For Immediate Release
Chicago, IL – February 11, 2010 – 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: Caterpillar (CAT), Kubota (KUB), EnCana (ECA), Exxon (XOM) and XTO Energy (XTO).
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Here are highlights from Wednesday’s Analyst Blog:
Troubling Trade Deficit
The trade deficit from oil is a particularly thorny problem. When the dollar declines, the price of oil tends to increase. After all, just because the dollar is strong is no reason for the price of oil the Japanese import to fall in Yen terms, or for the price of oil that the Germans import to fall in Euro terms.
The dollar declined sharply relative to other major currencies during the first half of the decade, as shown in the third graph. That decline made our exports relatively more competitive, and our imports more expensive, which was a major force in turning around our non-oil deficit.
Some of the improvement came from companies like Caterpillar (CAT) being able to sell more heavy equipment abroad, but also some of it came from domestic buyers discovering that Caterpillar’s products were priced more competitively than similar equipment from Kubota (KUB).
While I strongly feel that a weaker dollar is a good thing for the U.S economy at this point, it alone will not be sufficient to solve the trade deficit problem. It can help greatly on the non-oil side, but it is unlikely to do anything on the oil side. To solve that problem, we have to shift over to non-oil energy sources.
At one point, the U.S. had very large reserves of oil (people forget that for decades the U.S. was the world’s largest oil exporter). That oil has already been burned. There is no way we can drill our way out of the problem. No new drilling is going to result in a significant increase in domestic oil production — it can’t.
Most oil is used for transportation, so coal is not a very useful alternative. However, it is technically very feasible to shift to the use of natural gas as a transportation fuel, particularly for fleets that return to a home base each night, for example city buses. We have very abundant and growing supplies of natural gas thanks to the emerging shale plays.
I think that we will eventually move in this direction. That would be very good news for the more gas-oriented exploration and production companies like EnCana (ECA). I suspect that is also a very big part of the reason that Exxon (XOM) is buying XTO Energy (XTO).
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