Janet Yellen Admits She May Not Know What She's Talking About

As Janet Yellen dispensed more gibberish about labor markets and inflation in a speech at the annual conference of the National Association for Business Economics, stocks drifted aimlessly, seeking some sense of direction from congress, the president, the Fed Chair, anybody.

The problem for the markets is that there isn't any other direction but down. In just the past few weeks, Houston, Florida and Puerto Rico and the Virgin Islands have been wracked by hurricanes, NFL protests became more important than the games themselves, Kim Jong-un and President Trump continue to trade insults. These are not exactly headlines or stories that make people confident about buying stocks, mutual funds, ETFs or any of the other wealth-enhancing products offered by the Wall Street swindle machine.

In fact, since the FOMC meeting came to a close last Wednesday, stocks have done nothing but go lower. The Dow Jones Industrial Average is down four straight days since the Fed confirmed that it would begin shrinking its balance sheet in October. Though the losses have not been great, they have been consistent. The blue chip index is off 128 points since closing at a record high of 22,412.59 on September 20.

The S&P 500 snapped a three-day losing streak, but only by 18 cents, finishing green for the first time since the Fed announcement. The NYSE Composite bucked the trend by making new highs on Friday, but has posted losses both days this week, and the NASDAQ finished higher on Tuesday, but is still down 42 points from FOMC day.

Yellen's remarks aren't of any help to markets seeking guidance. In here address today, she said the following:

"My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective or even the fundamental forces driving inflation."

Essentially, statements like those are not going to inspire much confidence. Parsing the quote, she's basically saying all of the Fed's assumptions about the labor market, inflation and even the fundamentals of the economy itself may be wrong.

Wow. Just wow. And people actually listen to this witch doctor of finance for guidance and direction?

What's amusing, or scary, depending on your point of view, is the current madness is just the warm-up act to the Fed's actual sales of MBS and treasury bonds in upcoming months, a global garage sale that will commence over at least three to five years. Anything less would rapidly throw markets into a death spiral because of the number of assets, the size ($4.4 trillion) of the balance sheet and the lack of quality in the offerings.

For now, markets are taking it in stride, slowly adjusting to the new paradigm of rising interest rates in an environment of low inflation, slack wage demand and slow to no growth in GDP, globally.

If anything, the officials at the Fed should trade in their accountant vizors for dunce caps because they're sending the economy down a black hole with experimental policies and solutions to problems that don't already exist. Judging by past performance, the Fed will find a way to assure the business cycle is complete by plunging the economy into recession.

You can almost count on it.

At the Close, Tuesday, September 26, 2017:
Dow: 22,284.32, -11.77 (-0.05%)
NASDAQ: 6,380.16, +9.57 (+0.15%)
S&P 500: 2,496.84, +0.18 (+0.01%)
NYSE Composite: 12,127.93, -13.64 (-0.11%)

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