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John Tobey, CFA
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I am the founder and editor of Investment Directions. My career has been managing and consulting to multi-billion dollar funds. Using the widely accepted “multi-manager” approach, I have worked with top investment managers throughout the country, gaining a high level of expertise. My career has... More
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Investment Directions
  • Automobile Deaths and the How to be a Losing Investor 1 comment
    Jan 8, 2011 11:08 AM
    After Seeking Alpha selected my article, “New EPA Mileage Standards Could Stimulate Auto Sales,” an investor made the following comment:

    “Every time CAFE [Corporate Average Fuel Economy] standards rise, the total number of deaths from car accidents rises (lighter cars means less survivability).”

    The statement is incorrect, as I show below. More importantly, this comment is a good example of two common investing mistakes:

    1. Letting personal feelings (in this case, about politics) color investment judgment
    2. Relying on erroneous or simplistic “facts”


    Throughout my career I have seen and heard investors use personal beliefs as a reason to own or not own something. Doing so might make the person feel good, but to succeed an investor needs to remain objective. Leave feelings for dinner conversations.

    Now, about that comment above. There are three major problems:

    First, EPA mileage standards correlate with lower total automobile deaths

    The following graph shows a decline, not a rise, in total automobile deaths, now back to 1950’s level. Moreover, because the annual miles driven have risen significantly, the more appropriate statistic is deaths per 100 million miles driven. That measure has fallen consistently to new lows.

    Second, looking at the correlation of two items does not necessarily make a sound conclusion

    Many automobile changes have occurred over the past 30+ years besides the EPA’s mileage standards. Automobile designs, seat belts, airbags, speed limits, highway construction, traffic cameras, safety campaigns, etc. have undoubtedly had a significant effect – probably moreso.

    Third, automobile deaths are an unrelated measure to the original proposition

    A debating strategy is to ignore the issue and change the subject. The comment above follows that approach by discussing the EPA’s standards effect on deaths rather than on sales.

    So… To be successful, we need to remain objective when making investment decisions, even when we might have strong personal convictions. And this means neither allowing our feelings to color the analysis nor relying on unsupported or simplistic “facts” that happen to match our beliefs.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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  • john s. gordon
    , contributor
    Comments (14113) | Send Message
    i'm glad you mentioned passive restraints.
    in 1970 i was working on a project with jim robbins who bought their nylon fabric from allied/
    money for this project was provided by ford.
    no air in the air bags for this one, it was basically powered by a shotgun shell with a coolant cartridge to prevent (or at least minimize) burn injury to the human.
    (today's systems use sodium azide)
    due to lack (at that time) of gold plated electrical contacts in the system we could not achieve the required reliability levels. when needed it must work 100.000 % of the time & when not needed it must not go off 100.000 % of the time.
    gold unlike other metals is nontarnishing. for your high-end audio system you always use gold plated connectors.
    i say bless ford for attempting to make these things an available option on their product even if the project was not successful @ that time.
    > jack
    8 Jan 2011, 03:54 PM Reply Like
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