"Here there be monsters."
-- Old cartographic inscription indicating the end of the map
Cryptids have made big news in the last couple of weeks. "Bigfoot body found!" "Chupacabra caught on film!" And there was the Montauk Monster … whatever that was.
So much for the freaky fun, though. Bigfoot turned out to be a Halloween costume on ice. The chupacabra is probably just some ugly, mangy old coyote. And the Montauk Monster is apparently some kind of PR stunt for a movie.
I can see why monsters of myth and legend would capture the public's imagination these days. Many elements of our economic situation stink worse than Skunk Ape on an August afternoon. It's much easier to worry about, and be fascinated by, mythological monsters than about the real macroeconomic monsters that are hiding around every corner -- and, in some cases, staggering around in plain sight.
Meanwhile, it astounds me to see that many investors seem to be enamored with tall tales of another sort. Some people are making wagers on some of the scariest monster stocks, sometimes surrounded by a fair amount of mythology.
Talking crazy
The thing that really got me about the "Bigfoot's corpse" controversy was that the guys behind the claim not only said they'd put the furry corpse of Sasquatch on ice, but that they also held a press conference and conducted TV interviews about their "discovery." They even promised DNA and autopsies before admitting it was all a hoax! That takes either major guts or more than a few screws loose.
The Bigfoot guys say it was all just a joke. But the media is reporting that they allegedly ran off with some advance money, and that is the kind of stunt that reminds us that people often say and do crazy -- really crazy -- things when cold, hard cash (or, by extension, a career) is on the line.
Similarly, some people appear to believe that some of the most beleaguered stocks around could make them big money from current levels. Sure, that might be true. But I'm thinking that's like saying Bigfoot's in the ice chest and expecting people to believe it because, again, hey, it might be true.
Monster mash
Me? I'd rather believe in Bigfoot than invest in some of today's scariest stocks. For many, we are truly in uncharted territory, given the soaring oil prices and the continuing housing slump and credit crisis -- "here there be monsters," all right. I don't want to touch the market's current beleaguered bogies with a 10-foot, cryptozoologist-certified pole.
Lehman Brothers (NYSE:LEH) and Merrill Lynch (NYSE:MER) still seem to be wading through untold toxic waste on their balance sheets, and rumors that some of them could run out of capital and maybe even require government bailouts are far less shocking than your occasional Sasquatch sighting. Although these companies have barely survived some true horrors, the evidence indicates that things are still going to get worse.
Meanwhile, General Motors (NYSE:GM) and Ford (NYSE:F) continue to flounder and flail as the embattled consumer and their own strategic missteps pummel their business to the point where they've been angling for government assistance. Auto sales have fallen for 10 straight quarters, and Ford's chief marketing officer even said he "expects the second half of 2008 will be more challenging than the first half as economic and credit conditions weaken."
Believing the worst is already over for many of these names is kind of like believing in fairies. Sure, maybe it's true, but so far, the "worst is over" thinking has been proved quite mythological, when yet another quarter comes along with plenty more bad news. Investors aren't getting a good read on how dire the situation is for many of these companies. Some of these companies' managements may not even know.
Indeed, for the past few months, investing in Fannie Mae (NYSE:FNM) or Freddie Mac (NYSE:FRE) was not much different than buying a lottery ticket. That's speculating, not investing -- and today, it looks as though those lottery tickets lost.
It's a lot like becoming a full-time Bigfoot hunter: You're hinging an awful lot on something that may not even be possible.
Forget the monsters
Investors need to remember to avoid the Bigfoot-like speculation and remember that it's hard to go wrong when you're buying quality companies for the long term.
One of the core tenets of our Motley Fool Stock Advisor service is to "buy businesses, not tickers." As co-advisors David and Tom Gardner explain: "We buy into a company's prospects, future, and management. We put our money in a company we believe will generate shareholder value over the long term."
So forget about putting monsters in your portfolio; focus instead on buying quality businesses. For example, recent Stock Advisor recommendation Apple (NASDAQ:AAPL) isn't a company that "might" survive -- it has already proved itself with addictive, innovative products and has a strong balance sheet with $20 billion in cash. It's not a falling knife that might or might not make it out alive, but rather a solid company with a bright long-term future.
If you're looking for other ideas on where to find great companies, click here to give our Stock Advisor service a test spin. Since its inception in 2002, David and Tom have proved themselves with stock selections that are beating the S&P 500 by 42 percentage points on average.
Alyce Lomax owns no shares of any of the companies mentioned. She wants to believe, but not in scary companies. Apple is a Motley Fool Stock Advisor recommendation. The Fool's disclosure policy is very real; there's nothing Skunk Ape about it.
