The stock market’s current, um, situation (pick your own favorite Wall Street locution: drop, skid, adjustment, slide, descent, plunge, correction, downturn, tumble, slump, downdraft) will have a lot of folks wincing anew when they open their first-quarter 401k statements in the coming weeks. Despite a decent rally earlier this week, the Dow Jones industrial average is off more than 10 percent since the first of the year. The technology-driven NASDAQ has dropped 25 percent this year and has lost a breathtaking 60 percent of its value since its New Economy fiscal-orgasmic peak in early 2000.

The decline may have started last year when the theory of the profitless Internet enterprise (think of it as the dot-commode) began unraveling. But the bear is now feeding on a shaky technology sector in general, as well as disappointing earnings and wavering consumer confidence across the economy. These are indeed troublesome times for investors hoping that extravagant market growth in the 1990s would persist long enough to allow retiring a decade or two early.

But wait—there’s good news too: Wall Street’s malaise hatches an irresistible opportunity to pounce on the cloying purveyors of stock market and New Economy boosterism these past few years. Even a pundit with his own stock-heavy 401k in the tank gets a certain musical lift out of the sound of technohype bubbles bursting. The New Economy, it turns out, looks an awful lot like the old one. Technology may march us inexorably ever forward, but sometimes it’s comforting to know that the worldasweknowit hasn’t changed as much and as rapidly as we thought.

From a Wall Street perspective, the poster boys for bull market bravado could be James Glassman and Kevin Hassett, who made a splash in 1999 with their hyperbolically titled book Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market. Glassman and Hassett argued that stocks, which had already seen dramatic growth during the second half of the 1990s, were still vastly undervalued.

Back in December 1996, when Federal Reserve Chairman Alan Greenspan famously warned of “irrational exuberance” in the stock market, the Dow stood at just over 6400. By the first quarter of 1998, as the Glassman-Hassett theory was being hatched, the Dow was edging toward 9000. A year later the Dow rose through 10,000 without missing a beat—and kept climbing. The 10,000 level, Glassman and Hassett wrote in March 1999, was “only the beginning.”

The essence of their argument is that stocks are greatly undervalued because investors have a distorted view of the “risk premium” associated with the stock market. Risk premium refers to the higher return that people expect in exchange for putting money into investments that carry more risk. Stocks generally are priced to offer higher returns than bonds because investors assume that stocks are riskier and more volatile.

Glassman and Hassett reject this assumption, preferring an argument developed by finance professor Jeremy Siegel of the University of Pennsylvania’s Wharton School that stocks are really no riskier than bonds as long-term investments. If this is true, then stock prices ought to be much higher—supporting a Dow of about 36,000, by Glassman and Hassett’s calculation—in order to bring stock returns in line with those of treasury bonds.

Other books appeared around the same time as Dow 36,000 whose titles implied stiff competition for business bookshelf space among market hyperoptimists: There was Dow 40,000 by David Elias, and Charles Kadlec’s Dow 100,000. But actually, Elias and Kadlec were playing an entirely different game—making long-run projections based on unexceptional applications of the market’s historical growth pattern, and assuming that the risk premium for stocks continues as before.

Glassman and Hassett, in contrast, think a Dow of 36,000 is justifiable now (or at the time they wrote the book, anyway). In their view, the stunningly high stock prices in relation to earnings that have so amazed us are simply evidence that investors finally “get it,” and are moving toward eliminating the risk premium for stocks. Glassman and Hassett figured this would take maybe four or five years, at which time the Dow would sit where it belongs in the mid-30,000s. But then the market went south.

Wall Street’s current doldrums do not conclusively annul the Dow 36,000 theory, but they sure make it look fanciful. The Dow’s slump and the NASDAQ’s collapse signal with clarity that markets will not sustain price-earnings multiples of the magnitude we’ve been seeing the last few years, much less the far higher multiples that Glassman and Hassett believe are warranted. Investors are plainly unwilling to sustain high stock prices on sketchy promises of future earnings or dubious prospects for long-term growth. The stock market’s risk premium is alive and well.

The downturn does more than just expose the folly of a few highly visible market cheerleaders (who stand by their theory, by the way, and now blame Alan Greenspan for market woes). It raises larger questions about the entire enterprise—or should I say religion—of New Economy techno-zeal that has consumed politicians and journalists, as well as financial analysts and business schools, since the mid-1990s.

As the Internet caught on and the stock market took off, breathless New Economy hype was a robust growth industry. One of the bibles of the Internet age, Wired magazine, defined the New Economy in June 1998 as a “revolutionary insurgency.” Wired’s Kevin Kelly wrote of the promise of “ultraprosperity”—a moment in history in which “the convergence of a demographic peak, a new global marketplace, vast technological opportunities, and financial revolution will unleash two uninterrupted decades of growth.” Former Microsoft muckamuck Nathan Myhrvold said the New Economy is “about rethinking and reshaping what has already happened...producing fertile ground for radically new ideas.” MIT management professor Thomas Malone wrote that new information technologies “are bringing us to a place where we can consider radically new ways of organizing work.”

But some funny things happened on the infobliss highway to New Economy utopia: The Webbed life turned out to be less compelling for consumers than everyone figured; stratospherically overvalued Internet stocks came crashing down to earth; corporate earnings forecasts turned gloomy; stock markets here and abroad swooned; and New Economy firms took time out from their “radically new ways of organizing” to rediscover an Old Economy favorite: aggressive layoffs. Venture capitalists rekindled their old habit of actually scrutinizing the profit potential of start-ups, and business school students turned their attention back to opportunities in banking and consulting.

Does it all mean there was—is—no “New Economy”? Wall Street’s current slump does confirm what most had suspected all along: that the Internet age, for all its technological marvel, did not repeal the business cycle. The technology-propelled bull market did successfully topple one of the less savory policy axioms of the late 20th century U.S. economy—the notion of a natural rate of unemployment that must be sustained to avoid spiraling inflation. Although the Fed had to be dragged kicking and screaming out of this mentality, a lesson of the last decade is that high employment and low inflation can coexist without Alan Greenspan’s head exploding.

If market prosperity during the 1990s has led to some nontrivial revisions in Economics 101 textbooks, it still doesn’t translate into the novel, uncharted paradigm of revolutionary proportions at the heart of New Economy propaganda. Yes, dramatic technology innovations have addicted many of us to the wired (and wireless) life, bringing big changes to life’s transactions and diversions.

But at the end of the day, average Americans are lucky if they can earn the usual 10 or 11 percent on long-term investments, and just as likely as ever to celebrate a market downturn with an unceremonious pink slip. On the bright side, you can apply for unemployment online in several states.