Diversify

So as for running, as I think as I promised last time, there hasn't been any. I am still awaiting my orthotics (probably a week away yet), though I do go to the foot doctor for shock therapy #3 of 6 on Tuesday. My foot, from an ankle perspective, is feeling quite stellar. From a plantar fascitis point of view, not so good; the underside of my heel bone is quite angry. I've started socking again, and hope that a nightly tug on the old plantar will alleviate most of my heel pain as I prepare to start running again.

It's been awhile since I posted about money, moolah, change, cheese, greenbacks, etc., so here we go; I'm about to sale a lot of my company's stock. This article was brought up to me today, and it embodies what I've been feeling of late; we can't find oil. With the price of oil so bloody high, national oil companies (NOCs) are making it harder and harder for us to get access to their booty. In short, they would rather get the oil and gas themselves, instead of offering us, or any other international oil company (IOC), a piece of the pie. Most people think we make a lot of money from the sale of gasoline; we don't. Actually, our refining business isn't making much these days since the cost of oil that makes gasoline is so damn high. To some people's surprise, there has always been talk of the company getting out of the gasoline business. Instead, we would just suck the stuff out of the ground, and sale it to people who do nothing but refine it into gasoline and other products (Valero being the largest such example).

Our Upstream, the folks who find and suck the oil and gas, are making all our money. Since we are making a lot, the question is, what are we doing with it. Are we buying other oil companies? Nope, they are too expensive with the price of oil so high. Are we trying to get into new areas to find oil? Yes, but with limited success, as the most lucrative areas (Russia, Saudi Arabia, United States) are either off limits (the first two) or are limiting drilling (the good old US of A!). So instead we are ... buying butt loads of our own stock. Last quarter, the company purchased $8 billion (yep, with a B) of our own stock. Why?

Two reasons are popular. One, the company leaders feel we are under priced, so why not invest in ourselves. We demand a premium share price for its stock, more so than any other IOC, so that reason doesn't hold a lot of water. The second, and more likely truthful answer, is we don't have anything else to do with the money, so we buy up our own shares.

Why should I care, you ask? After all, if we buy our own shares, we have less dividends to pay, and can thus pay more for each dividend. The reason I care is share price is ultimately dictated by Wall Street's opinion of your ability to make more money than you have before. Without additional oil and gas to suck from the ground, we will be unable to make more money than we have in the past without a run up in oil prices. Though oil could go higher, many think we are reaching some kind of ceiling, or bubble, and the price is bound to decrease. For the first quarter of 2008, we produced 3% less oil and gas than in the same period of 2007; we are not finding and producing more oil and gas.

So without higher oil prices, and without more oil being produced, what is our future? Well, we will certainly still make gads of money, as we produce a lot of oil (though only 3% of the world's daily supply; the NOCs produce most of the world's oil). But, and this is important, we will not make more money, so one would think our stock price would go stagnant, or even decrease.

But what about the recent run up in our stock price (we've had double digit returns for the past five years)? Well, that is probably due to the recent run up in oil prices, which, one imagines, cannot go on forever. So what's the future of our stock price?

I'm not sure, really, but I'm no longer comfortable having 40 some odd percent of my retirement money tied to the company stock. The international fund that we can invest in has done well, and once the US is out of its current recession, that fund should continue to provide nice returns as the world's economy keeps on chugging along.

So in short, I'm not bearish on my company's stock, but I think it's time to realize that we may be entering a period of not so stellar growth. As a young man (don't laugh!), I'm all about capital appreciation. As I've pointed out to people before, the money I make before 35 is the money that will give me heat in the old folks home and fund whatever kind of late-life crisis I choose to partake in (I'm thinking a BMW M5 would be nice when I turn 60!). So sometime, maybe even tonight if I get around to it, I'm going to sale about 10% of my total retirement fund, all of it being company stock, and buy the international index fund. The international fund has been beaten down this year, almost as bad as the US markets, so it would seem I am buying low, a good thing.

Some will never fathom betting against the largest of the IOCs when the price of oil is around $120 a barrel, but long term, I think it's the right play. I've blogged such moves in the past, if for no other reason, so as to make myself be honest when I evaluate the value of such moves. Will the international fund out perform our stock over the next year? Should I just keep the status quo, and not muck with the formula that has my retirement fund plump and happy? If I'm wrong, I suppose I have a lot of race bibs I can burn if I don't have money for heat in the old folks home.