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11-12-2015, 08:58 AM
Before Bernie Madoff, before Charles Ponzi, there was George Graham Rice.
For more than two decades, from the turn of the 20th Century to the Roaring 20’s, Rice’s illicit, sophisticated scams and hustles earned him a huge fortune and national notoriety. By 1925, Rice’s net worth was estimated at around $100 million — equivalent to almost $1.4 billion today.
Racetrack tipster, stock swindler, and unreformed huckster, Rice was a master at taking your money and convincing you that the loss was your fault. Yet Rice, improbably, was for many a champion of the little guy. Rice would rail against the vast wealth of the then-rich and famous such as John D. Rockefeller — the 1% of that time — portraying himself as a friend to small-time investors even as he picked their pockets clean.
Rice had a willing audience. Americans at the beginning of the 1900s were obsessed with get-rich-quick schemes, and Rice readily obliged. The stock market then was largely unregulated, and tailor-made for touts like Rice. His most lucrative scheme involved creating and promoting publicly traded gold-mining companies in the Western U.S., then selling shares to unsuspecting, unskilled investors — rich and poor alike — through seamy “bucket shop” brokerages under his control.
Rice’s propaganda and sales machine would then spring into action, pumping up the stock price and creating more demand for the shares — and profit for Rice. Eventually the worthless mining company would be exposed and the shares would plunge. Rice, selling short, even made money on the way down. Such unscrupulous but successful stock manipulations tarred Rice as the “Jackal of Wall Street.”
How Rice robbed the public is the subject of author T. D. Thornton’s fascinating new biography of Rice: “My Adventures with Your Money: George Graham Rice and the Golden Age of the Con Artist” (St. Martin’s Press). In this edited telephone interview, Thornton explains how Rice’s con game is still played today, and the tools you need to keep a swindler from taking your money.
1. In Rice’s day 100 years ago, financial markets were largely unregulated and people weren’t as educated. Were people easier marks back then?
Thornton: When we read now about how easily people fell for some of Rice’s scams, there’s a sense of how something like that couldn’t possibly happen today.
The methods change, but confidence games by nature are cyclical. Sooner or later they revive, they’re modernized, and they’re used to trim some sucker. Low-level hustlers are still getting away with three-card monte. That game has not changed. You think you’re going to put one over on that guy because you’re smarter than them. But you’re entering into a rigged encounter.
In the Spanish Prisoner scam of the 1600s, a foreign dignitary solicits your financial assistance to get out of a nonexistent jail. Today the ruse often takes the form of a deposed Nigerian prince whose inheritance has been stolen. He needs to get to your bank account. The psychology, and the con artist mentality behind it, has been around for centuries.
Take Bernie Madoff. His decades-long swindle was presented as a new scheme. But rewind that to 1920 and it’s the same story as Charles Ponzi — we’ll deliver astronomical returns if you buy into it.
Every time one of these scams comes along and rocks the nation, people think it’s new and a product of our new era. That’s not true. These are the same swindles refurbished to fit the times. And there’s little possibility that there will be a shortage of marks for con games.
2. Why do scams sting otherwise smart people?
People often don’t want to hear the truth. These come-ons hit them in a place where they might be vulnerable.
A key to Rice’s success was that he realized the value of a well-told story. He would sell you the story. To facilitate getting his stories out there, he created his own news bureau to make up his own reports. The names of his sham securities were pretty much interchangeable: a mining stock, a “pump-and-dump” — he would pump up the share price through fabricated stories and the promise of riches.
Rice was the father of penny stocks. He realized that you can get a hook in people by promising them a better way of life. A lot of those people were not very well-educated so they were easier marks. Once he ratcheted the stock up, he would cash out. And once he learned to short the shares, he would make money as well.
‘A good con artist can be on friendly terms with any individual in 15 minutes.’
His game was to paint such an entrancing picture of the future that people would not think to check the facts in the present. When they came out with the Truth in Securities Act in 1933, the foundation for the Securities and Exchange Commission, Rice’s name often came up. Twenty years before, there was no SEC, no specific laws against defrauding people. The feds had to come in the back door and get you for using the mail to defraud. Rice was very careful. When he did come under attack, he got the little investors on his side because he pretended to stand up for them and rail against the establishment.
3. How can an investor spot a con artist?
A con artist is somebody who harnesses a person or the public trust for the sole purpose of using that trust against them, to separate them from their money.
Con artists take their time to research potential victims and markets. You think that your contact is random. But he would have already been sizing you up. Rice, for example, had a direct-marketing list he called his “sucker list.”
A good con artist can be on friendly terms with any individual in 15 minutes. He’ll find out your appetite for risk, how much money you have, and he’ll do this in a conversational way, to find out if you had a shared desire to participate in a get-rich-quick swindle.
The con artists bleed you dry. They’ll dangle illicit riches in the form of a too-good-to-be-true proposition. They’ll let you make a small teaser profit. It costs nothing to make up a stock tip. If they’re right, and you make a small amount of money, that emboldens your confidence.
4. Aren’t stock investors better protected nowadays from scammers?
I would think they are in theory. But you can have all the layers of protection you want at a federal level — people still bite on a too-good-to-be-true story. That’s the fuel to keep these swindlers going.
At the lofty heights of the stock market in the 1920s, nobody was thinking about the ride down. People who had no investing knowledge were investing in the stock market. Annual losses from stock swindling at the height of the Roaring ’20s were measured in billions of dollars.
5. How can people sharpen their radar so they’re not an easy target?
If you keep hearing about some form of insider activity in the broader marketplace, it’s going to make you suspicious. That opens the door for an iconoclast like Rice to gain a foothold. Here’s this guy riding in on a white horse who is going to protect you. Rice was masking his own frauds with large denunciations of others.
Take everything with a grain of salt. Question everything. Be a probing investor. One tool con artists like Rice use, which people use even in legitimate areas of business, is confusion. Rice would spell out this deal, and it was such a complicated deal. It’s complicated, he’d say, because it’s going to make money, and it’s going to make money because it’s complicated. As intelligent as we all like to think we are, we’ve all been in a position where someone explains an investment with confidence and charisma, and you can only ask someone so many times to explain something to you without looking foolish.
We see that in the investment world today. Investments are pitched to people behind layers of complexity. If they pared it down in a fully explainable and understandable way, you’d probably run.
Look at the underlying product, and not the story behind the product. The public demands to be mystified. People want those stories. When you tell somebody they can’t see something, it makes them want it more. There’s tremendous power in telling people that something is exclusive to them; people are fearful of missing out. Anything that is pressuring you to make the deal now is an obvious red flag.
Until we can find a way to change people’s fundamental human nature, you can only hope to make a dent in their awareness by educating them. That offer doesn’t just randomly land in your inbox. There are reasons you’re being targeted and you have to remain constantly vigilant. We all would like to get rich quick overnight. You have to resist the temptation to buy into that and raise your awareness. These technologies that we think are going to make our lives easier and ease our path to riches are being controlled by other people, and you just have to remain hyper-vigilant and hyper-skeptical. Uneducated investors don’t know when to cut their losses and get out.
More from MarketWatch
NB:-
A few years ago, as i was walking in a HDB's corridoor, i received a phone call out of the blue asking me to invest in something that "sure makes money". i was not surprised but what the FXXX... So keeping a low profile is quite important.
Oops.... !
What am i doing here?
My belief is always, we may be targeted one way or another by scammers. And nobody in the world "chiat par wu ah ney eng to put money in your pockets."
i always remind my family and friends not to entertain any cold calls from "strangers".
Not even talk a little bit too long with them.
Just tell them "No! No! No!, less you are carried away by some fanciful ideas.
i repeat, just remember below and i think you should be O. K.
"Nobody Chiat Par Wu Ah Ney Eng........xxxxx"
Don't say you don't know anything about them!
My 2 cents to keep scammers and con artists far away to enter into my world though they may have targeted me & you already!!!!
Amen.
For more than two decades, from the turn of the 20th Century to the Roaring 20’s, Rice’s illicit, sophisticated scams and hustles earned him a huge fortune and national notoriety. By 1925, Rice’s net worth was estimated at around $100 million — equivalent to almost $1.4 billion today.
Racetrack tipster, stock swindler, and unreformed huckster, Rice was a master at taking your money and convincing you that the loss was your fault. Yet Rice, improbably, was for many a champion of the little guy. Rice would rail against the vast wealth of the then-rich and famous such as John D. Rockefeller — the 1% of that time — portraying himself as a friend to small-time investors even as he picked their pockets clean.
Rice had a willing audience. Americans at the beginning of the 1900s were obsessed with get-rich-quick schemes, and Rice readily obliged. The stock market then was largely unregulated, and tailor-made for touts like Rice. His most lucrative scheme involved creating and promoting publicly traded gold-mining companies in the Western U.S., then selling shares to unsuspecting, unskilled investors — rich and poor alike — through seamy “bucket shop” brokerages under his control.
Rice’s propaganda and sales machine would then spring into action, pumping up the stock price and creating more demand for the shares — and profit for Rice. Eventually the worthless mining company would be exposed and the shares would plunge. Rice, selling short, even made money on the way down. Such unscrupulous but successful stock manipulations tarred Rice as the “Jackal of Wall Street.”
How Rice robbed the public is the subject of author T. D. Thornton’s fascinating new biography of Rice: “My Adventures with Your Money: George Graham Rice and the Golden Age of the Con Artist” (St. Martin’s Press). In this edited telephone interview, Thornton explains how Rice’s con game is still played today, and the tools you need to keep a swindler from taking your money.
1. In Rice’s day 100 years ago, financial markets were largely unregulated and people weren’t as educated. Were people easier marks back then?
Thornton: When we read now about how easily people fell for some of Rice’s scams, there’s a sense of how something like that couldn’t possibly happen today.
The methods change, but confidence games by nature are cyclical. Sooner or later they revive, they’re modernized, and they’re used to trim some sucker. Low-level hustlers are still getting away with three-card monte. That game has not changed. You think you’re going to put one over on that guy because you’re smarter than them. But you’re entering into a rigged encounter.
In the Spanish Prisoner scam of the 1600s, a foreign dignitary solicits your financial assistance to get out of a nonexistent jail. Today the ruse often takes the form of a deposed Nigerian prince whose inheritance has been stolen. He needs to get to your bank account. The psychology, and the con artist mentality behind it, has been around for centuries.
Take Bernie Madoff. His decades-long swindle was presented as a new scheme. But rewind that to 1920 and it’s the same story as Charles Ponzi — we’ll deliver astronomical returns if you buy into it.
Every time one of these scams comes along and rocks the nation, people think it’s new and a product of our new era. That’s not true. These are the same swindles refurbished to fit the times. And there’s little possibility that there will be a shortage of marks for con games.
2. Why do scams sting otherwise smart people?
People often don’t want to hear the truth. These come-ons hit them in a place where they might be vulnerable.
A key to Rice’s success was that he realized the value of a well-told story. He would sell you the story. To facilitate getting his stories out there, he created his own news bureau to make up his own reports. The names of his sham securities were pretty much interchangeable: a mining stock, a “pump-and-dump” — he would pump up the share price through fabricated stories and the promise of riches.
Rice was the father of penny stocks. He realized that you can get a hook in people by promising them a better way of life. A lot of those people were not very well-educated so they were easier marks. Once he ratcheted the stock up, he would cash out. And once he learned to short the shares, he would make money as well.
‘A good con artist can be on friendly terms with any individual in 15 minutes.’
His game was to paint such an entrancing picture of the future that people would not think to check the facts in the present. When they came out with the Truth in Securities Act in 1933, the foundation for the Securities and Exchange Commission, Rice’s name often came up. Twenty years before, there was no SEC, no specific laws against defrauding people. The feds had to come in the back door and get you for using the mail to defraud. Rice was very careful. When he did come under attack, he got the little investors on his side because he pretended to stand up for them and rail against the establishment.
3. How can an investor spot a con artist?
A con artist is somebody who harnesses a person or the public trust for the sole purpose of using that trust against them, to separate them from their money.
Con artists take their time to research potential victims and markets. You think that your contact is random. But he would have already been sizing you up. Rice, for example, had a direct-marketing list he called his “sucker list.”
A good con artist can be on friendly terms with any individual in 15 minutes. He’ll find out your appetite for risk, how much money you have, and he’ll do this in a conversational way, to find out if you had a shared desire to participate in a get-rich-quick swindle.
The con artists bleed you dry. They’ll dangle illicit riches in the form of a too-good-to-be-true proposition. They’ll let you make a small teaser profit. It costs nothing to make up a stock tip. If they’re right, and you make a small amount of money, that emboldens your confidence.
4. Aren’t stock investors better protected nowadays from scammers?
I would think they are in theory. But you can have all the layers of protection you want at a federal level — people still bite on a too-good-to-be-true story. That’s the fuel to keep these swindlers going.
At the lofty heights of the stock market in the 1920s, nobody was thinking about the ride down. People who had no investing knowledge were investing in the stock market. Annual losses from stock swindling at the height of the Roaring ’20s were measured in billions of dollars.
5. How can people sharpen their radar so they’re not an easy target?
If you keep hearing about some form of insider activity in the broader marketplace, it’s going to make you suspicious. That opens the door for an iconoclast like Rice to gain a foothold. Here’s this guy riding in on a white horse who is going to protect you. Rice was masking his own frauds with large denunciations of others.
Take everything with a grain of salt. Question everything. Be a probing investor. One tool con artists like Rice use, which people use even in legitimate areas of business, is confusion. Rice would spell out this deal, and it was such a complicated deal. It’s complicated, he’d say, because it’s going to make money, and it’s going to make money because it’s complicated. As intelligent as we all like to think we are, we’ve all been in a position where someone explains an investment with confidence and charisma, and you can only ask someone so many times to explain something to you without looking foolish.
We see that in the investment world today. Investments are pitched to people behind layers of complexity. If they pared it down in a fully explainable and understandable way, you’d probably run.
Look at the underlying product, and not the story behind the product. The public demands to be mystified. People want those stories. When you tell somebody they can’t see something, it makes them want it more. There’s tremendous power in telling people that something is exclusive to them; people are fearful of missing out. Anything that is pressuring you to make the deal now is an obvious red flag.
Until we can find a way to change people’s fundamental human nature, you can only hope to make a dent in their awareness by educating them. That offer doesn’t just randomly land in your inbox. There are reasons you’re being targeted and you have to remain constantly vigilant. We all would like to get rich quick overnight. You have to resist the temptation to buy into that and raise your awareness. These technologies that we think are going to make our lives easier and ease our path to riches are being controlled by other people, and you just have to remain hyper-vigilant and hyper-skeptical. Uneducated investors don’t know when to cut their losses and get out.
More from MarketWatch
NB:-
A few years ago, as i was walking in a HDB's corridoor, i received a phone call out of the blue asking me to invest in something that "sure makes money". i was not surprised but what the FXXX... So keeping a low profile is quite important.
Oops.... !
What am i doing here?
My belief is always, we may be targeted one way or another by scammers. And nobody in the world "chiat par wu ah ney eng to put money in your pockets."
i always remind my family and friends not to entertain any cold calls from "strangers".
Not even talk a little bit too long with them.
Just tell them "No! No! No!, less you are carried away by some fanciful ideas.
i repeat, just remember below and i think you should be O. K.
"Nobody Chiat Par Wu Ah Ney Eng........xxxxx"
Don't say you don't know anything about them!
My 2 cents to keep scammers and con artists far away to enter into my world though they may have targeted me & you already!!!!
Amen.
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
