The Market Is Drunk

Like the oaf with a lampshade on his head at the end of a very long party, the market is headed for a hangover -- if, that is, it's not experiencing one already. Just check this chart for all of this year's stomach-churning action, and ask yourself -- given the overall downward spiral we've been on -- whether maybe, just maybe, an intervention might be in order.

Doctor's orders
As any psychiatrist worth his or her couch can tell you, we can only control our own actions. For all too many of us, that can be tough to do. For instance, we may choose to get active during troubled times and double down on Sunoco (NYSE: SUN  ) just as its shares began to slide -- all the way down to $38.83, as of Friday's market close.

That's more than 50% below its yearly high, a low-water mark exceeded by the likes of Sprint Nextel (NYSE: S  ) , AMR (NYSE: AMR  ) , and Lennar (NYSE: LEN  ) . Indeed, an investment of $1,000 made a year ago in any of those names would be worth less than $400 today. Similar chunks of change plunked down on financial concerns such as Washington Mutual (NYSE: WM  ) , E*Trade (Nasdaq: ETFC  ) , and CIT Group (NYSE: CIT  ) would be worth less than $200.

Ouch.

Just the facts, ma'am
Those facts, of course, could be excellent news for prospective investors with time on their hands and the inclination to determine whether this clutch of money-losers has hit bottom -- just sticking with the metaphor here, folks -- and is ready to sober up for shareholders. At these prices, the question is: Are these companies values or value traps?

If it's your passion to get to the bottom of fiscal mysteries such as those outlined above, it's time to hit the balance sheets, gauging top-line revenue growth (where, 2007 notwithstanding, Lennar looks like a strong contender), cash flow (Sprint deserves a look there), and earnings expectations (Sunoco boasts a double-digit forecast) against a dicey economic backdrop that, at least in the near term, seems poised to become dicier still.

However, if you already have a full-time job -- not to mention friends, family, and a plasma television you'd like to spend quality (and quantity) time with -- you probably want a solution simpler than balance-sheet number-crunching during your downtime.

Am I right? Am I right?
Here's a Foolish proposition: Complexity is the enemy of wealth. Thus, the best portfolio for the vast majority of us is a compact, low-maintenance lineup that can see us through up markets and down, en route to what the game of Life dubbed "Millionaire Acres" back when we were in our Brady Bunch heydays.

Not coincidentally, those are the premises behind the Fool's brand-new Ready-Made Millionaire service, where our no-muss, no-fuss mission is to enrich members by delivering market-beating performance via a compact portfolio -- and to do so in a way that aligns with Foolish values. To that end, we'll have plenty of "skin in the game." A million dollars of the Fool's own money will be invested in the Ready-Made portfolio -- but only after our members have had a chance to act on our recommendations.

The upshot? In addition to providing investment guidance, the Fool is a member of the service as well. When it comes to determining whether our low-maintenance portfolio will be managed with your best interests at heart, few details will ever tell you more than that one. Click here to give it a go.

At the time of publication, Shannon Zimmerman didn't own any of the securities mentioned above. Sprint Nextel is a Motley Fool Inside Value recommendation. You can check out the Fool's strict disclosure policy by clicking right here.


Read/Post Comments (10) | Recommend This Article (22)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 25, 2008, at 4:33 PM, brigadoons wrote:

    Wouldn't it be easy to chalk up the market as drunk and get rid of the guy with the lampshade? I've never actually seen a guy with a lampshade btw, but I'm not in the loop.

    I hope the market isn't that stupid.

  • Report this Comment On June 25, 2008, at 4:40 PM, tfirma wrote:

    I tried the Million Dollar Portfolio - it's down dramatically since inception. Tough to start something like than when the market is tanking. Not a bad idea overall, but I opted out because they make such smaller purchases percentage wise, that unless you're actually matching the portfolio dollar for dollar, you end up buying $1000 worth of this and a $1000 worth of that on say a $100K (1/10) portfolio. For example, they'll buy 1,200 shares of AEO, so if you have a $100K portfolio and want to match the percentage, you'd buy 120 shares. You end up getting eaten up by commissions on such small purchases.

  • Report this Comment On June 25, 2008, at 5:07 PM, ddmdcm wrote:

    tfirma you can use a discount broker and pay little commissions. Like Scottrade or ETrade. Just a thought.

  • Report this Comment On June 25, 2008, at 5:15 PM, aerobracero wrote:

    The market is "DRUNK?".

    Surely with all the intellectual fire power at your disposal you can come up with a more articulate explanation or at least some valid reasoned suppositions why the worldwide economic morass is contributing to the dreary state of the marketplace.

    Expose us to your crystal balls and give us a hint what you think the future has in stock for us that your dependent readership so much has to come to rely on. We are after all not children that need to coddled and unexposed with [ahem] hard truths.

    At the very least, work up another newsletter that we can subscribe to "with just the facts ma'am".

    Yours, a subscriber of at least 4 of your news letters. [or is it 5?]

    Jose Sanchez

  • Report this Comment On June 25, 2008, at 5:53 PM, aerobracero wrote:

    ummmm ... I should have said Political-Economic morass.

    Also .. The above comment is not specifically directed to Shannon.

  • Report this Comment On June 25, 2008, at 6:14 PM, raoulvanhorn wrote:

    @ tfirma:

    As you've tried it, can you tell us more? Specifically:

    1. When was inception, and how much is it down?

    2. The offer says "It's a compact, rigorously vetted set-and-forget portfolio consisting of 8 holdings." If there's only 8 holdings, how come so many small purchases? Are they making repeated purchases of the same 8 holdings at various times (market timing or dollar-cost-averaging)?

    Thanks in advance.

  • Report this Comment On June 26, 2008, at 12:55 PM, michlav1 wrote:

    raoulvanhonr-

    He's talking about the Million Dollar Portfolio, not the Ready Made Millionaire Service, which is mentioned in the article. It's comparing apples to oranges as far as I'm concerned. What they have in common is that they both have 'Million' in the name of the service.

    The Million Dollar Portfolio is basically dollar cost averaging and there are (and will be) many more than 8 selections.

    Ready Made Millionaire Service is for those that don't want to constantly check their stocks - probably a more stable portfolio.

    Also, people need to remember that this is a long term service not a get rich quick scheme.

  • Report this Comment On June 26, 2008, at 1:33 PM, raoulvanhorn wrote:

    michlav1:

    Thanks for clearing that up; obviously I thought he was talking about the service described in the article. All these "Millions" flying around tend to cloud the mind. :-)

  • Report this Comment On June 28, 2008, at 12:01 AM, chantillydude wrote:

    The market isn't drunk. The economy at the macro-level for the world is reeling from bad decision making and bad policy choices by Governments and the highly concentrated financial industry.

    The market is displaying its inability to find sustainable patterns for risk accounting. Unless you have a very long time horizon you stay in cash or cash equivalents. If your time horizon is less, like mine, you go for liquidity and preserving capital. T-Bills and discount brokers for treasury bond funds.

    As for the million dollar portfolio, I'm a bit skeptical. They invited 200 players in for $500 each or $1 million. MF therefore has no risk of its own capital. I already can lose my money w/o paying others to help and I stay liquid to-boot. I can't wait 15 years to retrieve my money either. My time horizon is 3-5 years. It's capital preservation first for me.

  • Report this Comment On June 29, 2008, at 8:42 PM, wizenednovice wrote:

    chantillydude's calculation that (ignoring taxes) the million dollar portfolio looks like it paid for itself in 1 year with no risk to MF. Like tfirma I joined and then left. I was waiting to see what happened to thinly traded stocks when 200 people put in their bids after an MDP intent to buy pronouncement. However, during the time I was a member (approaching 30 days), no such statement was made. I can't tell what has occurred since then or how MDP is currently performing

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