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Another Interesting piece we pulled off the wire, hope you enjoy the read!
In a pinch, half of U.S. families can’t find $2,000
Jan Underwood David Berke, president of Rich’s Pawn Shop works behind one of the jewelry counters in the shop at 709 Watervliet Ave. Bertke said Rich’s has seen “a lot of customers” in recent months as people struggle to stay afloat during tough economic times.
By Mark Fisher, Staff Writer Updated 10:54 AM Saturday, June 11, 2011
Half of American families — including a growing portion of the country’s middle-class — would not be able to cope with an unexpected expense that required them to come up with $2,000 within 30 days according to a study that illustrates both the fragile nature of family finances and the depth of the nation’s financial crisis.
Dayton-area business owners, a credit-counseling official and a local economist said the findings from the study closely mirror the financial vulnerability that many Miami Valley families are grappling with.
A paper titled “Financially Fragile Households: Evidence and Implications,” published in May by the National Bureau of Economic Research, used data from a 2009 global economic crisis survey to document what the authors called “widespread financial weakness in the U.S.”
The researchers wanted to measure American families’ ability to access emergency funds, so they asked 2,148 people between 18 and 65 the question, “How confident are you that you could come up with $2,000 if an unexpected need arose with the next month?” The amount of money and time frame reflects the cost of an unanticipated car repair, home repair, medical or legal expense.
More than a quarter of Americans (27.9 percent) reported that they would not be able to cope with such an expense, while another 22.1 percent responded that they probably would not be able to come up with the money.
When asked the same question posed to the national survey respondents, Amy DeMordaunt, 43, of Beavercreek, said she “probably could” come up with $2,000 within 30 days — but would likely obtain it by not paying off her entire credit card bill.
“I wouldn’t want to do it that way, but I probably would,” DeMordaunt said.
DeMordaunt’s response mirrors those in the survey who suggested they would resort to measures that personal-finance experts don’t recommend in order to cope with a financial emergency.
The study’s authors conclude that financial hardship in America “is not limited to the poor or to a small group of the population” but instead extends to “those with higher-and-average income and higher educational attainment.”
The survey showed that while most people who said they could come up with $2,000 responded that they would withdraw from their savings, nearly one in five (19 percent) would sell some of their personal property to generate the cash and more than one quarter would do so “by resorting to what might be seen as extreme measures.”
David Bertke, president of Rich’s Pawn Shop at 708 Watervliet Ave. in Dayton, said he sees evidence of the study’s conclusions every day in his Belmont pawn shop.
“We have met a lot of new customers,” Bertke said. “A lot of people who never thought they would ever need to do this” are coming in to sell tools, electronics and other household items. Meanwhile, some of the pawn shop’s regular customers who have been coming in sporadically for years haven’t been seen for a while — they’re either tapped out or they’ve moved elsewhere to look for work, Bertke said.
Similarly, Plato’s Closet at 2476 Commons Blvd. near the Mall at Fairfield Commons in Beavercreek, which buys used brand-name closing and accessories, has seen an increase in the number of people coming in to sell, according to store manager Julie Kerstanski, who said those selling items appear to come from a wide range of economic backgrounds. And Kertanski’s not just seen an increase in interest from those looking to sell goods — there’s been an increase in customers looking for values. The business will expand later this month when it moves to a new location at 2750 N. Fairfield Road that is about twice the size as the existing store.
Robert Premus, professor of economics at Wright State University, praised the study’s quality and credibility, and said he believes it accurately reflects the vulnerability of Dayton-area families.
“People are running pretty scared right now,” Premus said. Because a “recessionary climate” has extended for two full years, traditional sources of help for families who are struggling financially — other family members and friends — are themselves tapped out, and credit is still difficult to obtain from banks and other financial institutions, he said.
The nonprofit Consumer Credit Counseling Services, a division of Graceworks Lutheran Services, has provided help since 1980 to Miami Valley residents who have gotten in over their head, according to Terrie Krumal, the credit counseling organization’s education and marketing coordinator. Counselors can help families or individuals develop a budget, manage debt or negotiate with lenders or creditors, and the organization offers confidential financial counseling, debt-management programs, housing counseling and bankruptcy counseling.
Krumal said the National Bureau of Economic Research study “fits right into the economic picture we’re seeing right now.” Too many Dayton-area residents are relying on credit cards and other forms of borrowing to serve as their safety net, “and when an emergency does hit, they’ve got no wiggle room,” she said.
Commentary from Jerry
I thought this was a very good article and wanted to share this with our subscriber base. I think it denotes the true tone of the country right now and what we are seeing in this industry all across the United States and around the world.
Many of our clients here in the USA have seen a dramatic uptick in loan demand and in purchases across the board. In many cases this is due to the activities in the precious metals markets. The overall trend is that we are seeing more “middle to upper” class folks doing businesses in our stores much more frequently and large loan demand is running at an all time high.
Because of this dramatic change, it has opened the door for the hybrid pawn operations and online lending spaces to gain some traction. We have seen a large demand for big ticket loans in many markets in the SE – US: Florida, Carolinas, MD, NY, and a few others to name a few. There are many specialty boutique pawn operations across the USA that are all seeing dramatic increases in large cash loans and activity in general.
The Industry is now in the BEST TIMES in it’s history from what I can see with Public Markets rewarding the sector very well, large loan demand is the strongest we have ever seen, the ease of obtaining cash for high value goods has shot off like the Space Shuttle and much more.
Most of our clients indicate that the ease and anonomynity of these transactions is very appealing to a growing class of folks doing business within our industry. Many in the other classes have been dramatically affected by this economic cycle and as such have had to take measures to adjust or cope.
With these trends, we are also seeing an increase in “value-shoppers” looking at high-end goods and their options in which to obtain them. High end watch markets are as strong as they have been, diamond markets are booming and big rocks are in demand as well as other high value assets.
Many of our clients as well as our offshore pawn operations deal in boats, vehicles, aircraft, busses, land and other potentially high value assets and this trend is upticking quickly.
Recently some of Groupons Founders teamed up with Todd Hills out of Colorado, a Veteran super store pawn shop operator for many decades and have created the really first main-stream online lending space “PawnGo”. There is very much a demand and an appeal for this type of operation.
I believe EBay firmly illustrated to the world people are perfectly comfortable with sending Emoney and Egoods around the world and is genuinely not a problem with today’s technology and related services.
I am happy to report that the Pawn Business outside the USA is also running very brisk. All the major Publicly Traded Pawn Shop Companies in the USA are aggressively expanding their operations thru Denovo opening and acquisitions and are all pushing outside the USA.
EZ Corp recently took a larger majority stake in Cash Converters out of Australia and their global reach has outpaced their competition as well as overall Valuation of their company. They recently exceeded Cash America International that has long held the strongest overall market valuation as public company. All of these stocks are performing very well I might add and the buy recommendations remains strong on all them by many of the institutionals.
Pawn Stocks are at histocal highs, companies are growing, large loan demand is up, loan demand in general is up, economic outlooks not to rosey, price of gold should continue to run!
Stay safe and stay tuned for more folks!
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