The news is grim. War with Iraq seems inevitable. Both consumers and business are hunkered down. It is distasteful to think about the personal finance implications of war with Iraq, whether you are against the war, in favor of overthrowing the Iraqi regime, or unsure where to come down on one of the more divisive questions of our era. That said, there is no question investors are feeling vulnerable, and unsure of themselves-with good reason.

Take American government bonds, a classic safe haven from geo-political and geo-economic uncertainty. Certainly, the bond market has put on a rousing performance in recent years, beating out stocks over the past one, three, and five years.

Still, the bond markets “salad days” are over, says William Gross, manager of the world’s largest mutual fund. Mathematics alone suggests there’s little appreciation left with bond yields at 40-year lows. Accelerating fiscal deficits as far as the eye can see is a genuine long-term threat to bond market values. The Federal Reserve Board has been running a loose money policy to stave off a double-dip recession. When the economic recovery gathers strength-and it will eventually--investors will suddenly worry about a surge in inflation. Interest rates will spike up, and bond prices fall. Bonds are risky.

No, stocks are a far more intriguing money making prospect. Stock market valuations are reasonable following three miserable years, including the retreat of recent weeks. If the U.S. and Iraq pull back from the brink of war, a global sigh of relief will send the stock market spiraling sharply higher. If President Bush decides to unleash America’s armed forces on Iraq, nervous selling will probably push stock values lower than even war warrants. Investors will have an opportunity to snap up quality companies on the cheap. Of course, the financial payoff from this strategy depends on a short war--or a long-term time horizon.

And that leads me to the value of hoarding cash at times like this: checking accounts, savings accounts, money market mutual funds, short-term certificates of deposit, Treasury bills, and the like. If the military engagement and its aftermath are messy, the economy will almost certainly plunge into a double dip recession. Already the odds of another recession are ominously high following the steep increase in oil prices in recent months. Cash is king during economic downturns. Cash holds its value compared to other investments. Laid off workers and their families need quick access to their savings to tide them over until another job opens up.

Sad to say, if it comes to that circumstance, job loss may be the least of our worries as a nation.

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