Having gotten through 2008 with portfolios battered and confidence shattered, I guess we all pretty much know how Queen Elizabeth felt when she described 1992 as an “annus horribilis” for her and the other royals. For most of us, however, there is no consolation of Buckingham Palace or the crown jewels.

Indeed, many people at year-end are feeling more like Humpty Dumpty than anything else. All the king’s horses and all the king’s men couldn’t put their nest eggs together again.

For a population pummeled by bank failures, incredibly shrinking credit availability, widespread and growing layoffs, to name just a few of the financial missiles raining down on the country, the Bernie Madoff debacle was just one more “you’ve got to be kidding” event. An alleged $50 billion Ponzi scheme that lasted decades? You’ve got to be kidding.

Unfortunately, it seems that Madoff wasn’t kidding and by his own admission some $50 billion in funds invested by wealthy individuals and charities and hedge funds went down the drain. Maybe this is where Humpty really belongs.

It intrigues me how heart-wrenching the stories seemed to be in reports about the wealthy people who had lost millions by investing with Madoff, often on the basis of a personal connection or network of acquaintances. These were much more heart-wrenching than any stories, if they happened to appear at all, about poor or middle class folks who lost their all even though it was only a small percentage of the millions that rich folks lost with Madoff.

Is it really so much more devastating for a millionaire to lose a bundle than for a working class joe (not the plumber, please) to lose everything?

In any case, one of the things that is so astounding about the Madoff affair is that a lot of these rich folks put everything with him and, as a consequence, did lose it all. Hadn’t they or their advisors heard of diversification? What kind of mentality, no matter how trusting, puts all their eggs in one basket? This isn’t investing, it’s elementary school stuff.

Speaking of diversification, the bloom is probably a bit off this rose, however. What, after all, is the value of diversification when what it means is that you can lose money in every asset category you’ve chosen?

And when stocks were one of the prime areas with which to diversify and magnify gains, and when stock portfolios have been singed, burnt or totally destroyed, then diversification has lost quite a bit of its glow. Perhaps for a long time.

Same goes for real estate, which many people saw as being equally gainful as stocks, but somehow more secure.

It’s going to be difficult to get a lot of these former stock and real estate people away from their newfound security blankets–fixed funds backed by Treasuries. Who cares if I don’t make a mint (or at current rates, anything), at least I won’t lose whatever I have left.

Will the meltdown will be a wakeup call for the life insurance business, or at least that portion of the business that positioned insurance products to compete with equities, to get back to basics? You know, the basics of protection and guarantees and guaranteed protection and protected guarantees.

Some companies will claim, and rightly so, that they never got off that message. They’re looking pretty good right now.

I’m wondering whether other companies will be able to kick their habit of being equity me-too’s and find the same kind of adrenaline in the staid world of just being insurance. When the rest of the world is falling apart, being the one who promises–and guarantees–protection is like being the one in the catbird seat.