While most of the other Mega-Cap tech giants were hit hard this week, META stock was largely unaffected by DeepSeek’s announcement, in part because it offered some validation for the company’s open-source AI strategy.

In fact the shares reached an all-time high intraday yesterday ahead of tonight’s earnings and right before the earnings were released (later than expected), The Wall Street Journal reports that Meta has settled its lawsuit with President Trump for $25 million.

President Trump has signed settlement papers that are expected to require Meta Platforms to pay roughly $25 million to resolve a 2021 lawsuit Trump brought after the company suspended his accounts following the attacks on the U.S. Capitol that year, according to people familiar with the agreement.

Of that, $22 million will go toward a fund for Trump’s presidential library, with the rest going to legal fees and the other plaintiffs who signed onto the case. Meta won’t admit wrongdoing, the people said. Trump signed the settlement agreement Wednesday in the Oval Office.

The latest Meta (or Facebook) has ever posted earnings before today was 1616ET.

Today’s print hit at 1640ET and it was a doozy with top- and bottom-line beats:

• *META 4Q REV. $48.39B, EST. $46.98B

• *META 4Q EPS $8.02, EST. $6.78

Daily active people, which you will remember includes the number of users across Facebook, Instagram, Messenger and WhatsApp, was 3.35 billion on average in December. The estimate was 3.28 billion… so another decent beat there…

BUT… weak guidance and refusal to provide full year 2025 revenue outlook:

• *META SEES 1Q REV. $39.5B TO $41.8B, EST. $41.67B

On the positive side, as had already been previewed, Meta raised its CapEx outlook:

• *META SEES 2025 CAPEX $60B TO $65B, EST. $52.41B

But sees total expenses considerably higher than expected…

• *META SEES 2025 TOTAL EXPENSES $114B TO $119B, EST. $108.01B

While META had missed CapEx forecasts dramatically for the last two quarters, Q4 2024 saw CapEx catching up notably…

META shares are flying around all the place after the print, unchanged for now (holding on to post-DeepSeek rebound gains)…

“We continue to make good progress on AI, glasses, and the future of social media,” Chief Executive Mark Zuckerberg said in a statement.

A little warning about regulation from Meta’s CFO in the release here:

“In addition, we continue to monitor an active regulatory landscape, including legal and regulatory headwinds in the EU and the US that could significantly impact our business and our financial results.”

Reality Labs sales in Q4 were almost the same as they were a year earlier: $1.08 billion in the last quarter of 2024 compared to $1.07 billion in that period of 2023.

For the full year, Reality Labs revenue was up 13% in 2024.

But, on the other side of the coin here, Reality Labs losses were also wider in 2024.

• 2024 Q4 losses: ($4.97 billion)

• 2024 full year losses: ($17.73 billion)

So this is a business unit that is still nowhere near break-even at the moment.

Will that CapEx hike really stick after the DeepSeek headlines?

Ahead of today’s earnings by the smallest Mag7 member, Tesla (with a $1.3TN market cap) , the company’s online forum for investor questions showed more than 120 queries about Musk. They asked largely about his politics, including his role in DOGE, his endorsement of Germany’s far right AfD party, and the controversial gestures he made during a speech that many people compared to a Nazi salute. Several of the questions focused on the potential for Musk’s actions to alienate Tesla buyers, while others raised concern that the CEO is being stretched too thin.

Turning to the actual results, one number which investors always go straight to in every earnings release is the company’s regulatory credits, which as Bloomberg puts it, is “the gravy train that keeps on giving.” In the third quarter, Tesla recognized $739 million in regulatory credit revenue, and said it was because other OEMs are still behind on meeting emissions requirements. Selling regulatory credits remains a tidy business for Tesla. It earns them by making and selling electric vehicles, then selling the credits to manufacturers whose new vehicle fleets exceed emissions limits set by various authorities, including in China, the European Union and the state of California.

Taking a step back, as investors are well aware, Tesla earnings have been a hugely volatile event for its shares over the past several quarters. The stock jumped 22% after the last quarterly results in October, and in the three quarters before that, it moved by at least 12% in either direction. This time, trading in the options market suggests investors are preparing for only a 7% move in Tesla shares after fourth-quarter results. If that happens, it would be the stock’s smallest post-results swing since October 2022.

With all that in mind, here is what Tesla reported moments ago for the just concluded Q4:

• Revenue: $25.71BN, missing estimates of $27.21BN, up 2% YoY, although total automotive revenue of $19.8BN was actually down 8% YoY
• Operating Income $1.583BN, missing estimates of $2.6BN, and down 23% YoY
• Gross margin 16.3%, missing estimates 18.9% and down from 17.6% YoY
• Automotive gross margin ex regulator credits 13.6%
• EPS of $0.73, missing estimates of $0.75, and up 3% YoY
• Free Cash Flow $2.03BN, beating estimates of $1.75BN, and down 1.6% YoY
• Capital expenditure $2.78 billion, beating estimates of $2.72 billion, and up +21% y/y,

And visually:

Here are the main income statement categories in chart format:

Taking a quick look at the slide deck, we find (on Page 6) that the big revenue driver was “growth in energy generation and storage and services and other.” Also of note, revenue from regulatory credits is $692 million. That’s a drop from $739 million last quarter, but still significant.

This suggests that over half of Tesla’s earnings are greenhouse gas credits and “other income”, a rather low quality result.

As Bloomberg notes, there are echoes of the second quarter in these numbers: “A very weak autos gross profit margin due to a big liquidation of inventory. Other items (credits, “other” income) shore that up and, similarly, account for about half of overall earnings.”

Clearing inventory helps with free cash flow, as working capital swings positive to the tune of $1B, but the quality is weak.

Something else to note here: Tesla’s vehicle sales in 2024 were 36% higher than two years earlier and energy storage MW also soared in that time, meanwhile, total operating profit has almost halved during this period. Or as Bloomberg puts it, “economies of scale outweighed by price war, ageing vehicle lineup.”

With automotive in decline, Tesla’s energy business continues to be its fastest growing division, with revenue more than doubling from a year ago. Gross profit for batteries were the highest ever. To this end, the company also says it completed construction of its Shanghai megafactory in December and will ramp up production there.

Here are some other highlights from the slidedeck:

Record deliveries:

“Q4 was a record quarter for both vehicle deliveries and energy storage deployments. We expect Model Y to once again be the best-selling vehicle, of any kind, globally for the full year 2024, and we have made it even better, with the New Model Y now launched in all markets. In 2024, we made significant investments in infrastructure that will spur the next wave of growth for the company, including vehicle manufacturing capabilities for new models, AI training compute and energy storage manufacturing capacity.”

Margin expansion and price cuts:

“In Q4, COGS per vehicle reached its lowest level ever at <$35,000, driven largely by raw material cost improvement, helping us to partially offset our investment in compelling financing and lease options. “

Tesla’s energy business humming:

“The Energy business achieved another record in Q4 with its highest-ever gross profit generation. Construction of Megafactory Shanghai was completed in December and will begin ramping this quarter. Powerwall deployments achieved another record quarter as we continue to ramp Powerwall 3 production and launch in additional markets:

Looking ahead, the company says that “2025 will be a seminal year in Tesla’s history as FSD (Supervised) continues to rapidly improve with the aim of ultimately exceeding human levels of safety. This will eventually unlock an unsupervised FSD option for our customers and the Robotaxi business, which we expect to begin launching later this year in parts of the U.S. We also continue to work on launching FSD (Supervised) in Europe and China in 2025. “

What may have helped reverse the drop in the stock price after hours, is the following outlook from the company’s volume guidance:

“With the advancements in vehicle autonomy and the introduction of new products, we expect the vehicle business to return to growth in 2025. The rate of growth will depend on a variety of factors, including the rate of acceleration of our autonomy efforts, production ramp at our factories and the broader macroeconomic environment. We expect energy storage deployments to grow at least 50% year-over-year in 2025.”

Turning to profit, Tesla expects that it “while it continues to execute on innovations to reduce the cost of manufacturing and operations, over time, we expect our hardware-related profits to be accompanied by an acceleration of AI, software and fleet-based profits.”

Finally, the company says that its “plans for new vehicles, including more affordable models, remain on track for start of production in the first half of 2025. These vehicles will utilize aspects of the next generation platform as well as aspects of our current platforms and will be produced on the same manufacturing lines as our current vehicle line-up. This approach will result in achieving less cost reduction than previously expected but enables us to prudently grow our vehicle volumes in
a more capex efficient manner during uncertain times. This should help us fully utilize our current expected maximum capacity of close to three million vehicles, enabling more than 60% growth over 2024 production before investing in new manufacturing lines.”

Finally, worth nothing that while unboxed is still happening, it won’t take place any time soon:  “Our purpose-built Robotaxi product – Cybercab – will continue to pursue a revolutionary “unboxed” manufacturing strategy and is scheduled for volume production starting in 2026.”

Tesla said that its newer vehicles will be built on the same production lines as the current line-up, which Tesla says will save money.  The company also notes that should boost manufacturing volumes closer to its max capacity of about three million vehicles annually, allowing “more than 60% growth over 2024 production.”

Eager to get an AI multiple, it is hardly surprising that the slidedeck included not one but two photos of the company’s “cortex”: the 50k GPU training center.

In kneejerk reaction to the results, the stock first slumped, dropping as much as 3%, before surging $40 from $365 to $407 and eventually stabilizing around $400, as investors focus on the company’s optimistic outlook, are excited about the Megapack, or the idea of FSD Supervised launching in Europe and China. One other positive sign from a product perspective is the promise that Tesla’s plans for new vehicles, including more affordable models, remain “on track for start of production in the first half of 2025.”

Reactions were mixed, some bearish…

“It’s clear that the market was looking for better profitability and better guidance,” said Seth Goldstein of Morningstar. “We heard on the last earnings call 20% to 30% growth, and now it’s just ‘return to growth.’ People want more firm guidance: What is the plan, and how are you going to get there?”

… And some bullish:

Cathie Wood said she thinks the stock reversal was fueled, in part, by the idea that Tesla will be scaling the Cybercab in 2026 and that production has to start this year. “We can see Tesla get down to a $15,000 car,” she said on a livestream on X spaces, noting a five-year time horizon. “This is nothing a traditional auto analyst can relate to.”

That said, A lot rides on the comments from the earnings call this time, which can explain the relatively muted reaction. Indeed, if this move holds in the regular trading tomorrow, that will be the smallest post-earnings reaction in Tesla stock since early 2022.

The Q4 investor presentation is below (pdf link)

TSLA-Q4-2024-Update by tyler

Former New Jersey Democratic Senator Bob ‘Gold Bar’ Menendez – who sat on the Senate Foreign Relations Committee while working for the Egyptian government (which was notably exempt from Trump’s recent halt to foreign aid) has been sentenced to 11 years in federal prison following his conviction on corruption charges.

The sentence comes after a jury convicted Menendez on 16 counts in a sweeping pay-for-play scheme to sell his office to foreign powers and shady businessmen in exchange for hundreds of thousands of dollars in cash, solid gold bars, and a Mercedes Benz.

Charges against Menendez included wire fraud, bribery and extortion – making Menendez the seventh sitting US senator to be convicted of a federal crime, placing pressure on him to resign before his term expires at year-end.

Menendez and his wife Nadine were accused by prosecutors of orchestrating a bribery scheme while he was head of the Senate Foreign Relations Committee, where he acted as an agent of Egypt, and intervened to quash a separate criminal prosecution in New Jersey in exchange for payoffs – and then tried to cover it up.

In a superseding indictment filed in Manhattan federal court, Menendez was accused of violating the Foreign Agents Registration Act (FARA), which requires anyone acting as “an agent of a foreign principal” to register with the US government. Menendez was prohibited from doing so either way as a member of Congress.

According to the indictment, Menendez and his wife, along with business associate Wael Hana, met with an Egyptian intelligence official in Menendez’s Senate office in Washington DC, during which they discussed a US citizen who was injured in a 2015 airstrike by the Egyptian military – an incident which some members of Congress cited as a reason to withhold certain military aid to Egypt.

Shortly after the meeting, the Egyptian official texted Hana that if Menendez took care of the matter, “he will sit very comfortably.”

“It wasn’t enough for him to be one of the most powerful people in Washington,” said federal prosecutor Paul M. Monteleoni in his closing argument. “But he also wanted to use it to pile up riches for himself and his wife.”

Authored by Sam Dorman via The Epoch Times,

The Department of Justice (DOJ) filed a motion on Jan. 29 to voluntarily dismiss its appeal in the Florida classified documents case that has reached the U.S. Court of Appeals for the 11th Circuit.

“The United States of America moves to voluntarily dismiss its appeal with prejudice,” a filing with the appeals court reads.

Hayden O’Byrne, an attorney for the U.S. Attorney’s Office in Miami, noted in the filing that the government had conferred with counsel for two remaining appellees, Waltine Nauta and Carlos De Oliveira, who were named as defendants along with President Donald Trump.

Carlos De Oliveira (L), a property manager for former then-former President Donald Trump’s Mar-a-Lago estate, arrives with his lawyer John Irving at the James Lawrence King Federal Justice Building in Miami on July 31, 2023. Joe Raedle/Getty Images

The move came after former special counsel Jack Smith’s office asked the court to dismiss the appeal as it related to then-President-elect Donald Trump – something the court granted last year.

The DOJ was in the process of appealing Florida Judge Aileen Cannon’s dismissal of the classified documents case. Cannon had ruled that Smith was unlawfully appointed.

Both Smith and Jay Bratt, a counterintelligence official who worked on the case, left the department prior to Trump taking office on Jan. 20.

The DOJ’s motion was made after Cannon blocked the release of the second volume of Smith’s report on the classified documents case.

Cannon sided with an emergency motion brought by Nauta and De Oliveira.

The previous administration had sought to allow certain members of Congress to read a redacted version of the report. In her Jan. 21 order, Cannon said that “there is certainly a reasonable likelihood that review by members of Congress as proposed will result in public dissemination of all or part of Volume II.”

“That reasonable likelihood risks substantial prejudice to the due process rights of Defendants, who remain subject to the protective order in this case.”

The motion is part of a wave of changes that have occurred under the new administration, which has expressed an interest in halting what it views as weaponization of the department, or politically-based prosecutions.

On Jan. 29, the Senate Judiciary Committee voted to advance the nomination of former Florida Attorney General Pam Bondi, who said in 2023:

“When Republicans take back the White House … the Department of Justice, the prosecutors will be prosecuted—the bad ones. The investigators will be investigated.”

Acting Attorney General James McHenry has already fired multiple DOJ officials “who played a significant role in prosecuting President Trump,” according to a spokesperson for the DOJ.

Our tweet sums it all up…

“Any minute now Trump will learn that Powell ended cutting rates as soon as the vegetable was booted out of the White House.

The reaction will be glorious”

Following the “least anticipated Fed meeting in recent history”, all eyes and ears will be on Fed Chair Powell’s press conference and his potential to say something more dovish than the statement infers.

“The Fed’s statement was somewhat hawkish relative to last month, so it isn’t surprising that the knee-jerk reaction was for some modest bear flattening,” Bloomberg Intelligence US interest rate strategists Ira Jersey and Will Hoffman say.

“As we also noted, the press conference may cause even more volatility than these modest shifts in the statement.”

Acknowledging that inflation is not making progress toward the target is clearly a surprise for the bond market, which had anticipated that Powell would highlight recent soft data reads.

Hence, rate-cut pricing in swaps is being trimmed, with March back around 5bps vs 7bps and June no longer fully priced for this year’s first cut. The market now looks to July for the Fed to cut again.

President Trump has mentioned his desire for “much lower” interest rates but we would not expect Powell to show his hand at all (indeed it would very out of character) with forward-guidance expectations now perfectly in line with The Fed’s dotplot expectations for 2025.

However, the market remains significantly more hawkish than The Fed’s dots for 2026 and 2027…

Will Powell be asked about (or mention) DeepSeek (market instability) or Trump tariffs (inflationary)?

Goldman’s Paolo Schiavone summarizes the setup going into the presser perfectly:

1. Powell wants a Fed meeting with zero volatility. It will be the third meeting where he tries to avoid Trump.

2. The starting point is the risk sell off from the Dec meeting as “ Some people did take a preliminary step incorporating conditional estimates of economic effects of policies”. Should they dial them back?

3. Fed will likely maintain optionality as the markets is comfortable with a tighter distribution of outcomes.

Powell will likely talk up the strong economic backdrop… but…

Schiavone sees three possible scenarios from the press conference:

Base case (55%) “meaningfully restrictive” / patient (Reiterates SEP 2 cuts in 2025)

• Labor market remains “solid” – u-rate falling and NFP running at or slightly above breakeven rate.

• ISM, Small business optimism and survey data picking up poses risk of re-acceleration of data.

• Acknowledge last 2 months of “good inflation” data, core PCE at 0.15%

But given sticky underlying inflation/residual seasonality Fed can continue to be patient

• Monetary policy remains “meaningfully restrictive” but is “significantly less restrictive” after 100 bps of cuts.

• SEP: December SEP still largely a good baseline for where the committee as a whole is.

• Tariffs – Important point that discussion is moving towards phased-in universal tariffs – as per comments in WSJ

• FCI tightening has been very modest

• QT: No concrete plan on QT taper/wind down – still see reserves as abundant

Hawkish (20%):

• Modest re-acceleration in data across labor market / activity

• Real income growth poses real risks of an economic reacceleration

• Inflation data improved but have to see the effects of residual seasonality in months ahead.

• Downshift policy stance to “somewhat restrictive”

• Tariffs: Bring into discussion the impact of phased in universal tariffs as creating more persistent uncertainty

Dovish (25%)

• Labor market in balance, stronger NFP can always be revised lower. Quits and JOLTS LOW

• Very good progress in inflation. Focus on market-based core PCE and housing disinflation slowing.

• No mention on neutral rate and worried about stock market volatility and impact on households’ wealth

• Reiterate Waller comments and on QT: Discussion started about winding down QT as reserves approach more “ample” level

The biggest risk continues to be losing the control of the long end… and Powell’s need, therefore, to try and manage that.

Watch the full press conference live here (due to start at 1430ET):

Tl;dr: The Fed removed a portion of the statement that said inflation has made progress toward the central bank’s 2% goal.

That aligns with the more cautious tone officials have been taking on the inflation outlook.

Rate-cut expectations for 2025 are sliding lower (hawkish)…

“The Fed’s statement was somewhat hawkish relative to last month, so it isn’t surprising that the knee-jerk reaction was for some modest bear flattening,” Bloomberg Intelligence US interest rate strategists Ira Jersey and Will Hoffman say.

“As we also noted, the press conference may cause even more volatility than these modest shifts in the statement.”

*  *  *

Since the last FOMC meeting, on December 18th, The White House has changed hands with oil & gold outperforming as bond yields soar (prices drop)…

Source: Bloomberg

US macro surprise data is basically unchanged – soft and hard – since the last FOMC, but not before dropping before and recovering after Trump’s inauguration…

Source: Bloomberg

But, digging into the details, we see a rather notable rise in growth data surprises and downside inflation surprises…

Source: Bloomberg

The market has fully priced-in ZERO rate cuts today so there should be little to no surprise at all, and the market has recently shifted (dovishly) up to match The Fed’s dot-plot expectations of 2 x 25bp cuts this year……

Source: Bloomberg

…with the only potential shift being from Powell’s press conference leaving this as we noted previously, the “least anticipated Fed meeting in recent history.”

The Fed held rates flat (no cut) as expected:

• *FED HOLDS BENCHMARK RATE IN 4.25%-4.5% TARGET RANGE

But offered some more hawkish shifts:

• *FED: UNEMPLOYMENT ‘STABILIZED,’ LABOR MARKET REMAINS ‘SOLID’

• *FED REMOVES REFERENCE TO INFLATION MAKING PROGRESS TOWARD GOAL

That last point is by far the most noteworthy from the statement.

A strong labor market and no progress on inflation is not the recipe for rate-cuts any time soon.

Now, we all look for any hawkish or dovish tells from Powell during the press conference.

Read the full redlined statement below:

The Czech National Bank (CNB) may become the first European central bank to invest in Bitcoin as part of its diversification strategy for the country’s foreign exchange reserves.

Governor Aleš Michl told the Financial Times that he would present a plan to the board to invest in bitcoin as a way of diversifying the CNB’s reserves at a meeting on Thursday.

“For the diversification of our assets, bitcoin seems good,” Michl said in an interview.

“Those [Trump] guys can now kind of create some bubble for bitcoin, but I think the trend would be an increase without those guys as well, because it’s an alternative [investment] for more people.”

Should the board approve this, then the CNB could eventually hold as much as 5 per cent of its €140bn of reserves in bitcoin, he said.

CoinTelegraph reports that the news comes three weeks after Michl said he was looking at Bitcoin as a potential reserve asset and was considering acquiring “a few Bitcoin” for diversification.

Central banks have traditionally parked their reserves in conservative assets such as US Treasuries and other forms of highly rated bonds.

Some have holdings in equities, but almost none have publicly ventured into crypto.

Michl said he had “a totally different philosophy” about bitcoin to his counterparts.

“Of course, if you compare my position with other bankers, then I’m the one entering the jungle, or the pioneer,” Michl said.

“I used to run an investment fund, so I’m a typical investment banker I would say, I like profitability.”

Michl said more central banks could follow his lead within the next five years, just as several funds and commercial banks had recently changed tack and added crypto to their portfolios. Some pension funds have begun investing in crypto.

Of course, Fed and ECB officials have warned about the risks of investing in cryptocurrencies, with the latter writing last year that “the fair value of bitcoin is still zero”, adding that “bitcoin is not suitable as means of payment or as an investment”, while former ECB official Benoît Cœuré has previously referred to bitcoin as the “evil spawn of the financial crisis”.

Federal Reserve chair Jay Powell confirmed in December that the US central bank did not hold any bitcoin as it was not in the list of assets Congress allowed it to purchase. “We are not looking for a law change at the Fed,” Powell said at the time.

Of course, that has all changed since Trump’s election and the potential passing of Senator Lummis’ Strategic Bitcoin Reserve bill. Meanwhile, Arizona lawmakers have advanced a Bitcoin strategic reserve bill, which seeks to deploy the world’s first cryptocurrency as a savings technology for the state.

Update (1345ET): Moments ago, White House Press Secretary Karoline Leavitt clarified the report – saying in a statement on X: “

This is NOT a rescission of the federal funding freeze.

It is simply a rescission of the OMB memo.”

Leavitt added that “The President’s EO’s on federal funding remain in full force and effect, and will be rigorously implemented.”

This is NOT a rescission of the federal funding freeze.

It is simply a rescission of the OMB memo.

Why? To end any confusion created by the court’s injunction.

The President’s EO’s on federal funding remain in full force and effect, and will be rigorously implemented.

— Karoline Leavitt (@PressSec) January 29, 2025

*  *  *

The White House Office of Management and Budget (OMB) rescinded an order freezing federal grants, according to a Wednesday memo.

“OMB Memorandum M-25-13 is rescinded,” reads the note, which sheds no additional light on why.

🚨 Trump’s White House OMB rescinds federal aid freeze. pic.twitter.com/u6lyLSQQhu

— Peter Alexander (@PeterAlexander) January 29, 2025

On Monday, the White House OMB issued a pause on all federal spending – including grants and leases, pending a thorough review to ensure that programs align with the Trump administration’s priorities.

A memo from OMB Acting Director Matthew Vaeth directed federal agencies to conduct a comprehensive analysis of all financial assistance programs to determine whether they are aligned with the executive orders signed by President Donald Trump after his inauguration on Jan. 20.

“In the interim, to the extent permissible under applicable law, Federal agencies must temporarily pause all activities related to obligation or disbursement of all Federal financial assistance, and other relevant agency activities that may be implicated by the executive orders, including, but not limited to, financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal,” it stated.

Vaeth stated in his memo that the pause will allow the government more time to review agency programs and determine the best uses of funding for those programs consistent with the law and Trump’s priorities.

The suspension was set to take effect at 5 p.m. on Jan. 28…

🚨🇺🇸TRILLION-DOLLAR FREEZE: TRUMP HITS PAUSE ON ALL FEDERAL FUNDING

In a sweeping move, the White House just ordered every federal agency to stop all grants and loans – effective tomorrow at 5pm.

White House Office of Management and Budget acting director Matthew Vaeth:… pic.twitter.com/OybR7x4mLI

— Mario Nawfal (@MarioNawfal) January 28, 2025

That order hit a snag Tuesday night, after a Biden-appointed judge blocked the pause.

US District Judge Loren L. KliKhan, who was appointed by former President Joe Biden in 2022, issued an administrative stay that lasts until Monday afternoon, and only applies to existing programs, AP reports.

Administration officials said the decision to halt loans and grants — a financial lifeline for local governments, schools and nonprofit organizations around the country — was necessary to ensure that spending complies with Trump’s recent blitz of executive orders. The Republican president wants to increase fossil fuel production, remove protections for transgender people and end diversity, equity and inclusion efforts. –AP

According to AliKhan, “It seems like the federal government currently doesn’t actually know the full extent of the programs that are going to be subject to the pause.”

And now, it looks like the Trump administration doesn’t want a legal dog-and-pony show to upstage the agenda.

By Michael Every of Rabobank

We stand at a fork in the road clouded in deep fog on many conflated fronts. Central bankers are aware forks are likely to be stuck deep into them by politicians if they choose the wrong path; the latter fear the same fate from voters; and voters increasingly fear similar from foreign threats.

Two years ago, I commissioned an art piece: A Fork in the Road.

Had to make sure that civilization took the path most likely to pass the Fermi Great Filters. pic.twitter.com/mYFzdAy6WF

— Elon Musk (@elonmusk) December 7, 2024

This morning, the RBNZ’s Chief Economist Conway said, “given uncertainty, we will need to ‘feel our way’ as the Overnight Cash Rate gets closer to our estimate of neutral”. However, he was clear that rates at 4.25% were restrictive and would come down further. Likewise, the RBA and Aussie government will have been thrilled by Q4 CPI data, because they were weak enough vs consensus to refocus conversation back to “RATE CUTS!” Headline CPI was 0.2% q-o-q vs. 0.3% consensus, and 2.4% y-o-y vs. 2.5%, with the trimmed mean and weighted mean q-o-q prints both a tick lower. If only higher house prices were a cure for Australia’s underlying problems, like low productivity, rather than part of the problem…

On the other hand, the BOJ’s December meeting minutes out today saw discussion of where the neutral rate sits – and ‘nobody knows’ is the answer. One voting member thinks it needs to be far higher, however, and changes to the monetary policy committee could also shift it in a hawkish direction.

Today next sees the Bank of Canada (who the markets says will cut 25bps to 3%), the Fed (on hold at 4.25% – see our preview here), and the BCB (seen hiking 100bps to 13.25%), as well as earnings from most big US tech firms.

But that fog is still getting thicker.

We just got a temporarily court-halted temporary US federal spending freeze, and a ‘Fork in the Road’ offer to buy-out the contracts of 2m federal workers, with expectations 5-10% may quit, saving $100bn annually. That’s as DOGE says it’s already saving $1bn a day and wants to save $3bn, which would slash the US deficit by $1 trillion. Those with one conception of how the state works argue this means chaos – which may be right; those with another conception think the fewer federal workers the better – and might also be right.

🚨 NEW: This is the full buyout memo from the OPM sent to all Federal employees titled “A Fork in the Road.” The pillars of the new Federal government are clearly laid out.

If Federal employees wish to resign they simply put “RESIGN” in the subject line of the email they… pic.twitter.com/fFCiSAiprV

— Autism Capital 🧩 (@AutismCapital) January 29, 2025

Moreover, President Trump is proposing a switch from income tax to tariffs to fund the state, as was the US fiscal model a century ago, as the White House says it plans to follow through on 25% Canada and Mexico tariffs on Saturday.

Monetary and market implications much? Is this all still a hypothetical for the BOC and FOMC or something to include in their projections for next week? Or will they wait and see what Secretary of State Rubio says after meeting the Canadian Foreign Minister this afternoon?

It’s not as if central banks need long to update ‘their’ views now: Stephanie Kelton shows DeepSeek calculated the impact of a potential 25% tariff on Canada in seconds, writing a better report than most analysts. As such, it’s the geopolitics that’s uncertain, not the econometrics.

Relatedly, as markets DeepCope at what just happened in AI, some echo my view that this is a Sputnik moment only in the sense of colder Cold War US policy, such as an AI arms race, and far tighter tech export controls and bans on DeepSeek – like the US Navy just implemented. Indeed, the real-world central bankers pretend they understand is all pitchforks in the road:

• The US will withdraw its troops from Syria, as the White House continues to back the relocation of Gazans to Jordan and Egypt, and ICC-indicted Israeli PM Netanyahu is named as the first official visitor to the White House next month.
• A US F-35 crashed in Alaska, seeming to plummet straight down.
• The war taking place in central Africa right next to critical green minerals is getting no attention from those in Europe focused on the green transition.
• Another Baltic undersea cable was just cut; another Chinese-owned vessel is being blamed.
• Two more Russian oil refineries are on fire after apparent Ukrainian drone attacks.
• Italian PM Meloni, Trump’s favorite European interlocutor, is being investigated for aiding and abetting a crime following Italy’s release of a Libyan wanted by the ICC.
• France may send troops to protect Greenland(!) after Denmark offered €2bn for the same goal.
• French pilots report in air-to-air combat their best jets would last just three days due to a lack of ammunition and face no chance vs. the F-35’s 5G sensors (as China flags a 6G jet).  
• And the EU doesn’t understand what the ‘Call of Duty’ means in statecraft given Brussels says it may ban exports of X-Box and PlayStation… as Germany ramps up Russian LNG imports via EU ports, having banned them from its own.

Day ahead

Today has no major data: just central banks… and fog.

Defense Secretary Pete Hegseth is about to drop the hammer on retired Gen. Mark Milley, Trump’s former chairman of the joint chiefs of staff and one of the president’s favorite rhetorical punching bags. In addition to pulling Milley’s security clearance and yanking his personal security detail, Hegseth will also ask the Pentagon’s inspector general to investigate his conduct, and the probe could end in Milley receiving a demotion, Fox News reported Tuesday.  

The IG investigation will center on allegations that Milley worked to “undermine the chain of command” during the first Trump administration. The probe is certain to scrutinize two calls Milley made to senior Chinese officials in the last days of Trump’s first term. First reported by Bob Woodward in his book, “War,” the calls were apparently made with the goal of diffusing military tensions between the two powers, and were said to have had the blessing of other Trump officials. In 2023, Trump used a social media post to say that, by giving China “a heads up on the thinking of the president of the United States,” Milley had committed “an act so egregious that, in times gone by, the punishment would have been DEATH!”

Woodward also reported that, at a March 2023 reception in Washington, Milley told him that Trump was “fascist to the core!” Milley was still on active duty at the time, and Article 88 of the Uniform Code of Military Justice makes it a crime for commissioned officers to use “contemptuous words against the president.” Milley doesn’t have to worry about criminal prosecution: President Biden gave him a pre-emptive pardon that covers “any offenses against the United States” that were committed between January 1, 2014 and January 20, 2025.

Fox‘s sources suggest that Milley could lose one of his four stars. In addition to humiliation, that would also put a dent in Milley’s rich military pension. However, as The Intercept reported last year, he has plenty of opportunities to turn his past service into stacks of cash:

Since retiring from the military last year, former Chair of the Joint Chiefs of Staff Army Gen. Mark Milley has become a senior adviser to JPMorgan Chase bank, joined the faculties of Princeton and Georgetown, and embraced the lucrative paid speaking circuit. From military pay of $204,000 a year, Milley is sure to skyrocket to compensation in the millions, especially because he is represented by the same high-powered speakers’ agency as Hillary Clinton. 

Milley oversaw the long-overdue but disastrously-executed withdrawal of military forces from Afghanistan. The botched undertaking saw 13 US service-members killed, another 45 wounded, and the deaths of 170 Afghan civilians in a bombing at Kabul’s principal airport. It also resulted in the Taliban inheriting a huge arsenal of US weapons. In June 2021, Milley assured legislators that a withdrawal would look nothing like the US departure from Vietnam. “I don’t see Saigon 1975 in Afghanistan. The Taliban just aren’t the North Vietnamese Army,” he said. 

Trump in 2021: “Milley said it’d be cheaper to leave all of our equipment behind in Afghanistan, instead of flying it back. That’s when I knew he was a fuckin idiot.” 😂 pic.twitter.com/irr8zFSdtK

— Sara Rose 🇺🇸🌹 (@saras76) January 22, 2025

The first official manifestation of the new administration’s utter contempt for Milley came just hours after Trump was inaugurated. A brand-new painting of Milley that had just been unveiled on Jan. 10 was yanked from a Pentagon hallway. Fox reports that a second painting in a different hallway was to have been taken down as early as Tuesday night. 

Until Trump took office, the Secret Service had continued to guard Milley, former national security advisor John Bolton and former Secretary of State Mike Pompeo, on the chance that Iran may seek to kill them to avenge Trump’s Israel-assisted, Neta assassination of Iranian Gen. Qasem Soleimani via a 2020 drone strike in Iraq. Trump removed Pompeo and Bolton’s security details last week. Senior US officials frequently retain their security clearances well after they’ve left government, a practice that is supposedly aimed at facilitating transitions, enabling ongoing advice and counsel, and anticipating officials’ potential return to government.  

So with Milley back in the news, a reminder that Milley was a willing & public participant in the scandalous cover-up of Biden’s lack of physical & mental fitness to be president. Biden rewarded him with a sweeping preemptive pardon.pic.twitter.com/6wMoWGoXfP

— Jerry Dunleavy IV 🇺🇸 (@JerryDunleavy) January 29, 2025