The ‘lumpy incomes’ of the rich

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the last egg

the last egg

A little late — and a lot more illiterate than the predecessors — Barron’s comes to note the arrival of Suttons & Robertsons pawn shop for the rich in Manhattan. Kamaaina Loan blog has already noted the incursion of the newcomer a month ago based on reports in the New York Times and other publications.

In some ways, the Barron’s report is better. It points out that while S&R can claim to have been in business for 250 years, it is really a new enterprise, having been taken over by a much younger, bigger firm with dreams of globalizing a local brand, sort of like what happened to Krispy Kreme donuts, although no doubt DFC Global hopes not to repeat that fiasco.

We like DFC chief Jeffrey Weiss’s characterization of his target customers as people with “lumpy incomes” and intend to steal that. Most of our customers are rather less rich than his but the conundrum of lumpy incomes is just as pressing. On Maui, with the visitor industry pulsing through peaks and bottoms and sides and saddles, lots of working people find  that — just like investment bankers waiting for the year-end bonus — the bills arrive before the money does.

Another interesting factoid — of no obvious relevance to us in Maui, though — is that while the uber-rich keep about 9.5% of their richness in tangible things (Aston-Martins, spare houses), that rises to 18% in places like the United Arab Emirates, Saudi Arabia and China. It helps to have a handkerchief full of jewels you can stuff in your pocket when fleeing the revolution.

Pawnbrokers and second-hand dealers made a good thing out of the Russian Revolution, as the exiled aristocrats unloaded their Faberge eggs, jewel-encrusted ikons and silver-gilt tea services in Paris, London and New York. A La Vieille Russie (To Old Russia) moved from Kiev to Paris about 1920 and opened a branch in New York in 1934.

It’s still there, across the street from the Plaza, and as late as about 1970, you could still buy the sweat of Russian serfs, once removed; although after three generations the plunder of the oppressed had finally been processed through the digestive organs of the capitalist snake, and the last time we were at A La Vieille Russie, it was reduced to selling reproductions of Georgian furniture and there wasn’t an ikon in the joint. (There are some rather pitiful-looking ikons, no jewels, in their online store at www.alvr.com; but the goose that laid the Faberge eggs is just about dead.)

The article is in Barron’s “Pentadaily,” which is described as “Insights and advice for families with assets of $5 million or more.” It’s a shame Pentadaily cannot afford any copy editors.

We are considering adopting a slogan for the Kamaaina Loan blog. Maybe:

“Insights and advice for families with assets of hard work, lots of children and an Hawaiian heirloom bracelet or two.”

 

Being ‘female friendly’

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We have been in pawn shops that do look kind of like a man cave, but we think this story in the Tampa Tribune overstates the novelty of Lauren Myhre’s “female friendly” She Money shop.

Most pawn shops, including our Maui pawn shop, have something like a 50-50 split of men and women customers, if not an absolute majority of women. After all, most pawn customers are working people, and women are in the work force in equal numbers with men.

Still, it couldn’t hurt to cater to half your audience, and Myhre has gone extra steps:

Like most any pawn shop, She Money takes gold, silver and diamond jewelry, but the store accepts high-end costume jewelry, too. Most women don’t have the tools and other items that are staples of the typical pawn shop, but Myhre saw the genuine value in other items they do possess.

“Women don’t always have jewelry to pawn or sell,” Myhre said. “I take a lot of crystal, such as Waterford or Tiffany crystal, as well as designer handbags and sunglasses, figurines, hand-carved wooden pieces, art, sterling silver, pieces of fine furniture, high-end lamps, musical instruments and even high-end cars.”

 

At Kamaaina Loan, we take most of those things, too, without specially considering ourselves “female friendly.”  Cars are an exception as Hawaii law restricts that, but our retail store has sun glasses, art, designer handbags. Not many lamps, perhaps.

A lot of what any pawn shop accepts as collateral (or will purchase) is unisex. Game systems are an obvious example. We probably get as many Xboxes and Playstations from women as from men, and, in fact, a lot from moms accompanied by their children.

 

Class acts

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A repeated theme here at Kamaaina Loan blog has been the turnaround in the attitude toward pawn shops in the press, probably due to reality teevee more than anything else.

Over the weekend, a kind of milestone in this process occurred when the New York Times published an admiring piece about pawn shops for rich East Siders, based on a 250-year0-old English pawn shop’s first branch in Manhattan. Not only that, although the story was in the “Wealth Matters” section, far inside the bulky newsprint version of the Sunday Times, for a brief time today, the story was on the front page of the Times’ internet edition, until it was pushed off by fresh Chris Christie scandals.

Their fancy East Side store

Their fancy East Side store

Now, as a pawn shop, we are happy to have the Times look upon pawn shops as public-spirited businesses, or at least as public-spirited as the big banks the paper writes about all the time. But we do have a couple of comments.

First, the Times is about a year late on this story. Reports about pawning by the rich have been common fare on such sites as CNN for a long time now. Second, the Times may have been late, but its reporting (by Paul Sullivan) was superior:

The high-end portion of the industry is betting that with comparatively lower pawn rates and an ability to fulfill even large loan requests in a day or two, it will be able to build its business on happy repeat customers. Paul Aitken, founder and chief executive of Borro, said he attributed repeat business to the human desire to spend today without thinking about tomorrow.

“Entrepreneurial people like to do things on the spur of the moment, and they’re probably not the best planners,” he said. “When they have money in their pocket, they like to buy luxury goods. When they don’t, they like to use those goods to get money for their next venture.”

And that is how he ends up taking a Mercedes McLaren in as collateral for a loan.

That’s an aspect — we are not necessarilu endorsing it — we haven’t seen in numerous other stories about high-end pawn.

Third, high-end pawn is not, as Sullivan’s story implies, something that arose when banks tightened credit following the Panic of 2008. It’s been part of the business all along. It has probably extended its catchment area since 2008.

Our Wailuku pawn shop. We have a fish.

Our Wailuku pawn shop. We have a fish.

Fourth, while our pawn shop at 96 N. Market St. is not as flossy as Suttons & Robertsons Upper East Side shop, our Private Viewing Room is just as swank as S&R’s, what with its Chinese antiques and paneling. And — something S&R does not seem to have — its private entrance, for those rich borrowers who don’t want the neighbors to know they are pawning the McLaren. (Actually, in Hawaii law pawn shops cannot make loans on McLarens, but you get the concept.)

private

Fifth, the bottom line is, as always with pawn loans, would you rather be turned down by a banker or accepted by a pawn broker. Because pawn brokers lend on collateral, and the extra scrutiny that has scared bankers into holding onto their money means nothing to us. Gold is gold, a diamond is a diamond, a Rolex is a Rolex, whether the stock market is booming or crashing.

Pawn 101: Pawn shop scammed

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Is that real gold?

Is that real gold?

Here’s an odd little story — in its entirety — from the Bradenton Herald:

MANATEE — A Manatee County pawn shop has been ripped off by a jewelry fraud artist.

Officials with America’s Super Pawn, 5612 15th St. E., say they paid out $550 for what they thought was a 10-karat gold chain with charms, but which turned out to be worthless metal, according to a Manatee County Sheriff’s Office report.

The transaction occurred on Oct. 1, but the pawn shop manager was just notified Tuesday by the company’s jewelry analysis expert that the gold chain was fake and of no value, the report states.

The pawn shop manager notified the sheriff’s office.

It is believed the subject who sold the necklace has sold other fake jewelry to pawn shops throughout Manatee and Sarasota, the report adds.

Odd because at our Maui pawn shop, we test all gold coming in. It is possible to fool the tester, but the touchstone is seldom fooled by something like a chain. Didn’t Manatee Pawn Shop test?
Maybe it was busy and they were in a rush. So if you ever have to wait a minute or two during the Christmas rush because the customer ahead of you in line is having her chain tested, that’s why. Always test.
Odder yet is the hint that the same scamster has hit other shops. Don’t any of the shops test? We know some Florida pawnbrokers, and we are sure almost all of them do test.
Has somebody in south Florida gone to the trouble of making some trick chains that defeat the touchstone? It could be done, but it would be a lot of work, both to manufacture the fake chains and then to pass them out in $500 lots all over a county.
Read more here: http://www.bradenton.com/2013/12/10/4881419/manatee-pawn-shop-ripped-off-by.html#storylink=cpy

One place pawnshops get respect

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Pawnbrokers — including Kamaaina Loan blog — often lament that the image of pawnshops with the public is generally low. But there’s one place where we rank high. In fact, as far as we know, the highly-regarded Fender company is the only business that uses “pawnshop” as part of its branding.

Fender has just announced an addition to its fairly new Pawn Shop Special series, a small amp called the Ramparte that

looks the part of the perfect pawnshop prize.

Who knows how many now-famous musicians would never have been heard of if they hadn’t scored cheap used amps and guitars and mixing boards from a pawn shop when they were starting out poor, hungry and working gigs for free? Many, we think.

Tools 086

Maui, whose tourist business supports a high concentration of talented players, is awash with quality instruments (and some of middling goodness), and there are always a few in our retail store at 98 North Market Street.

There are even more in the warehouse, but most of those you’ll never see in the store. They go back to the owners, who have pawned them. Not because they needed money but because they are off on a tour or for a recording date — as the pros so often are — and the akamai ones have figured out that it’s a whole lot cheaper and safer to pawn their instruments with us than to put them in storage.

Our bonded and insured warehouse is climate-c0ntrolled.

The musicians may have come on this cool trick on their own, or they may have learned it from Jerry Clower’s Uncle Versie Ledbetter.

Luxury asset lending

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One thing Kamaaina Loan blog hasn’t covered much is how pawnbrokers do business with small businesses.  Usually, the actual transaction is with an individual, as with the vast majority of pawn loans, but “luxury asset lending” differs because it is a loan for much more money than a typical pawn loan, and it is taken out to tide an operating business over a financial hump — like making a payroll, which is much different from asking for a few hundred dollars to cover an emergency car repair.

Our comfortable Private Transaction Room

Our comfortable Private Transaction Room

This sort of loan has been a part of the pawnbroking business right along, but only with the increased attention paid to pawn (thanks to cable TV) has it acquired a name — personal asset lending, luxury asset lending or collateral-based lending.

None of the terms is especially well chosen, but that’s what the financial press has decided to go with.

Collateral-based lending, also called personal asset, luxury asset lending, is small but fast-growing, part of the shadow-lending sector that has emerged since traditional credit dissipated after the financial crisis.

The Wall Street Journal estimates it could soon grow to a multibillion-dollar segment, which sounds big but would be trivial compared to the big sources of short-term business money, like commercial paper.

Here’s a typical example of how it works: Let’s say a small general contractor has to make payroll but, for some reason, a progress payment on a project hasn’t come in on time. He needs several thousand or maybe a few tens of thousands of dollars, and he needs it fast.

Banks and other lenders cannot react that fast. Credit cards might work  but only if the borrower has a lot left on his credit lines.

Who can give a businessman $25,000 in cash in 15 minutes? A pawnbroker can. If the businessman has a gold Rolex, or something similar. A safe deposit box of gold coins will do. Even a stamp collection, although it would likely take more than 15 minutes to value that.

Now, let’s say our general contractor also does not want to be seen handing his Rolex across the pawn counter. People might talk. At Kamaaina Loan, we have him covered.

Call 242-5555, explain you want to do a “luxury asset loan” and we’ll open our Private Transaction Room, which is accessed via a private entrance well away from the pawn entrance. We’ll even send a limousine to bring you and your Rolex (diamond tennis bracelet, Krugerrands etc.) to us.

 

“Small business owners are not willing to extend themselves further into debt without more assurances of an economic recovery and stability,” says Paul Aitken, CEO of personal asset-based lender Borro Inc., in a press release, noting that small business borrowing has continued to decline. “The macroeconomic picture shows indications that the recovery should be on its way, but small business owners don’t share that same sentiment. “The consequence of accumulating too much debt has become more than people are willing to accept,” he adds. “Personal asset lending continues to be a favorable option as it avoids the potential pitfall of damaging credit scores.”

As with all pawn loans, we don’t care what your credit score is. Your Rolex is good enough for us.

 

 

Why did gold swoon?

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Don’t get your hopes up. By the end of this post, we will not be able to tell you. But watching gold take a $40 swan dive the morning the government shut down raises plenty of questions.

Here at Kamaaina Loan, gold transactions make up over half our business, so we are intensely interested in price movements. But we have no influence. We buy and sell based on each day’s spot price in New York.

Also, we make no predictions about which direction the price will go. All we know is that it will go up, or down, or (rarely) stay the same. Recently, gold has been steadily dropping. After briefly hitting a record$1,900, it is now selling in below $1,300.

Last week, Goldman Sachs and other big operators predicted that during 2014, the price would average in the $1,200s. This seems bizarre. The Federal Reserve is printing money at the rate of $85 billion  a month, which is supposed to make money worth less, compared to gold.

And you’d have thought that shutting down government would be bad for stocks and dollars and good for gold. Wrong.

The stock market held steady and gold made one of its biggest one-day moves all year — a move down.

Bloomberg News reported that big players were betting that the shutdown would not last long, thus shortcircuiting any flight to precious metals, which is a usual response in troubled times. Go figure. One analyst told Bloomberg:

“While the standoff is not a great thing, the effects seem to be limited, and we are not seeing investors rush to gold for its safe-haven quality,” Frank Lesh, a trader at FuturePath Trading in Chicago, said in a telephone interview. “Riskier assets like equities seem to be in favor.”

However, Bloomberg also found an analyst, Ron William, who thinks gold will hit $2,000 next year, which would be a record.

Whatever, we stand ready to buy, sell or lend on gold every day.

A reliable kind of gold

A reliable kind of gold

 

Bye-bye Blackie

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The piece below about Blackie Gadarian ran in The Maui News. There was much more of Blackie that could have been said. He was, for example, one of very few people who owned a recreational tugboat:

In a world of pussyfooters, Blackie Gadarian walked in hobnailed boots. They were disguised as black Keds, part of his invariable costume of orange shirt and black trousers.

Blackie said what he thought, whether the subject was cheapskates, jazz music, traffic, ignorant tourists or the value of a college education.

Not that Blackie downplayed education or college; he was a well-traveled, well-read read man. But he considered, and proved in his own long life, that you could do very well without going to college. Each year, he and his wife Sara presented $500 grants to Lahainaluna School graduates who were not going to college.

Blackie was, among other things, a machinist. He made rolling stock for the Lahaina, Kaanapali & Pacific Railroad, and custom brasswork for the Hyatt Regency. The later, larger and grander Grand Hyatt used off-the-shelf brass, which Blackie deemed a comedown.

If you only know Blackie for his frequent, short, funny letters to the editor of The Maui News, you missed the essence of the man. He loved to talk, and lots of people — I among them — enjoyed listening.

You heard the most surprising things. At the invasion of Tarawa in 1943, a torpedo sank the small aircraft carrier Liscombe Bay, killing 600 Americans in a matter of minutes. Once Blackie mentioned he had been aboard a similar carrier just a short distance away. He never said anything else to me about his Navy service.

Late in life, after he closed his bar, Blackie’s Boatyard, and his machine shop, he wanted a place to work, so he bought a lot on Luakini Street and built a place with a pool table and workshop. A neighbor came over and pointed to a tree on the lot. As Blackie told it, “He told me a Hawaiian family had lived there in the old days, and they drank and they threw their empty bottles under the tree. ‘If you dig there, you’ll find plenty of collectible bottles.’ So I immediately had four inches of concrete poured around that tree. I don’t want anybody digging up any damn bones.”

Blackie was famous for throwing customers out of the boatyard. He told me he once threw out a young couple who tried to order one hot dog between them. He considered that unacceptably cheap.

Some people disliked such displays, but when an African-American woman he had ejected filed a discrimination suit, Blackie testified under oath that he threw people out without regard to race, creed, color or national origin, claiming a personal best of 23 in one day. He was acquitted of racial prejudice.

The Boatyard was filled with Blackie’s gags. He probably was most proud of the whale egg, which was about two and a half feet long and resided in a glass case with a placard that explained that Maui’s humpbacks laid their eggs in crevices at the bottom of the Alenuihaha Channel. Blackie claimed that many tourists believed it, and I believed him.

Blackie called me a few months ago to say he was working on his memoirs. I said I would be the first to want to read them, but I guess that pleasure will have to be foregone. The one and only Blackie Gadarian died July 21 after a short illness and a long life filled with fun.

Right turn on hospitals

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In reports Wednesday and Thursday in The Maui News, Gov. Abercrombie says he understands that Hawaii Health Systems Corp.’s financial stability needs to be addressed. Hurrah. It remains to be seen whether the Oahu-centric Legislature understands this yet.

It was obvious from the start that HHSC was the wrong way to deal with the fact that small, rural hospitals can never cover expenses. And when rural people start demanding urban services (like emergency rooms), the shortfall just gets more impossible.

Hawaii is an island state. Inevitably, some places are going to be distant in time and space from urban services. When that service is health care, it is reasonable to expect government to level the situation somewhat by subsidizing rural care. The question is, how?

The answer, in 1996, was to loot the operating profit of Maui Memorial Medical Center, the only one of 12 outside-Honolulu facilities to run in the black, to fund the other 11. This ensured that the 11 would be on starvation rations, while MMMC would be constrained in its development. It was a stupid idea, but appealing to the Oahu legislators because by not making demands on the funds th4y wanted for their local schemes.

The governor said he is open to public-private partnerships as part of the restructuring of the outlying hospital systems. No doubt the Oahu legislators will go for any version of this that does not touch the funds they want for their pet projects. Neighbor Islanders must be on guard against this poison pill.

Because if almost everything in health care delivery is debatable, one is not: No private medical center will cover mental health. Not one.

That’s what Mauians were asked to give up when Ron Kwon and Jan Shields attempted to do in MMHC in favor of a private Kihei hospital. They promised better, cheaper service, but what they meant was NO MENTAL HEALTH CARE.

 

 

 

 

Thoughts about buying gold now

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Is now a good time to buy gold? Maybe.

The price is the lowest it’s been in about three years. Which does not mean it couldn’t go lower still. But if you think gold is near a bottom and you want to accumulate, here are some things to consider.

Trust, trust, trust.

Somewhere in China, clever guys are busy counterfeiting gold coins, bars and nuggets. We see it all the time.

Want to hear a horror story? About a year ago, a customer brought us a “native nugget” (that is, as found in nature) of what looked like gold from a well-known deposit in China. (All gold is yellow, but this gold, probably because of the other minerals combined with it, is noticeably paler than most.)

Gold was selling high at the time, and the nuggest weighed close to a pound: If genuine, we would have offered about $26,000 for it.

But first we tested. At our Maui pawn shop, we always test (and, yes, once in a while, even with our experience we miss a fake). And when the “nugget” was sawed in two, it proved to be lead.

We don’t know where the guy got his nugget. Probably he wasn’t a counterfeiter. Just some poor schmoo who bought his “nugget” from somebody he could no longer get back to. Maybe, who knows, from an address in Internetland.

Even “slabbed” coins and bars, with serial numbers, are showing up fakes these days. And the fakers are getting better and better.

So, first, know and trust your vendor.

That means, among other things, avoid those “pop up” gold buyers that appeared everywhere — including kiosks at shopping centers and hotel meeting rooms — when gold was high.

Funny thing. It’s getting easier and easier to avoid those guys, because a lot of them have already disappeared. Several have closed on Maui in the past couple of months. One was a “chain” that had outlets on several islands.

Until one morning, it didn’t.

If you bought a “gold eagle” from those guys and you are dissatisfied now, lots of luck trying to do anything about it.

If you don’t like what you buy from Kamaaina Loan And Cash For Gold, bring it back. We were here 37 years ago, we’re here now, and we’ll be here tomorrow.

Other things to think about, if you are going to hold gold:

1. Put it in a bank safe deposit box. The annual rent is cheap insurance compared to just about any other place you could keep it.

2. Keep your records. There are plenty of legit places that will happily buy your gold. Our Maui pawn shop is one of thousands of reputable pawn shops that belong to the National Pawnbrokers Association. There are other reputable buyers, too.

Unfortunately, there are also too many shady ones.

3. If you are buying $50,000 worth of gold, or more, in a calendar year from one agent, that agent is supposed to file a report to FinCen (the government anti-money laundering agency). We will.

4. If you are converting cash to gold, a FinCen report is required for any purchases of $10,000 in a day. “Structuring,” or dividing up deals to avoid having to report is not allowed.

5. If you are selling gold (as jewelry, coins or bars), in Hawaii (and many other jurisdictions) the buyer is required by law to file your ID. In Hawaii, that means a government-issued picture ID (usually a driver’s license), and, at our Maui pawn shop, a thumbprint, and a physical address (P.O. Box won’t do). If the business you are dealing with does not ask for your ID, they are flouting the law, and that should make you suspicious about everything else, including the accuracy of their scales.

We have checked and found any number of pop-up gold dealers on Maui who do not follow this law, but it isn’t something that gets prosecuted. Be smart on your own behalf.

The same cautions apply to silver coins and bars as well. You might suppose that counterfeiters wouldn’t bother with silver, which is worth so much less than gold. And that’s true — up to a point.