A pawn shop chain moves upscale

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Pawn America is one of a couple of large (for the pawn business) chains that started in the past generation. Most pawn shops, however, are still small, local and often mom-and-pop operations.

Kamaaina Loan And Cash For Gold fits the usual pattern.

This story from the St. Paul Pioneer-Press describes how Pawn America is trying to attract shoppers who have never tried a pawn shop’s retail operation by separating it from the lending operation.

Our Maui pawn shop

Brad Rixmann, pawnbroker

did that long ago. In fact, we are perhaps overseparated, with four locations along one long block of North Market Street. One for jewelry, art and curios; one for tools, fishing and golf, the pawn shop and the new store with a wide selection of stuff, from guitars and surfboards to DVDs and Hawaiian artifacts.

The Pioneer-Press story also gives a good explanation of the difficulties pawn shops face from local governing authorities who have decided — but misguided — ideas of what pawn shops are.

“Six or seven years ago, they came to the city of Inver Grove Heights and we said no,” Mayor George Tourville said. “We took a look at the issues around how they operate, and the stigma of stolen goods going right straight to the pawn shop, and we didn’t have the votes to get them into the city of Inver Grove Heights.”

 

It took a while, but eventually the hicks in Inver Grove Heights got a clue:

Police were reassured by safeguards like the Automated Pawn System, which provides law enforcement with daily computerized reports on everything the pawn shop acquires — along with photo identification of each seller. That makes it much more secure than online resale activity, where it’s easier to stay anonymous.

Only then did Inver Grove Heights discuss rewriting its pawn ordinance and changing the zoning for Pawn America.

“It was not a slam dunk,” Tourville said. But with those safeguards and the company’s strong reputation, “it allowed the city council to say, ‘Hey, this is a good thing for our community,’ ” he added. “They built a good space, they’ve got people working. That space was empty and it was filled.”

As this blog has noted many times, a pawn shop is a really stupid place for a fence to offer stolen goods. He has to leave his name, address, driver’s license (or other ID) and a thumbprint, plus be filmed by surveillance cameras.

 

 

 

 

Words we like to hear

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Kamaaina Loan blog often grouses about the difference we perceive between how we see ourselves (and other pawnshops) and how the public sees us. Basically, the unpleasant guy played by Rod Steiger in “The Pawnbroker.”

So we were pleased to see reporter Jaime O’Neill in the Chico (Calif.) News & Review go out and see for himself. He, too, started with the Rod Steiger view, as he says,

I pitched this piece thinking it would provide the opportunity to write a hard-edged slice of Oroville noir focused on pawnshops where down-and-outers went from the Indian casinos to the pawnshops to hock their dead mothers’ wedding rings for a few pennies on the dollar, hoping to get enough money to return to the casinos and feed the slots once more, chasing the chimera of winning their money back so they could make the rent.

He was surprised.

Though it may be true that such scenarios get played out somewhere in the nexus between hard times and pawnshops, that wasn’t the story I found when I sat down to interview Danielle Batha, Chris Daniels and Gary Besser before business hours on a recent Thursday morning.

Instead, he found a pretty pawnbroker selling whole mammoth tusks and $5,000 Stetsons and not too much about busted gamblers hocking rings. Rather,

“I just don’t see that as a driving force,” she said. “More often, we see customers coming in who’ve had a win and they’re looking to go shopping. It’s not all tears and sad stories,” Daniels adds. “It’s like a curio shop.”

 

It’s quite a long piece, in fact the longest story about a pawnshop we’ve ever seen in a newspaper, and bouncy and positive, so of course we liked it.

As we have observed often, all pawnshops are different.  At Kamaaina Loan, our pawnbrokers are not kept behind thick plexiglass windows like in Oroville.

“We’re putting out the message that we’re not victims, and not about to be victimized,” Daniels answered. “We want customers to know that this is a very safe and secure place, and that stuff they pawn with us will be here when they come back to get it.”

 

Lucky we live Maui. On Maui, the post office clerks also deal across an open counter. If you don’t travel, you won’t know how different things are on the Mainland.

Not everywhere, but in some places, the United States Post Office is so afraid of its customers that a sliding, bulletproof glass is raised for you to put your money through, then lowered, while a second sliding, bulletproof glass on the clerk’s side is raised for him to take it.

But the basic dealings are pretty much the same at pawnshops in the Wild West of Oroville and the mild west of Maui:

“One of the things I’ve liked about working here,” Daniels added, “is how often people are grateful for the help we’re able to offer them.”

Batha nodded. “Our women customers tend to be really sweet people,” she added. “Lots of the people we do business with are single moms trying to get to the end of the week. They’ll bring in jewelry or laptops. Sometimes it’s for just enough money to fill the gas tank.”

 

 

 

The story of a pawn shop chain

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Lots of America’s pawn shops are one-outlet businesses, but there are chains, too. Here’s a feature about a fast-growing chain in the Southeast.

We find it interesting because the interviewer asked about “the seedy reputation of the pawn business.”

Rather than pretending it doesn’t exist, more and more pawn businesses are tackling this issue in public.  (Maybe it helps that the reputation of non-fringe lenders has gotten more seedy since 2008.)

Anyhow, Robbie Whitten has a good, succinct response to that question:

We’ve been fighting negative images for years. Pawn shops can be kind of shady, but the reality TV shows have been a big boost to the industry and its reputation. Now a lot of mom-and-pop shops are cleaning up their stores to take advantage of the interest.

There are a lot of new customers coming in who say they’ve never been in a pawn shop and want to check it out. We don’t want them to feel like they’re in a pawn shop. On one side we want them to think they’re in a fine jewelry store, and in the sporting goods section we want them to think they’re in a Bass Pro shop, with a department store in between.

 

Later in the interview, Whitten says:

There are lots of guys, like real-estate agents, who were making six figures that are now living on 40 grand. They can’t borrow $3,000 or $4,000 from the bank anymore–they just don’t make those types of personal loans. The term we like to use in the industry is “underbanked.” But these people have lots of nice tangible assets. They might have a Rolex or a $500 Ping driver they can sell.

 

That’s where Kamaaina Loan gets a lot of its resale merchandise. We even have a Private Viewing Room for customers who (we think) are either embarrassed to be seen in the pawn lobby or, perhaps, don;t want to be seen making a $50,000 cash transaction.

Economists list pawn shops as “fringe banking” institutions, because they serve what Whitten calls the “underbanked.” At least a quarter of Americans don’t have an account with a commercial bank. And not all of them are wearing Rolexes.

We prefer to think of ourselves as the most democratic of all “banks.” If your income is $100,00o-plus, we’ll be happy to serve you. And if it’s $10,0o0-minus, we’ll be happy to serve you.

 

 

Parking, parking, who’s got the parking?

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North Market Street is a great place to do business in many ways, but it was even better before the county started eliminating parking spaces.

Saturday, Kamaaina Loan sent an observer out to see what more parking means for business. The locale: the Upcountry farmers market.

The market used to be held at the Eddie Tam Community Center, which has maybe a dozen parking stalls. And it used to attract about 6 vendors and perhaps two dozen customers over the course of a couple of hours every Saturday morning.

If somebody was setting up the meeting room in the center for a baby luau or birthday party, which was usually the case, there was even less parking.

Over a year ago, for reasons unrelated to parking, the market was moved to the private parking lot next to Longs at Kulamalu Town Center.

It took a while for people to get used to it, but nowadays, the farmers market draws at least 5o vendors and we don’t know how many customers. But last Saturday, the parking lot — we didn’t count, but it has probably 300-400 stalls — was full. Overfull.

People wanting to get at the locally-made jellies, just-picked avocados, fresh greens and sausage biscuits (among many other things) had to park along the access road, and the overflow of cars reached nearly to Maikalani (the offices of the Institute for Astronomy).

We cannot think of a clearer example of what you need for business stimulation.

 

 

 

 

And soon, a daily pawn show in cable TV

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America’s thirst for pawn shops shows appears to be limitless. History, truTV and TLC already produce a variety of weekly shows. Now, CMT has announced a daily show, to be called “Win or Lose Pawn.”

A publicity photo shows a palm tree, but evidently this is not going to be Hawaii’s entry in the pawn TV derby. The show is being cast in Southern California, and Television Blend reports that its producers are looking for “two sorts of people: those who are looking to pawn an item and those who simply want to get an appraisal of a, hopefully big ticket, item.”

Sounds real. That’s what happens every day in Kamaaina Loan’s pawn shop.

“Win or Lose Pawn” is being birthed by a producer known for shows such as “Shark Tank.” Television Blend, however, is skeptical:

This show is coming at the wrong end of the pawn shop phase and I only see a long, hard road ahead.

Hey, here’s an idea, Hollywood. How about a pawn shop show that instead of being concocted and staged and produced, shows what really happens in a pawn shop. We think it would be interesting. You know, not reality, but real.

Warning: Fake US silver coins flood Canada

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According to the Hamilton (Ontario) Metroland news service, police have recovered “hundreds” of fake US Silver Eagles.

Although described as “silver dollars,” the fake coins — silver and nickel plate over brass — are also described as 10 ounces in weight. That would make them bullion pieces in a coin shape, since a silver dollar weighs 1 ounce.

The release (from police) says the suspects got the coins from online auction sites, before selling them to local shops. They targeted businesses that were either busy or short-staffed, so buyers would spend less time verifying the coins’ authenticity.

At today’s prices, a 10-ounce silver “coin” has more than $220 of silver in it. So 500 fakes means the scammers hit the Canadian pawn shops for somewhere in the neighborhood of $100,000 .

The story concludes with good advice:

Police say if someone is willing to sell a coin for less than its silver value, they’re most likely trying to pass off a fake. They also warn the public to buy coins and other precious metals through reputable dealers who take the proper steps to check authenticity.

The release did not say what online auction sites were moving these “high-quality fakes, professionally manufactured by an unknown source.” But Kamaaina Loan Blog had no trouble finding a site selling purported 1-oz Eagles for less than $19. Since that coin, if real, would have more than $22 in silver in it — and would retail, in 1-coin sales, for around $30 — we are suspicious.

A roller-coaster ride in India

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Although gold is the international store of value, accepted everywhere, there are still local variations in the way people interact with their gold, and India is fascinating in this respect.

It is the biggest market for gold, since Indians like to keep gold as a form of savings, and gold jewelry is part of a bride’s dowry — and her family’s emergency financial backup.

In India, ordinary commercial banks will make a loan against your gold, something US banks are not accustomed to doing.

In both countries, loans against gold are the mainstay of pawnbrokers’ business.

So when the price of gold flops, a much greater proportion of the population is directly affected in India than in America. And it flopped earlier this month.

This story  from Yahoo News rounds up some reactions when gold was down to as low as $1321 an ounce.

But that was 1o whole days ago, and gold in New York is up to $1474 (a gain of nearly $12 just over the last day), so perhaps some Indian lenders are breathing more easily today.

Interesting nuggets from the story:

Last year, India pawnbrokers were lending about 90% of the metal value of gold jewelry. But in India, pawn loan durations are longer. In Hawaii, a pawn loan is regulated by law at 60 days (30 plus another 30 if the borrower does not redeem after 30. Pawn loans can be rewritten after 60 days, but most are either redeemed or abandoned by then.

Even when defaults jumped after the price dropped, Indian gold borrowers were still reclaiming their gold at rates well over 90%. This is roughly similar to Hawaii experience.

India’s Reserve Bank told commercial lenders who were backing lenders taking gold as collateral to limit their exposure to 60% of the metal value of jewelry held as collateral. So even when gold swooned by 30%, that should not have had any destabilizing effect on India’s overall financial system.

 

Thoughts from a gold refiner

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Dillon Gage is a gold refiner that Kamaaina Loan knows well. They put out a press release today — not something they do often — ruminating on the big drop in gold prices. Here it is:

DALLAS, TEXAS– Gold prices tumbled in April, breaking below $1,400 an ounce to a three-and-a-half-year low as investors liquidated and many flocked to equity markets in hopes of better returns. Big gold investors watched their wealth shrink. On April 15, gold lost $140 an ounce in one of its biggest, one-day drops ever. Global inflation has been tepid, providing little incentive to buy gold. But bargain hunters stepped in as gold pric es retreated, says Dillon Gage Metals, international wholesale metals dealers.

“After a punishing selloff, gold appears to be in the process of bottoming,” says Terry Hanlon, President of Dillon Gage Metals in Dallas. Gold has fallen more than $500 an ounce from its 2011 peak of nearly $1,900. Demand for physical gold and jewelry picked up as prices dropped, he says. Additionally, many bargain hunters are buying on this dip causing a shortage in the supplies of physical metals.

Asian consumers in particular see this month’s lower prices as a good time to buy gold jewelry and minted investment products. India, the world’s biggest gold consumer, is in its wedding season–when jewelry is given to brides and at the most lavish weddings to guests.

Escalating tensions on the Korean peninsula are another reason to buy gold, Hanlon says. Investors are watching North Korea, where official s this month rejected South Korea’s call for bilateral talks.

Factors that led to gold’s slide nonetheless remain. Weaker-than-anticipated GDP figures from China have weighed on a number of commodities, including gold, this month. Crude oil prices, an inflation barometer, gave back all of their March gains in April.

Inflation is tame and that’s not good for gold. According to JP Morgan’s global consumer price index for more than thirty countries, inflation has eased from 4 percent in 2011. Global prices in February were up only about 2.5 percent from a year earlier, the index shows. In the United States, weak retail sales suggest inflation will remain subdued, even though housing starts and home sales are improving.

Another factor that’s weighed on gold is a rumored plan by the debt-saddled, island nation of Cyprus to sell gold reserves to raise about 400 million Euros. Worries are that other indebted countries, including Italy, Portugal, Slovenia and Hungary, could follow suit and unload some of their gold reserves.

But on a more positive note, several well-heeled nations might buy gold at these lower levels to add to reserves.

Hanlon says the bargain hunting that’s emerging in gold doesn’t mean the market will fully recover right away. “It may be a grad ual claw back,” he says. “But in time, I think we’ll see gold above $1,800 again.”

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Refiners are like pawn shops. They care less about whether the price of gold is up or down than they do about how much gold is moving.

 

 

. . . and what about diamond investing?

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With gold breaking back from its 9-year runup — as this is written, New York spot is $1372 or about $180 less than it was just a couple weeks ago — investors are wondering what other things there are (aside from mutual funds) they could put their money in.

What about diamonds, for example?

For starters, the last few years have been the only time in a century when it didn’t matter that diamonds (and gold, too) don’t earn interest. Neither does cash in the bank nowadays.

On  the other hand, a graph that shows a steady rise in diamond prices over half a century can be misleading.

A graph of Hawaii housing prices over the 50 years from 1955-2005 would look similar, but as Paul Brewbaker, the well-known local economist used to remind us, the rate of increase was only about the same as for a passbook savings account. (This situation has changed since the crash of 2008; today passbook savings accounts don’t grow, and housing prices went over a cliff.)
Anyhow, the point is, you have to watch out for money illusion and always remember the power of compound interest. $500,000 sounds like a lot more than $50,000, but $50,000 compounded at 4% gives you $500,000 in half a century. We should all live so long.
Here at Kamaaina Loan, a big move in the world price of gold brings in more business. Why?
Different strokes for different folks. The gold optimists think the price is unusually favorable and want to buy more. The gold pessimists have decided the gold bull market is over and want to cash out and get into something else. Should it be diamonds?
Here are some things to think about diamonds.
Diamonds are rated by the  “5 Cs” — cut, color, clarity and size (carat) and cost.
Cost is not an inherent character of a stone. It varies. And the other 4 Cs are subjective.
There are different diamond grading services because people have different opinions. This is not true for gold. A .9999 gold bullion coin is the same whether it comes from Australia or Austria (ignoring the very slight premium paid for especially popular coins).
Let’s consider a one-carat, internally flawless, round cut diamond of good (d) color. Rapaport, the leading price service and a big buyer and seller of  diamonds, reported the asking price for such a stone was $27,000 in April 2011. In August 2012 it was $28,00o. The latest report has the asking price as $28,400.
Not a lot of change over two years.
Now let’s look at gold. It was selling at $1556 in April 2011, and a report of the time said the recent changes “had the look of past silver and gold price peaks.”
Wrong!
In August 2011, gold was up to $1861 and it briefly passed $1900 a few weeks later (though only on intraday trades; gold has never closed over $1900).
Today, gold is $1372.
So, would you rather have put your money in gold or diamonds?
Inflation has been low over the past two years, and diamonds have just about kept up. Gold was way ahead of inflation for a while, now it’s way behind.
So, if you think you were so smart you would have realized gold was peaking last autumn and would have sold, you should have bought gold.
There’s more to consider if you want to try diamonds. Besides the 5 Cs, there are other factors, like scintillation, that strongly affect the value of a stone. Unless you are an expert yourself, you need to have a GIA-certified gemologist along with you. And while you may see some dealers pushing stones that have ratings from other sources (like EGL), know that GIA is the (ahem) gold standard of diamond grading.
So if you are considering selling your gold and getting into diamonds, or selling your diamonds and getting into cheap gold, or if you just need cash, we stand ready to buy and sell.
Know this. Kamaaina Loan has a graduate gemologist on staff and is GIA-certified.

Another pawn shop movie

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There are not a lot of films set in pawn shops. The best known, “The Pawnbroker” with Rod Steiger, is not admired by pawnbrokers, because it portrays them as grasping and cold, which they think is unrealistic.

Now there is another, called — what else? — “Pawn Shop.” We haven’t seen it, but it doesn’t sound very realistic either.

Pawn Shop tells the story of Rey (Garrett Morris) who has been working in the same pawn shop for nearly 30 years. In all that time, he’s refused to let his adult son Mike (Foolish) become his own man. These days, Mike earns his keep working in the shop, where he’s constantly bickering with his cheapskate dad and his eccentric co-worker Tony (Cool Aide). But trouble starts to brew when someone swipes local thug Pierre’s ( Joe Torry ) jewelry right out from under his nose, and police accuse Mike of dealing in stolen property. Now, with the law closing in on one side and Pierre looking for blood on the other, Mike is about to discover why doing the best thing isn’t always the easiest thing.

 

But at least it’s supposed to be funny.

Not all that funny, evidently, since it went straight to DVD.

Ah, well, we pawnbrokers will have to keep seeking our muse.