Given the headlines that have been streaming across every media outlet, most people wouldn't guess that real estate investment trusts (REITs) were relatively strong performers for the first quarter of 2008.

But that's exactly what happened. According (subscription required) to the Wall Street Journal, "a Dow Jones index of U.S. equity REITs posted a 1.4% gain in total return for quarter, out pacing the 9.4% decline in the Standard & Poor's 500-stock index."

Self-storage REITs were up 20% for the quarter. Huh? Who would have thought that self-storage would get hot!

The point is that it is impossible to beat the market based on following the news. Everyone knew real estate was going to be lousy -- and it was. But markets are a discounting mechanism, and the stocks had already been sold off to reflect the predicted weakness.

What will REITs do in the second quarter? I couldn't tell you. But for what it's worth, Ben Stein thinks they're a buy, telling investors in a speech that "I'm buying all [the REIT units] I can get my little paws on. These are God's gift to retirees."

According to a study written up in the New York Times (subscription required) this week, it isn't lousy management's frequent trading that's responsible for the poor performance of mutual funds. Nope, it's the investors who redeem their shares and force the funds to sell even if they don't want to. The study found that "liquidity-motivated" trades perform poorly compared to trades based on fundamentals.

Mark Hulbert, the author of the piece, suggests that investing in closed-end funds may be a way to avoid this problem, because they generally don't face redemption. In an exchange-traded fund, an investor who wants to sell shares just sells them to another investor. It's just like how selling shares of McDonald's Corp. (NYSE:MCD) would have no impact on the operations of the company.

And yet there's still a problem: Regardless of what any study says, mutual funds simply cannot, on average, outperform passively managed indexes. It's a zero-sum game. Before expenses, the average fund's performance can only be average. After expenses, the average fund is considerably below average. The fact that ETFs are almost always passively managed (rebalanced/adjusted once a year generally) is a large contributor to their outperformance. The fact that they are immune to redemptions by panic-stricken shareholders at precisely the wrong time adds to their value.

The more I study it, the more obvious I think it becomes: ETFs are probably better than traditional mutual funds for most investors.

Wall Street has the DJIA, Silicon Valley, the NASDAQ. Now gadget-happy geeks everywhere (yes, we resemble that remark) have their own benchmark: The Engadget Index. Announced today, our friends over at Engadget have assembled an assortment of their 50 favorite gadget stocks.



And today, on its first day of "trading," the Engadget Index was up $19.20 to $1552.94. Marked by especially good results from Sony Corporation (ADR) (NYSE:SNE) (up $1.54, or 3.78$, to $42.30) and Sprint Nextel Corporation (NYSE:S) (up $1.18, a whopping 6.66%, to $18.90), Logitech International SA (ADR) (NASDAQ:LOGI) (up $1.15, 4.58%, to $26.27), and Garmin Ltd. (NASDAQ:GRMN) (up $1.96, 3.70%, to $54.87). Advanced Micro Devices, Inc. (NYSE:AMD), up 3.22% to $21.50, is also worth mentioning.

Only one stock in the new index was down any noticeable amount: NEC Corporation (ADR) (NASDAQ:NIPNY), down 19 cents or 3.54% to $5.24.

All in all, a great first day! Did Engadget have any impact on these stocks? Would you have chosen differently? Head over to Engadget and weigh in.

As I start to type this story, it's 2:59 and the DJIA chart I just saw read 11999.97, the tiniest tick shy of yesterday's 12,000 milestone, and 11.76 points off the record close. [By the time I published the market had closed two points above the 12,000 mark.] I know, yawn! Everyone's doing the same story. Dow 12,000, milestones in history. Right?

Right, and wrong. Let's do something else here, in this time that seems fraught with cliche and over-valuation. So many Wall Street pundits are saying, watch out! There's a slowdown ahead. And surely, many of these valuations seem high. Too high. But in my opinion, there are just as many stocks that have room to grow.

I'm looking at the numbers and I've found five Dow stocks to stay away from, and five that may still have some legs.

Five with room to zoom:

• 3M Company (NYSE:MMM), $79.20 up 3.66% today; 52-week high $88.35; 52-week low $67.05. P/E 17.47. Latest quarter results show it is up 6% on LCD growth. I think that P/E is nice and low for a company which, despite its industrial roots, is really an innovative company that actually makes things that people want. A good 10% below the 52-week high sounds like lots of room to me.

I'm looking at my screen and I rub my eyes. Could it be? On the left-hand column I read a headline, "Slowing Economy Spurs Bond Rally." Over there in the side bar is the cute box that shows the Dow Jones Industrial Average and the S&P 500. The chart spikes peppily. "11610.55" is the bright number next to DJIA. "1330.60" reads the S&P 500 -- its five-year high. [Update: at market close, the S&P 500 had hit a brand-new five-year high of 1336.34, with the DJIA at its 2006 high and second-highest close ever, 16669.39.] The world is full of bright, happy green that seems to belie the sad economic data, the slow in advertising, the doom for American autos.

Could it be true?

It seems as if it is. One one side we have the DJIA and the S&P 500. The Dow's all-time high is 11,750 (140 90-ish points away), while the all-time closing high is only 11,722 (that's 111.45 52.61 points away from right now, if you're counting along with me). The S&P is raring to go, as well, creeping ever so slowly up towards its all-time high of 1,552 (although it's still 222 215 points away, 16.6% 16.1%). Strikingly, the current level is higher than the index has been for five-and-a-half years.

And yet, still, economy slumps, slows, dips, weakens. Why are consumers so confident, why are investors eagerly buying up stocks, while the rest of the indicators seem to warn them away? I've searched my brain for a creative answer, and can't discover one. What do you think?