Originally Posted by Marvin
If the share values were tied to earnings they could, which is what I was suggesting. Right now they aren't, which is pointless because people are just trading on the perception of worth. It doesn't matter how good Apple does financially, if people don't think they're going to keep improving at a certain rate, they lower their value of them but in the end, people are in it to make money. Apple is making money (unlike Amazon) so it's completely backwards to have investors in them lose money when they do well and have investors in other companies make money when they perform poorly. That is a broken system.
Share value HAS to be tied to 'perception of worth' ie. value of the firm. Markets are valuation mechanisms. Whether it's a street market in a 3rd world country or capital markets in NY, Hong Kong, Paris and London, markets are systems that determine value (ie. market cap).
If you want Apple to spread the wealth, lobby them to increase the dividend. Because real income in the form of dividends is how public corporations are supposed to act once they're 'mature'.
I don't know what you know about economics or the financial system (doesn't sound like alot) but what you're proposing simply can't work. It's akin to trying to impose communism on the capital markets...
Apple is still doing better than them though. Saying that the market caps make them different is circular reasoning as the market cap is based on the share value. How is it rational that having a high market cap causes share price to fall under certain circumstances but under poorer circumstances causes the share price of a company with a lower market cap to rise?
What you seem to be calling rationality is the determination of investors' perception of worth, which is really not much more deterministic than being able to spot someone's poker face.
If it's so rational then there's a simple, rational explanation for the sharp drop. What is it?
Market cap IS value. Share price is nothing more than market cap divided by outstanding shares. So value (ie. market cap) is what we care about. Apple's high market cap didn't cause the share price to fall, rather, Apple reached a level of value that the market didn't think they're worth in the long term. So they sold their shares, and because of supply/demand dynamics the value of the firm went down.
In the case of Amazon, their valuation is equal to or possibly less than the market thinks the company will be worth in the long term, so the share price rose/stayed high.
Now, valuation determines potential growth because the bigger you are, the harder it is to find growth. This is a general rule of economics, it's why India is growing faster than the U.S. or Canada, even though the U.S. and Canada are much richer countries.
I saw this while I was posting and that is what I expected was the answer to my questions before. I still don't think that justifies a drop otherwise other big companies with poor or no growth would drop too and Apple is still doing really well.
Dividends are the answer to this. Microsoft's valuation has been more or less steady because they pay a very healthy dividend (5% yield). Most large companies that are profitable but not growing pay dividends, so for funds and risk-averse investors, they can invest in these companies and make risk-free income.
If Apple instituted a dividend at 5% yield, you can bet you'd never see their share price dip below that level until the end of time, as long as the dividend gets paid and doesn't decrease.