Pawn Shop Trade Golden

From thestreet.com 7/14/08

It was almost a year ago to the day. I remember because it was just days before Major League Baseball's All-Star break. It was raining hard and the market was a bit nervous about subprime, but we had no way of knowing the Pandora's Box that would unfold in the coming months.
I had been calling the bull run in gold and was (and still am) very bullish on the metal. There was a business I had been following for a while that would be an incidental winner if gold prices stayed high and the economy weakened. I had pitched a new Bolling story for Fast Money. It was a "Dirty Trade" segment on pawn shops.
My theory was this: With a nervous economy and jittery job market, pawn shops stood to benefit. Seeing tough roads ahead, I suspected that people would pawn their gold jewelry and use the money for necessities. Pawn brokers would be the right business at the right time.
EzCorp (EZPW - Cramer's Take - Stockpickr) remains that best play on my "pawn shop" theme. It is one of the world's largest operators of pawn shops. It derives revenue from two main sources.
First, it collects interest from the loans it makes. In some states (Texas, for example, where the majority of EzPawn shops do business) the interest rate on short-term loans can go as high as 240% ... legally!
In about 25% of those loans, the customer chooses to walk away from the collateralized jewelry, electronics, musical instruments, etc. If that happens, EzPawn shops are allowed to sell those items. ....................
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