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Saturday, August 26, 2006

Weekend Edition: Exxon's Short Interest Rises

Stocks: (XOM)

The short interest in ExxonMobil went up this month by 12 million shares to 49 million. For a company that trades 23 million shares a day, that may not seem like much.

But, why lay odds against Exxon at all. Depending on who final numbers come out, it may top the Fortune 500 in revenue. Its market cap is $414 billion. In the last quarter, the company did $99 billion in sales and operating income of $18.6 billion, both substantial increases over the immediately previous quarter.

But, there are a few little issues lurking around Exxon. One is that oil prices may not go up forever. Gas consumption in the US and elsewhere is dropping off due to rising prices. It appears that BP will keep the Alaska pipeline open, at least partially.

There is also a move afoot in Congress. As the Fort Worth Star-Telegram wrote recently: One analyst, Paul Sankey of Deutsche Bank, asked (Exxon CEO) Hubble whether Exxon Mobil was concerned about "negative attention from Washington" in the form of proposals for excess profits taxes. Such a bill was introduced in Congress last year but has yet to receive committee approval.

Although the odds that such a bill would make it into law may be fairly long, if the rise in profits at the big oil companies continues, such an action in Congress is probaly more likely.

ExxonMobil's stock trades at $70, very near its 52-week high. Two years ago, the stock was at $45. For a company that has one of the largest market caps in the world, that is a real run. And, what goes up, must come down.

Douglas A. McIntyre

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