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Economist Shayne Heffernan takes a look at Wall Street’s Big Lie, Apple Inc NASDAQ:AAPL

If we take a look at the Dow Jones Index, the NASDAQ and the S&P 500 and their performance over the last year we would be justified to reach the conclusion that things are not to bad, but a closer look shows that those numbers are fake.

What is really being reflected is the success of Apple Inc. NASDAQ:AAPL, the success at Apple is justified, it has done a great job of developing new products, and even a new industry, but that does not mean all of America is in good shape.

Regulators have Apple forming the major chunk of the Dow Jones Index, the NASDAQ and the S&P 500, the 64% rally in Apple this year has directly bolstered the the Dow Jones Index, the NASDAQ and the S&P 500 numbers to the point where they do reflect any semblance of reality.

With out Apple Inc those numbers are negative on the year.

While Apple is destined to hit $1000 and is the worlds most valuable company, it is not a company that reflects the USA economy. Production occurs in China, most of the Company’s money is kept out of the USA to lower taxes, legally and properly. For regulators to allow Apple to make up so much of the exchange is a deliberate lie to international investors.

As Research from Economist Shayne Heffernan of Heffernan Capital Management has shown

The current Apple Inc (NASDAQ:AAPL) Weighting is misleading global investors and institutions in relation to the state of the US Equity Markets.

Apple Inc (NASDAQ:AAPL) currently accounts for more than 20% of the NASDAQ-100, but that weight will be cut to around10% after the rebalance. On the S&_ Apple has an 18+ % weighting, this will be reduced to under 10%.

When this happens, Index funds will be forced to sell their AAPL holdings, this combined with the large number of retail investors in the stock will see the price fall to under $520 according to our calculations.

When this happens a number of smaller companies will rally as they gain some Index exposure, however the initial effect may be a sell off across the board, but better it is done now rather than when AAPL is $1000, which eventually it will be.

For now, calculations of fair value, Quarter to Quarter Earnings Growth, Quarter to Quarter Index performance can not be relied on as they are all skewed by Apple’s huge success.