Is the Gun Boom About to Go Bust?

 

“Shares of gun makers Smith & Wesson Holding Corporation and Sturm, Ruger & Co. Inc. were lower Wednesday [down around four percent] after an analyst at Benchmark noted that FBI background checks continue to grow, just at a slower rate,” streetinsider.com reports. “According to the firm, adjusted FBI background checks rose 14.7% in September. While strong, September represents the second lowest Adjusted NICS growth rate this year, second to April’s 10.5% growth.” Add this into the mix: industry insiders told TTAG that supply has finally caught-up with demand. In fact, unless there’s another “Obama surge,” and maybe even if there is, we could be looking at a glut of product in the market, driving down prices. Until gun laws are liberalized further (national reciprocity?), unleashing more demand.

comments

  1. avatar Montesa_VR says:

    I noticed Smith and Ruger were down today while the markets in general closed up. I thought maybe it was a result of last night’s debate.

  2. avatar Loyd says:

    All bubbles burst. As much as it would pain me to see the only effective segment of the economy falter, I’m hoping for a gluttony of parts and accessories when the bubble bursts.

  3. avatar Ralph says:

    Waiting for national reciprocity to augment gun sales is like waiting for a unicorn to fertilize the lawn. Both are equally unlikely as long as anti-gun political hacks continue to rule the Senate.

    1. avatar Paul says:

      I don’t know if they will. Seems the pro-gun public is now outnumbering the anti-gun crowds. Hopefully they will vote that way this year.

      1. avatar Ralph says:

        Hopefully they will vote that way this year.

        Paul, I don’t hold out a lot of hope. Schumer, Feinstein, Lautenberg, Boxer, Durban and the rest of those sleazebags have a stranglehold on their states, which are (not coincidentally) the most hoplophobic in the nation. In the unlikely event that the Republicans take the Senate, those gerbils will still be there to filibuster and bottle-up any reciprocity bill.

        1. avatar jwm says:

          With enough of a defeat, including loosing the white house, maybe the dems will finally get the word and accept that gun control is the wrong path to take.

        2. avatar Elliotte says:

          Ralph, you forgot Mikulski and Cardin. Here’s hoping Dan Bongino can knock off Cardin

  4. avatar jwm says:

    By all means, let’s liberalize those gun laws some more. And if the market does become glutted I’ll make a little room in my safe for a couple more.

  5. avatar Aharon says:

    My sources tell me that hoards of young people are buying guns from private sellers. They are doing it because used guns are less costly and to avoid having their name put on a government black list. Therefore, the young people are seeking to avoid having their guns being confiscated and themselves being shipped off to a re-education camp run by Commandant Nancy Pelosi.

    1. avatar Human Being says:

      Your “sources”? That could be anything from metropolitan police CIs to Jim down at the local gun store. Can you give any indication what kind of “sources” you would have access to?

      1. avatar Aharon says:

        It was a joke.

  6. avatar Sanchanim says:

    Price drop? Someone said price drop, I am all for that!!!
    My daughter would love that pink Ruger!
    Markets fluctuate, but even still a growth of 10% or more per month is pretty darn steady. I certainly wouldn’t complain. From an investment stand point you need to look long term…

    1. avatar Bad Matt says:

      I think these figures are comparisons to the same month last year. Anyway, even 10% growth is about as good as it gets – about 20 times better than the return on a money market account.

  7. avatar Dyspeptic Gunsmith says:

    I’ve said this before and stand by it: I think there’s significant over-capacity in the AR product space. I’d look for a bubble to pop there first.

    When lowers start going for $50 or lower, before shipping/handling/background check, that will be the sign of the bubble popping. That’s probably just above COGS for most of the makers of lowers if they are making them from bar stock (aka “billet”). Forged lowers are probably selling at a loss at $50/per.

    1. avatar jwm says:

      D.G. off topic here. A few years ago there was a company that took M1’s and other ww2 rifles and restored them to factory new standards. I can’t for the life of me remember their name. Do you know who I’m talking about?

      1. avatar Dyspeptic Gunsmith says:

        Can’t be certain. Over the years, there have been several companies and gunsmiths doing this sort of work.

      2. avatar Steve (CT) says:

        There are a few out there. Here are some I have saved in my bookmarks. I suspect the 1st one is what you were looking for:

        http://www.miltecharms.com/
        http://www.dgrguns.com/
        http://www.m1garandrifle.com/

      3. avatar Steve (CT) says:

        jwm, I posted a response with some links, but I think its stuck in moderation. Hopefully it will be approved when you check this thread.

        1. avatar jwm says:

          Miltech. That’s the one. Thanks guys.

  8. avatar Dracon1201 says:

    I can’t see it going bust. It’ll slow if Romney gets elected, but that train’ll keep rolling, and if the bubble does pop, I’ll pick up some brilliant new toys and wait till a promising Democratic candidate starts a new push.

    1. avatar Anon in CT says:

      The firearms market won’t die, but stock prices go up on expectations of future growth in profits, so you could see those shares take a nasty hit even while overall firearms sales are steady.

  9. avatar John Fritz says:

    Seeing how nice condition 5906’s are getting five and six hundred dollar asking prices on GunStroker, and some of them are actually being bought, I think the market can stand a tiny contraction.

    I was bidding on a NIB 4506-1 a while back and dropped out at just shy of eight hundred. Scolding myself for being an idiot.

    It kept going. Unbelievable.

  10. avatar Chris says:

    If you have a carry permit you can skip the NICS check. All data points to huge surges in applications and granting of concealed permits across the country so the number of checks being performed isn’t that a great metric.

    1. avatar Houstorm says:

      Not in Ohio unfortunately; I think there are only a few states that the BAFTE have given exemptions for that.

      1. avatar Chris says:

        http://www.atf.gov/firearms/brady-law/permit-chart.html

        Guess I’m lucky enough to live in South Carolina then. I love getting in and out of a shop with the only limitation being usually how fast I can fill out the 4473.

  11. avatar Houstorm says:

    I think it depends on what you mean by bust. If you mean that firearm sales are going to stop exceeding the previous years, then yes. If you mean that sales are going to crater, the answer is no.

  12. avatar Greg in Allston says:

    Being the eternal optimist, I sure hope that the pending “glut” of guns comes to fore and with it a glut of reasonably priced ammo. I need to get up to my 5.56 minimum safety inventory without going into hock and my 7.62 x 51 reserve is dismal. Perhaps the “Peace Dividend” will bear a little fruit my way. (Ha, ha. Seriously, with so many potentially kinetic political/martial global shenanigans in the news lately, I just glad that I’ve got what I’ve got on hand.)

    1. avatar Dyspeptic Gunsmith says:

      Part of the ammo price issue is the huge, ongoing demand from the US government (DOD and the various federal agencies that carry guns, of which there are far too many).

      But people should be aware that there’s the other part of what is going to make ammo prices stay high, and that’s the devaluation of the US dollar. The Fed has indicated that they’re looking at an inflation rate of about 2% a year for an extended time, so don’t expect material prices to go down in the long term…

  13. avatar Mark N. says:

    One way to phrase the question is to ask when the market will reach saturation. Unlike a lot of other items, guns don’t wear out or break (much), and there is no market for replacements. There are already anough guns for every person in America to have one, but we all know that, like Lays, you can never have just one, and that obviously not everyone has one. If we know the average number of guns per owner and the average percent of gun owners in the population, we should have a reasonablke metric of when the demand will cool. That known, you can factor in the economy and politics to estimate the number of guns in circulation before saturation takes the wind out of the sales. Ballpark? My uneducated guess is something like twice the number in circulation today. Wonder what the industry thinks?

    1. avatar Bad Matt says:

      The market has to cool – it’s not behaving normally. On Calguns.net, people routinely sell used guns for $20 or so less than what a new one costs. That’s crazy – who would buy a used gun (sight unseen btw) for what a new one costs? But there it is happening all the time. Sometimes they sell for more used than new. That can’t last.

  14. avatar Pascal says:

    Popular models like the Shield and M&P40c and LCR are still on backorder on many shops. Ditto with ARs. I do not see a bargin on used prices especially when I see some beat up glocks close to new prices. This, like many things, is also probably very regional

    I believe we would all be happy with lower prices especially for ammo.

    One thing I have seen, even in not so gun friendly CT, we have two new gun shops and two new ranges opening up. For many of us here, its a shock!

    1. avatar Anon in CT says:

      There have been some pretty good sales on ARs at Hoffman’s in CT. I tend to think someone is trying to clear inventory. No price movement on European pistols, however, more’s the pity.

      Where abouts in CT are you?

  15. avatar Human Being says:

    I’ll believe a gun-inventory glut when I see a complete line of Kel-tec products in stock at a gun store. Any gun store.

  16. avatar Justice06RR says:

    I still don’t think supply has caught up with demand, in certain aspects of the firearm industry–AR15’s for example.

    Many AR parts are always out of stock or back-ordered. Try finding Spikes Tactical lowers in stock, or cheap 300Blackout ammo (CTD is out of the Remington 115gr), etc. That’s probably nitpicking on my part, but if the rest of the firearm world is caught up in supply, then the AR side of it is just experiencing the boom.

    Other things like Keltec guns (KSG, PMR30) are always never in stock either as mentioned by the poster above.

  17. avatar E.J. BEAVER says:

    RE: LCP .380 Anybody except me having trouble sliding the HOLD OPEN (a hell of a name for this). Looking at FIG.4 on page 20 of the instruction manual it looks as if the person posing for the picture is going to activate this HOLD OPEN with the knuckle of his thumb. I have found no way for me to do this.
    I am a novice at this and any help would be appreciated.

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