"When companies are forced to mark to market, they may be pricing securities on their books well below their value because there is no actively trading market, so they price it based on an irrational sale-i.e., the same kind of consequence of having to sell your house in 24 hours."

One of the bigger problems in this particular market, where every type of security seems to be so utterly, horribly correlated-marching in lockstep right off the cliff-is knowing what positions you can even evacuate to. Is your cash even cash?

D'Angelo had a client who was the CFO at a university, and wanted to retreat from her holdings and go to money markets funds-things D'Angelo pointed out were backed by pieces of commercial paper with now-dubious sounding names on them like Fannie Mae, Freddie Mac and AIG. This point was reinforced when the Reserve Fund, the nation's oldest money market fund, saw its largest fund "break the buck," and fall to less than a dollar per share in net asset value, one of the rare occasions that a money market fund lost money and was soon forced to freeze its accounts to forestall redemptions.
This cataclysm reverberated in the university endowment world and reframed the debate for the CFO client, who thanked her advisor for the sapient advice and stayed put in her investments rather than lock in losses.

"A lot of people don't realize money markets are short-term securities," D'Angelo says. "My client knows it, but she wasn't thinking about it when she was thinking about her money. The minute I brought it to her attention, she put her professional cap back on. They sometimes forget how smart they are and you have to go back and make them remember how smart they are."

Kresh has also gotten calls from people insisting he sell, even if there isn't anywhere good to go. "Where can we put your money?" he asks. "The two-year Treasury is paying 1.5%. My typical client through this week is down by a little more than half the market-21% to 22%-so if we move out of the market now and move into Treasurys at 1.5%, it's going to take 12 to 15 years to break even. So I get a CD at 4%. Then it's five to six years to break even."

You might not lose money with these, he says, but you won't get to jump back in and participate in the recovery either.

He points to the rally on October 13 of this year. "Here you had a day where the market earned four years' worth of return on your CD in one day. Do you really want to put your money in a place where you may be forfeiting years' worth of return in days' worth of market exposure?"

Richard Holbrook opened his firm Holbrook Global Strategies in Palo Alto, Calif., five years ago, and until June he says he was always fully invested. The current market, however, made him think twice, and he started to revert to cash positions during the summer that have now reached 80% to 85% of his equity portfolios. The prescient move has protected his clients and kept them happy.

"I do think there will be a snap back in that there always is," he says. "Right now I'm trying to figure out when that will happen. Nobody knows that."
The most immediate fallout from this is that many clients who might have been thinking of retiring will have to put off those plans, or in the worst cases, sell expensive homes for more liquidity. At best, they'll have to tighten belts and put off that trip around the world.

"I think all your pre-retirees that aren't high in the seven figures-who have one million or two million who is getting ready to retire-is going to have to reconsider unless there is a huge bounce-back," says Matthew Berquist, a CFP licensee and vice president at Intrepid Capital Management in Jacksonville Beach, Fla. "I just think anybody in this market that's got even 50% equity exposure is going to have a hard time retiring."