2012: Year of the Pawn Shop

Posted: Dec 31, 2011 12:01 AM

One of the most popular shows on cable television is Pawn Stars. It’s a nitty gritty version of eBay. Pawn shops were a traditional place to try and raise some capital when times were tough, and today is no different.

Pawn shops are great places to learn about economics. The owner sizes up the good that the person wants to pawn, and gives them cash for it. Then tries to resell it at a profit. This is a different kind of “trading”.

In the sizing up and valuing the object being pawned, the owner has to take into account, supply and demand. In the pre-internet days, that supply and demand equation was strictly local. Today, it can be regional or even international. Ebay was supposed to put pawn shops out of business, but I think it helped them. There is so much fake stuff on eBay that going to a pawn shop and actually getting an eyeball on something gives a buyer more confidence.

The entire world is in economic doldrums. The US may be in better shape than others, but at 1.8% GDP growth, it’s not exactly on fire. Next year, I don’t see anyone predicting over the top growth either. Look for pawnshops to get more active. 4 years of no growth is a killer.

Across the pond in Great Britain, they have pawn brokers too. The very wealthy are starting to get squeezed hard there. You can find some pretty cool stuff at a discount. Art, gold, expensive jewelry and cars. Diamonds are in demand.

I think that 2012 will be an up year in the stock market. Unfortunately, much will depend on the election in November. We have had a volatile 2011, and when you look at everything in the rear view mirror, we were really in a range. “Sell rallies and buy dips” may have given you a lot of pain, but if you could weather the storm you got a lot of gain. Few macro markets trended in any direction, although if you had the balls to short commodities in April you would have had a good year.
S&P GSCI Commodity Index Spot Stock Chart

S&P GSCI Commodity Index Spot Stock Chart by YCharts

Have a great New Year’s celebration. Enjoy the big blast of college football. Eat some Hoppin’ John on New Year’s Day and let’s hope for a great 2012.

And in 2012, please follow me on Twitter