The gun makers and the NRA may consider President Barack Obama to be their #1 enemy, but the financial facts prove just the opposite is true. In fact, the entire Obama presidency has codified an indisputable new economic fact: when American politicians talk about more gun control, more Americans buy guns... LOTS of guns. And the gun maker stocks go up... WAY up.
Today was the ultimate test for the stock market part of that new law, with the overall market down sharply and the Dow 30 pushing a near 500 point loss at one point this morning. And the theory is passing with flying colors. Smith and Wesson shares surged more than 6% before noon while Sturm Ruger shares were up well over 2% before the halfway mark in the trading day. This is all in reaction to the leaked reports over the New Year's holiday that unofficially announced President Obama is seeking to use new Executive Orders to broaden the scope of background checks on gun buyers.
Of course those surging stock prices are based on an expected big boost in sales. Several reports before the end of the year estimated that 100 million new guns have been sold in the U.S. since Barack Obama took office. The sales tend to surge the most after the President makes a public statement following a mass shooting. Americans who already vigorously defend their 2nd Amendment rights understandably get a little nervous when they hear that presidential rhetoric and they become more likely to buy more guns. The same thing happens to people on the fence about purchasing firearms when they start to think they might forever lose their chance to do so very soon.
You don't even have to be in office to create this effect. When Democratic Presidential front runner Hillary Clinton simply Tweeted a pro gun control message on December 2 after the San Bernardino shootings. And that helped spark a nice rally in both Smith and Wesson and Sturm Ruger shares, (Smith and Wesson shares rose 18% that week while Sturm Ruger surged 9%). Overall, Smith and Wesson shares are up almost 700% since the Obama inauguration, while Sturm Ruger is up 800% since January, 2009.
These results are no surprise to anyone who follows the free market and classic marketing techniques. But they seem to be a real foreign language to the White House and the Democrats overall who don't seem to get the fact that if they really want fewer guns in the hands of all American citizens, the better strategy would be to do something else besides talking about gun control in such dire and drastic terms.
But when pundits poke fun at Democrats and liberals for "unintentionally" goosing gun sales and stocks, they can sound pretty naive too. Because people from both sides of the political divide in America have to ask whether actual progress on reducing gun violence is really what the Democrats want. I say that because if reducing gun violence is what we want, we've already achieved that in America beyond many of the experts' wildest dreams. The Pew Research Center confirmed this recently by showing that deaths by gun violence are down an impressive 50% since 1993. Of course we'd like to see even more of a reduction in all violent crime, but what true opponent of gun killings 23 years ago wouldn't have embraced a 50% reduction in those killings with joy?
The answer to this apparent paradox is that politicians are rarely really interested in any cause other than getting elected and re-elected. Scoring political points with the liberal base and most of the news media is a lot easier than actually doing something about gun violence. Savvy Democrats like President Obama and Secretary Clinton know this and there's simply no way they care more about actually reducing violence than they do about making gains in the polls or at the next fundraiser. I don't even think you have to be a real cynic to realize this anymore.
There's a similar danger for the true supporters of Second Amendment rights when it comes to Republican candidates. Talking tough about protecting gun rights is just as easy for Republican politicians as it is for Democrats to talk tough about gun control. Voters on both sides need to figure out when a politician is actually doing something and when he or she is just pandering.
For now, it's the liberal voters and everyone else who really wants to restrict gun ownership who have to ask themselves if their current leader and his presumptive replacement are listening to them or just putting more guns on the streets and cash in the gun shop registers. And it's up to investors in gun stocks to ask themselves just how much they want to bet on this trend continuing through 2016 and into the next administration.