Friday, April 15, 2011

Pawn Stars

This show on A&E simply baffles me. That isn't to say that I don't find it interesting and even compelling, but I'm continually baffled by it. For the life of me, I can't figure out why people would go and sell their items for less than the item is worth, especially when there are so many opportunities to obtain a better return. Have these people never heard of Ebay?

It would be one thing if the owner were taking advantage of people, and the customers were selling their belongings with no idea of the worth. But every show, the pawn shop owner calls in an expert who gives a quote on what the item's value is, and then the owner lowballs the customer to, generally, somewhere around a 50% reduction in price. If memory serves, I believe I even saw him lowball a guy on a big chunk of gold that had likely been recovered from a shipwreck (pirates!), an item that many people would have paid much closer to its face value for.

But these baffling items I can take. What I couldn't take was on last night's show where a guy was trying to sell his 1986 Buick Regal that he had pimped out. The commentary suggested that the man had probably spent the better part of $10,000 on the paint job for the car and various other improvements. Nevertheless, the man was only hoping to get $2,000-$2,500 for it! While the car was certainly not meant to be an investment, and while there is certainly something to be said about spending money on things that you like and enjoy, what a huge cash drain! And for the man to simply acknowledge that it wasn't worth the money he had put into it was fascinating. That is a 75-80% loss on investment money (if not more; it wasn't clear if the original vehicle price was factored into that ten grand)!

As a comparison, particularly in the last year, many sound mutual funds have had amazing gains into the double digits as the economy slowly trudges out of the Great Recession. Some of the more modest gains I've been seeing in my research on mutual funds lately have had a 9% gain in the last year. If the car seller had put that ten grand into a mutual fund a year ago, he would now have $10,900 sitting the bank. When you consider that he only ended up selling the car for two grand, that's $8,900 that simply evaporated into thin air. Of course the flip side is that he could have invested in Citigroup before the crash, and now be left with pennies on the dollar (though I believe it's making progress towards improving its stock price in specific ways).

I suppose it just comes down to what you value. Me, I don't want to work forever, so I'm trying to get my retirement accounts squared away. How about you?

Disclaimer: I currently own shares of C, and I plan on owning more in the near future.
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