Money has also chased real estate. Mortgage debt has increased by $2.1 trillion since 2000 to almost $6.9 trillion at the end of the first quarter, according to the Fed.

Corporate managers are doing the same thing, with cash holdings exceeding $1 trillion according to the Fed. Research by Moody's Investors Service found that companies had cash on hand equal to almost one-quarter of their long-term debt, the highest ratio since 1969. The amount of cash was almost 1.5 times the amount spent on capital projects, an all-time high, Moody's said.

"Why are corporate managers being so cautious relative to available resources?" asked Richard Cripps, chief market strategist at Legg Mason in Baltimore. It's simple, he said: "risk aversion" in the wake of terrorism fears.

What could alleviate some of the fear and bring money out from under the mattress and back into the equity market? Professor Marcus says stability in Iraq, with a diminished U.S. role, would help. But don't stay up waiting for the capture of Osama bin Laden, he says. That might only provoke more attacks. And although the market rallied after Saddam Hussein's capture last December, those gains all but evaporated over the summer.

It has become a cliche to say "everything changed" after 9/11, but there's evidence to suggest it's true. Beyond the immeasurable personal tragedy of the attacks, the price of fear in the aftermath continues to extract its toll on all of us as reflected in the retreat from risk that sometimes ebbs, but remains ever present.
In keeping with TSC's editorial policy, Pressman doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback.

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