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Goldline Worried That Business Model of Trickery, Deception May Be In Peril

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With no end in sight to the gold bull market, you might be weighing whether gold stocks or bullion are likely to bring you greater returns. Meanwhile, your impressionable, Fox News-loving older relatives, thinking they’re getting a piece of the same action, are sinking their savings into “collectible” gold coins that can only lose them money.

Anthony Weiner, Brooklyn’s Democratic congressman, brought the problem into the spotlight yesterday when he dragged executives from Goldline International before a House panel for a hearing on legislation that would require gold-selling firms to tell customers how much the gold they’re buying is actually worth.

Goldline, of course, finds this totally unfair, because their whole business model is based on tricking people over the value of the gold they’re buying.

Here’s how it works: Goldline runs ads on Fox News and right-wing radio shows, featuring endorsements by such luminaries as Glenn Beck and Fred Thompson. When customers, fearful of the U.S. dollar’s collapse, call in hoping to convert their cash to gold, salespeople steer them toward the coins, which are worth far less than their sale price.

The sales push is based on a crackpot theory, promoted by Beck, that President Obama is likely to repeat a 1933 executive order by President Roosevelt confiscating people’s gold bullion, and coins with “collector’s value” would be exempt.

You’ve got to admit, as far as evil plots go, it’s a pretty brilliant one. They’ve got Beck, clarion of the conspiracy-minded, pushing a story that involves two of the far right’s favorite bugaboos in FDR and Obama. Thompson's sober credibility of a guy who played a district attorney on “Law & Order” complements nicely a sales force trained by guys who the Securities and Exchange Commission once sued for using “boiler room” tactics to defraud old people.

If they get their hands on coins engraved with Ronald Reagan and Dale Earnhardt’s faces, Middle America will be well and truly screwed.
POSITION:  No positions in stocks mentioned.