Sunday, March 25, 2012

Daily Briefing for Sunday, March 25, 2012

Shortages Affecting Your Efforts?

Supply and Demand isn't just a good idea; it's the law.

And by that, I mean the law of supply and demand.  For those of you who weren't economics majors in college, in a nutshell supply and demand works a lot like this: the greater the demand for a product is, the pricier the product.  If demand overwhelms supply, shortages of the product are the result.  The shortages are eliminated when other suppliers step up and offer more of the product.

We seem to be getting a first hand lesson in supply and demand, courtesy of Sturm, Ruger (NYSE: RGR).  Ruger recently announced it would no longer accept orders for guns until May of this year, most likely.  Ruger's purported reason for refusing to take additional orders?  Demand for Ruger products had outstripped manufacturing capacity.

I've read a lot of chatter on gun and prepper boards lately about an anticipated increase in the prices of guns, ammo and parts.  Generally, the theory goes something like this:

  • Obama will be re-elected.
  • If that happens, he will try to impose serious restrictions on guns and ammo, similar to the 1994 Assault Weapons Ban (AWB). 
  • To prepare for that contingency, we should buy guns, ammo and parts now.
As you can already surmise, the price hikes and shortages can become self fulfilling prophecies.  Add to that the increase in core inflation in commodity prices (copper, a key component in bullets, is trading towards the upper end of its five year price range).

Look, I don't know what Obama's plans are if he gets re-elected (the odds of which I am still placing above 50%) as they pertain to guns.  I don't see him winning any NRA awards, for certain.  Gun, ammo and parts prices will likely not go down in the coming months and years, even if Obama loses in 2012.

So should you stock up?  Well, yes, especially if you are doing it in bulk to take advantage of volume pricing.  Should you do it in anticipation of Obama winning re-election and implementing more restrictive gun laws?  In my mind, probably not, since a GOP-dominated Congress would likely prevent such laws from coming to fruition.

Yes, I am well aware that the President could use regulatory authority to do what can't be done legislatively.  I would submit there's always a threat of that, regardless of who is in the White House.

Paul's advice: always take advantage of good pricing opportunities, regardless of what you're buying.  And expect similar shortages in other prepper-centric supplies (we've already seen that happen in the storable foods market in the last couple of years) in the next several months.

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