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If the Fed is prompted by this event to take rates to where they are well below the two-year note, which is the most liquidity-generating possibility (a decrease of 100 basis points), you won't be able to buy the market. It will open too high.

If the Fed does something marginal, like another quarter point, you have to sell the rally because that move would merely be hastening what would have happened in October, and rates aren't low enough to arbitrage safely and make a lot of money.

If the Fed does nothing and the market opens up or anywhere near flat (2%), I would sell it. If it opens at 3% or below, I would pick at blue-chips, oils, oil services and defense stocks. I would not buy any stock that is up, though. Not enough is not known about the insurance books, and how much was laid off on others vs. how much was viewed as worth keeping, to trade those stocks with any degree of fluency.

Defense and oil stocks will have the most upward bounce. After the first bounce of the oil and oil service, I would sell those. That market is still in the slumps and this won't change it.

Defense stocks are best: General Dynamics (GD:NYSE - news - commentary - research) , Alliant Tech (ATK:NYSE - news - commentary - research) , Northrop Grumman (NOC:NYSE - news - commentary - research) , Raytheon (RTN:NYSE - news - commentary - research) and Lockheed Martin (LMT: - news - commentary - research) make the most sense. In that order.

The airlines, of course, will be affected by this disaster. I didn't like those stocks before, and I can't like them now. They have certain base valuations that they can fall to, but unless the Fed's antitrust policy changes because of this event, you can't expect a takeover to bail you out of what will be a year's worth of lowering of numbers.

Banks, if the Fed acts aggressively, will make money. Banks with brokers will be helped less, and pure brokers are the diciest banks of all. Among those companies with steady cash flow that, because they are a part of the S&P might be pulled down by sell programs (without Fed intervention), I like Pfizer (PFE:NYSE - news - commentary - research) , Merck (MRK:NYSE - news - commentary - research) and Philip Morris (MO:NYSE - news - commentary - research) among those.

Now, understand this: A successful terrorist attack like this is a giant price-to-earnings multiple-shrinking event. I watched some people on television (including a financial planner who has repeatedly given terrible, but calm and reassuring advice on television all year) saying that they would stay put, that this is a silent capitulation -- and I wanted to scream. This is not good news, it is bad news. World War III, if we get that, is not a buying opportunity. I would rather be in cash than in stocks for a war, and I am not going to say "Hey, look, we are a great country and I want you to show your loyalty and not sell."

I want to have more cash, not less. I want to have less exposure to riskier assets not more. I did not feel like this during the Iraq crisis because I was incredibly confident we would win that war and fast. Here, because of the protracted ways with which Israel has had to deal with terrorism, I don't want to suggest that this one will wrap up quickly. That's the analogue; not Pearl Harbor or Iraq-Kuwait, both of which stimulated the economy. This event will not stimulate it, unless the Fed cuts rates by 100 basis points pronto.

I can't tell you to do one thing, while I do another. If things go up, for whatever reason, Fed or otherwise, I want to take more off the table. Because equities are riskier and less rewarding than before. If I were at the hedge fund, I know I would be on the lookout for EMC (EMC:NYSE - news - commentary - research) or Sun Micro (SUNW:Nasdaq - news - commentary - research) who will now get big orders because major financial firms have to be rebuilt. That's like buying Home Depot after a hurricane. Always good for a couple of points in the rebound. Again, I mention that not because I am not being callous, but I am being asked what I would do and I am not going to say, "I would be doing nothing," When I was running other peoples' money, I could not afford to be above that kind of trade. I had to do what was necessary.

That said, I would not short. I said the same to Jeff Berkowitz. There are plenty of ways to make money without having to bet against companies crippled by this act of war. You readers know me by now. I have no desire to think about stocks right now. Not when there are memorial services to attend and families down the block to be comforted. But at what point do we let the terrorists decide that they can shut us on Wall Street down at their whim?

Never.