Because of recent financial troubles, there are more gold commercials on TV and radio than normal. Below are some dubious claims in some of them.
John T. Reed comment
|The U.S. has a $10 trillion debt
|As of the day I saw the ad, 4/28/10, the national debt was $12.9 trillion according to the National Debt Clock.
|During tough economic times gold is the time-tested currency that goes up, not down.
|The year-to-year price of gold was lower than the previous year in 1970, 1976, 1981, 1982, 1984, 1985, 1988, 1989, 1991, 1992, 1997, 1998, 1999, 2001. According to the National Bureau of Economic Research, we had contractions in 1973-5, 1980, 1981-2, 1990-1, 2001, and 2007-date. As you can see, the three bold contractions match years when gold dropped in value.
|While noisily shuffling gold coins in his hands, “Listen to that. That’s the sound of security. That’s the sound of gold.”
|Gold is a commodity like pork belly futures or nickel, only taxed at a higher rate (28% instead of 15%). Like everything else, it has advantages and disadvantages. See some of the disadvantages in my article on that subject.
|No dubious statements*
Actor Dan Florek, spokesperson
|Sometimes you only have one opportunity
|Please name a time when you only had one opportunity to buy gold. I cannot think of one.
|to insure your assets
|Gold is not an insurance policy. It is a commodity. Commodities tend to fall in dollar value during depressions/deflations and rise in dollar value during inflation.
|And how will you protect your investments? Gold.
|Gold protects no investments. If it is purchased for a reasonable price, it tends to keep pace with dollar inflation. But if you overpay for it, it will not preserve your purchasing power in the amount of gold you purchased. See my article on gold disadvantages with regard to overpaying.
|Over the last five years gold has out-performed the markets
|I saw this on 4/28/10 so the five-year period in question is 4/29/05 to 4/28/10. There are a lot of “markets.” Lear does not specify which markets they are referring to. Over that period, the S&P 500 went up 2.4%; gold, 166.5%. But does that mean now is the time to buy gold, or five years ago? The higher a price goes, the harder it is for it to go higher and the greater the probability that it will regress to its mean.
|and some experts believe the best is yet to come.
|Name them. And name the ones who disagree. This is close to a meaningless statement and could be claimed probably in every year since we went off the gold standard. It is also questionable whether the “experts” in question could be qualified as experts by the judge under the federal rules of evidence. A judge would question the qualifications of any would-be court expert. I wonder if anyone has ever been qualified to testify in court as an expert on future gold prices. In other words, it may be that no such expert exists.
|Gold…has never been worth zero.
|Actually it is worth zero or less when you are trying to stay afloat in water where you have no alternative to floating.
|And the timing may never be better.
|The word “may” renders this statement meaningless.
|[Use] gold to protect and grow your nest egg.
|Protect it from what? Gold does not protect you from falling gold prices which are typical during a depression or deflation. And gold does not “grow” your “nest egg” unless its price happens to go up in value higher than it was when you bought it. It is impossible to say in advance whether that will happen. Putting your “nest egg” in gold is arguably an irresponsible gamble.
|Gold, the smart choice for today’s investor.
|Only time will tell whether that is true.
* After I posted this article, Congressman Anthony Weiner (D-NY) posted a condemnation of Goldline at his website. As I understand it, he says Goldline is the biggest gold-selling company and they charge a higher percentage of the commodity market price of gold at the time a consumer buys from Goldline. Fox News attacked Weiner for picking Goldline alleging his did so to attack Glenn Beck. Goldline is a Beck sponsor. I would not be surprised if that were true. Although it is also an intellectually dishonest debate tactic. Roberts Rules of Order says,
It is not allowable to arraign the motives of a member, but the nature or consequences of a measure may be condemned in strong terms. It is not the man, but the measure, that is the subject of debate.
I think every gold sellers’ gold is overpriced compared to its historical average price in 2010 dollars even if you buy it wholesale. I have never looked into the margins of the various gold dealers. My recommendation is don’t buy gold from anyone until its price falls below its historical average price in 2010 dollars ($615). At that point, you should do what you’ve been told a million times: shop around for the best price consistent with trustworthiness. By trustworthiness, I mean you need to be sure it’s really pure gold.
Weiner quoted an L.A. Times story as saying that Goldline got an A+ rating from the Better Business Bureau by bribing the BBB. I do not believe that. I know of a case where a bad real estate investment guru tried to attack the BBB for its giving him an unsatisfactory rating. Finally, he decided if you can’t beat ’em, join ’em. He figured as soon as he joined, he would get a good rating. They refused to let him join at all! Why? Because his company’s performance was unsatisfactory.
I have never been a member of the BBB.
O’Reilly and Beck say the BBB A+ rating exonerates Beck completely. I disagree. If Goldline is doing anything wrong, like charging more for gold than anyone else, Beck should turn down their request to sponsor him. O’Reilly and Beck are extremely adamant against their having such responsibility. I disagree. Ad-dependent media like TV and radio are not know for being eager to find fault with their sponsors. Ms. magazine admitted it accepted money from Virginia Slims cigarettes for years in spite of their opposition to tobacco because they needed the money.
Indeed, I have noticed that the sponsors on conservative talk radio stations in general are embarrassing: They sell ED cures, getting out of paying all the taxes you owe, cancer charities you never heard of that want your old car. It’s a wonder no one has reverse engineered the apparent listener profile.
I have never sought or had a sponsor in any of my writing or speaking. If I ever did, you could be pretty sure I checked them out. About the only one I could think of off-hand would be Coca Cola™. I have trouble imagining Goldline sponsoring John Stossel.
Stossel is on my list of living national treasures whom we do not appreciate sufficiently.
John T. Reed