First inflated by cocktail-napkin business plans for dot-coms, the aftermath of that bubble bursting opened the first Bush term. Stocks plummeted. The economy contracted dramatically in the third quarter of 2000, followed by a full-blown recession in March 2001 and the horror of Sept. 11. Federal Reserve Chairman Alan Greenspan cut interest rates down to practically nothing and, with help from the Bush administration’s tax cuts and unbridled spending by Congress, created easy-money housing and credit bubbles during the Age of Froth.

The third bubble explosion in less than a decade has left us dazed and confused and thinking: “Can I ever retire?”

With that question in mind, I headed off to Boston to seek the advice of Nobel Prize winners in economics, and other financial savants, in hopes of finding out how retirement portfolios could be salvaged.

The general advice from the home of Harvard University and the Massachusetts Institute of Technology is that once you have picked a reasonable financial course, keep the faith. A mix of stocks and bonds and inflation-protected securities can do well over time if the economy is mostly healthy.

If you do it right, your portfolio needn’t keep you up at night. Robert Solow, 84, who won the Nobel in 1987, says he doesn’t know what’s in his portfolio and hasn’t worried about it.

“I just never paid any attention,” Solow said, who still has an office in the MIT economics department. His nonchalance, however, isn’t to be confused with no preparation.

Core Portfolio

Robert Merton, 64, who studied under Solow and won a Nobel Prize 10 years later, said what most good financial planners tell clients: Diversify across asset classes and the world.

With his portfolio in a global stock-index fund and Treasury inflation-protected securities, or TIPS, Merton is tapping profits and trying to beat the cost of living. He’s now avoiding real-estate investment trusts with commercial properties.

While Merton didn’t discuss his experience with the failure of hedge fund Long-Term Capital Management in 1998, he said he was glad he invested in TIPS, which are U.S. Treasury bonds indexed to the government’s understated cost-of-living index.

Merton, known for his research on options pricing, was one of the founders of LTCM, which had to be bailed out by the New York Federal Reserve and large banks when it threatened the health of the global financial system.

“I only lost 8 to 12 percent during a flight to quality,” Merton said of his recent investment in TIPS during the meltdown of the past few months.

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