AR-15 As An Investment

[legion]

I hadn't heard this before. No one I know is doing this.

http://online.wsj.com/article/SB123984046627223159.html

Like many gun enthusiasts, Mr. Chambers, a manager for a door wholesaler here, believes President Barack Obama and the Democrats in Congress soon will reimpose a version of an expired federal ban on the sale of so-called assault weapons. If such a law passes, he figures his collection -- enough guns, ammo magazines and weapon parts to assemble about 30 AK-47s, AR-15s and other semiautomatic rifles -- could triple in value.

"A guy could easily make a lot of money," says Mr. Chambers, 47 years old, while at Autrey's Armory, a gun store about 20 miles south of Atlanta.
...
But it's also clear that part of the gun-buying rally is driven by people like Mr. Chambers who are buying weapons the way others invest in a hot stock. The buying is pumping up prices. Many popular models of guns are back-ordered for a year or more. Some manufacturers are operating plants 24 hours a day. According to the 2009 edition of the Blue Book of Gun Values, the average price of European-made AK-47s -- the famous Soviet-era military weapon now made in several countries -- doubled from $350 last September to more than $700 by the end of 2008.
...
Bert Collins, an Atlanta commercial real-estate manager, recently bought two AR-15 rifles for about $1,600 each. He's keeping one in its box, untouched, with the hope of selling it at a profit should Congress re-enact the law, which expired in 2004. "It's certainly a better investment than my 401(k) has performed," Mr. Collins said.

Bubba Sanders, owner of Bullseye Supply LLC, in Brandon, Miss., said he has "a number of doctor clients whose financial advisers have told them to invest in ammunition. Beats the hell out of money markets and CDs. You can double your investment in ammunition in a year."
...
As gun-ban worries have made inventory scarce, Joshua Works, president of Mission Essential Inc., a large gun store in Hinesville, Ga., has flipped some of his own stock for a profit. Last year, he says, he sold a variant of an AK-47 for $400. He bought it back from the owner in January for $550, then quickly sold the same gun again for $750. AKs are a particularly good investment, he says. His company's sales have risen about 30% since the election, he says.

Mr. Works ran ads on local television highlighting fears of a weapon ban before and after the November election and says he's planning a new spot that promotes guns as a good investment. "You can buy gold or silver, but they go up and down," he says.

On a recent weekend, Ray Delashmutt, a 28-year-old flooring contractor in Auxvasse, Mo., bought parts to build 15 AK-47 rifles. He says he spent about $6,000 but figures he can eventually sell the 15 weapons for at least twice as much. "Military weapons have always gone up in value and those are the only guns I invest in," he said.
...
Of course, like all investments, guns do fluctuate in value. Weapons whose prices rose during the previous ban fell once it was lifted. "People I know in 2000 were buying Colts for $2,300 or $2,400," says Dennis Williams, the owner of Guns & Leather Inc. in Greenbrier, Tenn. "Now you can buy a new Colt for $1,400."

That the bubble could burst doesn't appear to be fazing buyers. "Right now even used semiautomatic rifles are selling like crazy," says Lawrence Keane, senior vice president and general counsel of the National Shooting Sports Foundation, which represents manufacturers and retailers.

Come on!

This has all the classic trappings of a bubble. Go out and buy an AR-15 if you want it to shoot, but don't buy it for an "investment". You're not going to come out on top by following the herd. This will not make up for your losses from the dot-com bust, the real-estate bust, the oil bust, or the stock market bust.

I have my doubts about whether this story is real or they just found a few paranoid individuals to write a story about and mischaracterized them as being more representative than they really are. I also think trying to predict the form of a future assault weapons ban based on the structure of a past one is a fool's errand. If the factions that desire another AWB had the political capital to get it reinstated (and they do not), they would certainly fix the loopholes on the old one such as "grandfathering" and basing the ban on cosmetic features over function.

[Halm]

I spend sometime on a few firearms forums and the folks there are buying now because they are afraid they will be pulled from the market by the current administration. I haven't heard anyone buying for potential future profit. And I agree with you on it being a classic "bubble" market.

[legion]

Is it possible to short-sell a gun?

If there is any truth to this article I'm pretty sure we are headed for an oversupply and they're going to get cheap.

[Halm]

Assuming these weapons remain available, I agree completely.

[jyl]

There are two gun stocks, SWHC and RGR. Both have had big up moves, might retrace some if/when gun sales decelerate from current appx +30% YOY rate. Neither has all that much exposure to "assault rifles" (SWHC sells a few AR15s and RGR the Mini-14), and some company-specific things going on at each. You'd have to do the research and decide if you want to make the bet. I sold SWHC just below $5 recently. Otherwise, I don't know of any way to short the gun business.

[rattlsnak]

I know at least 4-5 people that have done exactly that, for exactly that reason..

[gtc]

Some AR prices on gunbroker have come down a bit in the last few months. One of the guns I've been looking for has come back down to the MSRP.

[nostatic]

Personally I hate people like this. They have no interest in what they're buying, they only want to make "easy" money at the expense of other people who actually want to use things.

[jyl]

I suspect that many of the gun investment bulls have very strong ideological beliefs about the gun industry, and are not being as objective about the investment decision as they could be.

[Jeff Higgins]

Originally Posted by nostatic

Personally I hate people like this. They have no interest in what they're buying, they only want to make "easy" money at the expense of other people who actually want to use things.

In my offbeat world of black powder cartridge rifles, there once was a man who was buying up approximately 40% of the production of one of these small rifle companies. At the time, the waiting list was about five years deep on this particular rifle. This man was happy to sell you one for damn near double MSRP, promissing no more than a three to five month wait.

Some folks in these circles liked to say it was simply "supply and demand" capitalism at its finest. The majority saw it as opportunistic price-gouging. The shortage in this little cottage industry had been, in a large part, artificially created by one man's hoarding.

Well, what goes around comes around. Some years later, all of these little ma and pa specialty rifle manufacturers have pretty much caught up. Many who purchased these rifles because they were the "hot thing" years ago have now found they do not like all of the extra work associated with shooting black powder cartridges, and have also found these rifles do not shoot well with smokeless. They are selling theirs off (we are seeing the same thing in the early 911 market, by the way, as the luster has worn off for so many who thought they wanted one).

So now there is a glut of these rifles. There is no reason to buy one from this man at his inflated prices, and he has dropped them accordingly. Problem is, this is a very small circle of dedicated shooters who communicate with one another quite well and quite often. The word is out. What goes around comes around. Most would not purchase from this man if he offered his stock at half the going price. Most would prefer to see the greedy bastard buried with his inventory. So it goes... karma...

[jyl]

Originally Posted by Jeff Higgins

Many who purchased these rifles because they were the "hot thing" years ago have now found they do not like all of the extra work associated with shooting black powder cartridges, and have also found these rifles do not shoot well with smokeless. They are selling theirs off (we are seeing the same thing in the early 911 market, by the way, as the luster has worn off for so many who thought they wanted one).

So now there is a glut of these rifles.

Interesting. Is that why Thompson/Center is doing so badly, assuming it is? At least, that is how it appears to be, from the SWHC results. SWHC bought T/C and it has been a bad deal - SWHC's long gun biz results have been disappointing.

[Jeff Higgins]

Originally Posted by jyl

Interesting. Is that why Thompson/Center is doing so badly, assuming it is? At least, that is how it appears to be, from the SWHC results. SWHC bought T/C and it has been a bad deal - SWHC's long gun biz results have been disappointing.

I'm not sure what is up with T/C. I know S&W bought them, but I have no idea what the story behind that might be. T/C manufactures muzzle loaders, not the black powder cartridge rifles to which I refer. The rifles I'm refering to (as a genre) are the reproduction single shot breech loading Sharps '74, '75, '77, and '78; the various Winchester High Wall repros, Remington Rolling Blocks, Ballards, Stevens, etc. These are chambered in traditional late 19th century black powder calibers, the most famous and common being the .45-70. These were transitional rifles, using the old propellant of the muzzle loader (black powder) in the modern brass cartridge case, enabling rapid loading from the breech. This was a very short era in firearms terms - the '70's through about the turn of the century, by which time smokeless powders were edging out black.

[jyl]

I see. Thanks.

SWHC bought T/C to get into the hunting rifle biz. They introduced a S&W branded hunting rifle which has been a flop, and so have been their imported shotguns. It didn't help that sales of hunting rifles/shotguns slumped hard in late 2007 and through 2008, and the industry suffered an inventory glut which they have had to work off. As best I can tell, sales of the T/C-branded guns participated in the slump. I do not know if the hunting rifle/shotgun market has started improving. The major sporting goods chains (CAB GMTN etc) have been reporting better results in their hunting/fishing departments over the last two qtrs, but I haven't seen it in SWHC's long gun results. I didn't pay much attention to the last reported qtr though.

[Jeff Higgins]

It's no secret here that I'm into some pretty oddball stuff, one of which happens to be lever guns. Marlins in particular. The other is single shot rifles, both the older traditional ones and modern examples, like the Ruger #1 in particular. I can't think of a more purpose-built pure hunting firearm than a big bore lever gun or single shot. I'm always on the lookout for an interesting example of either. Anyway, I have found the supply of new examples of either to have completely dried up this year. No one can tell me when Marlin might ship the next run of anything, nor Ruger another run of #1's. So some hunting rifles, at least, have vanished in all of this. Not that they ever make all that many of either to begin with, but there are usually a few in the pipeline. Not now...

[tabs]

Higgins is talking about Shiloh Sharps...

As of today the used and collectible firearms market is strong. It may not be pushing new levels but is holding firm at more or less the old level.

In the past 3 or 4 years I have seen nearly a feeding frenzy to buy collectible arms. As with everything certain genres such as Luger's or Colt SA's having leveled or gone a bit soft only to be succeeded by Winchester Model 12's etc.. This phenomenon seems to be a matter of catching up to something that has already made the jump in price structure.

The idea of a bubble market in arms has been in the forefront of my thinking for some years now. Ever since the WSJ article stating that antique firearms were on a par with art as an investment, were under valued in 1998 the price has been on the rise. However I keep being astonished that the market seems to keep going ever higher without slow down. The answer to this phenomenon seems to lie in the fact that the collector market remains somewhat small which induces stability. With an ever increasing population and finite supply it is obvious that the collector pool is increasing and prices are gong higher.. Now with the Gun Control mindset of the Dem's you are adding a whole new demographic to the firearms calculus.

My feeling is that so long as the Dem's have a monopoly on political power the price of those assault thingys and ammo will remain in great demand. This fear will not subside. The question is whether the demand by people who want these things will eventually be satisified and sales level off and even fall back to prior levels.

In 1992 in CA when it was announced that Assault Weapons would be banned there was an immediate rush on them. People who had no intention of buying one suddenly felt the need and want. Sales doubled and tripled. For years afterward the arms market in CA was slow because people had spent their money on assault weapons and not other arms that they might oterwise have bought.

However the political and economic mix coupled with the threat of civil instability might just feed the American paranoia resulting in the ever increasing arming of America. Don't you Tread on me mtherfker is going to be the new mantra.

[tabs]

In 1998 the WSJ ran a story about the investment quality of atique or collectable firearms being on a par with art, and the fact that his market segment was undervalued. After which the collectable arms trade has never looked back.

The event which prompted the WSJ article was the sale fo a Woodward SXS shotgun I believe in 28 GA or 410 Ga which was made for the President of Standard Oil Co in 1940. the price realized at Devines Auctions was $220,000.00. The shotgun was purchased by Michael Zomber a antique and collectable arms dealer who was located on Washington Blvd in Culver City, CA. Zomber apparently had no trouble selling the shotgun within a month or so of the auction. Zomber eventually fell afoul of the State Board of Equalization for not paying his sales taxes and was forced to leave CA. Later he again ran afoul of the authorities and has done some time with either the state or federal authorities.

[tabs]

Another interesting little sidebar story is about an antique arms dealer by the name of CW Slagel out of AZ....CW is a big man who is hard to miss, rumor has it that he is a Medal of Honor receipant, was high up in the DEA and had a contract on his life by one of the Columbian Drug Cartels. One night CW awoke to find 6 assassins in his house who he promptly dispatched to their God with a knife..

However I digress, at one of Little John Gangles antique gun auctions I saw CW drop a cool 250K on a pair of Philidelphia Derringers made by John Deringer in the 1860's. Several years late I asked CW about those guns and this is the story he related to me. He bought those guns with a woman partner, they offered them around for about $325K with no takers. CW then did his homework and found that the guns were sold by the son of Secratary of State under Lincoln, Willaim Seward in 1920. with that provenance CW had no trouble selling the pair of pistols for $425K. The upshot was that after the sale those same people who refused to purchase them at 325K were upset that they were not offered them after the information about them surfaced.

To this day I still kick myself about not buying a #1 1877 LR Sharps rifle with an asking price of 20K from CW. I probably could have bought that gun for 18K as CW paid 16K at a Butterfields Auction. But that is past tense.

[MotoSook]

Here's what Barry had to say today:

Reviving a ban on assault weapons and more strictly enforcing existing gun laws could help tamp down drug violence that has run rampant on the U.S.-Mexican border, President Obama said Thursday.

Speaking alongside Mexican President Felipe Calderón, Obama said he has "not backed off at all" on a campaign pledge to try to restore the ban.

"I continue to believe that we can respect and honor the Second Amendment right in our Constitution -- the rights of sportsmen and hunters and homeowners that want to keep their families safe -- to lawfully bear arms, while dealing with assault weapons that, as we know here in Mexico, are used to fuel violence," Obama said.

The rest of the article here.

[Aerkuld]

Originally Posted by Souk

Here's what Barry had to say today:

Quote:
Reviving a ban on assault weapons and more strictly enforcing existing gun laws could help tamp down drug violence that has run rampant on the U.S.-Mexican border, President Obama said Thursday.

Quote:
Speaking alongside Mexican President Felipe Calderón, Obama said he has "not backed off at all" on a campaign pledge to try to restore the ban.

Quote:
"I continue to believe that we can respect and honor the Second Amendment right in our Constitution -- the rights of sportsmen and hunters and homeowners that want to keep their families safe -- to lawfully bear arms, while dealing with assault weapons that, as we know here in Mexico, are used to fuel violence," Obama said.

The rest of the article here.

Why would a member of one of these drug cartels want an over-priced semi-automatic AR-15 smuggled in from the USA when they can get a fully automatic AK-47 for peanuts from central America?

What am I missing?

[MotoSook]

Beats me why they'd bother...but I read an article today about how dead cartel hitmen are celebrated and lavished upon in death with $100,000+ tombs paid for by their patrons.

So over priced US weapons? Chump change...and it's available without waiting for a container to arrive.

The odd thing about that article is that a part of me thinks Barry is just playing this card to keep people happy and the ban may not happen....or maybe just a modified ban. As I stated in a different thread...weapons and ammo sales is a good economic stimulus.

So it looks like the ban will continue to be dangled about...and money will keep flowing.

I keep thinking that the smart invester might just buy up all the lower receivers and not bother with the whole rifle. The receiver is what gets registered, so if a ban were to be put in placed, companies could potentially continue to crank out parts which are not classified as weapons.

If some of the features that are banned (who really needs a bayonet on a rifle off the battlefield?) don't make it onto the parts...will it prevent someone from buying an AR? Is a verticle grip really necessary?

If a ban does happen, would the prices on lower receivers triple while manufactures concentrate on making parts not prohibited by the ban, thus forcing prices for parts down? In a banned situ, the full rifles would stop leaving the factory...which would drive up prices for assembled rifles on the street. But they'll be a flood of parts, so someone with a stock of lower receivers could buy cheap parts to assemble a rifle, then sell it as a pre-ban rifle.

I'm not a dealer or an investor ... just making a technical observation. It's like old Porsches. Full originally commands a high price, but if someone wants to replicate the look and performance of a 73RS...one can start with 73T and still make a good profit when it's converted to a 73RS replica.