Lemley Yarling Management Co
309 W Johnson Street
Madison, WI 53703
Bud: 312-925-5248 Kathy: 630-323-8422
Comments on activity in client accounts
24 April 2015
We did a bit of selling this week taking profits in most and breaking even on AT&T with a dividend earned.
The NASDQ has regained its year 2000 high and the valuations on some of the fancy concept stocks are in the realm of the emperor with no clothes. For example Facebook which produces nothing and has revenues of $14 billion from trying to get folks to buy things is valued at $225 billion. Even Amazon which actually sells things and has revenues of $95 billion is only valued at $210 billion. There are many other examples.
Our caution doesn't mean that these wonder stocks aren't going to continue to rise- they probably will. Our take is that we are again experiencing the greater fools market of the turn of the century.
We continue to hold issues we believe are fairly valued but we know they will go down if the markets go down. Our plan is to continue taking short profits until we are basically cash with positions in GM and Abercrombie and Alcoa.
Below are connections to two articles of interest.
Mother Jones has a story in the trader in London who was arrested for casing the Flash Crash: http://www.motherjones.com/kevin-drum/2015/04/high-frequency-trading-flash-crash-sarao
Slate on computers using Twitter to trade options:
And the beat goes on.
17 April 2015
Friday became correction day in the markets as China dropped 5% and
European bourse were off 2%. Greece, inflation, rain, Star wars trailer, and
Apple watch were all to blame.
Bloomberg terminals crashed Early Friday and folks couldn't trade on them for
almost 3 hours. Once the terminals recovered the big boys and girls went to
work selling with abandon.
Only time will tell whether this minor drop in the long running bull move higher
is just that or the beginning of a more serious pullback. Our guess is that by next
week traders will be taking the other side.
During the week we repurchased Sprouts in accounts in which we traded two
weeks ago for a nice short profit.
It's all about the journey.
10 April 2015
During the week we sold Marathon Oil for our second nice trading profit of the
year. We also repurchased Fifth Bank below our sale price of last month and
added to General Motors and Alcoa when both dropped on negative news. We
also repurchase GM warrants B in accounts at a price slightly higher than our
sale price of last month. The government of Canada sold its 78 million share
position of GM in a block trade to Goldman Sachs. We are guessing that Warren
Buffet was on the buy side of at least part of that trade.
Markets remain firm. A less than employment number last Friday was greeted
by a sell off on Monday but upon further review the number means that the Fed
will probably delay raise interest rates and that is considered a short term
positive. Overvaluation remains and so we are maintaining a comfortable cash
position in larger accounts.
The rain stopped yesterday
And warm weather is on the way
The grass is greening
and the birds are singing.
During the week we sold Sprouts and JC Penney for trading gains. Markets are
stuck for the present which is why we have been quick to take short profits. The
quarter is over- most of our accounts were flat as were the major market
Some of the high flyers have corrected but many continue on their merry way
with nary a pause. We still expect a correction in these stocks and when that
occurs the markets will probably tag along.
Employment numbers remain good and the economy is gaining slowly. We have
a substantial cash position in large accounts while smaller accounts are more
full invested as is usually the case.
Chag Kasher V'Sameach and Happy Easter.
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