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Obama's gun stimulus might be joining the clunkers and the down-free housing ploys.
October 23, 2009
Breakingviews.com
Firearms Bubble May Be Bursting
By ROBERT CYRAN and UNA GALANI
Cerberus plans to float the gun maker Freedom Group soon. It better hurry. President Obama’s election victory sent weapon sales — and the valuations of firearms producers — higher. Falling backlogs hint that sales could plunge. This gun bubble may backfire.
Two sparks set off this speculative burst. First, fears of economic calamity inspired sales of weapons. The assault-rifle-style autoload SR-556 is useful for shooting varmints and for “personal defense,” according to its maker, Sturm, Ruger & Company. Second, gun collectors feared a Democratic president would restrict gun ownership. The SR-556 is not available in blue state strongholds like Massachusetts and California.
There’s plenty of anecdotal evidence of the mania. Retailers reported ammunition shortages. Gun show attendance overflowed. Firearms factories are running flat out.
Meanwhile, insiders seem to be preparing for a slowdown. Smith & Wesson diversified into security systems. Cerberus said in Freedom Group’s prospectus that the durability of recent demand was a risk factor.
Total domestic firearm sales should be around $3 billion this year. That’s two to three times as much as is typically spent, according to estimates derived from Treasury excise taxes. Background checks over the last 12 months, which are a leading indicator of gun sales, were 50 percent higher than the levels reported during the middle years of the decade.
Rising sales lighted a fire to stocks of gun makers and sellers. Since the election, Smith & Wesson’s shares rose 114 percent while Sturm, Ruger jumped 92 percent. Cabelas, a hunting superstore, gained 81 percent.
This bubble may already be deflating. Smith & Wesson’s backlog hit $268 million early this year and shrank to $177 million last quarter because of cancellations and fewer orders. Considering it stood at only $50 million in April 2008, the backlog could have further to fall. Sturm, Ruger reported roughly similar trends.
If sales fell to more typical levels of recent years, up to two-thirds of gun sales could disappear. And they could fall further as there are up to 300 million functional guns already in circulation. And firearms have a very long lifespan if properly cared for.
Gun buyers may well decide their racks don’t need more company for a few years.
http://www.nytimes.com/2009/10/23/bu...l?ref=business
October 23, 2009
Two sparks set off this speculative burst. First, fears of economic calamity inspired sales of weapons. The assault-rifle-style autoload SR-556 is useful for shooting varmints and for “personal defense,” according to its maker, Sturm, Ruger & Company. Second, gun collectors feared a Democratic president would restrict gun ownership. The SR-556 is not available in blue state strongholds like Massachusetts and California.
There’s plenty of anecdotal evidence of the mania. Retailers reported ammunition shortages. Gun show attendance overflowed. Firearms factories are running flat out.
Meanwhile, insiders seem to be preparing for a slowdown. Smith & Wesson diversified into security systems. Cerberus said in Freedom Group’s prospectus that the durability of recent demand was a risk factor.
Total domestic firearm sales should be around $3 billion this year. That’s two to three times as much as is typically spent, according to estimates derived from Treasury excise taxes. Background checks over the last 12 months, which are a leading indicator of gun sales, were 50 percent higher than the levels reported during the middle years of the decade.
Rising sales lighted a fire to stocks of gun makers and sellers. Since the election, Smith & Wesson’s shares rose 114 percent while Sturm, Ruger jumped 92 percent. Cabelas, a hunting superstore, gained 81 percent.
This bubble may already be deflating. Smith & Wesson’s backlog hit $268 million early this year and shrank to $177 million last quarter because of cancellations and fewer orders. Considering it stood at only $50 million in April 2008, the backlog could have further to fall. Sturm, Ruger reported roughly similar trends.
If sales fell to more typical levels of recent years, up to two-thirds of gun sales could disappear. And they could fall further as there are up to 300 million functional guns already in circulation. And firearms have a very long lifespan if properly cared for.
Gun buyers may well decide their racks don’t need more company for a few years.
http://www.nytimes.com/2009/10/23/bu...l?ref=business
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