Wow! Sure didn’t see that coming

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At the Kamaaina Loan blog we have been following with amusement and fascination the ups and downs of the gold price over the past few weeks. One minute the price jumps to $1250 and a day or two later it’s under $1200 and then back up again.

Sometimes the moves can be attributed to some pretty obvious doings in the world economy, sometimes the leaps and slides seem practically uncaused. But the price has gyrated around the $1225 that the gurus at Goldman Sachs last year were predicting for this period.

But who anticipated that late last week the Japanese central bank would decide to pump a lot of yen into the deflated Japanese economy, the latest in a series of failed attempts to bring that sector out of deflation? (Although the US Federal Reserve and many other wise heads have been worrying for years about inflation, deflation is the big problem. Economists know how to control inflation but — as the experience of Japan over the past 25 years and of the whole world economy in the ’30s demonstrated — deflation is the really intractable problem.)

The American stock market went crazy, with the Dow Jones Industrial Average spiking to a record high. Just why the transfer of ownership of a small fraction of Japanese equities from private (mostly Japanese) hands to Japan government hands should make American stocks so much more valuable is hard to figure.

But the effect on gold and its poor stepsister silver — once the stock market had reacted — was in line with conventional thinking: both fell off a cliff.

Gold got down to a four-year low and shortly before the market reopened today buyers were offering a mere $1172. Silver cratered. It has been a long while since it broke under $17. Today it is flirting with $15.

#mauipawn #mauigold #mauiretail

Gold gyrates

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The price of gold changes every day, sometimes by quite a lot — a $25-an-ounce move is not unusual. But it doesn’t usually vary so much within a day that Kamaaina Loan has to adjust the amount it offers on gold loans or purchases.

Today, as gold continues a strange series of gyrations, a midday adjustment began to look like a good idea. (In the end, we didn’t change, though it might have cost us a few bucks.)

As our day began, gold was selling at just under $1227 an ounce.So that’sd where we pegged our offers for this day. Within less than 2 hours, it was down to $1209. It got as low as $1207 before rallying to around $1211 just before the market closed in New York City (which happens just after 11 a.m.Hawaii time).

The folks at Kitco, who offer a daily smorgasbord of gold news and opinion, thought the move — the biggest in 3 weeks — was an unhappy reaction to the release of the minutes of the Federal Open Market Committee. Kitco thinks gold traders think higher interest rates will be bad for gold (although, amusingly, you can find every shade of opinion on their website), for reasons that are opaque to us in the pawnshop.

Still, it has been a more than usually exciting couple of weeks for people who watch gold prices. As Big Rich always says, “Gold will go up, or it will go down, or it will stay the same.”

 

So, what did gold do today?

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Not much,.

Yesterday, Kamaaina Loan blog wondered if gold would track the stock market, which in theory it sort of does — gold up when stocks fall and vice versa.

Over the past couple years,. stocks have reached record highs and gold has taken a swan dive, off around 30%. But is the relationship real?

Recently, the stock market has been gyrating like a yo-yo, and gold prices have risen and fallen, but not so violently.

So, if we understood what is going on, we wouldn’t have to work so hard in the pawn business and could lie on the beach all day. But we don’t.

Tuesday,. stocks were way up: the Dow was up 1.12%, the S&P 500 1.19% and the Nasdaq 1.75%. Those are all big movements for a single trading day, especially the Nasdaq.

What did gold do? It went up, by 0.22%. Not down. And when the spot market reopened, after the stock exchanges were closed and the traders had had a chance to digest the mood, gold did go down, but by a mere 0.02% (only 30 cents on a quote of $1227.50, barely noticeable).

Well, to heck with it, we’re off to the beach anyway.

#Mauipawn #mauigold #mauiretail

What does Ron Paul think about gold?

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He likes it. We do, too, but possibly not for the same reasons.

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Although it has been getting almost no attention in the United States, Switzerland, home of one of the solidest currencies in the world, is going to vote in a month on whether to add more gold to its money.

In an interview with Kitco News, the retired gold bug and congressman Paul says he thinks the move should pass but won’t. If it did pass, the Swiss central bank would have to buy about 1,500 tons more gold to get its gold reserves up to 20% of paper francs.

That’s about 60% of annual production, though something less than 1% of all the gold humans have accumulated over the millenia. That much additional demand would, presumably, push the world price of gold up, although gold has been gyrating so much this month that it might be hard to tell.

(In round terms, gold dipped under $1200, rose to above $1250 when stocks went down, then fell below $1230 when stocks went up. Stocks didn’t go much of anyplace today, so it will be interesting to see whether gold, also, noodles around Tuesday.

Paul, of course, is the most prominent political voice for the idea that “fiat money” (money backed only by the prospects of the economy of the nation issuing it) is inherently unstable and likely to go “Poof!”

“When our crisis hit there was panic and people were scared to death. Even conservatives who didn’t believe in bailing out the banks were frightened into it,” he said. “But if you had a clean vote and just simply ask the question: ‘should Switzerland hold its own gold … should the central bank hold a certain amount of gold in reserves.’ I think you would get an overwhelming ‘yes.’”

Switzerland keeps 30% of its gold (some of which really should belong to murdered Jews, whose gold the Nazis let Switzerland keep for them in the ’40s) in England and Canada. (More gold is in New York City than Ft. Knox, and much of it belongs to other countries who do not trust their neighbors to keep their hands off their gold. That is, unless, you subscribe to the belief that all the gold has been taken out of Ft. Knox and put somewhere else. Where else? Who knows?)

You know who worries that the gold is not in Ft; Knox?

Ron Paul.

So now you know why he thinks the Swiss should worry about where their gold is.

If you pawn your gold with us, be assured it will stay in a bonded, insured vault and it will be there when you come to reclaim it. Kamaaina Loan And Cash For Gold: safer than Fort Knox!

 

Slow motion stock market crash

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The graceful swan dive by Wall Street — the DJIA managed to get under 15,000 today before closing at 16,141, about a thousand below where it was just a couple weeks ago — merits some comment:

Listen up, people. Inflation is whipped. Beat, over and done with. Deflation is the problem, the hardest of all possible economic crises to manage your way out of. (The famous hyperinflation in Germany was controlled rather easily by replacing all the money with “Rentenmarks,” though the damage done was irreversible.)

Some people just won’t believe it. According to Bloomberg News:

Investors who poured more than $1 billion this year into a $3.8 billion leveraged exchange-traded fund that bets against long-dated U.S. Treasuries are suffering a 4.1 percent loss today alone, Bloomberg data show. The fund is down 38 percent this year, a small window into the magnitude of pain in a market where many traders have been wagering debt prices would fall.

Gold, at last, finally woke up to the fact that securities are tanking and started playing its accustomed role as refuge when people are worried.  Gold, after managing to get below $1200 an ounce, was up to $1241 today. Not fabulous compared to where it has been over the last couple of years but reversing a slide that has been going on almost all year.

More from Bloomberg:

“The markets are clearly very jittery,” said Larry Milstein, managing director in New York of government-debt trading at R.W. Pressprich & Co. “It’s not just the global slowdown.”

While Wall Street economists may be sticking to their forecasts Treasuries will lose value, a lot of bond buyers aren’t listening right now. And the bears are suffering the consequences.

Worse off maybe than bond traders is Vladimir Putin. A different Bloomberg story says:

 

 Oil has been the key to Putin’s grip on power since he took over from Boris Yeltsin in 2000, fueling a booming economy that grew 7 percent on average from 2000 to 2008.

Now, with economic growth slipping close to zero, Russia is reeling from sanctions by the U.S. and the European Union over its land grab in Ukraine, and from a ruble at a record low. Putin, whose popularity has been more than 80 percent in polls since the annexation of the Crimean Peninsula in March, may have less money to raise state pensions and wages, while companies hit by the sanctions also seek state aid to maintain spending.

“His ratings remain high but for a person conducting such a risky policy, Putin has to understand the limits of patience for the people, business and political elite,” said Olga Kryshtanovskaya, a sociologist studying the country’s elite at the Russian Academy of Sciences in Moscow. “Putin is thinking hard how not to lose face while maintaining his support.”

Couldn’t happen to a nicer fellow, either.

Should you line up to buy silver?

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silver-coins

You might have to, according to this report from Numismatic News:

Rationing the supply of new 2014 silver American Eagle bullion coins might return if current extraordinary demand for them continues.

The real question is not whether you should wait in line but whether you should buy now. All we can say is, silver is priced much lower than it was two years ago. It has declined more rapidly than gold.

Taking the end of 2012 as a somewhat arbitrary point, silver is down by nearly half, while gold is down by less than a third. Still, either is only a bargain today if the price is not going to go much lower. Who knows?

Numismatic News attributes the latest boomlet in Silver Eagle sales to bargain-hunting spurred by low prices. The number of eagles sold in September was 4.1 million (or around $65-67 million, not a huge amount compared to what flows into mutual funds).

At our Maui pawn shop, we are agnostic about the price trend. We will sell if you want to buy, or buy if you want to sell, and take our chances on the market.

What we do promise is that we will beat any other offer on Maui. Shop around but see us last.silver-coins

#mauicoin #mauisilver #mauigold

What the heck is going on in the markets?

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At Kamaaina Loan we often say — it’s not a lament, just a fact — that we are at the mercy of the world gold market. Buying and selling (or making loans against) gold is our bread-and-butter, and when the price falls as it has recently, it hurts.

Not just our bottom line, but it lowers the amount we can offer on pawn loans. So, such is life.

But most of the time, prices — not just gold but most prices — move in a comprehensible way. There are trends you think you can rely on at least for a week or so. Gold, for example, has been trending down for over a year. Less heralded, the world price of oil has been going down.

You wouldn’t notice from pump prices on Maui, but according to Bloomberg News, the price is almost low enough to make the famous Keystone Pipeline a non-starter. All that political furor and $90 a barrel oil could make the arguments moot.

At the current price of about $87 a barrel, cheap American crude undercuts many of the most aggressive oil projects under consideration by the oil majors. About $1.1 trillion of capital expenditures have been earmarked through 2025 for projects that require a market price of more than $95 a barrel, according to a May study by the Carbon Tracker Initiative, a London-based think tank and environmental advocacy group.

At least the oil price drop is easily understood: production is way up and demand is stable or slightly falling.

But the securities markets seem to have lost their mind this week. Tuesday was the best day of the year, and today the overall market is swooning in a most remarkable way.

U.S. stocks plunged, with the Standard & Poor’s 500 Index’s erasing its biggest rally this year, on concern that slowing growth in Europe will hurt the American economy as the Federal Reserve ends its bond purchases.

All 10 of the main S&P 500 groups dropped at least 0.8 percent, with energy stocks plunging 3.5 percent to pace losses.

In a general way, a falling stock market is supposed to be good for gold, and this seems to hold true this week, although only in a modest way:

A combination of heavy short covering in the futures market, bargain hunting and safe-haven buying boosted the yellow metal.

After dropping well below $1200 early in the week, spot gold (the price of concern to Cash For Gold) rallied to about $1225.

For those who keep score, that is right where Goldman Sachs, a year ago, said gold would be around the end of 2014.

From our point of view, when gold behaves this way, your pawnbroker is your friend: If you need to convert your gold to greenbacks, you probably don’t want to sell at these price levels. But you can take out a pawn loan, reclaim your gold in 30 to 60 days and hope for higher prices in the future.

#mauipawn #mauigold #mauishopping

 

Keeping busy

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This morning I went to the breakfast meeting of the Rotary Club of Upcountry Maui, to see two high schoolers receive the club’s Students of the Month awards. They were an impressive pair, and I will relay a little about them in a moment, but what I found noteworthy was the variety (and, apparently, also depth) of the opportunities students have today.

There was nothing close to it when I was in high school, 50 years ago.

Of course, not all students get the same opportunities. Money and transportation would prevent some. Babysitting obligations would stop others.

But the opportunities are there for both private and public school students.

It is nearly impossible, in some circles, to bring up the topic of education without being subjected to a tirade against public schools. And teachers. And unions.

I spent a lot of time on campus when my children were in high school, and what I saw was generally good. Certainly far better than the Catholic school I went to. I do not believe that anyone pushing vouchers has the interests of the students uppermost. And religious schools are, with some but not many exceptions, antieducational.

The selectees were Jamie Gomes from King Kekaulike High and Josh Higa from Kamehameha Schools Maui. As you can see from the photograph, happy-looking kids.

Jamie said she had been thinking of becoming a family physician until attending a boot camp at Berkeley last summer where she observed a knee operation and is now wondering if becoming an orthopedic surgeon wouldn’t be better.

She plays water polo and for her community service requirement has started Operation JAG (Jamie Against Bullying) to go to the community with a message. She would like to attend Oregon State and then Oregon University of Health Sciences medical school.

Josh wants to become a botanist, with an interest in native plants. He’s been learning about the Hawaiian uses of plants as medicine — la’au lapaau. He does judo and runs cross-country and is studying Japanese in school. He has been on reef and park cleaning trips.

He has Northern Arizona and Pacific on his college list.

There were quite a few other items on Jamie’s and Josh’s busy lists, and I asked Josh’s mother Terilyn if she worries about burnout. “Yes,” she said.

But I think the kids will be all right.

150 guitars in a DAY

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I’ll say we are jealous, but then Maui is not Austin.

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This piece from the Austin Chronicle is one of the longest features about a pawnshop we’ve ever read, but the CashAmerica (formerly and famously Doc Holliday’s) shop on South Lamar is a different kind of cat. Austin’s huge music scene supports a huge instrument market:

If pawnshops hold rock & roll together, then the vast CashAmerica on South Lamar is what longtime employee Ian Doherty calls, “The big bottle of wood glue that holds all the broken guitars together. We make it happen for all the musicians who are struggling to get where they’re going. Even the really big-shot guys still have bills coming up.”

Maui’s music scene, while vibrant, is nowhere near as big as Austin’s where hundreds, if not thousands of bands play at SXSW, and the South Lamar shop claims to have sold 150 guitars on opening day one year.

 

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It is not made clear whether 150 bands showed up without guitars, or 150 kids were so inspired by the groove that they went right down and got their starter axes at CashAmerica.

Kamaaina Loan And Cash For Gold will not sell 150 guitars in a day. The two photographs show about two-thirds of our display inventory at 96 N. Market this morning. We like to think that our prices are as good as the musicians enjoy in Austin, and we can confirm that our pawnshop (96 N. Market, a few steps down the street from the guitars) has helped many a Maui musician between gigs pay the rent.

And here’s a pro trick you may not know. Quite a few musicians going on tour pawn their spare instruments. We store them in our bonded, insured warehouse. When the tour is over, the players reclaim their stuff, which is a lot safer way of ensuring their gear than leaving it behind and asking a friend to look after it.

 

#mauimusic #mauiguitar #mauipawn #mauiloan

 

Sell us your gold

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We at Kamaaina Loan And Cash For Gold buy and sell gold every day. It matters to us whether the world gold market is up or down but we cannot do anything about that. Here is a Bloomberg News story that is very down on gold:

“There are no compelling reasons to be in gold,” said Brian Levitt, a New York-based economist at OppenheimerFunds Inc., which manages $251.4 billion. “There are no inflationary pressures. You have a central bank that’s going to tighten sooner than most of its trading partners. That to me portends a strong dollar and weaker gold prices.”

What that seems to mean is that if you are thinking you might sell gold anytime in the next little while, now is the time to do it.

Ditto for silver, which fell under $18 an ounce for the first time in a long while last week.

#mauigold #mauipawn #mauiloanIMG_3682