Manipulating Apple's Stock By Association
In recent weeks we've heard of big investors dumping Apple stock in numbers that most of us can't understand. Yes, Apple's results last quarter weren't up to their usual sky-rocketing returns, but a $50bn+ revenue and $10bn+ profit in a single quarter hardly smacks of a company that's on its way down.
So two questions: why sell the stock and why tell the world in such detail that you have?
The answer, I would suggest, is the reverse of the pump and dump scam that's been successfully deployed by so many decidedly dodgy characters.
Here's how I see it working. Investor A has a large position in Apple. By virtue of difficult trading positions its stock seems to have it its zenith - for now anyway. So how is a big money Capitalist going to ensure that their capital continues to grow? By dumping large amounts of stock onto the market, forcing the price down and then by telling everyone that they too should be getting out of Apple, forcing the price down further.
At some stage in the future, once the share price has fallen enough to allow for rapid growth (following the launch of the next iPhone for example) the stock can be re-bought in order to cash in on the upside.
Technically legal, but morally dubious behaviour.
Now let's take the flip side of the coin. One of Warren Buffett's investment managers at Berkshire Hathaway recently gobbled up $1bn of Apple shares on behalf of the company - at a share price of $108. However thanks to the dumping of shares by other investors the share price has collapsed and the buyer is down around $150m on the deal.
I suspect this is the reason why we're suddenly seeing 'Warren Buffett buys $1bn of Apple stock' headlines, as that investment manager tries to pump the shares by associating them with the big name investor and so recoup his losses.
So, unless you have an investment interest in stocks and shares, you really should take all the headlines about stock price movements and most valuable companies with a large pinch of salt.
Because for every stock trading success story there's a sucker taking a loss. Don't let it be you.