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Lemley Yarling Management Co
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Comments on activity in client accounts

4 September 2015

The down Monday and down Tuesday days were positive. It would not have been good if markets had roared higher after last week's recovery. A correction needs to spend some time correcting or it's not a correction. That seems obvious but when market values of accounts are rising and falling by five percent on a weekly basis the concept of patience is sorely tested.Wednesday and Thursday were up days. A reason given for this action was the fact that the Chinese markets were closed in celebration of the end of WW II. But then Friday a good Employment Report brought out the "Oh my God the Fed is going to raise the Fed funds rate to 0.25% and the world is going to end" folks. Also since U.S. markets will be closed for Labor Day (may have to rename it Independent Contractor Day soon) the computer jocks decided to get a selling jump on the Chinese markets. Or maybe not. Whatever

We are fully invested for the first time in a long while but since we expected this action we have used the pull back to create positions in stocks that have pulled back much more than the markets yet offer the kind of value we are comfortable holding.

During the week we switched out of PG, DuPont, Caterpillar and Union Pacific for scratches to move to stocks with better percentage gain potential. As long as we are going to go through the pain we want the chance for better gain.

We added Cisco, and added to Ascena, Intel, Fifth Third, Marathon, and Symantec. We flipped VMware and bought EMC; and we sold Fresh Markets for a plus when it popped so that now we are down to Sprouts and Whole Foods in the grocery business.

we currently own: ANF, AA, ASNA, CSCO, DB, EMC, FITB, GM, GE, HL, INTC, MRO, XOP, SFM, SYMC, TWTR, URBN, WFM and YHOO.

The U.S economy is fine, Europe is recovering and while China is an enigma. it has been an enigma for a long time. U.S companies doing business in china are there for the long term and any dislocations will be short term in nature. Also the gurus maintain that China is growing at 5% which in any other country would be considered too fast not too slow.

Time is necessary as is patience.

*****

If you think the markets are confusing:

The International Business Times is reporting that the Administration is monitoring reports of Russian military operations targeting ISIS in Syria (h/t Raw Story). The Russians have been backing the Assad government because the latter has provided the former with a warm water port on the Mediterranean. In late 2013 and early 2014 reports started to dribble out from Syria that between 1,000 and 2,000 hardened Chechen fighters had joined ISIS. It is these fighters, radicalized in their ongoing dispute with the Russians and their proxy strongman in Chechnya that have always been one of my greatest concerns with ISIS. Not only because of their ability to influence the events in the Levant, but because as Eastern Europeans they can blend in while traveling throughout Europe, as well as the US.* That concern aside their influence was quickly seen within ISIS as they first started issuing threats agains the Hashemite monarch in Jordan and then against Vladimir Putin — their arch enemy and nemesis. According to the IB Times report a group of Chechen fighters, aligned with ISIS, attacked a Russian military base in Dagestan in the Northern Caucasus. Given that Chechen fighters have taken up both sides of the fight in the breakaway eastern provinces of the Ukraine, these reports of Russian actions in Syria bear watching. The Syrian Civil War, the rise of ISIS, and ISIS's ability to take and hold significant portions of Syria and Iraq are responsible for potentially creating some strange bedfellows. The US, Iran, and Russia are all opposing ISIS in Syria and Iraq while at the same time the US and Russia are in opposition over Ukraine and the US and Iran still, formally have not normalized relations and do not agree on much of anything. While it is hard to find silver linings in civil wars and the suffering that they create, let alone in the rise of ISIS and its horrific and heinous activities, the creation of a common interest, through common enemies, between the US, Russia, and Iran may be one of them. Especially if this common interest can be extended to each state's clients. Events in Syria should be watched very carefully over the next few days to see what develops.

 



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