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Lemley Yarling Management Co
15624 Lemley Drive
Soldiers Grove, Wi 54655
Bud: 608-624-5777       Kathy: 630-323-8422

Comments on activity in client accounts

22 July 2016

Markets continued to meander higher this week as many earnings reports beat lowered expectations. And even when reports missed the action in the shares of those companies was muted to the downside. Jim Cramer, who is this generations Eliot Janeway (http://www.nytimes.com/1993/02/09/nyregion/eliot-janeway-economist-and-author-dies-at-80.html ) Dan Dorfman (http://www.nytimes.com/2012/06/20/business/media/dan-dorfman-82-dies-his-tips-moved-markets.html ) believes that with the improved earnings reports and outlook the markets may avoid a scary correction and continue to move on to new highs.

With the S&P 500 at all time highs and priced at 20 times earnings that is a tall order to fill. We would rather err on the side of caution- especially with the January-March fiasco fresh in our in mind. We did add three oil issues; the XOP, Marathon Oil and British Petroleum to accounts when Oil dropped under $45 a barrel earlier this week. Oil stocks are pulling back less and testing recovery highs on up moves when the price pulls back to $45 and then recovers to $50. With the unrest in the Middle East and around the world we are willing to have exposure in oil. We are trading the oil stocks to earn better returns than holding 10 year Treasuries (1.5%) with less risk. Large accounts remain 85% or greater cash and small accounts are 60% and more cash.

Stay cool.


18 July 2016

We are back and all is well in La La land. The DJIA is up for the 8th straight day. We remain in cash. And life goes on.

A photo on our 50th wedding anniversary with the kids and grandkids:

The old stockbroker- who survived the Crash of 1929 but lost his fortune only to regain it in later years – believed that partnerships made the partners personally liable and that fact prevented the assumption of too much risk. In the good old days NYSE firms had to be partnerships and could not incorporate for that very reason.

From the NYT: Over the last few decades, Wall Street firms have transformed themselves from small private partnerships into the publicly financed behemoths that we know today. Along the way, they lost the old way of doing things, where the operating capital came from the partners, who faced the ultimate liability for anything that went wrong, including losing their entire fortunes.

Instead, the old partnership culture was transformed into a bonus culture where bankers, traders and executives have minimal accountability when things go wrong. Crises will continue to happen; Professor Goodhart predicted the next one would hit in 2025. But it is the creditors and shareholders who will pay, and pay dearly, for Wall Street's mistakes unless something changes. As the mantra of the 2008 financial crisis goes: The risks on Wall Street have been socialized while the profits have been privatized.

the entire article: http://www.nytimes.com/2016/07/08/business/dealbook/how-to-fix-wall-streets-flawed-system-of-compensation.html?&moduleDetail=section-news-0&action=click&contentCollection=DealBook®ion=Footer&module=MoreInSection&version=WhatsNext&contentID=WhatsNext&pgtype=article


6 July 2016

We are on vacation — our first in many years — to celebrate our 50th wedding anniversary with our family in northern Wisconsin. We will post a few thoughts on July 19 when we return and then have our regular post on the 22nd. Large accounts are 90% cash while smaller ones are 50% and more. We expect markets to meander through summer with a downward bias.

If you need anything Kathy is available at 630-399-4200


1 July 2016

We traded Devon and Marathon Petroleum last Friday through Tuesday for a plus scratch on Devon and a minus scratch on MPC. Given that we had a 10% loss in each on Monday morning we are satisfied with the outcome. We can't win them all but a near tie works for us.

One reason we sold both stocks on Tuesday is that we didn't like the rally. We would have considered staying in them if the markets had opened down 1% or more on Tuesday and then rallied in the afternoon. Instead they opened 1% higher and maintained that gain through the day. That type of action does not clear the seller's action and so we took some trades off the table. On Wednesday's rise we sold Deutsch Bank for $1 loss when it didn't rebound as the other issues had. We placed that money in BankAmerica which is moving with the markets and is a less controversial bank. We had purchased Deutsch Bank as a Brexit play but that didn't work. That's our second loss in the stock although this time not as bad as the last. On to other more favorable plays. We also sold Morgan Stanley for a scratch loss.

This week seems to be a situation where the hedgies who were the wrong way on Friday last decide to short Monday then panicked covered Tuesday when markets opened higher and refused to go down. On Wednesday markets again rallied as hedgies probably decided to go long.

We didn't trade it very well but that occurs sometimes. At least we broke even on our trades. The purpose of our trading it to try make a few dollars without risking a lot to earn better than the measly rates of return ( the ten year Treasury is a bit over 1.4% yearly). Last year and this year we have managed to succeed - except for the January through March roller coaster ride which none of us enjoyed. The returns of the 1990s and mid 2000s are fond memories and may remain so for a while. Meanwhile we trudge on enjoying the confidence of our clients.

We expect continued weakness through the rest of the summer.

Happy Fourth.




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15624 Lemley Drive Soldiers Grove, Wi 54655 608-624-5777
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