Corporate Profts are dirty - how about yours?

ExxonMobil recently reported record corporate profits of $39.5 billion dollars. This was on sales of $377.5 billion. Our astute Senator, Mrs. Clinton, has called for the government to "take those profits" and put them into an alternative energy fund. I think this is called Totalitarianism, but Hillary would never admit that. To her the money a big corporation makes is unethical and illegal.

Most Americans understand little about capitalism and how it works. They have become deeply suspicious of corporate profits and think that big corporations are evil - polluting the skies, stealing from the poor and taking jobs from hard working Americans and giving them to slave labor in Asia.

But Corporations are rational entities and the goal of every manager is to use the dollars that he has been given by shareholders as wisely as possible. Just like in the Biblical story of the Parable of the Talents, each manager is intent on getting the best return for his lender. Sure, there are some unethical people in companies, but there are just as many or more that operate unethically on a personal level. Most Corporations have checks and balances to help people act ethically, so they may, in fact, be more ethical than the general population.

I think that there is a disconnect between what people say and do in their personal lives and how they think about corporations. In every transaction that we engage in throughout our personal lives we try to maximize our profits. You buy a house for $100,000 and sell it at market price 2 years later for $200,000 - do you protest and and rant about your "individual greed" or do you turn around and reinvest your profits into another house? And when you find a collectible at a garage sale for $10 and re-sell it on EBay for several hundred dollars are you "evil" because you got the price the market valued your item for? Then why do you rant when gas prices go up due to market forces?

So what is the difference between your behavior and that of the corporations? At least the Corporation will report their profits to the IRS - do you always do that? Exxon's profit margin was less than 10%. This is pretty small when you consider the risk involved in finding new sources of oil (often in unfriendly countries), and investing billions in refineries. As an investor, I think their return is too small and risk too high for me to invest in their company.

Money (capital) will always flow to the best returns. When you invest in the stock market are you looking to take the most risk for a low return or do you calculate how much risk you are willing to take Vs the return you will get? Companies follow the same logic. If we make it too difficult for a company to make a profit, the investors will put their money elsewhere. We can see that here, where no new refineries have been built in the US for over 20 years. Then we wonder why a hurricane, that shuts refineries down, can cause gas prices to go up.

Winston Churchill once said "Democracy is the worst form of government except for all others".

If no one else has said it, then someone should make the same comment about capitalism - it is the worst economic system, except for all others.