Lemley Yarling Management Co
309 W Johnson St
Madison, WI 53703
Comments on activity in client accounts
New Year's Eve 2021
Our accounts moved higher this week recovering more from the early December pullback. We are fully invested, expecting our stocks to pop after yearend tax selling.
Time will tell. Happy New Year!!
24 December 2021
The Santa Claus rally came along as predicted and rescued accounts although we still remain below November's high.
Folks seem to treating Omicron as a bad flu season and with 60,000 folks-unmasked- at football games, we don't expect that to change. Since the ‘O' is trending downward in South Africa there is some suggestion that by the end of January it will do the same here.
Best wishes to All.
17 December 2021
The markets have been in a contrary mood this week and our accounts have suffered accordingly. We think the selloff in our companies is overdone. Most of them trade at 10 times earnings (not sales) and many have attractive dividends.
We can't argue with Mr. Market since he is always right. Right now, the markets are under siege from tax loss selling, quadruple expiration today, Bitcoin shenanigans, the selloff in overpriced wonder stocks with no earnings and of course Omicron.
3 of the five will end at year end or before but Bitcoin mania will remain. The last, Omicron, is like a virulent yearly flu epidemic- most experts say it is very transmissible but that the severity is less than Delta. If that's the case, we'll get thru it as we do most flu seasons. Wearing a mask and of course vaccinations both flu and the 3 shot regimen should reduce the risk for folks who want to.
We look forward to a rally in our issues as selling pressure abates.
Happy Christmas. We'll have a post next Thursday.
10 December 2021
Inflation is the new bugaboo. Covid is passe. What next? With inflation, one positive is that all of us on Social Security can hope for an increase in 2023 like the 6% increase we are receiving in 2022. That's probably why Biden is causing all this inflation so that he and Dr. Jill can see another increase in their Social Security payments. Weekly jobless claims slid to 184,000 last week, marking the lowest level since 1969. That damn Biden can't do anything right. Did you know that Biden created the Omicron virus to infect all the Republicans who refuse to get Vaccinated? That's as true as the fact that Democrats were organized enough to steal the election and that the January 6 demonstration at the Capitol was a love fest for Nancy Pelosi.
We continue to adjust portfolios into year end. We having been moving to 3% plus dividend payers that now make up half of larger portfolios. Currently 5%+ yields are Verizon, Dow and Pinnacle West. 4%+ is Kraft Heinz. 3%+ are Merck, Bristol Myers, Pfizer, Organon, ViacomCBS, Intel, Campbell Soup, and Carpenter Steel.
We are maintaining our serious overweight in retailers The Gap, Bed Bath, Macy's, The Container Store and American Eagle. AMC Networks and ViacomCBS continue under selling pressure and are very attractive holds and we own trading stocks JETS, Southwest Airlines and Western Digital. Old standby (recently added) GE rounds out our holdings. We traded six fancy stocks for gains this week having purchased them in last week's downturn. We won't be back in them since our luck held once- and that's enough.
We took a trading profit in Ford which we have been doing all year. Hopefully we'll have an opportunity to repurchase again.
Here's hoping for a Christmas rally. If not then, then in the new year.
So, the filibuster can be ignored when Republicans say so.
News: McConnell says he's "confident" he'll have the votes to pass a temporary filibuster exception to the debt ceiling. He says the vote will be Thursday
OK for Elon Musk and Tesla but not anyone else says the richest man in America (who is the richest because of federal and state subsidies for purchases of the first 200,000 Teslas). He and billionaire Ray Dalio (see last week's post) are #$%^&^%$.
Tesla CEO Elon Musk assailed a $2 trillion social and climate spending bill, saying he's in favor of scrapping the entire package.
"Honestly, I would just can this whole bill. Don't pass it," Musk said at the Wall Street Journal's CEO Council, which he appeared at virtually. "That's my recommendation."
He swung at a specific provision within the legislation that would authorize a tax credit up to $12,500 for Americans if they bought an electric vehicle assembled by unionized workers with batteries constructed in the US.
"I am literally saying get rid of all subsidies," he said.
Emperor' clothes fantasy on steroids
Last week alone, more than $100 million worth of metaverse land was sold as NFTs in metaverses including the sandbox (SAND), decentraland (MANA), CryptoVoxels, and Somnium Space, according to DappRadar.
Gord's firm Metaverse Group, which sold a 50% stake to Tokens.com for $1.7 million, last week bought a plot of digital land in decentraland for $2.43 million. Another plot of virtual land was sold for $2.3 million on Axie Infinity, a play-to-earn platform, in the same week.
Why are virtual lands being sold for millions?
The sudden boom in virtual real estate investing strikes many investors as speculative and unsustainable, yet Gord said the trend is early enough that purchasing virtual lands is almost equivalent to buying pixels of a website in the early days of the internet, which was not possible.
Store of value????
Bitcoin has a market value of over $1 trillion. Reports are that liquidation of $1 billion in Bitcoin caused a 20% drop in price. that's 1/10th of 1%. When selling begins in earnest the leverage that exists in Bitcoin (there is no Government overseer which sets margin or suitability requirements) will see much larger per centage drops. Greed and Fools!!
Saturday 8AM December 4, 2021
Bitcoin and other cryptocurrencies fell sharply Saturday, another sign that investors were pulling back from riskier bets after this week's stock-market selloff.
Bitcoin, the largest cryptocurrency by market value, was down 18% at $46,571.84 at about 7 a.m. ET, according to data from CoinDesk. It temporarily dipped to $42,000 before bouncing back. Ether, the second-largest cryptocurrency, was down close to 16%.
The declines were widespread across the cryptouniverse. Other widely traded cryptocurrencies including Solana, Dogecoin and Shiba Inu coin lost more than a fifth of their value.
Bitcoin fell Monday after a dramatic rout wiped more than $400 billion from crypto markets over the weekend.
The world's biggest cryptocurrency was down 3.7% to $47,585 on the Coinbase exchange as of 5.35 a.m. ET.
Bitcoin crashed to as low as $42,000 Saturday from above $57,000 Friday, before rebounding to trade just below $50,000 for most of Sunday.
As of Monday, the token was roughly 30% below its November record high of close to $69,000, underscoring the volatility of the digital asset.
SoftBank, the Japanese conglomerate that became synonymous with freewheeling spending on unprofitable technology start-ups including WeWork and Uber, is trying to spend less money — starting with one of its own top executives.
Marcelo Claure, the firm's chief operating officer and a close confidant of the SoftBank founder and chief executive Masayoshi Son, is seeking roughly $2 billion in compensation over the next several years, according to four people with knowledge of the discussions who were not authorized to speak publicly on pay issues. Mr. Son and other senior SoftBank executives in Japan are seeking to pay Mr. Claure a much smaller sum — tens of millions of dollars at most.
Hackers have taken $196 million from crypto trading platform Bitmart, a security firm said Saturday, December 4.
Bitmart confirmed the hack in an official statement Saturday night, calling it "a large-scale security breach" and writing those hackers withdrew about $150 million in assets. However, blockchain security and data analytics firm Peckshield estimates that the loss is closer to $200 million.
Bitmart added in a statement that all withdrawals had been temporarily suspended until further notice and said a thorough security review was underway.
Never own a boat; know people who own a boat.
3 December 2021
Employment numbers for November were good. The markets this week were schizophrenic, crashing 2 days, gaining back 2 days and finally on Friday- even though the employment numbers for November were good- markets faded into the close.
According to the talking heads the Omnicom virus is the proximate cause of the mayhem coupled with Chairman Powell's Wednesday tapering testimony. Our take is that many folks and funds have huge realized profits and with the overall markets down over 5% -and 50% and larger pullbacks in the many stocks- investors, hedge funds and mutual funds are selling anything with significant losses. We think the public funds are moving the money raised from those sales to Apple and Microsoft and Nvidia et al. in order to look smart thru year end window dressing.
Others, including old timers like us, are selling for losses in taxable accounts but are moving to other issues we own that are down as much or more than the issues sold. We remain confident in our holdings and look forward to future profits from them.
We did reduce our retail exposure because other areas have dropped significantly into which we can place funds raised while reducing exposure to the retail segment. We eliminated American Eagle, Abercrombie and Urban Outfitters. All three are good companies but our remaining retail issues offer special reasons to keep.
The Gap is now at fire sale prices. We sold GPS in our taxable accounts with the idea of buying back after 30 days at December month end. The collapse in November was the result of supply chain issues and the need of The Gap to spend over $500 million to fly inventory from Viet Nam rather than import by water. The cost difference was $400 million. That cost will not exist next year. The air cost cut expected earnings in half causing analysts to flee and resulting in the exaggerated price drop. The Gap was our first retail winner back in the 1980s and it has a special place in our heart. Athleta and Old Navy are the jewels of the company and The Gap and Banana Republic the laggers. In 2019 The Gap considered spinning off Athleta and Old Navy and just the suggestion sent the share price to $45. That offers an idea of the value inherent in the company
Bed Bath has been a winner for us this year. Management is intent on shrinking the outstanding shares to 50 million (from 100 million) through a $1 billion share buyback to end next year. Just this announcement pushed the share price from $16 to $27. We sold from $22 to $27 and have traded the shares profitably a few times since. After the pop higher share price have settled back to $20 and we are back in the shares for a move higher into the new year. The weakness in the share prices the last few weeks is giving management the opportunity to buy at very attractive prices. Bed Bath is still in turnaround mode but with a shrinking share base and improving sales the potential for significant earnings per share gain is evident.
Last Month the market loved Macy's as Macy's announced blow out earnings. We sold into the euphoria. The price pullback has moderated the love and traders who purchased at $34 to $37 are now tax loss selling and moving on. Macy's has an investor group that wants management to spin off the internet ($9 Billion annual revenues) business which gurus say would be valued by itself at $10 billion. That's 50% more than where the whole company is priced. Even with no spinoff Macy's is on track to earn $4.50+ this year and next which prices the shares at 6 times.
With other issues we took losses in Merck and moved the funds to Bristol Myers. They both tend to move the same. We plan on reentering IBM this month and Intel remains our chip exposure while we continue to trade Western Digital. We added Citigroup to go with our Wells Fargo position and several accounts now own Kraft Heinz down 25% from its yearly high with a 4.5% yield.
ViacomCBS and AMC Networks (not the movie theatres) have been under selling pressure for the last month as folks who bought the stocks in the $70s and above in the spring are selling for substantial losses. These lucky folks were sold the shares at the inflated prices by Goldman Sachs which was eliminating a margin call position of a customer so as not to lose money. We would guess that Goldman sales folks neglected to tell these clients -and maybe even they weren't told by management -that there was a huge overhang of margined stock to be sold by other brokers.
Carpenter Tech, the specialty steel company, may finally see daylight as the aerospace and medical equipment industries finally begin to recover.
We added the airline ETF (JETS) on its yearly low to several accounts as a means of participating in reopening without having to pick one airline.
We continue to trade Ford for profit.
We are also repurchasing -in nominal amounts and at much lower prices- fancy companies down 50% and more from their highs for a January rebound as tax loss selling ends. We were early in many of these types in October and early November and took minor losses at higher prices when we realized the selling was not over. So far, we have purchased Zoom at $190 down from a $450 high. Zoom actually will earn about $5 this next year and is now priced at a lower P/E than Nvidia, Adobe, Amazon, Salesforce and many more.
We bought DocuSign today as it is down $95 today from $220 to $135. Ooops! Analysts obviously didn't like the only 25% growth in revenues. It is still expensive even being down 65% from its yearly high. Much of today's selling is tax loss and portfolio painting action. Our guess we will make a few dollars in a new year's recovery.
We added Canadian Solar which a have traded with middling results for the past few years. It is now on its yearly low and is one of the few solar stocks that actually earns money.
And we are back in SNAP. With 300 million users and finally earning money the risk reward for an over year end trade makes senses to us.
December will remain volatile until Pfizer if its vaccine will have some effect on the new virus and when the CDC and other agencies report on the severity of those affected. We expect both results in the next two weeks.
We are heading out the land of milk and honey and deer hunters and snow next week but we will have our weekly post since markets remain interesting.
By the by, no poinsettias or candy will be sent this year as we are reducing our clerical chores and will instead donate funds to a few Favorite charities.
Ah, the rarified air of a billionaire must affect their thought processes. Or maybe the fact that China is a major customer means more than human rights.
Billionaire investor Ray Dalio likened China's moves to banish private citizens from the public eye to those of a "strict parent."
The founder of investment management firm Bridgewater Associates was speaking with television anchor Andrew Ross Sorkin on CNBC Tuesday.
Sorkin asked Dalio how he reconciles China's human rights issues and the recent disappearances of high-profile citizens with investing in the country.
"What they have is an autocratic system," Dalio said. "As a top-down country ... it's kind of like a strict parent. They behave like a strict parent ... That is their approach. We have our approach."
And the foolishness continues
By Monday, with still little in the way of hard evidence as to how easily transmissible the variant was, investors reassessed the threat omicron may pose to the economy and edged back into cryptocurrencies and stocks.
"Like gold, Bitcoin is being used as a hedge against global uncertainty in the world," Adrian Pollard, Chief Product Officer to HollaEx, a crypto exchange software company, told Insider.
In the meantime, a little-known decentralized reserve currency named omicron surged by almost 70% on the day and by 900% on the week, as trader focus on the new COVID-19 intensified. According to the developers' website, the token is backed by a basket of assets that includes stablecoin USDC and is only listed on SushiSwap.
"Omicron is a clear sign of a bubble, and while it might be a good way to make a quick return, it is not a good buying option for the long term investors," Freddie Evans, Sales Trader at UK based digital asset broker GlobalBlock told insider.
"With the founders of the coin being unknown, it is also at risk of a rug pull, the likes of which we saw with Squid Game coin last month," he said.
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