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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

December 26, 2014

Model Portfolio Value As of 26 December 2014

$ 773,265

Comment on Model Portfolio activity

During the week we sold Marathon and then thought better of that move repurchasing half the position. We also added to American Eagle and bought Sprint and U.S. Steel for many accounts.

The markets remain strong and after a surge in the New Year from new money we expect a pull back. The economy remains strong with GDP growing 5% in the third quarter and so any pullback should be temporary. Earnings are not growing as fast as multiples are expanding and there is certainly froth in the market. How long is the question and to that we have no answer.

Our guess is strength through March and then big question mark.

Happy New Year





December 19, 2014

Model Portfolio Value As of 19 December 2014

$ 760,224

Comment on Model Portfolio activity

The downturn on Monday climaxed on Tuesday with a volatile day followed by a rally on Wednesday and Thursday and a consolidation day Friday. Our guess is that the oil price drop and the Russian imbroglio mark the end of the December correction. As we have been saying the economy is fine and the drop in oil prices has created a ‘tax cut like’ windfall for most consumers. It will be felt in their credit card bills since that is the way most folks pay for gas.

We took advantage of the drop to add to issues that we own and increase overall equity exposure in accounts. Smaller accounts are almost fully invested and larger accounts are up to 80% invested, a good amount of that money is in income producing stocks with AT&T and Verizon comprising big chunks of most large portfolios. We have been lucky trading both those stocks this year and hope to continue that luck. Sprint began a price war with them early this month and that action caused all three to move lower. Sprint has been hardest hit and is a loser in portfolios but we remain confident in eventual gains.

We did switch out of BP at a loss an added to our Marathon and GM positions with the money. BP’s Russian participation in Rosneft worries us and since Marathon is a less controversial oil play we decided to stick with it to participate in the eventual recovery in oil prices. 

Tax loss selling through year end may keep some of our depressed issues down but in the New Year we would expect a least a little bounce at which time we will reevaluate.

Happy Holidays





December 12, 2014

Model Portfolio Value As of 12 December 2014

$ 743,092

Comment on Model Portfolio activity

The correction is upon us. We did suggest it would occur but we don’t know how long it will last. Given that folks have gains from earlier in the year, tax loss selling and the desire of institutional investors not to own oil names at year end may cause the selling to last into the New Year.

We didn’t know the reason why the selloff would occur but the pattern in normal years over the last decade is for selloffs to occur in October and December.

We have been buying into the sell off since we expected it. We have added yield stocks like AT&T (5%) Verizon (5%), BP Amoco (6%), Marathon (3.5%), DeutschBank (3.3%) American Eagle (4%) and Ford (4%).

This too shall pass. The economic numbers suggest the economy is in good shape. Lower oil prices help the consumer while hurting some of the high flying drilling and steel stocks. The loss of jobs in the oil industry – if they occur- will be offset by the dollars in consumer prices to pay down debt or to spend as most folks do.

Abercrombie’s long time CEO finally left and so the near term outlook for the company is uncertain. ANF should hire Jenna Lyons, the force behind J Crew’s recent success. They should give her the store in order to bring her on board. If they did the share price would rally 20% immediately



To have some fun we thought we would present recent news articles suggesting a $200 price on oil.

7/23 2014: If the standoff with Russia and the West reaches a point where the EU has to completely cut trade with Russia, oil prices could soar above $200 per barrel, sparking a global economic crisis, says Adam Slater, senior economist at Oxford Economics.


6/13/2014: If Iraq's oil supply goes offline, crude prices could hit $150-$200 a barrel, T. Boone Pickens, founder of BP Capital Management, told CNBC on  ..."That's where you have to kill demand with price. That's the only way you can do it, because oil won't be there," Pickens said in an interview with "Street Signs."


Analysts Warn of $200 / Barrel

Andy Rowell, October 14, 2013

Last week, President Obama lauded the fact that America was poised to become the number one energy producer in the world this year.

“For the first time in a very long time, we’re producing more oil than we’re importing. So we’ve got a lot of good things going for us,” he said.

But the US does not function in isolation. It is a global energy market and most analysts believe the international oil market is balanced on a knife edge, with precious little spare capacity.

On Friday, the Washington Post quoted Robert McNally, founder of the Rapidan Group, a consulting firm who spelt out what for many people is blindingly obvious. “Since oil is globally traded and fungible, reducing imports cannot ensure low and stable prices.”

The paper pointed out that globally spare production capacity is currently 2 to 3 per cent of global consumption, below the 4 per cent level, which is seen as a minimum level for a cushion. At this level, any political unrest could hit prices.

And the futures oil price has already begun to creep up on the news that the Organisation of the Petroleum Exporting Countries (OPEC) reported a slight drop in its September output which averaged about 30 million barrels per day.

And whilst there is also surging production from North America, we could be heading for an oil supply crunch due to growing demand from China.


And now for the present day predictions:

  Oil Resumes Drop as Iran Sees $40 If There's OPEC Discord


Bloomberg L.P.

2 days ago - Crude could fall as low as $40 a barrel amid a price war or if ... “I don't think we're going to get back to the over $100+ oil that we had for the last ...

  Will Crude Oil Prices Drop to $40 a Barrel? - 24/7 Wall St.


5 days ago - Could oil prices remain at around $40 a barrel for long? ... and if profits are going to get squeezed, oil companies will spend less on exploration ...

  Can oil fall all the way to $40? - CNBC.com



Nov 30, 2014 - Read MorePoll: How low will WTI go? But for oil to get all the way down to $40 a barrel would take "a massive lack of confidence in the ...

  Economist Jeff Rubin: Oil Might Fall to $40 a Barrel


Newsmax Media

Sep 29, 2014 - In past episodes of military conflict in the Mideast, oil prices have surged amid fears of ... Economist Jeff Rubin: US Oil Might Drop to $40 a Barrel .... Global economies are moving at different speeds, creating a divergence in ...

  $40 oil doesn't scare Big Oil. Here's why - Dec. 3, 2014



Dec 3, 2014 - In fact, they could survive oil as low as $40 per barrel. ... When the Oil Prices were going up, OPEC was to blame because they were not ...

  Can Oil Prices Drop to $40 a Barrel? - NBC News



Dec 1, 2014 - Remember way back in June, when oil was $115 a barrel? Now it's trading at around $67.90 a barrel for Brent crude and some analysts are ...

When interest rates were 20% in the 1980s they were never coming back down. today interest rates are 1% and they are never going back up. Never is a very long time.




December 5, 2014

Model Portfolio Value As of 5 December 2014

$ 760,283

Comment on Model Portfolio activity

We traded out of our two oil stock trades when the rally off the large drop last week faded. We made a scratch profit in both. We reentered AT&T and Verizon with the proceeds. We also took our small profit in KB homes and eliminated Hecla flat.

We remain cautious on the markets.




































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309 W Johnson Street Apt 544 Madison, WI 53703 312-925-5248
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