Tag: finance

Outspoken ‘Squad’ members have once again sparked controversy dividing Democrats in Congress – this time over support for Israel, particularly coming off last month’s eleven-day bombing of Gaza in retaliation for thousands of Hamas rockets launched. The inter-party controversy is spilling over into rare public turmoil and heated accusations.

A statement from a dozen Jewish House Democratic lawmakers has slammed Rep. Ilhan Omar for “equating the US and Israel to Hamas and Taliban” and is further demanding she “clarify” her words which came in the following tweet earlier this week…

We must have the same level of accountability and justice for all victims of crimes against humanity.

We have seen unthinkable atrocities committed by the U.S., Hamas, Israel, Afghanistan, and the Taliban.

I asked @SecBlinken where people are supposed to go for justice. pic.twitter.com/tUtxW5cIow

— Rep. Ilhan Omar (@Ilhan) June 7, 2021

“We must have the same level of accountability and justice for all victims of crimes against humanity,” Omar had posted. “We have seen unthinkable atrocities committed by the US, Hamas, Israel, Afghanistan, and the Taliban.”

The Jewish House members’ statement said the tweet reflect’s Omar’s “deep-seated prejudice” and further said:

“Equating the United States and Israel to Hamas and the Taliban is as offensive as it is misguided, Ignoring the differences between democracies governed by the rule of law and contemptible organizations that engage in terrorism at best discredits one’s intended argument and at worst reflects deep-seated prejudice,” the group said.

“The United States and Israel are imperfect and, like all democracies, at times deserving of critique, but false equivalencies give cover to terrorist groups. We urge Congresswoman Omar to clarify her words placing the U.S. and Israel in the same category as Hamas and the Taliban,” they said further.

But instead of backing down or offering an apology or clarification, the progressive Minnesota Congresswoman shot back with accusations of ‘Islamophobia’, saying later in the week: “The islamophobic tropes in this statement are offensive. The constant harassment & silencing from the signers of this letter is unbearable.”

It’s shameful for colleagues who call me when they need my support to now put out a statement asking for “clarification” and not just call.

The islamophobic tropes in this statement are offensive. The constant harassment & silencing from the signers of this letter is unbearable. https://t.co/37dy2UduW0

— Ilhan Omar (@IlhanMN) June 10, 2021

She also appeared to charge the signers of the House letter with “harassment” as part of a campaign to “silence” and police her speech, claiming also that every time she “speaks out on human rights” she receives “death threats”. 

The whole thing appeared to stem from Omar’s earlier in the week questioning of Secretary of State Antony Blinken over why the administration is seeking to block an International Criminal Court (ICC) investigation into Israeli war crimes against Palestinians as well as killings of civilians by US troops in Afghanistan, dual probes which are expected to span years into the recent past.

Twelve democrats led by Brad Schneider urge Ilhan Omar to revisit her words and not create false equivalences by equating democracies such as the US and Israel with Taliban and Hamas.

Ilhan calls it, harassment and Islamophobia.

Which part of this statement is Islamophobic? pic.twitter.com/Y0NZU8vEWb

— Sonam Mahajan (@AsYouNotWish) June 10, 2021

A further tweet from Omar sought to defend her initial remarks where she invoked Hamas and the Taliban: “Citing an open case against Israel, US, Hamas & Taliban in the [The International Criminal Court] isn’t comparison or from ‘deeply seated prejudice’. You might try to undermine these investigations or deny justice to their victims but history has thought us that the truth can’t be hidden or silenced forever,” she wrote. Meanwhile some progressive Jewish organizations in America are currently coming to her defense.

Authored by Andrea Widburg via AmericanThinker.com,

Science is a buzzword on the left, but an Ami Horowitz video about masks, combined with Fauci’s contention that attacking him is the same as denying science, shows that there is no difference on the left between science and ideology. The former is completely subsumed into the latter.

In my neck of the woods (the Southeast) even during the height of COVID mania, only about 50% of people wore masks outdoors. And depending on which store you were in, not everybody was wearing them indoors either. Target had full mask compliance. Walmart and Palmetto Armory did not.

Things are different now.

First, the CDC finally conceded that masks aren’t necessary outdoors.

More importantly, masks aren’t necessary for people who have been vaccinated.

And still more importantly, we know from Fauci’s emails that he was lying to people when he insisted on masks. 

He knew all along that people weren’t wearing masks that made the slightest bit of difference in stopping the virus’s spread (something the data confirms).

Again in my neck of the woods, a conservative state, people are abandoning their masks with the utmost rapidity. That’s not the case in many places. Ami Horowitz went out on the streets of New York to find out why vaccinated people were stilling wearing masks outdoors. He reminded all of them that, if you’re vaccinated and outdoors, it is virtually impossible to get or give COVID.

What was fascinating was that most people really struggled to come up with an answer as to why, on a lovely spring day, they were suffocating themselves on the streets of New York.

A lot of them said they had just gotten used to the masks. Some, though, had principled reasons and I can say with absolute honesty that every one of their principles was the result of Stockholm Syndrome or brainwashing:

What I hope jumped out at you watching that video is that science didn’t factor into any of these. Remember, they were all vaccinated. It was all about feelings, attitudes, and peer pressure. Emotion ruled the day.

And that makes perfect sense because, for the left, science is not a process by which someone advances a hypothesis, conducts a rigorously controlled and carefully observed experiment to test that hypothesis, and then admits honestly whether the hypothesis lived or died. On the left, science is a thing in which you “believe” (kind of like faith), and it invariably supports one’s political beliefs.

And if you have any doubt about that, take a gander at Anthony Fauci. He may be the biggest mass murderer in American History, defending himself for a year full of lies and derogatory statements about medicines that could have saved hundreds of thousands of lives, all to defeat Trump.

He doesn’t try to argue the merits of his many positions (he can’t). Instead, he goes on the attack. When you, the conservative troglodyte attack Fauci, you’re attacking “science.” I’ve cued the video up to the point at which he makes that risible claim, but I suggest you watch the whole interview. It’s a miracle of doubletalk, in which his endlessly conflicting positions are all “science.” Also, both he and Chuck Todd carefully ignore that much of what he said in public was belied by his emails, including the fact that he lied to Congress about the whole gain of function issue:

If anyone tells you leftism isn’t a religion, Fauci’s take on matters puts the lie to that claim.

After the “eye-popping” April CPI report, expectations were for another big increase in consumer prices in May and boy, did the data not disappoint with core CPI surging another 0.7% (0.74% unrounded), which boosted the % yoy rate to 3.8% (3.80% unrounded) from 3.0% previously. This was the highest % yoy rate since 1992.

One big similarity with April was continued outsized strength in used cars inflation, which rose another 7.3% mom in May. Used car prices are now up 16.6% year-to-date (ytd) and according to the Mannheim Used Car Index which is up 26% YTD and 48% Y/Y, it’s set to keep rising.

Also, for the first time CPI new car prices added to the strength, surging 1.6% mom.

And now new car prices surging too:

The index for new vehicles rose 1.6 percent in May, its largest 1-month increase since October 2009.

— zerohedge (@zerohedge) June 10, 2021

Together, new and used cars contributed 37bp to core CPI, accounting for half of this month’s increase. As Lin notes, the auto sector remains disrupted by the global chip shortage and it will be difficult to predict how much more upside there will be this year as the situation will take time to resolve, making the year-end core inflation forecast a moving target.

Additionally, there were signs of broader commodity pressures with household furnishings & supplies gaining 0.9% mom, apparel jumping 1.2% mom, and recreation commodities, education/communication commodities, and alcohol all rising 0.4% mom. In services, transportation services remained hot rising 1.5% mom. This gain was bolstered by a 7.0% spike in airline fares and car/truck rental soaring 12.1% mom.

In summary, the reopening theme continued to be a big driver this month. That said, lodging away from home cooled to a modest 0.4% mom increase. Airline fares remain 12% relative to pre-pandemic levels and lodging down 4.6%, so there is further room to run this summer as travel demand heats up.

One major difference in May vs April was a robust pickup in Owner Equivalent Rent (OER) to a 0.31% mom print, after averaging 0.23% mom over the prior 3 months. This – as we warned last month – puts rent pressures back in the territory of the pre-pandemic trend. As BofA cautions, while “one month is a not a trend, but this is certainly a positive signal for stronger persistent inflation should it continue to operate there.” Incidentally, BofA’s base case is that once transitory pressures ease next year that core inflation will settle above the Fed’s 2% target, and stronger rents will play a key role in achieving this.

Meanwhile, household operations also exploded 3.1% mom in May, although this may be more of a one-off. Meanwhile, healthcare remained soft at -0.1% mom.

A visual summary of the data looks like this, first on a M/M basis, where the base effect has no impact as it is sequential.

… and then the YoY CPI print which is less relevant due to the collapse last year.

Bottom line, the inflation doves will say that once again there are reasons to dismiss much of the strength in this CPI report. That said, given the jump in OER, this report reflected greater progress versus April in terms of stronger underlying inflation. In other words, as even BofA warns, “we cannot dismiss all of the strength to transitory stories” and adds that “it will remain important to monitor whether transitory inflation passes through into stronger persistent inflation.”

And unfortunately, while nominal wage growth – a critical component to keeping inflation sticky – continues to rise, when indexed for inflation, real average hourly earnings are the lowest they have been this century!

Authored by Charlotte Cuthbertson via The Epoch Times,

Customs and Border Protection apprehended 180,034 individuals illegally entering the United States in May, the highest month in 21 years.

The agency said the majority, more than 112,000, were expelled under the Title 42 emergency health provision.

Former President Donald Trump implemented Title 42 in March 2020, which effectively closed the border to nonessential travel in attempts to mitigate the spread of COVID-19.

It allowed for Border Patrol to turn back illegal border crossers almost immediately, rather than for them to be placed in Immigration and Customs Enforcement (ICE) custody for a more protracted process through deportation proceedings under Title 8.

A group of Venezuelans wait to be picked up by Border Patrol after illegally crossing the Rio Grande from Mexico into Del Rio, Texas, on June 3, 2021. (Charlotte Cuthbertson/The Epoch Times)

The Biden administration has already exempted unaccompanied children and many family units from Title 42; whereas single adults from Spanish-speaking nations are almost all still subject to immediate expulsion, according to Troy Miller, acting commissioner for Customs and Border Protection (CBP). But Border Patrol is also encountering more illegal aliens from non-Spanish speaking nations, in particular Brazil and Haiti, which Miller suggested weren’t expelled.

The number of unaccompanied minors and individuals within family units dropped in May compared to April but still made up more than 33,000 apprehensions.

Most of these individuals are released into the interior of the United States with a Notice to Report (meaning the individual is obliged to report to a local ICE office once settled), or a Notice to Appear (a date to appear in immigration court).

The Title 42 restrictions have triggered a higher than normal recidivism rate of illegal crossings as single adults repeatedly attempt to cross and evade capture, according to CBP.

During May, 38 percent of Border Patrol apprehensions were individuals who had at least one prior encounter in the previous 12 months. The average one-year re-encounter rate during the previous five years was around 15 percent, CBP said.

In addition, Border Patrol detected, but didn’t capture, more than 51,000 illegal border crossers in May, according to statistics obtained by The Epoch Times.

The fiscal year 2021 illegal border crossing apprehension numbers are depicted by the blue line. (CBP)

The Biden administration is under pressure to end the Title 42 restrictions, and has hinted at doing so. However the head of ICE has said its removal is his biggest concern.

“Title 42 is absolutely critical,” ICE Acting Director Tae Johnson said during a congressional hearing on May 13.

“I don’t think it’s a situation where it’s going to just be lifted electively—we will be mandated, through some sort of court order, to lift it.”

Once Title 42 is revoked, the 3,500 to 3,800 single adults that Border Patrol is currently arresting on a daily basis will have to be accommodated by ICE.

At the same time, ICE has less capacity than it did during the previous border surge in 2019. ICE had around 55,000 detention beds in 2019; however the capacity was reduced to 30,000 beds in the fiscal 2021 appropriations package—enough beds for less than two weeks at the current rates of alien arrivals.

Meanwhile, Vice President Kamala Harris is currently traveling to Mexico and Guatemala on a trip that the Biden administration said was to discuss the “root causes” of the vast numbers of illegal immigrants entering the United States from that region.

“We have, and it is a legitimate correct conversation and concern, which is to address what is happening at our America’s southern border, and no question about that. We cannot have that question and have that conversation without also giving equal weight and attention to what is causing that to occur,” Harris said while in Guatemala on June 8.

Pressed on why she hasn’t yet visited the U.S. southern border, Harris said she plans to visit “at some point.”

Guatemalan President Alejandro Giammattei said in an interview with CBS on June 6 before Harris’s visit that he would like to see the United States impose stronger penalties on human smugglers.

As much as half of the unemployment benefits paid by the US government over the past year may have been stolen through fraud, with the bulk ultimately ending up outside the country – likely into the hands of foreign crime syndicates in China, Nigeria, Russia and elsewhere, according to Axios‘ Felix Salmon.

According to some estimates, unemployment fraud during the pandemic could ‘easily reach $400 billion,’ as states weren’t prepared for the unprecedented wave of unemployment claims

States knew that fraud was inevitable, but opted to rush money out to people with minimal oversight, as opposed to laboriously vetting each application.

According to Blake Hall, CEO of ID.me – a fraud prevention service, America has lost over $400 billion to fraudulent claims, with as much as 50% of all unemployment payments possibly being stolen.

Of that, up to 70% of the money stolen by impostors ultimately left the country according to Haywood Talcove, CEO of LexisNexis Risk Solutions, who ways “These groups are definitely backed by the state.”

The rest of the money was likely stolen by street gangs domestically, who have made up a greater share of the fraud in recent months.

How it works: Scammers often steal personal information and use it to impersonate claimants. Other groups trick individuals into voluntarily handing over their personal information.

• “Mules” — low-level criminals — are given debit cards and asked to withdraw money from ATMs. That money then gets transferred abroad, often via bitcoin.

The big picture: Before the pandemic, unemployment claims were relatively rare, and generally lasted for such short amounts of time that international criminal syndicates didn’t view them as a lucrative target. -Axios

What’s more, unemployment fraud can now be obtained on the dark web on a software-as-a-service (SAAS) basis – similar to ransomware. Naturally, states without fraud-detection services in place are the top targets, however several states are beginning to employ more sophisticated measures to prevent fraud.

As Axios’ Salmon notes, however, “It’s far too late.”

Authored by Jesse Felder via TheFelderReport.com,

April’s inflation figures came in hotter than expected and [today’s hotter than expected CPI] only adds to that trend. As a result, you might think that markets may begin to price in an inflationary consensus.

You would be wrong.

As Nordea’s Mikael Sarwe tweeted last week:

🇺🇸 I note a growing consensus on FinTwit that sticky inflation is a consensus view. I doubt that. If it was, then the US 10-yr yield wouldn’t be 1.6%. Historically, such a low yield has been in line with 1.5-1.7% core inflation, ie the bond market believes the transitory story pic.twitter.com/7nWImwSXa4

— Mikael Sarwe (@MikaelSarwe) June 1, 2021

For those unaware, core inflation is double the figure historically associated with the current level of interest rates. Essentially, the bond market is betting inflation pressures will soon recede as the Fed would like us to believe.

Similarly, Michael Ashton tweeted:

US CPI swaps market still pricing transitory #inflation. Calendar year inflation extracted from curve: 2021 4.0%;2022 2.9%;then 2.4%, 2.5%, 2.5%, 2.5%, 2.4%, 2.4%, 2.5%, 2.5%, & 2031:2.5%. pic.twitter.com/HaOwW7v57i

— Michael Ashton (@inflation_guy) June 1, 2021

In addition, GMO noted last week that the stock market has also failed to reflect an inflationary consensus. In fact, the segment of the stock market most effective at protecting against inflation, energy and metals, trades at the deepest discount to the broader market in history.

‘With prices rising one might expect to pay a premium for inflation protection but energy and metals companies are trading at a discount of over 70% to the S&P 500 Index, the biggest discount we have ever seen.’ https://t.co/WjsxIQelBy pic.twitter.com/Yre5B6VDSE

— Jesse Felder (@jessefelder) June 2, 2021

In other words, the stock market is still pricing in disinflation. Confirming this view is the fact that, in contrast to the record discount in valuations of equity inflation protection, long-duration equities are the most overvalued ever, as noted by Richard Bernstein Advisors.

Long-duration #equities are the most overvalued….EVER! 2000’s valuation looks like nothing compared to today’s. (Chart: Empirical Research Partners) pic.twitter.com/X6tiUaWJQ8

— Richard Bernstein (@RBAdvisors) June 2, 2021

So markets of all kinds are taking the Fed at their word and buying the “transitory” narrative hook, line and sinker. This sets up a potential repricing event should inflation eventually prove more sustainable than the markets have priced in.

*  *  *

This post is based on an excerpt of a recent report featured on The Felder Report PREMIUM.

Australian fund manager BetaShares has officially dropped Tesla from its sustainability exchange-traded fund.

Chief Investment Officer Louis Crous said the company – which normally would be a mainstay in most “sustainability” funds – was dropped because of “ethical failures” on the part of Tesla, according to Business Insider. 

“Tesla is still definitely a carbon leader…but it has fallen foul of our [environmental, social and governance] screens which resulted in its removal,” he told BI.

He continued: “During May last year at the height of the COVID pandemic, Tesla reopened its factory in Fremont, California, despite the orders of the local authorities, resulting in quite a large number of COVID cases. New reports have indicated that there was a significantly larger outbreak than was previously reported, so we have numbers from one to 50 COVID cases related to the factory.”

The investment officer said he had been mulling the move “for a while” and finally dumped its $60 million stake after “new evidence came to light” and “controversies and reputation issues” arose.

The fund also took exception with Tesla’s environmental impact in Germany, where it is building a Gigafactory. 

Crous noted: “German media reports that Tesla’s factory in Brandenburg will consume about 3.6 million cubic metres of water per year, which is roughly around 30% of the total water in the region. Some experts believe this will lead to restrictions on drinking water.”

He continued: “In December 2020, NGO the Tech Transparency Project alleged Tesla has been linked through its supply chain to Lens Technology, which in turn is facing allegations of directly benefiting form the use of state-sponsored forced labor provided by Uighurs and other minority Muslim groups in China. At the end of the day, these are things we don’t really want to compromise on.”

BetaShares says the tone at Tesla starts at the top, and told BI that Musk’s behavior “does make a difference”. The fund says it reached out to Tesla with its concerns but has not received any response. 

Meanwhile, in its place, the fund still holds shares of Toyota. Crous concluded: “Toyota will remain in place because they haven’t been screened out for other reasons and that’s the only way you can look at it. Now, on the surface it might not seem like it represents the portfolio from that perspective, but this fund is more than just an environmental product offering.”

By Michael Every of Rabobank

Nemáme

US 10-year yields fell further again yesterday, in an even more insistent view that there isn’t going to be any inflation. We are now back to 1.50%, meaning a whole new set of people shouting about how we were going to 2% or 3% or whatever percent just a few months ago now have more-expensive-than-a-few-months-ago egg on their face. That is of course as the May US CPI release today saw a 0.6% m/m gain to pushing headline inflation to 5.0%, a 28-year high, and even core inflation at 3.8% y/y. 1993! Where you, and what were was your inflation experience back then?

I was about to find work in Slovakia, which had just split from Czechoslovakia in a ‘velvet divorce’. No threatened ‘sausage wars’ there, as between the post-Brexit UK and EU: but only because there weren’t any sausages. I recall walking round Bratislava’s crumbling old town center, empty at the weekend as everyone went home to grow food in their countryside plots; finding the restaurants or bars which were open; and playing the game of what was actually on the menu, as opposed to what was listed. (Which, due to the Czechoslovak equivalent of Goskomstat, contained the precise weight in grams of each promised ingredient in the dish.) The wait staff would never tell you: the tradition was that you had to ask line by line, and they would repeat “nemáme” (we don’t have any) until you got to what they did. One paid in Czechoslovak banknotes, which a few months later got Slovak stickers. And inflation was 26% even though demand had collapsed. Given everything was almost literally funny money, and that being 21, all I wanted was beer, fried cheese, and chips, which being made locally were cheap (and good), that didn’t matter to me – just to everyone else growing food at their chata (dacha) over the weekend.

The next year I went to work in Moscow on the promise (slash ‘lie’) of jazz clubs, grilled prawns, and Soviet champagne from a friend who later told me he just wanted me to have the experience. Indeed, the economic crisis was so much worse I was physically shocked. Everything was broken, rusty, or dangerous to touch. A bottle of vodka cost less than a bottle of water. People were drinking themselves to death, and falling past you from above on metro stairs. Long lines of babushky (grandmothers) outside metro stations in the snow held up yesterday’s newspaper, eyeglasses, or a single carrot; and many of them with PhDs in electrical engineering or such like. Shops offered little food, and you had to queue for each counter; calculate the price for XXXg of product X (based to 100g); get a chit; queue at the cashier to exchange the chit and cash for a receipt; and queue again at the first counter to swap the receipt for the goods – if you had calculated correctly. If not, you started again – and so on for each counter. Or one could take a metro ride for an hour into the city centre to buy the cheapest UK supermarket ranges at 4 times their normal price under armed guard.

In short, I know what supply-chain shocks, and “shock therapy”, and systemic inflation, and repressed inflation look like, even if long supressed. The guys who won the Cold War and say this is all “transitory” really don’t. So let’s hope they are right.  

As covered yesterday, the drop in US Treasury yields, and extended central bank largesse, makes short-term sense if a further US fiscal boost is less likely due to Washington DC realpolitik, which appears to be the case. And we can perhaps add to that list the 15% G7 minimum corporate tax rate, which Congress will have to sign off on, and yet Republicans don’t seem to like much. And, after getting all the right headlines, the UK wants an opt-out for the City of London (“because markets”); the EU might not be able to agree (for once); and China wants an opt-out too (“because China”). I did say when the news hit last week that this looked purely declaratory. However, as repeatedly underlined here, markets still face other structural shifts that will flow back to inflation longer term: 1) try throwing climate change and then reduced food supply into the mix; 2) and/or the disruption and race for industrial primacy in the Green New Deal/Build Back Better world which all major institutions, and most major governments, say is necessary to mitigate that risk; and 3) the links from both back to national security.

On point one, watch what the weather suggests for crop output this year in key producers. Moreover, striking closer to my stomach at least, Italian tomatoes are potentially about to rot in the fields because of a lack of cans to put them in – and we can expect a lot more of that due to the Bullwhip Effect. Meanwhile, yesterday China –where PPI hit 9% y/y– said it will ensure key commodity prices are kept stable, starting with coal. Logically, that means either: shortages in China (due to repressed inflation – 我们没有 being the equivalent of nemáme); shortages elsewhere (as China buys everything up, and then subsidises it at home – there was a lot of that kind of “soft budget constraint” thinking going on before 1993 in the Soviet bloc); or a policy that cannot work where global markets get to set prices (as did not apply in the Soviet bloc). Oh, and Beijing is also trying to set maximum property prices for good measure.

On point two, let’s see what the G7 has to say today — I will cover that key meeting in more detail then — but anyone who is anyone economically is going to be building their own semiconductors, at the very least. And if we then have too many of them, don’t expect economics to close some fabs back down: demand will have to be created to keep them open, one way or another.

On point three, US President Biden has struck down a Trump-era ban on TikTok and WeChat – which sounds bullish on US-China relations; until one sees the executive order which replaces it, as with much of the Biden administration’s thrust so far, aims at a more durable, comprehensive framework aimed at ongoing risk assessment and action against China. And again, we return to the G7 tomorrow.

1993 was also the year that saw the signing of the Maastricht Treaty in the EU, which has played a key role in the absence of any inflation there. And back in 2021, our ECBeebies expect today’s ECB meeting will see the deposit rate unchanged at -0.50%, the asset purchase plan (APP) steady at EUR 20bn/month, and the PEPP envelope unchanged at EUR 1,850bn. They do expect a “technical adjustment” to the PEPP pace, with a “slightly lower” pace through Q3, but acknowledge the risks are skewed towards a delay of any such slowdown.

But do we really have a clear idea of what is going to happen next on inflation, given so much of it is going to be so political? Nemáme.

US officials this week have been calling on Iran to immediately halt and turn around two of its warships believed bound for Venezuela. A trade and defense relationship between Tehran and Caracas has grown especially under the prior Trump administration sanctions on both countries. This has in the past year included Iranian fuel tankers engaged in sanctions-busting by delivering badly needed gasoline to Venezuela (Venezuela has abundant crude but derelict refineries for meeting domestic fuel needs).

Two Iranian warships, the Sahand and Makran recently rounded the tip of Africa for the first time, which is considered the farthest west that Iranian warships have ever gone. For the past week the US Navy is said to be tracking their movements, but on Thursday Iranian state media released footage of the ships as they traverse the Atlantic Ocean, in a direct “message” to Washington that they remain undeterred. 

Iranian media has released footage claiming to show the frigate Sahand in the Atlantic Ocean, one of the two warships the U.S. believes may be heading to Venezuela https://t.co/bozL5u6pkb pic.twitter.com/zMyfPKAl8g

— Dave Brown (@dave_brown24) June 10, 2021

Iran’s media described the video as confirming “the first presence of the homegrown ‘Sahand’ destroyer in the Atlantic Ocean.” 

According to a report from Politico, the pair of ships are carrying weapons to Venezuela – a hugely provocative move which the report suggests Maduro plans to use as a bargaining chip to gain sanctions relief. The report says that Biden officials are warning that the US will take “appropriate measures” to deter the “threat” to US allies in the Western Hemisphere.

“The delivery of such weapons would be a provocative act and understood as a threat to our partners in the Western Hemisphere,” an unnamed US official said in a statement to Politico. “We would reserve the right to take appropriate measures in coordination with our partners to deter the transit or delivery of such weapons.”

Here’s more from this week’s Politico report regarding the Iran-Venezuela alleged delivery in progress based on a deal believed to have been hatched during the Trump administration: 

The official did not specify the types of weapons involved, but last summer there were reports that Venezuela was considering purchasing missiles from Iran, including long-range ones, and aides to Trump repeatedly warned Venezuelan leader Nicolás Maduro against such a move.

The intelligence community, meanwhile, has evidence that one of the ships, the Makran, is carrying fast-attack boats, likely intended for sale to Venezuela, according to a defense official and another person familiar with the intelligence.

Below: Sahand and Makran, which are now believed to be in the Atlantic Ocean:

Yet the fact remains that the ships are in international waters – not to mention that the US sails warships, carriers, and submarines near Iran’s coast on a routine basis.

But in Washington’s eyes, Venezuela’s military being in possession of medium or long-range Iranian missiles would certainly constitute a “red line”.

“A significant demonstration of Iran’s naval capability and… a new foothold in America’s near abroad” is a rather alarmist way to frame Iran sending two boats on a route that humans have been able to sail since, like, Magellan https://t.co/DJTeQKeqGd

— Gregg Carlstrom (@glcarlstrom) June 5, 2021

Likely an occasional fuel shipment or two will make it past US Navy ships in the Caribbean, but the scenario of missile-transporting Iranian warships being allowed to pass seems highly unlikely. It’s increasingly appearing that there will be a showdown in the Caribbean, also as the US is reportedly putting Cuba on notice that it must not cooperate with the Iranian vessels’ passage through its territorial waters.

Traders bid up US equity futures ahead of the bell after a hotter than expected inflation print this morning…

The soaring CPI sent yields higher too…

Billionaire fund manager Stan Druckenmiller clarified the farce…”The market is not speaking right now on May’s CPI data and will not until the Fed stops cancelling market signals and at that point we will know.“

NEW: Famed investor Stanley Druckenmiller to @JoeSquawk: The market is not speaking right now on May’s CPI data and will not until the Fed stops cancelling market signals and at that point we will know. pic.twitter.com/Yz9iozp5iI

— Squawk Box (@SquawkCNBC) June 10, 2021

Will The Fed start thinking about thinking about tapering now?