The Finance of Guns

“The spirit of resistance to government is so valuable on certain occasions, that I wish it to be always kept alive. It will often be exercise when wrong, but better so than not to be exercised at all. I like a little rebellion now and then. It is like a storm in the atmosphere.”

The world wonders. A statement that sums up how every country perceived America’s gun-laws after Newtown. But what came afterward was an almost a childlike credulity that there exists despite the distinct degree of path-dependency in the focal lens of how American’s gun laws have evolved. Over the past twelve years about one half of Americans have applied to renew or to obtain a gun license. Over the past year alone approximately 18 million new applications were made.

Guns are expensive propositions. A typical assault rifle will cost 3000 dollars, on the lower side it can also range to just a 1000, with the tax on such a rifle like the AR-15 becoming about 200 to 300 dollars. But people often forget each round for such a rifle costs about 0.5 per round which actually increases as you purchase more. Typical practice for an A-15 takes about ten hours to fully comprehend the mechanics of the rifle. Let’s assume during this you fire 8 magazines, which is rather conservative, with a clip of .22 calibre ammo containing about twenty rounds per magazine. We can therefore assume that someone might also buy 400 dollars’ worth of ammo which is approximately equates to 1000 rounds for just a few year’s use of training.

On the upper tier, at any given moment people are worried that the standard AR-15 round, the .233 might be banned and thus it usually costs a lot more than the .22. It’s essentially a dollar per round since you’ll find from most retailers that the cost is 15 dollars per 20 rounds, plus shipping and taxes and that’s about 20 dollars per magazine for your AR-15.

Additionally, no one with an AR-15 or any normal rifle will fire non-steel cased rounds. If you’re abnormal and careless you might but this will destroy the internal mechanisms of the rifle leaving you with a thousand dollar paperweight. Therefore you’re forced into a single market where, like the healthcare industry, it becomes very heavily regulated and the actual cost of each component is essentially government controlled – constraining the supply and leading to a lack thereof and incessant waiting lists with the end result of linearly increasing prices.

So in essence, buying any rifle basically is dependent on the cost and ability to wait for low-cost ammunition. No one can handle any rifle, of any make, without buying a vast amount of ammo (however expensive). Buying a lot of ammo nowadays is very difficult considering the very high upfront cost and the inability for a typical consumer to find a Costco-like business willing to dole out 10,000 rounds at a cut-rate price. If anyone and everyone is forced to buy the ammo clip by clip – and nowadays such prices increase due to the backlog of orders for anything that can reasonably stop a human-being – this goes from expensive to simply extortionate.

So where does this leave investors? Obviously every incident leads to an overall surge in price. Every incident also leads to enhanced grandfathering clauses where governments will ban all instruments of death of a certain make from point A onward, leaving their original owners unmolested. The market lacks the ability to buy ammo options like cotton, or bonds, and wine. You cannot receive shipments of large crates of ammo and hold it in storage and not pay tax on it until it leaves, like hundreds of other commodities. Hoarding ammunition is quite a value-creating proposition but also rather risky when you get a knock on the door from the ATF Bureau Agent.

While incidents like Newton, by my standard calculations, happen every two years with about 10 more people dying in a massacre. It goes to show that this surrender by civilized man, taking revenge of members of their own country is certainly not an expression of any kind of truly revolutionary or democratic temperament, but another reminder that history is a tragedy and not a morality tale.

Weapons and ammunition will play a key part in America’s story for the next century, and the price seems to be going up with a degree of freedom from about 5-10 times the rate of inflation. Closing further loopholes that will happen in the coming few years, with the assault weapons ban perhaps coming in the next ten years, will probably mean further spikes. But, overall, as the most armed country in the world at least there’s some degree of an open market for the things Americans seem to most value, financially, in terms of their personal freedom beyond American Pie and Jagermeister: blood and iron.