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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

27 September 2019

We purchased Wisdom Tree Floating Rate Treasury ETF in accounts this week after it went X dividend. USFR pays a monthly dividend and yields 1.9%.

And that's it. Trump, Brexit October, tax selling to offset profits and market highs are all keeping us on the sidelines.

Enjoy the colors.


Autumn Equinox 2019

The reaction to the news is more important than the news. We are amazed by the nonchalance of the markets to the attack on the Saudi oil refinery. The one-day oil pop was followed by retrenchment and moving on to other stories as Mrs. Market decided that the bombing was no big deal. (Head scratch!)

During the week we reconsidered our Ascena position. We have recovered our gains for the year in our accounts and if we were willing to sell quality companies, we should be willing to sell our mistakes. Taking a significant loss is always difficult but the hidden signs of problems for Ascena- no comments about anything by management since the last earnings report; no purchases of stock by management in the open market when the shares are selling for pennies; no buyback by the company of penny shares when the entire equity of the company is less than its cash position; are all negative signs with no positive signs offsetting. And so, we decided to take our licks and sell. Live and learn. See below:

Lenders Fear Ascena with 3,519 Stores May File for Bankruptcy:

by Wolf Richter • Aug 26, 2019

Cash running low. Brick & mortar meltdown for landlords. Shares annihilated.

Ascena Retail Group – which operated 3,519 stores of the brands Dressbarn, Ann Taylor, Loft, Lou & Grey, Lane Bryant, Cacique, Catherines, and Justice – may soon file for bankruptcy. That is the fear of a group of about 40 lenders that Ascena owes over $1.4 billion.

The lender group, which includes Franklin Resources (Franklin Templeton Investments), Eaton Vance, Lord Abbett, and Greywolf Capital, has retained Milbank as legal counsel "because of all the uncertainty over what the company might do next," the New York Post reported today, citing a "source with knowledge of the situation."

The lender group is fretting because "Ascena has not returned the lenders' calls and e-mails for at least a month," which is raising concerns that the company may be preparing to file for bankruptcy protection, according to the New York Post, citing the source.

Ascena has already interviewed two bankruptcy law firms – Weil Gotshal & Manges and Kirkland & Ellis – the source told the paper. At this point, Ascena has not missed any payments to the lenders, according to the source. Read more:


Letting the fox into the hen house

A former lawyer for Ken Griffin's Citadel Securities LLC and cryptocurrency exchange Coinbase has been tapped to lead the U.S. Commodity Futures Trading Commission unit that monitors derivatives markets and reviews new products.

Dorothy DeWitt, who served in senior legal and compliance roles for Citadel, will oversee the CFTC's division of market oversight, the regulator said in a statement on Tuesday. She has been a top attorney at Coinbase since last November, according to her LinkedIn profile.


Preying on old folks:

In one of the first Justice Department cases of its kind, Maryland political consultant Kelley Rogers pleaded guilty to wire fraud on Tuesday for operating multiple fraudulent political action committees that raised money from donors for conservative causes but kept much of the funds for Rogers and his associates.

Rogers' arrest and indictment took place shortly after Politico and ProPublica investigated one of Rogers' PACs, Conservative Majority Fund, which since 2012 has raised close to $10 million — mostly from small-dollar donors, many of them elderly — while giving out just $48,400 to politicians.

Court documents state Rogers raised millions of dollars using "materially false and fraudulent pretenses, representations, and promises" in his solicitations to donors, made up fake bills for the PACs, including Conservative Majority Fund, and made false disclosures about them to the Federal Election Commission.


13 September 2019

Don't look a gift horse in the mouth i.e. don't question the value of a gift. The proverb refers to the practice of evaluating the age of a horse by looking at its teeth. This practice is also the source of the expression "long in the tooth," meaning old.

With that colloquialism in mind and our accounts at their yearly highs we decided to say thank you very much Mrs. Markets and take our money to the sidelines until late November/early December.

We wrote this back in February and then wrongly tiptoed back into stocks that were cheap but became cheaper and then went whole hog to try and recover all our yearly gains. Thankfully the market gods rescued us from our folly.

Once burned, twice shy- (today's the day for idioms).

The only stock we own is Ascena which is too cheap to sell. ASNA is either going to file bankruptcy or make us a lot of money. Since it is 1% or less of accounts, we are inclined to leave our bet on the table.

Next week we will place the cash in WisdomTree Floating Rate Treasury Fund yielding nearly 2% -and watch. With Brexit and Trump tweets, China trade, and the overpriced must own stocks with limited sales and no earnings, that is the best place to be- unless there is a significant correction from the DJIA all-time high. (the DJIA is only up 5% in the last 20 months).

The only stocks we may repurchase is AT&T if it settles back down from this news which doesn't warrant the 10% jump

AT&T Stock Jumps on Elliott Stake, Company Deemed Underperformer


Bond talk:

In Bond Anomaly, Negative Yields Bring Positive Returns

Currency hedges help U.S. investors squeeze gains from what look like losing bets

It works like this: Investors use euros to buy German 10-year government bunds. If they hold this debt for, say, three months, they may lose money on that investment, strictly speaking. The debt has a yield of around minus 0.64%.

But investors can more than make up for that loss by entering into an agreement with a bank to convert their euros back into dollars in three months. The forward exchange rate is largely determined by the gap between U.S. and European short-term rates.

Toward the end of last week, investors could convert $100 into 90.64 euros based on a spot exchange rate of $1.1032 per euro. They could use those 90.64 euros to buy 10-year bunds with an annual yield of around minus 0.64%. Three months from now, assuming the bund's price remains the same, they would be left with 90.50 euros. But those could be converted back into dollars at a prearranged forward rate of $1.1111 per euro.

In the end, investors would be left with $100.55, or an annualized gain of 2.2%. That is more than the around 1.6% yield on the U.S. 10-year note.


6 September 2019

The first week of September has been much kinder to accounts than August but markets and accounts remain at the mercy of Trump tweets and Fed rate policy. We managed several profitable trades in the last two weeks and have used some of the funds raised to concentrate on the stocks we still hold.

We did sell for a profit and buy back higher Michael's Stores. We were too cute thinking that we could repurchase lower (after the 15% short covering pop after good earnings) but the two-day rally in retail shares forced us to repurchase 50 cents higher. Since the profit was over $1.50 per share on the first trade, we are content.

We currently own:

AT&T- 5.6% yield and still 10 times earnings.

Verizon -4.1% yield and 12 times.

United Natural Foods- 0%; 4 times. We eliminated half when share price retuned close to our holding cost.

Sprouts Farm Markets -no yield; 17 times; still a takeover target.

Abercrombie- had a satisfactory earnings report that the gurus dismissed. 5.3% yield 15 times.

The Gap- 5.7% yield; 8 times. Old Navy sales down 7% reason for drop.

Macy's- 9.7% yield; 5 times and same store sales up slightly.

Under Armour disappointed and dropped 25% when we bought.

Michael's Stores- 0% yield; 4 times.

Walgreens Boots- 3.4%; 9 times, will need patience.

Kraft Heinz- 5.8%; 10 times, we are riding with Warren.

Apache- 4.5%; loss, our only oil holding,

Ford- 6.3%; 7 times- someday.

CBS-1.3%; 8 times- merging with Viacom.

Juniper 3.1%; 14 times.

Ascena Retail- Ugh, a real mystery.

Wisdom Tree- 7 Day Reset Treasury ETF as a cash substitute (2% yield).


Macy's sees savings of up to $550 mln from targeted promotions, better pricing


Why Abercrombie & Fitch Is a Buy


Michaels (MIK) Stock Up on Q2 Earnings Beat, Upbeat FY19 View


Mario Gabelli Sees Good Value In CBS


Wall Street analysts say ‘story feels better' for AT&T amid wireless improvements


Can United Natural Gain on Strong Brands Despite High Costs?




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