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Lemley Yarling Management Co
309 W Johnson Street
Apt 544
Madison, WI 53703
Bud: 312-925-5248       Kathy: 630-323-8422

August 31, 2012

Model Portfolio Value As of 31 August 2012

$ 618,026

Comment on Model Portfolio activity

There was no activity this week. September will be interesting.


August 24, 2012

Model Portfolio Value As of 24 August 2012

$ 620,490

Comment on Model Portfolio activity

With the usually down month of September and early October on the horizon we raised cash this week as the S&P 500 hit its high for the year. We held on to Dell and Hewlett Packard- even though we didn’t get the earnings pop we were hoping for. Most accounts are 33% or less invested and we are comfortable with that level for now.

Apple Computer, the apple of all investors’ eyes, has been crossing over and back the $666 per share level for the last three days of this week. 6666 represents the low in the S&P 500 in the break of the markets in March 2009 and also is the sign of the devil.  Coincidence?????????????????

The United Kingdom has been following lower taxes on corporations and the wealthy and cut government spending mantra since the Conservatives took power a few years ago. How is that going you ask?


Britain's economy shrank less than first feared in the second quarter, but remains mired in the longest double-dip recession since the second world war.

GDP fell by 0.5% between April and June compared with the previous quarter, according to the Office for National Statistics. The figure, which was in line with economists' expectations, was revised from the 0.7% decline statisticians had estimated last month.

However, the economy has been shrinking for three consecutive quarters in the country's second recession in four years. Bleak business surveys suggest it is unlikely to improve quickly, while the Bank of England estimates growth to be at a standstill for this year. GDP is at about the same level as it was in the middle of 2010, so growth has been broadly flat over the last two years, the ONS said. Output is still more than 4% below its pre- recession peak at the start of 2008.

The chancellor, George Osborne, came under intense pressure to boost the economy this week when government borrowing showed a shock increase in July.

Friday's figures showed consumer spending dropped by 0.4% in the second quarter, while exports fell 1.7% and imports climbed 1.4%. Trade shaved 1% off GDP, the biggest drag on growth since the second quarter of 1998.

Construction slumped by 3.9%, less than first thought, but still a sharp fall, and Manufacturing output was down 0.9. M% while the service sector shrank by 0.1%.

For those seniors who get Medicare and are interested in how much they paid in taxes for their Medicare benefits the following table and commentary from http://www.motherjones.com is instructive:

We think the “get the government out of my Medicare” slogan is funny when it’s on a sign at a Tea Party rally, but the “I paid for it” position is a less obviously dumb, and I’d wager more widely held, view of Medicare held by the over-65 crowd. They think they’re entitled to it because they paid for it, and if the under-55’s are going to pay less to get less, well there’s some justice in that if you consider Medicare a something you pay for more-or-less directly with your taxes. If we had any decent reporting on Medicare, people might understand how ridiculous that is, but even though Medicare and Social Security are talked about constantly, the details are almost never explained.


August 17, 2012

Model Portfolio Value As of 17 August 2012

$ 619,951

Comment on Model Portfolio activity

Abercrombie pleased folks with its conference call and the shares jumped 10% placing accounts back at even on the year in that issue. We sold half our holdings for a small loss but will maintain the rest. We have repurchased Aéropostale since we acquired the ANF position and so we cut the position since it was large in relation to the rest of our stocks. We sold Cisco for a 20% three week profit after earnings pleased the street. We repurchased Hewlett Packard and Dell ahead of earnings next week after Lenovo, a computer maker, reported better than sales and earnings. We have a love/hate relationship with these two issues. On a value basis they are really cheap. But the question of whether PC and tablet selling has become a commodity business continues to hamper price. We think the two companies are reinventing themselves to take advantage of the “Cloud” but only time will tell. Finally we added Deere to larger accounts when it dropped $6 per share on good but less than earnings.

Despite Crop Insurance, Drought Still Stings Farmers http://www.npr.org/2012/07/24/157243527/despite-crop-insurance-drought-still-stings-farmers

(Most of these farmers say they don’t believe in big government and vote accordingly :)

Stop by most any un-irrigated farm across the lower Midwest and you'll see crops in distress. Midwestern corn and soybean farmers are taking a beating during the recent drought, but it's not likely to drive many out of business.

Most of those farmers carry terrific insurance, and the worse the drought becomes, the more individual farmers will be paid for their lost crops. The federal government picks up most of the cost of the crop insurance program, and this year that bill is going to be a whopper.

Despite a withered soybean crop that he says won't even let him break even, Loren Alderson, a farmer in Nickerson, Kan., isn't too worried.

"The government has a program of crop insurance, revenue insurance, and it certainly is a lifesaver for years like this," Alderson says.

That's an attitude typical of most farmers affected by this drought, says Bruce Babcock, who specializes in agriculture economy at Iowa State University. They're not too worried because the great majority of them have crop insurance, he says. In the Corn Belt, upwards of 85 percent of farmers carry crop insurance, if you can call it that.

"It's not really insurance, because, as we know, when we buy insurance, we have to pay the full premium," Babcock says, "and that premium covers not only the losses, or the claims that are made, but also the administration and profit for the company."

When a farmer buys crop insurance, the government picks up most of the premium, and it also pays operating expenses for the companies. Those two subsidies cost close to $8 billion a year. But taxpayers also insure crop insurance companies against catastrophic loss.

So, as claims from this year's drought mount, the USDA will shoulder a larger and larger share of the payout. Babcock says it'll likely be taxpayers, not insurance companies, paying the bulk of this year's crop insurance claims, which could easily run more than $10 billion (More likely $15 billion)

"The drought really shows how important the program is, and who's really funding it," Babcock says.

Payouts are going to be extra high because most Corn Belt farmers also carry coverage tied to the changing value of the crops they produce. The drought has cut projected supply and pushed prices way up.

The more bushels of corn that are lost, the more each one of those lost bushels tends to be worth for a farmer's insurance settlement, and the more taxpayers owe drought-stricken farmers.

"Crop farmers are going to be OK coming out of this drought," Babcock says. "Taxpayers are not going to be; they're going to be paying large losses."

Of course, taxpayers do expect to eat, even after an agricultural disaster, so, arguably, in that light, crop insurance makes sense, says Tom Zacharias, the president of National Crop Insurance Services.

"It's designed to help the consumer," Zacharias says, "so that we know that we have stable, secure food supply. [And] we want to keep farmers in business from year to year."

Zacharias says crop insurance is a pretty efficient way of doing it, because while farmers pay into the system year after year, they don't get any money out until something goes wrong. In normal years, crop insurance companies eat the losses, and he says those insurance companies are eager to please.

"These folks are 24/7," he says. "We have loss-adjuster staffs in the field as we speak."

So, disaster coverage payments typically arrive in time to cover getting the next crop in the ground and keeping the food system running. But, farmer Loren Alderson says, that's about as far as it goes.

"Technically, you don't lose money," Alderson says, "but if you're especially a younger farmer who's got land payments to make and machinery payments to make, they're not going to be able to make those costs with insurance."

While it will take months to figure the true costs of this rapidly intensifying drought, it is clear there is going to be plenty of pain to go around.

Bush Tax Cuts Saved 57 CEOs More Than $1 Million Each Last Year


The Bush tax cuts, again, are set to expire at the end of the year, and President Obama has promised to veto any extension of the cuts on income in excess of $250,000. Of course, Republicans are opposed to anything but a complete extension.

In a new report, the Institute for Policy Studies shows just how unnecessary the tax breaks on high income are, noting that last year, 57 of the top 100 CEOs in the country saved more than $1 million due to the Bush tax cuts alone:

– CEOs have benefited enormously from the Bush tax cuts for upper-income taxpayers. Last year, 57 CEOs saved more than $1 million on their personal income tax bills, thanks to these Bush-era cuts.

The top CEO beneficiary of the Bush tax cuts in 2011, James Mulva of ConocoPhillips, saved $6.7 million. Mulva cashed in more than $140 million in stock options in his last year at the energy company’s helm.


IPS added, “All the CEOs on this list certainly saved significantly more from the Bush tax cuts than the sums listed here, since they had additional income from other sources, including their investments.”

In recent decades, CEO pay has absolutely skyrocketed, leaving worker pay far behind. It would take the typical American worker 244 years to earn what the average CEO now makes in one year. Over the last 30 years, CEO pay has increased 127 times faster than worker pay.


August 10, 2012

Model Portfolio Value As of 10 August 2012

$ 612,483

Comment on Model Portfolio activity

Sometimes we don’t know we really want to own a stock until we sell it. With this thought we repurchased a few shares of Walgreen this week in our large accounts at our sale price of a week ago and repurchased shares of Juniper in accounts 50 pennies higher than our last sale. We also added shares of Aéropostale to accounts. Finally we repurchased Sony at $12.30 (we sold at $14.37 in June).

During the week Goldman Sachs upped Cisco to its conviction buy list and the shares popped $1 on the news. We are holding.

The S&P 500 is back at its upside major resistance level of 1400. Time will tell.

August 3, 2012

Model Portfolio Value As of 3 August 2012

$ 599,256

Comment on Model Portfolio activity

Yesterday we took some profits when the ECB failed to take any action to improve the situation in Europe. We sold Walgreen, Symantec, Juniper, and JP Morgan for a profit and took a scratch loss in XLF, BankAmerica and the internet ETF and a $1 loss in Facebook- no guts to hold the Facebook.

We added Aéropostale, the teen retailer, at $13.25 after it dropped $7 per share on a reduced second quarter earnings outlook. The analysts loved it at $20 and hate it at $13.

Friday’s Employment numbers were much better than and the markets rallied into week end. We think a hope in the market that the ECB will do something over the weekend aided the rally.

On Thursday Abercrombie & Fitch was decimated by lousy earnings preannouncement but we remain committed to what is now our largest position. The shares are down over 50% from their 12 month high and ANF has the ability to earn $5 per share in good times. Even the bad forecast suggested earnings of $2.50 which means the shares have at a 12 multiple.






















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