Why is the Fed in Jackson Hole and I'm Not?

A reader asks: Why is the Fed in Jackson Hole and I’m not?

Archer replies: Some years ago there was a story about the Port Authority of New York and New Jersey and a parking deck. It began by noting that the Port Authority was staffed by the best and the brightest, the bureaucratic elite.

It went on to describe how the PA was in the midst of building a new deck somewhere out in Queens. Just as they’re painting the lines on the spaces they discover a problem: there are no access roads; it’s a parking lot without portfolio. The story concludes: “It takes an especially gifted cadre of bureaucrats to create a disaster of this magnitude.”

Indeed it does. But that’s not to say our public servants don’t deserve a good place to vacation. After all, you can’t think big thoughts at the airport Marriott. So there they are, guided by to Wyoming by the lodestar of the economic “data.” Not that the data is all that clear. Speaking in Jackson Hole, the Tetons rising in the background, Fed Chair Powell said, “As is often the case, we are navigating by the stars under cloudy skies.”

It’s amusing to think that there might be an astrological aspect to the formulation of Fed policy. “Hold on a minute,” Powell might say to his fellow board members before a vote, “while I go consult the Lord of the Second House.” And it would explain the attraction of the mountains; at an elevation of 6,300 feet, he’s that much closer to the heavens.

Late last year, Henry Weingarten, managing director of the Astrologers Fund, was predicting a bear market for 2023. So far, no dice. But like anyone making a lot of predictions he has occasionally been right, and Weingarten does have his fans. As a 2018 Bloomberg story put it, “Even odder than the existence of the Astrologers Fund is its ability to attract the interest of non-lunatics.”

In his book, The Drunkard’s Walk: How Randomness Rules Our Lives, Leonard Mlodinow writes that “perception requires imagination because the data people encounter in their lives are never complete and always equivocal.”

True enough; there’s a lot of ambiguity out there. And it’s in the use of imagination to fill in the gaps that things get complicated. You might look at the data and imagine a wage / price spiral and inflation raging out of control. Someone else might see high interest rates crushing the economy and throwing everyone out of work. Maybe others see signs that Chinese commercial real estate market is about to crash, and that it will pull the rest of the world down with it.

In his comments, Powell suggested something a little more prosaic. “At upcoming meetings, we will assess our progress based on the totality of the data and the evolving outlook and risks. Based on this assessment, we will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data,” he said.

How much do you have to pay someone to fly out west and say that? Fortunately, not that much. But still.

Here again, a lot is left to the imagination. Does it take a village to generate these kinds of insights? Maybe. Maybe that village is Jackson Hole, maybe it’s Aspen or possibly Gstaad. Sometimes the only way to get there is on a G-5.

Location. Location. Location.

Woof!