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Pretty packaging

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Some people will go to quite a bit of trouble to steal a measly $7,446.

Like the guy who made up 866 fake one-ounce silver bars and encased them in plastic.

Then, according to the Delco Times, he took them to a pawn shop outside Philadelphia, which incautiously accepted them as real without breaking open the plastic to test.

Not right away, anyhow:

“(Pawnbroker) Oblon told police he has purchased one-ounce silver bars from other customers in the same way in the past. . . .

Oblon became suspicious and broke open several randomly selected bars and tested them. The test showed the bars were not real silver, police said.

The story does not say what the fakes were made of. It is possible that even non-destructive testing could have detected them, although that would require breaking open the cases.

The Delco Times story does not say, but presumably the seller left his ID and address etc. with the buyer, which is required in many jurisdictions. At any rate, the pawnbroker knew where to find him in New Jersey.

It was a bad deal all around. The $7,446 paid for the fakes was only half what 866 ounces of real silver are worth among big dealers. Small dealers like coin shops and pawnbrokers buy at a discount, but a 50% discount is steep.

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

Gold gets interesting

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As readers know, the daily and weekly gyrations in the price of gold (and silver) don’t concern our Maui pawn shop too much. We make our money off commissions, so when gold goes up $25 or down $30, it doesn’t affect us that much.

Where will it go?

Where will it go?

 

But when gold gets near a top or a bottom, then we start paying attention. Today, the Dow-Jones average topped 16,000 for the first time and the S&P topped 1,800 for the first time. As often happens when stocks are up, gold is down, by $17 to about $1,273. That’s near the lowest for the 21st century.

Will it go lower? We have no idea. But here’s a good roundup of differing views from Bloomberg News. Some of the big noises in the Republican Party, like Rep. Paul Ryan, are gold bugs and, the story says, trying to get the Federal Reserve to tie the valuation of the dollar to the commodity price of gold.

Not everybody thinks that is a good idea:

“It’s a stupid idea,” Joseph Gagnon, a former Fed economist, said in an interview. “It’s pretty clear the Fed thinks so, too, since they do the opposite. They go out of their way to exclude commodities.”

It looked different, at least to vice presidential candidate Ryan, in 2010. His prophecy didn’t turn out too well:

To Representative Paul Ryan of Wisconsin, record gold prices in 2010 heralded “a lower standard of living for many Americans.” Representative Ted Poe of Texas foresaw “a blast of inflation that will crush the middle class” adding: “Where gold prices go, other prices follow.” Fellow Texas Representative Ron Paul, a perennial critic of the Federal Reserve, warned that “confidence is being lost in the entire fiat monetary system,” a reference to money created by central banks.

But the price of gold didn’t keep going up, up, up. Instead, it has dropped by a third.

The gold bugs may yet turn out to be right, but not so far.

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.