Yellen delivers the keynote speech at Jackson Hole today.  What does that even mean?  I remember being somewhat perplexed by the unclear significance of Jackson Hole, and am only slightly less perplexed now.  But hopefully if you've found yourself wondering "what's up with this Jackson Hole business," this will bring a bit more clarity.

First of all, from here on out, it saves time to simply say "J Hole."  This also sounds funny when you say it out loud.

With that out of the way, let's begin to understand J-Hole with an analogy based on you.  Do you have any colleagues that aren't necessarily great friends, but who throw a great recurring party every year?  Better yet, does the party adhere to a specific theme of sorts?  A clam-bake, a camping trip, a weekend of skiing by day and drunken Pictionary by night? 

This is the role that the Federal Reserve Bank of Kansas City (KCFRB) plays for their colleagues.  With the Federal reserve districts divided according to the following map, KCFRB doesn't have much by way of excitement.  But they do have one thing going for it: Wyoming.  It's pretty big.  It stays out of trouble, and it has this super picturesque and relaxing place called Jackson Hole. 

J-Hole is like the KCFRB's vacation house that it only uses once a year with a wide group of colleagues and their friends.  But instead of drunken pictionary (well, who knows... they could still do that), it's a time to come together and collegially and reflect on the year that's almost passed, and to discuss the important economic issues of the year ahead.

This has been a tradition since 1978, and at first, it was just one of those things that KCFRB did every year.  But past precedent has elevated this get-together as a venue for the Fed Chair to cut lose and tell the world his/her only slightly less meticulously-worded thoughts on where the economy and--more importantly, Fed policy--is headed.

In the past, important policy shifts have been alluded to at J-hole.  So now, markets have it up on a pedestal of significance that it usually doesn't deserve.  As is always the case though, we'll see what we'll see when Yellen takes the mic at 10am.