I heard the other day about a man who took all his money, bought gold and buried it in his backyard. The poor fellow probably listens to commentator Glenn Beck.
The incessant stream of end-of-the-world nonsense that Beck spews forth makes his incredibly popular radio and TV talk shows the ideal vehicle for gold advertisements.
An average of 9 million listeners a week makes Beck’s radio show the third most popular in America, behind Rush Limbaugh and Sean Hannity. Mercy Radio Arts, aka Glenn Beck Inc., took in $32 million in revenue in the past 12 months, according to Forbes magazine.
But this is not your traditional media advertising relationship:
Anyone who listens to conservative radio is getting bombarded with messages from Santa Monica-based Goldline, which boasts that it does half a billion in annual sales of gold coins and bullion
Others who offer testimonials on Goldline’s website are Laura Ingraham, Mark Levin, Mike Huckabee, Monica Crowley, Fred Thompson. You can listen to them shilling for Goldline here on the Goldline website.
It would seem to be a natural fit. Gold thrives on instability and chaos, and Beck is constantly hammering home the theme that the United States is highly unstable … ergo, we should buy gold. The problem is the gold that Goldline is selling often isn’t bullion, but rare coins, which are a different animal.
According to ABC News’ The Blotter, authorities in Los Angeles and Santa Monica are investigating complaints from Goldline customers say they were lied and misled in their purchases of gold coins and others who received something they didn’t order. The Santa Monica City Attorney’s office has set up a website to handle complaints.
Goldline customers are often sold gold 20 Swiss Franc and other European coins. The Missouri Secretary of State’s office found in 2006 that a Goldline agent violated state law by advising an elderly woman to sell her annuity to buy gold. The woman ultimately bought 153 Gold 20 Swiss Francs and other coins.
This is a classic bait-and-switch.
Buying a Swiss Franc coin is NOT the same as buying gold bullion or even gold American Eagles, South African Krugerrands or Canadian Maple Leafs, all of which are linked to the spot price of gold.
Gold 20 Swiss Francs, which are numismatic or rare coins, have less to do with gold spot prices and more to do with scarcity, condition and coin demand. In other words, if gold rises you still make not make any money.
Goldline charges a sizeable markup on numismatic coins. According to Goldline’s own disclosure on its website:
Our spread on semi-numismatic coins, rare or numismatic coins and rare currency currently ranges from 30% to 35%. Examples of coins which have a 30% to 35% spread include European gold coins such as the Swiss 20 Franc, the PCGS certified “First Strike®” coins, coins which have been encapsulated by a grading service such as PCGS or NGC, the Morgan and Peace silver dollars in all grades, and the Walking Liberty, Franklin and Kennedy silver half-dollars in all grades. Spreads may change based upon market conditions, availability and demand.
Here’s how this works. If the spread on a coin is 35%, then a coin Goldline is selling for $500 is really worth only $325. The coin must appreciate $175 before you earn a profit. Again the prices of these coins move independently from the price of gold.
According to a report issued in May Rep. Anthony D. Weiner, coins on the Goldline website were marked up an average of 90 percent compared to their melt values. But this is unfair: rare coins value has less to do with the price of gold and more to do with scarcity and other factors.
Mark Albarian, president and CEO of Goldline, is a coin collector. A coin collector knows what coins are worth. If you don’t, then caveat emptor — buyer beware — no matter what Glenn Beck says.