• I'm not giving in on shorting so easily.

My sense is that a lot of short sellers through in the towel when the market only bent and didn't break this morning.

But I continue to scale into shorts now.

Thanks for reading my Diary today and I hope the different posts provided value to your trading and investing.

Enjoy your evening and God bless Uncle Vinnie.

• Now slightly net short.

I am back shorting QQQs at $90.40 and back shorting the IWM at $118.17. I am 5% net short.

• I constantly get the question from subscribers asking me at what price I would add to Monitise (MONI.L).

Answer?

I would be a buyer at $1.05-1.10.

• Peter Boockvar on the 10-year auction.

The 10 yr auction was solid as the yield of 2.729% was almost 1 bp below the when issued. The bid to cover of 2.92 was above the previous 12 month average of 2.68 and the most in a year. Also, direct and indirect bidders took a total of 71% of the auction vs the recent average of 63%. Bottom line, the strength in the auction basically at the mid point of the 2.5-3% 10 yr yield range that has been carved out over the past 6 months implies the bet that for now that maybe we'll stay on the lower half of that range for the time being. There has been multiple tugs of war within the longer end of the market. To name the key ones: 1)The belief in an economic rebound off the harsh weather infested winter causing rates to rise, 2)Concerns with global growth, particularly emanating out of China and the lack of confidence in seeing 3% US GDP growth this year causing rates to fall,  and lastly the back and forth in the CRB index which has had a sharp rally over the past few months but has backed off a bit in the last few days due to lower industrial metals and oil, somewhat offset by higher food prices. Also throw in geopolitics as a Treasury market influence. In terms of the TIPS market and what they are saying about inflation, the implied rate in the 2's and 5's are down a few bps in the last two days off the highest levels since last Spring.

• On Knowledge@Wharton Penn's Ezekiel Emanuel discusses "Reinventing Health Care."

• Hanson on Phoenix and Las Vegas.

Real estate maven Mark Hanson talks about the Phoenix and Las Vegas markets this afternoon.

Since mid last year I have been focusing on what I thought would end up being epic demand destruction in all of the leading indicating, new-era "investor" buy-to-rent, flip, flop and frolic havens.  Phoenix and Vegas -- two regions touted over the past couple of years to be prime examples of "escape velocity" and a "durable recovery" -- were two of my primary research markets.  

Now, going into the peak season sales volume is down serious double-digit percentages YoY and barely higher than the 2008 Armageddon lows.  The pain continued in Feb based on data out yesterday from each region.

This is exactly what happened beginning in 2006....first demand went, then prices went. Volume precedes price.

1) Phoenix region February specific sales volume 2002 to 2014.Sales at 6-year lows, down 17% yoy.  Feb Pendings down 35% YoY and bodes ill for the prime spring purchase season.  Next phase is lower prices.

Sales volume remaining at 6-year lows in February while supply continues to rise sharply -- back to nearly 7 months in the greater Phoenix region -- means that the demand destruction cannot be due to "lack of supply".

This stimulus-induced "demand hangover" is simply a repeat of what happened from 2003 to 2007 when stimulus (exotic loans that turned everybody into a millionaire on paper when qualifying for a mortgage loan) created a ton of incremental demandand pulled even more forward. Then, when the stimulus suddenly ended (all the exotic loans went away over a short period of time) the market "reset to end-user fundamentals"; what the end-user can really afford using "fully documented 30-year fixed rate loans".

The last few years of insatiable all-cash investor demand has influenced house prices much the same way as the exotic loan bubble did.  That is, all cash investors controlling the market -- buying without a "mortgage loan house price governor" -- were able to run up prices way beyond what the average end-user could really afford. The next phase for this market is lower house prices until end-user fundamentals and house prices reach a point of equilibrium.

Feb house sales at 6-year lows, down 17% YoY. 

Supply surging YoY while demand plunges.

Pendings down twice that of sales bodes ill for the prime spring selling season.

A repeat of 2006 to 2008

2)  Las Vegas demand also at 6-year lows, down 22% YoY

• And I may be on to something with GM.

It is interesting to note that Ford (F), which traded lower all morning, is now higher on the day.



That said, the issue of GM's (GM) potential corporate liability (ignition switch recall), which i brought up last night and early this morning is being highlighted in the business media.



I think i am on to something here.



If the bankruptcy absolves GM of this liability, the current price is likely to be a rewarding entry point.

• Buffett owes a debt to Graham.

"Investment is most intelligent when it is most businesslike." -- Benjamin Graham, The Intelligent Investor

In his recent letter to Berkshire Hathaway (BRK.A) shareholders  Warren Buffett explains in the section entitled "Some Thoughts About Investing" that he owes so much of what he knows about investing to Benjamin Graham.

Warren went on to write:

"I learned most of the thoughts in this investment discussion from Ben's book The Intelligent Investor, which I bought in 1949. My financial life changed with that purchase...

Before reading Ben's book, I had wandered around the investing landscape, devouring everything written on the subject. Much of what I read fascinated me: I tried my hand at charting and at using market indicia to predict stock movements. I sat in brokerage offices watching the tape roll by, and I listened to commentators. All of this was fun, but I couldn't shake the feeling that I wasn't getting anywhere.

In contrast, Ben's ideas were explained logically in elegant, easy-to-understand prose (without Greek

letters or complicated formulas). For me, the key points were laid out in what later editions labeled Chapters 8 and 20. (The original 1949 edition numbered its chapters differently.) These points guide my investing decisions today.

A couple of interesting sidelights about the book: Later editions included a postscript describing an

unnamed investment that was a bonanza for Ben. Ben made the purchase in 1948 when he was writing the first edition and ¿ brace yourself ¿ the mystery company was GEICO. If Ben had not recognized the special qualities of GEICO when it was still in its infancy, my future and Berkshire's would have been far different.

The 1949 edition of the book also recommended a railroad stock that was then selling for $17 and earning

about $10 per share. (One of the reasons I admired Ben was that he had the guts to use current examples, leaving himself open to sneers if he stumbled.) In part, that low valuation resulted from an accounting rule of the time that required the railroad to exclude from its reported earnings the substantial retained earnings of affiliates.

The recommended stock was Northern Pacific, and its most important affiliate was Chicago, Burlington

and Quincy. These railroads are now important parts of BNSF (Burlington Northern Santa Fe), which is today fully owned by Berkshire. When I read the book, Northern Pacific had a market value of about $40 million. Now its successor (having added a great many properties, to be sure) earns that amount every four days.

I can't remember what I paid for that first copy of The Intelligent Investor. Whatever the cost, it would

underscore the truth of Ben's adage: Price is what you pay, value is what you get. Of all the investments I ever made, buying Ben's book was the best (except for my purchase of two marriage licenses)."

I recently completed a re-read of Graham and Dodd's Security Analysis and Graham's The Intelligent Investor.

Here are some of Benjamin Graham's greatest quotes:

* If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume.

* Individuals who cannot master their emotions are ill-suited to profit from the investment process.

* The underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in the financial mechanisms and climate.

* Obvious prospects for physical growth in a business do not translate into obvious profits for investors.

* Finance has a fascination for many bright young people with limited means. They would like to be both intelligent and enterprising in the placement of their savings, even though investment income is much less important to them than their salaries. This attitude is all to the good. There is a great advantage for the young capitalist to begin his financial education and experience early. If he is going to operate as an aggressive investor he is certain to make some mistakes and to take some losses. Youth can stand these disappointments and profit by them. We urge the beginner in security buying not to waste his efforts and his money in trying to beat the market. Let him study security values and initially test out his judgment on price versus value with the smallest possible sums.

* Most businesses change in character and quality over the years, sometimes for the better, perhaps more often for the worse. The investor need not watch his companies' performance like a hawk; but he should give it a good, hard look from time to time.The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator's primary interest lies in anticipating and profiting from market fluctuations. The investor's primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels at which he would be wise to buy and high price levels at which he certainly should refrain from buying and probably would be wise to sell.

* It is far from certain that the typical investor should regularly hold off buying until low market levels appear, because this may involve a long wait, very likely the loss of income, and the possible missing of investment opportunities. On the whole it may be better for the investor to do his stock buying whenever he has money to put in stocks, except when the general market level is much higher than can be justified by well-established standards of value. If he wants to be shrewd he can look for the ever-present bargain opportunities in individual securities.

* The risk of paying too high a price for good-quality stocks - while a real one - is not the chief hazard confronting the average buyer of securities. Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions. The purchasers view the current good earnings as equivalent to "earning power" and assume that prosperity is synonymous with safety.

* Even with a margin [of safety] in the investor's favor, an individual security may work out badly. For the margin guarantees only that he has a better chance for profit than for loss - not that loss is impossible. But as the number of such commitments is increased the more certain does it become that the aggregate of the profits will exceed the aggregate of the losses.

* Investment is most intelligent when it is most businesslike. It is amazing to see how many capable businessmen try to operate on Wall Street with complete disregard of all the sound principles through which they have gained success in their own undertakings. Yet every corporate security may best be viewed, in the first instance, as an ownership interest in, or a claim against, a specific business enterprise. And if a person sets out to make profits from security purchases and sales, he is embarking on a business venture of his own, which must be run in accordance with accepted business principles if it is to have a chance of success.

* Do not try to make "business profits" out of securities - that is, returns in excess of normal interest and dividend income - unless you know as much about security values as you would need to know about the value of merchandise that you proposed to manufacture or deal in.

* Do not let anyone else run your business, unless (1) you can supervise his performance with adequate care and comprehension or (2) you have unusually strong reasons for placing implicit confidence in his integrity and ability. For the investor this rule should determine the conditions under which he will permit someone else to decide what is done with his money.

* Operations for profit should be based not on optimism but on arithmetic.

* Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and if you know your judgment is sound, act on it - even though others may hesitate or differ. You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.

* In the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand.

* To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.

• The foundation of my cautious view.

As I have mentioned throughout the week, in support of my view that global economic growth is slowing, witness the sharp drops in copper, oil and in bond yields today.

Weaker-than-expected economic and corporate profit growth form the foundation of my cautious market view.

• Midday musings from Sir Arthur Cashin.

Early "copper collateral" fears abate slightly and ten year yield comes off the morning flight to safety lows.

S&P may find a bit of a struggle with resistance around 1868/1871.

Focus beginning to shift to Janet Yellen who must quickly address the Fed "targets" such as 6.5% unemployment.  Moving the goal posts, however, can chip away at Fed credibility.

Flurry of first hour trading (Europe?) slowed in mid-morning.  Run rate at 12:15 projects to any NYSE final of 640/720 million shares.

• Short selling is not for everyone.

Tesla's (TSLA) shares have more moves than a shortstop batting .110.

The shares were down $4 in premarket trading and are now up more than $9.

Short selling is not for everyone as reward vs. risk is asymmetric. This is especially true with volatile stocks like Tesla.

As I mentioned in a recent column how I survived, high-octane stocks (if shorted) should be sized properly and traded around.

That is precisely what I have been doing ... and will continue to do.

• ... that's our shortstop!

"Costello: Look, you gotta pitcher on this team?

Abbott: Now wouldn't this be a fine team without a pitcher.

Costello: The pitcher's name. Abbott: Tomorrow.

Costello: You don't wanna tell me today?"

-- Abbott & Costello, Who's on First?

As  our subscribers already know I love baseball.

It doesn't hurt that my cousin is Sandy Koufax (and then there is my Grandma Koufax!).

Since we are only 10 days from opening day, I thought I would have fun and commemorate baseball's new season with the picture below.

Of course, Abbott and Costello knew before any of us, as it finally has happened!

Who (Hu) is on first base!

• This is one of the key issues for investors in 2014.

Will the expansion in price-to-earnings ratios in 2013 be preserved this year? Or will valuations contract?

Stay tuned.

• I continue to add to GM.

Late yesterday I had an exchange with Paul Price on Columnist Conversation on the subject of General Motors (GM).

Paul implied that there was something of a conspiracy in the decision of the government to sell the balance of its GM shares before they made the recall announcement related to the ignition-switch issue years ago.

I responded to him by writing: "Didn't the government sell its shares before GM even began their recall? Thus, why would the government have an investigation before the company even expands its recall?"

On a different issue, It remains unclear to me whether the 2009 bankruptcy of GM shields the company from corporate liabilities relating to the ignition fiasco that occurred years earlier.

I continue to add to GM shares today and I wonder out loud whether someone like Warren Buffett (who already owns 40 million shares of GM) is buying into the dislocation this week.

• I added to Citi (C), GM (GM) and Bon-Ton Stores (BONT), bringing my net exposure to 5% net long.

• Take Bon-Ton, for instance.

Finally Mr. Market is beginning to show signs of aging. 

Monday and Tuesday represented the first back-to-back market decline in weeks, and the S&P 500 has sustained further selling so far this morning.

There have been clear-cut signs of loss of share price and impetus in certain leading market sectors, while momentum in corporate profit and sales growth has been slowing. Moreover, the short-selling community has been shattered and worn out, and now officially represents -- like the dodo bird -- an endangered species. Many hedge funds have totally abandoned the notion of hedging. Even some of the most stalwart bears -- like my friend/buddy/pal Bill Fleckenstein -- were reluctant to short.

Perhaps the proximate cause of this week's weakness was geopolitical, involving the Ukraine crisis -- an unexpected event that was outside the radar screens of most investors only two months ago. 

Or perhaps, as I observed last week in the Russell 2000's 3% move in one day, coupled with parabolic moves in a host of speculative stocks, there was a classic blow-off top. 

Regardless of the reasons, many of the sign posts of a concern and downturn have been posted in my Diary.

Though uncertainty has increased, and the market's near-term picture might be problematic, it is not likely the end of the world -- and not necessarily the end of the bull market of the last five years. In fact, Jim "El Capitan" Cramer made a solid point on Mad Money last night -- that there is a silver lining to the evaporation of froth that has occurred in certain speculative segments and offerings this week. 

For some time, prices of many equities have failed to meet my investment criteria, and the reward vs. risk scenario has been unfavorable. (Note: I start the day in market-neutral mode.) 

I am hopeful that the current down spell unearths attractive investment opportunities.

One such potentially attractive investment is Bon-Ton Stores (BONT)

Bon Ton Stores is a retailer based in York, Penn. The company operates 270 department stores, principally in the Midwest and Northeast. It offers brand-name fashion apparel and accessories for women, men and children, as well as cosmetics, home furnishings, footwear and other goods. Bon Ton operates under Bon-Ton, Bergner's, Boston Store, Carson's, Elder-Beerman, Herberger's, and Younkers nameplates. 

Yesterday Bon Ton Stores' shares sold off by 10%, reflecting the departure of company CEO Brendan Hoffman (for personal reasons). The decline was not due to the unexpected drop in results, as most of its stores are in areas of the country that were exposed to the bitter weather over the last two months.

I have initiated a buy of Bon Ton at $9.85 per share. 

I will have a more extensive analysis on Bon Ton early next week, but the following factors attract me to this name: 

• The departure of the company's CEO likely occurred because of his desire to return to his family in New York. There was nothing untoward about the announcement.

• Given Bon Ton's store locations, the disappointing results announced yesterday should not come as a surprise.

• Bon Ton's shares now possess an attractive reward-risk ratio given yesterday's 10% share-price drop. 

• While Bon Ton is debt-laden, the shares trade at only about 4x earnings before interest, taxes, depreciation and amortization, and the company is generating free cash flow. Importantly, the company has mentioned inventories well in the recent sales downturn.

• Thomas Grumbacher, the company's chairman, is 75 years old and owns nearly 900,000 shares. Given his age and the recent management announcement, he might be incented to look at exit strategies in the period ahead.

• I value Bon Ton at around $15 to $16 in a private transaction -- about 50% higher than Tuesday's close of $9.80 -- which I consider likely in 2014. Given's Bon Ton's geography, Dillard's (DDS) is the most obvious buyer of the company.

• Run, don't walk to see George Soros' television interview on Bloomberg TV. 

Run, don't walk to see George Soros' television interview on Bloomberg. 

Here are some highlights:

George Soros on what is facing Europe today:

"What is facing Europe, unless there is a more radical change is a long period of stagnation. Nations can survive in that way. Japan is just trying to break-out of 25 years of stagnation, where Europe is just entering. The European Union is not a nation. It's an incomplete association of nations and it may not survive 25 years of stagnation.

"The financial crisis as such is over. But now we are facing a political crisis, because the Euro crisis has transformed what was meant to be a voluntary association of equal sovereign states that sacrificed part of their sovereignty for the common good into something radically different. It is now a relationship between creditors and debtors, where the debtors have difficulty in paying and servicing their debt and that puts the creditors in charge. And that divides the Eurozone into two classes ¿ the creditors and debtors. The creditors are in charge and unfortunately the policy that Germany in particular is imposing on Europe is counter-productive and is making the condition of the debtor countries worse and worse. So, right now Europe is already growing a little bit, the Eurozone, but that's only because Germany is forging ahead and more than let's say Italy and Spain are falling behind. "

On Central Banks and whether he cares about the weakness we saw in the data and deflation:

"That's going to be a very tough year for the banks. They are under pressure, because they have to meet the stress test. The banks have an interest in passing the stress test rather than reviving credit to the economy, so the banks have a transmission mechanism for the people's savings channeling it into the real economy. They are not fulfilling their function."

On Ukraine's impact on Europe:

"Ukraine is a wake-up call to Europe, because Russia has emerged as a rival to the European Union. Putin has tried to reconstitute the Russian empire as a rival for the European Union and has been very successful politically. Not terribly unsuccessful financially and economically, because the Russian economy is not doing well at all, but Putin has outplayed, outmaneuvered the European Union, because Europe it [inaudible] to form, it demanded too much and offered too little. So, it wasn't difficult for Putin to output it. But the Ukrainian people stood up and demonstrated by actually sacrificing their lives. Their commitment to be part of Europe, so this is a challenge for Europe and Europe needs to rediscover its own European identity instead of each country just pursuing its national interests and getting further and further into conflict with the others. There are certain core principles and this is a political thing ¿ democracy, open society, freedom that Europe has believed in and ought to actually stand up and be united."

"Putin has a very different idea of what a society should be like. He believes that people can be manipulated. He actually has got a blind spot. It's beyond his comprehension that people can spontaneously resist. He believes that if Ukraine resists that there is a conspiracy that people, that Americans, CIA, my foundation are conspiring to threaten him or to undermine is policies. And that's not the case, people do believe in freedom."

• Procter & Gamble is slapped with a buy sticker.

BTIG initiates Procter & Gamble (PG) with a Buy rating and a $89-per-share price target.

P&G is on my Best Ideas list.

• Here's a snippet.

"With today's declines, most major European markets are at or below the closing lows of March 3rd, the Monday when markets finally reacted lower to Putin's war games. The Stoxx 600, German DAX, CAC, FTSE, Russian Micex, Dutch AEX, and Norwegian markets are the main markets at those levels. Persistent strength in the euro is also a main factor in the trading, especially for Germany. In Asia, the Shanghai, Hang Seng, Kospi, ASX, Singapore Straits and Japanese Topix are also at or near the March 3rd close but also are being influenced by China's growth concerns. While copper is now a new found collateral for loans in China that may now be at risk of being liquidated, it is still a global growth proxy and its trading lower to intraday levels last seen in June. If there is one common theme throughout and for whatever reason (Fed's taper, Russia/Ukraine, China's slowing growth, Japan/little 3rd arrow progress/widening trade deficit/no wage growth and/or strong euro), the 2014 global market action in its early stage has a definite different complexion than the easy ride up the chair lift in 2013. The contra is the action in gold which is back above $1350 to the highest since September.

"From a U.S. market standpoint, none of the above matters in terms of sentiment. The II weekly read said Bulls rose to 55.1 from 54.6, a 7 week high and while Bears rose 2.3 pts, it's still below 20 at just 17.4. Those expecting a correction fell to a 7 week low. Also of note in the US, with a 5 bps increase in the average 30 yr mortgage rate to 4.52% coincident with the rise in Treasury yields, refi applications fell 3.1% w/o/w and is down 65% y/o/y. Purchase applications were little changed, falling .5% w/o/w and down 17.5% y/o/y.

"On September 19th 2012, the Bank of Japan started its process of ramping up QE. On December 26th 2012, Shinzo Abe became Prime Minister of Japan for the 2nd time with monetary, fiscal and regulatory policy his 3 main areas of focus to light a fire under Japanese asset prices and economic growth. Today, Consumer Confidence in Japan in February fell to 38.3 from 40.5, the weakest level since September 2011 as all 4 components fell. In particular, the 'willingness to buy durable goods' fell to the lowest since February 2009 and 'income growth' is just off the lowest since June '11. Again, the lack of wage growth compared to the increases in consumer prices is the main problem and comes ahead of a major tax increase in April. We can only hope that the early signs of wage raises picks up steam quickly.

"In Europe, industrial production in January unexpectedly fell by .2% vs the estimate of up .5% m/o/m and was a catalyst for further market weakness there but it still saw a y/o/y gain for the 5th straight month after 22 months in a row of declines. The recovery in Europe is happening but it's still fragile and the resilient euro is not helping exporters."

• I am at a meeting.

I am at a breakfast meeting and will be back by 8:30 a.m. EDT.

• Now trading higher.

The $3.5 billion in Puerto Rico general obligation bonds were priced at $93 -- to yield 8.727%.

They are now trading in the secondary market at between $95.50 and $95.75.