Even after last week’s steep selloff in the commodities markets, the “Flight to Safety” trade is still on…big time. Gold may have retreated from its all-time high, but applications to purchase a handgun continue soaring to record levels.
According to the FBI, background-check applications for handgun buyers are on a record-setting pace so far this year. “In this year’s first quarter,” Bloomberg News reports, “the FBI’s Instant Criminal Background Check System processed 4.25 million requests on prospective gun buyers – up 16% from a year earlier.” If the current pace continues, the number of “gun checks” would hit a seventh straight annual record.
America’s gun-buying craze stands in stark contrast to the dismal trend of overall consumer spending. Bloomberg notes that spending on guns, ammo and other sporting equipment rose about 10% during the last 12 months – or more than four times the 2.5% increase in total consumer spending. Although spending on guns and ammo has been outpacing total consumer spending for more than a decade, the gun-buying trend has been accelerating during the last few months.
Meanwhile, Wal-Mart CEO, Mike Duke, observes that the retail giant’s “core shoppers” are “running out of money much faster than a year ago.” Since many of Wal-Mart’s core shoppers live paycheck to paycheck, they typically do most of their shopping at the beginning of the month…and less of it at the end. “Purchases are really dropping off by the end of the month, even more than last year,” Duke says. “This end-of-month [purchases] cycle is growing to be a concern.”
This troubling trend is not just a Wal-Mart thing. As a retailer that averages 140 million shoppers per week to its US stores, Wal-Mart’s “concern” is also the American economy’s concern. Wal-Mart is, as CNNMoney puts it, “a barometer of the health of the consumer and the economy. Wal-Mart has struggled with seven straight quarters of sales declines in its stores.”
Maybe that’s why Wal-Mart announced last week that it would resume selling guns and ammo in many of its stores – ending a five-year hiatus. (Handguns will not return to Wal-Mart shelves, but rifles and other “long guns” will, according to a recent press release).
Your California editor is not certain that America’s “gun boom” (pun only partially intended) means something, but he suspects it doesn’t mean nothing. Roughly 14 million Americans – about one in twenty – tried to buy a handgun last year. Another 16 million will shop for a sidearm this year. These 16 million folks certainly do not share identical motives for their purchases, but they do share an identical objective: to arm themselves. They are buying handguns in record numbers because they are feeling uneasy in record numbers.
It would be easy to dismiss the “gun boom” as an irrelevant cultural curiosity…if it wasn’t so seemingly relevant. Investors are also “arming themselves” in record numbers. They are buying gold and silver and oil and almost any other commodity under the sun. At the same time, they are also unloading US dollars in exchange for almost any other currency under the sun. The Norwegian kroner, Swiss franc, Aussie dollar and Canadian dollar are all trading near all-time highs against the US dollar.
Something serious is going on here. America’s economic recovery may be much weaker than advertised, while her economic vulnerability may be much greater than widely believed.
Confident citizens do not usually buy record amounts of guns and gold.
for The Daily Reckoning
Eric J. Fry, Agora Financial's Editorial Director, has been a specialist in international equities for nearly two decades. He was a professional portfolio manager for more than 10 years, specializing in international investment strategies and short-selling. Following his successes in professional money management, Mr. Fry joined the Wall Street-based publishing operations of James Grant, editor of the prestigious Grant's Interest Rate Observer. Working alongside Grant, Mr. Fry produced Grant's International and Apogee Research, institutional research products dedicated to international investment opportunities and short selling.
Mr. Fry subsequently joined Agora Inc., as Editorial Director. In this role, Mr. Fry supervises the editorial and research processes of numerous investment letters and services. Mr. Fry also publishes investment insights and commentary under his own byline as Editor of The Daily Reckoning. Mr. Fry authored the first comprehensive guide to investing internationally with American Depository Receipts. His views and investment insights have appeared in numerous publications including Time, Barron's, Wall Street Journal, International Herald Tribune, Business Week, USA Today, Los Angeles Times and Money.
And here I thought those were but core elements of the Fabulous Mogambo Investment Plan (FMIP)!! Have I been doing it all wrong? There are those of us that have the utmost confidence that the evil, satanic, loathesome Federal Reserve will continue to QE us and our children and grandchildren into oblivion.
Confidence, gold, guns- there you have it.
And don’t forget Bill’s recommendation regarding retreat property.
What percentage of these gun and ammo buyers
are buying for financial security reasons
(such as a hedge against inflation)?
I put $3OK into ammo and guns a week before Obama was elected and if I ever considered seeling (highly unlikely) all of those purchases at this point in time I would currently give me a $27K gain. I also cashed out a 401K with several hundred thousand and put it into an 85/15 split of silver/gold which we all know have both done very nicely. Gold and silver are excellent investments for protecting from inflation, but subject to various market influences while quality guns hold their value well. Quality ammo never/never gets cheaper. Still buying all four, too!
Mr. Fry needs to buy more guns and ammo…
I posted something similar on my own blog yesterday. I really like your Trigger Happy chart.
It does not take a rocket scientist to see the end game of printing trillions of dollars by the Fed. The dollar is deflating in relation to other fiat money. The dollar will lose its place as the worlds reserve money. Thus we will have to buy our imports in Chinese or the new worlds reserve curreny. Prices will skyrocket since the dollar is worth less and less. We see it in Oil and food already. So get ready. Its predicted it could happen this year or next.
Have you ever seen a herd of cattle after they have been frightened…. Stampede!
I’m already on my retreat property…it’s the good life. place of refuge 2012 dot com
Hi Eric you said you don’t understand gun sales but my question is where did you come up with it is for handguns? You see back ground checks are required on all guns not just handguns. Let’s see we have a fiat currency that the whole world understand is worth less or in reality worthless we have high umeployment, housing market is still crashing, silver is back on the march to $50 oh yes and the big hiring news was for McDonalds. Time people learn real survival skills.
I got a shotgun, rifle and a four-wheel drive, and a country boy will survive.
We grow good ‘ol tomaters n’ our own smoke, too, ain’t too many things these ‘ol boys can’t do, and a country boy will survive.
I live back in the woods ya see, my woman n’ the kids n’ the dogs n’ me.
And a country boy will survive.
Nah, you ain’t gotta be born out in the sticks
With an F-150 and a 30-06,
Or have a bubba in the family tree
To get on down with me
Blake Shelton, Hillbilly Bone
Thanks for the wonderful article it has really helped me. Thank you for the article Eric.
The average American still has common sense even if their leaders seem to have lost theirs.
You can’t beat the basics when planning for rough times, and that includes guns, bullets, food and commodities.
Whether for actual use or for barter later on, it is the best hedge against deflation and devaluation of state currency.
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