• Last Post

Positive news for Starbucks (SBUX), but bad news for Green Mountain (GMCR).

• I'm trading my long rentals from Tuesday and, depending on the jobs report, may add to my short book.

Back after mindmelt to see some positive Green Mountain Coffee Roasters (GMCR) and Starbucks (SBUX) news and a Texas Instruments (TXN) miss (which should modestly come to the aid of my PowerShares QQQ (QQQ) short).

But I have a date with the cold linoleum floor and some cheap tequilla.

I sold all my trading long rentals from Tuesday and am going out small net short with the thought that, subject to tomorrow's labor news, I will be adding to my short book.

Thanks for reading my Diary, and enjoy your evening.

• I am wondering (though not acting upon) whether the Greece news -- which frankly should have been totally expected -- has been fully discounted and should be sold.

Under normal conditions, I would say so. But tomorrow's premarket jobs report throws a wrench into what would otherwise be a classic opportunity on the short side.

• Greece bond acceptacne rate at 90%, according to news sources.

Market moves to intraday highs off of the news.

• I am bidding for more ProShares UltraShort 20+ Year Treasury Bond Fund (TBT) now -- shorting bonds.

As I will be discussing in a lengthy column on shorting U.S. fixed income next week, bonds have historically been considered a risk-free asset class. But I believe bonds should now be seen as a return-free asset class that is very risky -- they should be required to have a warning label for all potential buyers.

• I am now slightly net short.

I am trading out (on a scale but will be out at day's end) of the balance of my trading long rentals -- namely Broadcom (BRCM), Caterpillar (CAT), Fortinet (FTNT) and Parker Hannifin (PH).

As a result of my long sales and additional short positions, I am now slightly net short.

• This has been a winning trade.

Winner winner chicken dinner!

I just sold most of my Caterpillar (CAT) at $110.20-ish.

• Art Cashin shares today's NYSE run rates.

Here we go again, some volume data from Sir Arthur Cashin:

• 10:00 a.m. EST -- 960 million shares
• 11:00 a.m. EST -- 780 million shares
• 12:00 p.m. EST -- 625 million shares
• 1:00 p.m. EST -- 590 million shares

Despite protestations from many quarters, low volume and advancing stock prices is never a good cocktail.

• Still bullish despite the noise.

Altisource Portfolio Solutions (ASPS) is down nearly $3 today. I suspect the proximate cause is that Nationstar Mortgage (NSM) -- an IPO today -- announced the acquisition of the residential mortgage servicing portfolio of Aurora ($63 billion in assets).

Ocwen (OCN), the former parent company of Altisource Portfolio Solutions, was likely a failed bidder for the property and investors are probably disappointed that Ocwen lost out. That said, Ocwen faces huge opportunities to purchase other servicing portfolios (and ASPS will be a prime beneficairy) -- its bidding pipeline is probably very large -- so I am not concerned at all.

As mentioned in this morning's opening missive, I would be a buyer of ASPS under $55 and of Ocwen below $16. 

Strangely, Ocwen is trading higher on the news. Go figure!

• I offered some observations on Apple and the broader market.

First of all Rat, you never let on how much you like a girl. "Oh, Debbie. Hi." Two, you always call the shots. "Kiss me. You won't regret it." Now three, act like wherever you are, that's the place to be. "Isn't this great?" Four, when ordering food, you find out what she wants, then order for the both of you. It's a classy move. "Now, the lady will have the linguini and white clam sauce, and a Coke with no ice." And five, now this is the most important, Rat. When it comes down to making out, whenever possible, put on side one of Led Zeppelin IV.

-- Mike Damone, Fast Times at Ridgemont High

On Wednesday night's segment, along with Melissa "Stacy" Lee was Dan "Stoner" Nathan, Guy "Spicoli" Adami, Tim "Pirate King" Seymour and Pete "Mr. Hand" Najarian.

I offered some observations on Apple (AAPL) and on the broader market.

Let's go to the tape!

I explained to the gang that the preoccupation with Apple has become a borderline mania. Consider how much of "Fast Money" is devoted to discussion of the company every evening or that the shoeshine boys are all recommending Apple as well as every noninvestment professional I meet at parties in Palm Beach.

This preoccupation reminds me of something that Warren Buffett once wrote: "What the wise man does in the beginning the fool does in the end."

The problem with shorting Apple (or any company that has such strong fundamentals) on valuation is that price is not a good justification for shorting -- and I have the scars on my back to prove it over the years!

What is almost certain to me is that the big upside earnings surprise in the most recent reporting period will not likely be duplicated.

Every Apple investor should be focused (and should be monitoring) three basic fundamental issues facing the company:

1. a worsening of macroeconomic conditions;
2. possible supply disruptions; and
3. the potential for increased platform competition.

These will be the keys to Apple's future success or failure.

Tim asked me if I viewed Apple as a metaphor for the market, in the sense that the investment masses are all crowded into the best momentum stock extant -- that is, Apple -- and I wholeheartedly agreed.

My exposure to Apple is through my PowerShares QQQ (QQQ) short.

We then went on to discuss the market.

As I discussed a week ago on "Fast Money," I continue to see a pullback and view Tuesday's market swoon as the first shot across the bow.

I see a number of technical, economic, political and geopolitical issues that are unresolved or leaning in the wrong direction that suggest, to me, that the S&P will be trade between 1300-1400 for the foreseeable future. And the lower end of that range is what I expect over the next few months.

• I am still in these long trades.

In response to a lot of emails, I am staying with my long rentals in Broadcom (BRCM) and Caterpillar (CAT, now over $110!).

• I am upping my bets against retail and tech.

I shorted more Market Vectors Retail ETF (RTH) at $40.44 just now, and I added to my PowerShares QQQ (QQQ) short at $64.45.

• The two most important factors affecting stock market valuations are interest rates and corporate profits.

For now, interest rates are anchored at low rates, near zero, and, as such, are supportive of market valuations. As I mentioned on The Kudlow ReportTuesday night, risk premiums (earnings yield less the risk-free cost of capital) are back up to 1974 levels. And following that ramp up, the S&P 500 rose by 32% in 1975 and by 19% in 1976.

Profit Margins Are Now Vulnerable

With regard to corporate profits, though the markets paid little attention, Wednesday's unit-labor cost report was an important variable that could dent corporate profitability in the months ahead.

Remember that corporate profit margins are among the most mean-reverting economic series extant. (Already, profit margins have slipped from over 9% in third quarter 2011 to 8.7% in fourth quarter 2011.) 

Wage Inflation Is Accelerating

The rate of increase in unit labor costs for the fourth quarter of 2011 accelerated from +1.2% to +2.8% quarter over quarter. 

Reflecting a large revision in second-half 2011 incomes to +3.7% from +1.7%, unit labor costs year over year rose by more than +3% in the fourth quarter of 2011, by +2% in the third quarter of 2011, and by +1% in the second quarter of 2011. (CNBC's Kelly Evans discussed the vulnerability of corporate profit margins in a segment yesterday.)

The Fed's Dilemma

Currently, core inflation is rising at about a +1.8% to +1.9%. The year-over-year change of more than 3% in unit-labor costs will likely put pressure on core inflation in the first half of 2012. As such, rising inflation spurred by rising wages poses a dilemma for the Federal Reserve to maintain its continued monetary easing (more and more cowbell).

At the minimum, Wednesday's unit labor release substantially reduces the odds of another round of quantitative easing.

• Here is an updated list of buy levels for selected stocks that I have mentioned on Real Money Pro.

Below is an updated list of buy levels on selected stocks that I have recently mentioned on Real Money Pro. (Note: Of the 39 stocks, I would only rate Berkshire Hathaway (BRK.B), Cohen & Steers (CNS), ProShares UltraShort 20+ Year Treasury (TBT), PepsiCo (PEP) and International Flavors & Fragrances (IFF) as attractive to buy at current levels.)

• Altisource Portfolio Solutions (ASPS), under $55
• Berkshire Hathaway (BRK.B), under $79*
• Broadcom (BRCM), under $34
• Caterpillar (CAT), under $107
• Charming Shoppes (CHRS), under $4.50
• Colgate-Palmolive (CL), under $87
• Clorox (CLX), under $65
• Cohen & Steers (CNS), under $31*
• Dell (DELL), under $15.50
• eBay (EBAY), under $30
• E*Trade (ETFC), under $9.15
• Ford (F), under $12
• iShares FTSE/Xinhua China 25 Index Fund (FXI), under $37.50
• Freeport-McMoRan Copper & Gold (FCX), under $35
• Fortinet (FTNT), under $25
• General Motors (GM), under $24
• Goldman Sachs (GS), under $105
• Hewlett-Packard (HPQ), under $24
• International Flavors & Fragrances (IFF), under $57.50*
• KKR Financial (KFN), under $9.10
• Legg Mason (LM), under $26
• Lincoln National (LNC), under $23.50
• magicJack VocalTec (CALL), under $17.50
• MetLife (MET), under $36
• MGIC Investment (MTG), under $4.30
• Och-Ziff (OZM), under $9.00
• Ocwen (OCN), under $16
• Parker Hannifin (PH), under $85
• Pitney Bowes (PBI), under $18.00
• PepsiCo (PEP), under $64*
• Procter & Gamble (PG), under $65
• PNC Financial (PNC), under $55
• Prudential (PRU), under $57.50
• Schwab (SCHW), under $12
• ProShares UltraShort 20+ Year Treasury (TBT), under $19.50*
• T. Rowe Price (TROW), under $58
• Waddell & Reed (WDR), under $28
• XL Group (XL), under $19.50
• Exxon Mobil (XOM), under $78

*Eligible to buy at current levels

Position:

• After covering my SPDR S&P 500 (SPY) short (common and calls) in Tuesday's market schmeissing, I am re-establishing that short now at $137.

• I enter the trading day market-neutral; all things being equal I expect to exit the day net short.