Originally Posted by jragosta
That doesn't make sense.
First, why would Apple take a 25% hit when even the most pessimistic estimates are that capital gains taxes would go up from 15% to 20-22%. Nothing more than a 7% hit would make sense if taxes were the reason.
Second, why would Apple stock be hit when other stocks that have risen rapidly are not?
It makes reasonable sense when you understand AAPL stock and it's historical volatility, combined with the state of the market now in light of the administration being reelected under the promise of "taxing a select few rich folks." That sounds good during campaign time to get one elected, but most of the American people actually fall into the "middle-class" — a group of people who know they're not going to outpace inflation by keeping their money in a liquid condition in a cash bank account, so they have mutual funds and other individual stock investments to keep their nest egg alive through the years. In other words, the middle class, in terms of the sheer number of people, are more impacted by a capital gains tax increase than the so-called "rich." As such, you're seeing a large number of every day, middle-class people who read the news, panic, and then selloff stocks. Of course there are the hedge funds and the rich folks who are doing that as well. And all of this influences Apple execs who are pondering very seriously about selling their stock or part of their stock sometime over the next couple years. And if you as an Apple exec want to sell over the next couple years so so can buy a new house or something fancy want, are you going to do that when you stand to lose the least amount of money to the federal government, especially when it's clear from the present financial crisis that the federal government isn't the wisest manager of money. And so, given the truth in that present situation, there is no logical reason to limit a stock drop to a mere "7%." You cannot always looked historical selloffs to judge an existing selloff.
Originally Posted by anantksundaram
Then put your money where your mouth is, buy some 1-years puts on AAPL, and move on.... and come back and tell us in a year how it worked out for you.
You made a huge assumption by suspecting that I did not do that. I in fact saw AAPL fall from near $700 per share levels down to $640 a share. I bought a few thousand dollars of additional AAPL stock at that time. I'm not really that concerned though, since I've been an Apple shareholder since 1999, never selling any of my shares throughout the years. In light of how well the companies doing, despite the stock drops, it makes sense to own the stock in anticipation of inevitable future gains. Nothing is ever "guaranteed" in the US stock market, but I still feel strongly that there's more potential for gain in AAPL stock than in many other stocks, and I say this as someone who owns many other stocks and who keeps an eye on the portfolios of rich folk like Bill Gates and Warren Buffett. Once the effects of this recent presidential election blow over, I see the stock doing well, heading towards $1000 a share again. And look at how well the stock is doing now, now that the initial panic has subsided. I'm still have a loss on the recent share purchase I made, but all my previous AAPL purchases have a combined closing in on 800%.
You may find some so-called stock analysts and experts who disagree with this assessment, but my own portfolio has been benefitted by the age old maxim, "patience is a virtue." If you are patient through the dips and continue holding your AAPL shares, the stock will eventually come roaring back. There's really no reason to think otherwise. Before he died, Steve Jobs left Apple with a lot of great ideas that are still yet unimplemented and unreleased. I think that extends beyond mere TV set. Plus, think of all the cash that Apple has, and think of all the sales that they're continuing to make despite the bad economy. Apple is also paying out dividends now, which has a big impact on those of us who holds a substantial amount of Apple shares, thereby encouraging people to retain the stock. That something important in light of the fact that most banks and CDs pay virtually nothing in interest now, and people are looking for ways to boost their portfolios to keep pace with inflation.
But as I've already said, in the short term anyway, there are a lot of people (including hundreds of thousands of Americans who both voted for and against for the current administration) who are making a decision to sell now mainly because of the current administration's promised to raise capital gains taxes combined with the fact that these people are not patient enough to retain the stock until a new administration comes in who will most likely lower the capital gains tax rates again at that time. I very strongly think that the selloff would not be occurring now if the current administration was going to maintain or decrease capital gains taxes.
Even after reading all this may not make sense to a lot of you, and on some level it doesn't make complete sense to me either, but the explanation is that most people tend to act like "cattle" whenever there's bad news and a tiny bit of a selloff occurring. But again, just hold the stock and it will come roaring back.Edited by JDW - 12/1/12 at 2:03pm