Wall Street Journal

Amid the sound and fury of yesterday's IRS hearing were a few small tidbits which raise significant questions about who knew what and when within the Obama administration. While getting the answer (the real honest truth) is highly unlikely, as the Wall Street Journal notes, the IRS's watchdog told top Treasury officials around June 2012 (when Republican lawmakers were complaining publicly about alleged IRS targeting of tea-party groups) he was investigating allegations the tax agency had targeted conservative groups, for the first time indicating that Obama administration officials were aware of the explosive matter in the midst of the president's re-election campaign. The revelation nonetheless raised a fresh set of questions about who was aware of the problem within the Obama administration. However, the hearing left numerous other fundamental questions unanswered, including who ordered the targeting and why it continued so long, pointing to a protracted investigation ahead as Rep. Paul Ryan exclaimed, "how can we not conclude that you misled this committee?" As Doug Ross' full timeline below suggests, this is fascism on the part of the IRS and White House...

70% of graduates had at least some debt according to the latest poll from Fidelity Investments but as the Wall Street Journal reports the average student-loan debt for a borrower who received a bachelor's degree in 2013 is $30,000 - an all-time record. With $986 billion of outstanding student loan debt (up 50% from Q1 2009) and unemployment rates running at or near all-time highs for the 16-24 year old cohort in this nation, it is little surprise that delinquencies are surging. The unemployment rate among graduates is 7.1% (which is considerably worse than it looks given that many are stuck in low-paid jobs) but it is those who don't complete college that face the greatest burden - the median annual income of a non-completer was $25,000 (compared to $33,900 for a degree holder), less than the average student loan debt. As the WSJ notes though, the 2013 class is unlikely to hold the 'most indebted class ever' title for long as 2014 enrollments and tuition costs look set to continue the 20 year trend...

Read 'Em and Weep

On one hand we have bad Hilsenrath sending mixed messages saying the Fed may taper sooner (with good Hilsenrath chiming in days later, adding it may be later after all), depending on whether HY bonds hit 4% YTM by EOD or mid next week at the latest. On the other, even resolute Fed doves are whispering that a tapering may occur as soon the summer, so in a few months, and halt QE by year end. Bottom line - confusion. So who better to arbitrate than the firm that runs it all, Goldman Sachs, and its chief economist Jan Hatzius, who issues the following Q&A on "tapering." His view: "not yet." Then again, Goldman is the consummate (ab)user of dodecatuple reverse psychology, so if Goldman says "all clear" the natural response should be just as clear.

For the third year in a row (since the crisis) average pay at private companies in China surge by greater than double digits - far outstripping GDP growth. 2012 saw a 17.1% nominal rise in average wages for private companies to Yuan 28,752 per annum (still 9% after inflation) but dispersion remains high with "significant gap among regions, industries and specific jobs in some sectors." The continued rise in wages, as the Wall Street Journal notes, is likely to put further pressure on an already pinched manufacturing and construction sector (which accounts for over 41% of all Chinese employment) especially in low-end and labor-intensive positions. With slowing growth (demand) and rising costs (labor, energy), the profitability of Chinese companies is increasingly tenuous and only hindered by potential actions of the central bank.

• Mine union threatens to bring South Africa to 'standstill' (Reuters)
• Russia Raises Stakes in Syria (WSJ) - as reported here yesterday 
• Japan buys into US shale gas boom (FT)
• Bill Gates Retakes World’s Richest Title From Carlos Slim (BBG) - so he can afford a Tesla now?
• China Wages Rose Sharply in 2012 (WSJ)
• Regulators Target Exchanges As They Ready Record Fine (WSJ)
• Citi Takes Some Traders Off Bloomberg Chat Tool (WSJ)
• After Google, Amazon to be grilled on UK tax presence (Reuters)
• Apple CEO Cook to Propose Tax Reform for Offshore Cash (BBG)
• French, German politicians to pressure Google on tax (Reuters)
• Gold Bears Revived as Rout Resumes After Coin Rush (BBG)
• A stretched Samsung chases rival Apple's suppliers (Reuters)

• As scandals mount, White House springs into damage control (Reuters)
• Glencore Xstrata chairman ousted in surprise coup (Reuters), former BP CEO Tony Hayward appointed as interim chairman (WSJ)
• JPMorgan Chase asks Bloomberg for data records (Telegraph)
• Platts Retains Energy Trader Confidence Amid Price-Fix Probe (BBG)
• Syrian Internet service comes back online (PCWorld)
• Japan Q1 growth hits 3.5% on Abe impact although fall in business investment clouds optimism for recovery (FT)
• Soros Joins Gold-Stake Cuts Before Bear Market Drop (BBG)
• Factory Ceiling Collapses in Cambodia (WSJ)
• Sony’s $100 Billion Lost Decade Supports Loeb Breakup (BBG)
• Snags await favourite for Federal Reserve job (FT)
• James Bond’s Pinewood Turned Down on $300 Million Plan (BBG)

• Once a beacon, Obama under fire over civil liberties (Reuters)
• Eurozone in longest recession since birth of currency bloc (FT)
• EU Oil Manipulation Probe Shines Light on Platts Pricing Window (BBG)
• BMWs Cheaper Than Hyundais in Korea as Tariffs Crumble (BBG)
• Stock Boom Isn't a Bubble, Says BOJ's Kuroda (WSJ)
• Struggling France strives to shake off economic gloom (FT)
• JPMorgan investors take heat off Dimon (FT)
• Private-Equity Firms Build Instead of Buy (WSJ)
• Bloomberg Saga Highlights Clash Between Two Worlds (WSJ)
• Bank documents portray Cyprus as Russia's favorite haven (Reuters)
• HSBC Signals 14,000 Jobs Cuts in $3 Billion Savings Plan (BBG)
• Argentines Hold More Than $50 Billion in U.S. Currency (BBG)

Why There Is So Much Pro-War Reporting

• Controversies give Obama new governing headaches (Reuters)
• About that Capex... BHP to Rein In Investment, Chief Says (WSJ), considers returning cash to shareholders (FT)
• Bloomberg users’ messages leaked online (FT)
• Japanese mayor sparks China outrage with sex-slave remarks (Reuters)
• Economists Cut China Forecasts (WSJ)
• U.S. oil boom leaves OPEC sidelined from demand growth (Reuters)
• U.S. banks push back on change in loan loss accounting (Reuters)
• Fed’s Plosser Says Slowing Inflation No Concern for Policy (BBG)
• Watchdog probes 1m US swap contracts (FT)
• Used Gold Supply Heads for ’08 Low as Sellers Balk (BBG)
• Ex-BlackRock Manager Said to Be Arrested in U.K. Probe (BBG)

Despite the aura of control, Fed officials (and casual observers) may sense things spinning out of control. Of course, hyper-fragility is exactly the effect that all the Fed’s own actions would predictably lead to. When you divorce truth from reality, strange things are bound to happen. There is one thing that we know for sure in this strange period when bankers have tried to manage reality in the absence of truth: that advanced industrial-technological economies designed to run on $20-a-barrel oil can’t run on $100-a-barrel oil, and that is why the US economy was subject to financialization in the first place - to offset declining productive activity by an attempt to get something for nothing. The world is about to find out that you really can’t get something for nothing. It will be a harsh lesson.

The Fed knows this and is now trying to prepare the market for withdrawal. But the market is on total life support from the Fed. Take away the Fed punchbowl and the party stops.

• Hilsenrath: A Top Contender at the Fed Faces Test Over Easy Money (WSJ)
• Yen drops further as G7 avoids criticizing Japan (Reuters)
• Markets missed Flaherty’s clues on next Bank of Canada chief (G&M)
• Republicans turn screws over Tea Party tax probes (FT)
• Dual-track Libor replacement lined up (FT)
• Risks to China recovery seen as factory output underwhelms (Reuters)
• Barack Obama’s goal of universal healthcare could be set back significantly by Texas Governor Rick Perry (FT)
• Gold Bears Pull $20.8 Billion as BlackRock Says Buy (BBG)
• Mexico sets shelters as volcano shakes, spews ash (AP)
• Europe Eases Corporate Tax Dodge as Worker Burdens Rise (BBG)
• IPOs Set to Raise Most Cash Since Crisis (WSJ)
• Melting Ice Opens Fight Over Sea Routes for Arctic Debate (BBG)
• Top hedge funds bet on Greek banks (FT)
• Icahn Asks Investors to Make Big Bet on a Debt-Laden Dell (BBG)

In a weekend dominated by discussion of the "Taper Tantrum", i.e., interpretations of what Hilsenrath "said" after the close on Friday, what the Fed wanted him to say, what the market's response to what he said or did not say would be, and what the next steps may be, we present this convenient annotation of Hilsenrath's complete recital courtesy of Mike O'Rourke from Jones Trading.

The words "Shit Heel" come to mind.