“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.