US technology giant Apple has reported the biggest quarterly profit ever made by a public company.
Apple reported a net profit of $18bn (£11.8bn) in its fiscal first quarter, which tops the $15.9bn made by ExxonMobil in the second quarter of 2012, according to Standard and Poor’s
Wowww in one quarter Apple made 3/14ths of Fannie Mae’s $83 billion 2013 profits. Hey wait 3/14th is less than a quarter.
The record is the highest profit ever reported for a publicly traded corporation while Fannie Mae is closely held 80% by the US Federal government. It is a publicly owned corporation not a public corporation.
It is also generally agreed that publicly owned Fannie Mae is unnacceptable and must be privatized or, better, eliminated entirely. The public sector is just too inefficient although it makes the highest profits ever recorded, while competing with the private sector (oh and saving the US economy).
Technically, Fannie still is a publicly traded company. When Treasury had visibility into the gusher of profits that the GSEs were going to generate, they arbitrarily changed the terms of the Senior Preferred securities to sweep all earnings to the SPS rather than a normal flow of earnings to less senior securities. Hence the litigation from Fariholme, Pershing Square, and Perry Capital.
I’m unclear on the intent. Should I short apple or go long Fannie Mae?
Isn’t the real point to made here is why are there profits in the first place? The underlying micro-economics for the classical model (though not the neo-Keynesian) says there aren’t any. Profits are a sign of appropriated consumer surplus. Why are they considered a good thing?
no profits = no iPhones
you think they design them for fun?
amateur socialist — I hate to break it to you, but I am a professional socialist. I get paid to discuss the economy and economic policy. I am arguing that a publicly owned firm contributes to national welfare. The proposal to you as a citizen is to not support the privatization of Fannie Mae.
I note that if one hates taxes and think they impose dead weight losses, the one should love profits for the Federal Government which reduce the required tax burden. If one is completely indifferent to whether people own houses, one should have no problem with consenting adult home buyers, consenting adult mortrgage lenders and consenting adult Fannie Mae workers gettting their deal on.
Ideological hostility to state intervention in the economy is so strong that Fannie Mae is a dirty phrase. Especially the Fannie Mae bailout which added, oh in present value, carry the one roughly negative two trillion to the national debt.
If bailing out a failing government sponsored enterprise is that profitable, imagine how profitable Federal Government investment in shares of not yet bankrup firms would be. Note it would also be public ownership of the means of production AKA socialism.
Profits are not just rents. Accounting profits are also compensation for risk bearing. One can get much higher average returns investing in stock than in bonds. But I never did that ’cause I was scared. The US Federal Government has no reason to be scared.
Private firms could do what the US Federal Government is doing via Fannie and Freddie. Those private firms would go bankrupt if the housing market crashed again. Now the Fannie story leaves out the part about how ownership of Fannie would cause a huge Federal deficit automatically if the housing market tanked (or even if there were a huge recession for some other reason). This is a feature not a bug. It is called an automatic stabilizer.
Apple profits are quasi rents due to inventing cool stuff (and asesome iBrand management). Yes they show that there isn’t perfect competitoin. There isn’t perfect competition, largely because they have patents. The point of patents is to prevent competition and produce quasi rents in order to motivate R&D. They are the one and only intervention in the economy specifically allowed by the US Constitution. They work better than a free for all. Or, in short, what M.Jed said.