• I'm long General Motors and short Tesla.

"One last thing."

-- Lt. Columbo

Some of my friends on Fast Money suggested tonight that General Motors (GM) should be avoided and that Tesla Motors (TSLA) shoud be owned.

I have examined the ignition switch problem, and I am on the other side of the trade: long GM, short TSLA. 

I would remind my Fast pals that large long positions in General Motors are held by Warren Buffett, Kyle Bass, David Einhorn and Leon Cooperman (among others).

I wouldn't be surprised if Warren Buffett is a buyer in General Motors in the current period of weakness. 

• Nazz futures are down, and Apple is up 1%.

"One last thing."

 - Lt. Columbo

Regarding my ludicrous forecast:

Nasdaq futures down, Apple's (AAPL) shares up 1%.

Mission accomplished.

• Thanks for reading my diary today and enjoy the evening.

I am off to a meeting.

Thanks for reading my diary today and enjoy the evening.

• Who's there?

Late-afternoon funny.

• At $48.58.

I purchased some Citigroup (C) at $48.58, bringing me to 5% net long.

• I think not.

Ludicrous: The market is on the lows now.

• Here's another view on Ackman's battle.

"When Does an Attack Become Manipulation?" Jim "El Capitan" Cramer takes aim at the current controversy between Herbalife and Bill Ackman.

It's a thoughtful analysis 

• As Congress investigates the recall, I'm going 'all in.'

As the Congress widens its investigation into General Motors' (GM) ignition switch recall, I am going "all in" on GM at $36.

• Shares of Tesla (TSLA) are stumbling.

Apropos to my prior post on Plug Power (PLUG), the power charge on Tesla looks to be loosening up as well ($8 move lower from day's high).

• Plug Power is dropping double digits.

Someone just pulled the Plug Power (PLUG). 

• And on CNBC now. 

CNBC is covering the information contained in my post on Tesla (TSLA) earlier today.

• At $36.23.

Apropos to Steve Cortes's chart, I am adding to General Motors (GM) now at $36.23.

• Shares are on the move.

Direxion Daily Small Cap Bear 3X Shares (TZA) is geting jiggy.

• Illustrated.

Steve "Hernan" Cortes "de Monroy y Pizarro, 1st Marquis of 'Fast Money,'" reviews the opportunities in auto shares vis-à-vis a potentially overpriced homebuilding sector. (Note: I discussed homebuilders being expensive yesterday.)

• Jerky IBM cover.

Totally dumb cover on IBM (IBM) earlier today!

• Run, don't walk, to watch Bill Fleckenstein on CNBC.

Continuing my thread of the plight of short sellers, even my friend/buddy/pal Bill Fleckenstein is unwilling to short now.

• Here are his musings at midday.

Midday market musings from Sir Arthur Cashin:

Stocks seem to be range bound.  As we wrote in this morning's Comments, there is S&P support at 1865/1868 and resistance at 1883/1886.

Rather inert ten year yield suggests Ukraine not yet a factor in U.S. markets. 

This is making the rounds today:

Jason Goepfert, SentimenTrader:

After closing at a 52-week high four days ago, the S&P 500 is higher now than it was then, but breadth on average over the past four days has been negative. This has occurred at almost all major peaks since 1940. There are also quite a few "false positives", so watching near-term action is important. When this worked by identifying a market peak, it happened almost immediately, with stocks beginning their decline with little to no further upside in the days following.

Traders intrigued because you will know within three to five days if it is in process.

Run rate continues light.  At 12:15 it projects to 570/650 shares.

• I am out of my index shorts.

More algos going wild and, this time, taking the market down.

I have covered my SPDR S&P 500 ETF (SPY) and PowerShares QQQ (QQQ) shorts taken recently, and I am back to market-neutral now.

• Maybe it's not so ludicrous after all.

Regarding my ludicrous forecast, Nasdaq futures are now down, while Apple (AAPL) is up $7.50 a share and near the day's high.

• For $65 a share.

Break in: Men's Wearhouse (MW) to buy Jos. A. Bank Clothiers (JOSB) for $65 a share in cash.

• StreetAccount's new iPhone rumors.

From StreetAccount:

Apple's new iPhone model rumored to be cross between iPhone 5c and 7th-gen iPod nano - Apple Insider (pre-open) ($538.08 +$7.16)

• According to speculation in the Japanese blog Macotakara, AAPL has designed two IPhone models featuring larger screens (4.7- and 5.7-inch), and are a cross between its iPhone 5c and seventh generation nano.
• The larger iPhone is rumored to be a high-end version of the iPhone 5c, not a replacement, and is expected to be released this year.

• Copper is down again.

Dr. Copper is down again today.

Global growth slowing?

• Be careful.

The financials (particularly the banks) are acting dreadful again.

Be careful.

• At $35.64.

I am back adding to my General Motors (GM) long now at $36.54.

• New product news.

Some new product news at Monitise (MONI.L) today.

• It would be a major understatement to say that the short-selling community is beside itself.

• Again.

For what seems to be the ninth time in a row, I am stopping myself out of my IBM (IBM) short.

I have no clue why the stock is trading so well, but risk control and discipline trump conviction at times.

• SPY at $188.34 and QQQ at $90.90.

I added to my SPDR S&P 500 ETF (SPY) short at $188.34 and my PowerShares QQQ (QQQ) short at $90.90.

• I just purchased more shares.

I have added to my Apple (AAPL) long.

• My view is that as the weather improves, the inventory will be absorbed.

General Motors (GM) shares continue to be weighed down by the concerns of threatening and bloated inventories.

I just added at $36.58.

My view is that as the weather improves, the inventory will be absorbed.

Stay tuned.

• Overvalued?

How overvalued is the Dow Jones Industrial Average?

In inflation-adjusted terms, a lot.

Inflation-Adjusted DJIA

Source: Ned Davis Research

View Chart »View in New Window »

• Apple up, Nasdaq down.

Today's forecast: The Nasdaq will drop, though Apple (AAPL) will be up by over 1%.

A rare occurence.

• I am back to 15% net short now.

• Namely, NFIB Small Business survey.

The NFIB Small Business optimism report dropped to 91.4, below the estimate of 93.8 and prior of 94.1.

The weakness was broad-based, as plans to hire dropped from 12% in January to 7% in February; those expecting higher sales fell from 15% in January to 3% in February; and those viewing now as a good time to expand fell from 8% to 6%. Capex plans were slightly higher, though nothing that's all that meaningful in the context of the recent trend. On the inflation side, the NFIB noted that "there is little evidence that firms are able to raise prices much."

The NFIB is blaming the weakness on uncertainty out of Washington, citing unknowns in health care, the minimum wage and tax reform as impediments to stronger growth.

• He says that it's right out of the Nazi playbook.

This morning Mark J. Grant writes some hard-hitting stuff about the Nazi playbook:

It is seventy-six years later. Technology and global politics have changed and World War II is but a memory in the minds of most people. Yet the playbook of the Nazi's remains and has been taken off the shelf and dusted off by Vladimir Putin. He must have read it with some interest and recognized the political genius of Hitler even if Russia was in the opposition at that time.

The Nazis had perfected the art of stealing territory by 1938. They would start by encouraging political unrest and I am sure by spreading money around to those who were appreciative of their cause or those without a cause who could be persuaded by the jangle of gold and Deutschmarks. While the agitation was beginning they began their propaganda campaign. They were the Masters of the Universe in this capacity. They cited real and imagined wrongs committed against the German population. They claimed that fascists and Jews were attacking the ethnic Germans. Putin's tack is similar as he told Ms. Merkel, according to the Telegraph, that he was forced into the Crimea by the "threat of violence from ultranationalists."

Next the Germans told the world that they had entered Czechoslovakia because they were forced to enter the country to "restore order." Putin has been even cagier as he defines the Russian strategy. Russian foreign minister Sergei Lavrov has repeated President Putin's claim that it is not Russian troops occupying military bases in Crimea. Speaking in Madrid in remarks shown on Russian television, he said "self-defense" forces who do not answer to Moscow were occupying the bases and so Russia could not order them to leave.

By early 1939, at Hitler's instructions, Slovaks living in the eastern part of Czechoslovakia began agitating for an independent state. They said they no longer had any allegiance to Prague. On March 10, 1939 Czechoslovakia ousted the leaders of the Slovak region and declared martial law. This action, which may be the one used by the Ukraine, took Hitler by surprise and he ordered his generals to prepare for an invasion. Slovakia was first but the entire country was to follow as the German nationals had to be protected. The Germans contacted one of the former Slovakian leaders, Monsignor Tiso, and convinced him to call for Slovakia independence. The Germans later produced a phony telegram where Tiso appealed for the Fuhrer's protection. Slokaia fell but then the entire country followed in short order as the Nazis moved in to occupy Czechoslovakia.

After the fall of Slovakia Goebbels and the German propaganda machine went into high gear. They spread reports of alleged persecution of local Germans and they printed fake newspaper stories about the Czech "reign of terror" in what was left of Czechoslovakia. On March 15, 1939 the German army rolled into Prague as Hitler announced, "Czechoslovakia has ceased to exist."

"The Führer," has taken the law into his own hands...

Now we are told that this seizure of territory has been necessitated by disturbances in Czechoslovakia...If there were disorders, were they not fomented from without?

Is this the last attack upon a small state or is it to be followed by others? Is this, in effect, a step in the direction of an attempt to dominate the world by force?

-- Neville Chamberlain

Hillary Clinton has stated, as recited in the Long Beach Press-Telegram while she spoke to the Boys & Girls Club there, "Now if this sounds familiar, it's what Hitler did back in the nineteen thirties. All the Germans that were ... the ethnic Germans, the Germans by ancestry who were in places like Czechoslovakia and Romania and other places, Hitler kept saying they're not being treated right. I must go and protect my people and that's what's gotten everybody so nervous."

I am in agreement with Ms. Clinton. What Russia is doing has certainly gotten me nervous. The markets seem to want to look in any direction, every direction but what Putin is actually doing. The scenery is more pleasant no doubt.

I have studied the playbook however. I believe I know exactly where this is all going. It is obviously my opinion but the similarities between those days prior to World War II and now are disquieting to say the least. 

"You must choose. But choose wisely."

-- Indiana Jones and the Last Crusade

• The state is imposing more stringent licensing rules that would require new Tesla cars to be sold through middlemen.

Similar to Gilda Radner, Tesla (TSLA) hates New Jersey.

One of the longer-term threats to Tesla is the blocking of Tesla's direct sales model.

Apparently, on this score, things are not going well for Tesla in New Jersey, as that state is imposing more stringent licensing rules that would require new Tesla cars to be sold through middlemen.

• Here are his morning musings.

The Lindsey Group's Peter Boockvar early morning commentary touches on the Bank of England, the Bank of Japan, small business confidence and the European markets:

Mark Carney of the BoE is laying out his blueprint for normalizing policy which will first begin with "several" rate increases before they start unwinding QE. When those rate increases occur though is still uncertain as Carney still believes that there is excess slack in the UK economy. Forward guidance with respect to raising short term rates for both the BoE and Fed started out as only as good as one's crystal ball. Then both banks didn't like what they saw in the ball and forward guidance has now become Not Now. Quantitative guidance from the Fed and BoE was subjective enough and now we are going to get 'qualitative' guidance which will be even more subjective.

The other easy money banker in arms, Kuroda of the BoJ, stood pat with its policy as it takes a wait and see ahead of the April consumption tax increase. In comments after today's meeting, Kuroda said there was no need for changes right now and he doesn't believe the 1997 economic drop after the previous tax increase will be repeated. Make no mistake though that if the implications are deeper and longer lasting than expected, the BoJ will take their QE experiment to even greater than 50% of GDP with likely no difference in the economic outcome but will bring another round of yen weakness. JGB's traded poorly overnight with the 10 yr yield up 3 bps to the highest in 6 weeks.

In the US, the February NFIB small business optimism index was disappointing, falling to 91.4 from 94.1, the weakest since March '13. The NFIB blamed Washington DC for the weakness saying "facing continued unknowns with the healthcare law, the EPA, the minimum wage, tax reform and more, it is no surprise that the Small Business Optimism Index fell, reversing a few months of modest gains." Plans To Hire fell to 7% from 12% in January and 8% in December. Those planning on Increased Capital Spending rose 1 pt but those that Plan To Increase Inventory fell 2 pts. Those that Expect Better Economy dropped 8 pts to a 3 month low and there was also drops in those Expecting Higher Sales and saying that now is a Good Time To Expand. Higher Selling Prices were little changed. This number is never market moving but doesn't point to an economy that is about to take off.

The Shanghai index was quiet overnight but there was no bounce after yesterday's sharp selloff as it was little changed as was the Hang Seng index. This comes ahead of key retail sales and industrial production data in coming days and a closer eye on their corporate bond market to see who will default next.

The German stock market has been a clear underperformer this month with a 4% decline. While it does happen coincident with the 10% drop in the Russian Micex index and Germany's high natural gas needs, the strong euro is likely the main culprit with about 40% of their economy reliant on exports. German exports in January were resilient though, rising 2.2% m/o/m, above the estimate of up 1.5% with the euro averaging 1.362 vs the US$ in the month of January. This comes after a .9% drop in December however and a 1.385 euro today.

• High-frequency-trading powerhouse Virtu has lost money in only one of the past 1,238 days!

I have spent the last three to five years voicing profound concerns in my diary regarding the potential ills of high-frequency-trading strategies and the possible adverse impact on the U.S. stock market.

Yesterday Zero Hedge pinpointed the finding of what they have called the "holy grail of trading" by high-frequency-trading powerhouse Virtu, which has revealed that it lost money in only one of the past 1,238 trading days!

Before he passed away Barron's' Alan Abelson used to tell me that he only read nonfiction books, as the realities of Wall Street couldn't be made up. I am beginning to understand what Alan meant!

Where did Zero Hedge find this data? In Virtu's registration statement, of course, as Virtu has filed a prospectus and has plans to go public in the near future.

Think JPM's zero trading day losses in 2013 was impressive? Prepare to have your mind blown. The chart below shows the chart of daily net trading income by High Frequency Trading titan Virtu, taken from its just filed IPO prospectus. The punchline: in 4 years of trading Virtu has had one, one, day in which it lost money.

From the S-1: "The chart below illustrates our daily Adjusted Net Trading Income from January 1, 2009 through December 31, 2013. As a result of our real-time risk management strategy and technology, we had only one losing trading day during the period depicted, a total of 1,238 trading days."

Let that sink in: one trading loss day and 1237 days of profits. And that, ladies and gentlemen, is the Holy Grail of the New Normal broken, manipulated markets.

How is this statistical anomaly possible? For those who have been following our narrative on the market-manipulating, endless crime that is HFT will know all too well. When you have a "strategy" whose only mission is to frontrun order flow, and scalp pennies from every market order - that would be billions of market orders in a period of four years - there is no risk, as confirmed by the chart above. Furthermore, since all HFT really does is accentuate momentum but making the bid chase NBBO ever higher, in a market that is manipulated top down by the Fed itself, all HFTs really do is simply enable the Fed's policy at the micro level, and thus such crimes are not only ignored, but welcomed by the New Normal overlords.

It also explains why fundamentals haven't mattered in years - the only thing that does matter is to quickly open one's own HFT stop, frontrun as much order flow as possible, and scalp pennies ahead of the bid and ask... billions and billions of times, leading to the statistically improbable chart pictured above.

This, ladies and gentlemen, is why retail has given up - when companies want to go public and no longer even hide the "secret sauce" which confirms beyond a reasonable doubt that there is a two-tier market: one in which the HFTs just never lose, and one for everyone else, well: who would want to play in a casino so explicitly rigged?

And while there are countless losers, there are also few winners: such as the billionaire founder of Virtu Vincent Viola, who was recently selling his NYC mansion for $114 million, who just made $270 million in 2013 adjusted EBITDA courtesy of the Virtu "can't lose" money machine.

There is one last thing to note - in 2013 Virtu made the least amount of trading days in its most successful bucket over the past 4 years, the $1.3-$1.5 million daily net income range, when "only" 57 days made that amount of money, compared to 85 in 2012 and 168 in 2009-2011. What stands out is that Virtu is increasingly making more money in the higher net income buckets. HFT by definition makes the most money on the low end of the distribution - the fact that it made increasingly more profits in the higher bucket indicates that the traditional strategy is no longer working, and instead Virtu has been making greater profits not thanks to its organic business model but because it has been taking market share away from other, less profitable firms. This works in the short-term but always fails over the longer run, especially if market volumes continue to collapse as they have for the past five years.

This also explains why the giga HFT firm has finally stepped out of the shadows and its founder and equity owners are finally willing to cash out - the music is slowly ending. Even for those who have discovered the Holy Grail of the New Normal market.

-- Zero Hedge, "The Holy Grail Of Trading Has Been Found: HFT Firm Reveals 1 Losing Trading Day In 1238 Days Of Trading"

You can't make this stuff up.

Kill the quants before they kill us!

• Shares are trading better perhaps on an analyst upgrade.

Apple (AAPL), a recent add-on, is trading better (up $3.75 a share) in premarket trading on no big news.

Perhaps it's due to Pacific Crest's upgrade of the shares to Outperform with a price target of $635.