Good security sparks a rebound

Posted by William Neikirk at 12:47 p.m. CDT

After hearing the news from London about the terrorist plot to blow up American airplanes, the thought crossed my mind: "Oops, there goes my 401(k) again." Admittedly, I am more conservative about investments than I was before Sept. 11, 2001, but still this incident had a definite bearish tone to it.

I braced for the market opening, and indeed the Dow-Jones industrial average and the Standard & Poor's 500 fell in the beginning. Then when it dawned on people that British authorities had arrested the main plotters, the market rallied.

As I write this, the Dow and the S&P are in positive territory. They could still close down before the day is out, but it appears that investors have not panicked about this incident. Even airline stocks rebounded from a sharp plunge, though it is not clear this recovery will last over the next few weeks.

The news provides a lesson. In this crazy world we now live in, good security is good economics. There may be a big national argument over how safe we are, and how vulnerable we still are, but it is clear that security is a necessary and good investment. Terrorists not only want to kill a lot of people, but they also want to do severe damage to our economy. The Sept. 11 attacks did considerable damage on that score, hurting the airlines and the entire travel industry. Many jobs were lost.

It is remarkable that nearly five years after the attack, these industries have come back. It was not too long ago that the Dow flirted with an all-time high, though it fell back because of higher oil prices. The jobless rate is below 5 percent, and economy is still growing.

But the London incidents served as a huge reminder that we cannot let down on our vigilance. Had the terrorists succeeded, the economic damage would have been tremendous. That's the kind of edge we live on in the 21st century.