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Lemley Yarling Management Co
15624 Lemley Drive
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Bud: 312-925-5248

Comments on activity in client accounts

15 January 2021

Fancy stocks remain overpriced. Value stocks are now pricing in a 2021 recovery and many are selling higher that they did in January of last year. Gurus expect earnings to rise significantly this year. What they don't mention is that even large percent earnings gains will be less than actual 2019 earnings. Current markets are being driven by greed and folks who only know up markets or quick recoveries.

We remain sidelined owning six issues. Verizon and AT&T and Gilead and HP enterprises all yield 4% or more and priced at 10 X earnings or less. We have been trading GE and Ford thinking that their time in the sun may arrive. And we have a bunch of cash.


There are more troops in Washington than Iraq. Our guess is that the rioters while stupid are not stupid enough to reprise their action of last week. But there are 50 state capitols to protect and we won't be surprised by bad stuff occurring elsewhere in the U.S. these are difficult times that markets are happily ignoring. We are not.


This week a Mickey Mantle Rookie baseball card sold for $5.2 million up from $2.5 million in 2018 and $260,000 in the early aughts. Bitcoin Hits $42,000 Monday then trades at $32,000 a day later closing the week at $35,000.


And then:

Applications for unemployment claims, a proxy for layoffs, rose by 181,000 to 965,000 last week, the Labor Department said Thursday. That marked the biggest weekly increase since March 2020 and put initial jobless claims at their highest level since mid-August. It also put weekly claims well above the roughly 800,000 a week they have averaged in recent months.


Heads they win tails they win- Wall Street always takes care of its own before the client.

SPAC Mania Gives Early Investors Steady Returns with Little Risk

Hedge funds score gains when blank-check companies rise after announcing deals to take startups public

Sudden excitement about the flurry of startups going public through so-called blank-check companies is enriching some of the biggest players in finance, particularly hedge funds.

The gains come through the unique rights given to early investors in special-purpose acquisition companies, or SPACs, which look to acquire promising startups and take them public. As the vehicles become more popular, the hedge funds that invest in them early on, such as Magnetar Capital, Glazer Capital and Israel Englander's Millennium Management, can earn lofty returns without much risk.

Here is how the trade typically works: Hedge funds give the SPAC money for up to two years while it looks for a merger target. In return, they get a unique right to withdraw their investment before a deal goes through that minimizes any loss on the trade. At the same time, the potential return for early investors is huge if the SPAC shares rise because they also initially receive shares and warrants giving them.

Read More: https://www.wsj.com/articles/spac-mania-gives-early-investors-steady-returns-with-little-risk-11610533800?mod=hp_lead_pos1


8 January 2021

Markets fiddled while the Capitol burned. The invasion of our Capitol building was a desecration of an American temple. Folks trashing the Senate and House chambers are now a nasty scar on U.S. history. On a hopefully positive note, many but certainly not all folks have reached the point where the contretemps may be toned down

Our solution is the Nixon solution- Trump should resign and Pence become President and then Pence pardon Trump and his kids. This would solve the problem and also create windfall for apparel makers and collectors as Pence would become #46 and Biden #47. Biden #46 hats would become collector items which in the current Bitcoin mania might become worth thousands of dollars and two whole new set of #46 and #47 hats and T-shirts would be available for purchase. Everyone wins.


We moved to 80% cash and plan to maintain that level while trading the remaining 20%. Biden and the Democrats will be able to pass some stimulus and infrastructure bills through Budget Reconciliation. But the markets have priced in Nirvana. For the last 4 years market participants have prospered while the majority of folks not so much. The next 4 years may be the opposite.

We know of no reason for markets to collapse- we didn't last February either. But Bitcoin, Tesla et al suggest extreme risk ignoring euphoria.


The U.S. economy lost 140,000 jobs in December, while economists had expected a gain of 50,000.

Why it matters: The job market recovery that had been underway for the past seven months ended last month, buckling from the pressure of the coronavirus pandemic.

Details: The leisure and hospitality sector shed nearly 500,000 jobs, reflecting the enormous stress the sector faces as coronavirus cases surge and states impose economic restrictions — leading to worker layoffs.

Three quarters of these losses (372,000) were in restaurants and bars. Cold weather prevented them from taking advantage of the outdoor dining that helped keep business afloat in earlier months.

The bottom line: Economists are looking ahead to the latest coronavirus relief package (plus possibly more relief during the incoming Biden administration) and the vaccine rollout — which could stem the labor market bleeding.

Yes, but: "We can't say, β€˜don't worry, everything is fine, and it's all growth from here,'" James Knightley, an economist at ING Financial, told Axios ahead of the jobs report.

"I think that you could get the more pain in the jobs market in the next few months."



Bitcoin is the perfect emperor's clothes speculation. (The Emperor's New Clothes - Wikipedia) With a valuation approaching $1 trillion Bitcoin is an accident waiting to wipe out a lot of speculators. Its value is determined by the greater fool. Even tulip bulbs had more intrinsic value. (Tulip mania - Wikipedia) Does anyone remember Long Term Capital? ( Long-Term Capital Management - Wikipedia) Led by Economic Nobel Prize winners LTCM had the answer to risk- until they didn't. With major investment banks and hedge funds now trading Bitcoin and providing it to customers the table is set for big trouble.


In the same vein, Dow Jones is going to have to add Tesla to the DJIA if it wants to keep up with the S&P 500 and the NASDAQ 100.

The Index/averages game is all about enhancing the performance- fundamentals be damned. (the index and average folks are paid for the use of their measures.)

Tesla at an $800 billion -soon to be $1 trillion-market cap is now valued at more than all the other automakers in the world. Tesla sold 500,000 cars this year and will earn $2 billion of which $1,6 billion will be from selling EV credits to other auto companies- not selling cars. All the other auto companies in the world sold 80 million vehicles and earned over $250 billion.

(Excluding items, Tesla posted a profit of 76 cents per share. It reported net income of $331 million, or $874 million excluding stock-based compensation awards given to Musk. Revenue from the sale of regulatory credits made up $397 million. Without that revenue, Tesla would not have achieved a profitable quarter. So far this year, regulatory credits account for $1.18 billion, or 7% of total automotive revenue.)


We get email:

Happy New Year Bud!

Happy to wake up to a little saner world this AM!! And more optimistic about the future so…….

I am back looking at my university retirement portfolio. As we discussed, I currently have approx. 60% in cash reserves, 30% in Contrafund, and 10% in Bond. Writing to ask for any thoughts, guidance, opinions with an understanding that I am not expecting a recommendation, only more information to consider 😊

Considering the Fidelity Hypothetical Portfolio model, my university (RIT) favored funds, the idea to diversity across different funds, my age (61), and my own research on individual funds (also looking at managers, balancing companies between funds, etc.…), I sketched out the following target investments:

*funds I currently have investments
25% - *FCNKX – RIT (LG)
5% - MEIKX (LV)
5% - FSPHX – (Health G)
5% - *FSPTX – (Tech G)
20% - FIVFX – (Int'l G)
5% - *FISMX – (Int'l S/M B)
5% - *FLPSX - (MV)
Small cap
5% - LSSNX – RIT (SG)
5% - NDVVX – RIT (SV)
10% - *PTRQX – RIT (Bond)
10% - *VBTIX – RIT (Bond)

Thanks in advance for your perspective!

Best, Susan


I would get out of the bond fund. With us (U.S.) having Biden and Congress (YEA) spending on infrastructure and stimulus checks has a better but not certain chance. interest rates are at all-time lows and will move up hurting bond prices (price moves opposite to rates with bonds).

30% in Contra is fine. I would hold rest in a money fund. after market corrects 10% (from whatever level) put 10% of money in contra and then 5% every 5% down. Contra gives you all the diversification you need.

Contra was up 30% in 2019 and 25% in 2020. think you had more in in 2019 than 2020. in March you were probably glad you had less in- at year end 2020 the wish was probably more. I always wish I had more client money invested when markets are higher and always wish I had less invested when markets drop. That's human nature.

We and most everyone survived and lucked out in 2020 and everyone is now a genius and also greedy. I'm on the sidelines.

Sorry to be so simple but over the years simple is good.


We continue to trade GE profitably as JPMorgan analyst Tusa continues to be negative on GE which is one reason it is a trade for us.

From Barron's: It's a new year, with vaccines offering a possible return to a slightly more normal existence and soon a new administration. One thing that isn't changing, however: J.P. Morgan analyst Stephen Tusa's negative view of General Electric stock.

He panned shares again in a Thursday research report: "It's 2021, do you know what you own? GE (ticker: GE) stock has decoupled from long-term fundamentals." For Tusa, it's still about free cash flow and how much of that GE can generate when things get back to normal. Read more:




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