• "One more thing." -- Lt. Columbo

There is $250 million to sell market on close.

Nite!

• I am going to call it a day and a week.

Thanks for reading my Diary and enjoy your evening and weekend! 

• Between stock prices and the real economy.

The yield on the 10-year note is now 2.16% -- down nine basis points since yesterday.

Dr. Fixed Income, and most commodities markets, say global economic growth is slowing (and so do the recent domestic indicators) -- while stock prices say self-sustaining growth is on the horizon.

The great disconnect between stock prices and the real economy continues.

From my perch.

• I have stopped myself out of today's ETF shorts.

I have moved to under 10% net short.

• Crude oil prices are up $2.80/ barrel on the day.

• The big ones.

My largest purchases today were in Altisource Portfolio Solutions (ASPS) and Monitise (MONIF).

• Housekeeping item.

I have covered my iShares Russell 2000 (IWM) short for a small loss.

• Nice accumulation on weakness in Oaktree Capital (OAK) over the past few weeks.

• For now, FibroGen (FGEN) was a good sale.

• The 10-year U.S. note yield breaks 2.17% to the downside.

It is down seven basis points from yesterday's high.

• I'm adding to Altisource Portfolio Solutions (ASPS).

Ocwen Financial (OCN) has had a nice move (+10%) from yesterday's low of under $20/share.

Its sister company, ASPS, continues to trail its big brother, so I am adding to ASPS.

• I don't see it as a needle mover.

I have read about a great deal of excitement regarding Apple Pay and the possibility that the application will be a "needle mover" for Apple (AAPL).

I started using Apple Pay this week and, besides the comfort of the security issue, I see little value added to the application.

I would just as well use my credit cards.

I recognize that credit card companies like the Apple Pay product as it protects them from fraud and Apple gets only 0.15% per transaction. However, in light of the possible threat of market share inroads by Apple, one would think that the credit card providers will shortly "retaliate" with a more secure product and card offerings of their own in the not so distant future.

Even if the market is left to Apple by the credit card companies, the needle will not be moved. Try multiplying 0.15% by any reasonable sales figure and you will see why.

What am I missing here?

I will stick by my short investment case that the current product upgrade cycle, while gigantic in terms of current sales, represents the last major product upgrade cycle in quite a while and that neither the watch or Apple Pay will likely be significant incremental contributors to Apple's sales and earnings.

• I am back short Apple (AAPL).

• Caterpillar (CAT) is still a dog.

• I am growing more aggressive on Altisource Portfolio Solutions (ASPS) under $48.

• I am slightly net short banks.

I am back short JPMorgan Chase (JPM) at $61.90 against my Citigroup (C) long.

I am now slightly net short banks.

• The yield on the 10-year note is back under 2.20%.

I closed out my short bond position yesterday as the yield approached my near-term objective of 2.25%.

• Between the Russell and the major indices.

Another divergence is developing as the Russell 2000 Index (IWM) turns lower and the major indices are near their day's highs.

• From The Street of Dreams.

Potash (POT) has been upgraded to Buy from Neutral, at UBS. The target price was raised to $40 from $38.

• I am picking small at Monitise (MONIF) under $0.41.

As I wrote back in October, continued tax selling has pressured the shares. And so has Visa's (V) selling program.

I expect the tax-selling pressure to abate somewhat in the next 10 days and I wouldn't be surprised if Visa has materially sold down its position.

The next visible catalyst will be the February earnings update and analyst day.

At that time we will hear some more substantive information about subscriber adds.

• From The Street of Dreams.

I am hearing that OTR GLOBAL has upgraded Potash (POT) this morning.

• I am adding to Altisource Portfolio (ASPS) and Altisource Asset (AAMC) longs.

• I am back short the russell index, taking a short rental in IWM at $118.60.

• Oil stocks will fall.

I have a real Ludacris Forecast today. Oil stocks will FALL despite a rise in the price of crude oil.

• I moved up close to 15% net short this morning.

In premarket trading I added to SPY ($206.61) and QQQ ($104.326) shorts.

• The expanding disconnect between (rising) stock prices and (a weakening in) the real economy might be borrowing against future market gains. 

Late last week, as the markets fell, I argued that a year-end rally could emerge from the oversold.

Over the last two days a more significant rally than I expected has developed, possibly borrowing (or taking away) from any more seasonal strength.

Anecdotally, some observors who hated the market at last week's depths have turned unambiguously bullish now. 

I would argue that reward vs. risk (upside vs. downside) is now turning unattractive (for traders that have a time frame of 1-2 months).

I expect 2015 do be a more challenging year than 2013-2014. Valuations have risen quite substantially over the last two years as the disconnect between stock prices and the real economy has been stretched. 

One needs only to parse through the domestic economic data that have been released this week (and have generally been ignored as a result of the spectacular climb in global equity markets).

First, the Markit flash services PMI was much weaker than consensus expectations (coming in at 53.6 compared with an estimate of 56.3 and to the prior month of 56.2). Importantly, the drop relative to consensus was driven by the weakest new orders print (53.4 from 55.6) in more than nine months. Input prices declined to the lowest level in mor ethan four years. Payrolls in December, says Markit, should be weaker than seen in recent monthly reports. And the rise in backlogs was at the slowest pace in six months. According to Markit, the manufacturing and services PMIs suggest that 4Q 2014 Real GDP could drop below 2%.

Second, the Philly Fed Index also came in below consensus expectations (at 24.5 vs. 26.0E and from 40.8 in the prior month). Most components (including employment, shipments and new orders) were lower than expected, while inventories were at the higher end of estimates.

Though consumer confidence and retail spending have been relatively strong, the above weak reports are in line with the poor PMI report (of four days ago) and present a mixed view of the trajectory of the domestic economy as we enter 2015. 

Suffice to say, recent data suggest that the non-U.S. economies are also weakening and the chaos in Russia is raising additional risks to the downside.

Let's get back to the equity markets.

This morning a Quad Witch might positively impact the opening as expirations are often skewed to the buy side.

After trading like a drunken sailor over the last 10 days, I expect to reduce my activity and, as I suggested, gradually reduce my Value at Risk in the days ahead.

TGIF ... one day more!

• Great interview coming up on "The Price of Business" with Chris Kidd!

KTEK 1110AM Houston 7-8 a.m. CST or listen online

• There were loads of important macroeconomic events in the past week.

Here, The Lindsey Group's Peter Boockvar summarizes the major ones:

Positives

1)US Initial jobless claims fell by 6k to 289k which was also 6k less than expected. The 4 week average was 299k from 300k. After a strange jump last week in Continuing Claims by 148k, it fell back by 147k in today's report.

2)Headline CPI for November fell .3% m/o/m, two tenths more than expected but the core rate was right in line up by .1%. The y/o/y gains are 1.3% and 1.7% for both. Energy prices fell 4.8% y/o/y but food prices rose by 3.2%. Services ex energy up another 2.5% y/o/y led by a 3.5% increase in rents.

3)November US industrial production was strong, rising 1.3% m/o/m, well more than the estimate of up .7% and October was revised up by two tenths. The manufacturing component led the way with a  1.1% gain vs the estimate of up .5% and was driven by a 5.1% gain in motor vehicles/parts. Utility output also helped due to the cold weather. Oil/gas well drilling fell for 2nd month. Capacity utilization is finally back above 80% for the 1st time since '08.

4)The Germany IFO business confidence figure in December was up a touch to 105.5 from 104.7 and that was right in line with expectations and led by the Outlook component. This compares with the average year to date of 108 and the IFO said this, "dropping oil prices and a falling euro exchange rate are seasonal gifts to the German economy."

5)In Germany, the ZEW investor confidence measure of the German economy rose to 34.9 from 11.5. That was well above the estimate of 20 and the best since April. The current conditions component was 10 vs 3.3 in November and that was also above the forecast of 5.0. The ZEW said "this increase is related to favorable economic conditions such as the weak euro and the low crude oil price...However, we should be aware that the current optimism is fueled by factors that might change even over the short term."

6)The EU manufacturing and services composite index rose to 51.7, a touch better than the estimate of 51.5 and up from 51.1 in November which was the slowest since July '13. Both components were higher m/o/m.

7)French business confidence holds at 94, right at the year to date average of 94. Nothing better in December but nothing worse.

8)The UK unemployment rate for the 3 months ended October held steady at 6% and wage growth continued to improve. Wages with bonus and without were both above the estimates with the former up by 1.6% y/o/y, the best since October '12 and above the November CPI print of 1%. November jobless claims fell more than expected.

9)The introduction of Black Friday in the UK the same day we have it resulted in a 1.7% m/o/m increase in November retail sales ex auto fuel which was well above the estimate of up .3%.

10)While extremely damaging to its economy, the 650 bps hike in the Russian benchmark rate to 17% helps to stem the collapse in the ruble.

Negatives

1)The Fed treats us to another game of semantics with their FOMC statement, having us try to figure out what the difference is between "considerable time" and "patient." If they are truly data dependent and are willing to look thru the temporary drop in commodity prices, then short rates should be rising now. But, we know how afraid they are to move and the very high sensitivity the entire economic and market world is to it. If the persistent delay can lead to a 700 point DJIA move in just two days, imagine what happens on the flip side when they eventually do hike.

2)The Markit US manufacturing index in December fell to 53.7 from 54.8. It matches the lowest since October '13 when 53.7 was also seen in January. The peak in 2014 was 57.9 back in August.  Markit's chief economist said "softer output and employment numbers merely represent a cooling in the pace of expansion from unusually strong rates earlier in the year but...the fourth quarter is likely to see a weakening in the pace of economic growth, which is starting to hit hiring...We expect this weakening to become evident in the official data early in the new year...Exports remain a key area of weakness, although demand from domestic customers is also growing much more slowly than earlier in the year."

3)The Markit December services PMI index fell to 53.6, the weakest since February and down from 56.2 in November, 57.1 in October and vs the peak of 2014 of 61 in June. New orders fell to a 9 month low, backlogs were at a 5 month low and employment dropped to an 8 month low. Markit said "The slowdown is linked to weaker growth of new business as customers becoming increasingly worried about the economic outlook both at home and abroad, with the prospect of higher interest rates cooling demand alongside rising global geopolitical concerns."

4)The NY manufacturing index went negative to -3.6 from +10.2 in November and well below expectations of +12.4. It's the first negative print since January '13. The 6 month outlook fell to 38.6 from 47.6, the lowest since July and capital expenditure plans fell to 15.6 from 27.7 and is back below the 6 month average of 17.5.

5)The December Philly manufacturing index fell back to 24.5, 1.5 pts below the estimate after spiking to 40.8 from 20.7 in October. New orders, backlogs, shipments and employment all fell below their 6 month averages and the overall outlook dropped to 51.9, the lowest since May from 57.7 last month.

6) US Housing starts in November totaled 1.028mm, 12k less than expected and down from 1.045mm in October (revised up). After jumping by 53k in October, single family starts fell by 39k to 677k vs 710k in the same month last year. Multi family starts totaled 351k vs 329k in October, 365k in September and 395k in November '13. Permits were 30k less than expected with last month revised up by 12k. Permits for single family homes were 639k, down 8k m/o/m and little changed with the 645k in the same month last year. Multi family permits were 396k, down 49k m/o/m and vs 400k in September.

7)The December NAHB home builder sentiment survey fell 1 pt to 57 and compares with the estimate of 59. Both the present and future outlook components fell 1 pt and prospective buyers traffic held at 45, still remaining below 50. The NAHB chief economist said the data reflect "that we are in a slow march back to normal."

8)The MBA said refi applications were flat w/o/w while purchases were down by 6.9% and falling to a 5 week low.

9)The Swiss National Bank completely rids itself of its hard money past by cutting its deposit rate to -.25% and says "the SNB is prepared to purchase foreign currency in UNLIMITED quantities..." in order to maintain the 1.20 level vs the euro. The big caps are mine.

10)Housing bubble 2.0 in the UK starts to deflate. The ONS house price index rose 10.4% y/o/y in October vs the estimate of up 11.4% and it's the slowest pace of gain since June. Prices in London were still up 17.2% y/o/y but that is the slowest rate of gain since March.

11)Home prices in China continued to weaken as they fell .6% m/o/m in November after dropping .8% in October. On a y/o/y basis prices for new apartments fell in 68 of 70 cities surveyed vs 67 in October and 1 in June. A similar trend was seen for existing apartments.

12)China's HSBC manufacturing PMI for December fell to 49.5 from 50. It's below the estimate of 49.8 and the weakest since May.

13)Japanese exports in November rose by 4.9% y/o/y but that was below the estimate of up 7% and again it was all yen weakness as volume growth fell 1.7% and exports were down to all 4 major regions, the US, EU, Asia and China. Helped only in part to lower energy prices, imports fell 1.7% vs the estimate of up 1.6%.

• Marks' latest missive.

Howard Marks' latest missive, "The Lesson of Oil," is a must read from one of my favorite investors and authors. (Howard gives me a nice shout out in this topical commentary this month.) 

Here is Howard's highly-recommended book, "The Most Significant Thing," which I have previously reviewed in my Diary.