Ken Fisher Interview - Part 1 – Madoff and other Rats – Stockerblog Exclusive
Ken Fisher is a money manager, Forbes columnist, and is one of the Forbes 400 richest Americans. He is also author of several books, including his two latest, The Ten Roads to Riches: The Ways the Wealthy Got There (And How You Can Too!) (Fisher Investments Press) and How to Smell a Rat: The Five Signs of Financial Fraud (Fisher Investments Press)
Stockerblog: I wanted to go over your two latest books, the The Ten Roads to Riches: The Ways the Wealthy Got There book real briefly and then the How to Smell a Rat: The Five Signs of Financial Fraud book, which we will concentrate on. The Ten Roads to Riches book came out last year. Since that time we've had a market collapse and a recession,; any changes in regards to recommendations to achieve changes?
Fisher: No, the book wasn't about being timely. I don't think there's anything that's changed.
Stockerblog: You wrote a lot about lawyers and politicians, I was curious to know if you got any flack from politicians or lawyers?
Fisher: Not a bit.
Stockerblog: OK, let's move on to the How to Smell a Rat book. Do you think there are a lot more Madoffs out there that haven't been discovered?
Fisher: Probably not; not right now. The reality is that the nature of their market is that it is causing people to become more cautious, and Ponzi schemes like Madoff, Allen Stanford, and others have done may require people to be willing to invest and not redeem. In bull markets, you get an environment that allows the Ponzi scheme ratzo con artist to build momentum and keep going, but when you hit the kind of bear market we had last year, it tends to uncover most of them up to that point in time because people want to redeem and they don't want to invest, and since the Ponzi scheme is based on a simple notion of using current money to pay off old money, these things tend to get discovered.
I'm sure that there are a few of them that snuck through, but particularly with the amount of attention that Madoff and Stanford got, and particularly with the amount of fear we got from this bear market, I think most have been uncovered. The flip side and the bad news is that the next bull market will generate a whole new generation of them as does every bull market. The process, not only does is go away, you probably end up over time getting more and more of them as we move through the process that I describe in the book, How to Smell a Rat, is one where people don't really base their decision on the right kind of issues.
Stockerblog: You said that the bull market pulled out a lot of the scam artists and I guess we should say that Sir Allen Stanford is an alleged issue with him. A lot of people are saying that Madoff is one of the stupidest con artists because he could have just claimed that his hedge fund and brokerage firm collapsed with the market crash. If he came out with the news that maybe right after Lehman collapsed, he may have gotten lost in the shuffle. Do you agree with that?
Fisher: I think that that's unlikely because I think people would have screamed and said "Give me my money back", then they would have sued him and it would have all come out in lawsuits. The reality of Madoff is that he must have been one of the more clever people doing this because he perpetrated it so long and for so many dollars. That is, he made it through the bear market of 2000 to 2003. And he made it through the entire nineties. The entire nineties were a bull market period which would have been a great period to be a person like that in terms of ever increasing optimism over an extended time period so that he could pull in new money for anyone who wants to redeem. I would have thought he would have gotten caught in 2000 to 2003 because that was pretty good size bear market. He made it through that period so he had to be pretty good at playing that game.
Simply how long he did it and how big he did it, being the biggest ever, I think he was stupid to do this in the first place, but among the people that played this game, he must have been the most successful because he was able to do it in such size and for so long.
Stockerblog: But couldn't he have just, if he knew this was going to happen, he could have said to his investors "Well we've made several bad moves. We now have negative equity. We've just collapsed just like Lehman and some of the other firms", and leave it to the bankruptcy courts, and might not have been looked at as much as some of the other major banks and institutions.
Fisher: If you look at the amount of lawsuits that exist over Lehman, I don't think that you escape scrutiny by claiming that you went under. A smarter crook, what he would have done, and this is also true of Allen Stanford, who in my opinion, you used the word 'alleged', Allen Stanford falsified his background whereas Bernard Madoff was actually a very successful businessman before he turned to being a criminal. In both of these cases and every other one, what they could have planned would be an exodus from the country to a country with no extradition rights. One of the points I make in the book about Robert Vesco, who in the 1970's, took upon a Ponzi scheme , embezzled, fled to Cuba, had his money in Swiss bank accounts and basically paid Castro a set amount of money each year for Castro to protect him, and he lived out the rest of his life comfortably in Cuba.
Madoff claims that he worried forever about how it was that the SEC might get him. He claims he had close calls, he claimed that he worried about this a lot. The amazing part is that he never planned for his exodus from the country before getting caught and protected himself as a criminal. A smarter criminal actually would have been ruthless enough to say "I can't play this game forever, I'm getting out, I getting out now, and going to a country with no extradition rights, and I'm going to pay them enough money to protect me."
End of Part 1 – Stay Tuned for Part 2
By Fred Fuld at Stockerblog.com
Copyright 2009. All rights reserved. Reproduction of this interview prohibited with out permission.