Historical Returns and American Idols....

Is anyone else concerned that the stock market is over hyped as a viable strategy for long-term investment/saving? And when I reference the stock market, I'm talking across the board -- including the most stalwart, conservative bellweathers you can find. My trepidation would also extend to mutual funds which diversify holdings across multiple sectors and risk profiles. In short, any way you skin this cat, I've got doubts.

I chose this topic for three reasons: 1) the Dow Jones industrials experienced their worst weekly performance in over four years last week 2) people born after 1970 have little (if any) faith in Social Security and therefore correlate their retirement planning to private investment opportunities (often the stock market) and 3) I recently endured one of those dreadful broker pitches which repeatedly referred to the all-but-guaranteed "historical returns" of the stock-market.

First of all, when someone references a historical period of time, my mental compass rewinds to dates before the Ford Model T and Seabiscuit. Secondly, I'm pretty sure brokers and financial planners are starting their "historical" analysis after Black Tuesday (October 29, 1929.) So in essence they are excluding THE crash, referencing data for the next seventy years, and then downplaying the last seven. Even if you include the lethargic years of recent memory, does this snapshot really offer us enough data to evaluate all things (returns) to come??? Wasn't Jonah hanging out in the belly of a whale for a longer interval of time than we're examining here?

At the time of this entry the Dow is hovering around 12,050, a mere 700 points higher than March of '00. When compounded, that is an annualized return of less than 0.75% and says nothing of inflation or real purchasing power. Speaking of which, a terrific overview of the Dow's performance in relation to other asset classes and purchasing power can be found in this recent Money & Markets newsletter article: http://www.marketoracle.co.uk/Article356.html.

I haven't even touched on the precipitous decline of the NASDAQ Composite Index which has shed over 50% of its value from a high of 5,132 in 2o00 (currently trading at 2,340). Needless to say, if some broker has been touting tech revitalization stories to you for the last five or six years, you're ROI is probably hovering around ground zero.

Do I have any answers? Not necessarily. Just because I've got gold bouillon buried in my closet, it doesn't mean that you should. But in an era when healthcare inflation is holding steady at 10% and residential homes are overpriced in many regions of the country, you'd better be looking to invest somewhere (overseas?). One thing is certain: our generation will live longer than any before it and we will pay exponentially more to do so. Those voting baby-boomers with Medicare bills and social security payments will be on our tab for decades to come.

In other news.....

I'm kind of hooked on American Idol. Yes, I said kind of. Even if that term underwhelms, I don't think I could ever acknowledge a full-fledged addiction. Just like the East German judge that must leave room for a more perfect triple axle, I too await more icing on my reality TV cake.

In all seriousness, with Idol you do get a nice combination platter. Namely: 1) some actual talent, as opposed to other reality shows 2) three interesting judges which, in my opinion, give pretty accurate (albeit sometimes difficult to stomach) feedback and 3) the great unknown: America's vote. Admittedly, the results mystify me at times. How Sanjaya made it this far I'll never know. Then again, when I view any montage of celebrity A-listers, I'm often a little dumbfounded by their ascent.

Still, I can't help but feel this crop of 16 remaining contestants is split pretty acutely down the middle. Half of these contestants could sing psalms to lift any building's rafters. The other 50% seem more qualified for high school talent shows or local, boy-band auditions. A little unnerving that we couldn't find more depth amongst the throngs who auditioned.

But unlike my earlier subject matter, here I'm willing to make a prediction. The guys of Idol are, by in large, a rather mediocre lot. Certainly the same can not be said of the ladies. And while Lakisha and Melinda appear to be the front runners, I'm going out on a limb. My prediction: Sabrina Sloan will adorn the next Idol crown.

I think she's got the look and the voice to win America's heart over in the end. On TradeSports.com, an online trading/gambling exchange for everything under the sun, Sabrina is currently listed at approximately 12-1 to win Idol. This, compared with 4-1 for Lakisha and Melinda, makes her a darn good value play in my book. Not to mention, Sabrina heralds from Studio City, CA -- that's got destiny written all over it.