Jackson Hole Preview: Do Not Expect Policy Shift

Tyler Durden's picture


Via BofAML's Ethan Harris,

Gone fly fishing

The Kansas City Fed’s conference has been around since 1978, but it only gained notoriety in 1982 when it was moved to Jackson Hole, luring an avid fly fisherman named Paul Volcker. Since then, the conference has alternated between topics of market interest and more obscure themes, but one thing has been constant: the Chair’s speech on Friday morning. Chair Greenspan clearly relished the opportunity; indeed, in his last year as Chair, the topic of the conference was “The Greenspan Era: Lessons for the future.”

During the Bernanke and Yellen “era,” the conference continues to feature interesting research, but it has become less of a venue for communicating policy. The new Chairs want to move away from the cult of personality around the Chair in favor of a committee approach. This low-profile approach is one of the reasons Bernanke did not attend last year’s conference. Jackson Hole occurs just before an FOMC meeting (not to mention a payroll report) and signaling a shift in policy at the meeting would front-run the Committee.

In the new model, communication occurs through official channels that involve the whole committee. Indeed, the Fed has expanded these official channels. They now update their forecasts four times a year instead of twice. They have added funds rate forecasts, and they now have a press conference to explain each of these forecast changes. In this framework, the Jackson Hole speech becomes one of several speaking venues for the Chair over the course of the year. Sometimes it is important; often it is not.

This description may seem at odds with recent Jackson Hole events (Chart 1). Didn’t Bernanke often use the event to signal major policy changes? Looking back, the signals from the Chairman speeches are clearer in hindsight than in real time.


For example, Chart 2 compares the change in 10-year yields on the day of Bernanke’s speech at Jackson Hole to the change in yields over the rest of the year. Sometimes the speech provides a hint of things to come, but overall, there is no correlation between market response to the speech and the market movement over the rest of the year.

Consider the signals for each of the last four years.

2010: Leaning dovish Going into the 2010 conference, the US economy was losing momentum. We titled our weekly “One is the loneliest number” because we expected GDP growth to have a one-handle that quarter. In his speech, Bernanke focused on the logic behind policy rather than a specific road map, talking at length about the “benefits and drawbacks” of each policy tool. As we wrote at the time, “the speech buys time for the Fed to determine if the economy is weak enough to warrant action.” The Fed did eventually adopt QE2, but it wasn’t until three months later, after a long string of additional hints. The “urban legend” is that Bernanke clearly signaled QE2 at Jackson Hole; the truth is he nudged along an idea that was already in the works.


2011: Focus on fiscal Following the 2011 conference, we wrote, “as expected, Bernanke kicked off the Jackson Hole confab with a dovish view of the economy, but offered no specific promises for further policy actions.” The bond market rallied, but as Wall Street reporter Mark Gongloff wrote, “He really seems to be saying we are on our own for a while … that makes today’s rally a bit of a head scratcher.” No signal here.


2012: The case for more QE At this conference, Bernanke gave his most decisive Jackson Hole speech. The economy had been slipping, with both growth and inflation falling. Bernanke offered a strong defense of QE1 and QE2, while hinting that another dose was possible. This correctly signaled the policy shift at the September 13 FOMC meeting.


2013: The hole at Jackson In the Spring of 2013, Bernanke announced that he would not attend Jackson Hole for personal reasons, breaking a long-time tradition. Janet Yellen also demurred, choosing to host a panel rather than speak. This was part of a long hiatus from public speaking by Yellen in the run up to her vetting as a potential Fed chair. Over this period, New York President Dudley also did not speak. This is one of the longest periods with no comment from “the big three” in many years. In our view, it contributed to the extreme market mispricing of the likelihood of Fed tapering at the September FOMC meeting. As expected, absent speeches from either Bernanke or Yellen the conference was a non-event from a markets perspective.

2014: Hitting the trails, but no hiking talk

Going into this year’s meeting, it does not appear that the FOMC is leaning toward a policy change as in 2010, let alone on the verge of a big shift as in 2012. Instead, the Fed is in a bit of a limbo state as it waits for clear evidence that 1Q GDP was a fluke and convincing signs of stronger wages. With significant policy changes a long way off, and with the intense market focus on Jackson Hole, we expect the Fed Chair to try to say nothing interesting about the policy outlook.

Clearly, the conference topic — “Re-Evaluating Labor Market Dynamics” — offers plenty of room for discussion. Hence, if the Chair wants to be a bit more interesting, presumably, she will talk a bit about why she still sees a long recovery ahead in the labor market, pointing to the weakness in wages and broader measures of slack. In the past, the papers have been released to participants before the general public, creating some potential for a pre-conference market reaction. However, the papers usually stoke more economic debate than market action. The participants include the usual cast of critics who warn of inflation and asset bubbles every year — recall that in 2008, just before the markets and economy collapsed, conference participants were much more worried about inflation than about a credit crunch. This year, as in the past, criticism of the Fed is a useful “stress test” for Chair Yellen and her allies, but is usually a poor signal of the likely path of Fed policy.

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Fri, 08/15/2014 - 21:41 | 5100735 max2205
max2205's picture

Jackson hole is a shit hole

Fri, 08/15/2014 - 22:08 | 5100794 ChanceIs
ChanceIs's picture

Jackson Hole is beautiful.  A bunch of "beautiful people" from Hollywood flock there and drive up prices.  That might make it a s*&thole.  What mother nature did there is breathtaking.  Of course the Rockefellers built the Jackson Lake Lodge.  That in and of itself might justify your slur.

Sat, 08/16/2014 - 07:20 | 5101515 Arius
Arius's picture

Jackson Hole meeting is a great opportunity to have a quick peek on what policy makers are contemplaiting about the future ... you have to pay attention to every word, sign or angry, approval or somewhat disapproval look.... happy stock picking!

Fri, 08/15/2014 - 23:45 | 5101051 yogibear
yogibear's picture

Rename it to Yellen's hole.

Sat, 08/16/2014 - 08:17 | 5101563 doctor10
doctor10's picture

Expecting "the same minds that created the problem to solve the problem" compounds the existing insanity of those same minds "doing the same things over and over again expecting different results."

Fri, 08/15/2014 - 21:42 | 5100743 Bossman1967
Bossman1967's picture

Bunch of crooked bankers siting in a room hmmm ebola anyone? Maybe Isis and Putin will speak?

Fri, 08/15/2014 - 21:54 | 5100748 Reaper
Reaper's picture

To expect intelligence or honesty is for fools and the media.

Fri, 08/15/2014 - 21:50 | 5100757 dirtyfiles
dirtyfiles's picture

puppet for moppet show ...

Fri, 08/15/2014 - 21:59 | 5100774 q99x2
q99x2's picture

Someone please help Janet Yellen to go up my FAFSA.

Fri, 08/15/2014 - 22:01 | 5100782 J Pancreas
J Pancreas's picture

Eat crotch and die, Mr. Yellen.

Fri, 08/15/2014 - 22:05 | 5100784 ChanceIs
ChanceIs's picture

I was in Jackson Hole about this time of year back in '06 or so.  Dined at the Jackson  Lake Lodge.  The Lodge likes to hire waiters from all over the world for the summer.  You know.....good for international relations...exchange students...or some such.  Not a bad idea really.  After breakfast I asked the waiter to tell Bernanke to keep his hands off of interest rates.  He was....like....what the f*&k are you talking about.  I explained that in about one week he would be waiting on the most powerful person in the universe, and I wanted him to send a message for me.  He was...like...waht is the Fed???  I tried to expalin, but he said something like...'I will be back in Norway by then.'  They don't make exchange students like they used to.  Actaully I was rather pleased with myself.  Thought I was being witty - when in fact I was also deadly serious.  Ah well.  There is a bumper sticker which reads....'If you think education is expensive, consider ignorance.'

Dems indicted Texas Governor Rick Perry.  We have gone nuclear politically.  Watch the Chinese take over while the US politicians gouge each other's eyes out.  Of course the Chinese don't need the Dems and Pubs infighting for that.

Dare I say go Rand Paul????  Pray for western civilization.  The threat hasn't been so great since the Vikings sacked the monastaries on Iona.

Fri, 08/15/2014 - 22:13 | 5100806 Otrader
Otrader's picture

What dual citizen bankers want, dual citizen bankers get.  If TSHTF, they'll fly to the promised land in a heartbeat. 

Remember Yukos before Putin took charge?  I think they're still angry about that whole thing. 

Fri, 08/15/2014 - 22:41 | 5100871 Atomizer
Atomizer's picture

Israel, who poaches enormous amounts of US taxpayer funds from their paycheck. The Kosher Kike food aid used to subsidize Us taxpayer theft is also in the red each year. After the cash burn approaches zero, the Jews will ask for more monies and promise Mossad to take care of a geopolitical issue. Congressional members are so fucked, the hidden secrets are online. 

Enjoy your vacation Congress. Don't pull a Robin Williams stunt and hang yourself. 

Fri, 08/15/2014 - 22:16 | 5100817 Atomizer
Atomizer's picture

Why would they, more free money to propt up P/E. Who really cares? The handwriting is on the wall. Subsided Corporation era is coming to a end. 

Mark my fucking words. 

Controlling interest are scrambling. Who the fuck cares? One breath of a taxpayer stimulus plan or Bank TARP 2 will trigger unthinkable actions to a Government reaction. This United States of America is spiraling out of control. 

If you think this will work to change ideology, everyone has access to your private hiding spot. We can just kick Google in the nuts and begin dropping your hourly location for the peasants to locate you.

/stupid cunts trying to protect the bankers. 

Eyes are are on the ground. Make a pig noise before???? Oink, Oink 

Fri, 08/15/2014 - 22:18 | 5100823 Seasmoke
Seasmoke's picture

Will Bernanke be attending this year. He owes us a year.


Sat, 08/16/2014 - 09:52 | 5101694 Atomizer
Atomizer's picture

Depends, if he can make 250k for his speech. Then the answer is yes. 

Fri, 08/15/2014 - 23:06 | 5100894 Yen Cross
Yen Cross's picture

 Is this the  Wookie  thread> I'm getting killed as we speak>/////

  Free Beef Jerky?

     Hey, before I hit the mat.  Cable is going for another leg lower. Sleep well Bitchez

Fri, 08/15/2014 - 23:11 | 5100965 themadelksta
themadelksta's picture

This year's speech is titled: A better way to access fantasy football and porn while simultaneously buying bonds and mbs. A dialogue for the 21st century.

Sat, 08/16/2014 - 02:13 | 5101031 Yen Cross
Yen Cross's picture

 Surround yourself with "like minded people"

 Raise your standards! Strive for excellence!

  Take good care of yourself, physically, and don't let others drag you into their misery/

 Make lists of the things that make you happy!

  OK bitchez/

   When all else fails/ Hit the pub, and find some 3 dollar pole smoking "what ever"!

Sat, 08/16/2014 - 09:57 | 5101707 Atomizer
Atomizer's picture

Good motivational points. Mrs Atomizer has a few of those thoughts hanging from a wall in the house. 

Sat, 08/16/2014 - 21:37 | 5103584 notadouche
notadouche's picture

Surrounding yourself with "like minded people" is probably safe and fun but not exactly a choice that lends itself to challenging your mental acumen nor does it aid in fleshing out ideas in order to enhance and better.  How do you learn to debate contrarian thinking in a respectful and intelligent manner if you make a conscious decision to avoid the people holding those views.  

Like minded people congregating doesn't assure camaraderie any more than contrarians automatically being enemies.   Some of my closest friends hold polar opposite views and I find that we end up educating and learning from each other as opposed to disliking each others company.   I submit that you can certainly learn more from surrounding yourself with decent folks that happen to view the world through a different lens than your own.  Views are all about perspective and polar opposite views doesn't necessarily define either as being right or wrong. Views can be right and wrong depending on circumstance.  Very rarely do absolutes exist except in the case of mathematics.  

As long as all parties are decent, respectful, open minded people willing to actively listen more than just bloviate then you might find yourself in an extremely rewarding intellectual relationship.  

Than again you didn't exactly solicit my opinion so I hope you take in the manner it was intended.  The rest of your advice makes perfect sense to me. 

Sat, 08/16/2014 - 00:53 | 5101171 Salsipuedes
Salsipuedes's picture

Just remember, references to: "The lovely rose tint of the Tetons in the afternoon glow." = PRINT LIKE A MOTHERFUCKER!

Sat, 08/16/2014 - 00:55 | 5101174 Colonel Klink
Colonel Klink's picture

Jackson A-hole, enough said.

Sat, 08/16/2014 - 02:20 | 5101285 Yen Cross
Yen Cross's picture

 Hey Klink! Give this to your sister >(

Sat, 08/16/2014 - 05:55 | 5101444 Sorry_about_Dresden
Sorry_about_Dresden's picture

Such ghouls for even writing such drivel!

We will deal with the players the same way we always have: Arresting them dressed as women trying to escape the scene of their horrific crimes.

A few will, barely, feel the noose snap their neck since their comrades had already anesthetized them while sending them to their deaths..

Most will retire to Basel....linger at the hotel.....caressing fond memories of a distant past.

As time passes so to will those that remember them! we must assume

But not by choice mind you! But from treachery upon those remaining witnesses, deliberately disposed of to shield the cries of the billions the killers betrayed.

There will always be some, such as Bormann, who will be of such magnitude like the creatures who created them, so powerful they fade; like their handlers, into infinite luxury after the patsy is dead and gone.

Now that we are on this subject....might I ask, of all you; in the world who might know of such things?

What happened to Martin Bormann? The Rothschild's financed both the axis and the allied powers; their is no documentation, whatsoever, providing for Bormann's whereabouts or the disposition of the wealth of so many vanquished nations. There have been the most childish productions claiming the wealth of the NAZI regime vanished like a fart in the wind.

Since we have had no indignant demands from the Israelis we must assume their complicity in dividing the spoils of Bormann's wealth with respect to the state holdings Herr Bormann managed for the NAZI regime.

I give up to the assumption: Since Israel did not demand, Israel shared the plunder of the European conquest by the NAZI regime and worked with Bormann to divide these spoils, of so many vanquished country's to the benefit those who emerged alive.



Sat, 08/16/2014 - 07:32 | 5101521 buzzsaw99
buzzsaw99's picture

maybe they will speak about the upcoming UN-taper

Sat, 08/16/2014 - 07:55 | 5101544 yogibear
yogibear's picture

Their whole tapering was BS anyway, so they don't have to say anything. If they want to further inflate an already inflated market they could announce untapering.

Their backed in a corner with nothing left to do except run up their treasury holdings further at some point. It's not where they wanted to be 5 plus years into supporting the economy with massive printing.

Sat, 08/16/2014 - 08:32 | 5101584 Jack Sheet
Jack Sheet's picture

Another cabal writer crawling severally and separately up the asses of Greenspasm &co.
"conference continues to feature interesting research" my dick. Word clouds for the algobots.

Sat, 08/16/2014 - 09:47 | 5101679 SilverRoofer
SilverRoofer's picture

Getting ready to cornhole the taxpayer again at jacksons hole

Meet the new boss same as the old boss

Sat, 08/16/2014 - 12:55 | 5102352 moneybots
moneybots's picture

"...indeed, in his last year as Chair, the topic of the conference was “The Greenspan Era: Lessons for the future.” "


There are no lessons for the future.  Greenspan wrote in the 1960's, that 1920's FED policy lead into the Great Depression.

Greenspan doubled down on that policy.  Bernanke doubled down on Greenspan.  So here we are.  The lesson was learned in the 1920's.  So why are we here, again?  Because of people like Greenspan.  The lesson for the future in 1930, is that Greenspan would do it all over again- in spades.  So the lesson is that this will be repeated again and again, as long as there is a central bank.

Sat, 08/16/2014 - 13:01 | 5102375 moneybots
moneybots's picture

"Bernanke offered a strong defense of QE1 and QE2, while hinting that another dose was possible"


A strong defense, despite the fact they didn't work.  It is still not working.

Sat, 08/16/2014 - 13:07 | 5102389 moneybots
moneybots's picture

" ...she will talk a bit about why she still sees a long recovery ahead in the labor market, pointing to the weakness in wages and broader measures of slack."


One of the reasons for a long recovery, going forward, is the fact that we are nearing the end of the current business cycle and thus unemployment will rise before it has a chance to recover.

Sat, 08/16/2014 - 15:17 | 5102730 Jack4952
Jack4952's picture

The Jackson Hole conferences are, simply put. public relations SHOWS - media events put on for the press to the spew out to the public.

Just like going to the circus or a Broadway play or to a local strip club, expect no truth - merely a SHOW.


Sat, 08/16/2014 - 16:54 | 5102939 shadowboxer
shadowboxer's picture

...where's a lone gunman when you need one

Sat, 08/16/2014 - 23:10 | 5103821 AdvancingTime
AdvancingTime's picture

America imports around five hundred billion dollars more from other countries every year than they export. This means we have a giant trade deficit, when we add this to our enormous government deficit it is easy to see that we are living far beyond our means.

The Fed has been superbly entrepreneurial when it comes to Ponzi schemes or pseudo-economics hocus-pocus that has allowed the current situation to develop. The Fed  must at some point begin to ponder a real exit strategy and end the massive and corrosive stimulus that the economy has come to expect. To make matters worse little has been done to address our structural problems and make America more competitive, this will massively thwart growth going forward. More on this subject in the article below.


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