• At 3:50 p.m. there is $475 million to sell market on close.

• Barron's asks the question.

I participated in a Barron's article over the weekend that asked the question: 

"What business or financial book would you like to give or receive?"

• Lessened liquidity and lower prices have implications for demand/supply in equities.

CNBC's Kelly Evans and Rick Santelli (great job on Meet The Press!) were discussing the ramifications of the recent price indigestion and lessened liquidity in the high-yield market over the last 1-2 weeks.

To me, the high-yield debt market is the actor that provides access to capital for corporations to repurchase their own stock.

That substitution of equity for debt has been an important foundation for the Bull Market over the last few years.

Losing some access to the high-yield market threatens the favorable demand/supply equation for equities.

• None of my bids today were hit.

The closed-end municipal bond asset class has turned to positive (this afternoon) from negative (in the morning).

Though I was broadly bidding for more of all my fund holdings, none of my bids were hit.

• There is a lot of call volume today.

There is a lot of call volume activity in Twitter (TWTR) (in the Dec. and Jan. $38-$41 calls) today.

Though I can't legitimately evaluate the validity of the rumors, there has been persistent talk that Apple (AAPL) is interested in acquiring Twitter.

• Taking off another 1/3.

I am taking off another 1/3 of today's short in the Russell Index this morning for a nice gain of $2.30 on this tranche.

• Caterpillar (CAT) is on my Best Ideas list (short).

The company was heralded in the business media after its most recent quarterly EPS release, but as I wrote, there was less than meets the eye.

Dealer shipment activity remains awful.

And its shares are now down by $10 since I reloaded on this short. 

• Many are trying to find an explanation of today's weakness.

As I wrote in my opener, the Fed has made a mockery of fundamentals, so maybe it is not just the signposts of slowing growth in Europe, Japan and China (I am being facetious!).

My Gnome is hearing of several large hedge fund liquidations. 

• The chart tells the story.

Last week I mentioned that we should pay close attention to the high-yield market (iShares iBoxx High Yield Corporate Bond ETF (HYG) and the SPDR Barclays High Yield Bond ETF (JNK)).

HYG is now approaching a 2-1/2 year low.

Let's go to the chart!

• I am not buying this dip. Rather, I have raised my net short exposure today.

I have further reduced Best Ideas (Citigroup (C), Radian (RDN) and Potash (POT)) and I have added some more ETF shorts.

I also added to my trading rentals in the energy space.

• Sir Arthur Cashin on potential developing divergences. 

Mild divergences develop.  Dow hit by just three stocks.  Chevron cuts 24 points, McD 23 and XOM 12.  Meanwhile, the Nasdaq Comp fell off a cliff ¿ down 150 Dow points.

• Nasdaq dips under its eight-day MA.

This is the first time since the mid-October bottom that the Nasdaq is trading under its eight-day moving average.

• Here are the average prices.

I expanded my trading positions in the oil patch.

Here are my average prices on today's longs:

Exxon Mobil (XOM) -- $91.95

Chevron (CVX) -- $107.10

Devon (DVN) -- $56.96

• I'm bidding for the munis amid their mediocre performance this morning.

We're seeing mediocre performance among closed-end municipal bond funds this morning despite continued strength in bond prices, and lower yields. Here are my muni positions:

• BlackRock Municipal Target Term Trust (BTT),
• Eaton Vance Municipal Income (ETX),
• BlackRock Investment Quality Municipal Trust (BKN),
• Nuveen Select Quality Municipal (NQS),
• Nuveen Premium Income Municipal (NPM),
• Nuveen Dividend Advantage Municipal Fund (NAD),
• NuveenMunicipal Market Opportunity Fund (NMO),
• Nuveen Municipal Advantage Fund (NMA),
• Invesco Pennsylvania Value Muni (VPV),
• Invesco California Value Municipal (VCV),
• Nuveen Quality Income Municipal Fund (NQU),
• Nuveen Premium Income Municipal (NPI),
• Invesco Trust for Investment (VGM), and
• Nuveen New York AMT-Free Municipal (NRK)

This too shall pass -- and I am bidding again for the stocks, across the board. 

• Further thoughts from Arthur Cashin. 

Bit of a setback as Dow and S&P make a lower low for the day. 

Run rate at 12:30 projects to an NYSE final volume of 720/800 million shares.

Here is a value-adding analysis and post from Seeking Alpha on Ocwen Financial (OCN)

• For a gain.

I took off one-third of my short of iShares Russell 2000 (IWM) at $107.05 -- for a $1.25 gain from this morning.

• From Sir Arthur Cashin. 

Churning in narrow range warily watching oil. 

Yield on ten year pulls back below 2.3%, virtually unnoticed nor remarked upon by media pundits who are obsessed by the proximity of 18,000. Run rate later.

• Ratcheting it back up.

My portfolio is back up to 25% net short.

• For short-term traders, anyway.

Allow me to clarify my strategy when it comes to trading and investing in energy stocks. 

I was flat in energy by late last week, and I commented about the sector as trading sardines on Thursday morning. 

I took up an infinitesimal position in Chevron (CVX), Devon (DVN) and Exxon Mobil (XOM) mid-afternoon Friday, and I sold at the market's close. 

Just now, in the late morning, I reestablished a trading long in Chevron at $107.13, in Exxon at $92.04 and in Devon at $57.20 -- for a quick trade.  

Frankly, I am trading the group actively now -- and I am not sure how much more value I am providing in sharing my frenetic trading orientation with this group. 

One of the problems is that subscribers have different time frames. 

Again, for intermediate to long term investment, a buying opportunity is developing in the oil sector. 

For short-term traders, they are trading sardines with no clear stability -- yet.

• Read this if you haven't already done so.

Here is a link to my recent Apple (AAPL) update.

• Indeed I have.

I have added to my Apple (AAPL) short this morning.

• Alibaba continues to get schmeissed.

"You don't realize how easy this game is until you get up in that broadcasting booth." --Mickey Mantle

Last week in the business media there was nearly a universal view that Alibaba (BABA) was heading higher; after all, it was trading at an IPO high of $120 per share. Those talking heads talked fast, were self-confident and absolute of view.

Today the shares are $108.60.

Here is the five-day chart on Ali Blah Blah.

You will not likely here those commentators question last week's wisdom this week. Nor will you hear anyone of the respondents say, "I was wrong."  

But we most certainly learn another lesson. The lesson learned? Be independent of investment thought and do your own investment homework (as I mentioned in today's Chairman's Club event).

 --Kass Diary, "A Cautionary Tale: What We Can Learn From Alibaba" (Nov. 19)

Ali Blah Blah, the hedge fund community's favorite tech stock these days, continues to get schmeissed: It's down another $2 today, and has now lost almost $15 from its month-earlier high of above $120).

Here is the one month chart. 

The message -- a Warren Buffett quote that is often mentioned -- is: Be fearful when others are greedy.

That may also apply to the broader market today.

• I am not selling this.

A recent speculative buy of mine, FibroGen (FGEN), is trading up another $4 today -- or 15% -- after an outsized gain late last week.

I am not selling this position.

• To a new low.

Besides the continued disappointing economic data out of Germany, China and Japan, a distinguishing feature of this morning's trading is the continued schmeissing in the price of energy products. 

This morning, crude oil is down by another $2 per barrel, and to a new low of $63.85. 

On Dec. 1, I sold my three oil-stock positions -- in Exxon Mobil (XOM), Chevron (CVX) and Devon (DVN) -- for a profit. I wrote: 

For those that have a trading/short-term timeframe, I wouldn't be in these names.

But from a several-year horizon I would hold and accumulate on weakness.

That said, my fear of the general markets has led me to pare back (and then to eliminate) last week's buys.

I will await more panic in the energy sector, if it develops, for a better entry point.

• Via the IWM.

I have re-shorted the Russell 2000 Index -- iShares Russell 2000 (IWM) -- at $118.30 this morning.

• The books have been sent out.

My office has just sent out all the books won by the trivia contest participants.

If you don't get the book in the next 10 days, kindly email me!

• Where monetary policy is going, we don't need roads.

-- George McFly: " Lorraine. My density has brought me to you."

-- Lorraine Baines: "What?"

-- George McFly: "Oh. What I meant to say was..."

-- Lorraine Baines: "Wait a minute. Don't I know you from somewhere?"

-- George McFly: "Yes. Yes. I'm George. George McFly. I'm your density. I mean, your destiny."

-- Back to the Future

Perhaps we are going Back to the Future sooner than anyone thinks!

We can argue if the U.S. economy has reached self-sustaining growth and escape velocity. From my perch, while the jobs data are healthy, the manufacturing sector activity remains subpar. Capital spending, in particular, is moribund. Auto and home sales (and housing prices) have flatlined.

We can argue whether or not there is a disconnect between asset prices and the real economy.

But what we can't argue about is that the Fed has made a mockery of fundamentals.

Central bankers possess a powerful tool that can be described as a monetary monopoly, as they fix (or influence greatly) most interest rates with monetary policy. This money creation influences portfolio balancing. Typically, if a central bank prints money and increases the money supply, the yield on money declines and investors rebalance their portfolios as they seek higher-yielding investments. When investors move out of money and into non-monetary assets (like stocks or real estate), it generally tends to raise the price and lower the yield on those non-monetary assets. The rise in price and reduction in yield boosts wealth and lowers borrowing costs, which should in turn boost investor spending.

But never before have investors (and global economies) been so dependent on extreme policy and have comfortably embraced their confidence in the Fed's ability to successfully extricate from that policy without any unwarranted and adverse consequences.

As a result, there is limited honest price discovery as the price of many asset prices has been distorted.

Every new crisis since 2008 has brought on a more radical Fed response. One has to wonder: What is next if the U.S. economy falters anew?

Money reaches for yield, and every asset class prices off a phony 10-year note's yield.

It is even worse outside of the U.S. For example, the two-year Swiss government note yields -11 basis points to maturity. The minus side on the yield means your principal shrinks, not grows. Continually invested, one should consider -11 bps in rates halves principal in 580 years. We might call this usury in reverse. In many countries in Europe the 10-year yields are below that of the U.S.' 2.30% yield. Are Italy and France -- which possess such low yields -- more creditworthy than the U.S.?

Of course not. And it is those countries bonds' and notes' yields (depressed owing to the belief that Draghi and the ECB mean business) that act with almost gravitational force on our yields.

But, as I have written, ultra-low interest rates are the father of malinvestment, and bubbles are the outgrowth and children of easy money.

Interest rates are the investment traffic symbols of a free economy. They set investment hurdle rates in which we value many different asset classes, like stocks.

The interest rate forms the basis on how we discount and value the estimated future cash flows of companies.

Stated simply, by maintaining zero interest rates and instituting quantitative easing, we have been in a central bankers-sponsored boom in asset prices. 

Shockingly, the Fed doesn't even resist the notion that it is sponsoring this boom. It seems to be extremely happy with the lift off in stock prices. Indeed, near the end of his regime, former Fed Reserve Chairman Ben Bernanke cited (under the questioning of CNBC's Steve Liesman) his satisfaction of the Russell 2000 Index's climb a few years back when he cited the "portfolio balance channel." 

The Fed's explicit experiment of fueling asset prices since the Great Decession is the most glaring and prolonged example of trickle-down economics in history.

Unfortunately, the boiling-frog story comes to mind. In that metaphor the premise is that, if a frog is placed in boiling water, it will jump out, but if it is placed in cold water that is slowly heated, it will not perceive the danger and will be cooked to death. This story is often used as a metaphor for the inability or unwillingness of people to react to significant changes that occur gradually. 

The message of the boiling frog is that investors should make themselves aware of gradual change, or else they will suffer eventual and undesirable consequences.

The Fed and investors are like the frog being boiled slowly. At some point both will be jumping out.

The last time our Federal Reserve raised interest rates was in June 2006.

I will remind all that at 3:05 p.m. on one day in 1998, the Fed cut fed funds by 25 basis points and, in the next 60 minutes or so, the Dow Jones Industrial Average rose by 7%. The Fed knew which buttons to press, and it continues to do so.

The unimaginable in Fed policy has become commonplace: government-sponsored asset booms superimposed by low interest rates.

But to what end?

The Federal Reserve and central bankers are frightened about deflation.

But should we trust the Fed's statisticians and econometric models on which to base policy on small increments of deflation and inflation when the same Fed failed to foresee the deepest recession since The Great Depression six years ago? Moreover, in a time of technological change (and globalization), shouldn't prices fall?

Curious minds can wonder how the Fed and central bankers see very far in the future on these data points.

I am going to guarantee you all that, 10 to 15 years from now, investors will be scratching their heads.

They will look back at the current levels of building malinvestment, and on The Crash of 2016-2017, and a the heavy-handed monetary policy that provoked it, with puzzlement and fascination.

They will look back in amazement, as Jim Grant recently said, that "our generation gave the former tenured economics professors (who formed our Federal Reserve) the discretionary authority to fabricate monetary policy and fix interest rates."

They will look back in amazement on policy that put the cart of asset prices before the horse of enterprise. 

They will look back in wonder that we entertained the fantasy that high asset prices made for prosperity, rather than the other way around.

They will look back in wonder that we actually worked to foster inflation

Finally, they will look back at the mounting levels of building malinvestment and to the Hyperflation of 2018-2020 and recognize that they have miscalculated, in the same way the private sector miscalculated The Great Decession in 2007-2009, when the financial industry packaged and exported toxic derivative products based on the notion that home prices would never ever drop on a yearly basis.

Where we are going, we don't need roads.

Albert Einstein wrote, "Once you can accept the universe as matter expanding into nothing that is something, wearing stripes with plaid comes easy."

McFly put it differently:

-- Marty McFly: "Mom. That you?"

-- Lorraine Baines: "There, there, now. Just relax."

[pats a damp cloth on Marty's forehead]

-- Lorraine Baines: "You've been asleep for almost nine hours now."

-- Marty McFly: I had a horrible nightmare. I dreamed that I went -- back in time. It was terrible.

-- Lorraine Baines: "Well, you're safe and sound now, back in good old 1955."

-- Marty McFly: [opens his eyes wide] "1955?"

-- Back to the Future

• Jim "El Capitan" Cramer's opening missive is a tour de force which should not be missed.

Indeed, I would print it out and tape it on your office wall to remind you that 2015 is not 2000 (in a Nasdaq sense).

My concerns, expressed in my opening missive is something different than Jim evokes.  My primary concern is the growing  malinvestment -- an outgrowth of zero interest rate policy -- that might be sowing the seeds for the next business downturn.

In other words, it is not different this time.

Getting back to Jimmy's opus this morning, it is really an exquisite refutation of "here we go again." While I have written and am of the view that some social media stocks should be avoided, Jim's thoughtful and lengthy analysis graphically depicts the differences between today's technology stocks' valuations and future prospects vs. the Generational Top in the Nasdaq 14 years ago.

What a brilliant effort Jim has produced for all of us today!

• But there is still the Boockvar Gospel.

here will be no Market Setup as I am in a meeting this morning.

Here is The Gospel According to Peter Boockvar.

Just as Mario Draghi seems so anxious to raise the rate of inflation in the euro zone at the same time job growth and wage gains remain anemic in the region, he should look to the current experience of the Japanese. Instead of seeing an upward revision to capital spending in Q3 to a gain of .9% annualized vs the initial print of -.2%, it was instead a decline of .4% which brought the headline Q3 GDP revision to -1.9% annualized vs the estimate of down .5%. This comes after the 6.7% drop in Q2 and 5.8% lift in Q1. Also of note, from the Economic and Social Research Institute in Japan, its Economy Watchers survey was terrible. The current conditions component fell to 41.5 (with 50 being the breakeven between expansion and contraction) from 44. It's the weakest since November '12 and has thus given back all of the Abe optimism as that is about when he took office. The household component fell to just 39.5, the lowest since April right after the tax hike took hold. Employment fell below 50 to the weakest since November '12. The overall outlook fell to 44 from 46.6. All this weak data comes before the December 14th election where Abe will most likely win handily but I ask Abe and the BoJ, how is it that higher inflation is a good thing in and of itself? This all said, the stock prices of Japanese companies that are restructuring, improving ROE's and governance, and combined with the weak yen will continue to benefit.

The Shanghai index ripped another 2.8% higher to above 3000 for the first time since 2011. It's 7 day Relative Strength Index is now at 98 (can't go above 100) highlighting the intensity, violence and parabolic nature of the rally as the index continues to play a multi yr catch to other global markets. China trade data in November was softer than expected but I still don't know what to make of the export data in light of still fake invoicing that Chinese officials are trying to crack down on. Exports rose 4.7% y/o/y vs the estimate of up 8%. Imports unexpectedly fell by 6.7% vs the estimate of up 3.8% but much of that was driven by an 11% y/o/y decline in oil imports.

In Europe, German industrial production in October rose by .2% m/o/m, half of what was expected and September was revised lower. We watch to see how much the weaker euro will help the export heavy German economy in quarters to come. In terms of sentiment, the weak euro is helping investor confidence in the economic outlook as the Sentix Investor confidence figure in December rose to -2.5 vs -11.9 and it's the least negative in 4 months.

On the heels of the good payroll report on Friday, the US 2 yr note yield is up another one bp to almost 66bps, the highest since 2011. As I stated Friday, the real test of the US economy is not when rates are at zero, it's when they are no longer after 6 years of being there and without $1T annualized QE programs. The key data point of the week will be November retail sales on Thursday and we'll see to what extent the decline in oil prices and better labor market offsets other cost of living increases. Also, pointing to the two sides of the drop in oil prices, BP said over the weekend, "headcounts are starting to come down across all our activities." BP employs 20,000 people in the US and 84,000 worldwide.