The Bond Vigilantes Strike

 Most market commentators attributed last week’s bond market sell-off to the lack of specificity in newly installed Fed Chair Kevin Warsh comments during his post-open market committee news conference. Although the Fed voted to keep the Fed’s target rate unchanged, regional bank presidents Beth Hammack, Lori Logan and Neil Kashkari voted for an increase thereby issuing a challenge to Warsh who has said that “inflation is a policy choice.” Warsh did not give any guidance as to how the Fed will bring inflation down to its long missed 2% inflation target. Thus, short-term interest rates declined as long-term interest rates rose in a classic bear steepener trade.

 

To be sure, I am in general agreement with Warsh on the limitations of forward guidance. The markets should not be spoon-fed the Fed’s outlook as to the course of short-term interest rates. As I noted a decade ago, the Fed should not be the stock market’s fairy godmother. (See:https://shulmaven.blogspot.com/2016/01/memo-to-stock-market-janet-yellen-is.html )

 

My sense is that the back-up in yields has more to do with the return of the late 20^th century bond vigilantes in a 21^st century form. Simply put, the back up in the 30-year Treasury yield to 5.27%, its highest in 17 years and new multi-year highs in British, French, German and Japanese yields is telling us that something more fundamental is going on than a Fed meeting. What the markets are coming to grips with is the fiscal train wreck across the industrialized world, combined with supply shocks and an unprecedented amount of business investment associated with AI. Put bluntly, there is not enough funding to go around and the bond vigilantes sense this. There are more uses of funds than sources of funds.

 

In my year-end outlook I noted that the 30-year Treasury Bond would end this year at around 5.5%. (See: Shulmaven: 2026: A Year of Turbulence ) My guess is that target is likely to be exceeded before year-end and that it will likely have a 6 handle on it next year. Although the stock market rallied late week in response Citadel’s covering the hedge fund Situational Awareness’ margin call, it will soon turn its focus to the bearish forces emanating from the bond market.

  

My Review of John Ireland's "The Death of Trotsky"

 Stalin’s Long Arm

Stalin’s long arm reached into suburban Mexico City in August 1940 to assassinate Leon Trotsky, his former rival for power in the Soviet Union. Here author John Ireland examines how Stalin used his NKVD security service to infiltrate Trotsky’s inner sanctum to allow Ramon Mercader to smash an ice ax into the back of Trotsky’s skull thereby killing him.

Ireland tells us how the mother son team of Caridad Mercader and Ramon Mercader were recruited during the Spanish Civil War. Though both of them were stone-cold communists, they enjoyed the finer things in life. They were aided by Iosif Grigulevich, the NKVD’s super spy who assisted in the plot. (See: https://shulmaven.blogspot.com/2025/05/my-review-of-shaun-walkers-illegals.html )

 

The operation had a very long tail. For example, Ramon Mercador first had to seduce Sylvia Ageloff, a Brooklyn social worker who was the sister of one of Trotsky’s secretaries. It was the connection to Sylvia that enabled Ramon to enter Trotsky’s household.

 

Ireland goes into the background as to how Trotsky, the founder of the Red Army, lost his fight with Stalin. Trotsky was too much of an intellectual to get involved in the day-today nitty gritty of Soviet politics. On the other hand, Stalin coldly and methodically accumulated power to best all of his rivals. (See: Shulmaven: My Amazon Review of "Stalin: Volume I: Paradoxes of Power, 1878 -1928" and Shulmaven: My Amazon Review of Steven Kotkin's "Stalin: Waiting for Hitler, 1929-1941" ) Although, by the time Trotsky was assassinated he had little power being in charge of a very small sect revolving around his personality, Stalin was so paranoid that he feared him as a potential rival. Trotsky wasn’t the only one because during the Purge Trials Stalin finished off his old Bolshevik comrades in the early leadership including Zinoviev, Kamenev, and Bukharin.

 

So how did Trotsky end up in Mexico?  Stalin first exiled him to Turkey and Trotsky moved on to Paris and Soviet diplomacy forced him out. He then went to Norway. From Norway the new revolutionary regime of Lazaro Cardenas in Mexico invited him in. Initially he stayed with the painter Diego Rivera and had an affair with Frida Khalo, Rivera’s wife. Of course this did not please Natalia, Trotsky’s wife.  With so much tension the Rivera household Trotsky moved on to a villa in suburban Mexico City.

 

While there Stalin sent three assassination teams into Mexico. The first attempt failed, but not for the lack of trying; 200 bullets rained into the Trotsky household. The second attempt succeeded. After the assassination Ramon was jailed, a Stalin had no interest in pursuing the remainder of Trotsky’s following.

 

At times Ireland’s book reads like a spy thriller. However, at other times it gets bogged down in minutia. A better editing job would have been helpful. Nevertheless, we get a very real glimpse as of what happened to people who got on the wrong side of Stalin.

 

 

 

My Review of Maggie Haberman's and Jonathan Swan's "Regime Change"

 A Man in Full*

Much has already been written about “Regime Change.” New York Times reporters Maggie Haberman and Jonathan Swan have chronicled the first year of the second Trump administration which they rightly characterized as the start of an imperial presidency. Thus, I don't have much to add. It is an administration loaded with sycophants who are willing to enforce Trump’s retribution agenda. Indeed, Trump is presiding over an historic expansion of executive power that has no parallel in peacetime and has engaged in a pattern of self-enrichment that is without precedent.

 

There are more than a few nuggets in the book such as the use of the situation room, hitherto focused on national security events, to discuss the Epstein affair which for a while, paralyzed the administration. We also learn that Trump aide, Natlie Harper is with him constantly as she runs his Truth Social account and caters to his every whim.

 

Nevertheless, I expected much more from the book, especially from Maggie Haberman who has followed Trump since her days at the New York Post in the early 2000’s. ( See: Shulmaven: My Amazon Review of Maggie Haberman's "Confidence Man: The Making of Donald Trump and the Breaking of America")  In many respects the book reads like a long New York Times article, except most of the sources are on deep background. The authors put you in the room where it happened with direct quotes of the participants without attribution.  Unlike Trump’s first administration, the current one does not leak out of a real fear of retribution.

 

So, we are left with question, who talked to the authors?  Who benefits from the book? I can only guess, but those officials most interested in running for office in 2028 and in protecting their future reputation from the investigations that are sure to come can give us a clue as to who spoke to the authors.

 

My candidates are Vice President J.D. Vance, Secretary of State Marco Rubio, Chief of Staff Susie Wiles, Secretary of the Treasury Scott Bessent, CIA Director John Ratcliffe, and son-in-law Jared Kushner. These folks talked to Haberman and Swan on a situation-by-situation basis. They only spoke when it served their individual interests, par for the course.

 

What Haberman and Swan have done is to give us a good summary of Trump’s first year and it demonstrates his primary motivation is to avenge those who he perceived wronged him in his first term and the investigations that followed. Policy is secondary to vengeance, the accretion of power and self-enrichment.

 

*-With apologies to Tom Wolfe.

My Review of Randall Sullivan's "The First All-Star Game"

 All-Stars

On July 14^th baseball will celebrate the 93rd anniversary of the first All-Star Game to be held in Philadelphia. Here Randall Sullivan recounts the history of how the first All-Star game came to be along with digressions about the history of baseball, the Great Depression, The Negro Leagues, Franklin Roosevelt, Chicago politics, and the gangsters of the 1930’s. As a kid growing up in the 1950’s, I ate, drank, and slept baseball. I read all kinds of sanitized books about the early years of baseball and the great players of that era.

 

As Sullivan notes, the origin of the first All-Star game in 1933 had its roots in the Chicago Tribune and its sports editor, Arch Ward. With the country in depression there was a special need to hype up the 1933 Chicago World’s Fair. The idea came to Ward to have the “game of the century” that would feature the best players in the National and American leagues playing against each other with the players to be selected by a vote of the fans. To pull this event off it required the support of both league presidents, the Kenesaw Mountain Landis, the Commissioner of Baseball, Chicago Mayor Edward Kelly, and the support of President Roosevelt.

 

It worked and it all came together with Connie Mack, the manager of the then Philadelphia Athletics, and John McGraw, the manager of the then New York Giants piloting each team of all-stars. Of course, the great Babe Ruth played for the American League and let his team to a 4-2 victory with a home run.

 

I learned much about the players of that era. They weren’t quite the all-American choir boys, except for the great Lou Gehrig, they were portrayed in the books that I read those many years ago. For example, instead of coming out of an orphanage to play baseball, Babe Ruth was in reform school. He also had a gluttonous taste for food, booze, and women. He was a customer of brothels in every American League city. Nevertheless, after a night of carousing, he was still among the greatest of all time on the field and at bat.

 

My quarrel with the book is that Sullivan goes off on to many tangents that can lose the reader’s interest. Nevertheless, he tells a story of how baseball captured America’s imagination in the 1920’s with Babe Ruth along with Charles Lindberg being the two great celebrities of the Roaring 20’s.

 

Ukraine Goes on the Offensive

 Shulmaven has been commenting on Russo-Ukraine War since 2014 when the Russian “green men” seized Crimea. (See: https://shulmaven.blogspot.com/2014/03/the-ukraine-what-is-to-be-done.html ) The all-out Russian invasion began in February 2022 and if we date the war’s start to then, the Russo-Ukraine War is now longer than the fighting in World War I. Similar to World War I, the battlefield has been stalemated since the end of 2022 with a “no-man’s land” in the east separating the forces and on ongoing Russian drone/missile blitz on Ukrainian cities in the West.

 

However, of late, Ukraine has gone on the offensive with drone and missile attacks reaching into the heart of Russia. Both Moscow and St. Petersburg have witnessed the war coming home. More important, Ukraine has taken out more than 25% of Russia’s oil refining capacity triggering gasoline rationing that Putin was forced to admit last week.

 

Under severe wartime conditions Ukraine has built up the capacity to mass produce long range drones and missiles. What we are witnessing in Ukraine is a revolution in military affairs where ground forces have become immobilized by the fear of drone attacks and that swarms of low-cost drones can overcome Russia’s sophisticated air defenses. No region in European Russia is safe and perhaps we will soon see Ukraine set ablaze the west Siberian oilfields, a course I have long advocated.

 

Russia is now in a box. Instead of their once thought of inevitable victory, it is now slowly losing the war. Putin will have to accept this reality or attempt to widen the War into Poland or the Baltic states. His goal would be to force NATO into pressuring Ukraine to accept its demands. Of course, this high risk strategy could very well bring NATO directly into the war with unknowable consequences.

 

NATO is meeting in Ankara, Turkey next week. I am sure Ukraine will be a major topic of conversation. Given Ukraine’s battle-tested army and its advanced weapons production capabilities, it would seem to me that NATO needs Ukraine more than Ukraine needing NATO. It wouldn’t surprise me that while the meeting is in progress, Ukraine will launch its largest air assault on Russia to date.

Havana on the Hudson - Part 3*

With the results of last Tuesday’s primary victories for the TikTok Jacobins and the enactment of a rent freeze on one million rent stabilized apartments, New York City drove a few more nails into its coffin. The congressional primary victories of DSA members Claire Valdez and Derializa Avila Chevalier along with the anti-Zionist Jew, Brad Lander, defeating Congressman Dan Goldman demonstrated the power of Mayor Zohran Mamdani’s machine. To be sure he was pushing against a hollowed out Democratic Party. Put bluntly the socialist left in the Democratic Party is copying the Tea Party/Trumpian takeover of the Republican Party a decade ago.

 

Of particular note is that Chevalier is a stone-cold communist of the third world variety.  My guess is that she would take what I just wrote as a compliment. She doesn't beleive in prison terms for murderers. Her political support comes not from the Black and Latino populations of her district, but rather from the white intellectual leftists that seem to have found a home in New York City.

 

As expected, the Rent Guidelines Board froze rents on one million apartments under its authority. Because most of the rent stabilized housing stock is old, the likely outcome of a rent freeze would be speed up the deterioration of the buildings. Indeed, the not so hidden agenda of the Mamdani is to bankrupt the existing owners to enable the city to buy up the buildings.  Recall that the city is already the biggest slumlord through its housing authority.

 

While New York City seems to be prospering on the surface and benefitting from the Wall Street bull market, beneath the surface the socialist termites are eating away its foundation. So, just as the speed of the socialist takeover seemed to surprise, so too will the speed of the city’s demise. Havana here we come.

 

*-   See: https://shulmaven.blogspot.com/2025/11/havana-on-hudson-part-2.html

The Fed Turns a Page: Warsh and Greenspan

Kevin Warsh’s first meeting as Fed Chair last week and the death of longtime Fed Chair Alan Greenspan yesterday signaled that the Federal Reserve is embarking on a new chapter in its history. The Fed is now turning a page as it leaves its policies for the first quarter of the 21^st Century behind. Under Warsh the Fed is abandoning its policy of forward guidance and with that the so-called “dot plots” that were introduced in 2012 which presented the forecasts of individual members of the Open Market Committee will soon go by the wayside. As a result, the Fed Put that worked as a floor underneath the stock market since 1987 has been removed. Look for more volatility in stock prices. As if on cue, the stock market is responding today. Over the longer term the four task forces authorized by Warsh, which will include outside members, may end up having a far more lasting effect on the Fed.

 

Ten years ago, I reviewed Sebastian Mallaby’s biography of Alan Greenspan so there is no need to recount his remarkable career here. (See: https://shulmaven.blogspot.com/2016/10/my-amazon-review-of-sebastian-mallabys.html ) In a nutshell a kid from the Washington Heights neighborhood of Manhattan rose to become the conductor of the global economic orchestra as I wrote then. Both Henry Kissinger and Henry Kaufman, my old boss at Salomon Brothers came from the same neighborhood. Something must have been in the water.

 

I met Alan Greenspan twice as an outside consultant to the Federal Reserve Board. The first time was in December 1991, when the Fed invited a group of real estate experts to discuss the then ongoing meltdown in commercial real estate. Greenspan listened and maintained a sphinxlike expression. Two days later he announced an inter-meeting 100 basis point cut in the discount rate and a 50-basis point cut in the federal funds rate. He obviously took seriously my comments and those of others on the gravity of the situation.

 

The second time was in December 1996 when the Fed called in several Wall Street equity strategists and few academics including Robert Shiller. The topic was whether or not the roaring bull market in stocks was getting out of control. A few days later Greenspan gave his famous “Irrational Exuberance” speech. When the formal meeting was over, I sat with him and a few others at a small table over lunch. There he gave me a marked-up copy with his autograph on “Comments on Credit,” Salomon Brothers weekly publication on the credit markets and the economy. He noted a small error. When I got back to the office I gave the copy to Robert DiClemente, the author of the report. Bob was flabbergasted that Greenspan read his work in such detail and he immediately had it framed. One of the secrets to Greenspan’s success was that he was very meticulous. He knew every data point in most economic series, both current and historical.

 

Under Greenspan’s leadership the Fed helped lead the U.S. economy into an extended period of moderate growth, with low unemployment and low inflation. Along the way he rescued the stock market after the 1987 crash giving rise to the Fed Put, organized the rescue of Long-Term Capital Management 1997, the Asian crisis of 1998. The whole period form 1982 -2007 was known as “the great moderation.” Unfortunately, it came crashing down with the financial crisis of 2008. Just as in the days of ancient Rome, a slave in the chariot of a conquering general would warn that all glory is fleeting, the ghost of Hyman Minsky should whisper in the ear of every Fed chair that “stability leads to instability.” I think Warsh understands that and let us hope he won’t be a slave to President Trump.

 

All that said, Alan Greenspan was a giant in the world of central banking. May his memory be a blessing.