ANALYST WATCH: Baptism by fire

This massive erosion of the Nasdaq composite isn't the end of the world, but it sure seems like it to an entire generation of investors and analysts who've never seen anything like it before.

Oh sure, there have been some nasty corrections in the past 10 years. But when either the Dow or the Nasdaq pulled a real stinker, say a 200- or 300-point beating, the market showed amazing resiliency and would recoup those losses in a day or two at most.

The party would resume and everyone would congratulate themselves for having the balls to ride out that vicious six-and-a-half hour storm. They'd even buy on the dips. Sometimes on margin.

This time it's a full-blown tornado, terrorizing stocks of all sizes in every sector with equal tenacity. Even the pillars of this technology-stock dynasty -- the Ciscos, the Dells and Microsofts -- provide no shelter from this beast.

And you've got analysts in their 20s and early 30s trying to offer perspective and guidance on these technology stocks -- particularly Internet stocks -- who have never known a bear market, much less how to identify its tracks.

This wouldn't have been such a big problem 10 or 20 years ago, when investors tended to be older, wiser, and perhaps a bit less greedy. They'd seen some real sell-offs, not the 8 or 10 percent child's play that scares the hell out of today's traders.

Thanks to the bull market of the past 10 years, everyone assumed it was easy to make millions in the stock market. Some did make their millions. Others have seen their millions turn into thousands or even hundreds in the past eight months.

Flushed with stock option cash and fat salaries and disposable income that their parents could only have dreamed of, this new breed of investor genuinely believed he could only make money in tech stocks. The possibility of losing money seemed as remote as, well, a presidential election decided by less than 600 votes.

Thanks to 401(k)s and online accounts, more people are investing in the stock market now than at any time in our history. And most of these Johnny-come-latelies have gotten in only in the past four or five years.

So essentially we have the blind leading the blind here.

This is true of the media as well.

I admit that my age and experience covering the stock market puts me in the same category as these rogue investors and the analysts they follow. The past eight months have been just as shocking to me as anyone else.

Of course this all adds up to one gigantic mess.

You've got some inexperienced analysts guiding neophyte investors who read columns written by equally inexperienced reporters. I assume this is a pattern that's been repeated many times in the market's history, but never for as long or with so much at stake.

Even some of the old sages got sucked into this false sense of security, recommending companies that were only four or five years old and carried price-to-earnings ratios of 100 or 140. Nothing seemed too farfetched during this technological explosion.

In fact, you were crazy if you weren't buying these overvalued monsters. Friends and relatives and columnists like me were more than happy to tell you so.

Now here we all sit, crying in our beers and looking for someone or something to fix it. Everyone assumes this will all just go away, and the bull market will resume any day now.

But it hasn't happened.

"People are adjusting to lower revenues and equities expectations for 2001," said Donald Berdine, chief investment officer at PNC Advisors. "But there is no one to buy them on the other side. Why should you get in front of this freight train?"

It's a freight train, all right. Except the people driving the train have no clue where they're going, and the passengers don't even know they're on a train. Even the rails, the companies that make it all possible, are confused.

The profit warnings are flying fast and furious, and they'll be coming for a good while longer. Even companies that have somehow dodged this downturn are running scared. Might as well come clean now while everyone else is fessing up.

Take a look at some of these stocks: Yahoo! (yhoo), the Internet stock, at $40. Cisco (csco), the best stock I've ever seen, at $50. Intel (intc) and its 80-plus-percent market share at $40. Oracle (orcl) under $30. Lucent (lu) is cheaper than two movie tickets.

It's like a bad dream.

If there's any silver lining to be found in this enormous black cloud, it's that we're all getting either an education or a refresher course on fundamentals.

That might make all this pain worthwhile in the end.