Thursday, October 30, 2008
Profits, profit margins, get the whole story
With 58% Jump in Profit, a Record Quarter for Exxon
As usual the NYT, like most of the rest of the media fail to put oil company profits in perspective.
The "record" was set with the highs in oil prices back in the summer. I want to know what the profit "margin" was. The numbers are impressive, but most Americans don't differentiate between "profit" and "profit margin" or the net earnings to revenue ratio.
That is the real telling figure. Microsoft averages 28-29%. Coke averages 18%. Most people think a 10% margin is acceptable. Historically, oil companies earn 7.5-8.5%, even during the recent "astronomical highs." Exxon's net margin is 9.21%. Coke 18%, Microsoft 28%, Exxon 9.2%. Who's really raping the consumer?
In this quarter they spent $7 billion on research and development, nearly $33 billion on taxes (that's before the Obama "windfall" profits taxes) and had earnings of $14.8 billion.
And those earnings are returned to the investors, i.e. pension funds, mutual funds, 401-K's, individual investors, institutional investors. If you have a retirements fund or mutual fund, you may very well be a beneficiary.
All I want to see is perspective in these articles but they are determined to demonize these companies without which our economy would come to a screeching halt. No energy to run it, no economy, no jobs, no home, no retirement, no food, clothes, goods etc.
Do they make a lot of money, Sure do! Is that bad? Let 'em go bust and see what happens. Do they earn excessive profits, not even.
"We are all in the same boat on a stormy sea and
we owe each other a terrible loyalty." - G. K. Chesterson
Labels: capitalism, energy, Exxon, New York Times, oil, profit margin, profits, taxes, windfall profits
Thursday, October 02, 2008
H.R. 1424 remains step toward socialism
Dear Representative Keller,
Thank you for taking the time to listen to your constituency. I’ve written previously about the “bailout” legislation for the financial markets. Specifically, I’ve been decidedly against any such legislation.
I want to reiterate that I remain so. I am a small investor, a postal worker who lives frugally and saves and invests about 20% of my gross income. I have a pretty fair exposure to the markets and have in the past year watched the value of my investments go down considerably.
The negative reaction, some would say temper tantrum, of the markets the past few days has in no way changed my take on the so-called “Emergency Economic Stabilization Act.” I remain convinced that government intervention in the private markets is dangerous and ultimately will have negative repercussions in the US economy.
Because of the nature of politics, government cannot intervene without distorting the marketplace to try to gain some political advantage for one party or the other. It’s the nature of the beast.
The current legislation sent over from the Senate remains a piece of legislation that I think if approved will one day will be looked upon as the day the United States took a great leap into socializing the US financial markets and industry as a whole.
Still, I know that the art of politics is compromise. If there is anyway that this bill can be stripped of it’s socialist underpinnings while keeping the legislative changes insuring troubled assets (Sec 103 ), Mark to Market (Sec.132), FASB 157 (Sec.132), and increases in FDIC insurance to $250,000 (Sec.132) it has the makings of a decent bill that addresses the problems that created the stagnation in the financial markets.
I would also like to see repeal of some of the provision of the Community Reinvestment Act that have resulted in a situation where many who truly cannot afford the responsibilities of home ownership are now finding themselves strangled with unaffordable mortgages. The result of which is the sub-prime “meltdown” we are now seeing.
Sec. 124 addresses some changes in the HOPE program, but I have neither the resources nor the expertise in legislative language to cross-reference and discover the implication of these changes.
I am glad to see codified in the legislation that all proceeds from the sale of the purchased assets will be returned to the Treasury for the purpose of reducing the public debt. I can only hope that future administrations and Congresses will not find a loophole around this provision.
The inclusion of sunset provisions for the aforementioned legislative changes is distressing. If we recognize that the original adoption of these provisions was a precursor to the current situation, that we would even consider returning to them a some future time demonstrates an amazing lack of foresight and stewardship with the public trust.
The addition of “sweeteners” to this legislation makes it even more distasteful to me. Inclusion of important legislation on energy issues, a plethora of random tax provisions and Title V Subtitle B are acid to me. They should stand on their own without being thrust though on the coattails of H.R. 1424.
The provisions of Title V Subtitle B alone will most likely result in further increases in health insurance costs, for benefits many would not opt for, during a time when costs are escalating on their own at intolerable rates.
While I don’t support this bill in it’s current form, it’s preferable to the original legislation defeated on Monday. I am concerned that with a new administration coming, depending on their political leanings may migrate more towards the provisions of Sec. 101 rather than those of Sec. 102. That would be a tragedy for the American people and the long-term health of US economy.
Download H.R. 1424 as passed by the Senate October 1, 2008 from FoxNews
"We are all in the same boat on a stormy sea and
we owe each other a terrible loyalty." - G. K. Chesterson
Labels: abuse of power, capitalism, financial crisis, legislation, mortgage crisis, Ric Keller, taxes
Sunday, September 28, 2008
An open letter to Congress...
I am very concerned about the legislation currently being drafted to socialize the US financial markets. The primary reason for the current financial crisis is the manipulation of the financial system by Congress through entities such as Fannie Mae and Freddie Mac.
An additional primary factor is the decade old legislation such as HOPE IV promoting home ownership by all that provided stiff penalties to “unfair” practices in mortgage lending. Those unfair practices were left ambiguous enough to force banks and institutions to make unsound loans to unqualified applicants in a bid to protect themselves from lawsuits.
Secondarily, giving taxpayer funds to activist agencies such as A.C.O.R.N. is a travesty. A.C.O.R.N. has been a major player in creating this crisis taking advantage of the aforementioned legislation. Included in recent drafts of the bail out legislation is language giving them 20% of any profits. This is like allowing a convicted murderer to profit from books written about his crime.
A major initial concern of my was what Congress would do with any "profits" from this supposed "investment." I had no faith they would actually return it to the people from whom they took it. There is no precedence for that. Now we know what their intent is.
Ayn Rand said, "One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary."
The Congress has done that to our financial systems through demands for housing loans to many who cannot afford it, in the process encouraging the "cooking of the books" and fraudulent application and approval process that Congress now rails against.
The creation of GSEs Freddie and Fannie, then failing to provide strong rules to prevent them from buying up weak mortgage packages while allowing them to enrich members of Congress through lobbying and contributions has only created an incestuous and disastrous relationship.
Instead of a rush to create another monster that may address the short term "crisis" but in the process create unintended consequences that will irreparably damage our financial systems for decades to come and take us dramatically into socialism, the Congress needs to step back and breath deeply.
The American people in their intuitive grasp of this problem has said, "slow down and back off!" Congress needs to do just that. The major players in the financial system are sitting back to see what Congress is going to do.
If Congress stands down, the financial players will step up to the plate. But why should they if there is a socialist Congress willing to commit the wealth and treasure of ordinary Americans to the task.
I'll do my own investing; I don't need Congress to do it for me.
"We are all in the same boat on a stormy sea and
we owe each other a terrible loyalty." - G. K. Chesterson
Labels: capitalism, Fannie Mae, financial crisis, Freddie Mac, mortgage crisis, politics, socialism, voting