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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

18 February 2016

During the week we added a package of retail stocks. Our mistake with retail the last few years has been attempting to pick one or two winners and then abandoning them when perceived risk becomes too great; instead of buying a package of out of favor issues.

Retail is in turmoil and the big boys and girls are playing up the Amazon will control all of retail sales in five years meme as they short the brick and mortar stocks. Brick and mortar are also moving to online and our guess is that most of the companies survive with some doing well and others poorly. Thus the package.

We added Ralph Lauren (we decided we may die before Ralph does so the cheap share price is worth the risk- see Groundhog Day posts). We also purchased Nordstrom, Kohl's Macy's, Urban Outfitters, The Gap, American Eagle, Abercrombie, Under Armour, Sprouts and Ascena. The total package in most accounts is less than 15% of assets.

We didn't purchase a retail ETF because those issues have a large percentage of assets in Amazon, Walmart, Home Depot, Best Buy and other issues that are certainly not under owned on the street.

To partially fund these purchase we sold British Petroleum at a scratch loss. we continue to hold Marathon Oil and the Domestic Oil ETF (XOP) in the oil patch.

We also own QUALCOMM, Novo Nordisk, Ford and we purchased a risk able position in HAIN when it dropped 15% on news that once again their financials will be delayed.

And we repurchased Deutsch Bank as our Trump continuing Trade.

Our outlook on the markets expects a pullback of 10% or more. Our cash position remains 60% or more in large accounts and 40% or more in smaller accounts.

Happy Presidents Day.

*****

10 February 2017

We sold Twitter ahead of earnings at a loss but not as large a one as it would have been after earnings. We also added to British Petroleum when it dropped on earnings. Shares now yield 7%.

We now own positions in the Domestic Oil ETF (XOP), Marathon Oil, British Petroleum, QUALCOMM, Novo Nordisk, and Ford. Our cash remains at 50% in smaller to 70% in larger accounts.

Markets continue to meander higher.

Lloyd (Mr. Godman Sachs) says everything will be OK.

http://www.businessinsider.com/goldman-sachs-lloyd-blankfein-on-market-uncertainty-2017-2

Another reminder of March 2000:

http://www.slate.com/articles/business/moneybox/2017/02/snapchat_has_given_us_the_donald_trump_of_ipos.html

Greed knows no bounds. And these are the supposedly smart money folks:

https://www.bloomberg.com/news/articles/2017-02-06/-hamilton-ponzi-schemers-victims-said-to-include-tudor-jones

Goldman must have been reading our November/December posts:

http://dealbreaker.com/2017/02/goldman-sachs-weird-vibes-trump/

The lawyers always win. NBC reports that Trump has been named in over 50 lawsuits, since the inauguration. That's over 50 lawsuits in two weeks. To put that in context: http://abovethelaw.com/2017/02/donald-trump-will-make-the-legal-profession-great-again/

Bad year all around for the Clintons.

https://www.bloomberg.com/news/articles/2017-02-08/clinton-son-in-law-s-hedge-fund-eaglevale-partners-said-to-close

Marine Le Pen and her economic plans:

http://www.slate.com/blogs/moneybox/2017/02/08/marine_le_pen_has_a_plan_to_break_up_the_euro_start_a_financial_crisis.html

Groundhog Day 2, 2017

After the weekend's events we decided that our trades weren't going to work and so exited part of QCOM, Ford (trading positions), and Verizon and took our loss on Ascena. The only consolation with Ascena is that we are still ahead on trading Ascena for the last 14 months.

The tariff talk plus the disruption caused by online shopping is a huge negative for retail and the big boys and girls are using the news to short retail. We are going to stay out of their way. On Friday we added British Petroleum - which we have been trading for the last year - when the Trumpsters began imposing new sanctions on Iran. Iran is exporting over 2 million barrels of oil a day and with the tough talk the Trumpsters are adopting our guess is that some kind of brouhaha is going to occur to disrupt oil prices to the upside...

Taking no prisoners in retail:

Under Armour is tanking after posting weak fourth quarter earnings on Tuesday morning.

The apparel company missed on both revenue and earnings per share against analyst expectations. Earnings for the fourth quarter came in at $0.23 per share against analyst expectations of $0.25. Revenue also whiffed at $1.31 billion, lower than projections of $1.41.

Earnings for the fourth quarter came in at $0.23 per share against Wall Street expectations of $0.25. Revenue also whiffed, coming in at $1.31 billion, lower than projections of $1.41 billion.

The company also lowered its guidance for 2017, bringing estimates for operating income down to $320 million and a smaller gross margin.

"The current environment represents an inflection point to maximize our unique strengths by staying on offense — investing smartly in innovation, deepening our Brand connection with consumers and amplifying our focus on operational excellence — positioning Under Armour as a stronger company," said CEO Kevin Plank. The company also announced that CFO Chip Molloy is also leaving effective February 3 for "personal reasons."

Following the news, shares of Under Armour sank by just over 24% in pre-market trading as of 7:47 a.m. ET.

http://www.businessinsider.com/under-armour-q4-2016-earnings-stock-crash-2017-1

https://www.benzinga.com/news/earnings/17/01/8971493/short-sellers-pile-into-under-armour-as-growth-slows

Ouch.

Novo Nordisk (NVO) shares slumped after the world's largest diabetes drug maker reported disappointing fourth-quarter operating profits due to price pressure and increased competition in the U.S.

Novo Nordisk also lowered its 2017 operating profit and sales growth outlook, which pushed shares down more than 5.3% by at 0920 GMT in Copenhagen to change hands at Dkr236 each and wiping out all of the gains recorded in the past three months.

The company lowered its 2017 sales forecast to be in the range of a decline of 1% to a growth of 4%, and operating profit growth to be between a decline of 2% and growth of 3%, both in local currency.

"2016 was a challenging year. While we met our financial guidance for the year, strong market headwinds in the USA meant that we had to revise our long-term financial targets. However, 2016 was also a year in which we announced very encouraging clinical data for our key products, providing a solid foundation for future growth," Novo Nordisk CEO Lars Fruergaard Jorgensen said in a statement

https://www.thestreet.com/story/13975935/1/novo-nordisk-slumps-on-disappointing-profit-guidance-cut.html?puc=yahoo&cm_ven=YAHOO&yptr=yahoo

*****

Ralph Lauren dropped 10 % yesterday when Ralph and his CEO agreed to part ways after less than a year in charge for the CEO. Last year we commented when within days Lands End hired a woman from a high fashion retailer and Ralph Lauren hired the head of Old Navy. Our comment then was that the two hires should have been reversed. As of today both CEOs are gone. We know nothing of the nuts and bolts of retail but hiring a fashion person for Lands End and a discount retail person for Ralph Lauren made no sense.

With the share price at a 7 year low we would be interested if Ralph were not our age. We think his creative genius cannot be replicated –http://finance.yahoo.com/m/64f07142-e2b9-3d46-b2f9-95421b373759/ss_ralph-lauren-ceo-to-depart.html

****

Business activity in the Midwest fell in January, with the Chicago Purchasing Manager's dropping to 50.3 from a downwardly revised 53.9.

Tuesday's reading was the lowest in 11 months and has the index teetering on the edge of contraction (any print below 50 represents contraction).

http://www.businessinsider.com/chicago-pmi-january-2017-2017-1

****

To get away with insider trading you need a legal-even if far fetched-reason for the trades. Remember the plane in Michael Douglas's The Wolf of Wall Street movie. Well three hedge funds made a bundle on the acquisition of a Swiss drug company by J&J because they said they knew that J&J's corporate jet was parked in Switzerland for longer than usual. And we can jump tall buildings in a single bound.

From the script-

Bud races up to the mechanic.

BUD

Oh shit, don't tell me Mr. Wildman

was on board that plane?

(the mechanic nods)

My boss is gonna kill me. I was

supposed to give him this.

(holding his notebook)

You know where that plane is going?

MECHANIC

(walking off)

Erie, Pennsylvania...

https://www.bloomberg.com/news/articles/2017-01-27/hedge-funds-track-j-j-private-jet-for-an-edge-on-actelion-score?cmpid=socialflow-twitter-business&utm_content=business&utm_campaign=socialflow-organic&utm_source=twitter&utm_medium=social

*****

Soon Amazon will pay customers to have their goods shipped:

Starting Tuesday at 8 a.m., Walmart will offer free two-day shipping on more than two million items for all orders over $35.

All Walmart customers will qualify for the free two-day shipping. There are no fees or enrollment in membership programs required.

"We upped the ante here and decided not to charge people for it," Marc Lore, CEO of Walmart US ecommerce, said on a call with reporters Monday.

http://www.businessinsider.com/walmart-free-two-day-shipping-2017-1

These guys should get on the same page. Navarro should know that the euro's value is determined by the big boys and girls in London, Frankfurt and NYC.

US President Donald Trump's trade adviser Peter Navarro told the Financial Times that Germany is using a "grossly undervalued" euro to its advantage against other nations in the European Union and against the United States.

The euro jumped after the report crossed the wires, and touched a five-day high of 1.0764 against the dollar.

It is up by 0.6% to 1.0763 against the dollar as of 7:48 a.m. ET.

"A big obstacle to viewing TTIP as a bilateral deal is Germany, which continues to exploit other countries in the EU as well as the US with an 'implicit Deutsche Mark' that is grossly undervalued," Navarro, the head of Trump's new National Trade Council, told the FT on Tuesday.

The Transatlantic Trade and Investment Partnership, or TTIP, is a proposed trade agreement between the EU and the US.

Last week, Ted Malloch, the man who is tipped to become the US ambassador to the EU, told the BBC that the euro "could collapse" in the next 18 months.

"The one thing I would do in 2017 is short the euro," Malloch told BBC. "I think it is a currency that is not only in demise but has a real problem and could in fact collapse in the coming year, year and a half. I am not the only person or economist of that point of view."

http://markets.businessinsider.com/currencies/news/euro-fx-currency-update-trump-adviser-comments-january-31-2017-2017-1-1001708755

*****

According to President Donald Trump's press secretary, Sean Spicer, Trump is considering a 20 percent border adjustment tax on Mexican imports. Trump is also reportedly considering a 45 percent tariff on imported Chinese goods as well. Trump has also threatened German automakers with a 35 percent tariff on imported automobiles.

While none of these border taxes have officially been implemented, U.S. companies that rely heavily on imported goods are certainly concerned about the potential for costs to skyrocket. Supporters of new border taxes argue that these cost increases will be offset by a stronger dollar as the economies of U.S. trade partners suffer the consequences of the border taxes. However, many economists question this assumptionhttps://www.benzinga.com/news/17/02/8979725/why-the-case-for-a-border-adjustment-tax-relies-on-a-questionable-assumption

Our Comment: Trumps wants a week dollar but his advisors suggest a border tax which he also wants will lead to a strong dollar. Oh the decisions, decisions a president has to make...

http://www.reuters.com/article/us-usa-trump-dollar-idUSKBN15G2ZN

*****

http://www.marketwatch.com/story/heres-how-republicans-border-tax-policy-might-impact-the-dollar-2017-01-27

*****

These are the honest bankers who hold much of Trump's and son in law/advisor Kushner's debt.

http://dealbreaker.com/2017/01/deutsche-bank-russian-mirror-trades/

*****

The brokers and insurance folks are breathing a sigh of relief now that the Trumpsters are saying that they don't have to act in the best interest of their clients. How else would the banksters and Insurance companies make money?

The so-called fiduciary rule, six years in the making and unveiled by the Labor Department last spring, holds brokers and advisers who work with tax-advantaged retirement savings to a fiduciary standard as opposed to the previous suitability standard. That means they must work in the best interest of their clients and generally avoid conflicts, which can come about with the commission-based compensation common among brokers and insurance agents.

https://www.wsj.com/articles/trump-moves-to-kill-off-obamas-landmark-retirement-rule-1486116007?tesla=y

*****

 



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