At 10:00 a.m. Eastern this morning, Federal Reserve Chair Janet Yellen gives her greatly anticipated opening speech at the Federal Reserve Bank of Kansas City's annual economic symposium held in beautiful Jackson Hole, Wyoming.
Today, I'm going to tell you what she says before she says it. If you're reading this after the speech, you can gauge whether or not I was right.
This exercise, "guessing" what Yellen is going to say, before she speaks, is important.
Trending: How to Thrive into Retirement... Despite the Fed
It's important because if I'm right, you'll know I wasn't guessing, and you'll know exactly how the actors in Jackson Hole are burying us alive.
And you'll know what's going to happen with financial markets.
Here's what she's going to say...
The title of the meeting this year in Jackson Hole, which is usually attended by the Federal Reserve chair, the world's central bankers, and economists, is "Designing Resilient Monetary Policy Frameworks for the Future."
The title of Janet Yellen's speech, according to the symposium's agenda, is "The Federal Reserve's Monetary Policy Toolkit."
So, first of all, I'll tell you the symposium is about covering central bankers' failed tracks and offering up a witch's brew of monetary concoctions that, if necessary, will be implemented in the future, just so the world knows these gods of monetary manipulation have our backs and will make everything alright, no matter what fears we have.
Excuse me while I laugh my head off.
Yellen's speech, and she's wearing the tallest, most pointed black hat at the barn-raising event, will be about how the Fed hasn't failed, how unemployment is better because of the Fed's policies, how the United States is leading the world out of global recession, and how, no matter how it looks, there are other tools the Fed can drill and thrill us with, just in case we're worried that what's not really been working stops working or implodes us.
All this is necessary because the Fed's credibility is in a ditch somewhere in Detroit.
On Aug. 25, The Wall Street Journal's Jon Hilsenrath penned a fantastic piece titled "The Great Unraveling: Years of Fed Missteps Fueled Disillusion with Economy and Washington." The subtitle was: "Once-revered central bank failed to foresee the crisis and has struggled in its aftermath, fostering the rise of populism and distrust of institutions."
Hilsenrath cites how steeply confidence in the Fed has fallen, saying,
Back when the cryptic Alan Greenspan spoke in tongues when he spoke at all, most Americans, and a good part of the world, thought he was some kind of monetary god. The economy was humming along and his mostly low-interest-rate policies seemed to be doing the trick. Of course, in hindsight, we know the original modern central bank cranks set us up for the financial crisis and Great Recession.
So much for black magic.
Don't Miss: How Near-Zero Interest Rates Are Killing the Economy
One reason the Fed gets it so wrong, so often, is their economic "models" are like trash trucks - garbage in, garbage out. They're consistently wrong in their predictions and prognostications. Still, people believe they have some black box that predicts economic futures. They don't, and they've proved that for decades.
According to Hilsenrath's article (which is impossible to argue with), the Fed:
...missed signs that a more complex financial system had become vulnerable to financial bubbles, and bubbles had become a growing threat in a low-interest-rate world; were blinded to a long-running slowdown in the growth of worker productivity, or output per hour of labor, which has limited how fast the economy could grow since 2004; and had no idea inflation wouldn't respond "to the ups and downs of the job market in the way the Fed expected.
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
So with all that in mind, and knowing the symposium is about "Monetary Policy Frameworks for the Future," and that Chair Yellen is going to talk up her toolkit, here's what she's going to say:
Here's what she really means, and what she's not saying:
Sure, the markets are flat, waiting with baited breath to whatever the witchy woman says.
There'll be some reaction.
If Yellen is perceived to be dovish, meaning she's leaning towards more easing, more stimulus, if necessary, markets will rally for a while. Maybe a few hours, days, or weeks.
If Yellen is hawkish, meaning she indicates things are so rosy a rate hike isn't off the table (she won't give a timeframe), markets will drop. Maybe a lot.
In the end, Janet Yellen's job now is to not spook markets. It's not about the economy, stupid. It's about the markets holding up long enough for the economy to prove they're not in bubble territory and that their lofty levels are justified.
Folks, there isn't enough time on any economic clock for that to happen.
Janet Yellen and the Fed, like all the world's central banks, believe they're gods and can corral the free market and manipulate the world spinning on its axis to their beat.
Words will never be enough to control markets when they decide they've heard enough.
That's what we have to look forward to, no matter what Janet Yellen says today.
Up Next: This Tech Could Save U.S. Elections from Voter Fraud
Follow Money Morning on Facebook and Twitter.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.