Every week I bring to our readers some lesson about investing in Street University's Finance Professor Series. Also, I am an active writer for RealMoney Silver and answer questions every Monday on Stockpickr Answers.I am grateful to my readers, who take the time to email me their questions and comments. I try to answer everyone personally, but I apologize if I've missed some along the way. As I usually do every few months, I take some of those questions and share my answers with all my readers. 1. Very enlightening article re: regulations of market items and how to get around them. How can I get around the day trader rule? More seriously, why are the little guys like me being penalized just because the markets have fallen to point where our equity dropped below the magic 25K mark? I'm not a real day trader. I don't have the ability of time to devote to it as my career. But I could recover much faster if I would not have to hold my Baidu (BIDU) and other buys and sells overnight. --G.M. The Finance Professor: When it comes to most of these rules they are intended to protect the individual from themselves. This rule is intended to prevent small investors from turning into day traders and wiping out all of their savings. The reasoning is that if you want to day trade, which is seen as gambling by the regulators, you ought to have significantly more capital. Furthermore, trying to recover from last years market crash by day trading your way there is not a good strategy. Try to pick some solid stocks for mid to long term appreciation and as always keep an eye on them so you don't get caught in the pure buy and hold trap. Finally - thank you to everyone for joining our cause and signing the petition to the SEC requesting reinstatement of the Uptick Rule. 2. Several readers asked me about investing in master limited partnerships. TFP: I use MLPs for my LakeView Asset Management clientele who desire the higher cash flow associated with MLPs. These are not risk-free, and you must recognize the potential for capital appreciation or decline. My favorite name in this space right now is Kayne Energy Total Return Fund ( KYE), a closed-end fund that invests in MLPs. The stated distribution yield on Kayne is 10.6%, but please note that the fund also sells at a 12.23% premium to net asset value.
3. What do you think is the possibility that U.S. will have a funding crisis in the near future? For example, if the rest of world refuses to buy U.S. debt, the dollar will weaken and rates will rise. --C.W. TFP: I think there is too much of a tendency to look at the global issue with blinders on, from the perspective of the U.S. only. Many other nations, particularly in Europe, have far greater problems. If the rest of the world refuses to buy our debt, then one has to wonder: What will they buy? Russian debt? I think not. Gold is nothing more than a speculative asset that cannot buy anything other than hard currency. The sun set on the English Empire more than a century ago. Japan is now and never was as healthy as perceived. Which brings us back to the same question: Which hard currency and debt would you prefer? When I look at the total picture of global funding needs, I think that the U.S. will continue to have the best bid for its debt despite what its deficits might be. 4. I'm a sophomore accounting student at Bradley University. Though my major is in accounting, my passion is in investing and money management. I am at the age where it is crucial to gain knowledge and develop essential skills with regards to financial markets. With a full schedule of classes and a full-time internship, I do not have as much time as I would like for out of the classroom education. I am curious what you, as an accomplished financial professional, recommend as fields of study to focus the most on in order to achieve success in the finance industry. Though I should be well-acquainted with accounting by the time I graduate, I will have taken limited courses in economics and statistics, which I presume to be very important tools in the industry. Any advice or tips regarding education or career paths would be greatly appreciated. --D.O. TFP: You have hit on all of the academic aspects of becoming an investment profession that I feel are necessary. A few advanced economics course and a strong statistical/quantitative background would fill out the academic resume. Now what you need is some real life experience. I am not talking about working for a broker or money manager. In college, I worked in the New York City garment district during the summer and in a local stationery/convenience store (for those of you who went to The University of Pennsylvania, it was called Campus Corner) during the school year. Get some knowledge of what makes a business tick. Learn some sales skills. When you put the academic and practical all together you will become a success in your chosen field on Wall Street.
5. Could expand a bit on Skechers (SKX) with respect to your article about fad stocks and Skechers being an example of cash burn. Are your cash burn concerns more reflective of the recent cash burn (i.e., FYE08 to 1Q09), more long term or somewhere in between? I'm looking for a reason to separate Sketchers from the likes of Heelys (HLYS) and Crocs (CROX). --J.Z. TFP: I think you have to look at cash burn over a longer period of time. Be careful to factor in the nonlinear effect of seasonal cash burn. I would be most concerned if a company had several quarters of increasing sequential cash burn. As to Skechers specifically, this company does have some elements of a fad stock, but it has developed multiple product lines within footwear and thus is not a one-trick pony like Crocs. Also, Skechers has begun to offer clothing lines such as T-shirts, hoodies, pants and hats. As such, it is moving closer to a Nike ( NKE) (NKE) business model and away from a Crocs business model. 6. I have preferred shares of Lehman Brothers stock J series. They are now worth almost $0. Is there a possibility that if I wait for Lehman to come out of chapter 11, they could be worth something one day and pay a dividend again? --W.N. TFP: I am sorry to say that the possibility of that happening is slim to none. At best, if this isn't a retirement account holding, you will get a capital loss to write off on your taxes.