The CEO of Goldline International Inc., Scott Carter, was in New York this week and made time for an interview with FutureOfCapitalism.com over lunch in Midtown Manhattan.
Goldline made headlines here last year when a Democratic congressman, Anthony Weiner, called the company in for a hearing and sponsored legislation seeking to crack down on gold and silver coin dealers. At the time, Mr. Carter said he thought the company was being singled out because of its sponsorship of conservative talk radio and television shows.
The first news out of the lunch is that the congressional onslaught hasn't exactly hurt Goldline's sales. The company's revenues, he says, were $854 million in 2010, up from about $650 million in 2009 and about $350 million in 2008. Some of that has been driven by the increase in the price of gold, but even so, it's a growth trend line that a lot of businesses would envy.
I ask Mr. Carter what the marketing genius is behind the sales numbers. He says the company's largest source of new clients is now the Internet, with talk radio second, and television, where Goldline advertises on 14 cable channels, third. The advertising is driven by trial and error — testing what works and what doesn't. The results can be surprising. Goldline tried advertising during sports broadcasting, which you might think would attract a similar (heavily male) demographic to some of the talk radio shows Goldline sponsors. "Results are horrendous," Mr. Carter says. Same with gospel music shows. When people are watching certain things, they "don't want to think about finances," he says.
The company's sales are almost all in America, he says, because customs laws make shipping coins across international borders difficult.
But Mr. Carter says his business's growth is driven not only by marketing, but by political and economic developments that have heightened demand for gold and silver as a hedge against devaluation of fiat currencies and against protection against the prospect of inflation. Even low to negative interest rates, he says, counter an argument frequently used against gold, which is that it pays no interest or dividends.
What ever came of Congressman Weiner's crackdown? Mr. Carter says the Weiner legislation was never marked up or passed, let alone introduced in the Senate, and it has not been re-introduced in the new Congress. Nor did the subcommittee that convened the hearing send any follow-up questions. "It seems to have just ended," he says.
I ask if Goldline has any congressional agenda beyond the Weiner issue. Mr. Carter says the company would like Congress to have a look at reducing the capital gains tax on gold and silver, which is now taxed as a collectible at 28%, a higher rate than applies to long term gains on stocks or most other assets.
He also says his company supports a repeal of the requirement in ObamaCare to require IRS 1099 forms on all transactions of $600 or more. The company would have to provide such forms to everyone it buys coins from.
Will gold continue its strength in an improving overall economy? Mr. Carter says gold doubled twice between 2001 and 2007. He also expresses skepticism that five years from now America will have entirely surmounted either its debts or concern about the strength of the dollar. That, he says, is a difference between now and 1981 and 1982 — "we have built up debts that are not going away" — along with a wave of government obligations to retiring baby boomers. He mentions that investors including John Paulson, George Soros, David Einhorn, and Eric Sprott have positions in gold or silver.
All this makes him optimistic about his company's future prospects. Right now, he said, 1% of portfolios have precious metals as part of them. If everyone follows his advice to consider some diversification into gold or silver for from 5% to "a maximum of 15 to 20%" — but for most people 5 to 10% — of their portfolios, and to then hold it for at least a three to five year period, as he suggests — Goldline's sales will keep growing.
Whether you personally buy gold — and Mr. Carter's pitch for it — or not, the whole situation is an interesting, not-so-little example of a company whose commercial fate is intertwined with politics. A congressman tried to make trouble for Goldline last year, but the bigger picture is that Congress's failure to guard the value of the dollar and to manage public finances in a way that inspires confidence has helped to create a whole bunch of customers for Goldline.