The fallout from the November elections was, on the whole, somewhat unremarkable. Republicans retained control of the House of Representatives, the Democrats held fast in the Senate, picking up two net seats, and Obama clinched the Oval Office, as I’m sure you are all aware.
There was a momentary dip at market open on the 7th of November. This was an expected market response to a divisive and highly publicized presidential election whose practical impact on the markets were overstated, to say the least.
There were cries from the downtrodden right that this was a huge blow to capitalism and that the apocalypse was imminent, firms across the country reported plans to cut down on hours in order to avoid providing health insurance to their employees, or threatened to raise prices to make-up for one regulation or another. To listen to the media, it would seem that the reelection of President Obama struck a huge blow to American small businesses.
However, there was one sector or the economy that saw an explosion of sales in the week following president Obama’s reelection, gun sales. October background checks, an indicator of future gun sales, were up more than 18 percent in the month preceding the election and Smith and Wesson stock bounced 7.6% on November 7th despite the overall DOW drop of 2.2%. In the Birmingham regional area, sales were way up. Three days after the election, a firearms salesman with a local distributor, who agreed to an interview under the condition of anonymity, told me that company sales were nearly 50% above projected sales and that they were struggling to keep up with the sudden spike in demand. The same thing happened with Obama’s election in 2008 and around the Clinton elections in the 90s, all of this despite the fact that Obama has made only one statement about, and no administrative moves towards, any kind of firearms restriction.
The Telegraph, The Huffington Post, and (the ever dependable) Info Wars reported on this phenomenon and of course spun it in whatever way they thought would most scare their readership. I however, would like to offer a different account of this phenomenon. One based more on detailed investigation of the event rather than fear-mongering and advertisement sales.
My source at the local distributor told me that this kind of torrent in sales post-election has less to do with the election and more to do with what they called a “feedback-loop at the retail level.”
In years past, there has been a small panic among the hypersensitive gun owners of America who run out to retail stores post-election and want to buy a lot of product. More, in fact, than the retailer has in stock. The consumer then runs around town buying whatever product can be found at the retailers in town and spreading the word of scarcity among other firearms enthusiasts who then run out and purchase everything they can. Of course, we can see that this is artificial, self-fulfilling scarcity.
Before you start judging these folks, consider our collective panic when James Spann starts preaching three inches of snow bearing down on the city. Everyone runs out and buys milk, bread, beer, propane, and condoms. But knowing that everyone else will be buying these things, everyone buys early and in large amounts, more than they need really, and suddenly there is nothing left which causes more panic. This is the same thing but with deadly weapons.
Since this is an expected phenomenon, retailers attempt to get ahead of it by buying everything they can from the wholesalers and the entire process occurs on the retail level, where the retailers create shortage, and thus panic, before anything ever happens! So by the time the election rolls around, the market is in shock and the distribution is unbalanced, which amplifies the alarm, and so on.
What I am getting at is that it is not really panic among consumers that drive this economic phenomenon; it is a reaction to a reaction to what everyone else will do combined with the fear that if you don’t buy extra product and everyone else does, there may be nothing left and you’ll miss-out on the rush.
Economic events, like most events involving large groups of people interacting with one another, are usually a lot more complicated than they seem at first glance. It’s cheap (with a high payoff) to drum-up fear by reporting that guns are running out to the gun-lovers and that lots more people are buying guns to the gun-haters and then manhandle it to make some larger political point. I’m here to tell you that it’s usually bullshit and we’re all smarter than that.