The Zacks Analyst Blog Highlights: US Bancorp, Medtronic, Chevron, Marathon Oil and Apache Energy

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May 12, 2011, 09:30 ET

CHICAGO, May 12, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: US Bancorp (NYSE: USB), Medtronic (NYSE: MDT), Chevron (NYSE: CVX), Marathon Oil (NYSE: MRO) and Apache Energy (NYSE: APA).

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Here are highlights from Wednesday's Analyst Blog:

Trade Deficit Up on Oil Addiction

rowing world trade is a good thing, but not if it comes at the expense of an ever-rising U.S. trade deficit. In other words, all things are not equal. Had it not been for a dramatic deterioration in the trade deficit in the second quarter of last year, GDP growth would have been over 5.2%, not 1.7%. In the third quarter it would have been 4.3% rather than 2.6%.

The drop in the trade deficit in October and November was one of the most powerful forces behind the growth we saw in the fourth quarter. Without the improvement in net exports, the economy would have actually shrunk by 0.2%, rather than growing by 3.1%.

Trade turned against the economy again in the first quarter, but only slightly, subtracting 0.08 points from growth. Still the swing from being a big contributor in the fourth quarter to being essentially a non-factor in the first quarter more than explains the overall slowdown in growth from 3.1% to 1.8%.

Clearly it matters a great deal if the trade deficit is growing or shrinking. The higher-than-expected trade deficit for March would indicate that (all else being equal) that the next look at first quarter GDP will be revised down.

Trade Deficit Far More Serious

The trade deficit is a far more serious economic problem, particularly in the short-to-medium term, than is the budget deficit. 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, it 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 think 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 US Bancorp (NYSE: USB), while last month's deficit was the equivalent of selling off Medtronic (NYSE: MDT). How long would it take before every major company in the U.S. was in foreign hands if this keeps up? Put another way, the 2010 trade deficit has totaled $497.82 billion, which is 64% what all the firms in the S&P 500 earned, worldwide, in 2010.

Who Imports More - Rich or Poor?

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 line the shelves of discount retail stores. Of the total goods deficit of $62.11 billion, $31.29 billion -- 50.3% -- is due to our oil addition.

Relative to the overall trade deficit, our oil addiction is 64.9% of the problem. For all of 2010, we ran a $265.12 billion deficit just from petroleum. That is equivalent to the combined market capitalizations of Chevron (NYSE: CVX), Marathon Oil (NYSE: MRO) and Apache Energy (NYSE: APA).

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