Cramer adamantly encouraged his groupies to sell AAPL ahead of earnings. The rationale is that the market is on a tightrope and it's better to sell ahead of the inevitable pullback. Take profits, pay the tax and move on. Sounds good on the surface.
But really, Apple has been as constant and bullish as any stock. Since hitting the low $50s last summer, AAPL has run up and pulled back to a measly $143 as of today. Is Cramer right to have investors attempt to time the market? Does he even believe in investing? The answers are no and no. He believes in trading. Everything's a trade. Even though though Cramer has a lot of sensibilities that work for many retail investors, is it really sensible to advise them to sell, get hit with a big tax, only to re-enter with a 10- or 15-percent pullback, if that? I could see selling a quarter of half of a position in Apple if there were big question marks about growth. But if you do the math, AAPL longs are quite possibly better off adding a small number of shares on any pullback this month rather than slicing them.
There's merit to taking profits, no question. But calling for an automatic sell just because ... well — just because Mr. Booyah says so — makes no sense when the numbers don't add up. Sell now, pay big tax. Don't sell for another year, pay a significantly smaller tax.With most stocks, I think that rule of thumb certainly applies. Sell the cost basis. Play with house money. But this is Apple, and Cramer's logic applies more to a street trader than us average Joes. After all, when a hedge fund or mutual fund makes a trade, there's no cost to them. It just gets passed along.
When the average Joe jumps in and out of stocks, he gets stuck with commissions. When it comes to AAPL, the rule is nonsensical.
Disclaimer: Pupule Paul is slightly long AAPL.
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