Exclusive Interview with Ken Fisher Part 3 - Con Artists, Madoff, Rats

Ken Fisher is a money manager, and on the list of the Forbes 400 Richest Americans. He is also a Forbes columnist, where he recently recmmended several income stocks, such as TransCanada (TRP), Repsol (REP), and Sanofi-Aventis (SNY). His latest book, Debunkery: Learn It, Do It, and Profit from It-Seeing Through Wall Street's Money-Killing Myths was just published. He is also author of several other books, including The Ten Roads to Riches: The Ways the Wealthy Got There (And How You Can Too!) and How to Smell a Rat: The Five Signs of Financial Fraud

Ken Fisher Interview Part 3
Please note: Interview took place on Wednesday, October 27, 2010

Stockerblog: Let's talk about Bunk number 11, A Good Con Artist is Hard to Spot. As a follow-up to your How to Smell a Rat book from last year, do you think things have change in terms of the government taking a look at possible rats, or individual investors being more alert and aware, or do you think nothing has really changed?


Fisher: I think there's been a little bit of change on the part of the government but only a little bit, and let me address that. First, while my book How to Smell a Rat made the best sellers list, for the most part in today's world, book sales are down anyway. You can make the New York Times best sellers list if your book sells 35,000 copies in the first year, which isn't that much. My Only Three Questions book had to sell 125,000 copies in 2007 to do that. Today you can do it for about 35,000 copies. So that tells you 35,000 people bought the book, probably half of them never even opened it, and gave it to somebody as a gift or whatever, and people got it as a gift, and so on. So my point is not that many people as a percent of the investor world actually gets past the basic methodology.

There's this notion that nobody could have figured out Bernard Madoff was Bernard Madoff. Bernard Madoff, as I wrote about it in the book, had ALL the classic signs of the con artist, every single one, straight on down the list, and the most telling about that was that he took custody. Now what the SEC is starting to do, which is very good in the aftermath of Madoff and as I prescribed in that book, not that they listen to me, they understand this, the SEC has accelerated their inspections of those who take custody and put more emphasis on them and less emphasis on those that don't take custody, because they understand that this kind of thing happens 100% of the time where somebody's taking custody. So if you are looking for Bernard Madoff's, you look among the realm of those that take custody.

The dilemma unfortunately, is that you've got a lot of people that operate in realms that don't require an SEC registration, and unless somebody complains about them, they're not going to see them, smaller hedge funds and what have you. I think Bernard Madoffs will be harder to do at that size. If Madoff hadn't existed, Stanford would have been the biggest one in history. Both of these were lots and lots of much smaller ones, and that world is still out there. That world, that I wrote about in How to Smell a Rat, every time you have a bear market, Ponzi scheme operators get uncovered. It's kind of the Warren Buffett line that "you don't know who's swimming naked until the tide goes out."

Whenever you have a bear market and sentiment falls drastically, Ponzi scheme operators that are dependent on raising new money from optimistic people to pay off redemptions, which is the game of the Ponzi operator, they can't do it so they get uncovered for the first time. And guys that have successfully Ponzi schemed through a whole market, they get uncovered in a bear market and the consequences of a bear market. So the big ones for this cycle have been done. But that doesn't mean there aren't people out that are still doing it. There will be and the next cycle around there will be another raid.

Unfortunately, I don't believe that this stuff ever goes away. It's a little like the notion of mildew in a moist environment; you may clean it off here and clean it off there but once you wait, it just comes back. Or maybe Neil Young's line in a song he did a long time ago that "rust never sleeps."

End of Part 3

The Debunkery book is available at Amazon.

Ken Fisher obviously doesn't give individual stock recommendations in his interviews, but some stocks he likes that were mentioned in his recent Forbes columns, including high dividend stocks, are available in the form of a free Excel list at WallStreetNewsNetwork.com.

Part 1 of this interview is available HERE.

Part 2 of this interview is available HERE.

By Fred Fuld at Stockerblog.com

Disclosure: Interviewer doesn't own any of the stocks mentioned in this interview series at the time the article was written.

Copyright 2010. All rights reserved. Reproduction of this interview prohibited without permission. All opinions are those of Ken Fisher, and do not represent the opinions of Stockerblog.com or the interviewer. Neither Stockerblog nor the interviewer nor the interviewee are rendering tax, legal, or investment advice in this interview. If you want tax, legal, or investment advice, contact the appropriate professional.

Top PIIGS Stocks

The 'PIGGS' are the European countries that are suffering due to current economic woes. The countries are Portugal, Italy, Ireland, Greece, and Spain, and the crises that is looming is heavy. Recently, there has been much talk about Greece being bailed out by stronger EU countries, but even that is uncertain. And even if Greece is bailed out, will there be enough funds or even enough interest in bailing out Spain or Italy, with a much greater amount of sovereign debt outstanding?

But if the bailouts come through, the economies will come through, and the stocks in those countries should do well. So if you are a real contrarian, here are some stocks worth taking a look at.

PORTUGAL

Portugal Telecom SGPS SA (PT), is the largest telecom company in Portugal.


ITALY

Benetton Group SpA (BNGPY.PK) makes and sells fashion clothing for men, women, and children. Some of the brands include Playlife, Killer Loop , United Colors of Benetton, Undercolors, and Sisley brands.

Eni SpA (E) is lucky enough to hold one of the one-letter stock ticker symbols. The company is involved in the oil and gas business, electrical generation, petrochemicals, and oilfield services.

Fiat SPA ADS (FIATY.PK), the famous Italian automobile manufacturer, trades on the New York Stock Exchange.

Luxottica Group SpA (LUX) makes and sells high quality eyeglass frames and sunglasses, including such brands as Ray-Ban, Vogue, Luxottica, Chanel, Prada, Versace, Bulgari, DKNY, Brooks Brothers and Anne Klein.

Natuzzi SpA (NTZ) makes and sells fabric and leather furniture which is sold in Europe and the United States.

Telecom Italia (TI), an NYSE traded company that provides telecommunications services in Italy.


IRELAND

Allied Irish Banks plc (AIB) is a Dublin based bank holding company, with branches in Ireland, the United States, the United Kingdom, and Poland.

Bank of Ireland (IRE), is the oldest bank in Ireland, founded in 1783, has branches in Ireland and the U.K.

CRH plc (CRH), formerly known as Cement-Roadstone Holdings plc, manufactures building materials, such as cement, asphalt, concrete, and lime.

Elan Corp. plc (ELN) is involved in the development of therapies in the areas of autoimmune diseases and neurodegenerative diseases and drug optimization technologies. They are working on NanoCrystal technology which reduces crystalline drugs to extremely small particles under 400 nanometers.

Genesis Lease Ltd (GLS) is a commercial aircraft leasing company based in Limerick.

ICON plc (ICLR) provides outsourcing services to the pharmaceutical and biotechnology industries.


GREECE

Hellenic Telecommunications Organization SA (OTE) is a major telephone and Internet service provider in Greece and southeast Europe.

Coca-Cola Hellenic Bottling Company SA (CCH) is an Athens, Greece based company, which is a distributor of Coca Cola products in Europe.

National Bank of Greece SA (NBG), is a major banking institution in Greece.


SPAIN

Banco Bilbao Vizcaya Argentaria (BBV) is a bank holding company that was founded in 1988 and is based in Bilbao, Spain.

Banco Santander SA (STD) is a bank, asset management, and insurance company with over 10,700 branches around the world.

Repsol YPF SA (REP) is an integrated oil and gas company based in Madrid, Spain. They have operations in Argentina, Brazil, and Bolivia.

Telefonica SA (TEF), founded in 1924, is a large telecommunication company providing landline and wireless services, and serves Spain, Europe, and Latin America.

If you like international stocks, and high yield stocks, check out the lists at WallStreetNewsNetwork.com.

Author does not own any of the above.

By Stockerblog.com

How to Invest in Cuba

Now that the United States is easing restrictions on Cuban Americans traveling to Cuba and allowing them to send money to their Cuban relatives, investors are looking for any possible Cuban investment plays. Other good news for Cuba includes that fact that U.S. telecom companies are now allowed to do business in Cuba. Also, many believe that Obama may improve relations with Cuba, which may lead to more loosening of restrictions of all Americans traveling to Havana. Here are a few companies that have Cuban connections.

Freeport-McMoRan Copper & Gold Inc. (FCX) is the large mining company involved in the exploration and production of copper, gold, and silver, along with other minerals. The Moa Mine located at Moa Bay in Cuba is owned by Freeport-McMoRan but was confiscated by Fidel Castro in the late 1950's revolution. The stock has a forward P/E of 17, and a PEG of 8.75.

Sherritt International (SHERF.PK) is a Toronto, Ontario based mining, and oil, and gas company that is one of the largest foreign investors in Cuba, having more business in Cuba than any other Canadian company. A major portion of their revenues are generated by the Moa Mine in Cuba, as a joint venture with a Cuban government company. They also operate Varadero, Canasí, Yumuri, Puetro Escondido oil and gas fields which they have leased in Cuba. In addition, Sherritt owns, Energas, the Cuban electric utility. The stock trades on the Toronto Stock Exchange in Canada and on the Pink Sheets in the United States, and recently generated negative earnings of 91 cents per share.

Since more cruise travel should be opening up in the near future with Cuba, Carnival Corp. (CCL), which is one of the largest cruise and vacation companies in the world, should participate in that business. Their cruise lines which operate out of North America, the United Kingdom, Germany and Italy, include Carnival Cruise Lines, Holland America Line, Princess Cruises, Seabourn Cruise Line and Windstar Cruises in North America; AIDA in Germany; Costa Cruises in southern Europe; P&O Cruises, Cunard Line, Ocean Village and Swan Hellenic in the United Kingdom; and P&O Cruises in Australia. They operate a fleet of 81 ships, and will be receiving another 20 ships between now and 2011. They are headquartered in Miami, Florida and London, England. They have a P/E of 9, PEG of 0.8, and a yield of 6.3%.

Royal Caribbean Cruises Ltd. (RCL) , which should also participate with trips to Cuba, owns Royal Caribbean International [19 cruise ships with over 44,000 berths] and Celebrity Cruises [9 cruise ships with over 15,000 berths]. They also own Pullmantur S.A., which has five ships in Europe and Latin America. The company plans on having six more ships by the end of 2010. They also offers land tour vacations in Alaska, Canada and Europe. They are headquartered in Miami, Florida. Their P/E is 4, P/S 0.58, yield 6%.

Herzfeld Caribbean Basin Fund Inc. (CUBA) is a closed end fund which is a diversified way of playing the Cuba economy. It invests in stocks of the of the Caribbean Basin Countries and the United States. The stock has recently generated negative earnings and yields 2.9%.

Cuban Electric Co. (CGAR.PK) owns property in Cuba that was confiscated by Castro. The company trades occasionally on the Pink Sheets.

Sol Melia (SMIZF.PK) which is based in Spain, operates about 25% of the hotels in Cuba. Net profit margin is 12% and operating margin of 19%.

Trailer Bridge Inc. (TRBR) is a marine freight carrier between the U.S. and Puerto Rico which is expected to benefit from expansion to Cuba at some point in the future. The stock has a forward P/E of 9.

Petroleo Brasileiro (PBR) is in partnership with Cuba's government-owned oil company. The stock has a P/E of 10.

Repsol YPF SA (REP) is a Spanish oil and gas company with significant operations in Argentina.. They are drilling offshore Cuba for oil. The stock has a P/E of 7.5, and a PEG of 1.7.

Stocks in other countries may participate in the growth of Cuba, including Mexico, Colombia, Brazil and Argentina.

Author owns CGAR.PK and PBR.

By Stockerblog.com