• Thanks for reading my diary and enjoy your evening.

I was wrong about the market's direction today.

I am back to the research grind for the rest of the day.

Thanks for reading my diary and enjoy your evening.

• So it begins.

The new Apple (AAPL) iPad Air is not yet for sale, yet on day one Wal-Mart (WMT) is offering a trade in and a discount for the new product.

• I purchased more shares following the conference call.

After reflecting on the company's conference call, I have added to Potash (POT) this afternoon.

• For a small loss.

I called an audible on the Apple (AAPL) short and covered with a small loss.

• Uncovering a needle in the haystack is time-consuming analytically and takes numerous turns.

My eyes adored you

Though I never laid a hand on you

My eyes adored you

Like a million miles away

From me you couldn't see

How I adored you

So close, so close

And yet so far away

-- The Four Seasons, "My Eyes Adored You"

I have received a lot of subscriber emails regarding my search for what I hope to be my next home-run stock.

This part of the business, uncovering a needle in the haystack, is time-consuming analytically and takes numerous turns.

As an example, my basic analysis of Altisource Portfolio Solutions (ASPS) took nearly six months and Altisource Asset Management (AAMC) three months.

All I can say I am so close yet so far away.

But I just wanted to update all of you!

• My price is $30.50.

On today's conference call, Potash (POT) said it was comfortable with its current dividend payout.

I am bidding $30.50.

• Here are his musings at midday.

Midday musings from Sir Arthur Cashin:

Activity in the first 45 minutes to an hour was larger than the recent norm. Ye Olde Traders folklore suggests that means off-shore (European) players. At the European close (11:30), the NYSE run rate projected a final volume of 780/860 million. By 12:30, the run rate fell to 660/740.

That having been said, traders will watch action in final hour when Europe is snugly acrib.

• The action in the banks and Ford support it.

Ford (F), my tell today, coupled with weakness in financials, is keeping with my ludicrous forecast from this morning.

• My price is $49.75.

I am bidding $49.75 for more Citigroup (C).

• The survey was a mixed bag.

There's a party goin' on right here

A celebration to last throughout the years

So bring your good times, and your laughter too

We gonna celebrate your party with you.

-- Kool & the Gang, "Celebration"

The Kansas City Fed's survey of plant managers rose to 6 in October, indicating increased manufacturing activity in its seven-state area. Details of the report were mixed, with production activity rising strongly to 14 from 4, shipments increasing to 14 from 6 and the average workweek improving to 2 from -4. However, new orders decreased to 3 from 8 and the number of employees fell to -2 from 0. The six-month ahead outlook fell to 8 from 18. Prices paid rose to 26 from 15, while prices received rose to 10 from 4, suggesting that firms have been able to raise prices in accordance with costs.

Fed surveys have been mixed so far this month, with the Empire index at 1.5 (vs. an expected 7.0) while the Philly survey surprised on the upside at 19.8 (vs. 15.0). The Richmond Fed manufacturing index was up slightly but mixed. Taken together, the various regional surveys continue to show moderate manufacturing activity, no inventory overhang and no signal that the economy is vulnerable to a recession.

• For a trade at $531.42.

I have taken a small trading short in Apple (AAPL) at $531.42, and I'm putting on a $532 stop this trade.

• It just might be.

Is everyone piling into European equities just when things are beginning to slow down?

• You can sign up for his newsletters.

Here is Carl Ichan's new website.

You can sign up for his newsletters.

• I am hearing that Cantor just upgraded the shares.

Potash (POT) shares are weak today.

I am trying to research why.

I am hearing that Cantor just upgraded the shares.

• I shorted more shares at $82.21.

I averaged up my PowerShares QQQ (QQQ) short at $82.21 this morning.

• Here is a summary of the former Fed chair's recent comments from a lunch meeting.

Brother Bank of America/Mother Merrill Lynch recently sponsored a lunch meeting with former Fed Chair Paul Volcker.

What follows is a summary of his comments. Volcker is typically someone who sees the glass half-full.

He is bearish on U.S. and worldwide economic growth, a skeptic of the Bank of Japan's current policy and increasingly concerned about the eurozone banking system.

> world economic growth stuck at 2%

> business investment has plateaued despite record profits / no special sauce for the economy

> housing up but off a very low base

> consumer is spending but at restrained levels / no wage growth for the past decade

> loss of confidence (in the American political system)> low inflation / zero rates should be good for the economy

> Japan may not be successful reflating their way out of a 20 year recession given the depths of their economic morass

> Japan demographics contra to their ability to grow (oldest demographics in the world)

> Europe slowly emerging from their recession

> EU / Euro remains a good concept re: inability to devalue individual currencies

> weak periphery European countries (PIIGS) benefited and capitalized on strength of UK and Germany bringing down the entire EU

> a cohesive EU will take time / Germany cannot do it alone

> pay attention to France / critical that the French remain relevent and strong

> European banks remain weak

> lack of global confidence remains the primary (global economic growth) gating factor

> difficulty re: implementation of Volcker Rule / Dodd Frank / et al due to independent nature of individual banks

> not happy about how US government currently functions / regulators missed the crisis / reconstruction moving too slowly

> local government working more effectively / efficiently

> too many Federal regulatory bodies

> expect no great changes from Yellen

> QE taper is not "life or death"

> interest rates at zero is not a guarantee

> Fed will act when appropriate based on data

> U.S. remains best system globally/however emerging economies are not so willing to align with U.S. interests as they were 30 years ago.

• Averaging into TBT at $72.02.

I am starting to average into a bond short.

I just purchased ProShares UltraShort 20+ Year Treasury (TBT) at $72.02, going slowly for now.

• I am now 30% net short.

With this morning's short of SPDR S&P 500 ETF Trust (SPY), I am now 30% net short.

• As go the banks so goes the markets.

Banks continue to flash a market warning signal.

For as it is written in the Investment Bible, as go the banks so goes the markets.

Amen.

• Stay tuned.

My big tell today is how the market reacts to the upside surprise at Ford (F).

Stay tuned.

• Mark Grant chimes in on the markets.

Ever the skeptic, Mark J. Grant chimes in this morning:

Come away, O human child!

To the waters and the wild

With a faery, hand in hand,

For the world's more full of weeping than you can understand.

-- W.B. Yeats

It is an odd world we live in these days. A landscape more suited to Dali than to a real world with real people and real numbers. It is Grieg's "The Hall of the Mountain King" and a wafting tune as we stumble about in some cavern unable to see or to hear while the pixie dust shimmers on the stalactites. We bumble forward, we think it is forward, we are unsure, lost in the fantasies of monetary creation and distorted visions put forth by those with voices that carry in our perplexing cave. I stop, I utilize what senses I have, physical ones, the grounded sixth sense, common sense, and I realize the great and unmistakable truth now.

We are lost.

Bright minds, not the radical extreme, not the soothsayers of Armageddon, peer at the world with me and reach divergent conclusions that either we are going straight to Heaven or straight to Hell and the middle course seems blocked by various apparitions of our own making. In days of olde there seemed to be some truths. I was around during those long ago days. Numbers seemed real, the data seemed accurate and one could invest money by relying upon their release of figures and the trends that they set. It was tough work, the task was often difficult but you did not feel as if you were being misguided by the numbers spat out from our government or those abroad. It was a time when "face value" had a meaning and "honesty" was a word that could be described by Webster's Dictionary.

Now we have a distorted reality. In America the numbers for our CPI Index or for our Unemployment figures are either a Grimm's Fairy Tale annotated by their addition, subtraction or the methodology used to count them. Small towns of people disappear in any given month from the labor force and I keep wondering where they have gone. Perhaps Iowa is hiding them somewhere? Costs for food, energy and services all keep rising but there is no inflation as concocted by those with the green eyeshades that gather in the hollowed out boulders and rocks in our nation's capital.

Every month for the last five years we are told that next month will be significantly better in Europe. The drone never stops. All of the assets for the sovereign nations and for the European banks are counted and then recounted until the figures fit the German blueprint. All of the liabilities are expunged by either lending money at one hundred cents on the Dollar for buildings that have crumbled and stand empty in Catalonia or by refusing to count liabilities that may be inconvenient for the people in power.

In Asia the numbers could be anything. In China one plus one has long given up being two and it seems to be up 7.6% regardless of customary addition. I do not know how to use an abacus and perhaps that is where the magic lies. Pick a number, any number; pick an index, any index; always up 7.6%. There is great magic there without doubt.

The markets run along floated by the world-wide creation of money. Well, not money perhaps but small bits of blue and green paper that are touted as money. Tell no one, never say it out loud or the men in black might appear with their interstellar thought arrangers.

Wall Street has become a casino. The dazzling lights of Las Vegas and Macau. First it was the poker chips that were machine made and now it is also the money that is also machine made. Press a few buttons at any Federal Reserve Bank or at the ECB's headquarters in Frankfurt and these bits of paper are flung around the globe in nano seconds.

Whoosh!

I am not even sure it is possible to really invest anymore. Perhaps it is like gas lighting having been overcome by the electric generators. Now all we can do is speculate, guess, fling paper on the red or the black as the House rolls the dice with our future. 

"It's like Dungeons and Dragons, but real."

Jace was looking at Simon as if he were some bizarre species of insect. "It's like what?"

"It's a game," Clary explained. She felt vaguely embarrassed. "People pretend to be wizards and elves, and they kill monsters and stuff."

Jace looked stupefied.

Simon grinned. "you've never hear of Dungeon and Dragons?"

"I've heard of dungeons," Jace said. "Also dragons. Although they're mostly extinct."

Simon looked disappointed. "You've never killed a dragon?"

"He's probably never met a six-foot-tall hot elf-woman in a fur bikini, either," Clary said irritably. "Lay off, Simon."

"Real elves are about eight inches tall," Jace pointed out. "Also, they bite." 

-- Cassandra Clare, City of Bones

• An especially good read this morning from Arthur.

Morning musings from Sir Arthur Cashin.

An especially good read this morning from Arthur:

Some Cautionary Math ¿ In his MarketWatch column, Mark Hulbert does some calculations on where the S&P might go based on projections about earnings and the economy.  Here's a small bit:

Consider the following back-of-the-envelope calculation of where the S&P 500 will be in five years' time, based on the following assumptions:

• Sales per share will grow 2% annually. This is a generous assumption, since it assumes no recession , and assumes no share dilution from companies issuing more shares that they repurchase. Note also that, because of "entrepreneurial capitalism," GDP will have to grow faster than 2% annually in order for sales to live up to this otherwise anemic assumption.
• Profit margins will revert only halfway from their current lofty levels towards their long-term historical mean. This also is generous, since some ¿ such as James Montier, a visiting fellow at the U.K.'s University of Durham and a member of the asset-allocation team at Boston-based GMO ¿ believe profit margins will fall even further.
• The S&P 500's P/E ratio will stay constant. This again is generous, since the P/E ratio is already above average ¿ significantly so, in fact, by some measures.

Given these assumptions, it's a matter of simple math to calculate where the S&P 500 will be in five years' time: 1,589. That translates into a 1.9% annualized loss between now and October 2018.

Don't like that conclusion? Be my guest: Play around with the numbers yourself, and see what you come up with.

• The company reported third-quarter 2013 results, beating on most metrics.

My surprise large-cap pick for 2013 is Ford.

Trading at $13.50 a share, I expect Ford's share price to rise to above $17.50 a share in 2013 based on a combination of surprisingly strong domestic automobile industry sales (in excess of 16 million SAAR) and a revaluation (upward) in the company's P/E ratio.

-- Doug Kass, "15 Surprises for 2013" (surprise No. 9)

Back in January 2013, I chose Ford (F) as my top large-cap pick for the year.

This morning the company reported third-quarter 2013 results, beating on most metrics.

• The company reported $0.45 a share in earnings compared with $0.40 a share in the same period last year. Consensus was $0.37, and the whisper was $0.38-$0.40.
• Cash on hand totaled $10.3 billion (about $400 million higher than year-end 2012).
• Automobile revenue rose by 12%, to $33.9 billion.
• North American pretax profits increased to $2.3 billion.
• South American pretax profits rose from breakeven to $160 million.
• European pretax losses improved by $240 million, to a loss of $228 million. This compared to consensus for $500 million in European losses, even though depreciation expenses rose due to restructuring actions. The company now expects full-year European losses to be lower than last year's.
• Asia-Pacific pretax profits climbed to $125 million (up $80 million).
• Ford Credit recorded $363 million in earnings, a bit lower than the corresponding period a year ago.

In terms of guidance, the company increased it, now expecting 2013 operating profits/margins to be above last year's.

• Namely, jobless claims and the trade deficit.

U.S. initial jobless claims totaled 350,000, 10,000 more than expected, and last week was revised up by 4,000, to 362,000.

California still seems to be an issue in the elevated read, but the Labor Department is not quantifying.

Also, while the data doesn't include government workers that filed, the private sector impact was seen in the past few weeks, but, of course, will now reverse. Hopefully, next we'll see a clean number from which we can draw a reasonable conclusion.

The trade deficit in August was little changed at $38.8 billion vs. $38.6 billion in July. It was supposed to be released weeks ago and is thus very dated. Both exports and imports were little changed, and the overall data should not change third-quarer GDP estimates.

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

The rundown:

• S&P futures  are up 6;
• Nasdaq futures are up 11;
• Nikkei is up 0.4% (telecom and health care up, Hitachi up 8%);
• China Shanghai is down 0.75% (liquidity fears trumped a better October PMI);
• European markets are up (despite light PMI and weaker Credit Suisse EPS);
• euro is up;
• crude is flat;
• gold is up 84; and
• the 10-year U.S. note yields 2.50% (unchanged day over day).

Worth mentioning:

• Stocks broke their five-days-up streak yesterday. Breadth was only slightly negative.
• I did little trading yesterday, as I was involved with several new research projects.
• Markets are broadly higher overnight. PMI was good in China, light in Europe. I shorted more SPDR S&P 500 ETF Trust (SPY) at $175.34 in the premarket.
• I remain bearish. My fair market value calculation yields a market overvalued by about six percent (adjusted for today's futures rise).
• Ten-year bond yields have hit the bottom of my projected range (2.5% to 2.85%). The next move, for me, is to short on an overshoot in yields (lower).
• Europe's flash PMI falls short of expectations. The overall composite for October came in at 51.5 vs. consensus at 52.4 and September at 52.2. This breaks a six-month string of monthly advances in the series. It compares to a long-term average of 51.8 and a year-to-date average of 49. The print is consistent iwth +2% real GDP for the third quarter. Manufacturing was OK (51.3 vs. consensus of 51.4), while services was light (50.9 vs. consensus of 52.2). Germany's manufacturing was 51.5 (in line with the Street at 51.4), and services was 52.3 (compared to consensus at  53.7). France manufacturing was 49.4 (vs. the Street's 50.1), and services was 50.2 (vs. the Street's 51.3). Thus far, the European markets are nonresponsive to the miss. Investors continue to embrace its market based on 1 continued easing by ECB; 2. signals EU coming out of recession 3. the region is four years behind the U.S., so more recovery (in earnings) on a relative basis lies ahead; and 4. more reasonable valuations vis-à-vis the U.S.
• The World According to Peter Boockvar --
  
  Yesterday's jump in short term money market rates in China was not a one day thing as the 7 day repo rate spiked another 74 bps overnight to 4.79%, near a 3 month high as officials take another hack at excessive credit growth. The Shanghai index fell .9% to a 4 week low as the higher cost of money offset the HSBC preliminary October manufacturing PMI number which rose to a 7 month high at 50.9 vs 50.2 in September. Hong Kong stocks were lower too but most of the rest of Asia bounced in late afternoon after morning weakness.
  
  The euro is rising to a two year high vs the US$ notwithstanding the October EU services and manufacturing composite index falling .7 pts to 51.5 off the best since June '11 in September. The estimate was 52.4. The euro strength continues to reflect the difference in monetary policy between the Fed and the ECB with one's balance sheet ballooning and the other contracting. Italian consumer confidence moderated 3.5 pts off the highest level since July '11 but the UK economy continues to show signs of improvement as the CBI quarterly business confidence index rose to the most since April '10.
  
  After the bull/bear spread widened above 30 pts in yesterday's II measure of newsletter writers, the bears disappeared too in the individual investor AAII data. Bulls rose to 49.2 from 46.3, the highest since January '13 while the Bears dropped by 7.3 pts to 17.6, the lowest since January '12 and is just 1.2 pts from the least since November 2005.

In the news:

• The New York Times -- "Twiiter, Women and Power" (Kristof)
• The Wall Street Journal -- "Has He Got a Health-Care Deal for You" (Karl Rove); "Henninger: Obama's Credibility Is Melting."
• The Telegraph -- "Europe Already Has One Foot in 'Japanese' Deflation Grave."

Some possible economic and earnings catalysts that could impact the market:

• Eurozone flash PMI for October (4:00 a.m. EDT, see above).
• U.S. jobless claims (8:30 a.m. EDT, 340,000 estimate); continuing claims (8:30 a.m. EDT, 2.87 million estimate).
• Flash U.S. PMI for October (8:58 a.m. EDT, 52.5 estimate).
• August JOLTs report (10:00 a.m. EDT, 3.765 million estimate; Yellen's favorite metric!).
• Leading economic indicators (+0.6% estimate).
• Kansas City Fed (2 estimate).
• U.S. new-home sales for September (10:00 a.m. EDT).
• Eurozone leaders summit (Oct. 24-Oct. 25).
• Swedish central bank announces interest rate decision.
• Bank of England's Carney speaks (12:45 p.m. EDT).
• Analyst meetings -- CMS, HSH.
• The Fed plans to propose new liquidity requirements for U.S. banks during its Oct. 24 board meeting.
• Congressional hearings on ACA rollout; IT contractors will be testifying.
• Earnings before the open -- AB, ABB, AN, AVT, BG, BHE, BLL, BSX, CAM, CCE, CELG, CHH, CL, Credit Suisse, Daimler, Dassault, DNKN, DO, DOW,DST, Ericsson, F, HOT, IP, JNS, KKR, LAZ, LSTR, MJN, MMM, MO, NWE, PACR, PCP, PHM, Renault, RS, RTN, RYN, Santander, Shire, TCK, TEX, Unilever, USG, VLY, VNTV, WPPGY, XRX.
• Earnings after the close -- AMZN, CA, CB, CERN, CINF, CLF, COG, CPWR, CYN, ELY, EMN, ESRX, FSL, KLAC, LOGM, MCRS, MSFT, MXIM, N, PFG, QLIK, RGC, TCO, VR, VRSN, WDC.

• Something's rotten in the state of the market.

Our fear of corrective crashes is misplaced. They are necessary purges to clear the financial system of unhealthy mal-investment and to allow the redistribution of resources to stronger industries. I would argue that had the government followed this path in 1929, there would have been a garden-variety recession -- not a Depression. Unfortunately, we have labored under faulty assumptions and failed logic, particularly since 2008-2009. This is the legacy that Bernanke leaves not only to his successor, but to all of us.

What we must learn from history is that the government should stop suppressing the natural, homeostatic functions of the market. Otherwise, the "cure" will prove deadlier than the disease.

-- Mark Spitznagel

Throughout the day (and night), the business media dismissed Caterpillar's (CAT) large sales/profit miss and poor forward earnings guidance as a potential warning signal regarding global economic growth.

We were told by analysts and other talking heads that Caterpillar serves niche markets (construction, mining, engines and turbines, etc.) that are uniquely and poorly positioned compared to other industrial companies.

Perhaps they are right.

Below is a chart, however, that plots Caterpillar's year-over-year revenues (since 1996) compared to world GDP and shows a currently large disconnect.

The chart is far more foreboding than some commentators suggested on Wednesday.

Separately, successful hedge-hogger Mark Spitznagel was interviewed by Maria Bartiromo on CNBC late yesterday afternoon. It is a worthwhile watch (hat tip Zero Hedge).

While his view of a distorted and artificial market supported by ZIRP and QE that is vulnerable to a large drop may have been roundly dismissed by that network's talking heads, I find someone who made $1 billion during the 2007-2009 stock market crash to be an observer at whom one should not scoff but rather to be an observer to whom one should listened. Call me crazy!

His message: Step aside from the markets even though you might, over the short term, "look like a fool." (Note: I certainly feel foolish these days.)