NEW YORK ( TheStreet) -- Carl Icahn wants Apple ( AAPL) to borrow money to buy back shares. What he isn't saying is that he wants Apple to use its working capital to pump up the share price so he can sell at a profit. What's expedient for Icahn may not be in your best interest.
I'm going to let you in on a secret professional traders use consistently to profit in the market. In order to do so effectively, I need to explain a few characteristics of how the market works.
Fundamentals own the year; however, Apple investors know all too well lately that emotion owns the day. Unless you check your portfolio once a year, you're likely influenced by the day-to-day price changes in your portfolio. Sometimes (often in fact) positive or negative emotion can take on a life of its own and drive a stock well above or below fair value.
Investors rarely understand the magnitude a mob can drive a stock until it's all over and the dust settles. Then it's obvious, but too late. For example, Apple traded for under $400 not long ago, and we know by examining the volume traded that a lot of people were convinced it was a good idea to sell.
Fundamentally, it was clear Apple was worth more, but fear of further losses becomes overwhelming and shakes many out at the worst time. Typically, investors who remain are looking for something, anything to drive the price higher.
News that anyone, including the company itself, is buying shares is welcomed without regard to the long-term financial implications. That's the point where professional traders step in. Unless you sit at a trading desk listening to a news wire, you're the last to know when a company issues a buyback press release during trading hours.