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Why they pawn — playing the long iron game

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As we often say here at Kamaaina Loan blog, unlike at the bank, you don’t have to tell us why you want to borrow money. It’s don’t ask, don’t tell at the pawnbroker.

You could call it a sad iron

You could call it a sad iron

But sometimes we wonder, all the same.

From Bangkok, an unusual example of how a customer uses a pawnshop:

It seems he pawned an iron — Lovestar brand — 15 years ago and has been paying interest on it regularly ever since. Since he’s not rolling over the interest, it isn’t a case of owing much more than the iron is worth.

According to the Bangkok Post, pawn shop employee Nattarak Peekklang thinks, “The customer may think that his iron is better kept inside the shop’s safe than at his home.”

Maybe. But he isn’t taking the iron out to use it from time to time then returning it to “storage.” He isn’t even using his iron the way David Copperfield’s old nurse, Peggotty, did in Dickens’ novel, pawning hers for sixpence each Friday and redeeming it each Monday because she never can keep to a budget.

But Mr. Nattrarak follows the international Code of the Pawnbroker:

 

I never ask him why he doesn’t pay it all off at once

 


#maui #mauipawn #mauiloan

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

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.

 

Pawning and banking in China

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On the same day that The Maui News reported that China opened bidding for the first five private banks in the country, online news source Quartz reported on the  boom in pawn shops there.

China is considered the birthplace of the pawn business, maybe 3,000 years ago, but the Communists suppressed pawnbrokers and today there are only about 7,000 pawnshops, half as many as in the United States.

Do I look like a teddy bear?

Do I look like a teddy bear?

But as Quartz reporter Nona Tepper explains, an American pawn shop is about as different from a Chinese pawn shop as a teddy bear from a panda bear.

While our Maui pawn shop, like most of the 13,000 others in the Unitd States, deals in gold chains and TVs and lends a couple hundred dollars or less to most customers, in China pawnshops deal in astronomically priced apartments and serve to finance business. That’s because China’s state-run banking sector is famously dysfunctional.

At Huaxia, apartments are the most commonly pawned item, luxury vehicles the second, and jade, expensive stones and watches make a close third. Compared to America, where individuals pawning jewelry and electronics worth about $150 are brokers’ most common customers, Huaxia looks more like a luxury department store gleaming with Cartier and rare jade statues.

Huaxiz upscale Peking pawn shop (from Quartz news story)

Huaxia upscale Peking pawn shop
(from Quartz news story)

Tepper then goes into some commentary on China’s “shadow banking” business. In the absence of established markets for commercial paper or most of the other numerous sources of business capital in the western world, especially short-term capital, businesses raise money on personal assets – largely residential real estate that is widely viewed (from outside China, anyway) as a bubble.

Should the long-expected crash in apartments come, the effects on China’s businesses would likely be disastrous.

American small business owners occasionally pawn Rolexes to meet a payroll, but this is not a way of life like it has become for China’s small (and not so small) businesses.

“There’s certain risks in regards to the shadow banking industry,” said Ismael Pili, head of financial analytics Asia at Macquarie Group. “1) It’s not well regulated, 2) There’s still opacity with regards to what’s going on and 3) It’s become a sizable portion of the economy.”

So the spirit of unregulated borrowing and lending continues. Today, shadow lending is the fastest-growing part of China’s financial sector, and JP Morgan Chase estimated that it accounted for 69% of China’s GDP—or 36 trillion yuan ($5.9 trillion)—in 2012.

Pawn shop treasure: Peace out

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In a sense, this is old news, but a Nobel Peace Prize discovered in a pawn shop is headed for auction in, of all places, Baltimore.

Identified as the Peace Prize, this medal is actually a Pulitzer Prize

Identified as the Peace Prize, this medal is actually a Pulitzer Prize

Old news, because the pawn shop discovery was made 20 years ago, when an alert collector recognized the hefty medal (nearly half a pound of 23-karat gold) in a pawn shop in some unspecified place. Presumably Argentina, where the medal was awarded to the foreign minister for helping to bring to a conclusion the Chaco War, a war fought over what turned out to be no oil.

You never can tell what will come into your pawn shop. From the story, it appears the pawnbroker may not have known it was a Peace Prize medal but knew enough not to melt it for the gold. At today’s prices (way up by the way, thank you Vladimir Putin), the metal is worth around $10,000.

As a collector’s item, the presale estimate is $50,000. That’s why at Kamaaina Loan, we say we will give you the highest amount based on either the metal weight, the artistic value or the collectible value.

Gold taking a breather?

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We have been fascinated by the steady rise in the world price of gold, because we listened to the smart money (at Goldman Sachs etc.) that was predicting a fall in 2014.

Well, today, gold pulled back a little, but according to Kitco news, only because some holders were cashing in their profits from a 4-month-long rally:

Gold prices ended the U.S. day session moderately lower Wednesday, pressured on profit taking and chart consolidation following recent gains that saw prices hit a four-month high overnight.

#maui #mauigold #mauiretail

Gold offered for sale on Maui

Gold offered for sale on Maui

Hey, wassup? Silver and gold. that’s what

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It’s kinda puzzling. The Dow is up sharply, which usually has a depressing effect on metals. But gold is up, too. It was  briefly over $1,337 an ounce today. Silver, too. It got over $22 for the first time in a long while before slipping all the way down to $21.99.

Nowhere near the $1800 and $38 of a couple years ago,  but the trend is up not down.

Not only do we at our Maui pawn shop not pretend to understand what moves gold and silver prices, we find stock prices puzzling, too. Especially stocks in pawnshops.

Most of America’s 12,000 or so pawn shops are quite small, but there are a few  big chains.  Big  being relative compared to banks. Even local banks often have assets over a billion dollars. Pawn chains are not that size.

One of the ” big” ones is EZ Pawn, which reported an 8% gain in same-store sales over the holidays. The stock bounced up by 27%. How very nice for them, but hard to understand since “The company’s profit and sales actually fell during the quarter, by 27% and 1%, respectively.”

Profit down 27%, stock up 27%. It must make sense to somebody.

Bring us your old surfboard. We know how to value that.

 

 

What in the world is gold doing?

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First, our regular disclaimer whenever we blog about gold and silver prices: We have no idea what the trends will be. At our Maui pawn shop, we buy and sell metal every day but we are completely at the mercy of the world price.

Each day, when we open the computer to see where gold went, it is a surprise.

That said, we read the opinions of those who do claim to be trendspotters with interest. Late last year, the smart guys on Wall Street were pretty much agreed that gold would drop during 2014, probably to a price near $1,200 an ounce.

For a while, they looked like soothsayers. On Dec. 30, the price dropped below $1,200 for the first time in a long time.

So what did the world say to the smart guys? So far, it’s been a big Bronx cheer. Gold is up well over 10% even after taking a bit of a dip today.

Of course, most of 2014 is yet to come and maybe gold will start dropping in a big way.  There’s a scary report from the International Monetary Fund (summarized at Bloomberg News) warning about deflation, especially in Europe and emerging markets.

Deflation is generally bad for gold, as when you make fiat money (dollars, money that is money because the government says it is and everybody agrees to go along) more valuable, metal becomes less valuable. In fact, deflation is generally bad for everybody because it becomes harder for everybody to pay their bills.

Very low inflation, “if below target for an extended period, could de-anchor longer-term inflation expectations,” the IMF economists wrote. It “also complicates the task in the periphery where the real burden of both public and private debt would rise as real interest rates increased,” they said.

Translated, this gobbledegook means that inflation, which is good, or, at least, essential to a modern economy, has been tamed all too well and if luck is not with us, we could experience another crisis like we had in 2009.

Of course, some people think the IMF has been prescribing bad medicine since, oh, forever; and it would be a good thing to ignore those guys.

 

 

Bad press for pawn

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So, at Kamaaina Loan blog, we are quick to pass on just  about any news item that untarnishes (is that a word?) the widespread image of pawn shops as sleazy, predatory businesses. Fair’s fair.

Sometimes the old image crops up Paul Bunyan-size, as it just did in Flint, Michigan, where a pawn shop planning to deal in auto titles was denied a special use permit. (Pawning cars is not allowed in Hawaii; laws vary across the nation.)

liberty bell

 

The decision by the Flint Planning Commission was unconstitutional, a point we will expand on later, but first let’s look at some of the objections to the Cash for Keys pawn shop.

A preacher said,

“I’m against pawnbrokers and pawn shops,” said the Rev. Allen Gilbert. “I want to know: Who are they? Where did they come from? Is there anything in their background (that would be) a major concern?”

A citizen said:

South Flint resident Barbara Griffith Wilson said the proposed Cash for Keys Pawnbrokers would be another business that doesn’t help the neighborhood its in.
“We have an overflow of pawn shops and (gentlemen’s clubs),” Griffth Wilson said. “We should take a real microscopic look” at this business.
And while the comments on the All Michigan news site cannot have influenced the commission, they were as negative as could be:
They are businesses that the majority of their customer base is convicted felons. You’ve got to be a little shady to run one.
and

Pawn shops encourage criminal activity and cater to the desperate. It’d be nice to see them go. Most use them as a way to get quick cash after ripping someone off.

We need not go into the inconvenient facts, except to say that most pawn shop customers are not convicted felons. But quite likely some members of the commission think so, too.
Should the applicant have the resources to challenge the decision, she’ll win. Although we have not seen the contents of the decision and order of the commission, most of the testimony as reported by All Michigan was not germane. So what if the area has a lot of strip clubs? A pawn shop is not a strip club.
More to the point, there has to be a rational nexus between the action of any government body and the facts on the ground. Vague suspicions like those held by Rev. Gilbert don’t meet the test. Unless the applicant has a criminal record, character doesn’ count either.
Some places deny pawn licenses to convicted felons but most don’t. Even if an applicant was an ax murderer, the conviction might not rise to the level needed. If, however, she had been convicted to auto theft, that could be a rational reason to at least question her qualifications.
But, since she had operated a used car lot on the same site until recently, it seems unlikely she was boosting hot cars.
And there lies the real rational nexus. The application proposed to replace a used car operation with another used car operation. The financing of the deals would change, but not the use.
Pretty generally, equal protection of the laws don’t allow governments to discriminate on that basis. You cannot allow a Ford dealer on a lot but disallow a Toyota dealer because (for example), Toyota is a foreign company.
So it looks like we have an out-of-control planning commission in Flint. One wonders what the corporation counsel was doing. Nothing would be our guess.

To catch a thief — or several

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We have surveillance cameras at our Maui pawn shop, but we DO NOT do what Portland pawnbroker Mike Fink does:

Fink, who owns Guitar Grave, has been posting YouTube videos of customers who are trying to sell stolen items or have stolen from him.

Read more: http://www.wmtw.com/news/pawn-shop-owners-videos-help-police-fight-crime/24353626#ixzz2t8hddQU8

He does more than that. He posts videos from his shop about anything that strikes him as funny, and he is a humorous man. Some are what you might expect — stoners; but others are just Portlandians who seem to hear a different, more uncertain trumpet. You can watch a bunch of them by going here.

Portland Press-Herald photo

Portland Press-Herald photo

Fink also marries people. This is not that unusual. A number of pawnshops (but not Kamaaina Loan) will tie your knot. We have not watched all his  videos yet,  but our favorite so far is “A Very Guitar Grave Wedding.” The bride, Nikki Rae, who seems to be having a very good time, says, a few minutes after Fink ties the knot, “I want to be on top.”

For some reason a local radio reporter walked in during the ceremony and recorded it. It must have made for curious radio. He ended up being the witness for the marriage, too.

Guitar Grave is not the most obvious name for a pawnshop, but there’s a story behind that, too.

Fink says he started out selling games and was looking for a name. Marketing advice said to find something alliterative, so he started searching the database of available names for Game G-something.

Among the choices was Grave, and he picked that because it was the only one that his son, who was then 7, could spell.

Later, an employee persuaded him to expand into collectible guitars, and Guitar Grave was born.

Really, Kamaaina Loan (Hawaiian for “child of the land,” meaning native-born or, loosely, old-timer) seems pallid by comparison.  And nobody but a kamaaina can spell it.