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When you spot this shady character strutting toward your front steps, you'll see why this is one trick-or-treater for whom you won't want to open your door. For the second year running, the scariest Halloween costume imaginable is a Starbucks (NYSE:SBUX) stock certificate.

Beating back some impressively stiff competition for the title from highly leveraged financial companies, including Wachovia (NYSE:WB) and Bank of America (NYSE:BAC), Starbucks breaks the bank with a nasty combination of ghoulish past performance, spooky business contraction, and a bone-chilling outlook for consumer discretionary spending.

Nowhere to go but nowhere
Speaking of scary, have you seen the two-year chart for Starbucks lately? With the trajectory of a continental shelf giving way to the ocean's depths, the shares have jettisoned 75% of their value since late 2006. The equity markets are sufficiently frightful just now that this carnage loses some of its drama. Unlike Yamana Gold (NYSE:AUY), 3M (NYSE:MMM), and other quality companies that have fallen a lot just this year alone, you will not find me arguing that Starbucks has been unfairly slaughtered amid this rash of indiscriminate selling.

To the contrary, I believe much of the irrational exuberance that had been priced into this darling stock of caffeine addicts everywhere has thankfully been removed. In its wake, we find a company facing big challenges in the years ahead, including encroachment from competitors and the questionable affordability of a Frappuccino in this economic landscape.

That elusive magic touch
Not so long ago, it seemed Starbucks could do no wrong. No matter how many locations were built, nor how much they charged for a scone, caffeine junkies like me were still lining up for more. Just as the overplayed jokes about a Starbucks on every corner became more like reality, costs began to escalate, margins eroded, and price-cutting competitors such as Tim Hortons (NYSE:THI) and McDonald's (NYSE:MCD) mounted an all-out attack.

Of course, well before approaching market saturation domestically, Starbucks launched a concerted effort to globalize the brand. The prospect of having new stores open up in emerging markets and around the world no doubt lured its share of investors to the stock. On a basic level, though, the speed of this expansion effort has collided head-on with a freight train called global recession.

In fact, Newsweek's Daniel Gross recently proposed that the two phenomena were somewhat correlated. Offering a semi-serious theory that the rise of Starbucks helped feed the boom markets in housing and credit derivatives, he found that many countries with high Starbucks store counts in their financial capitals were also the most affected by the unfolding financial crisis. Now there's some food for thought you can wash down with a venti decaf mocha-latte chai.

Our frugal future
The principle source of my long-term bearish stance on Starbucks lies in the certainty that countless individual consumers will be forced to re-evaluate their discretionary spending and significantly revamp old habits, as a required adaptation to the leaner times ahead. I believe the U.S. and Europe in particular are faced with a far deeper and more protracted recession than many would think. I recommend avoiding any company that even remotely smacks of discretionary spending. Starbucks, frankly, is the most salient example I can conjure of something that people will learn to live without as their financial priorities shift.

I'm concerned that many of my fellow Fools may be sticking with Starbucks, and that either their love of the coffee -- which I fully understand -- or the "buy what you know" mantra may be unduly influencing that decision. Although the company is rated with only two stars out of five in Motley Fool CAPS, well more than 5,000 CAPS members still expect Starbucks to outperform the S&P 500 going forward. I need your help. If you haven't done so already, please sign on to the free CAPS community today, select Starbucks to underperform, and tell your fellow CAPS members why holding shares here is a mistake.

And in a week, check back, and we'll tell you whether your votes were enough for Starbucks to win the title of the World's Scariest Stock.

Further Foolishness:

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.