• I am signing off a little early.

"Does anyone have any Aspen?"

-- Steven Tyler

I am outta here early today, like Erika Van Pelt ("EVP") was last night on "American Idol."

Thanks so much for reading my diary this week.

TGIF!

Enjoy the weekend.

• I have sold out of my Microsoft, Dell and Anheuser-Busch Inbev longs.

I have liquidated my longs in Microsoft (MSFT), Dell (DELL) and Anheuser-Busch Inbev (BUD).

• Goldman Sachs Chief Domestic Strategist David Kostin just reaffirmed his 1250 year-end price target for the S&P 500.

Yesterday I objected to Goldman Sachs' (GS) newfound optimism, and I mentioned that the firm's chief domestic strategist, David Kostin, did not agree with the view presented.

Dave just came out with a fresh equity research piece in which reaffirmed his 1250 S&P 500 price target at year-end 2012.

• I am scaling back into the short $139.60.

Yesterday I covered my SPDR S&P 500 ETF Trust (SPY) short at around $139.

I am now starting to scale back into the short starting at $139.60.

• They include GM, Ford and magicJack.

I made some more sales in General Motors (GM), Ford (F) and magicJack VocalTec (CALL).

• It's from M3 Capital President John Netto.

Today's quote of the day is not from Twitter; it's from John Netto, president of M3 Capital, on CNBC: "We traders trade perception, not reality."

You just can't make this stuff up!

• The shares have had a nice rally this month.

Housekeeping item: As I grow more cautious on the broader market, I am looking to reduce my gross long exposure.

Case in point, PepsiCo (PEP).

I am scaling out of some PepsiCo common and calls after its nice rally this month.

• Run, don't walk, to read Howard Marks' latest market commentary.

Back in May 2011, I reviewed Howard Marks' remarkable book, The Most Important Thing: Uncommon Sense for the Thoughtful Investor.

As I wrote, The Most Important Thing is the single-best investment primer I have read since the two classics, Graham and Dodd's Security Analysis (1934) and Benjamin Graham's The Intelligent Investor (1949).

And, similar to the aforementioned investment classics, it is likely that Howard's book will find its way, in the fullness of time, to the classrooms of the leading business school and MBA programs.

Here is Howard's latest market commentary.

• I shifted back to net short.

I am back in a net short position.

• I continue to believe that the company represents a great takeover target.

My only equity purchase today has been more International Flavors & Fragrances (IFF).

I continue to believe that the company (by far my largest long) represents a great takeover target and, because of some earnings disappointment a quarter ago, is inexpensive on a standalone basis.

• Run, don't walk, to read this week's 'Ask Noah' column on our flagship site.

This week's "Ask Noah column on TheStreet deals with "To Move or Not to Move."

• This could put some pressure on Walter Energy.

Break in: Peabody Energy (BTU) guides to the low end of forecast.

This could put some pressure on Walter Energy (WLT) shares.

• The BATS Exchange IPO opened at $15 on a $16 pricing and traded down to $0.07!

He never be a big business man

He always buys all the installment plan

He sure ain't the boy I been dreamin' of

But he's sure the boy I love.

-- "He's Sure the Boy I Love," written by Barry Mann and Cynthia Weil, original recording attributed to The Crystals but actually performed by Darlene Love and the Blossoms

It's not a great day for the BATS Exchange.

Its IPO opened at $15 on a $16 pricing and traded down to $0.07! It's now been been halted due to network systems failures.

I suppose we might consider renaming it the Billy Batts Exchange after the beating it has taken.

• I am buying April out-of-the-money calls for some defined exposure.

I sold the balance of my Walter Energy (WLT) common on this morning's spike, and I am buying April out-of-the-money calls for some defined exposure (but less capital risk).

• Intrade currently gives the film a 92.5% chance of grossing more than $120 million during its opening weekend.

For those playing Lions Gate (LGF) shares based on the reception of this weekend's release of Hunger Games, Intrade currently gives the film a 92.5% chance of grossing more than $120 million during its opening weekend.

• The shares are up by nearly $2.50 now.

I cut my Walter Energy (WLT) long in half as the shares are up by nearly $2.50 now.

• I picked up more shares at $20.12.

I just came off my $20 limit and bought more ProShares UltraShort 20+ Year Treasury (TBT) at $20.12.

• It is strong in areas without a shadow inventory of foreclosed homes and weak in areas where many remain underwater.

"Reflecting the improving trends in the economy... we are seeing signs that the overall housing market is stabilizing and beginning to recover.... [T]he pace of the recovery is uneven, however, with certain local markets showing greater strength and more normalized activity than other areas where a rebound will take longer to manifest."

-- KB Home (KBH) earnings release today

February contract new-home signings were about 10,000 less than expected, at 313,000 (January was revised lower).

Average home prices rose by 6.2% year over year and almost 8% sequentially after weakness in Janauary.

Regarding KB Home's weak profit and orders (see quote above) the residential market in the U.S. is bifurcated, as I have been saying for months.

It's location, location, location -- strong in areas without the overhang of shadow inventory of foreclosed homes (Washington, D.C. to Boston corridor) and weak in areas such as Las Vegas and Orange County, California, where many remain underwater.

That said, the foundation for an extended recovery in housing remains in place, subject to the clearing and abosroption of inventory overhang (which will come in the fullness of time).

• Iranian March oil exports are expected to decline by 300,000 barrel per day.

Crude is up by $1.50 a barrel based on financial reports that Iranian March oil exports figures are reportedly expected to decline by 300,000 barrel per day.

• They include IFF, PepsiCo and Walter Energy.

My largest longs (in order, with largest first) are International Flavors & Fragrances (IFF), PepsiCo (PEP), Walter Energy (WLT).

• The stock is up on takeover chatter.

Walter Energy (WLT), a new long, is up on takeover chatter (source: Fly on the Wall).

As Grandma Koufax used to say, "Dougie, you should be so lucky!"

• I discussed potential winners and losers if interest rates rise in the year ahead.

"This is U.S. history. I see the globe right there."

-- Jeff Spicoli (Sean Penn), Fast Times at Ridgemont High

In last night's "Fast Money" segment with Mel and the gang, I discussed potential winners and losers if interest rates rise in the year ahead.

Two weeks ago on "Fast Money," when Michelle C-Squared was subbing for Melissa Lee, I discussed why I thought the bull market in bonds was over.

Finding opportunities (long and short) is the next logical step.

It is important to remember that I expect rates to rise not because the economy is especially vigorous -- it's not -- as Wednesday night's PMIs in Europe and China support the notion of below-trend worldwide growth.

As I mentioned in response to a question by Sir Anthony Scaramucci, I expect rates to rise because in a muddle-through recovery in the U.S, with Band-Aids applied to the European debt contagion and China set to ease further:

• The flight to safety in bonds will be reversed -- remember, over history the yield on the 10-year has approximated the sum total of nominal growth in GDP in the U.S. (i.e., real GDP plus inflation). We are currently growing domestically at slightly under 2%, inflation is about 2.3%, so you get a theoretical 10-year yield of between 4% and 4.3% vs. the actual yield of 2.25% for the 10-year now.
• This morning's Intrade odds that Obama regains the presidency are at 60%, odds that the Republicans regain the Senate are at 59%, and odds that the Republicans retain the House are at 70%. Based on these probabilities, gridlock is on the agenda in Washington, D.C. There will be little addressing of our fiscal problems, so it's only a matter of time before the bond vigilantes demand higher returns on U.S. paper.
• I don't see demand-pull inflation as the economy recovers slowly, but I do see the potential for cost-push inflation, particularly from higher oil prices and from the continued need to ease quantitatively around the world (which will likely push up commodity prices).

Let's assume for the sake argument that it is a given that interest rates are about to launch a gradual multiyear rise. Which industries and companies are then the winners and which are the losers in a rising-rate environment?

There are obvious and less obvious losers and winners.

Losers

• Most vulnerable are companies and industries with large debt-to-equity ratios, particularly those that have a large amount of variable-rate debt and low returns on assets. The most vulnerable industry sectors would include telecom -- I found a lot of long-distance and broadband providers on the Bloomberg screen that I conducted -- as well as names in retail, real estate, media and materials. Some exposed and possible short candidates with large debt loads include Pitney Bowes (PBI), which is in the mail and shipping business; Pepco Holdings (POM), which is engaged in the transmission of electricity and natural gas in the Mid-Atlantic area; CenturyLink (CTL), which provides local, long-distance and network access; PPL Corporation (PPL), an electrical and utility holding company; Avon Products (AVP) cosmetics; Cablevision (CVC), cable; and CMS Energy (CMS), a Michigan-based utility.
• High-yielders are up next. Every strategist that lives has encouraged buying high-yielders over the past few years. Now, not only are these yields less competitive as rates rise but proposals by the Obama administration to nearly triple the tax rate on dividends will make dividends less valuable. Utilities would likely be losers, a sector that has had terrific share price performance. Some other qualifiers include Frontier Communications (FTR), another local and long distance provider; Windstream (WIN), another broadband and voice provider; Supervalu (SVU), retail food distributor; and Gannett (GCI), a newspaper chain.
• Finally, we have sectors that have prospered from an unprecedented drop in interest rates and that have contracting margins or reduced demand for products as interest rates rise. Homebuilders would be prominent in this list.

I mentioned to Melissa that I would not necessarily short these names and sectors but I would carefully, after doing some more research, consider paring back these holdings.

I then moved on to the winners in response to "Chaminade" Joe Terranova's question on banks.

Winners

• Banks are obvious winners, but they have run up a lot and, as I discussed on "Fast Money" two weeks ago, it's my view that a fragile muddle-through recovery will result in sluggish loan growth and probably the end of the great credit-quality cycle that we have seen since the recession ended. (There has been a huge reduction in loan-loss provisioning.) My view is that these factors could trump net interest margin gains. Less obvious beneficiaries in the financials would be the life insurers. Industry valuations have been hurt because the marginal investment opportunities were lower yielding than their current portfolio returns, but this would change. Prudential (PRU), MetLife (MET) and Lincoln National (LNC) are good names.
• Also less obvious are the discount brokers. Companies such as E*Trade (ETFC) and Schwab (SCHW) are obvious beneficiaries from a rotation out of bonds and into stocks. More important, with large free-money balances, their net interest margins will expand relative to expectations. Property and casualty names, such as Chubb (CB), Travelers (TRV), Loews (L), and reinsurance companies, such as Berkshire Hathaway (BRK.A/BRK.B) and XL Group (XL), benefit from large floats earning higher levels of interest.
• For a rotation out of bonds and into stocks, there is purity in asset managers such as T. Rowe Price (TROW), Legg Mason (LM), Waddell & Reed (WDR) and Franklin Resources (BEN), which should be viewed as possible longs.

Pair Trade

Finally, given rising rates and higher marginal tax rates on dividends - a possible interesting pair trade is long municipals via iShares S&P National AMT - Free Municipal Bond Fund (MUB) and short U.S. taxable bonds via a short of iShares Barclays 20+ Year Treasury Bond Fund (TLT) or through a long in ProShares UltraShort 20+ Year Treasury (TBT).

Let's go to the tape!

• A market's advance that is characterized by a few members does not provide the most solid foundation.

The one feature of yesterday's trading that resonated with me, which was not discussed by many, was the new high made in the Nasdaq/S&P 500 yesterday, eclipsing the previous high made in October 2011.

In each market cycle, speculation takes different forms. In the case of today's market, arguably the high-octane Nasdaq leaders -- Apple (AAPL), Priceline (PCLN), Google (GOOG), Amazon (AMZN), Baidu (BIDU) et al -- are leading the market's way.

A market's advance that is characterized by a few members does not provide the most solid foundation.