Lemley Yarling Management Co
309 W Johnson St
Madison, WI 53703
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29 September 2023
Senators (both Dems and Repubs) are worrying more about a dress code (which wasn't being violated) than gold and $100 bills in a Senator's pocket. MTG and friends in the House want to impeach Biden and cut the Defense secretary's pay to $1 while allowing the Government to shut down. UGH!
We had a few profitable trades this week and ended with a comfortable cash position in most accounts. Most major stock measures were down 3% and more in the 3rd quarter and the question now is whether the Super Seven will have continual profit taking into October. The Supers have been responsible for much of the gains this year. They were also responsible for much of the loss in the major measures in 2022. The major market measures remain lower than the December 2021 close.
The pattern for September/October is down in September and then a rally beginning by mid-October. We are trying to hold our powder until late in December which has been the best time in past years to load up on over year pops in tax loss sold stocks.
Happy Autumn, the nicest time of year.
22 September 2023
The federal government is an insurance company with an army: The great bulk of nonmilitary spending is on the big safety-net programs, that is, Medicare, Medicaid and Social Security. And Gingrich in fact sought deep cuts in Medicare and Medicaid.
Markets were lower this week, led lower by profit taking in the Super Seven. Government close down is 9 days away and the auto strike continues. As a result, the Talking Heads have turned short term negative. Reacting to the tenor of the market we are back to a significant cash position. We have surrendered part of our gains for the year since Mr. Market has been unkind to our value trades. But the cash we hold gives us our usual opportunity to trade end of year tax selling stocks into the new year.
At week end we owned Wisdom Tree Floating Rate Treasury ETF (5.2% yield), Intel (1%), Pfizer (5%), Verizon (7.7%), AT&T (7.7%), Southwest Air (2%), Key Bank (7.7%), Macy's (5%) and The Gap (7.7%).
In a Monday court filing, lawyers representing the bankruptcy estate of the failed exchange alleged that Allan Joseph Bankman and his wife, Barbara Fried, "exploited their access and influence within the FTX enterprise to enrich themselves, directly and indirectly, by millions of dollars Fried, the exchange's disgraced ex-CEO and founder."
The lawsuit, which was filed in the U.S. Bankruptcy Court for the District of Delaware, goes on to claim that "despite knowing or blatantly ignoring that the FTX Group was insolvent or on the brink of insolvency," Bankman and Fried discussed with their son the transfer of a $10 million cash gift and a $16.4 million luxury property in the Bahamas….
According to the partially redacted filing, Bankman-Fried's parents also "pushed for tens of millions of dollars in political and charitable contributions, including to Stanford University, which were seemingly designed to boost Bankman's and Fried's professional and social status."
Fried is also accused of encouraging her son and others within the company to avoid, if not violate, federal campaign finance disclosure rules by "engaging in straw donations or otherwise concealing the FTX Group as the source of the contributions."
Bankman-Fried's parents are legal scholars who taught at Stanford Law School. His mother is an expert on ethics, while his father specializes in taxes. Bankman-Fried himself independently faces multiple wire and securities fraud charges related to the alleged multibillion-dollar FTX fraud.
15 September 2023
Markets remain range bound at upper levels for the major market measures. Since the Super Seven are a large part of those measures, they are responsible for most of the up market moves- as they were for last year's 20% (S&P 500) to 33% (QQQ) collapse. In reality markets haven't yet recovered the late 2021 highs and even many of the fancy stocks are well below their all-time unreachable highs.
The round trip has been exciting for some. For us and others- not so much. NVDA remains the darling of the talking heads and institutional money continues to lemming like rush in. Microsoft is back to its 2021 high while Netflix has doubled this year but remains 40% below its November 2021 top at $700 per share. And on and on.
We have begun gingerly repurchasing some of our favorites but hold 50% and greater (earning 5%).
At the close today we owned: RTX (Raytheon); Zoom; Apache Oil; Medtronic (implantable devices); Pfizer; Verizon and AT&T (in relative amounts after taking our losses last month); Southwest Air; Walgreens; Tapestry (Coach, Kate Spade, and Stuart Weitzman) plus agreement to acquire Capri- Versace, Jimmy Choo, and Michael Kors); VF Corp (The North Face, Timberland, Smartwool, Icebreaker, Altra, Vans, Supreme, Kipling, Napapijri, Eastpak, JanSport, Dickies, and Timberland PRO ); Nordstrom; Macy's; The Gap.
We continue to trade Foot Locker; Under Armour, United Natural Foods; Disney; GM; Ford; Truist Banks; Key Banks, AMC Networks and are looking for reentry points by year end.
8 September 2023
The Crazy 20 are back in Washington so the Budget Brouhaha can commence. And the Saudis plan to keep the price of oil high and the time of year suggests caution. Thus, we have raised cash and will await at least mid-October for any serious commitment of funds.
Question? Last month, who was buying NVDIA at $500 a share (now $450) when they could have purchased it at $100 a share last December? Also, Apple has pulled back 15% on news that The Chinese government is telling Government workers not to use iPhones
Walgreens and its CEO parted ways and the share price is now back to the level it traded at in 1993. So is the price on AT&T and Verizon. All yield over 6%. What to do? Conundrum! Folks need drugstores and cell phone service so these companies aren't going away. But the big boys and girls are enamored of AI and not interested in run of the mill value. They consider these stocks a source of cash if the own them at all. And the institutional folks are also using them as a source of cash as they pile into the Super Seven so they won't look like they missed the boat at the next reporting period.
On the Friday before Labor Day, we purchased shares of Walgreens in some accounts when the CEO departure news caused the share price to drop a 7% was already down 20% this year and 50% over 2 years). Over the holiday weekend we considered that it would be better to await a new CEO announcement or year end when tax selling occurs and we took a scratch loss.
With the September 14 strike deadline by the UAW on the horizon we eliminated Ford at a loss (still plus for the year on trades). Both Ford and GM are cheap versus Tesla valuation (what else is new?) but with the union demands and the market seasonality we would rather watch from the sidelines.
We own Macy's, Nordstrom, Pfizer all on multiyear lows with 5% plus yields. We continue to trade Key Bank.
Our Treasury ETF (Wisdom Tree) yields 5.3%.
Goldman Sachs lowers its estimate of the risk of recession to 15% from 20%. (Jim Cramer daily bulletin)
We think the odds of recession have been reduced to 18.7631%.
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