* A win for the bears, today

* And continued losses for Financial TV

Though well off of the session lows there was less than meets the eye to the market today:

* Breadth was consistently weak throughout the trading session (14 advancers for every 17 decliners).

* Ss over Ns.

* Growth got schmeissed -- Amazon (AMZN) (-$47), Tesla (TSLA) (-$32) and Google (GOOGL) (-$23) in particular.

* The speculative gewgaws (especially of a crypto kind) were very weak.

* Favored shorts ( (AAPL) (chart rolling over?), (ARKK) (DAL) ,etc.) pummelled.

* General Motors (GM) (on my Best Ideas List) was an upside standout.

* Bonds weak.

* Gold is breaking down (see Dennis Gartman's comments this morning).

Hubris Squared!

Relatedly, the only one making money seems to be the panelists on Fin TV who never ever seem to make a bad trade or investment. (One such character said he was buying AMC  (AMC) calls into the big gain yesterday and said today he was selling those calls (with no words of losses). Some even NOW make trades during the shows -- gloating about their wins as the reflection of their hubris makes them harder and harder to watch.

Speaking of BS -- the gambling over the last two weeks in AMC, GameStop  (GME) , Bed Bath & Beyond (BBY) and BlackBerry (BB) , make me even more negative about the broader markets (I do not view the notion that the gambling will be compartmentalized -- the markets are not likely going to be unscathed). And the fact that numerous members of the financial media and some otherwise thoughtful practitioners -- perhaps fearful or reprisal from the Redditt/WallStreetBets crowd -- embrace, encourage and rationalize that gambling community's nonsense speaks volumes about where we are likely to be in the market cycle (read: very late in the bull market). I am glad I am no longer tweeting, as I would have called them out, again. Instead, I respectfully email my objections directly -- not afraid to speak my mind.

I actually should be thankful, as today was an example how their euphoria creates sizeable trading opportunities.

There will likely be many more todays ahead.

For that reason I wrote my opening missive, "But First, Are You Experienced?"

Thanks for reading my Diary today.

Enjoy the evening.

Be safe.

Personally I believe it "is over" for Tesla's (TSLA) shares:

sbickley

EXCLUSIVE

Tesla's China Orders Halved in May, Internal Data Show, As Crisis Deepens
By Juro Osawa
Tesla vehicle orders in China fell by nearly half in May compared to April, according to internal data, as the electric car pioneer grappled with public outcry and government criticism over its handling of consumer complaints. Taken together, the developments put in doubt Tesla's vaunted position and success in the world's biggest electric vehicle market.
The company's monthly net orders in China dropped to about 9,800 in May from more than 18,000 in April, according to a person with knowledge of the data. The sharp drop reflected a drastic shift in Chinese consumers' appetite for Tesla, whose founder Elon Musk has celebrity status there. Orders spiked in January after the release of the Model Y SUV, and then slowly eased off before cratering last month. In March, Tesla had 21,000 net orders. Even on a week-over-week basis, orders so far haven't shown any signs of recovery, this person said.

The morning was exciting.

The afternoon is boring.

* Your father's stock market will never return. 

* DeFi is fueling the crypto boom. 

* How to fix America. 

* Near record prices paid (25 year period)

* Record ISM  (25 year period)

As expected, initial jobless claims fell to 385k from 405k last week. It's the first print with a three handle since early last year and continues to reflect the slowing pace of firing's, after all with more than 8 million job openings. The four week average fell to 428k from 459k. Those filing PUA declined to just 76k from 94k. 

The problem though was the jump in continuing claims by 169k to 3.77 million. That is the most since mid March in the midst of a record high amount of job openings. We know all the reasons for this so I won't harp on it again but there clearly remains a supply side labor issue. An offset, but delayed by two weeks, saw continuing PUA fall by 147k. On the other hand, those still receiving emergency benefits rose by 102k. 

The pace of firing's not surprisingly continues to fall while those still receiving benefits remains unfortunately still high with so many job openings out there.

ADP said a net 978k private sector jobs were added in May, well more than the estimate of 650k but partly offset by an 88k downward revision to April to 654k. The job distribution by business size was well balanced. 

Construction jobs grew by 65k after a 37k person increase in April. Manufacturing added 52k vs. 45k. The service side increase of 850k was driven by leisure and hospitality which added 440k job, the most since the initial recovery last May and compares with 251k in April and 200k in March. 

ADP said: "While goods producers grew at a steady pace, it is service providers that accounted for the lion's share of the gains, far outpacing the monthly average in the last six months. Companies of all sizes experienced an uptick in job growth, reflecting the improving nature of the pandemic and economy."

This job increase was great to see but one has to wonder how much better it could have been if there was more worker supply to fill many of these open jobs. 

The ISM services index rose to 64 from 62.7 and that was just above the estimate of 63.2 and is at a record high. New orders, backlogs and inventories were all up. Export orders grew but imports fell. Notwithstanding the ADP report and ahead of tomorrow's BLS figure, the employment component fell 3.5 pts to 55.3, a three month low. On the inflation and supply front, Supplier Deliveries rose another 4.3 pts to 70.4, the second highest read since 1997 (it printed 78.3 last April). In turn, Prices Paid was up 3.8 pts to 80.6, the highest since September 2005 when it printed 83.5 with all 18 industries seeing price increases. 

All 18 industries surveyed saw growth in the month. And ISM said this: "The rate of expansion is very strong, as businesses have reopened and production capacity has increased. However, some capacity constraints, material shortages, weather related delays, and challenges in logistics and employment resources continue."

I'll leave the bottom line to the comments below. 

Here are some key quotes from services businesses reflecting better business but with the challenges of higher costs and finding workers: 

"Stimulus money, increased vaccinations, increased dining capacity and pent-up demand are driving a fast recovery for dine-in restaurants - and all consumer segments, it seems - resulting in labor shortages and supply chain gaps." [Accommodation & Food Services]

"Container delays are impacting our supply chain in a significant way. Delays at the Port of Montreal and West Coast ports have impacted our ability to provide products in growing season. Truck availability has generally been tighter than normal. We've seen a real impact in the southeastern market." [Agriculture, Forestry, Fishing & Hunting]

"Business continues to improve, and we have worked through many of the supply chain disruptions at this time. We have begun to return to work at our corporate office on a limited basis." [Arts, Entertainment & Recreation]

"We are still busy and adding employees. One of the biggest concerns now is shortages of crucial material and equipment. Metal coils for production are especially scarce. Equipment and material suppliers have been raising prices since the first of the year. We hear of a new increase almost daily." [Construction]

"We anticipated the reopening reasonably well but were caught off guard with respect to some materials. Steel and copper went higher than anticipated, and shortages are having an impact." [Finance & Insurance]

"As the vaccination rate continues to climb and the coronavirus (COVID-19) infection rate continues to plummet, business conditions are steadily improving: Strong revenue performance is returning, and outlooks are improving. Some supply categories remain constrained (nitrile gloves, sterile wrap and the like), yet are somewhat manageable, limiting the impact to daily operations." [Health Care & Social Assistance]

"(We are) seeing cost increases and long lead times with steel and steel containers. Worker shortages, temp labor and the like." [Management of Companies & Support Services]

"Transportation, labor, steel and general commodities are all increasing (in price) based upon general inflation and the rising price of oil." [Mining]

"Small businesses in the area are reporting stimulus checks and extension of unemployment are hampering their ability to hire workers. Seasonal labor and H-2B (visa) workers are in very short supply, causing an uptick in cost per hour. Some employers are reporting they are offering cash incentives of (US)$50 if you show up for an interview." [Professional, Scientific & Technical Services]

"Business is very strong, and customer orders continue to increase at a rapid pace. Material shortages, increased prices and qualified personnel shortages are becoming a much larger concern." [Real Estate, Rental & Leasing]

"Very concerned about the rapid and continuing price escalations for any products with copper, steel, and polyvinyl chloride (PVC). Production issues and lead-time extensions are not improving." [Retail Trade]

"Business is doing good, exceeding sales target, but we have challenging issues with (1) increases in raw-materials costs and freight rates, (2) huge freight delays from overseas and (3) continued U.S. port delays. The (COVID-19 surges) in India and Taiwan are also causing delays on product availability/shipments." [Wholesale Trade]

I just covered my (AMC) short at $39 and I covered my July $65 calls.

I plan to reshort if there is strength.

My pal Peter asks, "What does a yellow light mean?"

Rather than have them mature, I'm glad to see the Federal Reserve decide to sell the corporate bonds they own directly and indirectly via ETFs that were purchased last March. I don't mean to be a Monday morning quarterback here but I think notwithstanding the clear stress everywhere last year, there was not going to be a problem finding buyers for risk free US Treasuries and the bonds of Apple, Berkshire Hathaway, Amazon and McDonald's to name a few. Yes, markets dislocate but the beauty of markets is that they always readjust. There was then and continue to be trillions of dollars of private sector money, particularly in the distressed community, that love opportunities that were given last year. Instead, the Fed crossed a line buying corporate bonds because of their lack of faith in markets and now they can NEVER walk this back. I argue that the problem of market functioning last March was a consequence of the Volcker Rule and the lack of inventory and market making ability by the big banks. That problem thus still exists and while this program is now ending, it is never really dead. "You can check out any time you like, but you can never leave."

According to AAII, the Bears have left the building. Bears fell to 19.8, the lowest since the 1st week in January, a few weeks before the vol trade blew up. That is down from 26.4 last week. Bulls jumped by 7.7 pts to 44.1, the most in 6 weeks. Bottom line, from a contrarian standpoint, this is now a yellow light for the short term. What would have made it red was if the Bull side was above 50. Here's a classic TV scene.

AAII BEARS

AAII BULLS

The Caixin China private sector focused services PMI for May fell to 55.1 from 56.3. The estimate was 56.2. Caixin said "After expanding in April, overseas demand shrank as the measure for new export business slipped into contractionary territory. Surveyed enterprises blamed the dip on the adverse effects of the pandemic overseas." With respect to inflation and my continued point that this is a global phenomenon, "Inflationary pressure was enormous as price gauges continued to rise. both the measures for input costs and the prices service providers charged rose to their highest points of the year. Surveyed enterprises attributed the rise in input costs to growth in raw material, energy, labor and transportation costs. The increased costs and strong demand pushed up the prices service companies charged." The underline is mine. As for the overall outlook from here, "The sector remained optimistic."

Elsewhere, the Singapore PMI rose to 54.4 from 51.8 "despite the reimposition of Phase 2 (heightened alert) restrictions." But business confidence "weakened notably in May as firms grew less optimistic following the stricter rules reintroduced amid the spread of a new COVID variant in Singapore." On inflation, "Overall input costs continued to increase in May, and at the fastest pace since June 2018. The amalgamation of rising purchased goods prices, wage costs and other expenses led Singaporean private sector firms to face higher cost burdens, which continued to be passed on to clients." The underline is again mine.

Hong Kong's PMI rose 2.2 pts m/o/m to 52.5 as they relaxed COVID restrictions at the end of April. "Notably, inflows of overseas orders improved in May including new business from Mainland China after a 3 yr hiatus, which were positive signs. That said, higher cost inflation arrived hand in hand with the expansion of economic activities."

India's services PMI plunged to 46.4 from 54 as "The intensification of the COVID crisis and associated restrictions suppressed domestic and international demand for Indian services."

Notwithstanding the fits and starts reopenings, I remain of the belief that the equity returns of note to be had in the coming decade will be in Asia.

The Eurozone services PMI was left almost unrevised at 55.2 (1st print was 55.1) while the UK services PMI was revised up by 1.1 pts to 62.9 from 61 in April. For both, the reopening is boosting services but along with higher inflationary pressures.

Twitter (TWTR) was placed on my Best Ideas List (long) in March, 2017 at $15.75 - it is now trading above $58. 

Tweet, tweet(!): 

Thomas C

Twitter launching 'Blue' subscription service at $2.99/month

Twitter (TWTR +0.3%) is unveiling a long-awaited subscription service: "Twitter Blue."

The service launches now in Canada and Australia, and will come to the U.S. later this year at $2.99/month.

The Canadian version launches at C$3.49/month, and Australia's at A$4.49/month.

That will come with tools to undo and organize posts, the company says. "Now you can review and revise your Tweet before it's visible to your followers on Twitter!"

Subscribers can also organize bookmarked tweets into folders, and turn long threads into easy-to-read longform text, it says.

Yesterday, the company said it was moving forward on a pilot project called Birdwatch to fact-check tweets via crowd-sourced action.

"JUST LIKE STOCKS, GOLD IS RALLYING ON LIGHT VOLUME AND WEAKENS OF HIGHER VOLUME: Emerson was right when he said that a foolish consistency is the hobgoblin on a little mind, but I hold to the thesis that a rational consistency is reasonable and wise and the fact that gold is rising as the volume wanes has my very real, considered interest."

Break in!

(AMC) is trading -$32/share from this morning's high of about $75. 

The many "talking heads" who openly praised the gambling in meme stocks by the Redditt and WallStreetBets community will rue the day they supported this nonsense. 

Or not - as maybe the don't care and are just looking for clicks. 

The averages cooperated with the slide rule yesterday and, traded completely within the range projected, which basically was the range of the previous day's trading.

It was interesting. They challenged the resistance a bit but not heavily, but they did get much, much closer to the support line, which indicates there was a mild, weak undertone to the market. In fact, late in the day, it looked like they were going to break slightly below the support levels, but a little bit of a last-minute rescue rally tended to bail them out.

There were several stories in the market yesterday. The one that caught headlines obviously was chat stocks with AMC virtually doubling in massive volume. The chatrooms are really getting heavy. It looks like they are back checking into the heavily shorted stocks because, aside from AMC, which was the center stage star, we had a lot of other stocks that Reddit and other chatrooms mentioned and, the financial media pundits continue to claim this is a retail revolution. (I do concede there is heavy retail interest much more this time than the last time when we took GameStop out for a walk.) There is some strong hint that hedge funds may be involved and kind of running a short squeeze that they are steaming up on those very same chatroom.

I think the real story of the day, however, is the action of the ten-year. We have written time and again in recent days that it doesn't have to make sweeping changes. It is very much like a thermometer checking your child's fever and, as we said in the morning's comments, the two important things about it will be which direction the yield is moving in and, where it is relative to key numbers like the 1.65%, we spoke of. They managed to get up to 1.62% but the economic data and the Tan Book, which was a very bland Tan Book this time, caused some buying in the ten-year, which, of course, took the yield down 1 or 2 basis points.

That was enough. The direction was evident and, I believe that the influence of the ten-year yield will continue to mesmerize trading to a strong degree.

For Thursday's market, the slide rule has advocated and suggested we go back to today's range. So, that will make resistance in the Dow 34706; S&P 4217 and Nasdaq 13775, while support will be Dow 34545; S&P 4193 and Nasdaq 13685. The lines are set. I think we will watch carefully to see if we begin to move out of this rectangle, which will be very important.

This burst of chatroom trading as I have said again and again is corrupting, if you would, a lot of technical indicators and, we will get to that. A lot of commentators failed to note is that if you buy a million shares of X and it goes up 100 percent and, there is a 100 million share outstanding, you create a ton of additional lendable value. So, in some ways, these chatroom rushes are adding, along with the Fed, to the amount of liquidity out there. Maybe we should do a study some day on how much impact it may or may not have.

Anyway, back to the market.

Overnight, there were mixed signals in the foreign markets but this morning, there is pressure on the U.S. equity futures and, that may suggest to us we may need to reassess the support levels because as dawn hits Manhattan, it looks like they would be broken upon the open.

We seem to be having some minor equipment difficulties so, we will have to abbreviate this morning's note (that sigh of relief was rather audible, folks).

The calendar is notable but not overwhelming. Obviously, jobless claims this morning, productive data and PMI and ISM all will be noted. We will have some Fedspeak a little bit later in the day with four or five speakers.

The slide rule suggests alternative supports are Dow 34340; S&P 4160 and Nasdaq 13505. We know we will all be watching the yield on the ten-year carefully. It still is a major influence.

Be wary and stay safe.

Arthur

"Trumpets and violins I can hear in the distance
I think they're calling our names
Maybe now you can't hear them, but you will
If you just take hold of my hand

Ah! But are you experienced?
Have you ever been experienced?

- Jimi Hendrix, Are Your Experienced?

I am unequivocal - as written on Tuesday I remain manifestly bearish on both stocks (value, growth and meme), bonds, Bitcoin and NFTs:

* Stocks and bonds are richly priced. It makes no sense to say, as many do, that equities are inexpensive against an overpriced asset class (fixed income). Most traditional metrics indicate that stocks are at least in the 95th percentile - a non trivial amount of indicators of valuation are in the 99th percentile.

* Cryptocurrencies are vulnerable. As I have written:

"The problem with fiat currencies, like the U.S. dollar, is that monetary authorities can create an unlimited amount of new dollars or other currencies - making it look, to some, like a Ponzi scheme.

The problem with cryptocurrencies, like Bitcoin and Ethereum, is that anyone can make an unlimited number of new cryptocurrencies- making it, too, look to some like a Ponzi scheme. Ponzi schemes and scams ae only visible to those that have no sense of history or want to believe in magic.

I believe cryptocurrency is like Tinkerbell's light - its power source is based solidly on enough children believing in it."

* NFTs - neither an art form nor a platform - exemplify the absurdity generated, in part, by liquidity and fairy dust (adopted by lemmings running towards the cliff).

* The popular and "cool guys," value stocks, are now extended. That (arguably) includes banks, industrials and "opening" stocks.

* The outlook for growth stocks will depend, importantly, on the future level of inflation and on what level GDP will be sustainable after the initial burst of growth. That debate's results will largely depend on whether the trajectory of the current abnormal GDP growth can moderate to a healthy pace in late 2021/2022 - or will the enormous levels of debt (and its rising servicing load) work (and weigh) as a governer to aggregate growth. (Here is a good synopsis of the debate, excerpted from John Mauldin's Thoughts From The Frontline)

* The return of Meme stocks ( (BYND)  , (GME)  , (AMC)  ) will likely be short-lived. (I added Beyond Meat and AMC to my Best Ideas short list late last week -- On Friday, GameStop's shares fell by -$46/share and AMC's shares declined by -$13/share from their intraday highs.) I will go one step further, it is my view, that those who are endorsing some of these worthless gewgaws will be made to look foolish and undisciplined in the fullness of time.

Here is the tape of my Bloomberg interview.  

Here is a summary of my thoughts that I prepared for that interview.

But first, are you experienced?

My friends at Miller Tabak have a non consensus view here:

Recent High Inflation Readings May Boost, Not Hurt, Stocks

Although last week's PCE inflation data generated headlines about inflation's return, the actual data are likely to reassure the FOMC that the high readings are temporary. There was never a chance that the PCE data would come in near 2%. The 8.3% m/m core-PCE reading does, however, suggest that the earlier 10.9% CPI figure was at least a bit of an outlier. More importantly, trimmed-mean PCE inflation, which removes the smallest and largest price changes, was much lower than expected at 2.4%. The gaps between core inflation and trimmed-mean inflation for both PCE and CPI are at record highs.

The U.S. is not yet experiencing a broad-based surge in inflation. Rather, it is facing isolated price spikes in a small number of sectors. This is clearly due to the disruptions resulting from the pandemic and re-opening and is connected to widely discussed supply chain issues. These types of price distortions can be very costly. The evidence suggests, however, that households rather than firms will bear most of the burden. We looked back, since 2003, at other instances (shown in Figure 1) where inflation is widely dispersed. A few results stand out. First, there is no evidence that this type of inflation data pushes the Fed into a more hawkish posture, or that it increases long-term (10-year) yields. Second, this type of data is generally good for stocks. An event the size of the current one tends to lead to excess stock returns around 2%.

A positive impact on stocks may seem counter-intuitive. And we are not saying that a sustained, broad-based inflation (which would lead to higher interest rates) would be good for stocks. But the type of inflation that we are seeing has allowed, in the words of this week's Beige Book, for affected firms to "pass through much of the cost increases to their customers." Furthermore, as expected, wages are not keeping up, which suggests that the response to the current inflation data is similar as to past instances of widely dispersed inflation. We expect firms in affected sectors to benefit from higher prices while those in other sector are largely unharmed due to slower wage growth and their ability to pass along higher costs.

Break in!

Delta Air Lines (DAL) gives its second half guidance - and it is a bit disappointing.

I would be short DAL - which is on my Best Ideas List (short).

Many smaller hedge funds are doing the manipulation of the meme stocks (like Blackberry (BB) , Bed Bath & Beyond (BBBY) , (GME) and (AMC) ) along with the retail crowd.

AMC traded about 700 million shares yesterday, that's nearly $40 billion of volume (measured by market cap). And that does not include the weekly options activity - which was unprecedented in AMC.

It's not stimmie checks that WallStreetBets is playing with as the volume is too large.

Its the smaller hedge funds in addition to retail gamblers buying stock and mainly weekly options.

WallStreetBets and Redditt do not have this kind of fire power.

As to what stops the gambling (it is not speculation) - no one knows for certain.

But we do know for certain... it ends badly.

* To the moon!

Here is a sign I saw in the front window of a Bridgehampton, Long Island restaurant last night:

AMC (AMC) has announced that it has filed to sell 11 million shares -- I have shorted AMC in premarket trading (at about $69/share on the announcement).

This couples with my shorting of AMC calls late yesterday. 

At least one serious FIN TV commentator issues some concerns...

Some potential short ideas(?):

Danielle DiMartino talks my book about affordability:

• Since last March's corporate bond market bailout, MBS purchases by the Fed have grown 62% to a level of $2.244 trillion; the Fed has stated that it will continue its $40 billion in monthly MBS purchases until further notice, despite the overheating housing market
• The Mortgage Bankers Association's average home purchase loan size hit $408,300 in its latest print, 21.5% above March 2020's $336,000; the MBA's Application Purchase Index has also fallen from its mid-January peak, with two-year performance nearly unchanged
• Rising home prices are shutting out more than lower-income and millennial buyers, all income brackets have reached a pain point; per UMich, home buying conditions for middle and upper-income households turned negative for the first time this month since the 1980s

"Boy bands" may not have entered the vernacular until decades after the Beatles invaded America. But they walked the walk and sang the songs the same as any duck has that's followed and that's just what they were. That said, the 1990s was the golden era for boy bands. We were, ahem, graced, with the Backstreet Boys, 98 Degrees and Hanson. Alas, the mania du jour brought NSYNC to mind, the five-member band of Justin Timberlake, JC Chasez, Chris Kirkpatrick, Joey Fatone and Lance Bass that burst out of Orlando, Florida in 1995. Over a seven-year run, NSYNC sold over 70 million records. The eight Grammy Award nominations are but one testament to their astounding success. To that you can add performances at the World Series, the Super Bowl and the Olympics. And they recorded with Sir Elton John, Stevie Wonder, Michael Jackson, Celine Dion, Aerosmith, Mary J. Blige, Gloria Estefan and the country music band Alabama.

Today, we are channeling NSYNC's 2000 single "Bye Bye Bye" which peaked at No. 4 Billboard's Hot 100. The hit scored Best Pop Video, Best Choreography and Viewers Choice at the 2000 MTV Video Music Awards. Through April 2021, it has over 258 million views on YouTube.

Unless you've been hiding under a rock, you also know that the Fed's quantitative easing (QE) program and the run-up in home prices have also been in sync. The March 23, 2020 bailout of the corporate bond market was ostentatiously accompanied by unlimited QE including direct support for the housing market via mortgage-backed securities (MBS) purchases. Through the week ended May 26, MBS purchases have ballooned by a cumulative 62%, or $860 billion, to a level of $2.244 trillion (blue line). While we see MBS as politically palatable for a taper, as of today's writing, the Fed will continue to buy buy buy $40 billion in MBS per month to go along with its $80 billion Treasury purchases "until substantial further progress has been made toward the Committee's maximum employment and price stability goals."

Yesterday's Mortgage Bankers Association (MBA) Weekly Applications Survey updated the progress on home price appreciation since COVID-19 hit last year. We use the MBA's average home purchase loan size as a real time proxy for overall housing price trends. It clocked in at $408,300 in the latest week, well north of the $336,000 in the March 20, 2020 week - 21.5% to be exact - just prior to the Fed opening the floodgates.

To dispense with criticism of comparing anything to the height of the Coronacrisis, we drew dashed lines that illustrate two-year comparisons in both of today's charts. That takes us back to a time when the Fed was not buy buy buying MBS, it was letting its holdings roll off. With this as the 2019 backdrop, home prices, again measured by average loan size, had begun to crest and moderate.

Director of the American Enterprise Institute's (AEI) Housing Center and QI friend Ed Pinto had a few choice words for the Fed in commentary this week. In his mind, the Fed's easy credit policies are creating a growing housing affordability crisis for lower income families, who are increasingly crowded out of the home buying market and putting homeownership out of reach for millions.

Pinto added that with easy money remaining in place for the foreseeable future, the Fed's policies are having a disparate impact which will lead to a slowing of gains in racial integration, a widening of wealth inequality, a further increase in socio-economic stratification, and a reduction in home ownership rates. His punchline: "Quite an accomplishment for an agency with a stated goal of 'stable prices for the American people.'"

This is just another scathing criticism of Fed policy overstaying its welcome. We would add that the affordability situation isn't just at the lowest rungs of the income distribution, it's made its way up the ladder. The University of Michigan's end-of-month final consumer surveys always include readings from different demographic cohorts. Home buying conditions for middle-income and upper-income households turned negative - more saying bad time than good time to buy - for the first time since Ronald Reagan was in the Oval Office.

History has a place in this discussion too. Pinto aptly quoted former Fed Chair Marriner Eccles, who served under FDR. Eccles' advice to Congress back in the day:

"If the easy credit situation were producing a substantial additional volume of housing at supportable values in the long run, it would be justified, but because of the limitations of labor and materials, it produces instead a dangerously inflated market which cannot be sustained for both new and old houses. I believe that by curtailment of credit for housing in closer relationship to the supply of labor and materials, the price trend would be reversed and a market for houses assured over a long period of years. Good low-cost housing cannot be built with high-cost materials and high-cost labor. Neither Government nor private industry can produce this miracle."

Today's purple line leaves little gray area - demand is being curtailed in real time. The MBA mortgage application purchase index has broken downside support off its mid-January peak. More notably, the two-year performance is nearly unchanged (dashed purple line).

Bye bye buy. It doesn't take a five-part harmony from Justin Timberlake and the boys to sing the tune that the U.S. housing market has overheated. The Fed has overdone it.