“Stop it – I have seen this movie before!” Last year, at almost this exact same time, all analysts, as well as journalists, brokers, house-spouses, and US senators were speaking with the authority of an economics Ph.D, and with one voice: productivity growth in the US justified sky high Nasdaq prices, and the business cycle was a thing of the past. In other words, wishes were horses and everybody, but everybody, was both an expert on the economy and the stock market. And if proof of expertise was needed, there were genuine, albeit paper, profits.

Today, everybody, including elevator men in India, is an expert on the US economy, and the deeply considered view is that, at best, the US economy is on a long road to nowhere. Further, that V-signs are for birds in flight, and that the US stock market, and in particular the Nasdaq, is a Kiwi. "Remember Japan" is the buzz-word. The comparison between the Japanese stock market, 1984-1989, and Nasdaq 1996-2000 is the favorite pin-up of the new experts. And history obviously repeats itself - so the next 10 years should be a deep funk zone for both the US economy, and its stock market.

Is it not the same movie? As both a practicing economist, and a fund manager, I must say that I felt a bit useless then - and now.

"The End" of the movie has been offered by the IMF, which, in its latest world report, sanctifies this gloom and doom view. Remember when the World Bank said in May1998 that the East Asian economies will stay forever in a prolonged recession? That was the bottom after the East Asian crisis. Now it is the IMF's turn to signal: when world babus emphasize the beginning of something to do with markets, it normally is the end - and vice-versa.

The US economy grew at an 8+ percent rate at the end of 1999; a year later the growth rate has collapsed to 1.5-2 percent. This quarter (April-June 2001), is forecast by Oxus to be the bottom of the cycle, with a growth rate close to 1 percent. The forecast for 2002 onwards is for US to converge to its new long-term growth rate of 3 percent. In other words, no recession, and a V shaped recovery, albeit not to the 4.5 percent plus growth levels observed in the late nineties.

As the decline from 8 to 1 percent growth indicates, there are parts of the US economy that are undergoing a genuine, big-time, recession. This downtrend has been most painful for the workers, and millionaires, of Silicon Valley - and their brethren in the rest of the world. It is a rich man's recession - high human capital holders, dot com vendors, producers of routers, software producers, and the experts spawned by the Nasdaq boom - new super profit fund managers, new economy stock analysts etc. (Their Ketan Parekh's!) The people working in these areas are not part of middle-America mainstream. Mom and Pop America never participated much in the bubble, and so there is no wealth effect to worry about. The S&P 500 is down only 11 percent year on year, compared to 43 percent lower for rich America's Nasdaq.

For almost a decade, employment in the manufacturing sector has been contracting, and that in the service sector expanding. This was a natural outcome of both globalization and the emergence, and maturation, of the new economy. The two effects are now close to completion. A two sector model (old and new economy) in a process of transition to a new equilibrium can to a large extent explain the stock market bubble, the productivity explosion, the bust of the bubble and the ensuing rich man's recession. What this model does not forecast is that this growth recession will be substantially different than past such recessions over the last 20 years.

An important reason why this time it feels a lot worse is because PLUS (People Like US) are the ones most affected. Who is writing the story about this invisible US, and global, recession? The PLUS people - around the world. They owned the stocks, their wealth exploded and imploded, they changed jobs from old economy New York Times to new economy AOL.com, and they are now losing their jobs. Hence the noise and the fury. The painful transition is nearing completion, but it is a good human-interest story - especially since it is about those wealthy 20 something millionaires who are now getting, some say deservedly, their chance to be human. A rightful correction to a revolutionary change, but by no means the end of the world, or the end of the PLUS people.

But there is no reason to stop believing that these former millionaires are no longer the best and the brightest. Cisco and Intel maybe shunned today, but does anybody doubt that there is not a world out there wanting faster computers, better Internet connections, voice activated e-mail, and something else that is unthinkable today (which is why I cannot describe it). The world will go on, as will the technological revolution. Therefore no reason to think that the present rich man's present problem will shake the world into a long enduring economic crisis.

Is there any evidence, besides the above speculation, that this is a rich man's recession? One can examine several indicators the quarter prior to the darkest hour of the last recession, Oct-Dec. 1990 - and the data for the first quarter, 2001. Since this, the second quarter, is forecast (by Oxus) to be the worst, and since in a few hours the all important report about US employment will be out, prudence might dictate that one should wait. But the contention here is that regardless of how bad this report turns out to be, the news will get better henceforth.

What do the data show? For no indicator are things significantly worse in Jan-Mar. 2000 compared to July-Sept. quarter, 1990 - and for several indicators, the situation is significantly better. Some are the same - most notably, overall job creation (payroll number) and the NAPM manufacturing index. Enough perhaps to suggest that things are just as bad now. But there are many Mom and Pop indicators which suggest a not so bad underlying economy - inflation, housing starts, construction spending, new home sales, car sales etc. Job losses are there, but their composition is now significantly tilted towards the rich man. And rich men can take losses in their stride - especially if they have been preceded by significant gains. So while a steep stock market decline can have a significant down-shifting effect, as it has, it is perhaps not enough to keep the economy of Gods chosen country down for long.

The stock market is meant to forecast, and sometimes accurately foretell. It is interesting to note that in the 1990 recession, the stock market (S&P 500) bottomed in October and the economy bottomed in the same quarter. What bets that the stock market which made a low in end March-early April is showing the same lead time this time around as well ? Oxus is betting with the US stock market. So grin and - do not! bear it . It will get better - and soon.