The arbitrage of The Fed’s various balance sheet facilities – which we have exposed in detail for weeks – first appeared after The Fed’s November 1st meeting made it clear that peak-rates were in (and the Treasury announced a lower than expected refunding plan). That was when the market started to price in lower rates in the year ahead, dragging the one-year overnight index swap rate lower (which The Fed’s Bank Term Funding Program – BTFP) is predicated on.

As we explained before, a completely perfect and riskless ‘free money’ arbitrage was available to those banks who could lodge collateral with The Fed at its BTFP facility receiving cash at par (at a cost of OIS+10bps) and then post that cash earning Fed Funds rate on it, pocketing the difference.

The difference  – at its peak – amounted to over 60bps of free money from you, Mr. and Mrs.Taxpayer (implicitly), to the bankers for doing absolutely nothing at all.

Since the arbitrage became worthwhile – really the start of December – bankers have been able to throw $47.6BN at this arbitrage (we are assuming most the incremental rise in the BTFP was arb-driven since it had been only very incrementally drifting higher for months before)…

With the program due to expire in March, this free-money arb made it extremely hard for The Fed to extend this program (with $162BN in bailout fund usage outstanding):

“In justifying the generous terms of the original program, the Fed cited the ‘unusual and exigent’ market conditions facing the banking industry following last spring’s deposit runs,” Wrightson ICAP economist Lou Crandall wrote in a note to clients.

“It would be difficult to defend a renewal in today’s more normal environment.”

And that March expiration of the facility lines up with another potential crisis moment for the banking system – The Fed’s Reverse Repo facility being drawn down to zero – at which point reserves get yanked which means huge deposit flight.

Which leads us to today, when with just two months until the March threat looming, The Fed has changed the terms on the BTFP to kill the free-money arb.

“…the interest rate applicable to new BTFP loans has been adjusted such that the rate on new loans extended from now through program expiration will be no lower than the interest rate on reserve balances in effect on the day the loan is made.

This rate adjustment ensures that the BTFP continues to support the goals of the program in the current interest rate environment. This change is effective immediately. All other terms of the program are unchanged.”

This out of the blue decision comes just a week after regulators were readying themselves for the end of the facility by attempting to de-stigmatize the use of the discount window (but a sudden $160BN plus demand from discount window would be anything but reassuring to the general public and their mobile banking apps).

This expanded on earlier plans that we detailed here to reduce banks’ ability to use FHLB as an implicit funding tool.

The question is why… or why now?

Yes, the optics of being arbitraged by bankers – giving them free money for even less than they normally do – is terrible, but it’s been going on for two months and $47BN…

Is this The Fed laying the groundwork for extending the emergency, temporary, one-time-only program indefinitely?

As a reminder, the regional banks are already deep in crisis without the BTFP (as the red line in the chart below shows), and large bank cash needs a home – green line – like picking up a small bank from the FDIC?

To avoid their need for more emergent liquidity stabilization in March – ending QT and restarting QE?

March will be lit:

1. Reverse repo ends
2. BTFP expires
3. Fed cuts (allegedly)
4. QT ends (allegedly)

— zerohedge (@zerohedge) January 8, 2024

We leave with one question – who could have seen this coming?

Authored by Emel Akan via The Epoch Times (emphasis ours),

Former Democratic presidential candidate Andrew Yang said on Monday that President Joe Biden is not the right candidate to beat former President Donald Trump in the upcoming election.

Last week, Mr. Yang endorsed Democratic presidential candidate Rep. Dean Phillips (D-Minn.) and began campaigning alongside him.

The Minnesota Democrat represents the best chance to defeat Donald Trump, Mr. Yang told The Epoch Times during a campaign event in Manchester, New Hampshire.

He added that an electoral race dominated by 80-year-olds does not reflect the choices of most Americans.

According to Mr. Yang, Dean Phillips’ campaign is going to see significant momentum beginning Tuesday in New Hampshire.

“Incumbent presidents historically get 80 to 84 percent of the vote in New Hampshire, and I think that Dean is going to do very well, and Joe Biden is going to do considerably worse than the norm for an incumbent president,” he said of Tuesday’s New Hampshire primary.

“And I think that that should really spur conversation,“ Mr. Yang said. ”The American people deserve a Democratic nominee who will defeat Trump in the fall, and the numbers show that Joe Biden is not that candidate.”

Mr. Phillips is a 54-year-old, three-term congressman who launched a run for the Democratic nomination in October last year. He hopes to boost his numbers by appealing to New Hampshire’s sizable population of independent voters in the state’s Democratic primary on Tuesday,

When asked whether he would still support President Biden if Dean Phillips doesn’t secure the nomination, Mr. Yang did not provide a direct response.

He said he would support anyone who could prevent President Trump from returning to the White House.

“Unfortunately, I think Joe Biden was the right candidate in 2020. I do not think he’s the right candidate in 2024.”

The president’s name will not be on the ballot in the Granite State. This is due to a change in the Democratic National Committee’s rules, which designated South Carolina as the first formal primary in the Democratic presidential nomination cycle.

However, New Hampshire’s Secretary of State ignored the Democrats’ new rule and set the primary for Jan. 23.

Twenty-one Democratic candidates will appear on the New Hampshire primary ballot Tuesday, including Mr. Phillips and author Marianne Williamson, who’s running for the nomination for the second time.

Supporters of President Biden launched a campaign, asking New Hampshire voters to write in his name on voting slips.

“This is not just about a primary in the state of New Hampshire tomorrow—a primary that our very party, the Democrats, have said is meaningless,” Mr. Phillips told his supporters at the campaign event. “You know what? I think it might be just the opposite.”

Billionaire hedge fund manager Bill Ackman recently endorsed Mr. Phillips and said he donated $1 million to a political action committee (PAC) backing the congressman.

In his Jan. 13 statement on X (formerly Twitter), Mr. Ackman explained in detail why Mr. Phillips would be a “truly outstanding President of the United States.”

“This is by far the largest investment I have ever made in someone running for office, and I am making this investment at a high-risk but critically important moment for his campaign,” he wrote.

Stephen Katte and Nathan Worcester contributed to this report.

A man transgender golfer has stepped into win a women’s tournament in Florida, bringing with him her “dreams of making it to the LPGA tour”, according to a new report by the NY Post.

Yes, in the latest example of men transgender athletes beating biological women in their own sports finally getting their slice of equality in sports, 30 year old Hailey Davidson, born a man, won the NXXT Women’s Classic at the Mission Inn Resort and Club near Orlando last week.

Davidson shot one over 73 and finished the three round tournament +4, which was enough to take the trophy. Davidson was three shots behind an actual woman the next best golfer before forcing a playoff and winning. 

NXXT says “The Tour’s mission is to prepare the world’s best young women professional golfers for a successful career on the LPGA Tour” and that the tour is focused on “elevating women’s golf”. 

The Post wrote that Davidson’s recent victory placed her first on the NXXT tour leaderboard with a leading score of 1320, 150 points ahead of her closest competitor. Since November, she has secured two top-2 finishes in the league’s five tournaments, along with seventh and ninth place results.

And it isn’t just bragging rights that Davidson won: he/she was entitled to $1,576.51 in prize money, which adds to her career total which currently stands at $5,801.89 over the course of eight events. 

The top five leaders in the tour’s standings will receive 10 exemptions to compete in the Epson Tour at the end of the season, the report says. As the official LPGA qualifying tour, the league has seen over 600 players advance to the premier global women’s golf organization.

With five events already concluded, eight remain, culminating in the NXXT Tour Championship in Ocala, FL., from March 25-27.

To qualify for two exemptions to the Epson Tour, Davidson, transitioning from male to female, needed LPGA approval. Discussions began in 2016, but eligibility was granted in 2021 after undergoing Hormone Replacement Therapy for over five years and completing gender reassignment surgery, as indicated in an October 2022 social media post.

Davidson reported a 15 mph reduction in club head speed following her transition, comparing to the PGA Tour’s average of 114.2 mph and the LPGA’s 94 mph, as per GraffGolf’s data.

Former President Donald Trump had a historic turnout for Tuesday’s New Hampshire Republican primary on Tuesday. With more than 300,000 votes cast  in the purple state as of early Wednesday vs. the previous high-watermark of 287,000 in 2016, Trump’s decisive victory over Nikki Haley has made his path forward all the more clear.

Even the NY Times had to admit: “The exceptionally high turnout on Tuesday underscores the electrifying effect Mr. Trump has on the electorate, driving loyal supporters and determined opposition to the polls as his divisive style of politics both inspires and revolts.”

Trump’s command of the Republican ticket is even more impressive when you consider that Democrats were turning out in droves for Haley in order to vote against the former president.

“He’s picking right up where he left off in 2020, which saw the highest turnout in generations,” said Tom Bonier, a senior adviser to TargetSmart, a Democratic data clearinghouse, in a statement to the Times. “New Hampshire was the first test of how that might have evolved, as an open primary and an opponent providing an outlet for anti-Trump voters to register their opposition.”

President Trump Makes Surprise Stop in Londonderry, NH on Primary Day🗳️🇺🇸

“We have to make sure we have honest, fair, and free elections and strong borders.” – President Trump@BenBergquam #NewHampshirePrimary #Vote #Election2024

Join RAV LIVE on Rumble 24/7 now. See you… pic.twitter.com/55IQFH233E

— Real America’s Voice (RAV) (@RealAmVoice) January 23, 2024

And despite calls for Nikki Haley to drop out after last night’s drubbing, Haley gave a tone-deaf ‘victory’ speech, and vowed to fight on, arguing that “this race is far from over.”

That said, the Times‘ Dealbook reports that a number of Haley supporters are reportedly heading for the exits.

An unnamed Republican fund-raiser told CNBC’s Brian Schwartz that one of her donors was done with her campaign, declaring it over.

Meanwhile, Puck’s Teddy Schleifer wrote on the social media platform X that the casino magnate Steve Wynn and the financier John Paulson attended Trump’s New Hampshire victory party last night. And Senator Tim Scott of South Carolina, who appeared at the event, told Schleifer that he expected the Oracle co-founder Larry Ellison, his biggest backer before Scott dropped out of the primary race, to support Trump as well. -Dealbook

Trump has argued that Haley is hurting the party’s chances in the fall by forcing him to engage in an extended nomination process.

“If she doesn’t drop out, we have to waste money instead of spending it on Biden, which is our focus,” he told Fox News shortly after the New Hampshire race was called.

Goldman, meanwhile, noted that the results “further reduce the odds of a momentum-driven surprise, including South Carolina – the next major nomination contest.”

“While Haley’s results were slightly stronger than polling suggested (roughly 11pp vs. 19pp margin), the outcome is unlikely to be enough to prolong uncertainty in the nomination process.”

Traditional party donors from Wall Street, who loathe Mr. Trump, poured money into Ms. Haley’s super PAC. And in New Hampshire, she seemed to have a political environment more hospitable than in Iowa, with a voting base that is less religious and more educated.

But on Tuesday, New Hampshire Republicans rejected Ms. Haley and her attempt to revive the old guard. -NYT

And when it comes to the anticipated Trump-Biden rematch, things are looking good for The Don.

Here’s a calendar of what’s to come over the next 12 months:

Authored by Dave Argall via RealClear Wire,

Retailers across the nation are under siege, with some struggling to stay afloat amid a rising tide of crime.

Many of us take for granted the ease with which we can walk into a store and buy the simple items we need to go about our daily lives – a toothbrush, a t-shirt, or a favorite snack. Yet in Philadelphia and other cities, it’s getting more and more difficult for retailers to operate.

The massive looting in Philadelphia last year was difficult to imagine. Small and large businesses throughout the city were ransacked and heavily damaged by mobs of organized thieves who rampaged through stores

The stores targeted include Apple, Lululemon, Foot Locker, and almost 20 liquor stores. As then-interim Police Commissioner John Stanford said, these were “criminal opportunists” looking to pad their pockets with stolen goods.

Dozens of people were charged in the aftermath of this crime spree. Yet they felt empowered to rampage through Pennsylvania’s largest city, unafraid of the consequences of their criminal actions.

The difficulties facing retailers, however, are not just restricted to massive crime sprees. A recent report by 6abc featured an interview with Vincent Emmanuel, a 7/11 owner in Philadelphia who reported that people steal items from his store every day. They walk in, take whatever they want, and walk right out.

Small business owners should not be responsible for dealing with this brazen criminal behavior.

The effect of this crime has been chilling. In Philadelphia, some stores have been driven to close their doors. Two Wawa locations were forced out of operation due to rampant theft. Others reduced their hours at night to protect the safety of their employees.

Many stores are also forced to increasingly lock up items that are frequently targeted by thieves, forcing well-intentioned shoppers to request assistance from staff to access simple necessities.

On a wider scale, many large retailers have warned of the need to close stores. Among them are Giant Food, Walmart, Whole Foods, Target, and many more. Executives for these companies have warned of increasing threats to employee safety, as well as concerns about profitability.

The effects of retail theft on the United States as a whole are massive. According to the United States Chamber of Commerce, retail theft in 2021 led to over $125 billion in economic losses and the loss of almost 700,000 jobs. That’s a huge burden for our economy to bear.

The same study also showed the average theft rose from $937 to $1180 from 2020 to 2021. That’s over 25% in just one year.

Pennsylvania, in particular, has been hit especially hard. A recent study by Forbes noted that our state is the 5th most impacted by retail theft. The same study determined that in 2021, approximately $430 in goods was stolen per resident – the highest total in the nation.

To combat this rising crime, I introduced Senate Bill 596. My bill was approved by strong bipartisan votes of 45-5 in the Senate and 179-24 in the House of Representatives and has now been signed into law by Gov. Josh Shapiro as Act 42 of 2023.

This new law makes it easier for perpetrators of organized retail theft to be charged with a felony. The monetary thresholds for being charged with a second- and third-degree felony were cut in half. A new first-degree felony offense was also created.

Act 42 also created a new deputy Attorney General that will specifically focus on prosecuting perpetrators of organized retail theft. We’re not focusing on a mom who steals baby formula to feed her children. Instead, this new law will assist law enforcement to go after the top criminals, leaders of organized crime rings that resell goods on online marketplaces.

Criminals need to know that if they commit these crimes, there will be consequences.

And the 7/11 owner mentioned above? He’s so desperate for help that he said this new law was “the best news I’ve heard in 43 years of operating this business.” I hope this is just the beginning of a concerted effort to restore law and order to our communities.

Sen. Dave Argall represents the 29th Senate District, covering all of Schuylkill and Carbon Counties and parts of Luzerne County.

ZeroHedge is boots on the ground (Read: Day 1 SHOT) at the Shooting, Hunting, Outdoor Trade Show (SHOT Show), the world’s largest shooting sports, hunting, and law enforcement industries expo of its kind, this week. 

Ahead of SHOT Show, industry insiders said to be on watch for a ‘SHOT Surprise’ – last year was the ATF Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) unveiling the “Stabilizing Braces” rule – now it appears anti-gunners at Bloomberg have leaked parts of Biden administration’s new draft rule that seeks to curb exports of semiautomatic weapons.

It’s crucial to recognize that the timing of the new draft rule’s release is not accidental. This timing was chosen to coincide with SHOT, where the world’s top firearms manufacturers showcase their products. 

Furthermore, the leaking of the draft rule via Bloomberg makes perfect sense, considering billionaire Mike Bloomberg wages war on the Second Amendment via his anti-gun group “Everytown for Gun Safety.” So, it’s an ideal combination for the anti-gunner billionaire and anti-gunners in the White House to deliver a SHOT surprise. 

The surprise is a draft rule governing commercial exports of semiautomatic weapons. This was made possible after a Commerce Department review of US firearms manufacturers following a Bloomberg investigation that allegedly links US gunmakers to overseas crimes. 

Commerce officials last week described the proposed changes to advocacy groups and others, telling them the State Department would have more influence over vetting exports to countries with bad human-rights records, according to people who were briefed.

They said Commerce officials pointed to incidents where legally imported US guns were tied to high-profile crimes, including a 2022 mass killing in Thailand and the August assassination of the leading presidential candidate in Ecuador. -BBG

Here’s more on the draft rule that was leaked:

According to the draft rules, officials would create distinct trade categories for semiautomatic firearms — including pistols, rifles and shotguns — making it easier for federal regulators to scrutinize exports of those weapons. -BBG 

Bloomberg journos are walking SHOT floors this week. They spoke with Jordan Young, chief executive officer of Global Defense, a Pompano Beach, Florida-based exporter of firearms, who said this about the speculation of the draft rule:

“It’s bad for the economy, it’s bad for our industry.

“If I can’t ship anything at the end of the day I have no business.”

The new draft rule appears to be the Biden administration’s weaponization of the Commerce Department to attack the firearms industry.

And, of course, Bloomberg ignores the military-industrial complex (Raytheon, Lockheed Martin, and many others), sending weapon systems around the world that have led to the deaths of hundreds of thousands, if not millions, over the last several decades. That is very biased reporting from a media outlet where the founder is waging war against 2A via a non-profit. 

Authored by Dave DeCamp via AntiWar.com,

The US launched airstrikes in Somalia on January 21, US Africa Command announced on Tuesday, marking the first known US bombing of the country in 2024.

AFRICOM said in a press release that the strikes consisted of two separate engagements against al-Shabaab about 20 miles northeast of Kismaayo, a port city in southern Somalia. The command said the strikes were launched at the request of the US-backed Mogadishu-based government.

The command said its “initial assessment” found three al-Shabaab fighters were killed and claimed no civilians were harmed. But AFRICOM is notorious for undercounting civilian casualties, and US military operations in Somalia are shrouded in secrecy.

The last US airstrikes in Somalia reported by AFRICOM were launched on December 20. The latest US bombing comes as tensions are soaring off the northern Somali coast as the US has launched a new war against Yemen’s Houthis in response to their attacks on Israel-linked commercial shipping that started in protest of Israel’s onslaught in Gaza.

US airstrikes in Somalia escalated in 2022 after President Biden ordered the deployment of up to 500 troops to the country, and the US-backed government launched an offensive against al-Shabaab.

When the House debated a resolution to withdraw from Somalia last year, lawmakers said there were 900 troops in the country. US troops on the ground in Somalia provide training for a special fighting force known as the Danab Brigade.

US operations in Somalia under Biden have not gotten as intense as they were during the Trump administration when the US bombed the country at a record pace.

The US military hypes the threat of al-Shabaab due to its size and al-Qaeda affiliation, but it’s widely believed the group does not have ambitions outside of Somalia. Al-Shabaab was born out of a US-backed Ethiopian invasion in 2006 that toppled the Islamic Courts Union, a coalition of Muslim groups who briefly held power in Mogadishu after ousting CIA-backed warlords.

Al-Shabaab was the radical offshoot of the Islamic Courts Union. The group’s first recorded attack was in 2007, and it wasn’t until 2012 that al-Shabaab pledged loyalty to al-Qaeda after years of fighting the US and its proxies.

Update(1657ET): It didn’t take long for the Pentagon to smack down Houthi claims, also in the absence of any specific evidence…

#BREAKING: US Navy smacks down Houthi claim to have hit an American ship. https://t.co/wMO3mMww7Q

— Jokerman Intel (@JokermanIntel) January 24, 2024

* * *

Update(1621ET): Yemen’s Houthis have issued a statement claiming that the earlier attack on a US-flagged Maersk vessel near the Red Sea actually hit the US ship. The Houthi military statement further praised the operation as a success, given the Maersk vessel and accompanying warships were “forced to withdraw” from their path entering the Red Sea. 

“Several of our ballistic missiles struck their targets despite warships’ attempts to intercept them,” the new statement claims. However, the Houthis have not offered any proof, such as photographic evidence collected by drone footage. Also, the earlier Pentagon statement asserted there was no damage to crew or ship, and that it wasn’t hit. US CENTCOM had said one missile fell into the sea, while others were intercepted by the warship USS Gravely. The Houthis have been caught lying about or exaggerating the results of their operations. But of course, the Pentagon has incentive to suppress the potential that an American vessel was hit, given that it would mean the significant US Navy escort utterly failed. 

#BREAKING: Houthis release statement claiming without evidence to have hit an American vessel in the Red Sea. pic.twitter.com/3AiHIb6kzz

— Jokerman Intel (@JokermanIntel) January 24, 2024

* * *

Update(1446ET): US Central Command has confirmed the attack incident on the US container ship, but has provided further key details saying that one of the no less than three Navy warships accompanying the US-flagged Maersk vessel intercepted most of the inbound anti-ship missiles fired from Yemen: 

The US Central Command has said that the Houthis launched three anti-ship ballistic missiles at a US-flagged container ship off the coast of Yemen earlier on Wednesday.

“One missile impacted in the sea. The two other missiles were successfully engaged and shot down by the USS Gravely (DDG 107),” CENTCOM said in a statement. “There were no reported injuries or damage to the ship.”

The fact that the Houthis launched the missiles despite the presence of a warship group is a testament to the fact that the Western naval coalition has not served as an effective deterrent.

This afternoon Houthis fired 3 anti-ship ballistic missiles from Yemen toward 🇺🇸US owned container ship MV Maersk Detroit in the Gulf of Aden.

One missile impacted in the sea. The two other missiles were successfully shot down by USS Gravely.

(Library Images) pic.twitter.com/LnGKHW2nRq

— Navy Lookout (@NavyLookout) January 24, 2024

* * *

Update(11:30ET): As we previously noted, earlier in the morning Sky News reported that Houthi forces fired at least two missiles from Al-Bayda towards the Gulf of Aden. Well, it seems they were targeting a US vessel, even despite it having a US Naval escort. Per the breaking details in Bloomberg:

Two Maersk vessels were targeted in attacks near the Red Sea on Wednesday, ShippingWatch reports, citing the Danish shipping company. The vessels, which belong to Maersk’s US subsidiary Maersk Line Ltd., were headed for the Bab el-Mandeb Strait, escorted by the US Navy, news website says.

ShippingWatch indicated that as a result of the attack, wherein all the crew and ships were unscathed, the ships have turned around. Maersk starting in early January suspended transit for all its ships, but the directive did not apply to its US subsidiary. 

This fresh incident is hugely significant given that after some eight or more rounds of US missile attacks and airstrikes on Houthi positions, the Iran-linked group remains undeterred, even with a US Navy escort seeking to protect an American container vessel. 

* * *

Two months of drone and missile attacks on commercial vessels, as well as hijackings, in the highly contested Red Sea region by Iran-backed Houthi rebels, have yet to abate as economic costs mount for shippers and increased risks of snarled global supply chains. 

The latest evidence that Red Sea disruptions will persist is a notice from the Department of Transportation informing commercial ship operators to avoid the “Southern Red Sea between 12N and 16N.” 

There continues to be a high degree of risk to commercial vessels transiting the Southern Red Sea between 12N and 16N. While the decision to transit remains at the discretion of individual vessels and companies, it is recommended that US flag and US-owned commercial vessels remain North of 18N in the Red Sea or East of 46E in the Gulf of Aden until further notice.

Besides Houthi attacks on Western vessels, the US and allies have ramped up attacks on the rebels in Yemen with repeated airstrikes. 

Bloomberg reported early Wednesday that one of the world’s largest shippers, Maersk, told clients in a notice to prepare for supply line disruptions as containerized vessels are rerouted to the Cape of Good Hope, which takes an extra 1-2 weeks for Asia to Europe shipping lanes.

“While we continue to hope for a sustainable resolution in the near-future and do all we can to contribute towards it, the situation currently remains untenable,” Maersk said. 

According to Flexport data, more than 500 container ships that would have sailed through the Red Sea have been rerouted to the Cape of Good Hope at the southern tip of Africa. This is about a quarter of all the container shipping capacity in the world. 

Meanwhile, a new report from the Financial Times, citing “American officials,” says the US has asked China to help rein in Houthi rebels. 

Officials have repeatedly raised the matter with top Chinese officials in the past three months, asking them to convey a warning to Iran not to inflame tensions in the Middle East after Hamas’s October 7 attack on Israel and the ensuing war. 

US national security adviser Jake Sullivan and his deputy, Jon Finer, discussed the issue in meetings this month in Washington with Liu Jianchao, head of the Chinese Communist party’s international department, according to US officials. Secretary of state Antony Blinken also raised it, said a state department official. -FT

In recent weeks, Red Sea diversions have tightened capacity and resulted in soaring container prices:

“We haven’t seen costs increase this quickly since the last crunch in the pandemic,” said Vincent Iacopella, a logistics expert at Alba Wheels Up, who spoke with Bloomberg. 

Iacopella said, “Many of the underlying bottlenecks in supply chains remain, even though prices dropped last year as the Covid-19 disruptions faded. 

The cost of shipping containers from China to the Mediterranean Sea has quadrupled since late November. 

We pointed out last week that executives and investors are becoming concerned about Red Sea disruptions in earnings calls. 

Using the Document Search function on Bloomberg, earnings-call mentions of “Red Sea” topped 41 last week, a record high. As the earning season progresses, the mentions will likely increase. 

And as of writing this note, Sky News reports Houthi forces “fire a second missile from Al-Bayda towards the Gulf of Aden.” 

President Biden’s Operation Prosperity Guardian faces severe hurdles as the West’s move to secure the critical waterway has failed so far. 

All eyes are going to be on Tesla after the bell today, with the company slated to report earnings and update its shareholders on numerous new developments as the stock continues slumping to start 2024.

First, what the street expects from Q4. According to Bloomberg forecasts, Tesla is anticipated to announce a revenue of $25.87 billion, marking a 6.4% increase from the previous year. Analysts are looking for EPS of $0.73, amounting to an adjusted net income of $2.61 billion, a 36.4% decrease from the same period last year.

As Bloomberg noted yesterday, the company’s margins are going to be an obvious focus as Tesla continues to slash prices in order to help move volume:

For Q4, Tesla announced it had “produced approximately 495,000 vehicles and delivered over 484,000 vehicles”, putting up numbers in line with adjusted estimates for the quarter. Production beat estimates of about 482,336, per Bloomberg’s estimates. 

The company noted that its full year vehicle delivery number was up 38% to 1.81 million, slightly less than recently revised expectations for the year. Nonetheless, total deliveries mark a record quarter for the EV manufacturer. The company manufactured approximately 1.85 million vehicles for the period. 

The company delivered 461,538 Model 3/Ys and 22,969 in “other models”, which includes Model S, Model X and the new Cybertruck.

Investors are also going to be watching for where the automaker will set the bar for production and delivery goals for 2024. Analysts had predicted the company would deliver 1.82 million vehicles in 2023, up 37% from the year prior. Estimates were for about 473,000 vehicles delivered in the fourth quarter. 

Daiwa Capital Markets analyst Jairam Nathan revised Tesla’s 2024 delivery forecast down to 2.04 million from 2.14 million, anticipating a 4% drop in average revenue per vehicle compared to 2023.

Today the street will also be looking for more granularity with Cybertruck deliveries, which were not broken out from its Q4 delivery total. There are likely be questions about how quickly the ramp up in production in the new model is moving.

Back in November 2023, HSBC lowered their price target on the name to $146, citing skepticism about the Cybertruck: “We see considerable potential in Tesla’s prospects and ideas, but we think the timeline is likely to be longer than the market and valuation is reflecting. Hence the Reduce rating,” the note said. 

“Timing of delivery is our primary concern: we think questioning Tesla’s credibility is  problematic. Its ambitions may be grand (20m units by 2030), but it has a track record of  generally doing what it promises.”

Last night there were also (timely, if we do say so ourselves) reports of Tesla considering a new $25,000 mass market vehicle for potential launch in 2025. Reuters noted that the company has told suppliers it wants to start production of a new mass market vehicle code named “Redwood” in mid-2025. The report also notes that Tesla plans on making an “inexpensive robotaxi” based on the same vehicle architecture. 

Given the delays the company has experienced with the Cybertruck, investors on social media are skeptical of the timeframe for the proposed new vehicle idea. 

Within the last 3 weeks, the company has cut prices globally again and has seen demand from rental car firm Hertz evaporate. 

Multiple sources, citing Tesla’s website, reported earlier this month that Tesla had reduced prices for two variants of its Model Y in Germany by 5,000 euros ($5,439). The Performance version of the Model Y is now available to German buyers at EUR55,990, and the Long Range version is priced at EUR49,990. Additionally, Tesla has decreased the price of the basic Model Y model by EUR1,900, bringing it to EUR42,990.

Daiwa Capital Markets analyst Kelvin Lau said in a note that the price cuts are hurting sentiment in the industry and that lackluster sales in China to start 2024 helped fuel the sell off. 

About two weeks ago we also noted that Hertz began dumping 20,000 EVs on the used car market last month and will be a seller through 2024. The sales are expected to record a non-cash charge in the fourth quarter of $245 million related to incremental net depreciation expense. 

“The company expects to reinvest a portion of the proceeds from the sale of EVs into the purchase of internal combustion engine vehicles to meet customer demand,” Hertz said, adding, “The company expects this action to better balance supply against expected demand of EVs.”

As of last October, Scherr said EVs were about 11% of Hertz’s total fleet, with Tesla accounting for 80%. This has likely not helped the tumbling price of used Teslas, which we noted has fallen for 18 straight months. 

On Monday, analyst Adam Jonas of Morgan Stanley wrote: “Tesla has already announced price cuts in China and Europe that matched or exceeded our prior expectations of price reductions for the full year 2024. The German Tesla price cuts came merely days after Tesla announced production cuts at Giga Berlin related to Red Sea shipping issues.”

He continued: “Fewer vehicles are eligible for IRA incentives given foreign content/local sourcing rules. Our teams anticipate further weakening/dilution of consumer EV incentives globally as governments re-assess budgets.”

Investors may also be looking for more clarity on Musk’s recent comments on X about his ownership stake. Last week Musk wrote: “I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control. Enough to be influential, but not so much that I can’t be overturned. Unless that is the case, I would prefer to build products outside of Tesla.”

The company’s relationship with China will likely also be in focus. This morning it also broke that China was expanding its ban of Tesla vehicles from military bases to “other government affiliated venues”. 

In late December we wrote that the EV-maker was launching a new mega factory project in Shanghai that would be designed to manufacture 10,000 megapacks per year. 

The packs are designed for large-scale energy storage and efficient renewable energy distribution, and will be available for global sales.10,000 Megapack units annually equates to about 40GWh of energy storage capacity.

And as we noted earlier this month, despite price cuts, competition globally and in China is ramping up: BYD has surpassed Tesla in full electric vehicle deliveries for the first time ever in Q1 2024. 

We wrote back in September that BYD and Tesla were the two companies neck and neck leading the EV industry. We noted then that for the first half of 2023, BYD alone sold almost 1.2 million plug-in electric vehicles (incl. plug-in hybrids), roughly double the combined total of BMW, Volkswagen and Mercedes.

We’ll know more after market close today…

Update (1445ET): That didn’t take long.

One day after the Daily Mail published a leaked recording of Arizona GOP Chairman Jeff DeWit trying to bribe Trump ally Kari Lake to stay out of politics for two years, DeWit resigned.

“This morning, I was determined to fight for my position,” he said in a statement reported by Just the News. “However, a few hours ago, I received an ultimatum from Lake’s team: resign today or face the release of a new, more damaging recording. I am truly unsure of its contents, but considering our numerous past open conversations as friends, I have decided not to take the risk. I am resigning as Lake requested, in the hope that she will honor her commitment to cease her attacks, allowing me to return to the business sector—a field I find much more logical and prefer over politics.”

*  *  *

Arizona Senate candidate Kari Lake called on the state’s GOP chair Jeff DeWit to resign after a recording emerged of him trying to bribe Lake to stay out of politics for two years.

In the recording, first reported by the Daily Mail, DeWit, 51, can be heard asking lake to name her price not to run.

“There are very powerful people who want to keep you out,” he can be heard telling her in a conversation recorded last March.

He then, after asking her not to mention the conversation to anyone, makes his first offer:

“So the ask I got today from back east was: “Is there any companies out there or something that could just put her on the payroll to keep her out?“

Lake is taken aback.

“This is about defeating Trump and I think that’s a bad, bad thing for our country,” she replied.

DeWit later framed it in a different way.

“Just say, is there a number at which –

“I can be bought?” Lake interjected. “That’s what it’s about?”

“You can take a pause for a couple of years. You can go right back to what you’re doing,” DeWit replied.

Lake repeatedly shuts him down, and says she wouldn’t pull out for a billion dollars.

“This is not about money, it’s about our country,” she says (one her own recording, we’re guessing).

Listen (via Collin Rugg):

BREAKING: Arizona Republican Party chair Jeff DeWit caught on secret recording trying to bribe Kari Lake not to run for the Senate.

Holy s***!

“There are very powerful people who want to keep you out,” he said.

At one point during the secret recording, Lake was asked to name… pic.twitter.com/9r1DoDzITD

— Collin Rugg (@CollinRugg) January 23, 2024

 Following the report, Lake called on DeWit to resign.

“He’s gotta resign. We can’t have somebody who is corrupt and compromised running the Republican Party,” she told an NBC reporter during Trump’s New Hampshire primary victory party.

Kari Lake calls for @AZGOP Chair Jeff DeWit to resign after release of audio in which he can be heard bribing Lake to not run for the U.S. Senate in exchange for a potential job (and its salary): https://t.co/8tF4sodXf3 pic.twitter.com/4XBSzoVyYL

— Vaughn Hillyard (@VaughnHillyard) January 24, 2024

Just one question…

Hey @JeffDeWitAZ before you resign, would you mind sharing the names of the “very powerful people” who buy US politicians? https://t.co/MZpE1K9i8z

— zerohedge (@zerohedge) January 24, 2024

What say you now Eric Garcia, senior Washington Correspondent of The Independent?