AHM crushed, down 90%

This event is spreading like a wind aided California wild fire. The repercussions will be felt like last weeks Countrywide Mortgage earnings report. Brace yourself. That said, as the financial sector transitions into nuclear winter...and the market takes some hits...think of the big picture asset allocation decision: Let's assume a million dollar base and how to invest in the current market environment:

1) Are you going to allocate a significant portion to fixed income?
2) What percentage will you allocate to real estate?

3) Assuming 1&2 are toxic, you are left with some combo of cash (money market or T-Bills), equities (non finance and real estate exposure), and commodities. You could certainly allocate to rare art, classic automobiles, stamps, and a host of other alternative type stuff, but that's not relevant when we are talking about big giant swaths of capital as it moves across the globe.

4) ultimately, a bid is in place for the "stock market": because most other asset classes are bunk. That's my conclusion. Therefore, you can panic out of stocks, but you have to ask yourself, where are you going to put the proceeds?