Drop in Apple stock blamed on anticipated capital gains tax hike [u]

Posted:
in General Discussion edited January 2014
After reaching a record high in September, Apple stock has suffered nearly eight straight weeks of losses as investors bail out ahead of potential capital gains tax hikes that could hit as early as next year.

Apple Stock
AAPL stock performance versus S&P 500. | Chart via Reuters


Editor's Note: This article has been modified to reflect the expected 2013 reversion to the 20 percent U.S. capital gains tax of 2003. This article incorrectly stated that the rate would increase to 35 percent.

As noted by Reuters, AAPL stock has lost a quarter of its value, underperforming the S&P 500 average which saw a 7 percent decline over the same period.

Since its mid-September high of $705.07, the stock dropped precipitously and closed Friday at $527.68, losing some $170 billion in market capitalization. The publication pointed out that the market cap dropped is worth more than the entirety of Coca-Cola.

With a market value of around $493 billion, Apple still stands as the most valuable company in the world and leads second-place U.S. stock Exxon by about $100 billion.

The stock's fall may be attributed to a dumping of assets as investors prepare for a likely rise in capital gains and dividends taxes as part of a program to cut the U.S. deficit. Also part of the supposed deal is a round of government spending cuts, however high-income taxpayers are expected to take the brunt of the increases.

Because of Apple's meteoric rise, investors could be looking to sell the stock now to protect against the feared capital gains tax bumps by locking in earnings to offset the higher rates next year. The current 15 percent tax on dividends and capital gains is scheduled to reset by the end of the year, and will change to the 35 percent rate levied on normal income.

It appears that uncertainty over how the government will handle the so-called fiscal cliff is dissuading investors from picking up Apple stock at its current relatively undervalued price.

Once legislators decide on a future plan and the U.S. fiscal outlook is solidified, Apple shares are likely to start gaining traction once again, as many analysts still see the stock as being worth between $700 to $850.
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Comments

  • Reply 1 of 134
    Ridiculous. All stockholders who want to churn their holdings will hopefully pay more taxes, including me if I decide to sell any of my stock holding. If I hold stock, the increase in tax on capital affects me not at all.

    It's not as though owning stock has any beneficial on the company or real investments to improve a company's productivity. That comes out of a company's revenue, not stock value.
  • Reply 2 of 134
    I don't believe a word of this. Afaik, capital gains rates are supposed to go from 15% to 20% (not 35%). That can't explain the 25% drop.

    I think it has to do, rightly or wrongly, with the market's perception that -- and an ironic one, at that -- Tim Cook is doing a lousy job of the supply chain and not making enough to fill demand.
  • Reply 3 of 134


    People don't expect Apple to grow as much, or their fast growth feels like old news. Or Android taking over by a large amount. Who knows. 


     


    I'm glad I didn't buy into the hype. Buy, buy, buy!!!


     


    Who knows. Psychology is a hard thing to understand.


     


    Could be the fiscal cliff and all of that psychobabble. Fear.


     


    Apple went down more than most?

  • Reply 4 of 134
    Utter nonsense
  • Reply 5 of 134
    solipsismxsolipsismx Posts: 19,566member
    I don't believe a word of this. Afaik, capital gains rates are supposed to go from 15% to 20% (not 35%). That can't explain the 25% drop.
    I think it has to do, rightly or wrongly, with the market's perception that -- and an ironic one, at that -- Tim Cook is doing a lousy job of the supply chain and not making enough to fill demand.

    The guy that made Apple's supply chain function so smoothly and efficiently despite their recordbreaking growth and success that landed Cook the position as CEO... is now gonna fail because Cook is CEO. Ironic, indeed.
  • Reply 6 of 134
    Clearly, the stock is being manipulated by hedge fund managers and other big boys to give them a buying opportunity. It should be illegal, but these guys are the top donors to both parties, so we all have to sit by and witness this theft.
  • Reply 7 of 134
    There are a lot of factors (and fear is a powerful one).

    At the end of the day, if you accept that Apple's growth will inevitably slow but that they'll continue to be in business for another 5 years, then the stock is simply undervalued and now is a decent time to buy.

    Sure, the stock might drop another 10% ... so perhaps you can try to perfectly time the absolute bottom (good luck to you), but over any reasonable long-term investor's horizon, you'll come out ahead.
  • Reply 8 of 134
    Apple's growth is only expanding and this drop deserves and SEC and DOJ Investigation into stock manipulation.

    This is a simple pump and dump and rebuy a stronger position before the HDTV hits the markets.
  • Reply 9 of 134
    hmmhmm Posts: 3,405member


    It's annoying when analysts try to reduce major stock drops to single factors. Potential for capital gains hikes is probably going to cause some people to sell, but that is a temporary effect. Even if they're locking in gains now, they will not just hold simply due to higher capital gains tax on future gains.

  • Reply 10 of 134
    @anantksundaram is correct, the capital gains rate is due to reset to 20%, not 35% as Mikey Campbell stated in the article, unless the rate is renewed.
  • Reply 11 of 134
    I don't believe a word of this. Afaik, capital gains rates are supposed to go from 15% to 20% (not 35%). That can't explain the 25% drop.

    I think it has to do, rightly or wrongly, with the market's perception that -- and an ironic one, at that -- Tim Cook is doing a lousy job of the supply chain and not making enough to fill demand.

    It is of course multiple factors, but for me personally I come out ahead on taxes (15/20% Federal, 10/13% CA) by selling if the stock is up less than 25-30% next year. With AAPL at its current levels, selling today seems pretty stupid, but if you sold at $600+ you likely came out ahead realizing long term gains in 2012. Most people don't really understand the math there.

    People who expect to not sell AAPL for the next three years for any reason are and were always better off holding and ignoring tax implications.
  • Reply 12 of 134
    The Democrats strike again. They won't be happy until they can turn their Great Recession into a Great Depression. Liberal Democrats were never happier than under FDR.

    And there's no question that's what's happening. The three state in the worst economic shape--California, Illinois and New York, are heavily Democratic. And Detroit, perhaps the worst major city in the country, hasn't elected anyone but liberal Democrats in half a century.

    Keep in mind another factor for Apple's stock fall. Many of those with Apple 'stuff' already have an older model. In this dismal Obama economy, they're going to be delaying upgrades.
  • Reply 13 of 134
    dasanman69dasanman69 Posts: 12,972member
    solipsismx wrote: »
    The guy that made Apple's supply chain function so smoothly and efficiently despite their recordbreaking growth and success that landed Cook the position as CEO... is now gonna fail because Cook is CEO. Ironic, indeed.

    Problem is not too many people know that. My buddy said yesterday "Apple is done" and I told him he should buy now because Apple's quarterly report in January is going to be astronomical. The iPhone 5 is 2 months ago and in most cases there's still a 2-3 week wait. People just don't get that Apple is unlike all other companies.
  • Reply 14 of 134
    tbelltbell Posts: 3,146member
    I don't believe a word of this. Afaik, capital gains rates are supposed to go from 15% to 20% (not 35%). That can't explain the 25% drop.
    I think it has to do, rightly or wrongly, with the market's perception that -- and an ironic one, at that -- Tim Cook is doing a lousy job of the supply chain and not making enough to fill demand.

    Yes, and perhaps that explains the Dow dropping from around 13, 800 to about 12, 500 in the same time period Apple's stock dropped? There is no way the market actually thinks Cook is doing a poor job. He has increased sales every quarter he has been at the helm and always meets Apple's own self guidance. It isn't his fault if sometimes market expectations are simply unrealistic.

    Further, there is no such thing as investing anymore. Investing is when you believe in a company and put your money into it to 1) help the company, and 2) get a return. Nowadays, however, brokerages loan out your shares to people betting against your investment thereby putting an incentive on those people to actively try to make the stock go down. That isn't investing. Shorting should be illegal as it undermines legitimate investing, and the true investors often times aren't aware their stock is being loaned out.
  • Reply 15 of 134
    dasanman69dasanman69 Posts: 12,972member
    inkling wrote: »
    The Democrats strike again. They won't be happy until they can turn their Great Recession into a Great Depression. Liberal Democrats were never happier than under FDR.
    And there's no question that's what's happening. The three state in the worst economic shape--California, Illinois and New York, are heavily Democratic. And Detroit, perhaps the worst major city in the country, hasn't elected anyone but liberal Democrats in half a century.
    Keep in mind another factor for Apple's stock fall. Many of those with Apple 'stuff' already have an older model. In this dismal Obama economy, they're going to be delaying upgrades.

    I don't know where you get your facts from but New York isn't in bad economic shape, and ummm isn't Arnold a Republican? What has he done to California? And how has Florida fared under good 'ol Jeb Bush?
  • Reply 16 of 134
    dasanman69dasanman69 Posts: 12,972member
    tbell wrote: »
    Yes, and perhaps that explains the Dow dropping from around 13, 800 to about 12, 500 in the same time period Apple's stock dropped? There is no way the market actually thinks Cook is doing a poor job. He has increased sales every quarter he has been at the helm and always meets Apple's own self guidance. It isn't his fault if sometimes market expectations are simply unrealistic.
    Further, there is no such thing as investing anymore. Investing is when you believe in a company and put your money into it to 1) help the company, and 2) get a return. Nowadays, however, brokerages loan out your shares to people betting against your investment thereby putting an incentive on those people to actively try to make the stock go down. That isn't investing. Shorting should be illegal as it undermines legitimate investing, and the true investors often times aren't aware their stock is being loaned out.

    All the amateur day traders are killing what the stock market is about. Buying one minute, selling the next and vice versa.
  • Reply 17 of 134

    Quote:

    Originally Posted by dasanman69 View Post





    I don't know where you get your facts from but New York isn't in bad economic shape, and ummm isn't Arnold a Republican? What has he done to California? And how has Florida fared under good 'ol Jeb Bush?


    1. You might check the current activities of Gov Cuomo in New York; apparently his maneouvre room on taxation is becoming severely constrained.


    2. Jerry Brown became Governor of California in 2010. His last budget was short by tens of billions, and three or four of his cities are entering bankruptcy.


    3. Charlie Crist succeeded Jeb Bush in Jan 2007, and was subsequently replaced by Rick Scott in 2011.


     


    Cheers

  • Reply 18 of 134
    tbell wrote: »
    Yes, and perhaps that explains the Dow dropping from around 13, 800 to about 12, 500 in the same time period Apple's stock dropped?

    I am sure you know enough math to know that it's nowhere near a 25% decline (since that would put the Dow at 10,350).
  • Reply 19 of 134
    tbell wrote: »
    Shorting should be illegal as it undermines legitimate investing.....

    Betting on bad news should be illegal!? What next? Newspapers should be legislated out of business? Whining should be made illegal? Sadness should be outlawed? :rolleyes:
  • Reply 20 of 134
    dasanman69dasanman69 Posts: 12,972member
    minicapt wrote: »
    1. You might check the current activities of Gov Cuomo in New York; apparently his maneouvre room on taxation is becoming severely constrained.
    2. Jerry Brown became Governor of California in 2010. His last budget was short by tens of billions, and three or four of his cities are entering bankruptcy.
    3. Charlie Crist succeeded Jeb Bush in Jan 2007, and was subsequently replaced by Rick Scott in 2011.

    Cheers

    Yes but both California and Florida were both in trouble before their current governors took office. Funny how this whole economic downturn started with a Republican in office and now we're supposed to believe a Republican will lead us out. The rich need to stop hoarding their wealth in order for the trickle down effect to work, I'd rather just give it to the middle class and let them do what they do best and spend that money which creates jobs.
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