Wall St continues to drive me batty

From today's NYT:

The Dow Jones industrial average soared 230 points on Tuesday as Federal Reserve chairman Ben S. Bernanke calmed some fears that the United States was poised to nationalize major banks, wiping out shareholders. The gains came one day after stock indexes tumbled to their lowest levels in more than 11 years.

By 12 p.m. on Wednesday, the Dow was down 100 points and the broader Standard & Poor's 500-stock index was down 2 percent as investors again confronted the realities of a grinding economic downturn.

"Everybody was trading on emotion there, positive news, something to look forward to," said Dan Faretta, senior market strategist at Lind-Waldock. "Today we're giving back the gains. I think everyone's coming back to reality."

Okay, then. And when you come back to reality, where then do you go? How much more money can you take out of stocks and cram into your mattress? Many of the rest of us Joe Sixpacks are all quietly contributing billions day in and day out to 401(k)s regardless of "reality." We're told that this dollar cost averaging will work out for us in the long run -- and it does seem to make one think that this steady influx should insulate the market from you Wall St savvies who are all screaming like toddlers during an earthquake. Nevertheless the market keep falling.

Books such as Infotopia and the Wisdom of Crowds have suggested, compellingly, that experts can't get it right as often as the mob can, or chance can. From the NYT again, here's another confirmation of that:

THERE'S yet more evidence that it makes sense to invest in simple, plain-vanilla index funds, whose low fees often lead to better net returns than hedge funds and actively managed mutual funds with more impressive performance numbers.

Basic stock market index funds generally aspire to nothing more than matching the returns of a market benchmark. So in a miserable year for stocks, index funds may not look very appealing. But it turns out that, after fees and taxes, it is the extremely rare actively managed fund or hedge fund that does better than a simple index fund.

So remind me again why we pay the experts so much, while they run down the economy during their crying spells...?