For many, to suggest that Apple is a trading vehicle is tantamount to sacrilege. As a stock, Apple would be far more healthy of a vehicle once it has fully digested its tremendous gains of the past few years and instead of moving unintentionally for an extended period of time, demonstrated the ups and downs of most stocks.
The hype that its shares have received over the past year has undoubtedly lured investors in anticipation that shares would climb much higher. When the chorus is in unison about $1000, how many put everything in at $650? $700?
Hopefully those that are sitting on their tremendous gains have at least taken some profits, rather than watching them erode. FOr those that came in as the highs were being approached, they will find that it's much harder to see shares appreciate 30% to reach their break-even than it was for them to have fallen 25%
Since this article was forward looking, it can't qualify as a non-fiction piece, so I suppose it's already a novel of sorts.. But then again, many novels are thinly veiled retellings of real events.
Considering that the universe contains over 5000 reputable companies with publicly traded shares, that kind of comment can be made with any stock. As it is, your argument isn't very convincing to many who bought their shares after April 9, 2012.
No, it's just that there will be so much pressure for another new product home run that the expected good sales and new markets have already been discounted.
The idea of tax selling is an annual thesis, perhaps more heightened now because of the unknowns in the upcoming tax code, but typically those theses aren't borne out in reality.
In fact, the counter argument is that those having purchased Apple shares in the 600-700 range are holding off to sell until after the new year, in the chance that the capital loss rate will be higher, as well.
Believe it or not, there are people sitting on paper losses from Apple
When my kids received their first paychecks and moaned about taxes, I tried to impart the philosophy that the more you pay just reflects having earned more.
As much as I like the concept of being able to have some capital losses subsidized,I'd much rather be in a position to claim those positions as gains and pay those taxes.
I agree that $40 isn't on the immediate horizon, although there is some news today that China may have passed an inflection point and demand may start improving for copper. Tomorrow could just as easily bring a report on Chinese economic slow down, though.
In the meantime, with a $40 lot of shares, I'm fine with adding additional shares and selling calls on those to help offset the paper decline in the older and more expensive shares. When it comes to FCX, it certainly wouldn't be the first time, but this is one stock that history demonstrates patience is worthwhile
1. "Simpletons are Better" is the obvious corollary to this article 2. If I wasn't such a putz I'd buy puts, too. (If not from east coast you may have to use Urban Dictionary) 3. The Lost Navigator is twice as good when double spaced.
When I make a purchase, the row entries include the S&P price at the open of the day. When that stock position is closed the S&P 500 close of the day is recorded. I haven't gotten to the point of precision and real compulsiveness by recording S&P values at the actual time of purchase and sale.
But I made that as a highly qualified statement, saying "That's true as long as the market bias is upward or the shares in question outperform the market."
For the buy and hold investor a DRIP can be a long term positive strategy, certainly if the stock appreciates in value, but the return may be further compounded if shares are received at a discount, no commissions are involved and a tax deferred account is used.
My basic objections to dividends applies and I do agree with your assessment, but for those for whom inertia is difficult to overcome, there may be value to letting shares accrue
I will maintain that reinvesting accrued premiums from the sale of options (PRIP) is far better of a strategy than DRIP for a number of reasons. Firstly, future value may be enhanced by the greater frequency of premiums as compared to dividends. Receiving weekly or monthly premiums and re-investing in new or additional shares will fuel growth far greater than a quarterly distribution. Secondly, the relative distribution is greater for option premiums than for dividends. FInally, there is far greater opportunity for portfolio diversification when unencumbered cash is credited to one's account.
I seek to have each position generate a return that is 1% greater than the S&P 500 for the precise period of time that a position was open.
For example, if I owned CAT for a 5 week period, I would add the accumulated premiums from sale of options to the capital gain (or loss) from shares and also add dividends (if any) into the mix. I would then compare that return to that of the S&P 500 for that period.
Doing so is consistent with the goal of trying to create income streams from a portfolio, rather than being entirely concerned with its growth. Essentially, the technique is concerned with preservation, particularly during a down cycle.
During periods of normal volatility, I believe that a portfolio should be able to generate 3-4% income, exclusive of dividends, per month. During that time, the portfolio value may rise or fall, but you are generating realized income flows. During low volatility, such as we are experiencing now, that is more like 2%. Those figures are based upon using near or in the money strikes.
During periods in which there has been a sustained upward move, like the first 12 weeks of 2012, such a strategy may under-perform the market. But during a choppy period, such as the current quarter, you can be expected to out-perform, despite the lower premiums that are related to low volatility.
When it's all said and done and I look at the yearly statistics, assuming that I didn't do anything really stupid, such as having a poorly diversified portfolio, or having too much in speculative issues, I expect to outperform the index by at least 1% and am disappointed if it's not significantly more.
Apple Shares Are A Screaming 'Bye' [View article]
The hype that its shares have received over the past year has undoubtedly lured investors in anticipation that shares would climb much higher. When the chorus is in unison about $1000, how many put everything in at $650? $700?
Hopefully those that are sitting on their tremendous gains have at least taken some profits, rather than watching them erode. FOr those that came in as the highs were being approached, they will find that it's much harder to see shares appreciate 30% to reach their break-even than it was for them to have fallen 25%
Apple Shares Are A Screaming 'Bye' [View article]
Apple Shares Are A Screaming 'Bye' [View article]
Apple Shares Are A Screaming 'Bye' [View article]
Apple Shares Are A Screaming 'Bye' [View article]
The idea of tax selling is an annual thesis, perhaps more heightened now because of the unknowns in the upcoming tax code, but typically those theses aren't borne out in reality.
In fact, the counter argument is that those having purchased Apple shares in the 600-700 range are holding off to sell until after the new year, in the chance that the capital loss rate will be higher, as well.
Believe it or not, there are people sitting on paper losses from Apple
Simple Is Better [View article]
When my kids received their first paychecks and moaned about taxes, I tried to impart the philosophy that the more you pay just reflects having earned more.
As much as I like the concept of being able to have some capital losses subsidized,I'd much rather be in a position to claim those positions as gains and pay those taxes.
Simple Is Better [View article]
Simple Is Better [View article]
In the meantime, with a $40 lot of shares, I'm fine with adding additional shares and selling calls on those to help offset the paper decline in the older and more expensive shares. When it comes to FCX, it certainly wouldn't be the first time, but this is one stock that history demonstrates patience is worthwhile
I Don't Understand Dividends [View article]
Simple Is Better [View article]
2. If I wasn't such a putz I'd buy puts, too. (If not from east coast you may have to use Urban Dictionary)
3. The Lost Navigator is twice as good when double spaced.
Simple Is Better [View article]
When I make a purchase, the row entries include the S&P price at the open of the day. When that stock position is closed the S&P 500 close of the day is recorded. I haven't gotten to the point of precision and real compulsiveness by recording S&P values at the actual time of purchase and sale.
Simple Is Better [View article]
My followers have asked that I use a white colored font. It would make things easier.
Simple Is Better [View article]
I Don't Understand Dividends [View article]
For the buy and hold investor a DRIP can be a long term positive strategy, certainly if the stock appreciates in value, but the return may be further compounded if shares are received at a discount, no commissions are involved and a tax deferred account is used.
My basic objections to dividends applies and I do agree with your assessment, but for those for whom inertia is difficult to overcome, there may be value to letting shares accrue
I will maintain that reinvesting accrued premiums from the sale of options (PRIP) is far better of a strategy than DRIP for a number of reasons. Firstly, future value may be enhanced by the greater frequency of premiums as compared to dividends. Receiving weekly or monthly premiums and re-investing in new or additional shares will fuel growth far greater than a quarterly distribution. Secondly, the relative distribution is greater for option premiums than for dividends. FInally, there is far greater opportunity for portfolio diversification when unencumbered cash is credited to one's account.
Simple Is Better [View article]
I seek to have each position generate a return that is 1% greater than the S&P 500 for the precise period of time that a position was open.
For example, if I owned CAT for a 5 week period, I would add the accumulated premiums from sale of options to the capital gain (or loss) from shares and also add dividends (if any) into the mix. I would then compare that return to that of the S&P 500 for that period.
Doing so is consistent with the goal of trying to create income streams from a portfolio, rather than being entirely concerned with its growth. Essentially, the technique is concerned with preservation, particularly during a down cycle.
During periods of normal volatility, I believe that a portfolio should be able to generate 3-4% income, exclusive of dividends, per month. During that time, the portfolio value may rise or fall, but you are generating realized income flows. During low volatility, such as we are experiencing now, that is more like 2%. Those figures are based upon using near or in the money strikes.
During periods in which there has been a sustained upward move, like the first 12 weeks of 2012, such a strategy may under-perform the market. But during a choppy period, such as the current quarter, you can be expected to out-perform, despite the lower premiums that are related to low volatility.
When it's all said and done and I look at the yearly statistics, assuming that I didn't do anything really stupid, such as having a poorly diversified portfolio, or having too much in speculative issues, I expect to outperform the index by at least 1% and am disappointed if it's not significantly more.