Easton then said, "That is the largest drop, the steepest drop in the history since we've been releasing this issue." And just to make sure that the audience didn't miss these points, program host David Gregory said: "Last year the worst economic performance in the 55-year history of the Fortune 500 list ... companies' earnings dropped 84.7 percent, as you just said, from the previous year, from $645 billion to $99 billion. It's the largest ever one-year decline."

There's a big problem here, however. Losses are netted against profits, and one in four (126 of the Fortune 500) companies reported losses last year. In fact, Fortune calculated for me that the companies posting a loss for the year posted losses totaling $514 billion. (The 10 biggest money losers last year alone reported losses totaling $351 billion, led by AIG, which posted a whopping $99 billion loss.) The 374 Fortune 500 companies posting a profit in 2008 produced profits totaling $613 billion. This represents only a 19.5 percent profit decline from the 443 companies posting a profit the prior year (2007).

Every year, some companies lose money, and some of those keep losing money and go under. According to Fortune's data, throughout the past 15 years, one in eight of the largest companies posted a loss in a given year. During the the worst year (2002) of the last recession, which wasn't as severe as the current one, nearly the same number of companies (120) posted a loss. The total losses of these companies in 2002 were just under $300 billion, so that shows that years like 2008 are not very unusual.

During tough times, companies reduce their stocks' dividend payments, and that has been happening of late for sure. However, for the 500 large companies in the widely followed Standard & Poor's 500 Index, would you believe that their dividends paid per share last year increased 2 percent? Did you see that statistic quoted anywhere in the horror stories about corporate profits supposedly dropping 85 percent?

Now, S&P is forecasting that dividend payments in 2009 should drop about 23 percent (in the first quarter, they were down 16 percent versus the first quarter a year ago).

First-quarter earnings reports are coming in generally above analyst expectations. According to S&P, of the companies reporting first-quarter results thus far, operating earnings are running 19 percent ahead of estimates (but 18 percent behind first-quarter results from a year ago).

In addition to the fact that smart investors know that corporate profits really aren't down 85 percent, smart investors also know that the stock market is a forward-looking indicator. The price investors are willing to pay for stock now is based upon future expected earnings, not current earnings.