Kenneth D. Gartrell

By: Kenneth D. Gartrell

Concerns that the New York Times and the Los Angeles Times have about the profits of ExxonMobil are pathetic. When will these organizations wake up to their own failings?

Both news organizations are on the brink of financial failure, and yet they do not see any connection between their consistent Socialist, anti-capitalist ideology and their own failure as businesses. Perhaps they resent being businesses and prefer instead to be the inside party organs (a sort of PRAVDA) for the left-wing radical agenda now controlling the American Democratic Party?

In any case, the profits being earned by American oil companies are astoundingly average (less than 8.5 percent of sales), and are barely capable, on an after-tax basis, of sustaining long-term capital growth.

The stock of the New York Times, meanwhile, is selling for a paltry $12.50 per share today, down from $45 per share in 2004. It tells us that the New York Times would rather berate the profits of vital (but average profit) companies, than focus on the nature of its own failures. Any objective, fair-minded person can understand that ExxonMobil has large profits in Dollars only because of the enormous assets it must employ to do business. If ExxonMobil is forced politically into paying higher taxes than the 49% it already pays, the only certain consequence is that they will be forced by capital markets to reduce investment, with the ultimate consequence of less oil on the market and higher prices at the pump.

Perhaps the “newspapers” see a higher calling than a fair return on capital for ExxonMobil and their own shareholders? Perhaps their own dedication to the unproven and over-hyped environmental agenda leads them to seek higher taxes on oil and gasoline, in order to discourage consumption and promote a reduction in civil freedoms in the name of conservation?

Whatever the central determinates of business and editorial policy at these papers are, fewer and fewer people buy both the New York Times and Los Angeles Times every month. It seems that both papers would have more concern about their lack of profits, and realize that their basic problem is that fewer and fewer people, largely because those people are more and more economically savvy, see value in the predictable and often meaningless articles that appear in these papers.

When I get subscription solicitations from these papers, I generally tell them I just do not eat enough fish or start enough wood fires to require either the New York Times or its subsidiary The Boston Globe. Maybe if they have their way on energy policy, I will have to burn wood instead of oil and stay home with nothing to do but read their papers, but as of today I am banking on their failure and not that of our highly productive market system.

Based on share price performance, it is clear that I am not the only one who believes that the New York Times and similar papers offer me too little for too much. It is very telling that at 75% of its highest valuation, there is not a single serious party interested in taking over the New York Times and rectifying their problems for shareholders. Their current performance is unsustainable for the future, and it is not unreasonable to expect the company will be forced to liquidate and reorganize. It will be a lesson well learned for the New York Times that you have to do something useful for people and you have to make your cost of capital to stay in business. Perhaps when they learn that lesson the hard way, their views toward the hard-working companies, who make an average return on capital invested, will find some moderation and balance.

That is… if they can find work?