All That Glitters Isn’t Gold

October 29, 2009

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Recently, I have noticed a lot of advertisements for coins on TV and in magazines.  Casual observers should be able to determine that many of these coins will never have any substantial value.  If you really think those Derek Jeter coins (the most hits ever by a Yankee!) are going to fund your retirement plan, you’ve got a few screws loose.  If you’re a Jeter fan and think the coin is pretty, then by all means buy it – but realize that it is a trinket, not an investment.  Items that are marketed as “collector’s items” rarely become items that collectors truly desire.

The deeper problem, though, are the companies that market gold coins by implying that these coins were produced by the US mint.  I saw one with the clever wording “U.S. government issued gold coins”.  Was the coin originally issued by the US mint?  Definitely.  Does the coin contain some small amount of gold?  Most likely.  Was the coin issued by the mint in the golden variety?  No.  The gold was added later, by a private company.  These companies love to use names that blur the line and try to imply that they are affiliated with the government in some way.

Some of the ads claim to sell the coins to you “at cost”.  I’m astounded that a private company would be so generous – they’re not even making a profit!  Or maybe they’re playing a shell game to make the statement true and false at the same time.  Let’s say that I own two companies: Widget Maker and Widget Seller.  Widget Maker incurs $5 in costs and sells widgets to Widget Seller for $50.  Widget Seller then sells the Widgets to you for $50.  Incredibly, the company has sold the widget to you “at cost”.  At the same time, I laugh all the way to the bank.




I laughed at one line in an ad – call today and you will speak with a senior specialist.  This seems a bit odd.  Why wouldn’t you have the junior specialists work with the new clients, and have the highly paid senior specialists work with the customers who want to spend a lot of money with you?  Oh, because you’re using the term to make  as a way to inflate the egos of possible customers – they have the opportunity to work with a senior specialist.

An ad on TV over the weekend really caught my attention.  The ad starts out describing 1877 $50 gold coins that contain 2.5 ounces of gold (worth a pretty penny, with gold going for about a thousand bucks an ounce).  The company is happy to sell you a 24 carat gold clad non-monetary copy for just … not $50, but $20!  What a great deal.  Except that “gold clad” isn’t the same thing as gold, and non-monetary means that it is not legal tender. The 1877 date might make the coin look interesting – but it has no correlation to the actual date the coin was “minted” (most likely 2009).  The Jeter coin might actually be worth more money ten years from now.

My general rule is this – if a company is selling specific “investments” through TV ads or full page print ads, it’s probably not a great investment.  If you want to make some investments, spend some time learning about the markets and/or work with a trusted broker.  If you want to invest in gold, fine – but invest in real gold, not this crap.

4 Comments (+add yours?)

  1. Patti
    Oct 29, 2009 @ 12:40:14

    As the saying goes ‘There’s a sucker born every minute.’

    Reply

  2. Evan Kline
    Nov 04, 2009 @ 12:41:36

    Investing is something I know very little about, but I also believe the old saying about “if it sounds too good to be true . . .”

    My wife sees products on TV (not gold coins though) and gets all excited about them. I constantly remind her that they are ADS. Of course, she does have a Snuggie, and loves it, so maybe she knows better than I do.
    .-= Evan Kline´s last blog ..5 Needed Improvements in Windows 7 =-.

    Reply

  3. kosmo
    Nov 04, 2009 @ 22:11:12

    🙂 I’m hoping to get a Snuggie soon. My wife likes the house considerably cooler than I like it, so I get cold a LOT.

    I don’t see Snuggie advertising deceptively, though. It’s a blanket with sleeves. I would hope that most people aren’t surprised when someone points out the fact that the Snuggie is a blanket with sleeves.

    On the other hand, if someone points out that your “1877” gold clad coin is essentially a subway token, I’m guessing that a few folks will feel that the company deceived them by suggesting that these were investment grade coings – which they certainly are NOT.

    Reply

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