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Lemley Yarling Management Co
15624 Lemley Drive
Soldiers Grove, Wi 54655
Bud: 312-925-5248       Kathy: 630-323-8422

June 29, 2012

Model Portfolio Value As of 29 June 2012

$ 606,681


Comment on Model Portfolio activity

We added Morgan Stanley at $14.45 (sold at $20 in February), Dell at $12.30 (sold at $17 in February), Symantec at $14.40 (sold at $16.32 in February), The Hartford at $17.60 (sold at $20.50 in February), and the IGN (Networking ETF) to accounts this week increasing our invested funds to about 40%. Today marks quarter end for large institutions and mutual funds. Last year it also marked the end of the major averages and indexes holding serve leading to down markets July through October. The markets have held better than we expected while sentiment has continued to deteriorate. Since we react to events rather than our predictions we have added equity exposure as sentiment has turned more bearish. We went to all cash when sentiment was bullish and the issues we are buying have all corrected much more than the overall indexes and averages. But, with second quarter earnings’ reports arriving in the next few weeks, caution remains a watchword and thus our large cash positions in all but the smallest accounts.
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In case you missed this item:

Everyone in California has lost their damn minds in advance of the state's foie gras ban that goes into effect this Sunday, July 1st.

Californians have known this was coming for 8 years (the ban was signed into law by Governor Schwarzenegger in 2004) but, with a child's concept of time, have spent the intervening months convinced always that the dark day of the foie gras ban was still very, very, very far away. Now that the final hours are upon them, many of the state's more insufferable citizens are downing foie gras like it's the only food their bodies can process… Foie gras is produced by force-feeding ducks and geese corn through a rubber tube in order to enlarge their livers, a process that sounds much more majestic when you describe it using the French term gavage.

http://gawker.com/5922245/californians-would-slice-their-mamas-throats-for-a-bite-of-foie-gras-as-foie+mageddon-looms
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June 22, 2012

Model Portfolio Value As of 22 June 2012

$ 602,210


Comment on Model Portfolio activity

We continue to expect a move down to S&P 1200 but bought some quality shares to raise exposure to 20% equities. We added shares in companies we have owned/traded over the years that are at especially attractive prices and that have corrected much more than the market has in the last three months.

Nvdia is down 23% from its yearly high. NVDA will provide the ARM chip for one of the two of Microsoft’s new tablets (Surface). We have traded from this level successfully over the last few years.

We traded Sony for a plus gain. The shares are cheap but we sold because we added more attractive positions as prices moved lower.

GM A warrants offer the right to buy GM shares at $10 through 7/10/2016. It leverages an ownership position in GM. GM is cheap. The warrants are down 36% from their yearly high.

Juniper is down 32% from its yearly high. We traded it a couple of times last year and own for a trade.

Walgreen dropped to an irresistible price. WAG raised their dividend so the yield is now 3.7%. Owning Walgreen is like owning a savings bond with appreciation potential of 100%.

Abercrombie & Fitch missed its numbers 2 quarters in a row and has dropped from $78 last November to $31. We have owned profitably over the years. It is the cheapest, quality retailer in the current market.
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Markets turned south on Thursday as Goldman Sachs recommended shorting the S&P 500. Goldman has so many different folks recommending so many strategies that one of them has to be correct.

(GS) 6/21/2012: We (Goldman) are recommending a short position in the S&P 500 index with a target of 1285 (roughly 5% below current levels) and a stop on a close above 1390. This morning, the Philly Fed print of -16.6, down sequentially and worse than expected, provides further evidence that weakness has extended into June.

Although yesterday’s FOMC delivered easing as expected, with a dovish statement, positive risk sentiment ahead of the FOMC had already buoyed markets. And we now think, with incremental US monetary policy on hold, the market will need to confront a deteriorating growth picture near term.

The risk to our recommendation is that the data soon reverts to the 2-percent growth path our economists expect, that China growth turns, or that European policy-makers’ rhetoric buoys risk sentiment further from here, with the upcoming end-of-June summit a focal point on this count.

 

Abby Joseph Cohen of Goldman Sachs in May when S&P 500 was 1403 (now 1320):

May 2, 2012 by The Guru Investor Goldman Sachs Chief Equity Strategist Abby Joseph Cohen says she thinks the U.S. won’t fall into another recession, and sees stocks as “very attractively valued”. “All you need to believe is that we will avoid another recession over the next couple of years,” she told CNBC. “And that is indeed our forecast, even though we see growth has slowed somewhat.” She added that interest rate levels make it ”hard for us to see how bonds can generate the same kind of returns going forward that they have over the last 30 years. Equities seem to be very attractively valued.”  Cohen says that growth has slowed recently, and that a mild winter may have “puffed up” growth figures in the first quarter. But she thinks the long-term term trend of growth is still to the upside.
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Happily for drivers oil is now under $80 per barrel. Goldman hasn’t been so good on Oil. From the Daily Telegraph June:

GS in May 2011: "It is important to emphasise that even as oil prices are pulling back from their recent highs, we expect them to return to or surpass the recent highs by next year," Goldman said. The comments from the investment bank, which warned its clients to sell oil and other commodities last month, halted the five-day slide in crude prices. Brent crude hit $105.15 at one stage on Friday but rallied to $2.46 at $113.26 in afternoon trading, although still down almost 10pc this week. The bank said the recent fall was prompted by weak macro-economic data and US inventory data – and did not rule out a further limited short-term fall in oil prices if data continued to disappoint. "We continue to believe that the oil supply-demand fundamentals will tighten further over the course of this year, and likely reach critically tight levels by early next year should Libyan oil supplies remain off the market," Goldman added.

http://www.telegraph.co.uk/finance/oilprices/8498543/Goldman-Sachs-says-oil-price-fall-is-temporary.html
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June 19, 2012


Comment on Model Portfolio activity

We put some dollars to work buying Walgreen after it dropped $2 per share to a new 12 month low on news that it was acquiring a 45% stake in Alliance Boots with an option to buy the rest.. The markets didn’t like the news but with interest rates at an all time low the move makes sense to us.

Walgreen Co. will pay $6.7 billion in cash and stock to buy a stake in European health and beauty retailer Alliance Boots, a deal that would give global clout to a U.S. drugstore chain struggling with slipping sales in its home market. The combination would create the largest single purchaser of prescription drugs in the world and give Walgreen access to emerging markets like China and Egypt, company officials said Tuesday in announcing the deal. However, it also will plant the biggest U.S. drugstore chain in a continent beset by debt worries from Greece, Spain and other nations.
http://finance.yahoo.com/news/walgreen-spend-6-7b-alliance-102432035.html
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We also added Sony which has been having problems but is at an all-time low plus shares of Juniper which we have traded successfully the past year and General Motors A warrants at $13, a $1.25 premium. The warrants offer the right to buy shares at $10 through 7/10/2016. Finally, we added Abercrombie & Fitch at $32 down from $75. We have wanted to place funds in these issues for a while. The markets have bounce off their lows of a few weeks ago and digested the Greek election news well. We have most of our funds (80% and more) still available for deployment.
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June 15, 2012

Model Portfolio Value As of 15 June 2012

$ 606,211


Comment on Model Portfolio activity

We remain in cash. The markets firmed his week ahead of Sunday’s vote in Greece. For the week the major measures gained about 2% with a lot of volatility.

This fellow hit the jackpot at BankAmerica- for a while.

Ronald Page thought he'd hit the jackpot when a glitchy ATM at a Detroit casino allowed him to make unlimited withdrawals, reports Detroit's Local 10 News.

With unlimited funds at his fingertips, police say Page went on a gambling bender, hitting up at least three casinos, including the MGM Grand and Motor City.

By the time his bank, Bank of America, figured out what was happening, he had reportedly withdrawn and gambled away $1.5 million.

Now that his luck has run out, Page has been convicted of theft of bank funds totaling $1.5 million and faces up to 15 months in prison, according to Local 10. He's due for sentencing on June 27.

http://www.businessinsider.com/atm-gives-unlimited-cash-2012-6

 


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June 8, 2012

Model Portfolio Value As of 8 June 2012

$ 606,212


Comment on Model Portfolio activity

We remain in cash. The rally this week relieved an oversold condition. The 200 plus point jump on Thursday negated the 200 plus drop last Friday. We continue to be cautious.
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June 1, 2012

Model Portfolio Value As of 1 June 2012

$ 606,208


Comment on Model Portfolio activity

We remain all cash in accounts. The May Employment report was a disappointment and stocks continued their slide. With the S&P 500 closing below the 200 Day Moving average the markets are set up for a possible interim trading bottom next Tuesday if Monday is a large down day and the selloff continues into Tuesday morning. If that occurs we may buy some shares for a trade. If the markets rally Monday the eventual bottoming process will be delayed.
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15624 Lemley Drive, Soldiers Grove, Wi 54655 312-925-5248
The factual statements herein have been taken from sources we believe to be reliable but such statements are made without any representation as to accuracy or completeness or otherwise. From time to time the Lemley Letter, or one or more of its officers or employees, may buy and sell as agent the securities referred to herein or options relating thereto, and may have a long or short position in such securities or options. This report should not be construed as a solicitation or offer of the purchase or sale of securities. Prices shown are approximate. Past performance is no indication of future performance.