With the housing crisis and less-than-robust economy making paupers out of people who thought they were living the American Dream a few years ago, investors are looking for ways to capitalize. Yesterday, I wrote about the strong business that self-storage companies are doing housing the belongings of former homeowners.

Today's Heard on the Street column (subscription required) in the Wall Street Journal looks at another obvious beneficiary of other people's misfortune: pawn shops and payday lenders. Shares of companies like First Cash Financial Services (NASDAQ: FCFS) and EZCORP (NASDAQ: EZPW) have run up nicely in recent years but have since pulled back as times have gotten tighter. Some analysts blame the aggressive expansion of pawn shops into payday loans, which lack any form of collateral.

"The earnings strength of payday loans is untested in a tough economic environment, when borrowers who lose their jobs default on the loans," according to The Journal. "And the business has come under increasing fire from state legislatures and consumer groups, which contend that the fees on these uncollateralized loans often amount to interest rates of as much as 400% a year."

The contradiction here is remarkable, and the Journal doesn't point it out: investors are worried that payday lenders are running the risk of defaults high enough to wipe out the profits from high-interest loans. Meanwhile regulators and consumer groups are accusing the companies of charging outrageous interest rates. But which is it? If the high "interest" on the loans isn't enough to overcome defaults, then the interest rates aren't high enough! Perhaps this explains why none of the big banks offer payday loans.

MOST NOTEWORTHY: PetSmart, Plantronics and First Cash Financial were today's noteworthy downgrades:

• Wachovia downgraded PetSmart (NASDAQ: PETM) to Market Perform from Outperform, citing margin concerns following the company's lowered Q4 SSS guidance.
  
• Baird downgraded Plantronics (NYSE: PLT) to Neutral from Outperform citing weaker core business outlook.
  
• Jefferies downgraded shares of First Cash Financial (NASDAQ: FCFS) to Hold from Buy following the disappointing results, as they believe the company's auto lending business will create an earnings drag in 2008, limiting potential share price appreciation. Shares were also lowered to Market Perform from Outperform at JMP Securities.

OTHER DOWNGRADES:

• Lloyds TSB Group (NYSE: LYG) was lowered to Sell from Hold at ABN Amro.
  
• Northstar Neuroscience (NASDAQ: NSTR) was downgraded to Hold from Buy at Citigroup.
  
• UBS downgraded Volvo (OTC: VOLVY) to Neutral from Buy.