he Nasdaq 100 is poised on the edge of a tax hike. President Obama and his team are quietly negotiating with congressional leaders to get them to help reduce the rate on taxable securities. As this negotiation plays out in the background, the Nasdaq has received a heavy dose of bad news.
A big reason that the Nasdaq has been dealing with some significant downturn in the stock market is the fact that the Internal Revenue Service has slapped with large fines on a few of the biggest financial institutions in the past few years. This fine print was not communicated to the public through media reports. Only a select few insiders were privy to the juicy details. Now, though, the full scope of the IRS’s actions is becoming clear.
A lot of small-dollar stocks have lost a lot of value since they were listed on Nasdaq. These companies include insurers, hedge funds, oil drillers and airlines. All of these industries are feeling the impact of the new wave of “pay for play” regulations. They have had to dump large amounts of cash into their businesses and delay dividend payouts.
If this doesn’t sound like a big deal, consider this. Over the last decade, the top Nasdaq companies have paid out more than three hundred billion dollars in dividends. That’s a huge cash flow advantage that small investors can’t ignore. And that’s exactly what the tax hikes are supposedly aimed at doing.
It seems that every time the Federal Reserve raises interest rates, it causes a sharp drop in stock prices across the board. And small investors have no cushion to absorb the losses in the event that their stock takes a huge hit because of the Fed’s actions. The upside for savvy traders is that the volatility of the markets doesn’t go away. They can ride out the volatility until the Fed begins to raise interest rates again.
So how does one take advantage of the Federal Reserve’s latest move? There are several ideas floating around. One is to use what’s known as a “tax camouflage service.” This basically means you hire somebody who goes out and buys up shares of stock that are falling in price just so they can hide them from the Securities and Exchange Commission. This is a little-known practice that wasn’t available until the Nasdaq 100 was restructured. Now it’s easier than ever for savvy investors to take advantage of this and take advantage of a falling market.
Another option is to use what’s called a “pink sheet” to do the same thing. These are financial articles that are distributed to investors throughout the day and trade electronically. Because Nasdaq works with the SEC, pink sheets can’t be traded electronically, but they can be bought and sold electronically.
Last but not least, one very interesting tactic is for savvy investors to use what’s known as a “put program.” Basically, instead of investing in the stock market, you invest in a separate financial product. If the stock rises in value, you make money by selling that stock for a profit, even if the Nasdaq doesn’t suffer. It’s an exciting way to trade, but it’s not something that most investors would want to get into if they