How to Smell a Rat: The Five Signs of Financial Fraud

Investors who lived through 2008 and 2009 witnessed history in the making: From the Dow Jones dropping more than 400 points in one day, to big financial firms falling like a house of cards--and to one of the most massive Ponzi schemes ever.

But Ken Fisher points out in How to Smell a Rat that scammers don't only exist during bear markets or financial crises. Instead, "bear markets reveal scams, but bear markets don't cause scams. Madoff did it for decades--2008 just popped him out into the open when he couldn't keep it going any longer, as bear markets and recessions do for many scamster rats. If a scamster successfully avoids detection long enough to get enough money from victims, big volatility simply unmasks deceptions--for a few reasons. First, downturns make it harder to bring in new money.

Also, investors in general, even in perfectly legit investment vehicles, tend to get fearful and redeem shares during downturns, putting additional pressure on fraudsters... This is why, in a bear's depths, scams get uncovered."

How to Smell a Rat: The Five Signs of Financial Fraud

New York Times Best Seller,

by Ken Fisher with Lara Hoffmans
John Wiley & Sons, Inc.
August 2009
Hardcover: 224 Pages

About Ken Fisher’s New Book, How to Smell a Rat

2008 and 2009 will be remembered for bear markets, a global credit crunch, and some of the largest investment scams ever. But did you know that nearly every financial scam, including Bernard Madoff's $65 billion-dollar Ponzi scheme, could have easily been avoided?

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 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.

While Bernard Madoff may be a criminal, the greater crime is that investors continue to be swindled for no reason. 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 scams before you commit your money.

Using recent and historic examples of fraudsters, how they operated, and how they could have been easily avoided, How to Smell a Rat will show you quick, identifiable features of potential frauds and arms you with questions to ask when assessing money managers. With this 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!

There should be a premium for integrity. Asking the right questions and performing the due dilligence goes a long way toward finding a firm that can help insulate you from financial fraud.

Ken Fisher's New York Times best seller, How to Smell a Rat, can help better prepare you to identify and avoid financial scams that could instantly destroy the wealth you've worked so hard to build.