Tuesday, August 25, 2009


I just caught a commercial for GoldLine.com. I am not knowledgeable enough to comment on the wisdom of investing in gold in general, but I do know shady marketing techniques when I see them. GoldLine.com is using just a lot of slimy tricks to get people's money. Here's a rough rundown of what I remember:

1) Testimonials
The commercial had a former Fed commissioner, I think. The website has more testimonials, including Glenn Beck, who I plan to write about in the future for his consistently manipulative behavior. Never pay heed to testimonials. Ever. Even when they're not paid (and I bet these are paid), they're not a representative sample. They are useless for making good decisions. It's a trick.

2) Fear-mongering

The commercial started out with the heavy implication that the US economy is in a death spiral that will destroy old people's savings, leaving them penniless. This gets the fear up, so the old folks watching CNN in the middle of the day will pay attention to the rest of the commercial, eager to learn how to protect themselves.

3) Impressive-sounding irrelevant information
3A) "Gold is worth three times as much now than it did in 2000!" When it comes to investments, past performance does not predict future performance. If that were true, everyone would be rich because we would all invest in things that had increased in value in the past. This just does not happen. In fact, there are risks that investments are overvalued (tech stock 10 years ago, houses 18 months ago), which leads to a "correction", in which their value drops. GoldLine.com may be trying to dump its gold right before a correction. It is interesting that they compared the current value of gold to that of 2000, when the economy had tanked because of the DotCom bubble.

3B) "GoldLine.com has over a half-billion dollars in sales!" This is a shady tactic used by some online auction and investment sites in which they report a number based on the sales of things through the site, without the site ever owning the stuff, making the site look like it has a lot of capital when it really has nothing and just collects trading fees. I don't know to what extent that applies to GoldLine.com, but I've seen it before.

3C) "Gold has never had a zero value!" Neither has pretty much anything else, except some stocks and defaulted bonds. So, that is marginally relevant when you're investing. Of course, at $900/oz, you're probably not so worried about a zero value as you are a value of anything less than $900/oz.

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