How to Smell a Rat
The Five Signs of Financial Fraud
Publication Date: July 2009
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In December 2008, a well-regarded member of the finance community, former NASDAQ chairman, huge charitable contributor, and pillar of New York society admitted to his sons the $65 billion he managed for hedge funds, charities, foundations, Hollywood stars, and myriad smaller investors was a fraud - a Ponzi scheme.
2008 and 2009 will be remembered for bear markets, a global credit crunch, and some of the largest investment scams ever. But these scams are nothing new - from Charles Ponzi to Robert Vesco to Bernard Madoff - they've been repeated throughout history, and there will certainly be more to come in the future. But the good news is fraudsters often follow the same basic playbook. Learn the playbook - and know how to ask the right questions - and financial fraud can be easy to detect and simple to avoid.
Some advisers start intending to embezzle. Others evolve to it as Madoff claims. Either way, it's structurally the same, and you can learn ways to identify both intended and possible future fraud. Throughout your investing life, you may be presented with opportunities that seem too good to be true. In How to Smell a Rat: The Five Signs of Financial Fraud, trusted financial expert Ken Fisher provides you with an insider's view on how to spot potential financial disasters before you commit your money to a scam.
Filled with in-depth insights and practical advice, this reliable resource takes an engaging look at recent and historic examples of fraudsters, how they operated, and how they could have been easily avoided. Fisher then shows you quick, identifiable features of potential financial frauds and arms you with questions to ask when assessing money managers.
With this newfound knowledge, you can learn to spot red flags, such as:
- Advisers with direct access to investors' funds
- Firms with numbers that seem too good to be true?
- Managers with fees that are too low? Madoff didn't charge any fees, he just charged for trading!
Ken Fisher is best known for his prestigious ¿Portfolio Strategy¿ column in Forbes magazine, where his twenty-five-year tenure of high-profile calls makes him the fourth longest-running columnist in Forbes¿ 90-plus-year history. Ken is the founder, Chairman, and CEO of Fisher Investments, an independent global money management firm. He is on Investment Advisor magazine¿s prestigious IA-25 list of the industry¿s most influential people; is the award-winning author of numerous scholarly articles; and has published five previous books, including the New York Times bestsellers The Only Three Questions That Count and The Ten Roads to Riches¿both of which are published by Wiley. Ken has been published, interviewed, and/or appeared in most major American, British, and German finance or business periodicals. He has a weekly column in Focus Money, Germany¿s leading weekly finance magazine.
Lara Hoffmans graduated from the University of Notre Dame with a BA in theatre. She is a content manager at Fisher Investments and contributing editor of MarketMinder.com. She also coauthored with Ken Fisher the bestsellers The Only Three Questions That Count and The Ten Roads to Riches.