It’s not Apple, it’s the ‘fiscal cliff,’ stupid

“Surely you can’t be this dumb! You are if you believe that in a little over one month, tech giant Apple (AAPL) has miraculously become a bum and that everything that has been right with the company over the past decade has suddenly come to an end,” Richard Saintvilus writes for TheStreet. “This was pretty much my response to an associate when discussing the current status of the stock. He, as with so many others have, bought into the noise.”

“These self-proclaimed masterminds seem to have forgotten that Apple is not the only stock suffering, but it is the result of this looming threat called the ‘fiscal cliff,'” Saintvilus writes. “The presidential election is over. Though this event has answered several questions, still, it has left many unanswered. Anyone who has been in the stock market long enough knows that ‘uncertainty’ is its worst enemy. Consequently, investors have started to apply theory known as ‘the bird in the hand.'”

Saintvilus writes, “For those who don’t know, on January 1, there are potential spending cuts as well as tax increases that are anticipated to go into effect. This is known as the “fiscal cliff.” However, this can be avoided if a compromise is reached by Congress. The magnitude of this agreement is pretty significant as anything other than an agreement have economists projecting upwards of 5% drop in GDP. Should this happen, there is no way to avoid another recession — resulting in weak corporate profits and high unemployment. What’s more, there is also the threat of meaningful reforms to tax policies including tax cuts from former President Bush that are due to expire.”

“Likewise, there are payroll taxes as well as concerns over income tax rates that are likely to rise by 5%. Not to mention the threat of current tax breaks for certain businesses that may vanish. What’s more, equally impactful and perhaps the major cause of all of this selling is that capital gains taxes are expected to climb from 15% to 20%,” Saintvilus writes. “The so-called ‘fiscal cliff’ is bread in politics — created to force cooperation within our government as it relates to fiscal policies. It was not indended to beat up on Apple at every turn.”

Read more in the full article here.

55 Comments

    1. Actually it’s a little lower then the average for a tech company when looking at the price in ratio to earnings.

      I think the average is around 14 or 15, with Google at 20 and Intel under 10. Apple is currently sitting at 12.

      Amazon on the other hand is through the roof in this regard… Because of their loss, their P/E is over 2,500!!! And the stock is still going up!!!

    2. Ummm….revenue of $28.27 billion and quarterly net profit of $6.62 billion, or $7.05 per diluted share for 3rd qtr 2011 vs revenue of $36.0 billion and quarterly net profit of $8.2 billion, or $8.67 per diluted share? Maybe? With only marginal iP5 contribution?

    3. Nothing, and none of those, is so special; not even the earnings per share is so special. However, the earnings per share (EPS) helps in knowing/measuring whether a company is making money. Turns out Apple’s EPS is around $50 (yearly) regardless of Obamas or Romneys, regardless of tax breaks, regardless of (and this is the surprising factor about Apple and it’s products) horrendous economy, regardless of unemployment rate, regardless of, you get the idea (yes, it is expected that the EPS would be impacted by these factors, and you only know how much it was impacted when they report results each quarter).

      And if people is willing to pay for those EPS a factor of around 11 or 12 times EPS, it gives you a share price of $550 or $600 respectively. That simple. Sooo, Apple’s share price is not inflated around the $600 level. A 12x EPS is considered very reasonable or ver healthy money wise, means, your not being ripped off or you are not paying too much for what you get, plus the expectation the the EPS will increase in the coming years.

      Note that the yearly EPS figure is determined by multiplying the quarterly EPS by 4, because it’s a “projection” into the “immediate future”.

  1. All the rats jump ship first. All the people that don’t believe in our countries ability to stay an economic power is taking their money out causing this dip. I’m just bidding my time to purchase more stock.

    1. This is the first time I like the idea of Iran having nukes.

      Nothing short of a nuke on Washington D.C. will get rid of this illegal treasonous ghetto scum regime in the White House that is shitting on the US constitution every day.

  2. When you have a Black Jesus who thinks he can walk on water, what is a fiscal cliff to him? That is until the day he walks off the edge and discovers that his magical powers do not extend to flying. Falling off a cliff should crack a few numbskulls in the White House.

    1. You hit the trifecta.
      You’re a racist.
      You’re clueless.
      You’re a boob.

      And… Your score bonus points for thinking that your guy (who lost badly because most folks didn’t see what he was offering to be a substantively positive path for this country to take) would even consider you and your income level worth caring about.

        1. because the only people who call him the messiah (also black jesus) are right wingers. They dislike him. Since they are the ones who bring his skin color into it…

          haha nevermind. how does it feel to be so dumb you can’t figure out simple stuff? Let’s hear about why you can’t figure anything out some more.

          1. Plus, he’s only *half* black (not that that is really relevant to anything). Why don’t you mention his white half when denigrating him? THAT is another reason for it being racist.

    2. Dear Red States:

      We’re ticked off at your Neanderthal attitudes and politics and we’ve decided we’re leaving: “Legitimate rape” is almost reason enough!

      We in Oregon intend to form our own country and we’re taking the other Blue States with us.

      In case you aren’t aware that includes New York, Hawaii, California, Washington, Minnesota, Wisconsin, Michigan, Illinois and the rest of the Northeast.

      We believe this split will be beneficial to the nation and especially to the people of the new country of The Enlightened States of America (E.S.A).

      To sum up briefly:

      You get Texas, Oklahoma and all the slave states.

      We get stem cell research and the best beaches.

      We get Andrew Cuomo and Elizabeth Warren. You get Bobby Jindal and Todd Akin.

      We get the Statue of Liberty. You get OpryLand.

      We get Apple, Intel and Microsoft. You get WorldCom.

      We get Harvard. You get Ole’ Miss.

      We get 85 percent of America’s venture capital and entrepreneurs.

      You get Alabama.

      We get two-thirds of the tax revenue. You get to make the red states pay their fair share.

      Since our aggregate divorce rate is 22 percent lower than the Christian Coalition’s we get a bunch of happy families. You get a bunch of single moms.

      Please be aware that the E.S.A. will be pro choice and anti war and we’re going to want all our citizens back from Afghanistan at once. If you need people to fight, ask your evangelicals. They have kids they’re apparently willing to send to their deaths for no purpose and they don’t care if you don’t show pictures of their children’s caskets coming home.

      We wish you success in Afghanistan, and possibly Iran as well, but we’re not willing to spend our resources in these sorts of pursuits.

      With the Blue States in hand we will have firm control of 80% of the country’s fresh water, more than 90% of the pineapple and lettuce, 92% of the nation’s fresh fruit, 95% of America’s quality wines (you can serve French wines at state dinners) 90% of all cheese, 90 percent of the high tech industry, most of the US low sulfur coal, all living redwoods, sequoias and condors, all the Ivy and Seven Sister schools plus Harvard, Yale, Stanford, Cal Tech, Long Beach State, CAL, San Jose State and MIT.

      With the Red States you will have to cope with 88% of all obese Americans and their projected health care costs, 92% of all US mosquitoes, nearly 100% of the tornadoes, 90% of the hurricanes, 99% of all Southern Baptists, virtually 100% of all televangelists, Rush Limbaugh, Bob Jones University, Clemson and the University of Georgia.

      We get Hollywood and Yosemite, thank you.

      38% of those in the Red states believe Jonah was actually swallowed by a whale, 62% believe life is sacred unless we’re discussing the death penalty or gun laws, 44% say that evolution is only a theory, 53% that Saddam was involved in 9/11 and 61% of you crazy bastards believe you are people with higher morals then we lefties.

      We’re taking the good weed too. You can have that crap they grow in Mexico.

      Sincerely,

      Citizens of the Enlightened States of America

    1. I agree. I am not as smart as the rest of the pack here. But, it seems that investing is not going to stop in 2013 and beyond. So, if you buy a stock now and the capital gains tax goes from 15% to 20%, you are not affected until you sell the stock. RIght? From my rookie standpoint, Apple is not going away. Far from it. They are leaping forward with the absolute best products on the planet in their categories. Barring a worldwide catastrophe, consumers will continue to buy the best value. But, hey, if people run away from Apple and the price drops…that’s not a bad thing if you are going long. But, I could be wrong… There is still time to sell your AAPL holdings today. Run… Please. For the love of God run…

      1. That is one of the more reasonable comments I’ve seen for a while. Thank you 🙂
        There is no evidence that Apple have having problems executing. If fact their biggest issue is being too successful and having huge demand for their products that no company could deal with.
        I will stay long on aapl until I see that the stock is hyper-inflated. The last time that happened was just at the dotcom bubble burst and aapl was overpriced based on only the success of the iMac. Apple have multiple sources of revenue now and no debt. Very different situation from back then.

  3. Like Brando suggested the smart rats jumped ship already and have for months. They are waiting to get back in at a much lower price when the inevitable drop overshoots. It’s just business. Follow Buffet, tell them you love paying taxes but fight the IRS every step you can. Sell on greed buy on panic. Nothing personal Apple the hedge funds love you.

  4. The “cliff” is misnamed. It is more like a steep downgrade. The reality is that while the cuts and increases are due to kick in on Jan 1st, the effects of those cuts and increases won’t all hit at the same time, nor have an immediate affect. (except on the stock market)

    The political reality is that, assuming Obama sticks to his guns and insists that Republicans pay attention to the new reality post-election, there are at least a couple of months in which the politicians can wrangle and wrestle with coming up with a solution. That solution is called “compromise”, and it means that neither party gets everything they want.

    It’s the way the country used to work, before the Tea Party came along.

  5. It’s the fiscal cliff and the upcoming Obamacare taxes and the anticipated tax increase due to eliminating the Bush tax cuts etc.

    Just look at the massive layoffs that started this week.

    I think the Repubs should just support everything the Dems want. More taxes? Sure. Carbon tax? Sure. Then when we are deep in a depression the Dems can’t blame anyone. Of course, they will still blame Bush if they can.

    1. This is a great example of why the Dems just cannot win with some people. Do you want the deficit cut or would you prefer the US government to continue borrowing more than it can afford? Balancing a nation’s budget isn’t as simple as balancing your own account. Your inputs don’t change if you cut your spending, a government’s does. You can also cut your outgoings in one direction without it increasing your outgoings in another as a knock on effect. Not so with a government.

      There needs to be a delicate balancing act to close the fiscal gap. Tax rises and spending cuts together, but in small amounts originally so as not to force the economy back into recession. Then when the growth comes you keep tweaking the balance until hopefully one day the gap is gone.

      The Bush tax cuts in particular were always meant to be temporary, but they were unaffordable when implemented and even more unaffordable now. The House should work with the Senate and POTUS to commit to a gradual scaling back of the cuts over a period of three years or so, and in return the Senate and POTUS must commit to gradual spending cuts over the same period. Creating a crisis for the sake of creating a crisis might make great headlines, but it doesn’t help anyone, least of all the American people.

  6. The fiscal cliff hasn’t arrived fully yet. We’re still hanging over the precipice. The current administration claims to only want to tax the rich but he will let the Bush tax cuts expire. All will pay more and then he will try to blame the other party. Same with the January 1st defense cuts. A million or more jobs will be lost next year just with the defense cuts alone. If you still own Apple hold on for the ride. It’s too late. If you are lucky enough to be in a position to buy I would be patient.

    1. Very selective reasoning. Just the other day, “he” said “he” is ready immediately to agree to extending the tax cuts for those earning less than $250,000. It’s not just “he” who doesn’t agree with your world view. Even “they” (Americans – the majority – who don’t agree with you) made it clear this week that the right-wing is living in an alternate universe that is still stuck in some way-past era.

      1. Ask the 3 former buddies of Oscumbo that frequented the same Gay Club with Oscumbo.

        Funny thing, they all were found murdered execution style within 6 weeks shorty after Oscumbo ascended to the throne 4 years ago.

  7. Since this seems to be a political thread, I’ll try and contribute as well.

    The election that took place in America a few days ago was fascinating to watch, and the results are incredibly telling. The circumstances were set for a big Republican sweep: expectations were high for them to retake the senate and solidify the numbers in the congress (not to mention take over the presidency). That the result was opposite shouldn’t really surprise too many. Some twenty years ago, any mention of the Republican party always included the “big tent”. In other words, back then, the party was inclusive and flexible, and that brought in voters across the board. This election was to be a given, considering the general perception in the public that the administration is doing poorly, that the democrats aren’t able to get anything done and that change is necessary. Add on top of that over $600 million of conservative superPAC money for the presidential election alone (plus several billion for senate/house races), and it is, at first look, baffling how that didn’t translate into a clean sweep. When we look at the actual candidates, though, with their individual (and collective) platforms, it is clear that they were trying extremely hard to expand their quite narrow and very far right base, rather than figuring out how to reach voters close to the centre. Primaries have made sure that candidates that were capable of reaching such middle were eliminated and replaced by those who appealed to the far end, which ended with a logical result.

    The problem for the future will be mobilising similar amounts of money from those superPACs. Many of them will question the value for their money, as they weren’t getting much this time around. When the party cannot make gains in a situation where they command solid financial, as well as perception advantage, it speaks to the broad appeal of candidates they put forward.

    There are two ways forward: figure out how to move closer to the centre, without losing the base, or doubling down on the extreme end, in hope of widening that base. The party has less than two years to figure this out, or it will lose the congress too.

    This election was not so much won by the Democrats; it was lost by the Republicans.

    1. There will always be unlimited funds for Oblabla that he accepts from foreign sources on his web site like he did illegally in this election.

      An 109-page examination of “fraudulent and foreign online campaign contributions,” it points out three ways in which the Obama campaign may be receiving foreign funds, which is illegal.

      First, the report, titled “America the Vulnerable,” claims the Obama campaign “lacks the industry-standard level of credit card security for donations,” but “uses it for merchandise purchases” on the campaign store. Donors on the official Obama site don’t need to include their credit card security number, the three- or four-digit code found on every card.

      The Obama campaign previously claimed it doesn’t need that code — called the CVV — because “they are able to vet contributions on the back end using sophisticated techniques that it doesn’t disclose,” claims the report (the Obama campaign since said it uses an Address Verification System to verify credit cards).

      Second, the report highlights Obama.com, a domain that’s not owned by the Obama campaign but points to a campaign donation page. According to the GAI, a majority of traffic to that site has come from abroad:

      “In 2008, Obama.com was purchased by an Obama fundraiser living in Shanghai, China, whose business is heavily dependent on relationships with Chinese state-run television and other state-owned entities. According to industry leading web analytics site Markosweb, an anonymously registered redirect site (Obama.com) features 68% foreign traffic. Starting in December 2011, the site was linked to a specific donation page on the official BarackObama.com campaign website for ten months. The page loaded a tracking number, 634930, into a space on the website labeled “who encouraged you to make this donation.” That tracking number is embedded in the source code for Obama.com and is associated with the Obama Victory Fund. In early September 2012, the page began redirecting to the standard Obama Victory Fund donation page.”

      1. If it makes you feel better, then yeah, what you said.

        Even if any of what you say is accurate (and I have neither time, nor need to go fact-checking), at the end of the day, it was still no match (money-wise) to the formidable superPAC money. Not to mention that there is no doubt that solid amount of foreign money bankrolled the other side just the same. The “Citizens United” case opened the doors wide for any and all foreign monies to grease the wheels of American elections, with no oversight.

        The point is NOT about how much foreign money supposedly finances Democrats (and it is quite negligible, by the way); it is that the American corporate purse will always remain more powerful and more plentiful.

        In real democracies around the world, corruption on this scale is not legal the way it is in America. While in most of them elections are still bought and paid for, that is still against the law, making it much more difficult to do and therefore much less prevalent (and less influential) than in America, where law makes it perfectly legal for election campaigning to run up $8 billion dollar bill.

        1. It’s pretty amazing. He’s talking like an insane person. And here you are somehow responding in a long thought out manner befitting a response to an intelligent discussion.

          It’s fukn odd.

          1. Kind of like you and basic reasoning.

            If i were to choose, I’d go with dropping the notion of fact checking for the sake of a discussion with a mental midget. Why BOTHER? Then there’s you.. simple man. You think I’m wrong? He plainly said there was no need to go fact checking. That’s his forte.

            god dang. it must be brutal being you. you must miss lifetimes of opportunity with your reasoning ability.

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