|Posted by commonsenseforamericans on January 25, 2010 at 9:40 AM|
There is no Mr. Exxon
It was recently reported that Exxon made over $45 Billion in profits in one quarter of one year. Outrageous Congress shrieks! Outrageous many Americans say. How can it be acceptable when so many people are unemployed? Can’t Exxon take a little less profit and lower gas prices?
Let’s take a look at the basic economics of capitalism in general and Exxon in particular.
First of all, there is no Mr. Exxon! The company is owned by millions of shareholders who are invested either directly, in their pension funds or through their investments in mutual funds. In reality, relatively few shares are owned by the executives of Exxon. It is a rare event when the major holdings of stock in companies are owned by individuals.
The largest stakes of shares are owned by pension funds and the very people upset at the large profits may very well be owners in Exxon without knowing it.
The rare exceptions are Bill Gates in Microsoft, Warren Buffett in Berkshire Hathaway, the founders of Google and Apple Computers.
The present value of investment in Exxon is in excess of 317 billion dollars.
In the last quarter of 2009 the Exxon dividend per share was 42 cents for an investment of approximately $65-70 depending of purchase date. This dividend comes to approximately 2.5% return on investment on an annual basis. There is of course the hope among investors that the value of their shares will rise. Great expectations, except that the price may in fact fall just as easily.
Publicly traded companies are always at risk, as well as potential of success in the form of rising share prices which all investors hope for. By selling at the right time, they may well gain a substantial profit. But remember that prices rise and fall over time and it is very difficult to pick just the right time to buy or sell.
During the last two years the market has fallen and risen in large percentages causing some to loose and some to gain. That is the stock market risk and reward ratio. The larger the risk the larger the potential gain, but loss is always lurking in the background.
Don’t let the politicians pander to the public by pointing their fingers at companies like Exxon or any other that makes a profit when they are of course aware of the real economics involved. At least we hope they understand. The same is true of Banks, Tech companies or your neighbor who owns a small business. Small companies with the potential of growth create the vast majority of jobs. No bankrupt company or company that can’t make a decent profit is able to hire employees.
Don’t let politicians point their fingers at the risk takers, whether they are entrepreneurs of a start up businesses risking all their money on a chance to succeed and in the process hiring workers. The mature businesses providing products and services that people want and need have to make a profit in order to grow and hire additional employees as well.
I can’t deny that there are some businesses that abuse their workers and investors by making self serving business decisions and they need to be punished. Sooner or later they usually are, by the capitalist market that has made this country wealthy over the years.
No one has ever been hired by a poor man. If government eliminates the profit potential, as it seems to be doing, then there will be no profit and therefore no jobs.
Socialism doesn’t work, it has never been successful anywhere on earth for any length of time.
During the past 5 decades congress under the leadership of Presidents Kennedy, Reagan, George H. Bush and George W. Bush have cut taxes and thereby causing expansions in the economy resulting in increases of tax revenue. Unfortunately Congress then proceeded to immediately increase spending causing the budget deficits. The Presidents signed those spending bills and are to blame along with Congress for doing so. It’s time to stop the spending and go back to lowering tax rates and allowing businesses to flourish and expand the economy. The net result of tax cuts has always been an increase of tax revenue. What part of that doesn’t congress understand?