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Comments on activity in client accounts

20 January 2017

Today we abandoned retail as we sold GPS for a scratch, and half our Ascena position for a 20% loss. We are still ahead on our overall trading of the stock. We are watching the change of power and happy to have an overly large cash position.

Some ideas:

http://www.businessinsider.com/ray-dalio-populism-scares-me-2017-1

Hedge funds are making 'extreme' bets on the impact of Trump

http://www.businessinsider.com/hedge-funds-positioning-for-trump-2017-1/

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14 January 2017

During the week we switched Macy's at a too large loss to a one half position in The Gap. Macy's is saddled with a comparison to Sears - which isn't fair but is a reality - and with our view that markets may be topping we decided to abandon ship. The Gap had great same store sales numbers at Old Navy and decent ones at The Gap while Banana Republic not so much.

We have traded retail profitably over the years but the last few have been the most difficult given the emergence of Amazon and online retailing. This year may be our last go around on retail stocks but for now we will stick with our GAP and Ascena positions.

We also reduced our Marathon Oil holdings buy half since oil seems to have stagnated at the plus $50 level. We still have an outsized positon in oil relative to our portfolios and will maintain it.

The Trump era begins next Friday. ☺ We hope.

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When u run out of borrowing power just call on a few rich friends to keep on buying:

http://www.wsj.com/articles/the-wall-street-trader-behind-softbanks-100-billion-fund-1484087822

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6 January 2017

With the bounce after the New Year we took trading gains in Stratasys, Ford, Gap, and scratched on Fitbit. We added to Macy's when it plunged on same store sales down 2% for the quarter and lowered expectations for next year. Earnings for 2016 are now expected around $3 down from the $3.25 forecast of a month ago.

Macy's is going to close about 100 of its 800 plus stores; layoff 10,000 folks and sell some real estate. The big boys and girls knew about the store closings and layoffs but didn't like the same store sales drop and earnings forecast.

With the share price down from $75 in the spring our view is that the company price has been punished enough.

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US wages in December rose at the fastest pace since mid-2009, according to the Bureau of Labor Statistics' employment report released Friday.

Average hourly earnings increased by 2.9% year-on-year. The economy added 156,000 jobs in December, which is fewer than expected but extends the record streak of job creation in the US.

Economists had forecast that nonfarm payrolls increased by 175,000.

The unemployment rate rose to 4.7% from 4.6% as the size of the labor force increased.

The labor-force participation rate ticked up to 62.7% from 62.6% but remained near its lowest level in several decades. There are several causes for the decline. An analysis in August by the President's Council of Economic Advisers suggested that about half of the drop had come from structural, demographic factors, with the baby boomers, an immense cohort of Americans, starting to retire.

http://www.businessinsider.com/us-jobs-report-december-2016-2017-1

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The Macy's/Cramer saga

5/11 2016 Cramer hates Macy's

Macy's (M) stock is plunging in late-morning trading as its quarterly decline in same-store sales proves that the company can't overcome aversion toward mall-based retailers, Jim Cramer says.

https://www.thestreet.com/story/13567374/1/more-squawk-from-jim-cramer-macy-s-m-mall-based-retailers-near-obsolescence.html

8/11/2016 More Squawk from Jim Cramer loves Macy's again

Macy's (M) Is a Trading Buy

https://www.thestreet.com/story/13672685/1/more-squawk-from-jim-cramer-macy-s-m-doing-some-self-help.html

9/14/2016 Cramer loves Macy's

NEW YORK (TheStreet) -- Shares of Macy's (M) were advancing in early-afternoon trading on Wednesday after Citigroup upgraded the stock to "buy" from "neutral" given its free cash flow and dividend yield.

"I like this call," TheStreet's Jim Cramer said on CNBC's "Squawk on the Street" this morning.

https://www.thestreet.com/story/13728568/1/more-squawk-from-jim-cramer-macy-s-m-upgrade-a-good-call.html

1/5/2017 Cramer says Macy's has no reason to exist

So, when it came to Macy's and Kohl's, Cramer wondered what the point of their existence even was. He would rather just go to Amazon or the boutique stores in the mall that cost a fortune, but can help him pick out something nice for his wife.

"Macy's is the third-largest online seller in its categories after Amazon and Wal-Mart, but that doesn't pay the rent," Cramer said.

There is still room for ultra-specialty retailers, but that is only because the elite one-percent has to shop somewhere, he said. They won't dish $10,000 for a pair of earrings without seeing them in person.

Mass merchandise, even the higher-end kind from Saks or Nordstrom, on the other hand, doesn't cut it. If a shopper knows their size, they can just buy the item online or from Amazon.

"Everyone is too cheap to shop at the mall. It's just too inconvenient unless you are uber-wealthy and need to see the ultra-luxury wares in person before buying them," Cramer said.

And if Macy's and Kohl's haven't figured that out yet, Cramer fears there just might not be a solution.

http://www.khadashot.com/cramer-figures-out-what-macys-and-kohls-dont-understand-about-retails-vicious-implosion/

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Analysts Throw In the Towel on Macy's; Shares Sink 14%

Brett Hershman , Benzinga Staff Writer

January 05, 2017 12:33pm Comments

Coming off a disappointing holiday season, Deutsche Bank is throwing in the towel, shoes and handbags on Macy's Inc. M 13.87%. At time of writing, shares were plummeting over 14 percent on Thursday.

Macy's announced it would be closing 68 stores and cutting over 10,000 jobs following a weak showing during the holidays. Same-store sales came in at -2.1 percent.

Analyst Commentary

Commenting on the figures, Deutsche Bank expressed surprise that Macy's CEO Terry Lundgren guided 2017 comp as in line with holiday results.

"In our view, this discouraging 2017 forecast reflects the realities of market share losses to off-price retail and other online threats with the pace of store rationalization and monetization just not fast enough," said Deutsche Bank.

Improvements by off-price retailers TJX Companies Inc and Ross Stores, Inc. combined with e-commerce growth, have been cannibalizing old-fashion department stores Macy's, J C Penney Company Inc and Sears Holdings Corp, which just announced it would be closing 150 stores as well and selling the Craftsman tool brand for $900 million.

Deutsche Bank noted that while management did have some good performance in streamlining operations and reducing expenses, core earnings ex-real estate were declining at "an alarming pace."

The German bank lowered its price target to $34 from $47 and downgraded the company to a Hold from a Buy.

Latest Ratings for M

Date Firm Action From To
Jan 2017 Deutsche Bank Downgrades Buy Hold
Nov 2016 OTR Global Upgrades Negative Mixed
Oct 2016 Deutsche Bank Upgrades Hold Buy

http://www.benzinga.com/analyst-ratings/analyst-color/17/01/8872697/analysts-throw-in-the-towel-on-macys-shares-sink-14

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How companies decide to close stores? It's not just the weakest stores that get chopped

http://www.cnbc.com/2017/01/06/losing-your-sears-or-macys-its-not-just-the-weakest-stores-that-get-chopped.html?__source=yahoo|finance|

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Current stories that remind of stories we read in January 2000 before the large correction:

Report: Snapchat ad revenues to reach almost $1 billion in 2017

Posted Sep 6, 2016 by Sarah Perez (@sarahintampa)

($20 billion valuation for $500 million revenues- not earnings-revenuesJ)

A new report out this morning from analysts at eMarketer is forecasting explosive growth for Snapchat's ad revenue by next year. The firm estimates the mobile social application will generate $366.69 million in 2016, but that figure will grow to $935.46 million by 2017 – a jump it attributes to Snapchat's ability to reach younger millennials, a wider ad portfolio, and ad targeting improvements.

The $366.69 million in 2016 is a bit higher than the internal goals Snapchat had reportedly set for itself this year, according to a report from Recode this spring. Sources had told Recode that Snapchat was targeting between $300 million and $350 million in revenue this year, up 6 to 7 times from the $50 million it projected last year.

The $1 billion estimate, meanwhile, lines up with details found in Snapchat's leaked presentation deck, which predicted revenues between $500 million and as much as $1 billion for 2017.

Snapchat has grown its ad business significantly this year, with new products like Snapchat Partners, its advertising API, which allowed Snapchat ads to be sold by third parties. eMarketer also cited a broader portfolio with a wider array of video ads, as well as more sponsored geofilters and sponsored lenses.

Currently, Snapchat's Discover feature generates the largest share of the ad revenues (43%) in the U.S., says eMarketer, but it expects Stories to overtake Discover next year, to generate 37.8% of Snapchat's U.S. ad business. The U.S. right now is also critical to Snapchat's ad business, accounting for 95% of its ad revenues. But eMarketer estimates that a quarter of its ad revenues will come from outside the U.S. by 2018.

The company is also able to reach a coveted, younger demographic, the report says, which is why it's poised for growth.

"Advertisers are attracted to Snapchat for its broad reach among young millennials and those in Generation Z, which are valuable demographic groups for many businesses," eMarketer principal analyst Cathy Boyle says.

Today, Snapchat has a 31.6% share of social networking users in the U.S., but only 2.3% of the social network ad dollars given that its ad platform only launched in mid-2015.

The challenge for Snapchat now is convince advertisers it can offer a better return on investment than other networks.

"Snapchat has improved its targeting capabilities and partnered with 11 measurement firms to address the concerns voiced early on," said Boyle, referencing the criticism Snapchat's faced initially regarding its ad offerings. She added that it faces challenges with Facebook and Twitter in particular when it comes to targeting and ad measurement.

https://techcrunch.com/2016/09/06/report-snapchat-ad-revenues-to-reach-almost-1-billion-in-2017/

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AOL and Time Warner merged in March 2000- How did that work out? it was all about synergies- fun fact, Verizon now owns AOL.

AT&T and Time Warner have agreed to an $85 billion deal -- one of the biggest media tie-ups ever.

The move, announced Saturday evening, will help AT&T expand beyond wireless and Internet service into programming. Time Warner (TWX) is the parent of CNN, TNT, HBO, the Warner Bros. studio, and other channels and websites.

AT&T (T, Tech30), which dates back to the invention of the telephone in 1876, is one of the country's largest providers of wireless phone and Internet service. It also recently acquired the DirecTV satellite TV business.

The deal will be subject to a review by government regulators that could take more than a year to complete.

AT&T will pay $107.50 a share -- a big premium over where Time Warner stock was trading last week. Including Time Warner's debt, the deal's value is $109 billion.

http://money.cnn.com/2016/10/22/media/att-time-warner/

Here's Why AT&T and Time Warner Is Worse Than the AOL-Time Warner Deal

Mathew Ingram

Updated: Oct 24, 2016 2:13 PM Central

Now that the offer is official, many have drawn the obvious comparison between AT&T's proposed $100-billion acquisition of Time Warner and the disastrous combination of Time Warner and AOL in 2000. But the current deal may actually make even less sense.

How is that even possible, you might ask? After all, AOL's $164-billion takeover of Time Warner still stands as one of the worst deals of all time and for good reason.

But at least the combination of Time Warner's media and cable assets with AOL's online business was theoretically about trying to become part of the future of media and entertainment. Its influence was already waning at the time, but AOL had a foot in the emerging world of the Internet, and theoretically some knowledge about how it worked.

The collapse of that merger had more to do with a clash of cultures (something Time Warner CEO Jeff Bewkes was a part of) than it did any kind of inherent strategic error in the combination itself, although there's no question that AOL was wildly overvalued.

Related

When we look at AT&T and Time Warner, it feels like a deal that is being driven by a vision of the past, not the future. It seems like a desperation move by both, an admission that they don't really know what else to do, except try to get larger and hope everything works out for the best. And AT&T is paying a huge price for an uncertain outcome.

12) This gives $T no platform to where the puck is going – no differentiated tech, digital audience or content creation capabilities, etc.

- Zack Kaplan (@ZJKaplan) October 22, 2016

In fact, this combination may be even more of a signal that certain markets have peaked than AOL-Time Warner, which marked the peak of the first digital bubble.

AT&T (t, -0.28%) is looking at slowing growth and/or future declines in both its core telecom business and its core cable business. Its proposed solution? Buy a content company and become vertically integrated. Time Warner's (twx, -1.68%) content business is aging rapidly, and innovation is in short supply. So why not get married to someone who owns the pipes?

There are serious flaws in both of these arguments. For one thing, vertical integration between distributors and content producers is no guarantee of success, and it's not clear that even trampling all over the principle of net neutrality will make it work—although there's no question AT&T will try.

Get Data Sheet, Fortune's technology newsletter.

In fact, owning Time Warner content could actually make it harder for the content side of the combined business to prosper because potential partners may not want to sign deals with the telecom giant where they might have if Time Warner was a standalone company.

"When we combine Time Warner content with our scale and distribution... we're going to have something really special," AT&T CEO Randall Stephenson has said. But in what way is it going to be special? Is it going to somehow generate synergies that would never have been possible if the telecom and satellite provider had just licensed content?

Has Comcast (cmcsa, +0.40%) really seen much of a strategic benefit from owning NBCUniversal? It broadened the company's lines of business, and provided a hedge against the decline of cable, but what hedge we've seen has mostly come the theme park and movie business—not the TV or web side. And very little synergy.

What happened over the last seven years that made the marriage of content and distribution valuable again? What has Comcast done for NBCU?

About the only bright spot in Time Warner's portfolio is HBO, which is putting up a credible fight against Netflix (nflx, +1.85%) in streaming, and could theoretically benefit from access to AT&T's customer base. But is that really enough to justify a $100 billion deal?

On the Time Warner side, the fact that the company is so willing to sell to just about anyone just reinforces the fact that it is more or less out of ideas when it comes to figuring out how to survive in the current landscape. (It was rumored Time Warner also had discussions in the past with Apple (aapl, +0.53%) about a potential acquisition, but Time Warner CEO Jeff Bewkes has insisted that's not the case.) Might as well hook up with a pipeline company!

http://fortune.com/2016/10/24/att-time-warner-aol/

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