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Lemley Yarling Management Co
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10 July 2020

Up Monday on both value stocks and crazytech; down Tuesday for value while crazytech rose again; up Wednesday and Thursday for crazytech while value suffered; and Friday value rose while crazytech retreated slightly. For the week crazytech finished higher and value lower.

Friday's rally in value was partly the result of reports that Gilead's Remdesivir treatment for sick Covid patients might be more effective than previously mentioned. The key word is not effective as the markets seemed to hope; rather the key word is sick. Market and TV gurus keep focusing on the lower death rate which is a result of the increase of younger folks now getting the virus. Again, the focus is wrong; the sickness itself is much worse than a cold or even the flu for many including younger folks.

Whatever, it does no good to question Mr. Market. He wants to go higher as individual new traders coupled with computers and hedge funds create record volumes in call option and ETF trading which in turn creates upward movement in the underlying stocks. We don't know when the gambling will end, only that it will.

The new mantra posits that sales growth not earnings is all the matters. That is really not a new mantra; it is the mantra that analysts and mavens adopt when the usual measures of stock valuations can't be applied. Analysts raise price targets because share prices have exceeded their previous targets and they lemming like need to stay in the game. For example, Tesla is up 50% in the last month, Amazon up 30%. By any measure such price action would usually suggest caution and at least a hold if not a sell recommendation. In today's market such calls are anathema.

And so, we remain 95% and more cash. As we mentioned, we may trade earnings misses over the next few months. We did take a trading position in Walgreen Boots after it announced less than continuing earning; and a $2 billion write down in its Boots drugstores in England. WBA did announce sales up 1.3% and a dividend increase while predicting earnings for the year of $4.20 per share. On the news the share price dropped 10% to $38, a level from which we have traded it profitably all year. Traders would rather buy Shopify at 2000 X earnings and no dividend than Walgreen Boots at 9X earnings with a 4.7% dividend yield.

Mr. Market wants to party like it's 1999 and we can't do anything about that. But we were there in 1999 and we have never liked to party. It may have something to do with stories from the old stockbroker who at the age of 25 founded his brokerage firm in January 1929; was a millionaire by July; and not a millionaire by December.


As the markets march higher the bankruptcy list grows, this list- it's just the beginning- doesn't include the probably hundreds of thousands of small and medium business i.e. restaurants and other retailers and manufacturers who will be closing their doors.

Brooks Brothers joins a parade of U.S. retailers seeking relief in bankruptcy court since March, including Neiman Marcus Group Inc., J.Crew Group Inc. and J.C. Penney Co. Economic fallout from Covid-19 has also pushed high-profile companies in other industries into bankruptcy, including Hertz Global Holdings Inc. and Chesapeake Energy Corp.


Someone's been reading our stuff:

Veteran strategist Ed Yardeni, president of Yardeni research, said stocks are starting to "look like 1999 all over again," during a CNBC interview this week.

He said actions by the Fed, including purchasing corporate bonds, have prompted a move out of bonds into equities, causing the latter to be in "the mother of all melt-ups."…. markets tanked in March, but strategist Ed Yardeni has shied away from calling it a market crash, and believes actions by the Fed are in fact causing stocks to explode into the "mother of all melt ups."

… He referred to soaring equity valuations that preceded the 2000 dot-com bubble burst.

Yardeni said: "Remember that Prince song about partying like it is 1999. The market certainly has that potential."


"I think the bull market is still intact, I don't view the sell-off we had in February and March as a bear market," Yardeni said.

Markets tanked on March 23 when countries had just starting placing their economies under lockdowns due to COVID-19.

The S&P 500 had touched a low of 2237.40 on March 23.

But Yardeni doesn't think it was a true sell-off and thinks "the tail end of this bull market" may end up "with a melt up."

He thinks the US economy is more likely to face a "swoosh recovery" rather than a V-shaped one that market players are hoping for.

Even Yardeni is afraid to say sell

His final advice to investors is to wait for the market to consolidate.

"At this point if you are in the equity market, I would stay with it," he said.

Yardeni added: "Along the way I may very well recommend that they use their profits, but we will see. It is still early in the game."



Who gets to be reckless?



Robinhood Has Lured Young Traders, Sometimes with Devastating Results



An example of 1999 mania is predicting current valuation based on 2030 sales estimates. Yes, that's 10 years from now.

Tesla shares have risen 45% in the past six days.

"Our revised bull case of $2,070 is based on 6 million units of volume by 2030 as well as an EBITDA margin of 20%," wrote Jonas. The scenario "would place the company among the very best luxury car manufacturers to give them greater credit for mix and/or greater volumes of high margin software revenue."


There are 128 million households in the U.S. 30% of those households earn less than $100,000 a year That's about 48 million households. $10,000 to 48 million tax filers under $100,000 a year ($480 billion) would have had much more effect than the billions given to law firms and private equity firms.


There is a special place somewhere folks who rail against government giveaways to the poor but line up at the giveaway trough.



Independence Day Weekend 2020

Independence Day Weekend 2020

All cash- up 3% to down 3% in accounts and we have


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15624 Lemley Drive Soldiers Grove, Wi 54655 312-925-5248
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