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Lemley Yarling Management Co
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Madison, WI 53703
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24 June 2016

Well Brexit was approved even the though the smart money and betting odds (yes the English love a bet) said it wouldn't be and so the markets reversed their gains (big time) for the week in the first minute of trading on Friday.

Our guess remains that the markets will hold at this level - which is the level of last Friday - till July 1 and then move lower over the next few months. Markets dislike uncertainty and the UK exit from the European Union won't occur for two years. Also Britain will have a new prime mister, Scotland may schedule another independence vote and Sein Fein is making noise for Northern Ireland of joining the Irish Republic and remain the in the EU…and so Britain will be a mess politically- if not economically for a while.

We have no idea what the leaving will do to the rest of Europe but our guess is that events over the next few months will place the whole issue on the back burner.

We used the drop on Friday as an opportunity to establish a few trading positions. We repurchased Marathon Petroleum, Deutsch Bank (down 17% on the exit news), BankAmerica and GM B warrants. We also added to our Ascena position under $7.

We still have an 80% cash position in larger accounts so we aren't betting the house. Also these issues have been good to us in the past.

Time will tell.


17 June 2016

We traded Marathon Petroleum twice this week for profit and on Friday also rescued an underwater trading position in Devon with a small plus. We also traded Marathon Oil for a plus against our established holding.

We are trying to take advantage of the swings in the price of oil to earn some dollars in issues we have traded well this year.

Markets are focusing on the BREXIT vote on Thursday June 23 and will probably meander till then. With quarter end approaching which is also nonprofit organizations fiscal year end we don't expect any significant pull back till after July 1.

Following are a few interesting reads:

The old stockbroker has a tear in his eye. He used to reminisce about how Sewell Avery, CEO of Montgomery Ward in the late 1940s and 1950s (https://en.wikipedia.org/wiki/Sewell_Avery) had surrendered its leading retail position to Sears by not renovating and expanding. Now hedge fund guru Eddie Lampert has done the same at Sears. Capitalism is creative destruction and is not kind to those who think they are smarter than the rest. A story on the decline of Sears well worth the read: http://www.businessinsider.com/sears-obsession-with-wall-street-2016-3


Citi Rank and File Can't Believe Senior Execs Chose "Annual Ferrari Road Trip" Over Brexit Prep

Foreign exchange traders at Citigroup, the world's biggest currencies-dealing bank, are pulling out the stops to prepare for next week's UK referendum on EU membership and its potentially cataclysmic impact on sterling. But as rank-and-file workers worked long hours, five of the bank's most senior currencies executives each took between one and three days out of work around last weekend to drive their sports cars, including some Ferraris, through France. The five executives, most of them managing directors, declined to cancel their annual Ferrari road trip with two former colleagues…Two people who have talked to Citi employees about the holiday said they felt it was embarrassing. "Everyone is entitled to a holiday" but the timing and nature of the trip was "insulting" to employees, one said.


10 June 2016

We traded Marathon Petroleum again this week for a $1 plus profit and on Friday took positions in Marathon Oil and Devon with the hopes of being able to get a quick trade next week. We may be pushing the envelope a bit but we like both companies so holding them longer won't be a problem. They both have been volatile recently and we bought them near their trading bases of the last month.

Accounts remain 90% cash and we are comfortable watching while trying a few trades. The downside will be easier than the upside from these market levels over the next few months.

BREXIT vote is June 23 and until those results are in the markets are going nowhere.

Warm weather has arrived. Enjoy.

2 June 2016

We are traveling this weekend and so we are posting a day early.

While we want to remain in cash several attractive trading/owning opportunities have arisen that will bring positive results at some time no matter what the markets do.

We sold Ascena Retail (Ann Taylor, Lane Bryant) in April at $10.40 and bought a portion back on Thursday at $7.30. Shares dropped on Wednesday when ASNA announced less than revenues but still profitable earnings. We have had luck trading this issue this year.

We also have had good luck trading Marathon Petroleum this year. Our last sale was at $41 in late April. When oil was $26 MPC was $30; when oil was $40 MPC was $41; now that oil is $50 MPC is $35. Go figure. This week we bought MPC on Tuesday and sold Wednesday for a point profit off the $35 level from where it has been bouncing higher (then retreating) regularly. With an OPEC meeting Thursday (today) we were more comfortable trading than owning. We do want to eventually own it.

Marathon Petroleum

This top refiner rolled over after first-quarter earnings and may be offering an outstanding entry point. Marathon Petroleum Corp. (NYSE: MPC) has a diversified business that operates through Refining & Marketing, Speedway, and Pipeline Transportation segments. The company owns and operates seven refineries in the Gulf Coast and Midwest regions of the United States that refine crude oil and other feedstocks, and its distributes refined products through barges, terminals and trucks, as well as purchases ethanol and refined products for resale.

While acknowledging that the company's margins may have compressed some, many on Wall Street also expect strong revenue contribution from the assets acquired from Hess. Last year the company converted almost all the Hess stations to the company's Speedway brand.

Marathon reported lousy first-quarter 2016 earnings, owing to weak crack spreads and increased turnaround facility activity. The company posted earnings per share that fell well short of the consensus estimates. Revenues topped estimates, but they were much lower than in the same period a year ago. Only 12.7% of funds own the stock.

Marathon shareholders are paid a 3.6% dividend. The $50 Merrill Lynch price target is right in line with the posted consensus target of $50.75. Shares closed trading Tuesday at $35.81.

Read more: Marathon Petroleum and Other Merrill Lynch Neglected Dividend Stock Picks (NYSE: MPC) - 24/7 Wall St. http://247wallst.com/investing/2016/05/25/merrill-lynch-has-4-neglected-dividend-stocks-rated-buy/2/#ixzz4AF2TYXhM

As prices rise analysts become bullish; as prices fall analysts become bearish. That's the buy high sell/low philosophy of Wall Street.

From the WSJ: Analysts are again raising their oil-price forecasts, in a reflection of falling concerns over the glut in crude supply.

That helps relieve the pressure on members of the Organization of the Petroleum Exporting Countries—who are set to meet on Thursday—following months of fervent debate over production levels within the cartel.

Investment banks surveyed by The Wall Street Journal raised their price forecast for the third consecutive month in May, predicting that Brent crude, the international benchmark, would average $43 a barrel in 2016. That is up $2 from April's survey.

The survey of 13 investment banks predicts that the price of West Texas Intermediate, the U.S. oil gauge, will average $41 a barrel this year and $55 a barrel in 2017.

"The market is conspiring to help OPEC," said Doug King, chief investment officer at RCMA Asset Management and manager of that firm's $240 million Merchant Commodity hedge fund. "If I was in the Saudis' shoes right now, I'd be pretty happy right now."

Oil prices rose above $50 a barrel last Thursday for the first time since November.

Late Tuesday morning in New York, Brent crude was trading up 21 cents, or 0.2%, at $50.57 a barrel. West Texas Intermediate was up 50 cents, or 1%, to $49.83. Brent is up close to 80% from its lows earlier this year.

Almost six months of lower prices has dragged the year's average down. But analysts see a more-positive trajectory for the second half of the year. By the fourth quarter of 2016, analysts expect oil to be trading at $48 a barrel, up from a prediction of $47 in April's survey.


We aren't surprised.

CNBC TV personality and "Mad Money" host Jim Cramer has built a lucrative career as a stock picker, but a new analysis of his charitable fund—a personal stock portfolio he co-manages that the financial website he founded has built a subscription service upon—shows he doesn't beat the market.

Cramer's Action Alerts Plus portfolio has underperformed the S&P 500 index SPX, +0.11% in terms of total cumulative returns since its 2001 inception, according to a working paper released Friday by Jonathan Hartley and Matthew Olson, researchers from the Wharton School at the University of Pennsylvania. While the fund outperformed the 500-member index in the years leading up to the 2008 financial crisis—which Hartley said was partially a reflection of the fund's previous inclusion of small-cap companies and growth stocks that were outperforming during the pre-recession bull run—things have gotten worse since 2011, with Action Alerts Plus falling 9.5% in that year, when the S&P 500 was unmoved. It rose just 1.3% in 2014, versus an 11.4% increase for the S&P, the study found.

The Action Alerts Plus portfolio, which is used in part by Cramer and TheStreet.com to sell $15-a-month newsletter subscriptions that provide subscribers information about the fund's holdings, its buy-and-sell strategy and exclusive market commentary from Cramer, was found to have returned 64.5% cumulatively over the past 15 years, versus 70% for the S&P 500, when adjusted for the reinvestment of dividends, according to the Wharton researchers' study. The Vanguard Diversified Equity Fund, by comparison, a mutual fund composed of a blend of U.S.-based companies, has underperformed the S&P 500's total return by 0.8% over the last 10 years, according to Morningstar.

read more at: http://www.marketwatch.com/story/jim-cramer-doesnt-beat-the-market-2016-05-13


The whole Uber thing seems to us a scam. the company has never made a profit and has survived by raising cash such as a recent $3.5 billion investment by the Saudi wealth fund- (getting in at the bottom- of oil prices- not Uber valuation). And so this story from Bloomberg as reported by Dealbreaker reinforces our skeptical view of the company's finances.

Uber And Goldman Now Leasing Cars To Broke People Because Good Ideas Are Boring:

Aside from regulation, competition, labor hassles and an unquenchable thirst for cash, Uber really only has one problem: a need for more drivers with their own cars.

But like all of its so-called "hurdles," the Ayn Rand-themed car service that lives on your phone has a brilliant plan to put new asses behind new wheels. Per Bloomberg…

In a deal led by Goldman Sachs, Xchange received a $1 billion credit facility to fund new car leases, according to a person familiar with the matter. The deal will help Uber grow its U.S. subprime auto leasing business and it will give many of the world's biggest financial institutions exposure to the company's auto leases. The credit facility is basically a line of credit that Xchange can use to lease out cars to Uber drivers.

Two generally "beloved" entities getting into a subprime lending market? Why didn't this happen before?

Xchange caters to people who have been rejected by other lenders. The program is run by Andrew Chapin, who pitched it to Uber Chief Executive Officer Travis Kalanick in 2012. Before joining Uber, Chapin was a Goldman Sachs commodities trader. He oversees all of Uber's auto-financing efforts, including a partnership with Enterprise Rent-A-Car and vehicle-purchase discounts. "I want the driver to get an option that is best for them," Chapin said. "I try to provide a menu of options that the industry thus far has not provided."

And by "a menu of options" for "people who have been rejected by other lenders," Chapin means this:

The terms of an Xchange lease run 28 pages. Drivers pay a $250 upfront deposit and then make weekly payments to Uber over the course of the three-year life of the lease. As the video promoting the arrangement puts it: "The best part: Payments are automatically deducted from your Uber earnings." At the end of three years, Uber keeps the $250 deposit to release the drivers from the lease. If they want to buy it, they'll need to fork over the residual value of the car, which could run many thousands of dollars. Uber declined to provide an average figure.

Aside from "disrupting" the literal definition of the word "deposit," the loan is based on high weekly payments designed to make lessees drive for that cheddar. All of which, of course, inevitably leads to this:

Xchange was a solution to Shawn Hofstede's money problems at first.

Hofstede, 30, started driving for Uber in the Dallas-Fort Worth area last year, using his own car. But then, during an accident on his own time, he wrecked the car and was left without the income. "I was literally screwed," he said. Then Uber e-mailed him about its financing options.

He leased a 2016 Toyota Corolla from Xchange in November, paying $155 a week. Two months later, Uber slashed fares nationally. Soon Hofstede had trouble keeping up with his payments. He went from making $200 in a weekend to $140 in a weekend, he said. "It got to the point that I would drive just to meet my payment," he said. "If you were short on your payment for a week it would roll onto the payment for next week. It starts adding up."

Eventually, Hofstede gave up and stopped driving. He said he told Xchange to come get the car several times. That was in February. "I felt trapped, and then I said, ‘F— it,'" he said. "I'm not paying them."

It was no secret where the car was; Uber had installed a GPS tracker on it. For a while, Hofstede left a note on the Corolla that read, "Dear Uber, thanks for coming to pick up the car. Call this apartment, and I'll come out and give you the keys." After two months passed, he stopped putting the note out. One April morning, Hofstede woke up and the car was gone; it had been repossessed overnight.

Throughout the Bloomberg piece, loan experts refer to Xchange's rates in glowing terms ranging from "Pretty expensive" to "Predatory." And the reporters illustrate that point with stories of other drivers that found themselves underwater on their car payments before even leaving the lot.

Uber's defense seems to be that Xchange will lose money over the long-term, but that doesn't really appear to jibe with Goldman's involvement in the aforementioned $1 billion investment. Even sweet-talking Travis Kalanick can't get Goldman to throw money at his staffing shortage…can he?

But it does make sense for Uber to keep this up, at least until Travis can get his robot drivers out on the road. After all, robots have no problem driving around the clock to pay off those rapacious weekly payments on a subprime car loan designed to benefit only the company that funded it.


Bloomberg website: http://www.bloomberg.com/news/articles/2016-05-31/inside-uber-s-auto-lease-machine-where-almost-anyone-can-get-a-car

It's not as bad as working in a coal mine:

Investment bankers at UBS (UBSG.S) can now take at least two hours of "personal time" a week in the latest attempt by a bank to retain staff with a better work-life balance.

In a profession known for its grueling schedules, banks around the world are trying to lighten workloads to lower stress levels, especially among junior bankers.

The UBS policy, dubbed "take two", aims to give bankers more flexible hours without colleagues having to pick up too much slack.





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