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Market turmoil does not necessarily bring economic crisis, but it matters and should be addressed.

JOHN PORTER September 21, 2008

I spent Monday, Oct. 19, 1987, on the phone talking to anyone I could about the wild ride on Wall Street that day. I was an editor at a twice-monthly publication in Fairfield County, Conn., that covered the corporate community there and in nearby Westchester County, N.Y. By any measure, this was big news for us.

We wrote mostly about corporate mergers and the comings and goings of executives in our area. We did a lot of profiles and occasionally would write about the local economy and job market. Our job was to cover the things that a mid-level executive at a local company would want to know about but couldn't find in the national business press. But the stock market crash of Black Monday was national news with local implications, so we were all over it.

The 1980s merger and acquisition craze provided fodder for our news pages, and it gave our publisher advertisers eager to sell office space and other goods and services to ever-changing corporate entities. Black Monday was the end of that era. It meant that the business of tending to the needs of a hyped-up corporate community would soon change, and in fact would contract considerably.

Two years later, it was my own employer who turned out to be most affected. With a calmer corporate world licking its wounds in the wake of the 1987 crash, the demand for office space and a lot of other services in Fairfield County would ebb. With it, the need for businesses to advertise in our publication would also decline.

Our company would be bankrupt and gone by the middle of 1990. My wife at the time and I left our apartment in Manhattan to start a new life in what seemed an exotic place: Portland, Maine, where I'd landed a job with the local paper as a business reporter.

FEARING A DEPRESSION

There was considerable fear that day in 1987 built on a 58-year-old myth. Growing up, I had always been told that the Great Depression that defined the childhoods of my parents was caused by the stock market crash of 1929. That conventional wisdom, along with the belief that military spending during World War II ended the Depression, held considerable sway in 1987.

Maybe the best thing to come out of Black Monday 21 years ago was the lesson that, while the stock market and economy are tied to one another, they are not the same thing. Technical issues, including electronic trading and how the stock market and futures markets interacted, had a lot to do with the 1987 crash, but, at bottom, the merger frenzy – fed by federal tax policy and other factors – pushed the value of stocks up to unrealistic levels. The market and the economy it supposedly represented were out of sync.

Still, at the end of the day that Monday, I remember not really knowing exactly what it meant. It would be months before we knew how automated trading, arbitrage and proposals to change the tax treatment of mergers would conspire to drag stock prices down in a sudden, scary frenzy. I was worried, but not so much for me. I was still a single guy in 1987, dating my soon-to-be wife, but with little responsibility.

My father, on the other hand, was just a few years from retirement, and his future was more directly tied to investments in the market. I called him before I left work that day, asking if he was OK with what had gone down.

He wasn't concerned in the least. He and my mother had no intention of changing their retirement savings plan. No, they'd just ride it out and figure things would be OK so long as they tended to their daily financial concerns with the same Depression-era discipline that had gotten them that far. It worked, of course, and today this factory worker and his nurse-teacher-school administrator wife are comfortably and happily in the grandchildren business.

It was the right attitude then, and after a week of really scary headlines from Wall Street, it's the right attitude today.

I'm not saying that...