30-day hold period on purchased tangiable goods, now seven-days is about time.
Business Report on behalf of the California Pawnbrokers Association
By Dan Gudino
In Ben Franklin’s essay, Advice to a Young Tradesman, Franklin first coined the old adage, “Remember time is money.” In the essay, Franklin writes about credit in relation to time, he writes about time and its waste on lost opportunities and he praised creditors.
Franklin’s advice is fitting for the tradesman of California Pawnbrokers Association, whose members operate as small loan creditors, and should all be given credit for their unity to amend Calif. Assembly Bill No.1993, now, finally giving brokers more time to find opportunity with purchases of secondhand tangible goods.
Across the state brokers witnessed the importance of timely strategy, letters written by hand fulls with a clocked deadline – delivered to the footstep of Sacramento, as moving fast was a difference.
“For this precise reason, this is why I would encourage every pawnbroker to join the state association (CAPA). They are truly paving the way for our success. The holding period reduction is the best thing that has happened in a very long time. Price volatility (in precious metals) will no longer be a major concern in my business. I believe this positive change will impact the the industry, patrons and the economy as a whole,” said Mario Lemus, owner of Norwalk Loan Company in Norwalk, CA.
The tangible good with the most upswing, as Lemus mentioned are precious metals and as Franklin refers about Shillings in his essay, a .925-silver currency from England’s past and how it was treated in relation to time and how idleness can be a waste.
Pawnbrokers can relate to sitting on 30-day hold period of purchased scrap jewelry, and tell you it can be a roller coaster, and lately a downward gut wrenched ride.
“AB 1993 is a game changer for every pawnbroker who buys gold or silver jewelry in California,” said Tony DeMarco of Western Loan & Jewelry in Los Angeles, CA.
In a 60-day selling period, since July 12, the price of gold alone is down $48, from a spot price of $1250 an ounce, as of this writing ($1202).
That’s hundreds of lost dollars on 10 oz of gold.
Precious metals are a large part of the pawn shop.
Bought and loaned on, jewelry, coins, sterling, etc, can be profitable, and a great cash flow for your business, especially when a fixed price is setup.
You, as a buyer and seller of precious metals, possibly already protect yourself with fixed prices to allow room for declining prices and for validity of the item.
However, we’re all at the mercy of time and movement of market trends.
With the seven-day amendment of purchased goods, strategic moves can be made, this is what Franklin wrote about, opportunity cost, an economic theory, that shows the relationship of scarcity and choice. We all rather have the choice to sell at the highest prices, but opportunity is a commodity itself, it doesn’t grow on trees, instead we’re subjected to waiting idly, as prices sink.
Seven days is whole new ball game, especially if your collector, buyer, or refiner, provides the ability to hedge against downward movements in price.
Like Demarco mentions, “… having the ability to lock in my precious metal that I purchase, conceivably at the time I purchase the metal, means that I can be more aggressive in buying jewelry and other metals. It also will free up much needed cash for my business.”
All collectors, buyers and refiners have a different operating systems of pricing, hedging and terms for delivery of metal. Ask your partner how many days from pricing your metal would you have to deliver. Some refiners allow 30-day periods, others five to 10 days, all vary.