The people’s bankers

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It has been 80 years since the Pecora hearings exposed how big banks work against the public interest. New Deal regulations limited some of the worst depredations and, most importantly, initiated the longest period in history without a financial panic.

Since 1980, the trend has been to regulate less and less, or not at all. In 2008 the country realized the benefits of that policy with a giant crash.

This week the Senate held a hearing on “regulatory capture,” which means the regulators get too cozy with the banks. The New York Times headlined:

New York Fed Chief Faces Withering Criticism at Senate Hearing

So that even what restraints on banks’ antisocial practices remain in law are nullified. One way that happens is through “revolving door” hiring of former regulators by banks they used to oversee, with expectable bad outcomes.

Pawn shops are regulated, too, but there is no revolving door between America’s 12,000 pawn shops and federal and state regulatory agencies.

Just sayin’.

Pawnbrokers are the people’s bankers.

#mauipawn #mauigold

Anti-scam for Internet sales

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Another insight from this year’s National Pawnbrokers Association convention. This one came during the roundtable on Police Confiscations, but the speaker did not identify himself, so I don’t know whose good advice this is.

When selling electronics, like a laptop, over the Internet, he said he puts an identifier somewhere hidden on the item. He uses Whiteout or a scratch tool.

He also photographs — not just writes down — the serial number.

That way, if a “buyer” has a broken laptop, then buys a good one from you, then “returns” the broken one for credit, you are in a strong position to defend yourself when Paypal or eBay starts a dispute.

burglar

This won’t protect you from someone sophisticated enough to swap the good memory module in your machine for the bad one in  his, then return a “broken” machine to you, but it will screen out the less akamai scamsters, and that’s most of them.

Good to know.

#mauipawn #mauiretail

 

Anti-scam for Internet sales

/in

Another insight from this year’s National Pawnbrokers Association convention. This one came during the roundtable on Police Confiscations, but the speaker did not identify himself, so I don’t know whose good advice this is.

When selling electronics, like a laptop, over the Internet, he said he puts an identifier somewhere hidden on the item. He uses Whiteout or a scratch tool.

He also photographs — not just writes down — the serial number.

That way, if a “buyer” has a broken laptop, then buys a good one from you, then “returns” the broken one for credit, you are in a strong position to defend yourself when Paypal or eBay starts a dispute.

burglar

This won’t protect you from someone sophisticated enough to swap the good memory module in your machine for the bad one in  his, then return a “broken” machine to you, but it will screen out the less akamai scamsters, and that’s most of them.

Good to know.

#mauipawn #mauiretail

 

 

 

Purse matching

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Jordan Tabach-Bank is one of the best pawnbrokers at getting media attention, so we are happy to piggyback on his skill by linking to a piece at Pawn Times about pawning Hermes bags.

Kamaaina Loan also takes high-end  bags for loans, and we are not quite as snooty as Tabach-Bank’s Beverly Pawn, which takes only Hermes, Chanel or Celine, and then only models that retail (new) for $5,000 and up.

Kamaaina Loan will lend money even on down-market stuff like Coach. And even if it retails for only a few hundred.

Here’s a tip that’s good for either pawn shop:

Handbags must be in excellent condition and be accompanied by provenance or proof of purchase, usually in the form of receipt from the original retailer.

Well, we don’t absolutely require an original receipt, but it helps seal the deal. So all you fashionistas out there, save your receipts. Because you never know when (or why) you might need to raise some fast cash.

We generally have a fancy  bag or two or three in our store at 42 N. Market. (Just checked: about a dozen items today.)

Do you know you can rent Hermes bags? Not from us, but it can be done.

 

Seedy maybe, but not dark

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Reporters who show no interest in the millions of ordinary working people who patronize the nation’s 13,000 pawnshops are endlessly fascinated by the small number of threadbare millionaires who — when down to their last Patek Philippe — do the same.

Few show much evidence of ever having visited a pawn shop themselves.

Kamaaina Loan -- neither dark nor seedy

Kamaaina Loan — neither dark nor seedy

Take, for example, a story that got nationwide exposure yesterday on National Public Radio.

Ashley Milne-Tyte — sounds rather posh, doesn’t she? — of the Planet Money team did a segment about a “new” (not really) sort of pawn shop that caters to the well-off. These shops are not, she said, “dark and seedy” like other pawnshops that deal with the “desperate.”

While traveling around the country, I stop in pawnshops of all sorts. Some are really gun shops that do a little loan business, others are really jewelry shops that take in a small amount of household goods. Others are primarily second-hand goods stores that will buy a gold ring or two.

Most are like Kamaaina Loan, full service lender/traders whose customers are primarily working people. They may need to even out their cash flow (especially if they work on a tourist island where many jobs are intermittent or subject to wide swings in income) but are hardly desperate.

Some pawn shops I have visited are definitely seedy. These tend to be on the outskirts of town, in areas of low-paid work, cheek by jowl with mobile home sales lots, dealers in not-too-new used cars, second-hand furniture stores and apartments and houses that have not been repainted since the Reagan administration. The people they deal with seldom acquire high-quality merchandise in the first place, and what they have to offer for a pawn loan will not impress the likes of Ashley Milne-Tyte.

But dark? Never dark.

#maui #maui gold

The risk the pawnbroker takes

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All lenders take a risk,  but pawnbrokers live with an unquantifiable risk that most other lenders do not have to worry about: the possibility that gold will crash.

We have written often about how our

Some of Kamaaina Loan's gold inventory.

Some of Kamaaina Loan’s gold inventory.

Maui pawn shop is at the mercy of the world gold market on the Kamaaina Loan blog. Today, the lesson is driven home in an example from England: Albemarle & Bond, a chain with 180 locations, was caught holding a lot of gold when the price started falling last year. Now it’s bankrupt.

Albemarle’s situation was partly of its own creation. According to earlier news reports, it chose to hold gold.

Kamaaina Loan’s situation is different in important respects. First, we are not a stock company. The stock market can act with  brutal swiftness when it perceives that a company has bet wrong. While gold is down about a third from its recent peak, Albemarle & Bond’s stock went down 97%.

Second, we do not hold a lot of gold. We have some in inventory as jewelry at our retail store at 96 N. Market St. And we have quite a lot  being held as collateral for loans at our pawn shop at 52 North Market Street.

State law requires us to hold pledges for 60 days. Right now (according to the historical charts at Kitco.com), gold we lent against 60 days ago is worth a little more than it was then: $1310 an ounce this morning compared with $1260 then.

Over the past six months, the net change in gold has been almost 0, although there have been many ups and downs in between.

We prefer that our customers redeem their gold pawns, as most do. First, a redeeming customer is probably a satisfied customer who might want to do another loan someday. Second, if we have to take over the collateral, there are overhead expenses, so even if gold has gone up a few  bucks, we might not cover our costs by selling. And if gold goes down over 60 days, we for sure cannot cover our expenses.

Over the long haul, the best way to play the world gold market is not to try to beat it but to go with the flow: Sell gold as it comes in and live with the ups and downs. As we understand it, that is not what Albemarle did. They held gold when they didn’t have to and got  burned.

Pawnbrokers in India, who are even more tied to gold than even American pawnbrokers, apparently are caught in the Albemarle trap, too.

It’s great when gold goes up. Everybody feels happy, and those who are holding “physical gold” as the speculators like to call it make windfall profits. If that sounds like the real estate business in the early 2000s, that’s because the situation is parallel.

Leverage works just as much in down markets as in up markets, though.

 

What are we waiting for?

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There was a bill in the Hawaii Legislature this year that would have mandated electronic reporting of pawnshop transactions to police. At present, it is optional. There were a number of questions ab out how it would work in practice and the bill was deferred.

Electronic reporting at Kamaaina Loan is more advanced than this

Electronic reporting at Kamaaina Loan is more advanced than this

Instead the Department of Commerce and Consumer Affairs will form a working group to report to the 2016 Legislature. So far, so good.

One of the issues is the “hold period” for purchased or pawned items. The rationale behind a hold is that it gives citizens or police a chance to check dealers to see if they have received stolen items.

(Yes, from time to time citizens come by with circulars describing items they have lost in  burglaries, usually readily identifiable jewelry. Not often, but sometimes, there’s a match.)

In Maui County, the hold period for licensed secondhand dealers, like Kamaaina Loan, is 15 days. For pawns, 60 days. In theory, most people dealing in buying and selling secondhand goods ought to be licensed, but we don’t think most are. Inspections are lax to nil, except pawnshops, which are more closely regulated.

In other Hawaii counties, hold periods vary within the 15- to 60-day framework. But on the Mainland it can get much more complicated. How complicated, you ask?

The Brockton, Massachusetts, area may hold the record. Each community sets it own standard, ranging from no hold at all, to 10, 14, 21, 30 or (in a proposal in one community) 60 days.

burglar

While the amateur burglars may not keep that straight, it seems likely that the professionals know which towns have the least regulation.

 

Pawn shops take over the Big Apple

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According to an article in Crain’s New York Business, there are now 493 pawnshops in New York, up by 50 percent (when you include secondhand dealers) since 2010. The big growth is in high-end pawnshops, which cater to the pawn-my-Picasso set.

Blogging for gold -- what we do at Kamaaina Loan blog

Blogging for gold — what we do at Kamaaina Loan blog

This from CNBC’s Robert Frank, who blogs about “Wealth.” He opines:

I could understand why the wealthy needed pawn shops in 2009 and 2010. But with stocks and other asset values so high, and with the wealth of the wealthy back to all-time highs, I’m having a hard time figuring out just who these cash-strapped “rich” are today.

Huh. He must not know many wealthy people. For every one who can plunk down cash for a McMansion, there’s another whose assets are tied up in lettered (temporarily unsalable) stock; stock options; real property; or otherwise something that they feel reluctant to liquidate.

Like gold. Gold has been rising for a few days (thank you again, Mr. Putin!), but it is still no higher than $1,356. While that is a pleasant $25 an ounce more than it was 30 days ago, it is an unpleasant $300 or $400 less than it was if you bought gold a year or two ago.

Lots of people (we surmise) who bought gold for the long term, and still expect that to pay off, would rationally be willing to pawn their gold to meet current obligations, rather than realizing their losses, and be able redeem it next month (or 2 months) and keep on keepin’ on with their long-term strategy.

Even people who bought gold last May when it dropped near $1,200 and would therefore show a profit if they sold today might still expect plenty of upside and be reluctant to sell out now and miss that.

The reputation of pawnshops as the resort of the desperate is not incorrect. In fact, our Maui pawn shop takes pride in being willing to help desperate people who no one else will deal with.  But most of Kamaaina Loan’s customers are not desperate.

Fingertips -- no good for paying your utility bill

Fingertips — no good for paying your utility bill

Typically, they are evening out cash flows. If you are a person who works for a fixed wage, life would be very different if you were in the visitor industry and saw your income yo-yo up and down with the seasons.

MECO bills tend to run around the same amount each month, and MECO wants to be paid each month, even if some months your tips or commissions drop to almost nothing.

 

Yes, we are regulated, duh

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It seems the Michigan State Police raided a “pawnshop,”  and now the “pawnshop’s” “customers” are

  wondering if they will ever be able to buy their items back.

Aside from the evident confusion of the Fox reporter — pawn customers do not “buy back” their collateral, they repay a loan and redeem it — this story does raise some questions. The “pawnshop” was (allegedly) operating without a permit. That means, we suppose, that the “customers” were without the protections that regulations provide for real “customers” of real “pawnshops.”

Just hanging out a sign doesn’t make you a pawnbroker, any more than  hanging out a shingle makes you a lawyer or a doctor.

The story does not say low long the “pawnshop” operated without a permit, or whether it had any sort of business license at all. In other words, was this a totally fly-by-night operation, or was it an example of a (more or less) legitimate business that crossed the line into pawnbroking unintentionally?

 

We have been around long enough for our guardfish to get huge

We have been around long enough for our guardfish to get huge

Generally speaking, you shouldn’t have to check the Business Registration division of the Department of Commerce and Consumer Affairs (in Hawaii, or whatever the equivalent is in Michigan) before doing business; although maybe that wouldn’t be such a bad idea. Our Maui pawn shop has  been in business at the same location for decades, so you can assume — and you would be correct — that it has its proper licenses and is supervised by (among others) the Maui Police Department.

A pop-up shop that hasn’t been around for long, all assumptions are chancy.

Before you pledge your wedding ring — we will assume here that it has both sentimental value and precious metal value, and the sentimental value might be higher than the gold value — maybe you should check DCCA for complaints. Just because a pawnshop has a license doesn’t mean it also has a good record of complying with the mandatedc hold perios (15 days on purchases, 60 days on pawns). We know of a local pawnshop (not ours) that has been sued — more than once — because a customer went back to redeem a pledge and discovered that it had been sent to the smelters.

Pawnshopsa are not the only businesses where people leave  valuable property and expect it will be there later when they want it — banks, escrow companies, stockbrokers, property managers  and storage companies come to mind in this respect. Think Bernie Madoff.

The adage, know who you are dealing with, applies across the board.

Look who’s pointing fingers

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An ad on my Facebook page alerted me to a film coming out this summer to be called “Spent: Looking for Change.” It is said to be about the 70,000,000 Americans who are “underserved” by the regular financial system.

Now, Kamaaina Loan blog has often considered the unbanked and underbanked. Pawnshops are prominent among the “alternative financial institutions” who do serve the unbanked. No credit? Bad credit? No problem, as long as you have an asset to pledge.

It is clear from the “Spent” trailer that the film — posing as a documentary but actually a long commercial — will be a hit job on, among others, pawn shops.

Are pawn loans expensive? Compared to what? If you can borrow a million dollars, you can probably get it for 4%. If you want to borrow $160 (an average pawn loan), you will pay 20% in Hawaii, less in some other states; although where the rates are lower, fees are usually allowed. In Hawaii fees are not allowed.

Let’s say you need that $160 to pay your electric bill. Borrow on pawn and it will cost you $32. Borrow from the utility — by waiting until next month — and you will probably pay even more than $32 in late fees, plus maybe get a bad mark against your credit.

We wouldn’t recommend anybody take out a pawn loan every month to pay electric bills; but once in a while, when the bills outstrip the household budget, it might be the cheapest, most prudent alternative.

Now let’s get down to the nitty-gritty. Who is paying for “Spent”?

American Express.

Yes, one of the giants of banking that is not serving those 70,000,000.

Why? According to ABC News:

“Spent” will premiere this summer and is sponsored by American Express. The company currently offers two alternative financial products for the financially underserved, in their “Serve” and “Bluebird” prepaid debit cards.

Not really an alternative for the typical pawn customer sketched above, who, if he cannot pay his electric dill also cannot buy any prepaid debit cards.