Debra Goldman’s Consumer Republic

During the great explosion in equity ownership that marked the 1990s, watching the stock market became a form of mass entertainment. It still is, but these days the show is less like Who Wants to Be a Millionaire and more like Fear Factor. And among the scary stories emerging from the market morass, none is quite so disturbing as the tale of The Incredible Shrinking Nest Egg.

The media is filled with images of white-haired sixtysomethings whose evaporating investments have pulled them off the golf course and put them behind the counter at a fast-food joint. They’re the human face of the five-year lows in the market averages. And right behind them are the baby boomers, whom Time magazine asked on last week’s cover, “Will you EVER be able to retire?” Not when you thought you would, the story concludes. Not only has $7.7 trillion disappeared in the market’s plunge, but the returns of the Great Bull Run of the ’90s will not be seen again even after the market finds its feet. The experts’ advice: Scale back your expectations for your golden years.

That, of course, is the worst thing one can say to a boomer. Scaling back, lowering expectations, making do with less: These are not boomer strengths. Indeed, boomers’ sense of entitlement provided much of the psychological fuel for the bull market that was never supposed to end. Yes, the mythic figure behind the dot-com bubble was the baby-faced entrepreneur, the nerd who started a business in his dorm room and retired at 31. But they—all 12 of them—could not have done it without the millions of boomer saps who were the true engine of our mad ride toward Nasdaq 5000.

It hardly seems a coincidence that the beginning of the longest bull market in history coincided with the boomers’ early middle age. As the ’90s commenced, there they were, in their 40s and counting: parents with college-bound children, proud and indebted owners of McMansions, lifestyle hounds with weekly restaurant tabs in four figures. They were spenders, not savers, too busy living to the max in the present to worry about maxing out in the years to come. And their crow’s-feet and waistlines were signaling that retirement was no longer in the distant future.

Of course, the retirement pros pects are pretty dismal for a middle-aged guy or gal with no pension, $25,000 in life savings and a life style that Social Security cannot support. Surely there had to be some way for boomers to have their cake and eat it too. And lo and behold, there was! Who needs to save money when the market is returning 20 percent annually? And having made 20 percent on their money for one, two, three years, why not for 10 years? Forever? It sure beats self-denial.

So boomers believed, and believing made it so. Until it didn’t. That, after all, is what a bubble is.

Now that the bubble has been punctured, we keep asking ourselves the same questions: How could we have believed that profits did not matter? That the business cycle had been abolished? That the next big thing would be a company that sold pet supplies on the Internet?

But let’s say your 50th birthday is nearing and you have a 16-year-old daughter preparing for her PSATs, a second home on the lake and a negative savings rate. You wouldn’t ask too many questions if you were offered a magical tripling, quadrupling or more on your money in a matter of days. You would believe Ken Lay and Bernie Ebbers when they said they were opening new frontiers in capitalism. From great needs comes great faith.

Thus far, that faith remains remarkably steadfast despite ravaged 401(k)s, accounting scandals, self-interested stock analysts, incompetent corporate boards, grasping CEOs and outright larceny in the executive suite. Many pundits see these lapses as terrible blows to the public’s sense of trust, causing damage that could take years to repair. But it is more likely that the boomers will forgive and forget as soon as possible. With a mere 10 years between them and titular retirement age, they want to believe in the market.

Watching anxiously for signs that it’s bottomed out, they are a little like their younger selves, sitting in front of the black-and-white TV, clapping to demonstrate their faith in Tinker Bell. Indeed, a recovery may be delayed because too many investors continue to believe in the market’s power to enrich them. It’s just that the alternative—saving more, spending less, working longer—is too terrible to contemplate.