The full scope of the technology carnage finally struck home with me today. We all know the Nasdaq Composite Index -- made up of all 4000 companies listed on the Nasdaq -- has lost more than 70% of its value from its high-water mark in March 2000, but I've seen a few things that have shown me just how drastic some of those losses were, and how fast some of the "anointed" companies of two years ago have disintegrated.

It is a miserable market out there. Not a whole lot of fun. I feel the same about the market as I did when it was at its peak: The most dangerous thing about it is that many of its participants are incapable of extrapolating forward an economic scenario different than the one we are in. Think about this for a second: How many professional stock analysts in 1998 and 1999 were warning that the economy would slow down? They were out there, of course, but the majority of analysts were projecting stock price appreciation as if the boom would go on forever. Does anyone else remember Juniper Networks (Nasdaq: JNPR) at 3000 times earnings? That was less than a year ago.

With this aura of economic invincibility came some corporate decisions that now seem indefensible. How about the fact that CMGI (Nasdaq: CMGI) president David Wetherell nixed a deal that would have merged Internet portal Lycos, now part of TerraLycos (Nasdaq: TRLY), into USA Networks (Nasdaq: USAI)? How about the purchase of BlueMountainArts by @Home (Nasdaq: ATHM) for $780 million, despite the fact that BlueMountainArts had shown no aptitude whatsoever at generating revenues, much less profits? Lucent (NYSE: LU), meanwhile, kept forking over credit to debt-ridden telcos while only one of the 38 analysts who covered it bothered to notice.

The mutual fund pitches were EVERYWHERE. Some $55 billion flowed into U.S. stock funds in the first quarter of 2000 alone, far and away the largest amount ever. Telecommunications companies racked up a total of $1.3 trillion in debt on the premise that the Internet provided them with a can't-miss opportunity. They missed. Everybody missed, because those few who did point out that there was no reason to believe the economic cycle had retired were dismissed as cranks.

Now there is no end in sight to the bad times. We're going to war with an enemy we can't even see, the airlines have laid off 133,000 people in two weeks, and consumer confidence -- which had stayed inexplicably high for the last year -- has finally dropped off. Perfect timing, too. Didn't you hear? We're the ones who are supposed to save the economy.

The economy doesn't need saving, really. What it needs to do is work through all that poorly deployed capital that flooded the market in the late 1990s. Some companies, even in the horribly distended sectors, are already there. I discuss a few such companies in telecommunications in this month's issue of The Motley Fool Select. We're now waiting for "then" to be "now."

And it will. The economy will rebound. I don't know timing, but the fact of a recovery is indisputable. No outside event has ever managed to keep the economy or the market down permanently. Heck, not even the surge of popularity of Menudo in the early 1980s did us in. And "Achy Breaky Heart" caused barely a flicker. Osama bin Laden? Bring him on.

But not every company will be there to take part in the resurgence. Too many companies that were launched in the 1990s were simply not built for longevity. They've lived hard and fast on other peoples' money. They won't be here when the sun comes out. It is simply not worth waiting out the bad times waiting for a rebound, because some of the most-loved companies of the past few years will not be there when we pull free from our hangover ne plus ultra.

So many investors -- professional, individual, money managers, hedge fund operators, pension fund operators alike -- made so many mistakes in capital allocation in the 1990s that it makes little sense to point fingers now. We cannot go back and make the oh-so-sweet Ariba (Nasdaq: ARBA) trade at $173. It's at $1. Deal with it.

Even those who manage the indices got it wrong. The data point I mentioned at the beginning of the article makes that case in point very well. I looked at a list of the current components of the Nasdaq 100, which is an index but can also be bought as an exchange traded fund as the Nasdaq 100 Trust (Amex: QQQ). It's so named because it is supposed to track the 100 "largest and most actively traded companies on the Nasdaq," but the component list includes some astounding things. Of the companies in the Nasdaq 100:

• one, Exodus Communications (Nasdaq: EXDS), is bankrupt;
• 19 trade as penny stocks with share prices under $5;
• seven, including CMGI, Exodus, and @Home, trade under $1 per share;
• 74 have lost more than 50% of their value in the past year, 52 more than 70% of their value, 24 more than 90%, and six more than 99% (which doesn't include some of the more bodacious all time highs from before September 2000);
• Of the 26 companies that have lost less than 50%, seven are "non-tech" and seven are biotech companies; and
• 12 companies maintain market caps below $1 billion.

It seems unbelievable that an index purported to be the biggest and the best of the Nasdaq would contain so many companies that are in a huge amount of trouble, but there they are. I hate to be the bearer of bad news, but a good deal of these companies are not going to make it. The cream of the crop are not going to make it. Once again, unbelievable.

I'll make this simple: If you have a Nasdaq company in your portfolio that has lost more than 90% of its value and is not making any money, you should probably sell it. Just sell it and take the remainder of your investment and save it for better days, better circumstances, and better companies. Your chance of making back even a small part of your investment is minimal, because the companies that are not making money are likely to need more funding, which will come at a steep price, if at all. Any subsequent improvement is not likely to help much.

Some people are going to ask where the [radio edit] such advice was before. Fair question. The answer is that it was out there, and it wasn't out there. I can claim some victories in having preached some caution -- including calling big-cap tech stocks "sucker bets" in early 2000 -- but never in a million years did I foresee Cisco Systems (Nasdaq: CSCO) dropping to $11 per share.

Perhaps Warren Buffett's most difficult-to-follow advice is "Above all else, don't lose." This means buying stocks defensively at all times, and selling them defensively when you must. With a great number of profitless companies, the "sell when you must" time has long come and gone. But there is still time to salvage something. Do so. There are strong odds that the price of staying put will be the remainder of your investment in these companies.

Fool on!

Bill Mann, TMFOtter on the Fool Discussion Boards

Bill Mann's favorite lacrosse move was "trip over your own stick." At time of publishing, Bill had beneficial interest in Cisco. The Motley Fool is investors writing for investors.