Financial Fraud: The Tip-Off

Snake Oil Liniment

“Tell me why I’m so lucky!” This was the challenge hurled by the head of Capital Markets of my former Wall Street firm at any trader who booked a profit. My partner, who ran our trading business, had the Head of Accounting sitting outside his office and he tracked the firm’s securities operations like a hawk. Since perfect markets have the profits squeezed out of them, a reported profit demanded an explanation. Why were we so lucky?

My former partner lived the first rule of avoiding financial scams: understand where your money is, what it is doing, and the logic of your profits. If you don’t understand, if it does not make sense to you, if it does not reflect how the real world really works, then it is prudent to assume you are dealing with fraud.

There are a few basic rules that will help you protect yourself from most financial frauds. Consistent returns were the dead giveaway that something was fishy at Madoff’s operations. Consistent returns, however, are a siren’s song for investors who want to prosper inside a financial bubble.

Madoff raised funds through intimate networks. Critics say this is why you would not bank and invest with people you know. Rubbish. You need to know who you bank and invest with. You also need to know what they are doing with the money. Black boxes are usually frauds — whether by individual investment firms or by the partnership of the Treasury and central bank.

In this week’s Solari Report (Thursday, January 8 at 9PM EST), we’ll review some simple rules to help you avoid financial frauds and embrace the “rock-and-roll” of investment in the real world. I will also be joined by nutritionist Dr. Laura Thompson, a healer who has brought many people back to health from seemingly impossible odds. I know — I am one of them. One of the great blessings of seeking out people who are researching “what is really going on” is that they are applying real solutions to real problems. When it comes to health, this is absolutely critical.

You can learn more about The Solari Report and subscribe here.

I hope you’ll join us.

Note: Solari Report subscribers can now listen to Catherine’s discussion of this topic via MP3 recording. You can subscribe monthly or annually here.

9 Comments

  1. Catherine,

    I was just thinking about this while I was sharpening my pitch fork this morning…

    All derivatives are fraud. If we only trade the basic instruments of debt and equity, I believe we could restore transparency to markets and regain a modicum of sanity. Sure, it’s an over simplification, but it’s a start.

    BAN DERIVATIVE SECURITIES.

    Anyone know where I can get a new rag for my torch?

  2. You can’t ban derivatives but you can make sure that there is always a buyer and seller at equal risk. I am trying to include derivatives like puts and calls where the gain by one is the loss by the other. That type of derivative works.

  3. Movie Comment: Today I viewed scene 20 for the dialogue that Catherine recommends of the movie Syriana with George Clooney, Matt Damon and Jeffrey Wright among many more stars. syrianamovie.com was based on a book See No Evil by Robert Baer. It is riveting. I saw it a couple of years ago and Clooney was a best supporting Actor Academy award winner. If you have not seen the movie, it makes more sense to see it entirely before going back to this scene. George Clooney’s Conversation piece from the extras adds value as well.

  4. Ever since the ‘Guilded Age’, the WEALTHY OLD WHITEBOY 1%-ERS who live behind gates and travel in limos have been RAPING the other 99% with ever increasing success. Two reason for such is the ever-present ‘Guilelessness’ reflected in their GLEE at Financial Wizardy (SCAMS) and Good Breeding shone in accepting the short end of the stick with a smile – over & over again.

    A while back my father told me “You can always tell a Rich guy by the blood on his hands ’cause he canc give Pain & We can’t. He can Lie & Steal and never be caught. Only DEATH’ll stop him.” Hmmm.

  5. THE RICH GET RICHER……..WHILE WE HOLD STEADFAST IN OUR ( ONCE UPON A TIME BELIEFS IN INTEGRITY AND JUDGMENT FOR ALL )

    QUESTION! WHY IS IT THAT WE SEE COMMERCIAL AFTER COMMERCIAL FOR THE PUBLIC TO GO OUT AND BUY A NEW VEHICLE WHEN THE VALUE OF THE DOLLAR IS WORTH APPROXIMATELY 0.40cents? A NEW VEHICLE AT TODAYS PRICES WILL COST YOU NEARLY THREE TIMES WHAT YOU INITIALLY PAY FOR IT…OR ANOTHER WAY TO LOOK AT THE ECONOMICS OF THIS VEHICLE IS….FOR EVERY $1.000.00 YOU SPEND FOR THIS VEHICLE YOUR BUYING POWER WILL ONLY BE WORTH APPROXIMATELY $400.00 AND YET WE NEVER SEE REALITY (ESPECIALLY IN A COMMERCIAL SPOKEN) TO AS THE TRUTH AND NOTHING BUT THE TRUTH SO HELP YOU GOD. THE SYSTEM HOUSE IS AT AN ALL TIME HIGH SCAM!!!!! MY TIPOFF IS TO CASTOFF FROM THE NEW VEHICLE. MAY GOD BLESS.

  6. A couple of items I find quite interesting about the Madoff robbery. I watched an interview on yahoo finance today where they showed the trading floor of a 20 billion dollar hedge fund…it was
    the size of a football field!! Second, the day after the Madoff scandal was announced, the chairman of the SEC was on television and in print stating that the SEC had overlooked Madoff and had made serious errors when reports/complaints were made over the past 10 years. I have been a licensed advisor for 15 years, and as Catherine can attest, the first rule any broker-dealer, the SEC, FINRA, etc will tell you, if you ever receive a complaint or charges are made you NEVER EVER admit guilt or a mistake until a full investigation has been completed. That was the moment I knew for certain that the SEC was as much a part of this theft as Madoff.

  7. “The Journal said that neither Palmer, nor Trigon, are registered as investment advisers with state securities regulators, which Idaho law requires.”

    A local man has defrauded people in the community by as much as $100 million according to reports. My neighbor was caught in the scam. He didn’t check the guy out or he would have known that he wasn’t qualified to run a hedge fund.
    http://groups.google.com/group/misc.invest.stocks/browse_thread/thread/d60b974cc03f13b1/6e22560a32f2efc1?lnk=raot

  8. Hi,
    Check out the bigest heist of them all…
    British Financial Media Confess They Are Hooked on Hyperinflationary Junk.
    From:
    http://www.larouchepac.com/news/2009/01/20/british-financial-media-confess-they-are-hooked-hyperinflati.html

    January 20, 2009 (LPAC)–The City of London’s two most prominent media outlets, the Economist and the Financial Times, have both come out like a bunch of smack junkies, demanding the creation of more and more toxic financial waste to help bailout the existing mounds of toxic waste.

    The Economist commented on the latest British bailout package in an editorial suggestively titled “Another Shot in the Arm,” which was accompanied by an even more suggestive picture of a syringe against a backdrop of the British flag, the Union Jack. They dismiss the latest British bailout as insufficient, saying that “there is little in the new package to give banks the incentive to put their profit motive aside and help reflate the economy.” In any event, “the world’s systemically important banks have regulators over a barrel…Britain’s main banks know they will be kept alive.” Better than the bailout, the Economist notes, “is the international move to relax the Basel 2 capital regime for banks,” which would allow them to get away with just about anything, and overdose on hyperinflation.

    The Financial Times, for its part, argued that the incoming Obama administration should go ahead and create a so-called “bad bank,” which would centralize all the toxic waste in the system in one place, which the government would then bail out. This is the best route to take, they say, because U.S. Treasury bailout funds could then be leveraged into even more toxic waste creation: “The $100 billion of TARP equity could be geared up five times to provide $600 billion of purchasing power,” the toxic junk addicts fantasized.

    And hot of the press.
    Is The Imperial Slime Mold Sacrificing The Bank Of England?
    From:
    http://www.larouchepac.com/news/2009/01/20/imperial-slime-mold-sacrificing-bank-england.html

    January 20, 2009 (LPAC)–The British Government yesterday launched a second bailout of its banking system, promising a series of cash injections, asset purchases and guarantees similar in may respects to what has been done in the U.S. The government increased its ownership stake in the Royal Bank of Scotland to 68%; the government also owns 43% of Lloyds Banking Group, the new bank formed by the merger of Lloyds TSB and HBOS. Thus far, it has not taken a stake in either HSBC or Barclays, the remaining two big British banks.

    The most interesting aspect of the bailout is the bailout role taken on by the Bank of England. The Bank, which in the early phases of the crisis had urged the Fed and the European Central Bank to launch bailout programs while remaining on the sideline itself, is taking an active role in the new bailout. Since such a role is ultimately self-destructive, one has to wonder if the deeper levels of the imperial oligarchy have decided that it is necessary to sacrifice some of their key London-centered control mechanisms in order to save their oligarchic system itself. That is to say, if they know the present financial system is going down, they may be forced to hunker down themselves, in an attempt to ride out the chaos with the intent to emerge at a later date, and create a new financial system suitable for a much smaller world economy. If so, then these parasites might be willing to sacrifice their British “national” host, in order to save themselves.

    The empire has a history of destroying the hosts it infects, having in the past moved from Rome to Byzantium and then Venice, before moving to the Netherlands and then England. Is it preparing to move yet again, to some safer havens while chaos engulfs mankind?

  9. The Royal Bank of Scotland had losses of 24Billion UK pounds and Fred Goodwin still gets 650k pension every year. That is just unbelievable! They should strip him of his pension.

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