When troubles on Wall Street really began to kick in, a few weeks ago, I talked a bit about 1987: I remember how bad it was in ’87, or alleged to be; how the sky was caving in. But it didn’t cave in. My lesson? “Don’t necessarily believe all the alarums. We have been through these things before and rebounded, handsomely.”
But then I talked to very wise heads, and they said, “Oh, no, Jay: There’s no proper analogy to 1987. This is much, much worse — deeper, more fundamental.” So I shut up — including in my own head — about 1987.
In light of this, I was particularly interested in this reader letter. Try it on for size. I don’t know what to think, but perhaps you do:
When I was a Wall Street broker (for nearly 20 years), I would often tell advice-seeking clients, “If I really knew what the market was going to do, why would I tell you?” (At least that’s what I told those clients who had a sense of humor.) So I have no idea what will happen next to the markets. But I do have three vivid recollections of the 1987 crash:
1) The media (led by the New York Times and Dan Rather) immediately began trumpeting the next Great Depression. Wrong.
2) On the weekend after the crash, my wife and I decided to go to one of the New Jersey malls and were pleasantly surprised to find that the stores were jam-packed — I guess the people on Main Street didn’t get the message about the Depression.
3) The 1987 crash was the best stock-buying opportunity of the past 20 years.
I’ve been back and forth about whether Congress should bail out Wall Street, but then I remember 1987 and think, “What if we had a financial panic and the public decided to ignore it?”
I wish I could do better than provide food for thought — I wish I had absolute answers. But this letter is pretty good food for thought, I hope you’ll agree.