Sighting: The Year of Wall Street's Fallen Idols

"Millions of Americans are reeling from investment losses this year. For many, the financial cost of the red ink is only part of the misery. They're also kicking themselves for the losses.

"Maybe you feel you invested too much. Maybe you feel you should have invested in different assets. This may prove scant consolation, but it is worth noting: Through mid-November, the best of the best have done no better. So go easy on yourself.

"Marty Whitman, the legendary septuagenarian who co-manages Third Avenue Value, has seen crises come and go. There are few you could trust more in a panic. But his fund has almost halved this year. Bill Miller, the famous manager at Legg Mason Value, has fallen by nearly 60%. And that's not even the worst of it. Miller's more flexible, go-anywhere fund, Legg Mason Opportunity Trust, is down by two-thirds since the start of the year.

"Ron Muhlenkamp at Muhlenkamp, Wally Weitz at Hickory, Manu Daftary at Quaker Strategic Growth, Richie Freeman at Legg Mason Partners Aggressive Growth, Ken Heebner at CGM Focus, Christopher Davis and Kenneth Feinberg at Davis New York Venture Fund, Will Danoff at Fidelity Contrafund: They've all lost about 40% or more. Some have nearly halved.

"It is a shocking bloodbath. These are managers with some of the highest reputations on Wall Street. They have beaten the Street over many years, even decades. And even they got shellacked.

"What chance did you have?

"Even most of those who anticipated a crash got pummeled. Bob Rodriguez at FPA Capital has been very bearish for years, and was holding large amounts of cash in the fund. But he's still down 36%....

"There's a long-term lesson here for ordinary investors — if the smartest and best fund managers can't successfully anticipate a crash with any degree of confidence, you can't either. Time spent trying is time wasted. The smart money rarely spends much time very bearish, and with good reason. In practice it is almost impossible to predict a crash. And even if you are right about the direction, you will probably get the timing wrong. That may end up compounding your losses instead of preventing them."

— Brett Arends, Wall Street Journal, WSJ.com