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Lemley Yarling Management Co
309 W Johnson St
Apt 544
Madison, WI 53703
Bud: 312-925-5248

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29 April 2022

Mayday! Mayday! Mayday!

We just spent the last hour writing a long detailed version of our take on the current craziness of Mr. Market and the reason we own the stocks we do. Unfortunately, our computer ate our work – never to be found again. After this week We don't have the energy to rehash our thoughts.

For the first time this year we are fully invested in good quality issues with low P/Es and with many having 3% and greater dividends, including oversized positions in Verizon and AT&T with 5% plus yields and priced at 8 times earnings.

As we say on our web page at https://www.lemleyletter.com/lemley_about.html Our portfolio management follows an investment philosophy that buys good quality stocks when they are out of favor. This investment philosophy infers that all companies, no matter how smart the people in charge, eventually suffer corrections in price. The reasons for these corrections vary but the price drops are real. After a period of time investors seek out these issues. Just because a stock is down is not a reason to buy. Rather, it is a reason to begin looking at the company's fundamentals. We stress book value, cash flow, low debt, insider ownership and previous market performance.

The markets are scared, greed has given way to fear and we want to take advantage of the opportunity presented. Happily, most accounts are still positive for the year versus the NASDAQ down 21%, S&P 500 down 13 %, and the DJIA down 10%.

Keep the faith, we are.

Earth Day 2022

Markets gained thru Wednesday noon and then fell for the rest of the week. Gurus are worried and speculating about the Feds interest rate plans and even good earnings were not enough to hold prices. The destruction of prices of the fancy stocks resumed with a vengeance in late week. We traded profitably early in the week but gave back our gains and more in the Thursday/Friday selloff.

AT&T announce better than earnings and postpaid subscriber additions. Now that it is again a cell phone/internet company-only- with a 5.5% plus yield we began establishing an oversize position. T is a conservative income holding. On Friday Verizon disappointed, announcing greater than postpaid subscriber losses – although earnings and revenues beat-and the share price dropped $3.50 allowing us to reestablish holdings in the shares. VZ will also become an oversize income holding in our accounts.

We lost money in a short misadventure with Warner Discovery buying and then selling during the week at too large a loss. With our Paramount Global and AMC Network positions it was apparent we should have avoided WBD because its purchase exposed us to too much streaming/content exposure. This over concentration was laid bare when Netflix crashed on Wednesday taking all the streaming stocks lower. With Netflix alone spending $18 billion every year creating content, the content that PARA and AMCX own makes then attractive acquisition targets.

Our forays in NASDAQ related ETF shares have not yet been profitable and we have reduced holdings to just the online retail ETF (ONLN) taking losses in the QQMG and a scratch in the FCLD this week.

We exited Bed Bath on Friday to reduce our holdings in retail to Macy's. The Gap fired the head of Old Navy on Friday and that news caused a drop of 20% in GPS to $11. Happily- though at a large loss- we had exited the stock last week at $14 plus. Our trading of retail stocks over the past two years remains overall profitable; but action in these issues the last 3 months has reduced our profits and encouraged us to the sidelines for a while with regard to them.

We own the Domestic Oil ETF (XLE) and the Retail ETF (XRT). We have had decent luck trading both. We also have been trading Cleveland Cliffs (which reported blowout earnings on Thursday night) profitably the last 2 years and we continue to; and we have reestablished our position in Ford in taxable accounts as the wash sale period expired last week. We want to repurchase GM but we are trying to get it under $40.

Our cash holdings have been reduced by the purchase of T and VZ for income but our cash is adequate in the current market atmosphere.

Stock market corrections, although painful at the time, are actually a very healthy part of the whole mechanism, because there are always speculative excesses that develop, particularly during the long bull market.

Ron Chernow


Tax Day 2022

Inflation remains high and is a constant subject of the Talking Heads. Unemployment remains at historic lows which is less often mentioned. Oil prices fluctuate around the $100 level and are also mentioned ad nauseum. Ukrainian lives and homes are being destroyed every day and yet we in the Land of the Free and the Home of the Brave are unable to bear the burden of higher gasoline prices. And so, it goes.

Markets were indecisive this week and volatility continued. We readjusted by selling all but one of our retailers (to return-maybe- sometime after first quarter earnings at the end of May). We continue our aggressive trading

On the earnings front, because currently most earnings receive a negative initial response, this week we sold both Bed Bath and Wells Fargo ahead of earnings and bought Bed Bath back 20% lower after a disappointing report and Wells back 10% lower after a mixed report.

In Finance we currently own Wells Fargo and Huntington Bancshares. HBAN has a 4% yield and we have been profitably trading its range for the past few years. We have tried trading the Bank ETFs (KBWB, KBE) with middling success. The rising interest rate environment should be positive for banks earnings but the markets are not considering that fact.

For NASDAQ (down 15% this year) exposure we have been trading Nasdaq related ETFs, again with neutral success. The Online /Retail ETF (ONLN) has a large position in Amazon (24%) and Alibaba (12%). Amazon has gone nowhere over the two years and BABA has crashed down 60%. With the coming split in AMZN and an improving earnings multiple in both we want to have exposure without betting the farm. The ETF allows us to hedge exposure with other online stocks most of which are down 50% and greater from their ridiculous highs. We also own two other Nasdaq ETFS: Fidelity Cloud ETF (FCLD) which owns premier and still expensive cloud companies Salesforce (4%), Service Now (4%), Sap (4%), Equinix (4%) and Snow (4%) as its top 5 holdings. Finally, we are trading QQMG the Invesco NASDAQ 100 ETF which owns as the name implies the top 100 NASAQ stocks including Apple (11%), Microsoft (10%), Amazon (8%), Google (8%).

For more individual tech exposure we are back in old favorites Intel (3% yld) and Western Digital with a new one Dell Computer. We've had luck with both INTC and WDC over the years. Intel is the fallen former star of the tech world which does nothing but have massive revenues and earnings. We like to compare to the 3 current tech darlings: Nvidia, AMD and Adobe. Together those 3 wonder stocks have a combined market cap of almost $1 trillion with combined sales of $60 billion and combined bottom line earnings of $18 billion. Unloved Intel has a market cap of $192 billion with revenues of $79 billion and bottom-line earnings of $19 billion. Like Intel, Western Digital which produces commodity chips and storage devices is ignored even though it's priced at one time sales and 6 times earnings. Dell is the computer maker that is priced at reasonable 7 times with a yield of 2.8%.

We've been in and out of Walgreens Boots for the past several years as it has slowly sunk lower in price from its heyday $100 per share valuation 7 years ago. We've lost much less money than long term holders and managed to trade positively the last 3 years. WBA's share price has atrophied because The Boots acquisition was a mistake and WBA was slow to react to the internet adoption of drug ordering plus the combinations of insurance companies and benefits managers. But our family has a long history with the stock and we do think/hope they can off load Boots and continue to adapt and expand their market penetration. With a 4% yield and at 9 times we will continue to hold/trade the issue.

We are intrigued by the need for the major streamers Apple and Netflix and Amazon to create viewer content. That's why we own/trade AMC Networks, Paramount Global and recently Warner Discovery (spinoff from AT&T). All have been value traps. That is, they are priced at low price to earnings and price to sales ratios. We lost too much in PARA in 2020/21 and have only slightly recovered with profitable trading this year. We've been profitable in AMCX and just registered our first profit in WBD this past week. Our theory is that eventually the big three will buy these folks for their huge in the bank content.

AT&T emerged this week as a straight forward cell phone company with a 5% yield. We will be adding to accounts. Coupled with our trades in Verizon we view both and reasonable range trading/ dividend paying conservative plays.

Hewlett Packard Enterprises had been trading at the high end of its price range leaving us behind. This week an analyst downgraded and the share price dropped back into our trading range and we reestablished positions. With a 3% yield at current levels, we don't usually own it long enough to get the quarterly dividend but we more than compensate with the trading profit.

We will be reestablishing our Ford and General Motors positions in taxable accounts this coming week as our wash sale time period expired today. As we have been saying, either Tesla has to drastically retrench in price or GM and Ford will double in price over the next few years as they roll out production of electric vehicles. The Street is notoriously impatient yet we were gob smacked by the 30% plus drop in the price of both stocks from their January highs. But that's the volatility and one way street mentality that option and computer trading have created. Present levels are investable both for a trade and the longer term.

And that's all Folks. Happy Easter!!, Chag Sameach!!, Ramadan Kareem!! and Enjoy Spring!!


8 April 2022

This week bonds lost ground with the 10-year treasury climbing to 2.76% which resulted in mortgage rates rising to almost 5%. Interest paid on cash at banks and money funds hasn't risen nearly as fast- big surprise. Markets remain lower for the year and also were off for the week although they tried to rally-feebly- on Thursday and Friday. Since we have been doing well with our trading, we tried to catch what turned out to be falling knives. We failed and lost a few percentage points of gain. Rather than turn trades into investments we took our losses and returned to our tried-and-true stocks as well a bit more cash. Mr. Market doesn't suffer fools or greed and we learned our lesson for the umpteenth time over the last 50 plus years.

We currently own Boeing, AMC Networks, Paramount, Walgreens Boots, Wester Digital, Wells Fargo, BankAmerica, Huntington Bancshares, General Motors, Ford, Goodyear Tire, Foot Locker, Macy's, Bed Bath, American Eagle, The Gap and The Container Store. All are priced at 12 times earnings or less with half at less than 6 times earnings and most are down 25% and more from the beginning of the year.


One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.

William Feather

Back to the Middle Ages

Georgia Republicans push bill banning all government mandates of 'any vaccination including in public schools'

Georgia Senate Republicans are pushing a bill that would end any requirements for any vaccinations by any state or local government agency or office in the Peach State, including vaccines for children entering public school.

The bill also bans any government agency from requiring private companies or entities from requiring any proof of any vaccination.

The bill, SB 345, was filed on January 14 with five original co-sponsors. It now has 17, including state Senator Jeff Mullis, whose campaign website prominently features photos of him with former Vice President Mike Pence, and former President Donald Trump's eldest son, Donald Trump, Jr.

The CDC recommends a list of about 17 different vaccines children should have before entering school. The list includes inoculations against diseases, often deadly, including Hepatitis B, Rotavirus, Diphtheria, tetanus, & acellular pertussis, Haemophilus influenzae type b, Pneumococcal conjugate, Inactivated poliovirus, Influenza, Measles, mumps, rubella (MMR), Varicella, Hepatitis A, Tetanus, diphtheria, & acellular pertussis, Human papillomavirus, Meningococcal, Meningococcal B, and Pneumococcal polysaccharide.


Only In America. (Notice the name of Brady's company. As we said, only in America.)

Disney's ESPN is entering the world of non-fungible tokens, and its first deal is with NFL legend Tom Brady, who runs his own NFT platform and is preparing to return for a 23rd season of playing pro football.

The sports channel signed a multiyear deal with Brady's company, Autograph…. NFTs are blockchain-based tokens that give holders rights to mostly digital representations of art, music, and other collectibles. NFT trading volume soared in 2021 to $17.6 billion from $82 million in 2020, according to a report from Nonfungible.com.

The collection is made up of three ESPN zine — or specialized magazine — covers focused on Brady's career. A second NFT collection with the theme "Back in the Arena" will arrive with the debut of the documentary's 10th episode on ESPN+.

"Man in the Arena" is produced by Religion of Sports, a media company co-founded by Brady. Autograph, which launched in July 2021, sells digital collectibles from celebrities and sports icons, including golfer Tiger Woods, tennis player Naomi Osaka, and musician The Weeknd.


April Fool Day 2022

We are sojourning for a few weeks in the land of milk and honey. Yesterday we had snow, today beautiful sun and tomorrow rain is forecast. So, to with the markets. We continue to trade our favorite issues adding a +% now and then with the result that accounts are now enjoying gains of 8% to 15% for the year.

The war in Ukraine continues- unfortunately. The talking heads and gurus keep harping on inflation and the suffering consumer. Our take says the inflation will be controlled, and the consumer is just fine with unemployment's at 3.3% and 10 million jobs available. The Government doesn't take in more Ukrainians and open the southern borders to fill the low paying jobs that are going begging. more workers mean more tax revenues and more money for Medicare and Social Security. Obviously opening the southern border is a no go- since the Republican Pooh Bahas would have a fit but accepting more than 100,000 Ukrainians while Poland has taken in 2 million seems a no brainer. Ans since the Ukrainians are lily white the Trumpsters would have a hard time complaining.

We are a bit more invested this Friday but that is a function of the pullback this week.


Origins of April Fools' Day

Some historians speculate that April Fools' Day dates back to 1582, when France switched from the Julian calendar to the Gregorian calendar, as called for by the Council of Trent in 1563. In the Julian Calendar, as in the Hindu calendar, the new year began with the spring equinox around April 1.

People who were slow to get the news or failed to recognize that the start of the new year had moved to January 1 and continued to celebrate it during the last week of March through April 1 became the butt of jokes and hoaxes and were called "April fools." These pranks included having paper fish placed on their backs and being referred to as "poisson d'avril" (April fish), said to symbolize a young, easily caught fish and a gullible person.




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309 W Johnson Street Apt 544 Madison, WI 53703 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.