Why You Shouldn’t Buy Stuff From TV, Part 4736

July 19th, 2012 by Nelson Smith

If you're new here, you may want to subscribe to get stock tips or have investing ideas delivered to your email. I'm also on The Twitter.Thanks for visiting!

I watch a lot of CNBC, partially because I’m the opposite of cool and partially because I have a bit an unreasonable crush on Mandy Drury. Hey. At least it’s not Taylor Swift.

If any of you watch CNBC often, I guarantee you’ve seen this commercial. Make sure you all watch it, or else the rest of this post won’t make a whole lot of sense. Internet genies, do your thang.

What happened is, in 2008, the U.S. government minted this almost (99.99%) pure gold coin that could be exchanged for $50 cash. As the price of gold went up, so did the demand for this proof. Apparently the government ran out of the special casts that they needed to produce the coin, but I’m thinking they started losing too much money on the thing, so they stopped. If you want to get your hands on one these days, you’re probably out of luck unless you sweet talk eBay user “Iheartboobies69″. He hearts boobies.

If you’re one of those people who wants to invest in physical gold, this coin makes you more excited than Grandma when her Life Alert showed up. But since it’s not available anymore, what’s a gold nut to do? Buy this new gold coin, obviously. Duh.

It’s a terrific deal. Instead of you shelling out $50 for the original, you could buy one for just $9.99. If my fifth grade math doesn’t fail me, that means you can buy 6 5 of these new coins for the price of 1 of the original. 5 is more than 1, therefore this new coin is a better deal. Case closed, possibly forever.

This new coin has 14 milligrams of pure gold hiding somewhere inside. Probably right under the buffalo’s ass or something. That doesn’t sound like very much gold. Just what is the market value of gold in that coin?

Gold closed at $1578 per ounce last night, plus or minus a few cents, which probably won’t end up mattering. According to the Google, one ounce of gold is precisely 28.3495 grams. If you multiply that by 1000 (converting grams to milligrams) you figure out that one ounce of gold is 28,349.5 milligrams. It seems so much bigger when you convert it to milligrams, kind of like when I convert my penis size to millimeters. 3 inches is a LOT of millimeters.

If you remember, each new buffalo coin has 14 milligrams of gold. Time to crack out the calculators kids. There’s enough gold in 1 ounce to go into 2,024.96 coins. Let’s call it 2025, just because that’s a pretty round number. If they sell each coin at $9.99, that’s the equivalent of selling one ounce of gold for $20,229.75. That’s a profit of $18,651.75 per ounce of gold. Only in your dreams can you achieve margins that big.

Well, in your dreams and from hocking crap on TV.

Obviously that’s not all profit. There’s other metal in the coin, it comes with a fancy certificate of authenticity, and TV time isn’t cheap, even at 12:30am on CNBC. Plus, their website seems pretty spiffy.

If you watch the commercial, the company tries to present the coin as a way that common schmoes can invest in gold. I’ve always thought gold nuts were a little stupid, but I hope none of them are willing to pay over $20,000 per ounce.

The commercial is pure salesmanship. There’s a “strict limit of 5 per order”, trying to create a sense of scarcity. It was going to be $50, they say, but now they’ve reduced the price just for guys like you. Hey, you say. I’m a guy like me. And gold is doing so well that they can only guarantee the price for 7 days. Hey, you never know, gold could go up $18,000 an ounce in the next week. Stranger things have happened. (Editors note: no they haven’t)

Anyway, let that be a lesson to you. If a company is pimping something as an investment, chances are it’s not a very good investment at all.