What a difference a [election] day makes...

In the course of performing my day job, I had occasion to speak with two physicians, both of whom were quite concerned with how the economy will continue to effect their personal and professional well-being. After making a customarily stellar presentation of the merits of my product, the discussion segued to how - to paraphrase one of the MDs - Barack Obama's freshly-announced mortgage rescue plan rewards irresponsible borrowing, with the second quipping, "I shouldn't pay my mortgage for three months so I can get some help."

Whatever the merits of the President Obama's $75 billion mortgage program, it is self-evident that the markets appreciated it about as much as my two clients. The day after the program was unveiled, the Dow Jones Industrial Average reached a six-year low. But the events of the last 24 hours are of a piece with what has been going on since Election Day. Since November 4, 2008, all of the major indices have been off by anywhere from 17 to 22 percent.

The trendlines evidence the singular frustration of the financial sector, namely uncertainty about asset valuations. How should a bank value a mortgage when the terms of said mortgage are to be renegotiated at gunpoint? What is the intrinsic worth of securities that are backed by renegotiated loans, particularly when those who receive the loans are just as unlikely to be able to pay the new note as they are their current one? And who decides what TARP-infected banks and brokerage houses themselves are worth when the dust settles?

Of course the frustration extends beyond banking; the broader markets have observed the ham-handed manner with which Barney Frank et al. have dealt with financial institutions and the auto industry, and have concluded that they are dealing with a White House and a Congress whose strong suits are punishing their ideological foes (i.e.: anyone with an income over $60,000), but come up short on actually jump starting a struggling economy. The fact that Democrats appear to be much like a gaggle of school kids chasing a soccer ball into traffic only adds to the palpable lack of clarity in the equity sector.

Indeed, one could justifiably question if the intent is to fix the economy at all. (For his part, Obama could certainly do better than contributing to the climate of uncertainty.) To be sure, he said that things "would get worse before they got better," but I suspect that none of us thought that he would be doing so much of his own accord to make them worse. It all puts me in mind of Al Gore's smarmy line to the effect of "everything that should be up is down, and everything that should be down is up." After the 1992 election, George H.W. Bush was sent to his Kennebunkport Waterloo for presiding over an economy that Obama might rightly wish for. If only it were unequivocally clear that as much was indeed Obama's wish.