This isn’t a political blog so I’m not going to go into detail about the political primary scene taking place across the country. You can read about that elsewhere. But one thing has really struck me about the recent speeches and debates and it has to do with American companies.

Specifically, former Senator John Edwards attacks on ExxonMobil. He keeps saying that it is wrong that ExxonMobil made $40 billion last year. Somehow this is immoral when there are people without health insurance or food in our country and when average Americans can’t pay their rising heating bills. From the Edwards campaign:

“New England families are facing skyrocketing home heating oil and gasoline prices – all to fuel massive profits for Big Oil,” said Edwards. “As home heating oil prices are approaching a record-high, today families in New Hampshire are paying nearly three times as much as they did in 2000 for heating oil. Meanwhile, the top six oil companies have collected over $477 billion in profits over the past six years. Exxon Mobil, for example, earned $40 billion last year, the largest annual corporate profit in history.

$40 billion is such a huge number it’s easy to throw out there in a speech in order to illict a reaction in people.

How dare that evil oil company make all those profits! What is wrong with this country?

Yet- isn’t ExxonMobil’s success exactly what is right with America?

What do we want to have happen to our companies- that they all become like General Motors? Aka, losing money and losing in the fight against the foreign competition?

ExxonMobil is one kick*ss company. Yeah, they’re making gobs of money. But good for them. When crude was at $10 a barrel ten years ago, they were hardly making any profit and were eating into cash reserves. Where were the critics then? Did anyone feel sorry for them then?

It’s not every oil company that is making $40 billion a year. ChevronTexaco isn’t. BP Amoco certainly isn’t. Neither is PetroChina.

What’s wrong with ExxonMobil being #1 in its industry?

And if you want to tax ExxonMobil for its excessive profits then you’d better tax other companies that are making the same. That would include:

1. Microsoft
With at least $18 billion cash on hand and several billion in profits every quarter

2. Cisco
With at least $25 billion cash on hand and several billion in profits every quarter

3. Apple
They have $15 billion cash on hand. They are making money hand over fist right now

4. Hewlett Packard
They have about $14 billion cash on hand. They’ve struggled in recent years but what the heck, let’s tax them too because why do they have all that cash?

5. Berkshire Hathaway
Let’s not forget Warren Buffett. He is sitting on $40 billion in cash. Now THAT’S some cash. His sale of PetroChina stock netted at least $3 billion in profit last year. Why aren’t we taxing that?

You can see how absurd it becomes. Yes, it’s easy to single out the evil oil company. But technology is pretty darn “evil” too (if holding cash and making money is considered “evil.”) And all of this despite Google’s mantra to “do no evil.”

Hey- speaking of which, what about Google?

Their cash hoard is $13 billion and growing. They are making gobs of money every quarter.

When I look at this list I can’t help but think “wow.” That is American ingenuity and success. This isn’t a bad thing. It’s what makes this country great.

ExxonMobil is one of America’s great companies. Someone is going to make profits off of the spiking oil price. It might as well be an American company.

To ExxonMobil: Keep kicking some *ss. I salute you.

There are very interesting things going on in the technology sector right now. You can feel the excitement in the air when you mention one of the following stocks to investors:

Google
Amazon.com
Research in Motion (RIMM)
Apple

Amazon.com is at new multi-year highs, trading above $95 a share. The last time they traded that high was in, yes, you guessed it, 2000. It’s near an ALL-TIME high.

I don’t care how “high” a stock trades, as long as its valuation isn’t skewed. We do care about valuation, don’t we?

Amazon.com is trading at 132 times earnings.

It cannot, as we know from the first tech bust, be sustained. So why does the stock keep going higher?

Irrational exuberance. Investors are trading on pure emotion and disregarding the fundamentals.

Apparently, nothing was learned 7 years ago.

What about Google?

Google is making billions, unlike Amazon, and dominates its industry. It also has the ability to increase its margins (unlike Amazon). But the stock has gotten ahead of itself. Its market cap now surpasses that of Wal-Mart. Remember when Cisco briefly had the largest market cap in 1999-2000?

Yes- good times. But it didn’t last.

Google is trading at 45 times earnings. That doesn’t seem altogether pricey for a company that is growing as fast as Google is. But eventually the growth will slow down. As the stock price increases, it will be removed from fundamentals.

According to MSN Money:

If Google were in the Dow, the company would rank eighth in terms of market capitalization among the 30 stocks in the blue-chip index.

Its market cap is nearly as large as the five Dow stocks with the smallest market caps combined: Caterpillar (CAT), DuPont (DD), Honeywell (HON), Alcoa (AA) and General Motors (GM).

Apple “believers”

Lost in the Google excitement is that Apple has also reached an all-time high: trading at over $167 a share or 47 times earnings.

Apple is also in the nosebleed levels. Yet it too continues to just continually go up. Until they got the iPod, the company’s Return on Equity was pathetic. It barely registered. Even in the last two years it hasn’t been spectacular (though it HAS been good.) It’s been over 17 the past two years.

Research in Motion Puts Apple to Shame

How to value Research In Motion? Apparently no one is. Its trading at 92 times earnings. Again, how does anyone expect this to continue? They cannot- yet investors are piling in like there is no tomorrow. 31 million shares traded hands today.

Yes- the company has doubled its profits in the last quarter. They are likely to do so again as the Blackberry moves into China. But at that p/e ratio? That’s, again, nosebleed level.

Are we in a mini-technology bubble here? Or is it just crazy exuberance in a few stocks?

Tech isn’t dominating the way it once did (in 1999) but it was still quite scary to see “Google Passes $600″ on the front page of USAToday’s website. The “Google story” is dominating the news. You don’t see the media talking about the Chicago Mercantile Exchange and those great gains. (CME is also an expensive stock right now however.)

The herd is moving quickly into the tech names. The chatboards are active. Everyone is excited.

You can feel the greed.

Check out Eric Savatz’s great article in Barron’s called “Danger Signs: True Believers are getting more Fervent”. He lays out the greed pretty clearly. And it’s not pretty. From the article:

Henry Blodget is back, writing in a blog post that you can easily argue Google eventually will trade for $2,000 a share, which would give it a stock-market value of $750 billion — 50% more than ExxonMobil’s. This is familiar territory for Blodget, who first came into the spotlight with his famous bubble-era prediction that Amazon.com could hit $400, a price it promptly passed, if only temporarily.

Even more alarming: Not long after I wrote about Blodget’s call on my blog, I heard from two other people complaining I hadn’t highlighted previous outsized predictions for Google’s stock; they apparently want some of the credit Blodget now surely will get if it ever gets that high.

What really has me edgy, however, is the tone of the reader commentary on my blog, Tech Trader Daily. The comments lately are almost uniformly bullish; but bullish doesn’t begin to describe the supreme self-confidence, the absolute self-righteousness, that is seeping into the chatter. For a growing number of stocks, even a mildly negative word brings a torrent of attacks, which typically assert that I’m a short-seller, pump-and-dumper and stock manipulator who should be fired and tossed in the pokey.

Any time Henry Blodgett is again making predictions on a stock- I’m running the other way.

Don’t get sucked into the herd! Think contrarian. There are plenty of ways to make money in this market.

This is the Gateway computer stock chart from 1995 to the present. It isn’t pretty.

Trading as high as $84 at the height of the tech boom in 1999, it is now trading at $1.85. A few weeks ago, Gateway threw in the towel and agreed to be acquired by Acer. It is the best that can be hoped for Gateway shareholders.

While the brand is still recognizable (remember the cows?) and scores high in consumer surveys, there is, frankly, no way to make much money off of mass producing computers.

The CEO of Acer, the company that just bought Gateway, has taken heat from shareholders and the financial press since announcing the deal. In an interview with the Financial Times, he basically admits that they were making zero profits on selling computers in the United States:

The key argument that Mr Wang presents to make his case is that Acer’s growth would be unsustainable without the acquisition.

“What has vexed us most in the past year is that, although I make almost$3bn [in the US market], my profit has been very tiny,” he says.

He adds that the only way Acer could squeeze into the US market after years of failures was with net margins close to zero, a fact that has dragged down Acer’s overall performance.

The reason is the company’s weak brand recognition in the US, which, argues Mr Wang, would take up to $100m to improve, with no certain results.

Taking over Gateway, a trusted brand with 96 per cent recognition among US consumers, is a promising alternative, he says, and will hopefully allow Acer to lift its net margin in the US to 2-3 per cent within two years.

Wow- 2 to 3 percent margins? Sign me up to buy into that company right now. NOT!

So it makes you wonder: whither Dell?

Gateway has a powerful brand. It even had a charismatic founder who returned to the company to try and “rescue” it (much like Michael Dell is attempting at Dell.) Who doesn’t like Dell? I’m typing on one right now.

But the lesson is in the margins. How many computers do you have to sell to keep growing if all you’re making is 2 to 3 percent? A heck of a lot of computers.

Gateway and Dell are “tech” companies, or at least that was how everyone categorized them. In fact, Dell has been lumped in with the other “tech titans” (Cisco, Intel, Microsoft, Oracle.) But is it? Or is it just another manufacturer trying to sell a low margin product to the masses but that product just happens to have some computer components?

Be careful in investing in companies that have no way to improve margins.

Despite the dot-com meltdown seven years ago, there is a sizable percentage of the investing public who “still believe” that technology companies are the way to riches in investing.

And why not? Look at Google. It IPOs around $85 and is currently trading over $500. Not a bad return for only a couple of years.

But you can’t say the same for Microsoft, Dell, Oracle, Cisco and others (though with a few of them, you at least have made money if you bought it during the bust years.)

Many of the tech companies are solid companies with great earnings (ex: Microsoft.)

But what is the obsession with companies like Amazon.com? Barron’s talked about this this week. (Finally- a financial publication telling it like it is.) Once the darling of the dot-com boom (remember when analysts were calling for $600 a share?)- it was crushed during the tech bust. But there it was last week, like a rising Phoenix, shooting up over 20% in one trading session simply because it had pretty good earnings during the last quarter and beat estimates.

Let us remember- Amazon.com is nothing but a retailer. Sorry for all you “believers” out there- but it’s true.

They sell music and books (and a host of other things.) They are like Wal-Mart, only slightly more glamorous. There is no moat to someone entering in that business. Anyone can start up an on-line retailer (and examples abound such as footwear seller Zappos.)

Where is their pricing power then? There isn’t any.

The stock is now trading above 50 times earnings both this year and next. On what planet does that make any sense? It doesn’t.

Yet there are analysts saying that Exxon is overvalued because it’s trading at 15 times earnings. But I digress.

Why is Wall Street so clueless? I often wonder.

But you shouldn’t be. Don’t buy overpriced tech stocks because they seem glamorous. The largest stock market fortunes were made by buying insurance companies (see Warren Buffett and Geico.) No, it’s not glamorous in the least. But everyone needs insurance, right?

Boring isn’t necessarily bad. And yet some glamour stocks ARE good. But don’t be blinded by “belief” in the superiority of tech.