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Fear of Obama drives gun stocks higher

Posted Feb 25 2009, 02:02 PM by Anthony Mirhaydari
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Rising concern over increased regulation from the Obama White House has gun buffs stocking up on the latest tactical rifles and pistols. This helps the fortunes of gun makers Smith & Wesson (SWHC) and Ruger (RGR) as well as specialty retailer Cabela's (CAB), which specializes in firearms and hunting gear.

Ruger reported Tuesday that gun sales increased 81% in the fourth quarter on new products and "robust firearms demand." Its order backlog now stands at $48 million. Smith & Wesson plans to double revenue within the next three years and reported increased sales from "speculation on the outcome of the presidential election." Cabela's reported that same-store sales rose 2.2% over the holiday election season -- a time of great distress for other retailers.

With that kind of performance, it's not surprising investors are flocking to these names. Over the last week, while the S&P 500 is down 2%, Smith & Wesson is up 56%, Cabela's has gained 35%, and Rugers added 44%.

Based on my conversation with Wedbush Morgan analyst Rommel Dionisio, much of the sales increase has been in self-defense firearms like military-type semi-automatics or pistols. Sales of traditional bolt-action hunting rifles and shotguns remain steady. Cabela's spokesman Joe Arterburn notes that many of these customers are first-time buyers who "have never had a handgun in their home but believe now ... is a good time to buy them." In other words, people aren't looking to hunt deer; they're worried about other people.

The question, of course, is whether this performance will continue or will end up being a brief, post-election buying binge. According to the FBI, background checks on potential gun buyers increased 29% last month over the same period in 2007. Although Obama has always played down the gun rights issue, many seize on his off-the-cuff remarks last year that people "cling to guns and religion" during times of economic stress. For the record, he has tried to soothe jumpy nerves: "I believe in common sense gun safety law, and I believe in the second amendment. And so, lawful gun owners have nothing to fear."

Nevertheless, as the economic picture darkens, it's more than possible people will stop fearing our new president and start worrying about a Mad Max-like apocalyptic scenario. Just look the huge increase in the popularity of physical gold. Sales of the popular American Eagle gold coin are up four-fold while commodity investors are increasingly opting for physical delivery of gold bullion instead of settling futures contracts in cash. Bankers are reporting that more clients are hoarding gold in their vaults.

Sure, this is crazy. But remember that humans aren't rational and that fear is the strongest of all emotions. Forget traditional defensive sectors like utilities and healthcare. Go with guns and gold.

Update: Attorney General Eric Holder told reporters Wednesday that President Obama would like to "reinstitute the ban on the sale of assault weapons" that expired in 2004 under the Bush administration. Holder said the ban would not only be a "positive move" by the United States, but would help reduce the trafficking of guns to the drug cartels in Mexico. It looks like the gun boom is far from over. 

Image credit: jeroen020

Disclosure: The author does not own or control shares in any of the companies mentioned.

Anthony Mirhaydari is a contributor to the Strategic Advantage investment newsletter. He can be contacted at anthony.mirhaydari@live.com. Feel free to comment below.

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Beginning of the end for falling home prices?

The shrinking of American retail

Forget gold. It's time to invest in platinum

Why Eastern Europe's meltdown matters

Comments

 

Great story and photo!  They both show such a grasp of knowledge on this important subject.

NOT!  

The photo of the guns are of a TOY GUN DISPLAY . . . not that any one on your staff would know the difference.

A huge part of the information problem that impacts American freedoms today is ignorance, on the part of the media reporting information to the people.  Combine this with laziness in getting things "right," and we have a problem that is dangerous for America.

Come on guys . . . start doing your homework.  If this were an assignment in a college journalism class, you'd get an "F."

 The first sign of a country is going bad is when, law abiding citizens rights are being taken away.  Illegal imigrants and criminals have more rights than the tax paying American citizen.

 When the majority is not heard and special interest "Al Sharptons" are taken seriously well the average citizen will arm themself.

 I retired from the military and took an oath of office to "defend the nation against all enemys "Foreign and Domestic".  Wake up America we have both in our nation.

As someone in the firearm sales and training industry, I can confirm that the amazing increase in firearms sales is directly related to FEAR of a possible 'ban' on firearms, ammunition, or their accesories based on President Obama's own words and actions he suported as a Senator.  Additionally, the current controlling members of the Democratic Party ALL want a siginificant reduction in private firearms ownership, based on various failed theories of government.  All one has to do is listen to Eric Holders comments on Feb 25, 2009 (see ABC Online) where he states the administration is hopeful of reenacting the Clinton Era Ban as well as making it permanent.  THe interesting thing about that ban, is that it was supposed to provide data to see if the banned weapons had any impact on crime.  The answer, the statistic and reports prove, no significant or measurable change in crime rates due to the ban.

I have lots of friends and family buying guns. They are afraid that the left fringe will push Obama, to follow Pelosi and try to ban guns and free speech (our first two amendments). Without those amendments freedom is gone forever.

Wow - "Sure, this is crazy. But remember that humans aren't rational and that fear is the strongest of all emotions."  Crazy?  What's crazy is the government printing Monopoly money every day that is not backed by gold.  The Federal Reserve is not accountable to anyone.  What!?  Our dollar is back by ink and paper now - worthless.  So, yes people are buying gold - how is that crazy, irrational, or being emotional?  

Going out and buying a fire arm is not crazy or irrational either.  Not learning how to use the damn thing is!  I've owned a gun as far back as 10 years old and my father taught me how to use it.  It is protection for myself and my family and anyone that would try to harm us.  My husband and I both have a conceal carry license and we have signed a petition to push for open carry in TX.  He's active duty AF and I'm prior Army.  

I do believe things are going to get worse, but I also believe things will improve eventually.  I haven't ran out and built a bomb shelter yet or bought three freezers and stocked them with food, so I don't believe I'm irrational, crazy, or fearful.  I believe I am an American exercising my rights.

I believe that our "representatives" have let us down - across the board - BOTH parties.  I believe that we do need to change things and get rid of the corruption, but there are not enough educated voters out there anymore.  People rely too heavily on what they hear on television - whether that is Fox or CNN.  Uneducated voters have been the downfall of our country, so until that changes - we will have more of the same.  

One objection, and it comes from your last paragraph.

Humans are rational. Fear is rational. People can sometimes appear irrational when the reality on the in-looker in is not subject to the same view of reality of those looking out.

Since we are on a fiat currency, individuals are looking to the physical world for a store of value as opposed to trusting politicians and the banksters at the Fed/Wall Street to do the "correct" thing with the supply of government money and credit. This is rational thinking. It's not crazy. There is a much better chance that a certain amount physical gold will be worth something in 200yrs than the pieces of paper we have in our pockets right now.

As for guns, it is rational thinking too. When people look around and find it really difficult to see where any recovery may take place, they (we) get anxious that unless people are allowed to find productive uses for their time, they will turn to theft and destruction of property. This is a natural and rational human instinct to preserve what property is rightfully theirs.

First of all, if anyone has noticed, the pic in the article above shows nothing but airsoft guns, not real guns. The giveaway clue is the fact that all of the prices are in Japanese yen. Of course, the law-abiding people of Japan are prohibited from owning a real gun. This, just like many other countries' gun control laws, doesn't apply to criminals.

We can thank Bill Clinton for the housing mess that we're in today. He thought it was a great idea to allow credit to those who made just above minimum wage to buy those fancy $300K and up homes. Of course, what didn't help was the fact that Clinton helped send numerous jobs to Mexico and to other countries.

Support the NRA and the right to have firearms. It goes back to guns don't kill people it's the guy that pulls the trigger that does. They want to ban assault rifles? for what reason because they are being bought in the U.S and sold to the Mexican drug cartel. I don't remember when the last time a Assault rifle was used in a crime? Maybe the LA bank robbery. It not the firearms license holder thats doing this its the Dumb-A** that bought them from the dealer, He's the one that needs to be prosecuted . We cannot let anyone take away our guns and if you do whats next.

I was in the firearms industry (both retail & wholesale) for over 30 years. I've seen this type of hysteria come & go. When the economy starts getting better people will start "feeding" on something else. They'll feel better about themselves and their circumstances- and target shooting will not be in the mix-ergo-sales of ammo and peripheral accessories will go by the wayside, leaving the retail stores with too much inventory-slow sales will mean less cash- can't pay bills, payroll...And the whole cycle starts all over again.

I sold my 30-30 deer rifle before moving to AZ - have purchased a .38 for my own protection now.  No, not protection from the other people in my area, but from the illegals and drug cartels that have infiltrated AZ and other states.  More kidnappings for ransom, more killings in our own country due to the drug cartels and more home invasions, robberies and burglaries by illegals - many of whom are connected to the drug cartels.

No - I am not a Republican nor am I a Democrat.  I am a 72 year old female registered Independent for many years.  What I have done for my own protection is just common sense.  My view is that we are facing an invasion of our country and that is an act of war.  

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