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.

 

 

 

 

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.

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.

 

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.

 

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.

 

Pawn 101: ‘Rogue’ gold buyers

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At the risk of sounding like a broken record (do young people even know what that means?), we are returning to the problem of dishonest gold buyers. Because the problem is not going away.

Here we link to an interview with a National Pawnbrokers Association vice president on the subject. Ric Blum makes a couple of points that Kamaaina Loan blog has not spent much time on:

First, “there are more businesses buying gold than just pawnshops. Almost every jewelry store in the country is now buying gold. Gold is being bought in flea markets, barber shops and auto repair facilities. Many are unlicensed and do not have the proper ‘legal for trade’ scales.”

Second, “Another popular scam is gold buying parties. These are usually ‘sponsored’ by a local person who is encouraged to invite all of their friends over to their house and bring their jewelry to sell to a ‘gold buyer.’ Besides not often paying a fair amount to the sellers, there are usually kickbacks being paid to the party sponsor.”

Blum says the problem is tough for law enforcement — especially if you are imprudent enough to mail your gold to somebody on the Internet. Even for local rogue buyers, enforcement is often low on the priority list for overstretched police departments.

You have to protect yourself.

Read the whole thing, but take this away: Do not mail off gold. Do check with several local buyers and compare offers.

We’d add: See us last. You’ll get the highest price that way.

Pawn 101: Fender’s Pawn Shop series

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Pawn shops don’t get a lot of respect — tell us about it! — but from time to time there are indications that some people appreciate what America’s pawn shops bring to the table.

Perhaps the most unusual nod comes from the Fender guitar company, which now has a “Pawn Shop Series” of new productions, described as  “guitars that never were but should have been,” and as homages to the more eccentric models the company introduced (in modest numbers) in the ’60s and ’70s.

Fender doesn’t come right out and say so, but apparently the company is acknowledging that sometimes the only place you really can get what you want is a pawn shop. You can’t always get what you want, but if you try sometimes, you just might find, you get what you need — in the pawn shop.

Somebody said that in the ’60s, we recall.

That headstock isn’t a mistake. It’s the Fender Pawn Shop Super Sonic

More ‘Pawn Stars’ soap opera

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According to Fox News, “Pawn Stars” dumped Oliva Black because she was formerly a model at the Suicide Girls nude website.

Apparently, she still works at the pawn shop.

We are pretty sure Big Rich has never modeled for Suicide Girls.

When we auditioned for a reality TV show for Kamaaina Loan, we asked the

staff to sign model releases, but nude modeling was not on our minds.

Pawn 101: Check under the hood

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Here’s a story that every pawn shop operator can give

personal testimony about.

A man brought us a book to see what it was worth.

It was volume 2 of a 2-volume edition of one of

Charles Darwin’s books. Ordinarily, volume 2 is

worth more than volume 1, because 2’s tend to get lost

more often. In this case, however, and on Maui, the

book was virtually worthless.

That’s because a complete set, in excellent condition,

can be had on the Internet for about $50. Given

shipping costs from Maui, and considering how

unlikely it would be to find a volume 1 here; and that

it’s a heavy book, it would cost more to marry volume 2

 up with a volume 1 on the Mainland than it’s worth.

However, while the owner was talking about where he

got the book, our assistant was flipping pages. “It’s

worth at least $20,” he told the owner.

Because someone had stuck a $20 Silver Certificate

between the pages.

At last August’s pawnbrokers’ convention, a Mainland

broker told about how a good customer whose husband

had died brought him a fancy hunting knife, hoping

she could get $300 to pay bills.

“I looked under the cotton in the knife box and there

were four one-hundred dollar bills.”