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Who do you trust?

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One cool thing about being in the pawn business is that we can (usually) make money on gold whether its price is up or down. That’s because we both buy and sell and depend on the commission for profit, not the fluctuation.

That is not the case with most individuals. Probably most buy gold as jewelry, so the variation in price doesn’t matter much to them anyway. But for those who buy gold as an investment, it certainly makes a difference when to hold ’em and when to fold ’em.

For example, right now the price of an ounce of gold is about $1,314. Goldman Sachs thinks the price will be down close to $1,000 by the end of next year; but there’s an alternative opinion. Bloomberg News describes the views of  Peter Schiff, a well-known gold bug. He thinks gold is going to $2,000, and soon.

So, take your pick, $1,000 or $2,000. The story quotes Ben Bernanke:

“Nobody really understands gold prices and I don’t pretend to really understand them either.”

Neither do we.

We will buy your gold or silver jewelry, coins, ingots, dust any time, for the daily New York spot, minus a small commission. Or we will sell you jewelry, coins or ingots (sorry, gold dust not usually in stock), for the New York spot plus a small commission.

We will beat any other written offer you can find on Maui, too.

A reliable form of Maui gold

A reliable form of Maui gold

 

Two colorful pawn shops

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These two pawn shops, one in Maine and one in Florida, make our little Maui pawn shop seem kind of — how to say? — drab?

Pawn shop in Maine

Pawn shop in Maine

 

The photo of the Florida shop does not show quite how colorful the shop is. Even the palm trees are painted green, yellow and blue.

 

Even if we wanted to paint our Wailuku pawn shop this way, we don’t have the wall space to do it.

Pawn shop in Florida

Pawn shop in Florida

We see this happen, too

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From  a summary of a new episode of “Hardcore Pawn,” set on a day when gold has taken a big drop (although the claim that it dropped 5% is bogus — that would be around $75 and gold doesn’t move that much in a day):

When a woman came into pawn her gold bracelet, she was told she could get $250. She had received $300 in the past for it and demanded the same. When she was told that the price of gold had dropped, she told the woman at the window that it was not her problem and wanted to see a manager. When Ashley came to confront her, she called her out to the parking lot, without Byron. Ashley handed her back her bracelet and told her to have a good day.

At our Maui pawn shop, we have a lot of customers who pawn the same item over and over. They know and we know what the loan value is, and writing up those loans goes really fast.

Maui is a tourist island, and plenty of workers in the visitor industry have busy and slow periods. They use pawn loans to smooth out their cash flow so they don’t get behind in  their bills.

Most of these regular customers are quite sophisticated about the value of their collateral. Unlike the lady in the “Hardcore Pawn” episode, they don’t get bent out of shape when they’re told they cannot get as much as usual.

On the other hand, sometimes when gold is rising, a Kamaaina Loan pawnbroker will be asked for, say, $100 and will check the New York gold price and say, “You know, you can get more for this now.”

Some take more, some say, “No, that’s all right. $100 is what I need.”

The really sophisticated ones recognize that some lendable items can lose a lot of their appeal overnight. This is true, for example, of video game systems. When the new Xbox or Playstation comes out, the old ones lose a lot of their value. Since the game system makers usually announce new versions well in advance, the value actually starts adjusting well before the new version is released.

What are they worth now?

What are they worth now?

Something similar happens with cellphones. They are very lendable, but every new version of the iPhone makes the old ones worth less. There have been so many versions of the iPod that it takes a maven to keep straight the market value of the various models and features.

Gold, silver and diamonds are less predictable. They aren’t coming out with a new version of gold.

Gold today is under $1,300 an ounce. It was over $1,300 a few days ago. No telling where it will be next week, particularly since the issue of the government shutdown is still unsettled as this is written.

 

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

 

We admire a fake

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Yesterday found us around the desk admiring a phony Mexican 50-peso gold coin.

A customer had offered to sell it, along with a fistful of pre-1964 US silver coins, which were genuine and which we did buy.

Mexican 50-peso golds, real or fake, are not rare, and we do not stop to admire them. But this fake was a beauty. It looked right. It felt right. It weighed the right amount. If it had been real, it would have been worth well over $1,000.

It would have fooled most people, which, of course, what somebody had designed it to do. But it did not fool the go/no go gauge, which is almost the court of last resort when it comes to checking coins. (The last resort is cutting into the coin for acid testing; which if the coin has — or is supposed to have — collector value you do not want to do.)

The run-of-the-mill fake gold coin is made by forming a mold from a genuine coin, then pouring in molten metal while the mold spins rapidly. This spreads the metal to the farthest reaches of the mold,  but it also leaves a gradient that is obvious at a glance to a trained eye.

It will fool most of the people most of the time, which is good enough most of the time.

This fake, however, was struck on a die, the way genuine coins are made. It takes a pretty hefty die to make coins, so the spin mold method is easier for counterfeiters. This one had a perfect “boardwalk,” the flat area next to the milled edge, which tilts in a spun coin. Every detail was crisp as only a die-struck coin can be.

However, however the die was made, it was not exactly the right size. (Getting the weight exactly right is difficult, too, but not impossible.)

It is very common, when we are brought counterfeit coins, to have them come in along with genuine ones. It is unlikely that the customer made his high-class coin; or than anybody on Maui is striking such good fakes. We cannot tell, but when someone brings in a fake, it is usually most likely that they are victims, not con artists.

It is not a pleasant part of the pawnshop business to tell a customer that he has presented you a phony coin. The implication is either, “You are a crook” or “You are gullible.”

In  the first instance, you don’t want his return business; but in the second, you do (at least if he brings in better goods next time). But who can tell?

The moral of this story is: Know who you are buying from. The fakes are getting better and better.

The next item of business yesterday was a “collection” of bottles, including some wine bottles that could have been brought the day before yesterday at the grocery store, with wine in them. Some of the older bottles were potentially collectible but chipped. The whole collection was valueless. At least to us.

The next item after that was in a way the exact opposite of the fake gold coin: a small jade necklace. It was real but also valueless. You can buy these trinkets from vendors at Waikiki for a dollar or two.

Sometimes it’s a relief when a customer brings in a fishing reel. Its gears may be worn out, and it may or may not be worth hundreds of dollars, but at least you don’t have to wonder if it’s “reel.”

The real McCoy

The real McCoy

 

 

 

 

More good press for pawn shops

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A ReutersMoney feature discovers (again) that well-to-do people use pawn shops for short-term loans. Pawnbrokers like to emphasize this, because so many people are convinced that all our customers are fences, derelicts and down-and-outers.

When Marc Kaye needed a loan to fund his boutique insurance firm at a time when payroll, his kids’ college tuition and a mortgage payment were all draining his cash reserves, he didn’t go to a bank.

Instead, he pulled a 1940s Picasso pencil drawing off his living room wall and made an appointment with Borro, a high-end pawnbroker. Borro did not require mounds of paperwork, did not care about his credit rating and did not put him through the third degree over how the money would be used.

“I needed some immediate cash,” says Kaye, who quickly got a six-month loan of $39,500, agreeing to a monthly interest rate of 3 percent plus about $175 in processing fees. “I had never pawned anything before.”

Nothing really new here. Even our little Maui pawn  shop has made a loan on a Picasso. It doesn’t happen every day, but it happens perhaps more often than you would think.

That’s the great thing about pawnbrokers. They are completely democratic.

Well, maybe not completely. Because some customers don’t want to be seen in a pawnshop, either because they are embarrassed or because they don’t want anyone to know money is tight, many brokers — including Beverly Loan Co., mentioned in the story and famous among Hollywood stars as a place to get a discreet hit of cash — have set up private transaction rooms, with secluded entrances.

At Beverly Loan Co., a brick-and-mortar pawn business outside Los Angeles that has catered to the wealthy for 75 years, business is also brisk, and small business customers are on the rise, says owner Jordan Tabach-Bank.

To meet demand for loans ranging from a few thousand dollars to $1 million, he opened a second office in the New York City’s International Gem Tower; it offers well-heeled customers secure storage for everything from GIA-certified diamonds to Patek Philippe watches.

Kamaaina Loan has a private transaction room, too. We go further. Call for an appointment, and if the deal sounds big enough, we’ll send a limo to pick you up.

In  reality, our private transaction room is used  at least as much for appraisals to help conservators settle estates as it is for pawn loans.  (Since the owner is a court-recognized appraiser.)

And not necessarily only for high-value deals. As Jimi, who has been working our pawn counter for longer than anybody except our owner, Big Rich, points out, sometimes a customer comes in with 50 items, all different, that he wants to borrow on (or sell).

That’s awkward to do on the counter, so usually that bargaining ends up in the private transaction room, where there is room to spread out. (Think about offering a collection or coins or stamps. It takes time and space to go through a big assortment.)diamond

Should you be interested in the private transaction room, call for an appointment, 242-5555.

 

Real secrets of reality TV pawn shows revealed

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One of the newer entries in the unending stream of pawn shows, Hardcore Pawn: Chicago, started out its latest program this way:

The first person on this episode wants to sell cemetery plots, and although they are worth the money, nobody wants to buy a plot at a pawn shop. Randy knows that being buried alongside his brother Wayne would surely be hell. No sale!

We have had customers offer burial plots at our Maui pawn shop, and we turned them down, but not because nobody shops for gravesites at a pawn shop — although that’s true enough.

No, the real reason is that pawn loans are made on portable collateral. That’s why Kamaaina Loan And Cash For Gold will give you money for your gold or silver coin but not for an equally valuable spot at the memorial gardens.

Now, the secret is revealed. Although it is not impossible that Hardcore Pawn: Chicago really was offered a chance at a plot, it’s much more likely that this little incident was dreamed up by screenwriters.

Get out! Do you mean to tell us that reality TV is scripted?

Yes. If you subscribe to iMDB Pro, you can read off the names of the scriptwriters. And not only for Hardcore Pawn: Chicago. For all of them.

 

 

 

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.

 

 

 

 

And soon, a daily pawn show in cable TV

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America’s thirst for pawn shops shows appears to be limitless. History, truTV and TLC already produce a variety of weekly shows. Now, CMT has announced a daily show, to be called “Win or Lose Pawn.”

A publicity photo shows a palm tree, but evidently this is not going to be Hawaii’s entry in the pawn TV derby. The show is being cast in Southern California, and Television Blend reports that its producers are looking for “two sorts of people: those who are looking to pawn an item and those who simply want to get an appraisal of a, hopefully big ticket, item.”

Sounds real. That’s what happens every day in Kamaaina Loan’s pawn shop.

“Win or Lose Pawn” is being birthed by a producer known for shows such as “Shark Tank.” Television Blend, however, is skeptical:

This show is coming at the wrong end of the pawn shop phase and I only see a long, hard road ahead.

Hey, here’s an idea, Hollywood. How about a pawn shop show that instead of being concocted and staged and produced, shows what really happens in a pawn shop. We think it would be interesting. You know, not reality, but real.

Warning: Fake US silver coins flood Canada

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According to the Hamilton (Ontario) Metroland news service, police have recovered “hundreds” of fake US Silver Eagles.

Although described as “silver dollars,” the fake coins — silver and nickel plate over brass — are also described as 10 ounces in weight. That would make them bullion pieces in a coin shape, since a silver dollar weighs 1 ounce.

The release (from police) says the suspects got the coins from online auction sites, before selling them to local shops. They targeted businesses that were either busy or short-staffed, so buyers would spend less time verifying the coins’ authenticity.

At today’s prices, a 10-ounce silver “coin” has more than $220 of silver in it. So 500 fakes means the scammers hit the Canadian pawn shops for somewhere in the neighborhood of $100,000 .

The story concludes with good advice:

Police say if someone is willing to sell a coin for less than its silver value, they’re most likely trying to pass off a fake. They also warn the public to buy coins and other precious metals through reputable dealers who take the proper steps to check authenticity.

The release did not say what online auction sites were moving these “high-quality fakes, professionally manufactured by an unknown source.” But Kamaaina Loan Blog had no trouble finding a site selling purported 1-oz Eagles for less than $19. Since that coin, if real, would have more than $22 in silver in it — and would retail, in 1-coin sales, for around $30 — we are suspicious.