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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.

 

 

Your personal info and us

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OK, this is a little bit inside baseball,  but in the age of digital promiscuity, everybody should be interested in who gets their personal data and why.

A chain of New York pawnshops is suing the New York police for $61 million in a dispute about a national pawn reporting database.

According to the New York Post, the cops want to force the pawnshops to hand over their customer information to a company called LeadsOnline.

Gem’s owners say they stopped using the Texas-based LeadsOnline because they feared the service violated federal privacy laws, which they are required to follow.

 

At Kamaaina Loan, we’re concerned, because the Honolulu police have been trying to persuade the state Legislature to force island pawnshops to also participate in a national database (the big ones are LeadsOnline and BWI).

Long before Leads or BWI, Kamaaina Loan set up the first Internet reporting service, which lets Maui police see what items we have taken in on a pawn loan or a sale. The local cops can match this list with any information they have about stolen goods.

If there’s a hit, the police can 1) come pick up the allegedly stolen goods; and 2) find out the name, address, phone number, driver license number (or other ID), and thumbprint of the person we obtained it from.

This is, we believe, a useful protection for honest customers and for ourselves.

But we are very worried about what happens if some national or international ” big data” company is given access to our records. They won’t say what they do with the data. Who they sell or give it to. Or why.

We believe our sales records should go to the local police. It’s required by state law. But we don’t think it should go any further.

Other pawnbrokers, like Gem in New York, agree.

 

Pawn 101: Stupid pawnbroker tricks

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According to the Newport News (Virginia) Daily Press, a local pawnbroker was caught accepting stolen goods.

In a sting operation, police used an ringer to present items in “plastic security boxes.”

Maui retailers don’t seem to have adopted these, but they are the jewelry store equivalent of those plastic security tags that clothing stores attach to clothes to discourage shoplifters.

The Virginia pawnbroker was buying items in security boxes that had not been unlocked. That’s not in itself illegal, but it ought to have made him suspicious.

During the 2012 investigation, Newport News Police Detective W.E. Nesbitt indicated in the criminal complaint that he learned Pellecchia takes suspected stolen items brought in through the pawn shop to his home to sell on eBay.

The suspect wasn’t actually charged with receiving stolen property but with failure to keep pawn records. He maintains his innocence.

As we often say at Kamaaina Loan blog, a pawn shop is a stupid place to fence stolen goods, because you have to leave your name, address, picture and thumbprint. By the same token, if you’re going to accept stolen goods, setting up a pawn

Pellecchia

shop is a stupid way to do it, because most cities or states (including both Hawaii and Virginia) require pawnbrokers to keep complete records of what they buy or accept as collateral, and, in Hawaii, police can inspect the records without notice.

Mr. Pellecchia may not have know that, because the newspaper reported his business experience was in selling pizza.

 

If that’s a 4-foot-long catfish, we must be in Indiana

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An Indiana pawn shop has started a reality TV show about itself for local cablevision.

Early submissions were a large stuffed catfish and a phony check not written, as claimed, by George Washington. Sounds interesting.

In case you’re wondering about the reality pawn show that Kamaaina Loan auditioned for in October, things are progressing. The “sizzle” (TV lingo for a short sampler used to try to interest producers in watching a longer pilot show) has been turned down by several networks but not all. Several appointments are scheduled in the next few weeks to keep hunting for a home.

We had a great time meeting folks who brought their unusual treasures to us for our sizzle to promote a Maui pawn reality show

No, no, no, not that kind of stuffed catfish

and are grateful no one asked us to place a value on a stuffed catfish ($450 in Indiana). A stuffed marlin we could have dealt with.

Pawn 101: We buy (almost) anything

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So when a customer walked in with a box of old cannon balls and shells, Kamaaina Loan shelled out, so to speak.

Old ordnance has collectible value, but it takes an expert to identify the many varieties.

The collection we have is from the Civil War period and includes a Parrott shell (which was used in a cheap cannon that had a tendency to explode), some round shot and a mortar bomb filled with Minie balls (which are not balls but cylinders) rather than the usual round grapeshot.

As collectibles, cannon balls have the advantage of not needing gentle handling, unlike, say, Meissen china. On the other hand, shells, if filled with powder, can be dangerous. All ours are either solid cast iron or disarmed, so no worries.

In a pawn shop, you never know what will come through the door next.

 

Funny, we get along with the hair salons

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From the Des Moines Register, a story about a suburban enclave that denied a business application from a pawn shop, in part because the owner of a hair salon in the same strip mall said

“I think my clientele will be intimidated. A pawn shop is not curb appeal. That’s intimidation.”

Perhaps the people of Windsor Heights are unusually skittish. Kamaaina Loan has peacefully co-existed with Stephanie’s Hair Salon for over 35 years and with Lori’s Hair Shack for over 25 years.

If Mindy Schmitt only knew it, many of her stylists and many of her customers go to pawn shops. Kamaaina Loan’s customer base includes about 10% of the population of Maui, and this is not unusual.

The pawn shop owner announced he would appeal to the local district court (the Iowa equivalent of Hawaii’s circuit court). He will almost certainly win if he does.

 

Why we should welcome water rate increase

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Alan Arakawa has got religion when it  comes to water rates. When he was on the County Council, he, along with all the other members, thought it best to keep water rates as low as possible. So when the semi-autonomous Board of Water Suppply (as it then was) came in with requests, the council would take pride in holding rates down.

As a result, the water system deteriorated.

It’s a rule of thumb that businesses ought to spend about 3% of the value of their physical plant in maintenance each year. More if you’re an airline, maybe. The reasoning is that most things you own last about 30 years.

Cars don’t last that long, but water pipelines last 50 years or more before needing to be replaced.

So if your water system is worth around a billion dollars — which is a fair guess at the value of Maui’s public system — you should be spending $30 million, give or take, just on replacing and repairing your pipes, trucks, treatment plants, computer systems etc.

In recent years, the department has spent at that rate, or better, but for decades and decades, the entire operating budget hardly equaled 3% of the value of the plant. So there’s lots of catching up to do.

Whether the 5% rate increase the mayor called for in his State of the County message is the right amount is up for discussion, but at least the necessity for greater spending on maintenance is getting through to the ninth floor. It will be interesting to see whether the eighth floor gets it.

Pawn 101: The most common bad news

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According to examiner.com, the most common bad news answer that the Pawn Stars stars give to customers is:

 “The customer’s ‘Sterling Silver’ flatware is actually plated.”

At Kamaaina Loan, the most common answer the customer doesn’t want to hear is probably, “Not for me.”

And it probably applies more to tools or electronic equipment than to flatware.

The deal is, it doesn’t make sense for a pawnbroker to lend money on (or purchase) anything that doesn’t have a ready resale value. “Ready” is a relative term. For collectibles and art, a ready market might take years to develop.

For power tools, which we see a lot of, a ready market means turnover in weeks, or at most a few months.

For electronic equipment, stuff that still works perfectly might not be worth a dime — games and game players from a couple of years ago usually have very small value in the market, if any. Older cellphones are another item that depreciates fast because newer models keep pushing them into the background.

The market is what it is. We don’t do much in the fur coat line, because who on Maui would we sell a fur coat to? On the Mainland, the coat might do better.

Plated silverware is usually (but not always) practically worthless, because the film of silver is so thin. Underneath is scrap iron, worth a penny a pound.

But you have to check. There are a few (very few in the case of plated eating utensils) models that have collectible value.

Which is why the No. 1 all-time response we give to customers who call is, “Bring it in.”

Until we see it and handle it and examine it, we cannot put a value on it.

We can tell you what silver is worth — $30.82 cents an ounce in New York as this is typed, but that’s for Comex-deliverable silver, which is a strange beast of great purity. Sterling is silver mixed with other metals (for durability), so it is worth less.

But a silver dollar — even if it is a Susan B. Anthony silver dollar without any silver in it — it always worth a dollar.