Zap!

Let's start with some comforting news: a lot of stocks are doing well. Despite awful headlines and a palpable fear, the average diversified stock fund has fallen a manageable 13% in the past year. Meanwhile, if you owned Philip Morris, Duke Energy and Ralston Purina in that period, you made money. Good money. Of course, those stocks killed you the two years before that, so nobody really loaded up with them. Still, it's a mistake to assume that everyone is losing his shirt in this bear market.

Lots of people are doing well too. Job creation is growing at a faster pace this year than in the final months of 2000. Inflation is tame, and interest rates are falling fast, lowering the cost of mortgages and car loans.

Still, for those of you who got creamed in the stock market last week, here's a little more comfort: you've got company. Lots of it. Such meager solace won't put Junior through college or send Cisco back to $82, but it sure helps the ego knowing that tens of thousands of people clung to their tech stocks as desperately as you did for the whole bloody decline. How could they not? For years tech stocks were magical. Unimagined wealth was yours simply for logging on to the New Economy mind-set, clicking three times and whispering, "There's no place like a good home page."

Boy, did we buy that line! From the end of 1997 through March 2000, some $112 billion flowed into aggressive growth stock mutual funds, the kind that load up on the Yahoos and Akamais. Investors anted up $52 billion to buy 585 tech IPOs during the same period--roughly the same amount spent on twice as many deals over the previous eight years. At the peak, just over a year ago, tech stocks accounted for 35% of the S&P 500's market value, up from 12% in 1995. It was a mania for the ages, and you were in the front row.

So where are all the dreamers now? Did someone ring a bell saying the jig was up, time to cash out? Nope. They never do.

Jose Aguayo, a New Jersey-based energy analyst, was one of those believers. He lost thousands in Lucent and WorldCom shares. "I felt very silly," he says. And chastened. Now the splurge money is gone, and Aguayo says he won't be going back into stocks anytime soon. His experience is common. Vaporized stock-market wealth is at $4 trillion and counting. The losses have engendered one of the fastest economic decelerations ever--from an annual growth rate last spring of 6% to near zero today. In a $10 trillion economy, that's a difference of $600 billion.

Right now, it's more important that folks like Aguayo buy socks--and shoes, and televisions and airline tickets--than stocks. Despite all the stock-market noise, consumer spending is still the linchpin of the economy. And scared consumers sit on their wallets. "We do not believe we are in a recession. But the economy is vulnerable to a decline, and the consumer is the key to preventing a decline," notes Steve Young, the director of asset allocation at Banc of America Capital Management in St. Louis, Mo. Want to help? Buy something. Buy two.