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alstry (< 20)

Plan B.....Pawning in the New Year



January 01, 2009 – Comments (8)

From the WSJ:

PHILADELPHIA -- At Society Hill Loan, a pawnshop in a middle-class neighborhood here, a steady rain fell outside as a fashionably dressed young man parked his Cadillac Escalade outside. Looking around warily, he came in to speak with Nat Leonard, co-owner of the store.

The visitor was a 29-year-old engineer who was laid off earlier this year from one of the local chemical companies. Since then, he's been cleaning planes at the airport for less than half the salary he was earning a year ago.

Now he needs a $2,500 loan on his watch -- a Movado Fiero with a diamond bezel -- to pay his mortgage note.

"I want to help," said Mr. Leonard. But unlike Rolex and a few other brands, "there's no market" for Movado in his pawn universe.

The young man, who didn't wish to give his name, left the store disappointed. "I'm not sure what I'm going to do," he said.

Typically, pawnshop customers have a household income of about $29,000, according to Dave Adelman, president of the 2,400-member National Pawnbrokers Association. But operators around the country say they are seeing a surge in new activity fueled in part by a different clientele: middle- and upper-middle-class customers facing ravaged stock portfolios, tightened bank credit and unexpected layoffs. In areas dogged by high unemployment and foreclosure rates, the pawn business is especially robust....

While some pawnshops -- like Beverly Loan Co. in Beverly Hills -- have discreetly served the wealthy for decades, more stores, such as Society Hill, are newly awash with furs, diamonds and other baubles from the bubble. At places like Society Hill, transactions are up by as much as 40% in recent months.

Even Beverly Loan has seen a shift in customer patterns. "We have had so many $50,000-plus loans and more businesses [as clients] than ever before," said Chief Executive Officer Jordan Tabach-Bank. Many business clients, he said, are "getting loans to meet payroll or other obligations because their lines of credit are frozen."

Lee Amberg, owner of AA Classic Windy City Jewelry & Loan in affluent Evanston, Ill., said he's been seeing Cartier watches, two-carat diamonds, David Yurman jewelry and pieces from Tiffany's. One client, he said, brought in a fur coat from Saks Fifth Avenue that retailed at $9,000. She told him she needed a loan to help buy private-school uniforms for her child.

Diamond Exchange USA is more of a hybrid store. In addition to selling its own pieces, it makes loans against customers' goods and purchases used jewelry too. Located on a major thoroughfare in Bethesda, Md., it has a constant stream of Mercedes-Benzes, BMWs and other luxury cars pulling into the lot. Virtually all of the clientele are women. Many come to sell their gold or diamond jewelry.....

"You have to have a Plan B," he said. "If you don't have one, you'd better find one fast."

It is clear now that marginal customers will have a very difficult time obtaining a loan from a bank.   As gold, diamonds, and other luxury merchandise keeps piling up in pawn shops, it apprears prices for those items will continue to fall as supply rises.  Could the theme for 2009 will be DEFLATION and falling prices?  Since we are only a few hours into the New Year here in the States, we will have to monitor it accurately and closely.

Alstrynomics keys in on the analysis of actual data......and preferably data obtained from a variety of sources  to increase the odds of accuracy.  Now it is simply a function of dillegently digging the dearth of definitive destinations to distill the data into deliciously digestable doses.

Do you know anyone up for the task???........

It looks like if you are a consumer of goods, shares of stock, or most anything for that matter.......2009 could be a year for deals.............if you have US dollars of course.  If you have gold, there are any number of pawn shops or jewlers who would be more than happy to convert it to dollars on very distubing terms.

8 Comments – Post Your Own

#1) On January 01, 2009 at 9:18 AM, alstry (< 20) wrote:

A Novel Thought???????

WASHINGTON (Reuters) – Recession-wary Americans embraced the virtues of thrift this Christmas, with stores reporting a clear rise in the popularity of piggy banks.

"We have been selling coin banks really well," said Laura Kellner at Kikkerland Design Inc. in New York City, whose stylish chrome pig is priced at $31.

U.S. savings levels have increased markedly in recent months as households adjust to a yearlong recession and the worst financial crisis since the Great Depression.

The downturn has shattered house prices and the value of retirement accounts which, in turn, has reinforced the necessity to systematically put funds aside for the future.

Hmmmmmm.....Saving Money??? that is an interesting twist.  Could America go back to being the Greatest Savings Nation on it was not too long ago???????

If America converted from being a debtor nation to a creditor nation.....what would that do to the dollar and the price of gold????

Now this is too much soooooo early in the New Year.....can things actually change?????

Happy New Year to All My Fellow Fools!!!!!!!!

May the Savings be with You.


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#2) On January 01, 2009 at 10:18 AM, DaretothREdux (49.54) wrote:


We can only hope that people will change and once again start saving but credit cards make it much less likely today imo than in the past. You can still get credit just not the type people need to run biz and stock their shelves etc., and so I doubt we will see many huge changes.

Sounds like I need to take some of my savings and find a pawn shop.

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#3) On January 01, 2009 at 10:21 AM, DaretothREdux (49.54) wrote:

Diamonds btw are already WAAAAAAAAAAAAAAYYYYYYYYYYYY overpriced for the number of diamonds in the world. Rubies are actually more rare (but don't have the wedding tradition behind them). The average mark up on jewelry is also around 600%! So really even if they are offering it 70% they are still making a killing.

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#4) On January 01, 2009 at 10:47 AM, devoish (67.86) wrote:

We have been selling coin banks really well," said Laura Kellner at Kikkerland Design Inc. in New York City, whose stylish chrome pig is priced at $31.

Are people really getting thrifty if they are buying a $31 chrome pig instead of using an empty juice bottle? Or is thrift just the latest fad?

Also if I can get an under 5% HELOC from WaMu or C (and I think I can), why not invest in Pfizer with a 7% divi, especially as Pfizer seems in better financial shape than the USA.

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#5) On January 01, 2009 at 10:59 AM, motleyanimal (36.75) wrote:

I wonder how many women would be impressed with a macaroni necklace.

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#6) On January 01, 2009 at 11:05 AM, alstry (< 20) wrote:


I myself use a gallon wine bottle to collect change throughout the year....but a $31 chrome pig is at least a start.  I guess pigs really can get fat.

You should not be surprised if Pfizer cuts its dividend this year.  You will likely find saving money will be the theme for 2009.

Will frugality be for Fools???..........we shall see.


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#7) On January 01, 2009 at 11:12 AM, alstry (< 20) wrote:

I wonder how many women would be impressed with a macaroni necklace.

I have little doubt if I arranged to have George Clooney eat it off, my wife would love it........actually, if I ate it off it might make for an interesting evening.

motleyanimal, you just might have given me a 2009 Valantines gift idea;)

Frugality can be fun..

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#8) On January 01, 2009 at 7:39 PM, marketdias (72.66) wrote:

"As gold, diamonds, and other luxury merchandise keeps piling up in pawn shops, it apprears prices for those items will continue to fall as supply rises. Could the theme for 2009 will be DEFLATION and falling prices?"

Pawnbrokers and others who buy gold over-the-counter have had a banner year. For example, at $850 gold, the pawnbroker will receive about $23.50 per pennyweight of scrap 14K gold, so the pawnbroker simply pays a few dollars per pennyweight less than $23.50, then ships the gold to the refinery and waits for his check. Scrap gold (often nowadays defined as any gold jewelry that is not immediately retail-able) is very liquid, and very profitable.

But you are dead-on concerning diamonds and deflation; they can pile-up, and their values and liquidity - at both the wholesale and retail levels - have weakened since September/October.

The same is true with numismatics; many coins are now showing decreased liquidity at the retail and trade levels.

Pawnbrokers' outstanding loan volumes most certainly increase during recessions. However, as indicated above, many of the items that eventually end up in the pawnbroker's inventory (as forfeited loans and items purchased outright, over-the-counter) can lose their value. The pawnbroker must make sure that he's into things "right" because, as his retail sales suffer, he had better be able to at least wholesale (i.e. sell to the trade) his diamonds and other excess inventory.

In short, during bad economic times, the pawnbroker's loans and purchases over-the-counter can soar, but his retail & wholesale businesses can get challenging. It's that balance of acquisition/disposition of assets.

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