, would be huge. It seems inevitable to me that it will eventually happen, and when it does, it will be a great boon to major natural gas producers like Chesapeake (NYSE: CHK) and EnCana (NYSE: ECA). The timing of it happening is very uncertain, but the sooner it happens, the better.

Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5514.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5516

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4580.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.