Limbaugh and Beck pimp gold merchants with 35% spread

Jon Taplin takes a close look at the small print from the gold merchants pimped on Rush Limbaugh and Glenn Beck's shows and discover a whopping 30-35 percent spread between their buy and sell rates.

Obviously all these new boiler room high pressure sales groups that used to be pushing sub-prime refinancings are now trying to convince the unsophisticated listeners of right wing talk that they better buy gold before the dollar becomes worthless because of Obama's reckless spending. But how do firms like Goldline make money? Well it's all there in the fine print of their sales agreement.
Goldline's "bid" is the price it pays to clients for a product. Goldline's "ask" is the price it charges clients for a product. Goldline has a price differential or "spread" between its bid (buy-back) and ask (selling) prices for precious metals, rare coins and rare currency...
The price of Goldline's semi-numisimatic and numismatic coins and currency include the bid/ask spread that ranges between 30% and 35%.
OMG! An average stock broker commission is 2% and these scammers are getting 35% off the top. Where is the FTC and the CFTC in investigating this fraud? Why are Limbaugh and Beck propagating this scam?

The Gold Scam Fear Merchants

Previously:

I write books. My latest is a YA science fiction novel called Homeland (it's the sequel to Little Brother). More books: Rapture of the Nerds (a novel, with Charlie Stross); With a Little Help (short stories); and The Great Big Beautiful Tomorrow (novella and nonfic). I speak all over the place and I tweet and tumble, too.

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StRevAlex

Non-story. Must be a slow day.
styrofoam

I hae to think that the bond or stock you buy/sell for 2% markup is in the exact same physical (or electronic) shape it was in after the sale as it was prior.

I don’t imagine people are trading in 100% pure gold, or something like little Troy ounce ingots/wafers/whatever theyr’e called.
There’s got to be _some_ overhead involved in turning it from consumer gold to commodity gold.

Now if you can convince me that there’s a trend such that Beck and Limbaugh pimp 35% markup, sports stations advertise 30% markup, pop radio 25% markup, and leftist talk radio stations advertise the free people’s gold exchange, I’ll start listening.
dculberson

I’m the last person to defend the typical scummy gold place, but seriously, 30-35% is not that unreasonable of a margin. Our local food co-op has a default 40% markup. The stock broker comparison is a false equivalency. They are not dealing in physical goods with inventory, etc.

By comparison, the Cash4Gold scumsuckers offer 30-35% of what your gold is worth to a dealer – meaning their markup is 65-70% assuming they sell it at wholesale, which you can be sure they don’t. THAT is a scam and a ripoff.
Anonymous

nobody sells gold for the spot price. and coins and bars in any size have been substantially more expensive than spot gold for some time now. the smaller the size (1/10th and 1/20th coins) the higher the markup, by a LONG ways.
Anonymous

Wait a sec! Today the buy rate is $1022 and the sell rate is $1117 US for one ounce of gold at the place where I exchange currency. That’s about a 10 per cent spread, a fair margin. Not the 30 to 35% that those scammers are showing.
RevEng

I don’t understand why people are comparing gold trading spreads with profit margins on retail consumable. In retail, goods are bought to be used. Their value — and therefore, their price — depends on the use I can get out of that item.

The amount I pay for a retail item is spread between the raw goods, manufacturers, distributors, and retailers based on margins. Each adds a bit until the retailer finally sells it at suggested retail price. Yes, convenience stores sell candy at a 400% markup, but that doesn’t mean they are ripping off the customer — it just means they are taking the lion’s share of profit on the sale of that item. Besides, that isn’t even profit: it’s income, the majority of which goes back to pay for operating the store you bought it from.

But gold trading is a lot more like stock trading: what you buy you won’t consume, but will instead sell at some later time, hopefully for more. It’s just another way of keeping your money; you could put it in a savings account, but with the fluctuation of the dollar, it might not be worth much when you go to pull it out, so you invest it in gold instead. You could think of it as a different kind of bank account, where you hold gold instead of dollars — both commodities of fluctuating value.

Now, if your stock broker or bank skimmed 30% off of a two-way transaction, you’d be pissed. Even if that gold goes up 30% in value, you’ve only just managed to break even and your broker (fleecer?) takes the profit. In reality, people investing in gold aren’t expecting it to rise in value, but merely to stay stable (with respect to other goods) while the dollar plummets. The expectation is that you can trade it in later and get back whatever you put in, like any good savings account. So when you get back 70% of what you paid, you’ll be pissed.

So, 30% spread is terrible — anybody who buys into this is going to see a huge loss when what they really expected was a stable savings.

However, caveat emptor. What these gold companies are doing is atrocious, but if people are willing to funnel their life savings through them without doing the research, it’s their fault.

On the other hand, the US Securities and Exchange Commission exists precisely to prevent unscrupulous trading companies from screwing over their investors. There may not be a rule against ridiculously large spreads, but if the traders are hiding these spreads in the fine print and misleading their investors, there could be hell to pay.
Anonymous

I made the mistake of buying from goldline..I was naive. I thought I had done my research, but you can only learn so much from the internet..I didn’t know anything about greysheets and what not..I didn’t learn of these things till I made friends with someone who happened to be a gold dealer. I’m in the process of filing a lawsuit against goldline. The prices on their site are bull. They screwed with the wrong person, tho..Their contract says 35%..They took 42% from me..And the average spread is 2-12%. 35%, or in my case, 42%, IS a ripoff. And last couple of times I checked the difference between the greysheet and their asking, it was also over 40%..this is obviously typical for them. They are just hoping you aren’t paying attention, at least not until after the statute of limitation to sue them is up.
Anonymous

Just because Limbaugh and Beck are douchbags, doesn’t mean that the dollar isn’t sinking.

Last time I checked, the Canadian dollar is just about on par with the U.S. dollar. Usually the Canadian is about 60% or 70% of the U.S. dollar. Now, this isn’t because the Canadian dollar has suddenly become extremely valuable overnight, this is because the U.S. dollar is sinking.

Canada isn’t a right-wing conspiracy cooked up by Limbaugh or Beck. The fall of the dollar is something that is talked about by politically diverse folks all around the world. The U.S. government (both the current Obama administration, and the Bush administration before it) is mismanaging the U.S. economy, and it is going to be a disaster. Outside the U.S., where people don’t have to worry about partisan sniping if they question the U.S. governments policies, people from across the political spectrum are deeply worried about the U.S. economy.

Pretty much the U.S. government is going to devalue the dollar as a way to mitigate America’s insane national debt, that is going to cause the petro-dollar system to collapse, and people who have their savings in something tangible are going to be far better off than people with money in their savings account. That isn’t a right wing conspiracy… that is the prediction from many left-leaning folks around the world. Just because you don’t like the politics of Limbaugh or Beck, doesn’t mean that it isn’t true.
SamSam

35% is so freeking minimal for any place that buys and sells.

I searched “buy sell cds” on Google.

The very first link was to secondspin.com. The very first CD I saw there was for “The Fray.” You could sell it for $3.00, or buy it (used) for $8.99.

OMG a 133% markup!!!!

Just to see if this was craziness, I went to the second link on Google, spun.com. Their featured CD was Abbey Road, so I looked at that. You could sell it for $4.38, or buy it (used) for $8.98.

OMG a 105% markup!!!!

I didn’t cherry-pick my results. These were the very first results for “buy sell cds.”

This sensationalizing is so stupid. Really, you want us to think that a 35% difference between buy and sell is a scam? Gold-buyers are probably the slimiest people in existence, besides people like Limbaugh and Beck, but let’s get outraged for the right reasons. 35% difference between buying and selling is nothing remotely near a “scam.”
Roku

News Flash!

Relentless advertising costs money, and you, the customer, will pay for it with increased frictional costs – whether the product for sale is beer, pet food, brokerage services, janitorial services, or gold coins.

If you want to keep as much of your own money as possible, never buy anything that you see or hear lots of advertising for. There will be a cheaper alternative somewhere, sold by someone who doesn’t have to pay for all the TV, radio, and print ads.
Anonymous

While I agree it’s bad business there’s no law protecting desperate dolts or fools from parting with their gold for cash. What’s the difference between this or picking up someone’s trash at a garage sale and flipping it on eBay for ten times the money?

As far as I can tell there’s no fraud involved. If they promised or advertised lower profit margins then they would be defrauding. Free markets (which I’m sure many here hate) put the onus on the gold seller to check prices. You don’t play poker with your cards showing. CDs, books, furniture, etc. all cost a helluva lot more retail than it does to priduce them.
octopod

how is it a scam if it’s in the small print?
so like, big deal.
SamSam

I always know who’s writing posts when they’re extremely well-meaning, but always sensationalizing with some shoddy math or comparisons.

1) Like dculberson says, 35% markup really isn’t that huge compared to plenty of food stores, thrift stores and everything else.

2) The comparison to stockbrokers commission is just silly. A commission is an extra that’s tacked on every time they do anything. A markup is the difference between the buying price and the selling price. They are two completely different things. It’s like saying “how can they charge a 35% markup when everyone knows you only tip waiters 17%?”
Anonymous

The difference here with regards to Goldline, etc.. and being a retail operation, they are pitching their product as an investment. Their margins are absolutely freaking ridiculous. Other sites like Kitco have far more reasonable spreads on metals. While this isn’t a scam, It drives me nuts when advertisers prey on fear to push people into an inferior product. In this case, way overpriced metals.
webmonkees

It’s all in the costs of processing and the chain of profit-taking commerce.

A typical package of 2 oz. of precooked bacon @$2.99 will run you about $24 a pound; approximately a 800% markup. More expensive than the fanciest uncooked steak in the grocery store.

However, there is some attrition of usable bacon atoms in the conversion process to a BLT-ready state.

So, cut out the middleman, go find a gold mine and dig out your own jewelry.
valdis

@Stefan Jones: “Also, gold buggery helps promote the fear-driven in-group bonding that helps them cement their base.”

s/gold/closeted/

There, fixed that for you…
fencepost

They’re not specific to the Right-end shows, similar ads run on the lefty shows as well. “I buy my gold from…” though I’m not certain it’s the same company and haven’t looked at the spread.
They’ve probably decided that folks who follow politically-oriented radio are more likely to think that the country is headed straight downhill, and that’s their market.
Anonymous

Hate to say it, but in a retail business that buys and sells product, we look at used items as a way to boost margin. In my industry, we hope to get around 50% for common items, and something more desirable can command a smaller margin, just so we get the clientele. I sell musical instruments. Pawn shops operate at a similar rate. 30-35% seems like a fair margin in this case.

A stock broker gets 2% because he isn’t dealing retail goods, and 2% of thousands of shares at a time is a good living. A salesman can make 10-15% commission. A retail business needs a certain amount of profit. That’s just the way it is. It’s not a scam, its business.
Anonymous

There are lots of suckers, and apparently they’ve decided that the best results from scare tactics are among the listeners of these shows.

It’s the free market at work. It can’t really be a statement about the audience because NPR isn’t open to advertising.
misterdna

I gotta say, a 35% spread sounds fucking great, compared to when I bought an engagement ring at the local jewelry store for $2k, then sold it back to them after the divorce for $300. While I hate Limbaugh and Beck, I sometimes think you look at the name involved rather than the (proper) marketplace when you decide to point fingers (or when you think a measly $300 prize/payment is a wonderful deal from goliath music company Fender for designing their new t-shirt).
TharkLord

Not to go all “apples and oranges” on ya, but the difference between buy and sell is pretty much the only measure of the difference between the good guys from the bad guys in the gold business. In that business there is no added value, customer service, shelf life, special delivery, continental breakfast, etc. These 30-35% places are just fleecing the newbies. I little place up in Portland I have done business with in the past has a 5% difference between buy and sell and thats the best I have been able to find. The difference between the 5% guys and the 35% guys isn’t the difference between high-end and low-end, its more like the difference between free-range organic and rat-turd botulism poisoned.
Chainring

You mean those guys standing on the street corner holding signs that say “WE BUY GOLD” aren’t paying top dollar? And, if I buy from a merchant that blankets the airwaves with fear-laden advertising, I’m not getting a good deal?

The shock! The horror!
Astin

For starters, the SPREAD is 30-35%. So rounding gold to $1000/oz, means a $300-$350 bid/ask spread. That means 15-17.5% each way. So you’d be looking at them buying at $825 and selling at $1175, not 30-35% each way.

So unless they have a matched buyer and seller, they’re getting the difference between their costs and market price (or holding the position themselves).

Now, a 15% move on most commodities would seem tough to achieve, but gold is known for its wild swings, so it IS possible to break-even, which is the goal of people looking for dollar protection.

That said, the spread is still nuts and there are better deals out there for sure. But if a consumer decides they don’t want to shop around or compare offers, then that’s their own damned fault for following Limbaugh or Beck’s paid advice without question.
Stefan Jones

“Why are Limbaugh and Beck propagating this scam?”

They get paid to. Also, gold buggery helps promote the fear-driven in-group bonding that helps them cement their base.

I look forward to the day when I buy these suckers’ gold at firesale prices, after my investment in Zero-Point Energy 100 MPG Water Engine Carburetor pays off.
the r kelly

Guys… this isn’t a mark up like at the grocery store. You aren’t buying and selling your gallon of milk to make a profit. You buy it to drink.

This is an investment which you probably plan on selling someday (unless you just really like holding ownership rights to some theoretical gold that may or may not exist.)

To break even on this scam gold the price of gold needs to go up 35 friggin’ percent. Otherwise you lost money on your “investment.”

Stop defending this obvious scam.
SamSam

35% is so freeking minimal for any place that buys and sells.

I searched “buy sell cds” on Google.

The very first link was to secondspin.com. The very first CD I saw there was for “The Fray.” You could sell it for $3.00, or buy it (used) for $8.99.

OMG a 133% markup!!!!

Just to see if this was craziness, I went to the second link on Google, spun.com. Their featured CD was Abbey Road, so I looked at that. You could sell it for $4.38, or buy it (used) for $8.98.

OMG a 105% markup!!!!

I didn’t cherry-pick my results. These were the very first results for “buy sell cds.”

This sensationalizing is so stupid. Really, you want us to think that a 35% difference between buy and sell is a scam? Gold-buyers are probably the slimiest people in existence, besides people like Limbaugh and Beck, but let’s get outraged for the right reasons. 35% difference between buying and selling is nothing remotely near a “scam.”
Anonymous

Good for them. I personally wish the each and every Beck and Rush fan get’s thoroughly fleeced on a regular basis.

Hooray for free enterprise, and Real Americans!
Halloween Jack

Wow–people who really don’t know what they are talking about are comparing apples to oranges, emus, pulsars, and just about anything and everything else. You don’t have spoilage, as you do with food; you don’t have refining costs, as you do with unprocessed ore; you don’t have the expense of opening and staffing a storefront as you do with tchotchkes, since you’re not selling it as jewelry, you’re selling it as a commodity. I don’t see much in terms of expenses except for assaying, security, and of course advertising. FFS, people!
gparker32

I’m sure this is meant to be a jab at Rush and Glenn Beck, but I’m not seeing a scam here. I just looked up the price of gold (http://www.goldprice.org/), and see that it is about $1055. I’ve bought gold before (coins, and not from these guys) and have paid very close to market rate. Let’s say they buy it back at $700. So what? I don’t have to sell it to them, nor buy it from them. Ever bought a diamond ring and then tried to resell it? You won’t even get close to what you paid, not even within 30%. So what?
Mark Frauenfelder

That’s what I was thinking, Anonymous. This is the best thing I’ve heard all day.
SKR

Try buying a bottle of wine at a restaurant. It is 3x what you can buy it for in a store. OMG it’s a scam.
- Tzctlp
  
  Well, yes, it is.
  
  It is up to you not to pay exagerated prices for anything really.