On this day in 1989, once everyone stopped patting themselves on the back for bringing down the Berlin Wall, Secretary of Defense Dick Cheney lamented what East German freedom would do to defense contractors in the pages of the Wall Street Journal:

Investors yesterday took the defense stocks out and shot them … Defense Secretary Dick Cheney said he expects to make significant cuts from previously budgeted levels in both weapons and troop strength. Some Pentagon officials said he was looking to chop about $180 billion out of the defense budget over the next six years. Troop cuts in Europe suddenly seem not just possible, but likely …

To many people, all this is wonderful news. But not for defense stocks. “Obviously, these are war stocks,” said David Dreman, a New York money manager. “What’s good news for the world is bad news for them.”

The heavy selling in defense stocks may soon push them into bargain territory, several money managers and analysts say … The defense industry is “totally washed out,” said Mr. Dreman. “There basically are some good values in that group. Earnings are not going to nose-dive.” But he’s in no hurry to buy. “I’d probably wait for a few more months here. These companies are not likely to do much for a while.”

Fortunately, there was a silver lining:

Some people don’t think investors need to wait that long. The biggest enthusiasm yesterday was for E-Systems, which specializes in electronic surveillance.

“The more peace treaties we have with the Soviets, the more we need to verify that we are truly getting the force reductions we think we’re getting, and that the Soviets aren’t stashing tanks or missiles in a mountain cavern somewhere,” said Mr. Aseritis. Accordingly, he thinks E-Systems is a “screaming buy” if it dips below 30, as it did yesterday …

Shockingly, a mere one year later Defense Daily reported that E-Systems,

The Dallas-based developer of reconnaissance, communications and intelligence systems reported record year end sales, earnings, new order bookings and backlog of unfilled orders and a 50 percent increase in cash dividends.

Even more shockingly, one year after that the New York Times reported that:

Some analysts are advising clients to sell their holdings in military electronics companies like Raytheon and E Systems. The stock prices of the two companies, as well as that of the Loral Corporation, had risen sharply in the months after Iraq invaded Kuwait. Some analysts thought the beginning of the war was a good time to cash in on those gains and sell …

E Systems will also benefit from the hostilities in the gulf, Mr. Harris said. One of the company’s biggest programs is providing support services for two spy planes, the TR-1 and the RC-135. With the high level of surveillance of Iraq and Kuwait, Mr. Harris expects E Systems to report higher revenues and earnings in the current quarter. In the long run, E Systems is expected to benefit from the need for sophisticated surveillance gear to monitor Soviet compliance with arms-reduction treaties …

Not that anyone involved in these transactions is a war profiteer, mind you—they’re merely taking a lemon (the fall of the Berlin Wall) and learning how to make extremely profitable lemonade (the first Gulf War).