Tuesday, May 18, 2010

Bad Gold dealer puts all dealers in Congressman Weiner's cross-hairs

Congressman Anthony Weiner (D-NY) held a press conference today during which he accused radio/television talking-head Glenn Beck and notoriously dissatisfaction-producing precious metals dealer Goldline International of engaging in an "unholy alliance" to "cheat consumers," and swore to save us all from Goldline and ourselves.

As covered in a CBSNews article and others, Mr Weiner's claims against Mr Beck and Goldline included the following:

1.) Goldline uses "aggressive sales tactics, conservative spokespeople and rhetoric to sell over-priced gold coins to unsuspecting consumers."

2.) Goldline's compensated "conservative spokespeople" use "their shows to prey on the public's fears of inflation and socialist takeovers while actively promoting the purchase of gold coins as insurance against this purported government overreach."

3.) Goldline spokesman Glenn Beck and others tell "tall tales about the future of gold to sell overpriced coins that can be bought somewhere else for cheaper."

4.) Goldline "grossly overcharges" for coins and "formed an unholy alliance with conservative pundits to drive a false narrative" that gold is a good investment.

Now, after reading the above list of "amazing" discoveries uncovered by the relentlessly rock-flipping Mr Weiner, you might be thinking, "Uh...Okay. We've known this about Goldline for years. So, I'll stipulate that Goldline did do all of those things. . .

. . . So what?"

Exactly! "So what?" would be the natural response of a free-enterprise respecting, libertarian-leaning, freedom-loving American who has no interest in being protected from his/her own mistakes--in gold or any other market--by an overbearing and overintrusive government that declares itself to "know better." And, therefore as you would expect, this response is galaxies away from the reaction of Mr Weiner, who, apparently, does "know better" than any of the thousands of ostensibly content (braindead?) Goldline customers, and better than anyone else who has purchased metals under the current market standards!

For the record, I have never done business with Goldline, and I don't ever intend to. I don't have a problem with Goldline: I just think they're outrageous expensive and unethical. And guess what? I didn't need Mr Weiner's amazing investigative super powers and rhetoric-packed press release to tell me that Goldline's premiums were way too high, their prices way too inflated, and their sales techniques way too high-pressure. Nah--turns out I can figure that out all on my lonesome, and did so years ago with a single phone call. In fact, if memory serves me correctly, I believe that phone call ended with my question, "Are you serious, or was that last price a joke?"

As it turns out, I didn't need a congressman to tell me when I wasn't getting a good deal at Goldline. But again--I don't have a problem with Goldline. Lots of other people apparently think that the huge premiums are worth the "buying experience" from Goldline, and they trust Goldline as a good dealer. I don't have a problem with these people, either . . . I just think they're crazy. You can check out Goldline's online store tonight for a perfect example. Note, the price will change on this link, but this is a link to the very limited online store. Most Goldline products are sold over the phone. Right now, spot gold is $1,216/oz. Goldline is listing an American Eagle 1-oz gold round at $1,337--a whopping $121 over spot. For comparison, APMEX has the same gold round for $1,277, and BD has it for $1,279, and larger purchases at either will reduce the premium to $49. It takes two minutes on the internet to figure this out: no congressman necessary. And considering that Goldline has such expensive mouthpieces as Glenn Beck, Laura Ingraham, Mark Levin, and Fred Thompson, it also takes only about two minutes to figure out why their premium is nearly 2.5 times that of APMEX or BD. Again, we don't need a congressman to tell us this.

But, of course, one congressman--Mr Weiner--thinks we do need him, primarily to protect us from ourselves. Perhaps this notion is most compactly folded into the following statement from Mr Weiner:

Goldline rips off consumers, uses misleading and possibly illegal sales tactics, and deliberately manipulates public fears of an impending government takeover – this is a trifecta of terrible business practices.”

I know that Goldline attempts to manipulate the fears of unsuspecting individuals who listen to Mr Beck and call them, but that Goldline would be able to single-handedly "deliberately manipulate public fears" is a fairly absurd statement on its face. Not to be outdone, however, Mr Weiner has matched Goldline's "tactics" with his own trifecta of terrible legislative abuse. The idea that a congressman would accuse a private company of using "possibly illegal sales tactics" without registering any specific examples whatsoever of such "illegal" practices has, unfortunately, lost its novelty through its frequency. However, that the same congressman would use this non-event as a springboard to regulate the entire precious metals market should be alarming. Yet this is exactly what Mr Weiner is attempting to do, thanks to his perception of a single dealer which happens to be widely-recognized by anyone who has done any research into dealers as one of the worst in the business.

Along with his seemingly baseless accusations of "illegal sales tactics" against Goldline, Mr Weiner used today's podium to announce his intent to pursue legislation that would impact not just his loathed Goldline, but that could burden every precious metals dealer in the country with new federal regulations. As outlined by Patrick Heller, Mr Weiner's legislative goal is to pass federal regulations that would require dealers to list:

1) "hidden fees."
2) the premium above intrinsic metal value that the seller is charging for products.
3) the price that metal must reach in order for the customer’s purchase to be profitable.

Perhaps no one on his staff advanced to inform Mr Weiner that we already have a method for determining this, and its called a calculator (assuming that a pen and paper is too complicated and an abacus is unavailable). We even have the formulas!

1.) Premium: Product price - Spot = Premium.
2.) Price metal must reach to recover premium: Premium/Spot = Premium in %, which is same % as metal must rise to recover premium assuming a buyer/bidder at spot level.
3.) "Hidden fees": anything that cannot be calculated by 1) or 2).

There is nothing here that cannot be determined by a customer on his own, and as a precious metals investor, an individual buying precious metals has his own obligations to complete due diligence. Good dealers will explain these things to new buyers. Bad dealers won't. I very much like dealer Patrick Heller's commentary on the topic, which is worth reading. As a dealer, he details the notoriety of Goldline's inflated prices, which are, again, very obvious. But, also as a dealer, he also notes that there's no law against selling an overpriced item to an eager buyer. Though he (and I) take exception to Goldline's advice concerning PM IRA's, the fact is that such advice is subjective, as is much of the precious metals market itself. Like equities or bonds, metals and commodities are not for everyone, and no one should be making any "investment" decisions without considerable research and knowledge as a prerequisite base. Mr Weiner could just as well sight his cross-hairs on 401(K) plans, which very few people even understand despite their prevalence and popularity.

This brings us to another comment by the congressman. After the press conference, Mr Weiner stated that, “Commentators like Glenn Beck who are shilling for Goldline are either the worst financial advisers around or knowingly lying to their loyal viewers.” Obviously, Mr Weiner's opinion on Mr Beck or his viewers is utterly irrelevant. Personally, I don't know what Mr Beck and others see in Goldline if they really, honestly "like" the company, but as I'm not a customer, my opinion is also utterly irrelevant. I tell everyone I know not to deal with Goldline. But the fact of the matter is that, for whatever reason, Goldline has thousands of apparently happy customers, and a few very high-profile spokespeople. Many people apparently like Goldline, even if it is only because Glenn Beck tells them to buy there. I will say that Mr Beck doesn't fool me as the most genuine person on the planet, and I wouldn't trust him to tell me the time of day. Additionally, months ago I heard a routinely-aired commercial voiced by Mr Beck for Goldline wherein he stated that he'd "toured the Goldline factory." This struck me as ridiculous and likely an outright lie, as Goldline is located in Santa Monica, California, doesn't produce any rounds or coins themselves, and certainly doesn't have a "factory" to tour. This commercial has since been changed to omit any mention of a mysterious "factory," which makes me wonder if Mr Beck was even ever there or not. Of course, it doesn't much matter to me--again, I recommend everyone stay away from Goldline, and would courteously extend that recommendation to Mr Beck, too.

As I've made clear, I'm no fan of Goldline, but I have to say that while Mr Weiner accuses Goldline of deceptive practices that do not inform buyers of risk, this is something I actually find baseless. I know that there are plenty of unhappy Goldline customers (more, more, more) who will agree with Mr Weiner, but these customers were sold by their ears and not by their eyes. Goldline has perhaps the most detailed and easy-to-read "Risk Disclosure" statements of any dealer I've seen, and this statement actually clearly identifies the best reason not to buy from them, as well as offers an explanation of spreads:

"With the exception of the most common 1 oz. bullion coins, Goldline charges clients its numismatic spread, which currently ranges from 30% to 35%, on coins and currency. To earn a profit upon resale to us, your coins, currency or bullion must appreciate sufficiently to overcome this price differential."

"To illustrate how this spread works, consider the following example. If the spread on a coin is 35% and Goldline's ask/sell price is $500 for the coin, then Goldline's bid/buy price is $325. Your coin must appreciate more than $175 to earn a profit. If you choose to sell your coin back to Goldline, you must also pay a 1% liquidation fee (the minimum liquidation fee is $15). Purchases of less than $1,500 are subject to a small lot fee of $15."

Goldline says--right there--that they charge a numismatic spread on all but the "most common 1 oz bullion coins." As I showed above, even their spread on 1-oz bullion is 2.5 times that of other dealers. The disclosure also lists a good reason why not to listen to their "Account Executives:"

"The Account Executives at Goldline are generally commissioned salespersons. Their commissions are usually greatest on rare coins and semi-numismatic coins and least on bullion related products. Their work experience, knowledge, background and training vary widely. They and/or Goldline may receive, from time to time, undisclosed compensation for recommending specific coin or currency products (including but not limited to contests, cooperative advertising, and trading profits in coins that they may own and/or sell). Goldline's employees are not licensed as investment advisors and are not authorized to recommend the purchase or sale of any product or investment other than the products specifically sold by Goldline."

Seems pretty simple to me: Goldine's "advisors" are a random group of telephone salespeople who make the most dough hawking numismatics and "semi-numistmatics," a term that is an oxymoron as far as I'm concerned. Thus, these "Account Executives" make a much better paycheck pushing buyers Swiss Francs (ie 20's) than they do American Eagles, and Goldline is notorious for pushing Swiss Francs as "confiscation-proof," and at a 35% premium. I would take vociferous exemption to assertion of confiscation-proof, and I would never pay 35% for them! This is an incredibly profitably venture for Goldline, however,as they (and everyone else) certainly aren't buying Swiss 20's for anything near spot +35%! The "Account Executives" make the best commissions on these outrageously priced coins, as well, and thus push, push, and push them. As if these shady reasons are not enough, and anyone needed more convincing, you can read the Account and Storage Agreement, as well, where you'll learn about Goldline's "unique" practice of adjusting product pricing while they wait for your check to come in the mail! From this "agreement:"

"Bullion orders cannot be accepted prior to Goldline's receipt of good funds."

There are plenty of horror stories online about this little dousey! I'm just amazed that people can read and hear a line like that, and the just drop the check in the mail. As I mentioned, it is a "unique" practice indeed: I am not aware of any other dealer that requires a commitment to buy on an unsecured price. It should make the decision of whether or not to buy from Goldline a very, very easy one.

So, Mr Weiner is right that Goldline doesn't have the best prices, and he's right that they don't have most ethical practices--but when it comes to the law, I think the have their tails covered. People are walking into this scam eyes wide shut. As long as a steady stream of Glenn Beck, Laura Ingraham, Mark Levin, and other listeners and viewer keeping calling Goldline begging to buy overpriced metal, Goldline will be more than happy to sell it to them.

And finally, there was another statement on this matter that is so especially illogical, particularly baseless, and strangely so-ridiculous-that-its-actually-humorous from Congressman Weiner's office. According to CBS:

"Simply put, Goldline is little more than a gold peddler posing as an investment advisor, an unfortunate byproduct of the Tea Party movement," Weiner's office said.

Now this is just amazing: I've heard the Tea Party people accused of racism and even blamed by NYC Mayor Bloomberg for the failed Times Square bombing, but I didn't know the Tea Party people invented gold?! That is incredible! Who would have ever thought? Here I was thinking that gold has been around for a few thousand years as the original monetary unit of investment--but I was wrong! Turns out those sneaky Tea Partiers made it all along--wow!

Now that is some amazing research by Mr Weiner and company. With a mind like that, maybe we should all pay more attention to his attempt to regulate precious metals dealers with some burdens he thinks will be good methods to protect people from themselves and Goldline. All this time we thought gold was an element, and it turns out its just a byproduct of the Tea Party movement. Cool!

You learn something new every day!

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