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

Comments on activity in client accounts

29 May 2020

As markets continued to climb higher this week with the major averages (but not many individual stocks) recovering all but 5% of their losses of the last three months we decided to exit the crazy gravy train and moved accounts to 80% and more cash. Our accounts have recovered most of their losses with more than a few higher on the year. We have kept a few speculative oil stocks and we are and will continue to trade a few earnings misses.

With Trump on the yellow menace warpath with China (with Democrats tagging along so as not to look like wimps) coupled with the buy anything mood on Wall Street the recovery in stocks is ahead of the facts. Time for us, if not the markets, to pause and rest.

For your reading enjoyment:

Our ancestors:


In the good old days circa 1980 markets crashed when Argentina defaulted


Government money going to hospital chains with billions in cash and their own hedge funds:


And so, it goes. Stay safe, wear your masks in public to save old fellows like me from Covid. Thanks.


22 May 2020

We continue to edge our way back to even for the year, As the markets seemed to stall at week end, we returned to a 50% plus cash position.

Memorial Day is upon us and so we offer one of our poems to celebrate the arrival of Spring in the land of milk and honey.

Wondrous Spring

Farmers round have turned the ground
And let us know by plowing soil
We should move our thoughts from toil
And welcome spring's smell and sound.

The bobolink has now returned
To join the meadowlarks sweet song
While down below in beavers' marsh
The frogs sing lustily all night long.

Happily, we welcome warmth
And dandelions painting gold
The land that but a week ago
Was covered with a cloud of snow.

Our little dog jumps to the sky
When after work her daily walk
Takes us to the valley creek
And up the hill where turkeys lie.

As little boys are wont to do
We tarry by the wondrous spring
That gifts us water all the day
And where our grandkids love to play.

Poppies too linger there
To clear the watercress that grows,
For water playing boys to care
And wet themselves from foot to hair.

For no matter what the age
A male can never water pass
Without some act that causes him
To tempt the fate of falling in.

After soaking our feet, a while
We walk the valley to find the cows
And count the calves that now are six
And up to playing calf like tricks.

They jump and bellow with delight
As the dogs chase them round
No harm meant but just to see
How far they'll run before we sound.

No need to rush for springtime bright
Has now begun and stopped the night
From hastening walk and air delight
'Cause winter's darkness has turned to light.

BL 06 May 2002


The death of cash:


It's a perfect storm of stupid in the stock market right now.


Hedge Fund Elite who themselves are sheltering on their private estates are all for herd immunity for the masses so the economy can recover.



15 May 2020

It was another crazy week in the markets. We sold (last Thursday/Friday trades) into the jump higher (up 300 points) on Monday; then bought the 500 point down on Wednesday and 400 point drop on Thursday morning which was followed by a 700-point DJIA upside reversal Thursday afternoon. We were all set to enjoy Friday and take some very nice trading profits when the Trumpster decided to revive his trade war with China in Friday morning tweets. Well, with him it's always something.

We still raised serious cash on Friday taking less but still OK trading profits in a few stocks and plus/minus scratches in several.

The reopening of Wisconsin by judicial fiat on Thursday has given us pause. The next month will make the cheese head state the perfect petri dish for the consequences of an uncontrolled opening in the pandemic. (Of course, if authorities follow the Trumpster's advice and don't test there will be no increase in reported cases) -even as many folks become sick and die.

This whole pandemic thing is getting old- and remains dangerous. Take care.


For your reading pleasure:

The Pandemic Helped Topple Two Retailers. So Did Private Equity.


Kroger Pays CEO $21 Million After Ending Store Workers' 'Hero Bonus'


Murphy Oil:

Overall, when looking at the full year 2020, Murphy will have an average of 48,000 barrels of oil per day hedged at an average price of $54.35 per barrel. Looking ahead to the second quarter. Production averaged approximately 179,000 equivalents per day for the month of April with approximately 7,000-barrel equivalents not produced due to curtailments and shut-ins, primarily in onshore. We anticipate 40,000 barrels equivalent production shut-in and curtailments for the month of May with the majority planned from offshore wells. At the time we made the decision on nominations in the Gulf of Mexico, prices were very low. Since that time, prices have improved greatly for June, especially without -- and without significant changes, we should flow in June in the Gulf of Mexico. But as we all know, it can be quite volatile in oil prices, and we'll have to continue to monitor that situation.


8 May 2020

We raised money at week end taking trading profits and a few small losses. We did this because leadership has again rotated from banks and other depressed areas to the nifty 5 – Amazon, Apple, Facebook, Microsoft, and Google which comprise 40% of the NASDAQ 100 unweighted Index (which is now positive for the year) and 20% of the S&P 500 index. Day traders and underinvested big boys and girls are crowding into those stocks and indexes.

The whole country is opening and even if Covid cases spike the pols and powers that be won't be willing to close it again given that the bearded, white, gun carrying, freedom fighters are willing to shoot security guards to maintain their god given right not to socially distance.

We do think that time will cure the virus with an eventual vaccine (that 40% of the population will refuse to take) and herd immunity and we feel the need to be in companies that have value and earnings and recovery potential. We have even purchased a few no earnings- great idea stocks in small amounts. We will continue to trade positions like Timken, Exelon and Western Digital and our ETF selections.

The journey to nether regions may not be over hence the move back to 40% plus cash.

We currently own: A&T, Starbucks, Ralph Lauren, Walgreens Boots, Morgan Stanley, Twitter, AMC Networks, Carpenter Steel Tech, Ebix (software), Pinterest (social), NCR, ViacomCBS, Hewlett Packard Enterprises, Lyft, Hexcel, Johnson Controls, Dish, Boyd Gambling, Carrier, Marathon, Devon Oil, Apache Oil, Murphy Oil and the equal weighted U.S. banks ETF.

Recent earnings news on ViacomCBS (our continuing soap opera) and our four speculative oil issues is below.

ViacomCBS: https://finance.yahoo.com/news/viacomcbs-reports-q1-2020-earnings-110000852.html

Marathon Oil has added to its hedge positions with a primary focus on protecting near-term cash flow. As of May 4, 2020, the Company's second quarter open crude hedge positions include 117,000 bopd of fixed price swaps and two-way collars at a weighted average floor price of $30.33/bbl. Additional protection to second quarter cash flow has been added through fixed price sales agreements. The Company has also added hedges to protect near-term regional basis differentials and NYMEX trade roll exposure.….Total liquidity as of March 31 was approximately $3.8 billion, which consisted of $0.8 billion in cash and cash equivalents and an undrawn revolving credit facility of $3.0 billion. Marathon Oil is investment grade rated at all three primary rating agencies, including recent reviews from Fitch and S&P, and has no significant debt maturities until November of 2022.


Murphy Oil: employs derivative commodity instruments to manage certain risks associated with commodity price volatility and underpin capital spending associated with certain assets. For full year 2020, Murphy will have an average of 48 thousand barrels of oil per day (MBOPD) hedged at an average price of $54.35 per barrel. Since fourth quarter 2019, Murphy has executed additional WTI fixed price swaps to hedge an additional 20 MBOPD for May and June 2020 at an average price of $26.45 per barrel, resulting in a total 65 MBOPD of volumes hedged for the months of May and June 2020 at an average price of $47.20 per barrel. For the month of April 2020, as well as July through December 2020, the company has 45 MBOPD of volumes hedged at an average price of $56.42 per barrel.

Additionally, subsequent to quarter end, Murphy entered into fixed price forward sales contracts for the delivery of 25 million cubic feet per day (MMCFD) at the AECO hub in Canada at an average price of C$2.62 per thousand cubic feet (MCF) for calendar year 2021.


Apache Oil: http://investor.apachecorp.com/news-releases/news-release-details/apache-corporation-announces-first-quarter-2020-financial-and



Devon Oil: The company states that we have the financial strength to withstand an extended downturn. As you can see on Slide 3 of our earnings presentation, Devon had $4.7 billion of liquidity, consisting of $1.7 billion of cash and $3 billion of undrawn capacity on our credit facility at the end of the quarter. In addition to our substantial cash balances, Devon's liquidity is further enhanced by our senior unsecured credit facility, which does not mature until the end of 2024. This facility contains only one material financial covenant, a debt to capitalization ratio below 65%, and at quarter-end, this ratio was less than 20%. The facility is fully committed to us, and we are not subject to semiannual redeterminations.

And lastly, a key event that will be additive to our liquidity over the remainder of 2020 is our recently amended agreement to sell the Barnett Shale. Under the revised terms, we agreed to sell our Barnett Shale assets for up to $830 million of total proceeds, consisting of $570 million in cash at closing and contingent payments of up to $260 million. This agreement includes a $170 million deposit, which we received in April. And we are on track to close the transaction by year-end.

Also adding to Devon financial margin of safety is our lower leverage with no outstanding debt obligations until the end of 2025. Our near-term debt maturity runway is best-in-class within our peer group with nearly six years of time until our first tranche of debt comes due. This is a critical competitive advantage in this period of extreme commodity price volatility.

The second key message I want everyone to understand is that Devon is committed to living within cash flow. Our top priority in this environment is to protect our financial strength. And to do that, we have taken decisive actions to protect our revenue and align our business with industry conditions by aggressively reducing capital and operating costs.

Looking specifically at revenue, Devon's disciplined hedging program has protected approximately 90% of our expected oil production for the remainder of 2020 at an average WTI floor price of $42 per barrel. We have also taken steps to protect about half of our expected oil volumes for the first half of 2021 at prices that are nearly $40 per barrel. Additionally, to further protect against a risk of widening in-basin differentials, we've utilized regional basis swaps to lock in pricing for the vast majority of our Eagle Ford and Delaware Basin oil volumes for the remainder of the year. In aggregate, the estimated market value of our go-forward derivative position is roughly $750 million, a substantial contributor to our cash flow in 2020.

On the cost front, the most significant changes we have made to date are related to the reduction of our capital activity levels. With our revised capital plan, we have limited our spending outlook to $1 billion in 2020, a decline of 45% compared to our original budget



1 May 2020

May Day! May Day! or just Happy May Day.

For April accounts we are up 10% and more but still not back to even for the year.

The markets created another confusing week- up the first three days then down the last two. We raised cash on Tuesday into Wednesday on the DJIA 1000 point up move and recommitted a chunk of those funds on Friday as the DIIA gave back the gain.

We continue to trade the 10% up down moves in stocks that have been kind to us the last few months i.e. Western Digital, Timken, NCR, Exelon, Johnson Controls, Carpenter Tech, and Ebix.

We have also added in relative amounts some street favorites i.e. Starbucks, AMD, Ralph Lauren, and Emerson Electric.

The gurus and market pooh bah are suggesting/hoping the country will open up in the next month. The new talking point on Fox and Friend Trump is that the folks who are dying from Covid 19 would have died anyway of something because they have underlying health problem or are old- like us. Nice thoughts- NOT. The Trumpsters haven't gone so far as to publicly suggest the deaths will be positive for the Social Security fund and Medicare but---.

Once the country opens up the politicians won't shut again it even if deaths spike. The patience of the vocal minority with guns and beards has been exhausted and as long as they don't get sick – what's the problem. We had to go to town today to get a tire fixed and we were one of the few wearing a mask. Sadly, the only way the Covid crisis may end is through herd immunity.

Covid 19 is an unknown and past market reactions really don't offer any counsel since this pandemic is a one off. We are just trading around 1000 point moves and maintaining a core 50% in equities.

Safe May.

Reading assignments for the week.


Meet Monty, The Sad Rich Trump Donor Who Only Got $96 Million ​In Small Business' Loans




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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.