Filed under: International markets, Rants and raves, Exxon Mobil (XOM), Politics, Oil, Headline news
Last year I wrote a story in support of Exxon’s big profits, arguing that they were not incredible given the company’s size and that many other companies, big and small, had much higher profit margins. I could have re-posted the same story this year since Exxon Mobil (NYSE: XOM) reported similar results and the same short-sighted folks whined about it in the same knee-jerk reaction. The stock shut last Friday at $85.37 per share, up about 13% in a year, not including the 1.7% yield.
In last year’s article I even commented on the difficulty XOM faced in dealing with Mr. Putin and Mr. Chavez, and I guess my words rang all too true given the current mess in Venezuela. In order to play on the world stage, you have to be big and this is particularly evident in the oil business.
So I’m on record that I don’t mind Exxon’s size or profits. Let me go further and say clearly that I also support its lawsuit to freeze Venezuelan assets until XOM is compensated for the theft of its investment. If it weren’t for Exxon’s investment and technological know-how, the government and people of Venezuela would be a lot poorer.
That stated, I do not know the full extent of the agreements between Exxon Mobil and the government and I wouldn’t side with the oil giant if it could be argued that the agreements were so long and so one-sided that they took advantage of a disadvantaged, unknowing partner. That in fact may be the position of the Chavez government; however, I doubt it weighed as heavily as the political and financial issues. So the courts should settle it.
What got me thinking about the subject again wasn’t oil or profits but a very good article from the March 2007 issue of Smart Money by Roger Lowenstein. The article highlights foreign trade and all the benefits that flow from it. It talks against populist politicians who tell the masses what they want to hear.
The best example of this was uttered by former Republican presidential candidate Mitt Romney, when he told Michigan auto workers that he would restore their industry back to its old glory. That is not possible and he knows it. Perhaps this might have been expected of former Democratic candidate John Edwards, but alas they’re all capable of pandering to the audience.
Lowenstein reminds readers that this country was built by hard working immigrants and trade, and for Republicans to be down on immigration reform and Democrats to be bad-mouthing trade and business isn’t economically smart. He even points out a great example from history: “Two centuries ago politicians from Virginia, New York and Massachusetts had to be coaxed into allowing free trade among says.”
Many of our greatest companies are finding most of their growth prospects outside the United States. Isolationism contributed to the Great Depression and despite all the rhetoric, trade and immigration have only led to economic expansion and prosperity for American workers and consumers.
There is much more to be stated on the subject, but I’ll leave that for reader comments and, depending on the response, a follow-up post.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. To find potential opportunities and verify my track record, read Chasing Value or Serious Money. Disclosure: I do not own shares of XOM.
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