- Joined
- 20 May 2011
- Posts
- 1,544
- Reactions
- 1
I'm referring to Apple making up a lot of nasdaq and even sp500. A lot of this rally has been Apple so far, and this might simply magnify it's effect.
International markets traders banter
- Thread starter Trembling Hand
- Start date
I'm referring to Apple making up a lot of nasdaq and even sp500. A lot of this rally has been Apple so far, and this might simply magnify it's effect.
So why will that "drag everything up so much" or how will it completely distort the market?
- Joined
- 20 May 2011
- Posts
- 1,544
- Reactions
- 1
Because it makes up a very large part of those indexes, so when it goes up the index is likely to go up (at least more so than otherwise).
It's like BHP and the asx200, but Apple is even bigger.
Then one failed product launch and bam.
I completely understand index components, and their size contribution moves to the overlying index.
What I don't understand, and not sure why you keep talking about index component size, is why you think Apple using their 'cash' will drag everything higher or completely distort the market?
- Joined
- 20 May 2011
- Posts
- 1,544
- Reactions
- 1
No; I'm saying Apple's share price is already distorting the indexes to some degree since it has gone parabolic and is arguably in a bubble. Through this it has dragged up the US markets and other markets rather unwillingly.
Should Apple should to use their very vast cash reserves to boost their share price directly, then the above will be even more so.
- Joined
- 11 September 2008
- Posts
- 844
- Reactions
- 0
I'm with Sinner here. Nothing has been distorted.
Apple is a bull phase. They make up a large part of the NASDAQ. When they go up, so should the NASDAQ. The NASDAQ has not been distorted.
The fact that other companies which are constituents of other indexes also go up on the back of Apple's rise does not necessarily mean that they have been distorted. It just means that some companies trend in line with Apple.
Many companies that make up the Dow Transportation average haven't gone up, we can't blame Apple for that.
Talk is that if Apple do pay a dividend, it will open the flood gates for a whole new breed of investor. There are a lot of pension funds etc that only invest in dividend paying stocks. Guess who will be number #1 on their list if Apple do announce a dividend. This is also the primary reason for the current rush into Apple stock for hedge funds during the past quarter.
Who would blame them if they can make 20%+ return while entering at all time high prices.
I guess you can say that all this blue sky talk in Apple is distorting what is really going on behind the scenes in the global economy. One company heading to the moon does not change the **** hole the global economy as a whole is in. However it sure as hell helps drag US indexes straight up as illustrated by the current quarters charts.
Edit: Obviously Apple isn't the only reason for stock indexes going straight up (Fed easing duh), but all one has to do is look at relative sector returns and tech is clearly out shining. And within tech, Apple is a clear leader this quarter and due to it's index weighting, has a decent flow on effect into other index components.
Thanks sammy. Even simpler than above is that:
NASDAQ (including Apple!) stocks trend in line with their corresponding portion of the economy. That is all.
As quantitative financial research has indicated at least a few times, momentum is a stronger phenomenon in stocks which have no 'futures backing'. e.g. momentum is stronger (and actually profitable) in Consumer Discretionary than say, Copper Miners because unlike the miners, there is no futures market which allows a 'live' evaluation of input profits, etc.
- Joined
- 20 May 2011
- Posts
- 1,544
- Reactions
- 1
That is precisely why I think it's a distortion. Then it becomes about analysing Apple more than the economy in terms of trying to figure out what the stock markets are going to do.
Furthermore, it is not only NASDAQ but the SP500 as well.
lulwut? Come on dude. The 'index' is not the economy, it's just a set of rules. In this case, the index rules are the 100 largest companies by weighted market cap. Apple fits that rule.
That is all.
If you find it problematic, why dont you use composite or equal weight indices instead, like NASDAQ composite, NYSE composite to 'analyse the economy'? For the record, the equal weight QQQ looks not that different from the regular Qs, so I'm not really sure how valid your Apple claims are.
Of course this is what happens when you take your view verbatim from the blogosphere without checking against reality...
- Joined
- 20 May 2011
- Posts
- 1,544
- Reactions
- 1
The issue is not the weighting so much as the fact that Apple stock is in a bubble.
Ok mate, no worries I am clearly having trouble understanding your point after a page of discussion.
I thought we were talking about this
- Joined
- 20 May 2011
- Posts
- 1,544
- Reactions
- 1
That simply means at the most fundamental level that such actions by Apple will cause their stock price to rise much higher - well ahead of what it would be otherwise.
This in turn will push the sp500 and nasdaq higher than otherwise. None of this will have anything to do with future earnings growth which stock markets are meant to track.
Savy?
This in turn will push the sp500 and nasdaq higher than otherwise. None of this will have anything to do with future earnings growth which stock markets are meant to track.
Savy?
Err right. Apple pays dividends, thereby reducing their market cap significantly, which in turn reduces their weighting on the indices, which in turn induces selling of Apple by recalibrating index funds...and somehow this process will shoot Apple shares "much higher".
Buying back shares might boost EPS but I don't see how it will have any "much higher" affect on the share price.
- Joined
- 20 May 2011
- Posts
- 1,544
- Reactions
- 1
Speculative bubbles tend to do that.
- Joined
- 1 May 2007
- Posts
- 2,904
- Reactions
- 52
An announcement of a buyback might have a positive effect initially, but after that why should it rally?
Share buyback means smaller market cap if prices stay the same... ie less shares on issue.
Share buyback means smaller market cap if prices stay the same... ie less shares on issue.
That's exactly what I'm having trouble with. The market has known of Apples large cash position for a long time now and speculation that they would do something with it for just as long. What possible announcement could occur that isn't anticipated?
Where is skc when you need him...
- Joined
- 11 September 2008
- Posts
- 844
- Reactions
- 0
They plan to use the excess cash to buy half of Google.
- Joined
- 1 October 2008
- Posts
- 3,733
- Reactions
- 391
No. They should buy Hollywood.
Apple TV - the last frontier.
Imagine if they did with that what they did to music!
professor_frink
Moderator
- Joined
- 16 February 2006
- Posts
- 3,252
- Reactions
- 5
I'm lightening positions up at the these levels. Recent rally has run up at a speed I'm not entirely comfortable with.
At best I reckon we track sideways for a couple of weeks
At best I reckon we track sideways for a couple of weeks
Similar threads
