Oh dear. The expected feel-good rally ran into a juddering halt, and instead morphed into a "sell the fact" on the Obama victory. Of course, pundits being what they are, they could obviously claim that yesterday's rally was "always" going to happen. The market rallies? An obvious result of the Obama feel-good factor! The market tanks? Having bought the rumour of an Obama victory (and its presumed beneficent impact on consumer confidence), markets were always going to sell the fact once he was elected.

Of course, such Harry Hindsight analysis is utterly useless, particularly when you're running risk. Your P/L tells you whether you had the right call. From Macro Man's perspective, he has completely disengaged from positioning in equities. For choice, he would have expected the feel-good rally to continue, so being flat was the right choice.

In any event, it seems like the grim reality of the global recession is swiftly intruding into the recent rally. The notion of "value" is a movable feast, and overnight news suggests that the earnings target is moving swiftly.....lower.

After last night's close Cisco guided down forward revenue expectations to levels well below prior expectation. Perhaps even more significantly, Toyota slashed its profit forecasts after japan's close this morning; the e-coupling dream seems a long time ago, doesn't it? While analysts are forecasting relatively little earnings growth in Japan over the next year, it nevertheless seems likely that earnings will fall quite a bit more than currently expected. Sound familiar?
Of course, central banks globally are trying to address the dramatic economic slowdown. Of course, trying to do something and actually doing it are two different things, and it is now probably time to exhume a word last heard in 2003: "traction." Specifically, the ability (or lack thereof) of policymakers' actions to gain traction, to have an impact.

So far, the Fed's policy actions have had mixed results. Bernanke and co. made a big deal about paying interest on reserves, as it would theoretically allow them to quantitatively ease while maintaining a nonzero funds rate. So far, that effort appears to be failing, despite repeated announcements from the Fed raising the level of interest (aka, the "floor" on the effective funds rate) that they will pay institutions depositing reserves at the central bank.

So far, it's not working.