• How much to buy?

Little on the close in terms of imbalances ($240 million to buy).

Thanks so much for reading my diary.

I hope it was helpful.

Enjoy your evening.

And God bless Uncle Vinnie.

• As the banks go, so goes Mr. Market. 

Monitor the banks.

As it is written in the investment bible: As the banks go, so goes Mr. Market.

And Cook's inbox.

Carl Icahn tweets that he just sent a letter to Tim Cook at Apple (AAPL).

• Win some, lose some.

"Strikes and gutters. Ups and downs."

-- The Big Lebowski

I am long Altisource Residential (RESI) and short the Russell 2000 -- strikes and gutters.

• More Greenspan.

And then there is "The Daily Show's" interview of Alan Greenspan!

A must-see!

• Run, don't walk, to read the latest article by Chris Versace.

"Don't Miss the Petroleum Railcar Story" is a great article by Chris "Not the Designer" Versace that has a lot of actionable ideas.

• But it goes the other way, too.

One thing I have underestimated is how many traders and investors worship at the altar of price momentum. (And I am not writing this in a bad way!)

Buying begets more buying, regardless of an ever-higher entry point.

That said, I would expect -- and it should follow -- that if/when the market's momentum reverses (to the downside), the magnitude of a real market correction will likely be deeper (and scarier) than many expect.

• It ain't easy, though.

On CNBC there is a conversation on Icahn's sale of a portion of his Netflix (NFLX) holdings.

Bob Pisani's guest is saying, "You can't go wrong taking a profit."

I am reminded, however, of something that legendary hedge-hogger Stanley Druckenmiller once said, referencing his $1 billion score when he and Soros broke the British pound, which contradicts that point: "Sometimes it is hard being greedy."

• Many European bank stocks are being halted from trading.

From Zero Hedge on European banks: 

Across the board, we are seeing European bank stocks (most notably Italian) trading halted. The 5-7% plunge in prices - just when everyone is proclaiming victory in Europe - reflects an apparent concern that the tougher-than-expected European bank stress-tests will expose the Italian banks for the bloated sovereign debt issuance soaks that they have become. As Draghi himself noted, in a desparate plea to maintain some credibility "banks do need to fail" to prove the credibility of the exercise, adding "if they do have to fail, they have to fail. There's no question about that.". Spain is also under pressure and it would appear the "smart"money that chose to catch some knives in Greek banks may just lose more than one finger...

• The stock down by over 5%.

Tesla (TSLA) is down by over 5% today.

I wrote up some observations on the stock and car yesterday.

I wouldn't touch the stock -- nor would I buy the car.

• I covered my BofA short too early.

I was premature in my coverage of my Bank of America (BAC) short.

• The government's measure of home prices has slowed.

Consistent with the housing stall that I have written about, the government's measure of home prices has slowed.

In August, this measure advanced 0.3% month over month, the slowest increase since mid-2012.

Home prices have advanced between 8% and 12% year over year vs. income gains of just 2%. This is one reason why home price inflation has slowed as these prices are up a lot vs. income.

It will be critical for income/employment to accelerate to underpin a sustained recovery in housing demand/home prices.

If we don't get the recovery in employment/income growth, the Fed will push out the start of tapering. Then, the question that investors will confront is whether the U.S. stock market can continue to lift when it is clear that Fed policy cannot spur the economy but only provide liquidity injections to capital markets.

• I have made no trades today, and I am still at about 25% net short.

• Run, don't walk, to watch Alan Greenspan on Bloomberg TV.

I am in the business where, Harry Truman once said, "If you can't stand the heat, get out of the kitchen".... I apologize for something I did wrong, and I do apologize. I don't apologize.... I was doing the best I can. The arguments, some of which are quite accurate is I missed certain forecasts, you don't apologize for that. Do you? I don't. We are not omniscient.  I am a human being. I cannot see beyond the horizon any more than anyone else can. Now to apologize for not being Superman, I just refuse to do that because that never entered my mind.

-- Alan Greenspan (defending his monetary actions and forecasting)

Run, don't walk, to watch former Fed Chair Alan Greenspan on Bloomberg TV today.

• I am holding on to my core investment position.

Last week I updated my thoughts on Altisource Residential (RESI).

Yesterday, RESI reported excellent earnings that were pumped up a bit by extraordinary gains from asset sales.

Revenue at $19.8 million and cash available for dividends at $13.7 million ( $0.18 a share) beat consensus comfortably.

I am not making any change in my estimates for EPS or cash available for dividends for 2014-15.

Most important to me as an investor is that the pipeline of new business is growing and will likely bode well for the company's profit.

During 3Q 2013, RESI closed on about 3,800/4,900+ non-performing loans previously announced. In October, the first month of the fourth quarter, RESI closed on another 1,100 non-performing loans. The closed loans represented about $1.2 billion in UPB ($250,000/property), $1 billion in market value ($205,000/property) and $685 million in price paid ($139,000/property or at 68% of market value). 

The company said on its conference call that it has a pipeline of about $5 billion of UPB and has the capacity to acquire an additional $1 billion in market value through NPL purchases, with most of the supply coming from the larger money center banks, the government and selected private equity players who are exiting the business. 

RESI has plenty of capital to engage in these acquisitions after raising $350 million in equity, and with slightly less than $75 million in investable cash previously on its balance sheet. In addition, the company has access to the debt markets.

For the current quarter, I am expecting about 4,000 non-performing loan purchases, though this might be low. For next year, 10,000+ in non-performing loan buys are in my model. This produces 4Q EPS of $0.20 a share (assuming no extraordinary gain).

Like Ocwen in its early stages of acquiring mortgage servicing platforms, there are only a handful of buyers that are in competition for the loans.

What could benefit RESI more than expect is if the large supply of product results in lower purchase prices for RESI and its competitors. (As an example, I previously mentioned that the FHA announced its intention to sell nearly 30,000 non-performing loans by year end). If so, my estimates could prove conservative.

The bottom line is the company should earn more than $1.50 a share in 2014 and $1.75 a share of more in the following year.

I wouldn't chase RESI at current prices, as the shares are slightly ahead of themselves (as mentioned earlier this week) and I would expect some consolidation in the name.

if the company can continue to raise capital well in excess of book value (currently $18.34 a share) -- allowing it to  continue its aggressive acquisition strategy -- the shares could trade in the low $30s in 2014. 

RESI remains a solid long-term holding over the next few years and I am holding on to my core investment position. 

The stock remains on my Best Ideas list.

• Let's take a look at the overnight and early-morning price action in the major asset classes.

The rundown:

• S&P futures are down 8
• Nasdaq futures are down 18
• Nikkei is down 1.95% (steepest drop since Oct. 2, now down on the month)
• China Shanghai is down 1.25% (weakness in telecoms, oil/gas, tech, basic materials, industrials, and financials)
• European markets are unchanged
• Euro is unchanged
• Crude oil is down $1.30 per barrel
• Gold is down $14 per ounce
• The 10-year U.S. note yields at 2.49% (down 1 basis point day over day).

Worth mentioning:

• Tuesday's market action -- both bonds and stocks rallied strongly, for the fifth consecutive trading day, after the weaker-than-expected jobs data.
• My market moves -- I did little trading Tuesday, as I was involved with two research projects.
• Premarket Trading -- markets are broadly lower around the world. There was the Netflix (NFLX) reversal, European Central Bank stress tests for banks, China's bad bank debt, the McClellan Oscillator turned bearish and we saw weak earnings (including at Caterpillar (CAT) this morning. I haven't done anything thus far in premarket trading.  
• Market view -- I remain bearish. My "fair market value" calculation says the S&P is overvalued by about 5% -- it should be at 1645 vs. yesterday's closing 1755 level.
• Bond market view -- I am agnostic on bonds, expecting the 10-year U.S. note yield to range (narrowly) between 2.50% and 2.85% over the balance of the year. The 10-year remains around 2.50% now, at the low end of the anticipated band.
• Over the next few days we'll have our peak earnings-reporting week
• Housing stall continues -- Mortgage applications announced this morning were weak, signaling a housing stall/pause. New mortgage applications were flat after having dropped over the prior month. Now down by 2% year over year, applications have been in a steady decline since May. Refinancing applications dropped by 1.3% last week and are now down by nearly 60% year over year. This, coupled with slow income growth, has served to constrain household cash flows and helps to explain weakening retail spending.
• The World According to (Peter) Boockvar -- Most Asian stock markets overnight did not follow another of our "in Fed we trust (to lift stock prices)" rally. A two-week high in the yen sent the Nikkei down by 2%, and Shanghai and Hong Kong both fell 1.3% after short-term repurchase rates in China jumped. While the seven-day repo rate is just back to where it was a few weeks ago, the one-day jump constituted the most substantial one since late July -- by 47 basis points to 4.05%. We'll soon see if Chinese officials are taking another run at slowing excessive bank lending. European stock weakness was led by banks, shares of which are falling to one-and-a-half-week lows ahead of the beginning of ECB bank reviews that will last a year and are expected to be strict.
• After nine straight quarters of contraction, Spain's third-quarter gross domestic product is expected to rise 0.1% sequentially, according to the Bank of Spain. Next week we'll see the actual result. French business confidence in October rose 1 point to 98, in line with expectations. But this matches the highest level since March 2012 in spite of the French government, and certainly not because of it.
• European Union bank stress tests -- Eurozone banks face a yearlong assessment of their balance sheets starting next month, and finishing with a heightened stress test, the European Central bank announced today. The tests on 130 banks will first look at their transparency in unearthing potential bad loans or risky assets.
• This will be followed by the stress test that will simulate a crisis in the financial system. ECB President Mario Draghi said the assessment should "strengthen private sector confidence in the soundness of euro area banks and the quality of their balance sheets." Banks could be forced to repair finances by raising capital.

In the News:

• National Journal: How budget talks could impact Paul Ryan's political career.
• The New York Times: Is the US falling behind?
• The New York Times: The cry of the true Republicans
• The Wall Street Journal:  The Obamacare con job.
• Financial Times: Germany's responsibilities
• Financial Times: American business must stand up to the Tea Party

Some possible economic and earnings catalysts that could be market-impactful:

• U.S. import/export price index for September
• U.S. home price index for August, 9 a.m. EDT
• China HSBC/Markit flash purchasing managers index for October, Wednesday night
• Bank of Canada interest-rate decision
• Bank of England publishes meeting minutes.
• ECB to publish details of bank stress tests Wednesday
• Detroit trial commences Wednesday

• Earnings before the open: Airgas (ARG), Avery Dennison (AVY), Boeing (BA), B/E Aerospace (BEAV), Bristol-Meyers Squibb (BMY), Caterpillar (CAT), Commercial Metals (CMC), Dr Pepper Snapple (DPS), France Telecom, General Dynamics (GD), GlaxoSmithKline (GSK), US Airways (LCC), Lumber Liquidators (LL), Eli Lilly (LLY), Molex (MOLX), Motorola Solutions (MSI), Meritage Homes (MTH), Nasdaq OMX (NDAQ), Northrop Grumman (NOC), Norfolk Southern (NSC), NewYork Community Bancorp (NYCB), Owens Corning (OC), Prologis (PLD), Rollins (ROL), Thermo Fisher Scientific (TMO), Tupperware (TUP), WellPoint (WLP), Wyndham Worldwide (WYN).

• Earnings after the close: Akamai (AKAM), AvalonBay (AVB), Cheesecake Factory (CAKE), Cadence Design Systems (CDNS), CMS Energy (CMS), Citrix Systems (CTXS), Brinker (EAT), Equinix (EQIX), F5 Networks (FFIV), Fortinet (FTNT), Infinera (INFN), Logitech (LOGI), Lam Research (LRCX), LSI (LSI), Mellanox (MLNX), ServiceNow (NOW), Polycom (PLCM), Plexus (PLXS), Everest Re (RE), Raymond James Financial (RJF), SL Green Realty (SLG), Symantec (SYMC), AT&T (T), TriQuint Semiconductor (TQNT), Tripadvisor (TRIP), Varian Medical Systems (VAR).

• For the U.S. stock market, that is.

"I'm glad you're home, well, did you really miss me?

I guess you did by the look in your eye

(Look in your eye, look in your eye)

Well, lay back and relax, while I put away the dishes

(Away the dishes)

Then you and me can rock a bell

You can ring my bell, ring my bell

You can ring my bell, ring my bell

You can ring my bell, ring my bell

You can ring my bell, ring my bell!"

-- Anita Ward, "Ring My Bell"

Markets often overshoot, to both the upside and downside -- and, based upon my "fair market value" calculation of the S&P 500, the markets have now likely overshot to the upside.

Sometimes the bell is rung -- but most market participants don't recognize it even though it might be "obvious."

Back in July 2007, the "bell was rung" by Citigroup (C) CEO Charles Prince III, who famously said -- in referring to the bank's aggressive lending tactics -- "When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing." 

Just months after Prince's comment, Citigroup took a $1.5 billion writedown in its leveraged-loan portfolio. A few months later the world was thrown into the deepest recession since the Great Depression and the S&P 500 fell to 666.

This week, Netflix (NFLX) CEO Reed Hastings sounded another alarm when he wrote in an investor letter that accompanied Netflix's third quarter earnings, "In calendar year 2003 we were the highest performing stock on Nasdaq, we had solid results compounded by momentum-investor-fueled euphoria. Some of the euphoria today feels like 2003."

 In my "fair market value" calculation I highlighted, among other issues, the growing disconnect between equity prices and fundamentals.

On Tuesday three benchmark type companies in the industrial/consumer spaces -- Panera Bread (PNRA), United Tech (UTX) and Illinois Tool Works (ITW) -- continued the pattern of missing top-line estimates but meeting or beating consensus earnings.   

Thus far third-quarter earnings are up by about 7% year over year, mostly in energy and the materials sectors. Sales are up only slightly better than 2%. The margin expansion that has fueled earnings-per-share growth has come to pass from squeezing labor compensation, limiting hirings and, most important, via aggressive share buybacks. The latter helping to raise earnings growth by 3% to 4%.

With limited jobs growth -- again seen in Tuesday's weaker-than-expected employment data -- and tepid wage growth, the anticipated reacceleration in second-half gross domestic product has not come to pass.

The U.S. stock market continues to be driven by the Federal Reserve's massive buckets of liquidity. This has served to disconnect stocks from economic, revenue and profits growth, even as price-to-earnings multiples have moved ever higher.

Today the Shiller P/E is almost 25x, the highest level except for the 1999 and 1929 bubbles. Corporate profit is at a record level vs. gross domestic product.

But, as Reed Hastings cautioned, we should recognize this: When an advancing market is fueled by higher valuations, the market is vulnerable to shocks or in a change in psychology -- just as Netflix's shareholders found out yesterday. 

Perhaps in 2013, as in 2007, "The Bell Has Been Rung" for the U.S. stock market.