"If you gaze long into an abyss, the abyss will gaze back into you." Friedrich NietzscheI get so tired of folks that are too lazy to think things through, making sweeping nonsensical arguments about what is wrong with America.
One popular argument is that evil oil companies are destroying our economy and taking advantage of us all. Usually Exxon-Mobil (XOM) is cited as the biggest offender, raking in windfall profits and bilking us out of millions of dollars!
Did you ever think to wonder who owns Exxon-Mobil (XOM)? Some consortium of oil barons who sit on OPEC boards? Darth Vader himself?
Obviously, since the government doesn't spend enough money, a windfall tax on XOM makes perfect sense. The government can "steal" that money from the rich and spread it around to the rest of us or spend it on things we need, right?
No...pretty much the American public owns XOM. 51% of XOM is owned by institutional mutual funds that pretty much every American owns in their 401Ks and individual retirement accounts. The other 49% is held by investors that hold individual shares of XOM in brokerage accounts.
Exxon executives and insiders cumulatively own closer to 0% of the company than 1%. No one individual investor owns greater than .02% of the company. The largest institutuional owners include noted mutual funds Vanguard and such and also various ETF's and Spyders that are popular investment vehicles for retirement accounts.
If you look at a chart of XOM, you see that investors get a very modest 2.1% cash dividend ($1.60 per year for each share) and the stock price movement is very boring when compared to something like Google. For many years, the stock didn't move at all until it's recent swing up and now it's falling back down. Let's face it, nobody is making a fortune recommending a very boring XOM stock.
So, who is the evil oil company? We are....
Us who have bought mutual funds to save for our retirement over the years. If you look in your portfolio, I can almost guarantee that you own some XOM somewhere. Lots of pension funds own plenty of XOM as well.
So then, who exactly will benefit from the XOM stock price finally moving from $50 to $90 (it's currently at $73) after not really budging for years. Do us investors get it?
Not if government has it's way with windfall taxes on these companies. Government will try to steal our money and use a clever ruse to "blame evil oil companies". Oh, it sounds good as we fill our gas tanks with $4 gasoline. But lo and behold we look into the abyss and realize that the abyss is us...
Oil companies have small profit margins at 10% or less. Google has a profit margin near 30%. But government doesn't consider enacting windfall taxes on them.
Government thinks you are too stupid to realize this.
Are you?
1 comment:
Don't confuse people with the facts. It's much more comforting for them to have an enemy, "big oil" the so called "rich". Logic has nothing to do with it.
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