• Such is life.

I was badly faked out by the underperformance in the Russell Index.

Such is life.

Thanks for reading my diary and enjoy the evening.

• Will my No. 1 surprise come to fruition?

Remember my No. 1 surprise is that the S&P 500 makes a high in the first two weeks of January.

Stay tuned.

• Ocwen and Altisource Asset Management are hitting highs.

Ocwen (OCN) has been a standout all week. (It just hit a 45-day high).

And here comes the mini Altisource Portfolio Solutions (ASPS), Altisource Asset Management (AAMC), up $8.50 and at a new high.

• Kansas City Fed head Esther George's cautionary commentary has made headlines.

Again new and hawkish voting Fed member, Kansas City's Esther George, made the following headlines:

• Fed's George says low rates risk causing inflationary surge.
• George says U.S. economic recovery "is building momentum."
• George forecasts economic growth "a bit more than 2% in 2013."
• George says unemployment may fall 0.5 percentage point in 2013.
• George: Asset purchases pose "risks and are not without costs."
• George says QE may complicate Fed's exit from stimulus.
• George: Fed mortgage bond selling may be disruptive to markets.
• George cautions against letting inflation exceed 2% goal.

That said, George is in a minority position compared to the doves on the Fed (Dudley, Yellen and Bernanke).

• It was better than the 10-year.

Today's 30-year bond auction was much better than yesterday's 10-year note auction.

The yield came at 3.07%, below when-issued of 3.08%-3.09%, and the bid-to-cover was 2.77, above the one-year average of 2.60).

Direct and indirect bidders took nearly 55% of the auction, in line with the average over the last 12 months.

• Kansas City Fed President Esther George says that record stimulus might fuel the risk of financial instability and a surge in inflation.

Federal Reserve Bank of Kansas City President Esther George is saying that the central bank's record stimulus might fuel the risk of financial instability and a surge in inflation.

• I have done less trading today than nearly any day in the last six months.

• Here are the stats.

In the comments section, "Cali Girl" asked for statistics on earnings guidance -- a good question: "Does anyone have the data on negative pre-announcements for fourth-quuarter earnings, I had been following it, and it has been increasing each quarter, but I haven't seen any latest data for fourth quarter?"

Here you go: According to Bloomberg, of 453 companies that gave financial outlooks for fourth quarter, 71 were up, 199 down, with the balance neutral. Within the S&P 500, of 118 companies given guidance, 16 up, 53 down.

• Breadth, that is.

Slip sliding away

Slip sliding away

You know the nearer your destination

The more you're slip sliding away.

-- Paul Simon "Slip Sliding Away"

Below is the intraday breadth of the three major indices.

Breadth

Source: Bloomberg

View Chart »View in New Window »

• Russell 2000 breadth has just turned negative.

• For Herbalife heads.

Here is the streaming video for Herbalife's (HLF) analyst meeting.

Note: I won't be on it!

• The Russell 2000 is really underperforming at the get-go.

A lot of thoughtful subscribers point out in the comments section that we should watch iShares Russell 200 Index Fund (IWM) as a precursor to broader market trends. 

It might be something, might be nothing but the Russell 2000 is really underperforming at the get-go.

I have a 6% weighting short IWM.

• This is not the sort of traded to which I would subject my investors.

1. I wouldn't worry about Loeb or Ackman, as they are not worrying about us!
2. I read the Herbalife (HLF) analysis by Ackman -- it was thorough. Based on it, I wouldn't be long the stock.
3. I wouldn't be short something that Loeb is long either.
4. I don't see a near term catalyst for the short either.
5. Why bother to enter the fray? Easier ideas around.

Bottom line: Two brilliant billionaire hedge-hoggers with opposing views is mildly interesting but not investable or tradable, from my perch.

This will take a while to sort out in either direction.

-- Doug Kass, "WWF XXII"

A bunch of contributors have chimed in on Herbalife over the last two weeks.

As I wrote on Columnist Conversation yesterday afternoon, I see no edge long or short in the name.

This is not the sort of traded to which I would subject my investors.

I would rather own Ford (F), as an example, than Herbalife.

It is easier to sleep at night.

• So says Draghi.

Break in: Draghi is saying that a decision has been made to keep interest rates unchanged. (In his Dec. 6 meeting Draghi suggested some members wanted a rate cut.)

This has resulted in an increase in the value of the euro, a drop in the U.S. dollar's value and a spike higher in gold.

• Bearish sentiment deflated and depressed.

Yesterday I highlighted the Divine Ms. M.'s analysis of sentiment, which indicated an increase in bulls and a decrease in bears to multi-month levels in the Investors Intelligence survey.

Today's AAII read is supportive of yesterday's data.

Bulls rose to 46.5 from 38.7, representing the most since February 2012. Bears fell by 9 points, to 26.9, and now are at the lowest levels in six months.

• The day is coming when Spain and Italy must deliver economic growth and austerity measures.

This is certainly not my wheelhouse. Of all the developments in the past nine months that I don't fully understand, perhaps the most puzzling is the degree to which Spanish and Italian bond yields have fallen.

The yield decline has occurred despite the lack of large sovereign debt purchases and despite the continuing weakness (albeit, recent expected steadying) in the EU economies.

Draghi's power of persuasion has carried a big stick, as OMT and ECB have become the lenders of last resort. The risk of Greece breaking up the euro has certainly stabilized the fixed-income markets in Europe. As well, there have been some structural improvements in ESM funding, the coordination of budgets and wider bank regulation. Finally, since the Spanish banks' large deposit outflows have been stemmed, yields have fallen further.

As a result of these factors and others, neither Spain nor Italy has approached the ESM for financial aid, a condition for ECB bond purchases.

It should be noted that the spread between Spanish and German bonds remains at an historically elevated 305 basis points today vs. about 50 basis points in the 12-year period ending in 2009. We should argue, however, how poor Spain's economic outlook is and how much higher the debt loads are relative to the late 1990s.

In yesterday's piece by Southwest Securities' Mark Grant, he makes the case that, yes, time has been bought but a judgment day is coming in which Spain and Italy must ultimately deliver on both economic growth and on austerity measures.

The bottom line, to me, is that there is a big disconnect between the low 10-year yields in Spain and Italy with the underlying economic outlook of those countries.

Moreover, the global yield grab might be coming to a close in 2013.

• Here's a roundup.

Below are some highlights of this morning's analyst action:

• Microsoft (MSFT) and the auto sector are lowered to Neutral at Morgan Stanley.
• Deutsche Bank names Amazon (AMZN) its favorite large-cap name in e-commerce (a late call!).
• Piper Jaffray sees a weak quarter at Fusion-io (FIO) but is keeping it Overweight. (I would avoid this name, as problems in storage are emerging.)
• Citigroup initiates Prudential (PRU) with a Buy and a $63 price target.
• CSX Corporation (CSX) is cut to Market Perform and Sourcefire (FIRE) is named Neutral at Raymond James.

• Run, don't walk, to watch Herb Greenberg's 'Selling the American Dream.' 

Since this is officially Herbalife (HLF) Day, I wanted to recommend my friend/buddy/pal 'Herbela" Greenberg's CNBC documentary, "Selling the American Dream."

It is a very well done project.