The Tragic Death Of Curtis Moberly

Dan Ferris - Mon 03 Nov, 2003

"...Fools, wise fools and greater fools...novice investors, take heed!..."

 

Two Sundays ago, a man was killed on a motorcycle just a few miles from my house.

Curtis Moberly was riding his brand new 2003 Harley Davidson Heritage, having purchased it only minutes before. He went around a turn, lost control, and slid into a car. As he lay in the road, another car came from behind and ran over him.

Moberly was 39 years old. I can just imagine him, saving up to buy a new bike, this great symbol of freedom among men - especially middle-aged, American men. Then, in an instant, the vision transforms from dream to nightmare, becoming the instrument of his early demise.

The local sheriff said speed wasn't a factor in Moberly's loss of control. He didn't die because he pushed the envelope too hard. A newspaper article said he tried to lay the bike down because he lost control. I obviously can't predict the outcome of the sheriff department's investigation, but at first glance, it seems that Curtis Moberly died because he just didn't know how to handle a simple turn...and panicked.

The thing I can't fathom is this: I can't believe Curtis Moberly didn't have some sneaking, small voice somewhere within him that said, "buying this bike is a bad idea for you," or even, "this could kill you, you know." I can't believe he didn't know that some curve like the one that killed him wasn't at least a possibility, somewhere in his future. It's like the way a gambler knows he's going to lose. It's just there, unspoken, perhaps even denied at every turn, but no less present and certain.

Curtis Moberly was from the same town as me, though he died in another town nearby. I know he lived near me, since the town is so small that everyone lives near everyone else.

The accident made me wonder about Moberly's and my neighbours, the few thousand other denizens I see coming and going through town each day. Specifically, I wonder how their financial situations resemble Curtis Moberly and his brand new motorcycle.

They probably feel great, having just made money for a whole year after losing it for three years straight. They feel the way Moberly felt when he drove his new bike off the Harley Davidson lot. It's the same feeling you get after struggling through any difficult period, after which you come out on the other side with something you've been wanting for some time. Elation. Release. Triumph. I'm there. I've made it.

Perhaps they've increased their stockmarket-linked pension contributions to take advantage of the "new bull market". They've got some momentum going. They're feeling good and they've now got the money to justify that feeling. They're over the hump of the 2000-2002 bear market. Now they're cruising along, the way Moberly was cruising along just before he took the turn that ended his life.

As with Curtis Moberly, I find it difficult to believe there isn't a nagging little voice inside his former neighbours. "Do I really have any idea of what I'm doing?" it asks. "I know nothing about any of these companies, and I've just bought a piece of them costing thousands and thousands. I spend more time buying a new car...or motorcycle...than I do allocating my own investment funds. What am I doing here? Something is wrong with this."

It's probably not such an articulate voice as that. And probably not very loud. I imagine it's easily drowned out by a good news story or a quick look at one's rising broker’s account balance. By the time Moberly's little voice was audible, telling him to bail out, it was too late. He'd reached the point of no return. Investors were there in 2002, and now they think they've dodged a bullet. I doubt it.

Curtis Moberly's poor neighbours are probably as unprepared for their futures as he was for that last turn. After all, they've put money into investment funds and unit trusts through financial planners and pension plans. Maybe they have a stockbroker’s account with a few thousand in it, which they churn a little every day, buying and selling some tech-stock or the other half a dozen times a week.

I'm willing to bet they know as much about investing, have as much experience at it, as Moberly did at riding a Harley hog: very little. I remember what the Christian brothers called us at high school: wise fools. That's what investors are today, and what Curtis Moberly was - may he rest in peace. Wise, having had a little experience. Fools, not realising they haven't had enough experience. Moberly won't get fooled again. I bet investors will continue to get fooled for as long as there's a stock market.

And now those investors are about to slide into an oncoming price slide, the way poor Curtis Moberly slid into an oncoming Subaru. Make no mistake about it, stocks and shares will slide. They've never been this expensive without sliding downward towards cheapness again.

The equity-risk premium is forecasting that most stock market investors will lose money in the coming years. The rational investor has no reason to expect to make money in 90% of all investment funds out there today. Certainly no rational reason to buy almost all the US stocks out there, especially those that individual investors love the most - like Sirius Satellite, XM Satellite Radio, Sun Microsystems, Intel, Cisco and Microsoft. Those are the US stocks individual investors bought the most of the day before this writing, according to my broker.

Consider what I've done in my investment advisory, Extreme Value. In the last 14 months, I've only found 10 stocks that were cheap enough to buy, with enough upside to justify hanging onto them. 10 stocks out of 8,000 or so.

As for all those people buying stocks like Sirius Satellite Radio, Intel, Cisco, Microsoft and Pfizer...well, they're going to lose their money. Simple. They've paid way too much and gotten way too little. No margin of safety. No idea of what price is too low or too high.

All investors have are promises: satellite radio promises; microprocessor promises; internet router promises; Windows-based software promises.

One day soon all these promises, even if they're technologically sound, will look to investors like the promise Curtis Moberly made to the bank when he signed the agreement to repay the loan on his new Harley Davidson.

Good value hunting,

Dan Ferris
for the Daily Reckoning