There's a sucker born every minute V

Piltdown Man was discovered in 1912.  It was exposed as a hoax in 1953.  What took so long?  This was a 40 year long hoax.  Not bad for a hoax.

     From the very beginning, there were skeptics concerning Piltdown Man.  Skeptical anthropologists noted that Piltdown Man was an aberration from the very beginning.  It would take a lot more evidence (for these anthropologists anyway) for them to accept the Piltdown "fossil."

   Further, when other anthropologists tried to reconstruct the Piltdown fossil, they arrived at different results (remember, one of the hallmarks of the scientific process is that the results should be reproduceable).  Keep in mind these other anthropologists were using the same skeleton fragments, but the results were not the same.

    An anatomist from the very beginning was able to show that the skull was a modern human skull with an orangutan jaw with filed teeth.  But, because he was not an anthropologist, his findings were ignored.

    Finally, by 1953, other finds in the evolutionary process (other fossil finds) clearly showed that Piltdown Man was a hoax.

More tommorrow.

http://www.tauskvega.com

-------------->>>>>>>>>>>>>>>>>gene  

There's a sucker born every minute IV

OK - we've brought up two important points which will come into play in this matter:

1.  European empire building led to an idea that some human races were more advanced than others, including on the evolutionary ladder (NOTE: this false idea was not limited to European civilizations);
2.  Anthropology, still a young science at the time, was exploring the possibility that there was a "missing link" between modern humans and other primates.

     These two ideas were in vogue when Piltdown Man was "discovered" in 1912.  As we have seen in the Wikipedia article, this "discovery" was nothing more than a fraud which included, most significantly, a human ape with an orangutan's jaw.  But, many people were anxious to jump onto the bandwagon and declare that Piltdown Man was the "find of the century" and the "missing link" between modern humans and other primates.

     Piltdown Man became famous and scientific journals around the world were fooled by this hoax.  Some people even built their careers on Piltdown Man, arguing that it was indeed a correct part of the fossil record and that it was the missing link.

     Soon after 1912, when the "discovery" was excavated, it was the most famous skull in the world.

     How was the hoax exposed?  We'll examine that tommorrow.

Have a great and fraud free day.

http://www.tauskvega.com

-------------->>>>>>>>>>>>>gene tausk

There's a sucker born every minute III

OK - we talked about the publishing of Darwin's seminal work and the development of the idea that life on Earth evolved.  As stated earlier, Darwin's work changed forever how we look at ourselves and the world.

     Human evolution, however, was still viewed in many different ways during the late 19th and early 20th century.  As stated, some groups in Europe viewed this new theory as "proof" that certain groups of humans were more "evolved" than other groups.  This was the age of European imperialism and European groups dominated the world.  It was easy to misinterpret the ideas of evolution to argue that if some groups were more evolved, other groups were less evolved.  We will explore this more in future posts.

    However, mixed in with this was also the idea that evolution was imperfect with many unanswered questions.  One of these unanswered questions was the idea of the "missing link."  Where was the "link" between humans and other primates.  This question has long been answered, but during the 19th and early 20th centuries, this was an overriding question.

    These two themes, the idea that certain groups were more advanced than others and the "missing link" combined to assist the hoax of the Piltdown Man when the Piltdown Man was "discovered" in 1912.

Have a great and fraud free day.

http://www.tauskvega.com

-------->>>>>>>>>>>>>>>>gene tausk

There's a sucker born every minute II

Charles Darwin published his immortal book On the Origin of Species in the middle of the 19th century.  Darwin was the first to publicize (but not to theorize) that organisms evolve.  The purpose of this blog is not to be a biology primer, but Darwin's work is (and remains) one of the seminal milestones in the history of science.  Through Darwin's work, modern biology was born and the idea of evolution is now accepted as a scientific fact. Living creatures change, they adapt to their surroundings, and all life on this planet came from more primitive organisms.

     Like all scientific works, however, Darwin's discovery led to massive social upheaval (and still does, unfortunately).  Some people find the idea that the Earth is not 7000 years old to be unacceptable.  Others argue that evolution cannot possibly coexist with certain religious texts.  Even today, in some states, the idea of "intelligent design" (a thinly veiled type of Creationism) is argued to be taught alongside evolution.

     But, for others, the idea of evolution was appealing, but it was appealing for all the wrong reasons.  Europe in the 19th century was building international empires.  Great Britain had annexed India and parts of South Asia; France owned half of Africa; Germany was setting up colonies in what was left of Africa; Holland had in its position the "Dutch East Indies" (modern Indonesia); the Russian Empire was the largest empire in history.

    Many Europeans (but certainly not all) believed it was the "manifest destiny" of Europeans to subjugate other peoples.  European culture and civilization was thought to be the height of humanity.  What if Europeans were not only advanced culturally, but genetically as well?

   To be continued.

Have a great and fraud free day.

http://www.tauskvega.com

------------>>>>>>>>>>>>>>>gene tausk

There's a sucker born every minute

Fraud takes many forms.  I could spend the rest of my life just blogging about financial fraud (which, let's face it, is the area of concern for most people), but the subject of fraud has just so many good targets, sometimes we need to take a break from financial fraud and focus on the other aspects of deceit.

      I want to take some time to analyze one of the most amazing and controversial frauds in history.  It has nothing to do with money, or for that matter, finances or savings (although as we will see, people did make some money from the fraud).  It is not related to any bank, savings and loan or financial service provider.  No Bernie Madoff or other scammer is involved.

    Rather, it explores the sometimes murky area of......human evolution and anthropology.

   Don't go to sleep - it really is interesting and has a few surprise twists and turns.

  Let's talk about PILTDOWN MAN!

Thanx to Wikipedia, here is an overview:

http://en.wikipedia.org/wiki/Piltdown_Man

Have a great and fraud-free day.

http://www.tauskvega.com

-------------->>>>>>>>>>>>>>>gene tausk

The Great Albanian Pyramid Scheme XV

OK - one last note before we leave this topic.

Some observant readers have asked me - isn't this a PONZI scheme rather than a PYRAMID scheme?

    The answer, of course, is yes.  The great Albanian Pyramid Scheme is actually the Great Albanian Ponzi scheme.

     So - why call it by the wrong name?

    Blame the International Monetary Fund.  The IMF initially called them Pyramid schemes and the name stuck.  But - I am glad that my readers know the difference!

   We will begin a new topic tommorrow.

http://www.tauskvega.com

-------------->>>>>>>>>>>>>gene tausk

The Great Albanian Pyramid Scheme XIV

OK - what can the Albanian experience teach us?

      It's easy to point at this entire mess and say "well, that's that" or "the history of Albania meant that this was an accident waiting to happen" (which is one of the reasons I posted on Albanian history) or "that's what happens when you expect something from nothing."

     Remember the key to all fraud, however - it is the acquisition of money or goods by deceit.  No violence is needed or expected, no weapons are used and no threats of force are required.  A good fraud scheme just really needs two elements: (1) the gullibility of the victim or "mark" and (2) the projected confidence of the perpetrator of the scheme.   BTW - when I use the term "gullible" here, I don't mean that the victims are stupid - far from it.  They are at a point in their lives when, for a number of reasons, they are letting their defenses down and are ready for the scam to be introduced to them.

    As we have seen from the Albanian experience, there was indeed a "perfect storm" that enabled the entire nation to become gullible to the projected confidence of the scam artists that pulled off this incredible, nationwide pyramid scheme that had its end result of plunging an entire nation into civil war.  An inexperienced and uneducated (as to Western economic functions and terms) populace and a massive criminal element (including, unfortunately, some elements of the Albanian government) pulled off a massive pyramid scheme not just on one victim or two, but millions of people.

     This, then, in my opinion, is the "lesson" (or one of them anyway) of the Albanian experience: fraud can not only rip apart an individual's life, it can have far reaching consequences.  It is not unreasonable to expect that people who find that their meager savings were destroyed by scam artists will become upset and, sometimes, violent.  When economic losses due to fraud are not contained, entire governments may find themselves on the receiving end.

     It is a lesson worth remembering in any economic situation, but especially economic "downturns."

We will wrap this up tommorrow.

Have a great and fraud-free day.

http://www.tauskvega.com

--------------->>>>>>>>>>>>>>>>>gene tausk

The Great Albanian Pyramid Scheme XIII

So - we have seen some of the unique factors that went into enabling Albania to become a "poster child" for pyramid schemes.  Chief among them was the country's unique history which made it ripe for such schemes to be perpetuated on a mass of people; namely the country's history as an isolated backwater of the Ottoman Empire for 500 years and it's isolation and totalitiarian rule under Enver Hoxha fromn 1944 until 1985.

     There is another factor that needs to be explored as well, however.  Keep in mind that the pyramid schemes were so massive, so perpetuating and so prevalent in Albanian society during this time because, in part, of government backing.

     One of the problems of a country like Albania which was "in transition" from despotic Communist rule to a free market economy was that no one knew exactly what was going on.  The Albanian government of the early 1990's was caught up in economic problems of its own, not to mention the fact that at this time the government had, at best, loose control over the country.

     There is also the fact that the Yugoslav wars were occurring during this time as well, and the Kosovo crisis was beginning.  This led to frequent cross-border incursions from Albanians living in (the former) Yugoslavia and arms shipments and gangs of both criminals and paramilitary groups that were using the Albanian economic system (such as it existed) for their own purposes.

    In short, a "perfect storm" was brewing during the 1990's which allowed pyramid schemes to get out of control in Albania.

   Next, we will ask what we have learned since the crisis of the 1990's in Albania.

Have a great and fraud-free day.

http://www.tauskvega.com

------------->>>>>>>>>>>>>gene tausk

The Great Albanian Pyramid Scheme XII

Let's talk about why the country disintegrated into civil war for a moment.

     People lose billions (yes, that is billions with a 'B') every year on pyramid schemes.  There are lawsuits and counter-lawsuits that fly back and forth as a result of such actions and, of course, criminal prosecutions that result.  We have seen that pyramid schemes are illegal in many countries, including the U.S.

     Albania, however, was a unique case.  We discussed the fact that Albania emerged from 50 years of the worst kind of communism.  The isolated country was not prepared for the modern world.  The Albanian population, with no recent history of contact with the outside world or free market economic systems, was easy prey for schemes that enticed massive rates of return for little investment.  And, remember, pyramid schemes pay off the earlier investors, so there was a great deal of "evidence" for people to invest in these schemes.  Why stop investing while people around you are getting rich (sound familiar)?

     There is another issue involved as well.  Albanian history is long and tortured and previous to the "experiment" with Communism, Albania was a backwards province of the Ottoman Empire.  So, long before Communism was imposed on the country in the hands of a mad dictator, it was isolated from the rest of the outside workd because of its position in the Ottoman Empire.

    So, for 500 years, Albania was cut off from the outside world.  Its people, except for a small minority, were not exposed to the rest of Europe and the development of free market capitalism through the Renaissance.  This history, combined with the recent Communist history, made Albania a prime target for "get rich quick" schemes.

    We will discuss this economic illiteracy more tomorrow.

Have a great and fraud-free day.

http://www.tauskvega.com

------------->>>>>>>>>>>>>>>gene tausk

The Great Albanian Pyramid Scheme XI

OK - let's talk about the actual breakdown of authority and open revolt that occurred because of the financial schemes.

     In January, 1997, the government began to close some of the fraudulent investment firms that were pepetuating the pyramid schemes.  It is important to note that prior to this, these firms often had the backing of the government.

    Protests began in earnest on January 16.  By January 19, the capital of Tirana was engulfed in protests.  Within a few days, the protests descended into violence and buildings were torched and open revolt actually broke out against the government.    

      The government tried to deflect the protests by paying out some of the losses beginning in February.  However, there was no way the bankrupt Albanian government could cover all of these losses.  The investment firms declared bankruptcy and the government ran out of money.  By this time, the country was in open revolt and even the intervention of the Albanian special forces could not put down the revolt.

    Keep in mind, this civil war began once the financial firms that engaged in the pyramid schemes became unable to meet their obligations.  As we know from our studies, it is only a matter of time before pyramid schemes run out of money because the ability to pay investors comes from bringing in other investors.  Once this pool of investors dries up, which always happens, the money evaporates as well.

   We will begin wrapping up our discussions of this event tommorrow.

Have a great and fraud-free day.

http://www.tauskvega.com

-------->>>>>>>>>>gene tausk

The Great Albanian Pyramid Scheme X

The pyramid schemes and financial collapse eventually led to the intervention of the United Nations.

http://en.wikipedia.org/wiki/United_Nations_Security_Council_Resolution_1101

We will begin to summarize this tommorrow.

As always, have a great and fraud-free day.

http://www.tauskvega.com

------------->>>>>>>>>>>>>>>>>gene tausk

The Great Albanian Pyramid Scheme IX

We have seen the effect of the massive pyramid schemes on Albanian society.  The entire country dissolved into civil war.  

     Remember what we are talking about - in 1997 and 98, directly as a result of the massive financial losses, an entire country turned in on itself. 

     The entire population of Albania was caught up in promises of massive financial returns on investments.  It's easy to say that history was not on the Albanians' side.  They were trapped in a Communist dictatorship for 50 years that cut them off from society and free market economics was not only discouraged, it was actually against the law during this time.  Further, the harsh dictatorship of Hoxha would almost guarantee that any kind of self employment or investing (other than the corruption that was rife in Albanian society under Communism) would result in criminal penalties (usually concentration camps or harsh prisons).

     However, it is also clear that the scammers took advantage of basic human nature as well.  The scammers and con artists took advantage of peoples' desire to get something for nothing, or in this case, to try and get a large rate of return for little money.  This is the basic "pitch" of all con artists and fraudsters, but it found easy marks in a country like Albania.

As always, have a great and fraud free day.

http://www.tauskvega.com

-------------->>>>>>>>>>>>>>>>gene tausk

The Great Albanian Pyramid Scheme VIII

These pyramid schemes, about which we have been discussing began to unravel in 1997.  Remember - of a total population of 3 million, about 2 million were involved with the pyramid schemes ("involved" = investors).  And remember as well, the losses were $1.2 billion dollars.  Dividing that number among the number of investors gives an indication of the monumental losses per capita to the population.

      On March 1, 1997, in the face of massive demonstrations from angry Albanians who lost their life savings in these schemes, Prime Minister Aleksander Meksi resigned and on March 2, President Sali Berisha declared a state of emergency.  Protests continued to spread throughout the country, however, and the Albanian military was unable to stop the revolts.

     By the end of the month, the security situation had completely deteriorated.  The southern part of the small country was in open revolt and in the hands of criminal organizations and gangs.  The northern part was engulfed in violence but still under government control.

     This out-of-hand situation was started because of massive pyramid schemes.  This was not the first time in history that fraud brought down a government.  But, it was one of the few times that it led to a civil war.  Food for thought because as I write this, the "Occupy Wall Street" protesters are still going strong, presumably in response to the American economic situation.

Have a great and fraud free day.

http://www.tauskvega.com

-------------->>>>>>>>>>>>>>gene tausk

The Great Albanian Pyramid Scheme VII

We have seen the enormous toll the pyramid schemes took on the Albanian populace.  From a population of approximately 3 million, billions of dollars were lost.

     One important feature of these pyramid schemes was that they were quasi sanctioned by the Albanian government.  This was due to corruption in the newly-democratic Albania.  Many of the leaders used these schemes not only to enrich themselves, but also to find ways to take money out of the country quickly.

     Remember, at the heart of pyramid and ponzi schemes are criminal acts.   The people who perpetuate these schemes are perpetuating a fraud, pure and simple.

    In the case of a national pyramid scheme such as the Albanian schemes, these schemes were also fronts for drug running and gun running.  Criminal organizations, as stated often with the tacit or unwilling support of the Albanian government, were able to raise enormous amounts of money which were used to fund other illegal operations.

    As always, have a great and fraud free day.

http://www.tauskvega.com

---------->>>>>>>>>>>>>>gene tausk

The Great Albanian Pyramid Scheme VI

Between the fall of Communism and the rebellions that began as a result of the pyramid schemes that were rampant in Albania (1991-1997), Albanians invested a rough total of about $1.5 billion dollars in these schemes.  Yes, that's "billion" with a "B."  And, since these investments were a total loss, this means that the population of Albania lost this $1.5 billion.

     Compounding this problem was that Albania is a country with a small population - at the time of these schemes, it was approximately 3 million people.  By comparison, more people live in my city of Houston, Texas.

    So - there is a loss of $1.5 billion dollars spread out over a small population.  When you consider the people that invested in these schemes were limited to adults (since children generally do not have the money to invest in any type of schemes), it becomes even worse.  Now we are talking about a population of roughly 2 million people that lost $1.5 billion.

     The amount of money lost to these schemes, therefore, from the population as a whole is staggering.  It is no wonder that this triggered a civil war.

As always, have a great and fraud free day.

http://www.tauskvega.com

--------------->>>>>>>>>>>>>>>>>>gene tausk

The Great Albanian Pyramid Scheme V

OK - let's move forward with our discussion.

     We've seen that Albania was basically a closed state until the early 1990's (think North Korea in the present situation).  People had no idea about how to invest money or how to look for fraudulent investments because free-market capitalism of any sort had been outlawed for approximately 50 years.

     Pyramid schemes started in as early as 1991 when the new democratic parties emerged.  These schemes were simple schemes in which people would invest money and the entire network of operations was made up of people investing money.  There were no investments.  The entire scheme was just designed to bring in investors to deposit money.   Albanians would invest in these schemes and as they moved up the "pyramid," they were able to get astonishing rates of returns.  But, of course, like any pyramid scheme, with no further investors, the scheme eventually collapsed.

    The first known pyramid scheme was organized by Hajdin Sejdise who, after getting rich from his "investors," fled to Switzerland with millions of dollars of his "investors'" money.  Another scheme was started by a man named "Sudja."

   These schemes ran rampant from 1991 to about 1997.  We will examine the sheer numbers of investors in these schemes in the next post.

   NOTE - I am not a speaker of the Albanian language and in no way will I attempt to replicate the Albanian alphabet or phonetics.  So, for any Albanian readers who happen across this blog, I apologize for any misspellings.

As always, have a great and fraud-free day.

http://www.tauskvega.com

------------->>>>>>>>>>>>>>>gene tausk

The Great Albanian Pyramid Scheme IV

Let's review the history somewhat as we set the stage for the pyramid scheme that engulfed Albania in the 1990's.

     As stated previously, Albania was a Communist state until the entire system collapsed along with the governments of other nations of Eastern Europe and the Former Soviet Union.  Albania was somewhat unique, however, among these states in that Albania was not aligned with the Soviet Union or Warsaw Pact nations for most of its existence.  The Albanian dictator, Enver Hoxha, first aligned himself with the Soviet Union in the 1950's but following the death of Joseph Stalin and the subsequent de-Stalinization of the USSR (which involved denouncing Stalin), Hoxha broke with the Soviet Union.

     He then aligned the country with the People's Republic of China in the early 1960's and kept this alignment until mid 1970's.  The PRC provided aid to the country as well as material support.  However, Hoxha's own paranoia led to a break with the Chinese as well.

     From the mid 1970's until the death of Hoxha in 1985, and until the eventual fall of Communism across Eastern Europe in the 1990's, Albania continued this policy of isolation.

     What this meant was that for two generations, Albanians were completely cut off from the outside world.  Visitors to Albania were few and far between (and only allowed in with sanctioned Albanian government visas) and Albanians were not allowed to travel.  Albania had few foreign embassies.

      When Communism fell, therefore, the people were not prepared for the world of free-market capitalism.

We will discuss more tommorrow.

Have a great and fraud-free day.

http://www.tauskvega.com

--------------------->>>>>>>>>>>>>>gene tausk

The Great Albanian Pyramid Scheme III

Sorry - issues with posting the last one:

Ponzi Scheme:  A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation. The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going.

A pyramid scheme is a non-sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public. Pyramid schemes are a form of fraud.

The Great Albanian Pyramid Scheme III

Before we move forward with our discussions on the Albanian Pyramid scheme that caused a civil war, it is useful to refresh our memories concerning the differences between a pyramid scheme and a ponzi scheme.  Remember, although they are related, the two are different.

Definition of a pyramid scheme from Wikipedia:

A pyramid scheme is a non-sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public. Pyramid schemes are a form of fraud.


Definition of a Ponzi scheme from Wikipedia:


A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation. The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going.


Differences between a pyramid scheme and a Ponzi scheme:


A pyramid scheme is a form of fraud similar in some ways to a Ponzi scheme, relying as it does on a mistaken belief in a nonexistent financial reality, including the hope of an extremely high rate of return. However, several characteristics distinguish these schemes from Ponzi schemes:

• In a Ponzi scheme, the schemer acts as a "hub" for the victims, interacting with all of them directly. In a pyramid scheme, those who recruit additional participants benefit directly. (In fact, failure to recruit typically means no investment return.)
• A Ponzi scheme claims to rely on some esoteric investment approach and often attracts well-to-do investors; whereas pyramid schemes explicitly claim that new moneywill be the source of payout for the initial investments.
• A pyramid scheme typically collapses much faster because it requires exponential increases in participants to sustain it. By contrast, Ponzi schemes can survive simply by persuading most existing participants to reinvest their money, with a relatively small number of new participants.

Have a great and fraud free day.

http://www.tauskvega.com

---------->>>>>>>>>>>>>>>>>>>gene tausk

The Great Albanian Pyramid Scheme II

OK - before we move forward to talk about the pyramid scheme that toppled the Albanian government in the 1990's and ignited a civil war in that country, it is worth looking into the history of that country in the 1990's.

    From 1944 until 1985, Albania was ruled by a despotic and cruel Communist system headed by Enver Hoxha.  Even by Soviet and East European standards, the Communist dictatorship of Hoxha was harsh and barbaric.  The country was kept in a state of virtual isolation from the outside world and the ever present secret police enforced a brutal repression over the small country.

     This isolation and backwardness meant that for about 40 years, the people of Albania had no real way to compare their country with other countries, including the standard of living and, more germane to our discussions, how economic systems and actual investments work.  This meant that when Communism eventually collapsed across Eastern Europe in the late 1980's and ended in Albania in the early 1990's the population was completely ignorant about investments and free market systems.

    In situations such as this, it is not surprising that people are easy prey for criminals and fraudsters to take advantage of the situation.  And, of course, this is what eventually occurred.

As always, have a great and fraud-free day.

http://www.tauskvega.com

------------>>>>>>>>>>>>>>>gene tausk 

The Great Albanian Pyramid Scheme

We are going to spend the next two to three weeks examining how a pyramid scheme brought down an entire government and ignited a civil war.

     Albania in the 1990's had just escaped from decades of Communism and was entering the world of free market democracy and capitalism.  Because of this unique situation, it was ripe for the scheme.

    Here is a summary of the events.

http://en.wikipedia.org/wiki/1997_rebellion_in_Albania

As always, have a great and fraud free day.

http://www.tauskvega.com

---------------->>>>>>>>>>>>>>>>>gene tausk

James Randi and Fraud Prevention XIV

Cold reading used by fraudulent investment advisors.  This is a person who uses the techniques associated with so called "psychics" and "speakers with the dead" to get information from people to use against them.

     Cold readers fall into two broad categories - cold readers either use their skills to pretend that they have special abilities or they use them for entertainment, the same way as a magician or illusionist.  The second method is for the enjoyment of everyone, the first method is to rip off people.

     Using a bit of skepticism here goes a long way.  If you are being confronted with an investment advisor that is asking you a barrage of questions and, in essence, reading the answers back to you instead of speaking to you and eliciting information from you to discover what are your goals, then there is an issue.

    Financial advisors are to make things more clear for their clients, not confuse the issue.

   So, this is but a small example of how critical thinking can go a long way.  Examine if the advisor is "cold reading" you or actually trying to discover what you want.

   We will move on to another area tommorrow.

As always, have a great and fraud free day.

http://www.tauskvega.com

--------------->>>>>>>>>>>>>gene tausk

James Randi and Fraud Prevention XIII

Let's wind up our discussion regarding cold reading and fraudulent financial advisors.

    I stated at the beginning of this thread that we would discuss how the lack of critical thinking often works with fraud.  The specific example I gave, or have been using, is that there is a link between fraudulent financial advisers (at least some of them anyway) and the technique of cold reading.  Financial advisers, by their very definition, intend to take your money from you.  The only difference between a real financial adviser and a fraudulent one is that a real financial adviser will look out for your best interests while a fraudulent financial adviser will look out for his best interests.

     A real financial adviser welcomes questions from his clients regarding his investments because he has nothing to hide and wants to share information with his clients.  A fraudulent financial adviser will try to discourage or deflect questions from his clients because he wants to hide information from his clients and hide behind a smokescreen.

     "Cold reading" techniques let the fraudulent financial adviser hide behind such a smokescreen.


Have a great and fraud free day.

http://www.tauskvega.com

--------------->>>>>>>>>>>>>>>gene tausk

James Randi and Fraud Prevention XII

So - we reviewed the difference between a fraudulent financial "professional" and a real one and, specifically, how cold reading works into all of this.

     And - I think we come to the same conclusion.  A real financial profession is interested in what YOU want, what are your goals as the client of a real financial professional, and so will ask questions designed to elicit the information from you to help you meet your goals.

     A fraudulent financial professional will use techniques such as cold reading to make you think you are the one making the decision when, in actuality, the fraudulent financial person is leading you down the path he wants.

     Once uses a method to collect information from you that allows you to think and plan.  The other uses a method of overwhelming you with information (questions) which are designed to shut down your ability to think and only to force you in one direction.

     Cold reading is a great parlor trick, but it is also a method used in fraud.  Being aware of how it is used for fraudulent means is a way of detecting it.

Have a great and fraud free day.

http://www.tauskvega.com

--------->>>>>>>>>>>>>>>>gene tausk

James Randi and Fraud Prevention XI

OK - let's put together the fraudster financial planner and the real financial planner.  And, how is this related to cold reading?

     Remember the central plan of all cold readers - questions, questions and more questions.  Barrage the mark with questions until the mark gives you the information that you want.  Asking question after question overloads the mark and confuses him, so much so that the mark doesn't even realize that he is giving the cold reader the answers he wants.

     The cold reader masks this off as some kind of "psychic" or supernatural ability instead of what it actually is - just some basic psychology at work.

     In other words, the cold reader fools the mark into giving information when he should be just admitting to the mark that this is HOW he gets his information.

     A good financial planner is the same way - a good financial planner will ask questions of the client to get the information he needs.  A fraudulent financial adviser will fool the mark into giving him information to show that he possesses "special" abilities.

More on this tomorrow.

Have a great and fraud free day.

http://www.tauskvega.com

---------------->>>>>>>>>>>>>>gene tausk

James Randi and Fraud Prevention X

OK - let's explore the questions that should be asked by an honest financial advisor:

Please visit this website:

http://blogs.economictimes.indiatimes.com/moneyhappyreturns/entry/5-personal-questions-your-financial-advisor-will-want-to-ask

And we will discuss the difference between a fraudster and an actual financial advisor later.

Have a great and fraud-free day.

http://www.tauskvega.com

-------------->>>>>>>>>>>>>gene tausk