How to Smell a Rat
The Five Signs of Financial Fraud
Erschienen am 9. Juli 2009
224 Seiten
978-0-470-55271-1 (ISBN)
Beschreibung
A timely guide to uncovering financial fraud
2008 and 2009 will be remembered for bear markets, a globalcredit crunch, and some of the largest investment scams ever. Butthese scams are nothing new, they've been repeated throughouthistory, and there will certainly be more to come. But the goodnews is fraudsters often follow the same basic playbook. Learn theplaybook, and know how to ask the right questions, and financialfraud can be easy to detect and simple to avoid.
In How to Smell a Rat, trusted financial expert KenFisher provides you with an inside's view on how to spot financialdisasters before you become a part of them. Filled within-depth insights and practical advice, this reliable resourcetakes an engaging look at recent and historic examples offraudsters, how they operated, and how they can be easily avoided.Fisher also shows you the quick, identifiable features of financialfrauds and arms you with the questions to ask when assessing amoney manager.
* Prepares you to identify and avoid financials cams that couldinstantly destroy your wealth
* Contains examples that highlight how financial frauds arecommitted
* Provides questions everyone should ask before entering anyinvestment endeavor
With How to Smell a Rat as your guide, you'll learn howto protect your interests and assets from unnecessary losses.
Rezensionen / Stimmen
With five straightforward rules that would have saved any investorfrom Bernie Madoff, investment firm CEO and Forbes columnistFisher (100 Minds That Made the Market) gives readers asecure plan for fraud-proof investing, worthwhile for novices andsophisticated financiers alike. Using the example of everyman"Jim," a precarious investor navigating shark-filledwaters, Fisher presents a clear, fast-paced, tightly organizedguide to principles like "Too good to be true usuallyis," and "Due diligence is your job, no oneelse's." Fully-referenced data, insider details,laser-focused statistical digressions, and the finer points ofpractical investing keep pages turning. Readers will value thepractical, easy-to-follow models of solid, transparent investmentstrategies and examples from Fisher's experiences as CEO of his owninvestment firm. Fisher also includes suggestions for furtherreading and appendices that reproduce previously-publishedcomparisons of different asset allocations, information for smallbusiness owners and short biographies of market-movers. Much morethan what to avoid, Fisher's concise guide should be highlyilluminating and confidence-building for anyone with a bankaccount. (Aug.) Starred review (PublishersWeekly, September 2009) Using well-known examples from recent headlines like BernardMadoff and R. Allen Stanford along with a bevy of historical scamartists, Fisher details the red flags that should alert investors.They are: advisers who have access to your money; promises ofreturns that are too good to be true; mumbo-jumbo that takes theplace of explaining investing strategy; fake benefits likeexclusivity, and relying on someone else for duediligence. (Associated Press)Weitere Details
Weitere Ausgaben
Personen
KEN FISHER is best known for his prestigious "PortfolioStrategy" column in Forbes magazine, where histwenty-five-year tenure of high-profile calls makes him the fourthlongest-running columnist in Forbes's ninety-plus-yearhistory. Ken is the founder, Chairman, and CEO of FisherInvestments, an independent global money management firm. He is onInvestment Advisor magazine's prestigious IA-25 list of theindustry's most influential people; is the award-winning author ofnumerous scholarly articles; and has published five previous books,including the New York Times bestsellers The Only ThreeQuestions That Count and The Ten Roads to Riches, alsopublished by Wiley.
LARA HOFFMANS is a content manager at Fisher Investments,a contributing editor to Fisher Investments MarketMinder, andcoauthor of the bestsellers The Only Three Questions ThatCount and The Ten Roads to Riches.
Inhalt
Acknowledgments.
Introduction.
Chapter 1: Good Fences Make Good Neighbors.
Chapter 2: Too Good to Be True Usually Is.
Chapter 3: Don't Be Blinded by Flashy Tactics.
Chapter 4: Exclusivity, Marble, and Other Things That Don'tMatter.
Chapter 5: Due Diligence Is Your Job, No One Else's.
Chapter 6: A Financial Fraud-Free Future.
Appendix A: Asset Allocation--Risk & Reward.
Appendix B: Same But Different--Accounting Fraud.
Appendix C: Minds That Made the Market.
Notes.
Index.
About the Authors.
Introduction Imagine this: Jim's a decent, hard-working, working stiff-frugal, with a nice nest egg. Between his job, family, a serious Saturday golf addiction, and some community commitments, he hasn't the time, know-how, or inclination for investing details. And there are so many confusing options-tens of thousands of mutual funds, thousands of money managers. Hedge funds. Brokerage products with confusing names. Too much! So he turns to friends for advice-like you might. Turns out his golf partner, boss, and a few fellow church members all invest with the same adviser-have for years-Mr. Big Time.They swear by him! Big Time is pretty famous-held a big government post in the '80s. He manages several billion now, mostly for rich folks-way out of Jim's league. Big Time is so big, he's his own broker-dealer-Big-Time Portfolios, Inc. Jim's friends say Big Time never had a down year-not 1987, not in the 2000-2002 bear, and not the most recent bear. His returns look pretty darn stable-and after a few rough years, stability sounds good to Jim. Jim's golf buddy fixes a meeting. Big Time's office is posh, including photos of Big Time with diverse celebrities. All of the last three Presidents. Brett Favre. The Pope. Bono. There's Big Time flying his private jet.Winning a regatta in his yacht. He does well-it shows. He's dripping with success. Amazingly enough, when Jim comes to Big Time's office, Big Time himself meets Jim! (Though he makes it clear he's very busy and can't talk long.) Jim asks about performance-what's the strategy? BT explains: It's proprietary-even most staff aren't 100 percent privy to it-wouldn't want it to get out. If an employee left and took it outside-maybe gave the secret to a competitor-it would hurt Big Time's clients. Mr. B is earnest-he must protect existing clients. Jim feels bad insisting about knowing all this, but this is his life savings. BT hasn't got time to explain-it's complicated-involves option hedging RMBSs overlaid with swaps, some arbitrage, some playing volumes-which cuts the volatility, hence the consistency. Jim's only ever bought mutual funds and a few individual stocks-he's not sure he understands. BT says he's just about out of time. Jim quickly asks where he can get more information? Will he get statements? And from whom? BT says Big-Time Portfolios sends quarterly statements. How is he structured? Big Time explains he manages a "hedge fund"-which means he doesn't have to register with the SEC, and isn't. But this is better for his clients. If he registered, he would have to divulge his proprietary strategy, and good-bye market advantage. But BT encourages Jim to ask his golf partner, boss, and church buddies. They've been happy and can tell Jim all about it. But BT warns Jim-he prefers Jim doesn't talk to non-investors about the fund. Big Time wants to protect the exclusivity of his clients-he only lets "certain" people invest with him. Jim's friends really shouldn't have told him about Big Time, but Mr. B's OK this one time because he knows Jim's friends. Jim can't quite believe that he's really going to be "in the club." Who does he make the check out to? Mr. Big says to Big Time LLC. Mr. B will personally deposit it. Jim hands Mr. B a check, they shake hands, and Jim walks out feeling like a million bucks-sure to get 15 percent a year forever. How many red flags did you spot? The biggest was early on. Maybe Mr. Big Time is honorable and won't embezzle. But if he is a fraudster, or evolves into one, it's now simple to swindle Jim. Why? Jim failed to see the five signs of financial fraud. That's what this book is all about: Five simple signs that, if heeded, can help protect you from investing embezzlement.
2008 was miserable enough for most investors without finishing on news of Bernard Madoff bilking clients out of approximately $65 billion over 20 years. His victims included big names from all walks of life-from politics to Hollywood luminaries. But they weren't just big-pocketed stars. He reportedly bankrupted Holocaust survivor Elie Wiesel and his Foundation for Humanity. Madoff stole from many in his Jewish community, not all so wealthy either. Madoff accepted investors, big and small-an equal opportunity embezzler-fooling them with claims of exclusivity and consistently positive returns. I needn't retread this-you've read about Madoff. Years from now folks will recall Madoff as the guy who used his powerful community connections to garner a big chunk of his victim's assets-which he then embezzled in a massive pyramid scheme. Turns out, many scamsters do this-prey on affinity groups. (This book details why they do and shows you how to spot it up front.) And it wasn't just Madoff-2009 opened on endless news of similar scams, including the bizarre case of Forbes 400 member and Antiguan knight, Sir R. Allen Stanford. We'll cameo some of the most egregious cases-recent and historic. But a Google search renders more than you need. This book doesn't aim to detail their deceptions, follow the money, or give you all their dirty laundry. There will be many books doing post mortems-and even more on the next round of big-time fraudsters. And there will be more future scams-100 percent certainty. Always are! No matter what regulators may devise, there will always be scamsters. We've had them since long before Charles Ponzi became synonymous with the timeless "rob Peter to pay Paul" swindle in 1920. The only thing to do is protect yourself. So how can you ensure you never fall victim to the next Bernard Madoff, Stanford, or Ponzi?
In my 37 years managing money for individuals and institutions, 25 years writing the "Portfolio Strategy" column in Forbes, and a lifetime studying markets, I've witnessed money managers-all kinds, good and bad. I've also seen and studied the occasional fraudster (and in truth, though sensational, they're very rare) who forgoes money management for thievery. The thieves can be creative, but structurally the scams are similar. That's good news because avoiding a would-be con artist is easy, no matter how convincing he is.There are just a couple questions-one or two tops-you must ask to avoid most all scams. Be vigilant for a few more red flags, and you can have even better success. But, interestingly, most people don't know the questions to ask. And because these rats are so despicable, I'll tell you-right here, right now-the number one most crucial thing you must do. I don't care if you're reading this in your favorite bookstore and never read another word. If I can help even one person not fall victim to a financial scam, I'll consider the time it took to write this book worth it. You can avoid hiring a would-be thief by:
What does that mean? Said another way: Always make sure the decision maker (who will decide what you should own, like stocks, bonds, mutual funds, etc.) has no access to the money-meaning they can't get their hands on it directly. I'll explain what that means in more detail in Chapter 1. But, simply said, when you hire a money manager, you yourself should deposit the money with a third-party, reputable, sizable, big-name custodian wholly unconnected to the money manager or decision maker. That custodian's job is to safeguard the security of your assets. Do that-even if you do nothing else from this book-and you can mostly protect your money from being "Madoff " with. If your adviser has access to the money because he controls or is somehow affiliated with whoever has custody of your assets, there is always, always the risk he carries your money out the back door. Maybe he's pure of heart and won't, but why risk it? Don't give him a chance.
Here are five signs your adviser might now be or could evolve into a swindling rat: 1. Your adviser also has custody of your assets-the number one, biggest, reddest flag. 2. Returns are consistently great! Almost too good to be true. 3. The investing strategy isn't understandable, is murky, flashy, or "too complicated" for him (her, or it) to describe so you easily understand. 4. Your adviser promotes benefits like exclusivity, which don't impact results. 5. You didn't do your own due diligence, but a trusted intermediary did. This book examines each sign in detail-from a variety of perspectives-and shows you how to use them together like a checklist to help ensure a con never swindles you. Note: Just because your manager displays one or a few signs, it doesn't mean they should immediately be clapped in irons. Rather, these are signs your adviser may have the means to embezzle and a possible framework to deceive. Always better to be suspicious and safe than trusting and sorry. Remember, Madoff and Stanford (allegedly) ran their scams for years-Madoff for possibly two decades! Folks looked into their eyes and trusted them.
Madoff stole billions. Stanford's alleged to have done the same. Even some relatively "smaller" cons stole many millions. That may make smaller investors think they're...
Don't Let Your Money Get "Madoff " With
2008 was miserable enough for most investors without finishing on news of Bernard Madoff bilking clients out of approximately $65 billion over 20 years. His victims included big names from all walks of life-from politics to Hollywood luminaries. But they weren't just big-pocketed stars. He reportedly bankrupted Holocaust survivor Elie Wiesel and his Foundation for Humanity. Madoff stole from many in his Jewish community, not all so wealthy either. Madoff accepted investors, big and small-an equal opportunity embezzler-fooling them with claims of exclusivity and consistently positive returns. I needn't retread this-you've read about Madoff. Years from now folks will recall Madoff as the guy who used his powerful community connections to garner a big chunk of his victim's assets-which he then embezzled in a massive pyramid scheme. Turns out, many scamsters do this-prey on affinity groups. (This book details why they do and shows you how to spot it up front.) And it wasn't just Madoff-2009 opened on endless news of similar scams, including the bizarre case of Forbes 400 member and Antiguan knight, Sir R. Allen Stanford. We'll cameo some of the most egregious cases-recent and historic. But a Google search renders more than you need. This book doesn't aim to detail their deceptions, follow the money, or give you all their dirty laundry. There will be many books doing post mortems-and even more on the next round of big-time fraudsters. And there will be more future scams-100 percent certainty. Always are! No matter what regulators may devise, there will always be scamsters. We've had them since long before Charles Ponzi became synonymous with the timeless "rob Peter to pay Paul" swindle in 1920. The only thing to do is protect yourself. So how can you ensure you never fall victim to the next Bernard Madoff, Stanford, or Ponzi?
Just One Thing
In my 37 years managing money for individuals and institutions, 25 years writing the "Portfolio Strategy" column in Forbes, and a lifetime studying markets, I've witnessed money managers-all kinds, good and bad. I've also seen and studied the occasional fraudster (and in truth, though sensational, they're very rare) who forgoes money management for thievery. The thieves can be creative, but structurally the scams are similar. That's good news because avoiding a would-be con artist is easy, no matter how convincing he is.There are just a couple questions-one or two tops-you must ask to avoid most all scams. Be vigilant for a few more red flags, and you can have even better success. But, interestingly, most people don't know the questions to ask. And because these rats are so despicable, I'll tell you-right here, right now-the number one most crucial thing you must do. I don't care if you're reading this in your favorite bookstore and never read another word. If I can help even one person not fall victim to a financial scam, I'll consider the time it took to write this book worth it. You can avoid hiring a would-be thief by:
Never hiring any form of money manager or adviser who takes custody of your assets.
What does that mean? Said another way: Always make sure the decision maker (who will decide what you should own, like stocks, bonds, mutual funds, etc.) has no access to the money-meaning they can't get their hands on it directly. I'll explain what that means in more detail in Chapter 1. But, simply said, when you hire a money manager, you yourself should deposit the money with a third-party, reputable, sizable, big-name custodian wholly unconnected to the money manager or decision maker. That custodian's job is to safeguard the security of your assets. Do that-even if you do nothing else from this book-and you can mostly protect your money from being "Madoff " with. If your adviser has access to the money because he controls or is somehow affiliated with whoever has custody of your assets, there is always, always the risk he carries your money out the back door. Maybe he's pure of heart and won't, but why risk it? Don't give him a chance.
Better Yet, Here are Five Signs
Here are five signs your adviser might now be or could evolve into a swindling rat: 1. Your adviser also has custody of your assets-the number one, biggest, reddest flag. 2. Returns are consistently great! Almost too good to be true. 3. The investing strategy isn't understandable, is murky, flashy, or "too complicated" for him (her, or it) to describe so you easily understand. 4. Your adviser promotes benefits like exclusivity, which don't impact results. 5. You didn't do your own due diligence, but a trusted intermediary did. This book examines each sign in detail-from a variety of perspectives-and shows you how to use them together like a checklist to help ensure a con never swindles you. Note: Just because your manager displays one or a few signs, it doesn't mean they should immediately be clapped in irons. Rather, these are signs your adviser may have the means to embezzle and a possible framework to deceive. Always better to be suspicious and safe than trusting and sorry. Remember, Madoff and Stanford (allegedly) ran their scams for years-Madoff for possibly two decades! Folks looked into their eyes and trusted them.
Big or Small-a Con Wants 'em All
Madoff stole billions. Stanford's alleged to have done the same. Even some relatively "smaller" cons stole many millions. That may make smaller investors think they're...
