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Bad Economy Opportunities
With the economy going towards a major adjustment, if not a recession, if not a borderline depression, what opportunities might there be for business?
For one, I like pawn shops because of the spread that they get on their merchandise. Say that Jimbo was once a successful person. Making enough money that he could afford some pleasures of wealth, he bought items like gold watches and chains, fancy electric guitars that he couldn't play well, exotic weapons, memorabilia, etc., etc. On top of that, Jimbo also thought he would try his hand at flipping houses with all his wealth; leveraging his own buying power. Well, guess what... as a bad economy rolls in, Jimbo is highly leveraged with all the things that made him feel wealthy in a good economy, and he in unprepared for financial stress. (sound familiar?) He needs to liquidate his most valuable things just so that he ensures his own financial security, and to avoid filing bankruptcy. So, what goes? All the pleasures of wealth, and the house...
Jimbo needs to liquidate tangible goods; the pawn shop, eBay, and the classifieds are the only markets for this. But let's look at the pawn shops... They buy their merchanidise at scrap value or lower. The equivalent amount of pure gold in Jimbo's chains is purchased at 50-60% off the spot gold price, or about 5-10% of retail value for the jewerly. The guitars go for $25-$50, and the list goes on. The pawn shop gives Jimbo the money... about a maximum of 25% of what was paid, gives him his ticket to repurchase at a higher price, and then puts the price tag on it for someone else to buy from the storefront.
Do you see the margins here? The pawn shops are providing liquidity to the public in exchange for 100% to 500% profit on the merchandise. The costs are minimal... storefront, security, low labor rates, and insurance. And the best part is that pawn shops will perform better in poor economy!
This is the list of publicly traded companies associated with this seemingly seedy industry of pawn shops: EZPW CSH FCFS.
After a little reflection, maybe looking into this post as more than just a post on pawn shops may shed some light on what the US government and FED are currently doing. hint: they are the pawn shop, and we are Jimbo
For one, I like pawn shops because of the spread that they get on their merchandise. Say that Jimbo was once a successful person. Making enough money that he could afford some pleasures of wealth, he bought items like gold watches and chains, fancy electric guitars that he couldn't play well, exotic weapons, memorabilia, etc., etc. On top of that, Jimbo also thought he would try his hand at flipping houses with all his wealth; leveraging his own buying power. Well, guess what... as a bad economy rolls in, Jimbo is highly leveraged with all the things that made him feel wealthy in a good economy, and he in unprepared for financial stress. (sound familiar?) He needs to liquidate his most valuable things just so that he ensures his own financial security, and to avoid filing bankruptcy. So, what goes? All the pleasures of wealth, and the house...
Jimbo needs to liquidate tangible goods; the pawn shop, eBay, and the classifieds are the only markets for this. But let's look at the pawn shops... They buy their merchanidise at scrap value or lower. The equivalent amount of pure gold in Jimbo's chains is purchased at 50-60% off the spot gold price, or about 5-10% of retail value for the jewerly. The guitars go for $25-$50, and the list goes on. The pawn shop gives Jimbo the money... about a maximum of 25% of what was paid, gives him his ticket to repurchase at a higher price, and then puts the price tag on it for someone else to buy from the storefront.
Do you see the margins here? The pawn shops are providing liquidity to the public in exchange for 100% to 500% profit on the merchandise. The costs are minimal... storefront, security, low labor rates, and insurance. And the best part is that pawn shops will perform better in poor economy!
This is the list of publicly traded companies associated with this seemingly seedy industry of pawn shops: EZPW CSH FCFS.
After a little reflection, maybe looking into this post as more than just a post on pawn shops may shed some light on what the US government and FED are currently doing. hint: they are the pawn shop, and we are Jimbo
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