INDUSTRY INSIGHTS

The Firearms Industry, America

and World Insights for 2009

by Andrew Molchan

A RECORD YEAR FOR GUN SALES.  As I’ve been predicting for over three years, the firearms industry keeps rolling forward to new sales highs month after month. October 2008 gun sales by FFL holders had a 55,000 increase over October of 2007.  Since the election there’s been some semi-panic buying of AR-15 and high capacity pistols in some parts of the country.  We expect a big increase in November and December 2008 gun sales over the same months in 2007. Firearms sales are on track to come in at over 12,000,000 firearms sold by FFL holders in 2008.  This will be the all time high year for FFL holder firearms sales since the NICS System started.

SOME NEW TOYS FOR YOUR CUSTOMERS.  FNH USA has a brand new shooting pack. The hard sided carry case comes with holsters, three magazines and a training barrel to dry fire.  FNH said they’re best seller is the 570 followed by the .45. FNH engineered their .45 to have a softer recoil than 1911 type models.

Mr. Charles Brown at MKS has re-designed their very popular carbine by adding an AR-like stock, and MKS has added a .45 carbine version to go along with their popular 9mm and .40 models.

Mr. Stan Smith at ProMag said that ProMag is going to introduce one brand new product per week for all of 2009.  Stan said that their new "Archangel" tactical kit for the 10/22 is a big hit. It makes the 10/22 look like a tactical AR-15 so the customer can play games at a low ammo cost. Stan pointed out that a .22 upper for an AR runs between $500 and $600, but the standard Archangel kit is only $199 suggested retail and the deluxe kit is only $299 suggested retail.  The kit has standard AR15 sights. Stan said that 14 million 10/22’s have been made. Included in the many brand new ProMag products is a very nice 10 shot magazine for the Saga auto shotgun.

Mr. Tom Tyler at Bushmaster Firearms said their standard AR15 is their number one seller, but the flat top is their second best seller. With the flat top you can put anything on the gun. Bushmaster made around 70,000 AR15’s in 2007, and will manufacturer around 90,000 in 2008.

Mr. Tommy Tacker, the SCAR product manager for FNH, said the SCAR L, the civilian model of the SCAR is shipping. He also said that the special operations forces in Afghanistan have been changing from .223 to .308 SCAR’s and that makes sense for a mountainous country.

At the NASGW Show I ran into my old friend Bob Chiarello and his son Joe from the Joseph Chiarello insurance company. Back in the late 1970’s insurance companies came under great pressure from the anti-gun forces, and 98% of the insurance companies cancelled the insurance of gun stores and firearms related companies. It was a major problem at the time. In 1981 Bob Chiarello, and our NAFLFD Association, worked together to build an insurance program for gun retailers and the industry. Building a program was difficult because you needed a major re-insurer to stand in back of the program. At the time, the NAFLFD had an accidental firearms death policy as part of the membership program. Up to that point we’d had zero claims, so that convinced a major European re-insurer to take on firearms dealers. Mr. Bob Chiarello deserves credit for solving a late 1970’s – early 1980’s anti-gun attack against our industry.

Savage Arms, CEO Mr. Ron Coburn and Mr. Brian Herrick, have a brand new metal insert rail for their molded stocks called the "Accu-Stock." Savage firearms are already excellent, and the "Accu-Stock" looks like a significant improvement. Savage has jumped into the tactical rifle market with a brand new .308 tactical. The tactical market is booming, and Savage makes good rifles so it should be a success.

Para USA has a new up graded Mil. Spec. 1911 in all black. It has the Para Trigger and is a nice addition to the upper end 1911 offering.

Mr. Dick Pelton at Taurus showed me their new 410 single shot, $138 dealer. I think about 65% of all the single shot shotguns are sold now during Christmas.

Glock has a brand new rough grip texture for their handguns. Glock will start with the G23, the FBI’s pistol, and work down the line. The people at Glock said that the G23 is the best selling commercial pistol. The 10mm Glock has the same frame.

Mr. Mark Eliason at Bushmaster showed me their brand new Bushmaster in .338 Lapua Magnum. The firearm is basically a heavy duty AR-15. In places like Afghanistan where an American soldier might be firing from one mountaintop to  another, the .338 Lapua has a 1000 + yard advantage over an AK 7.62X39. 

Mr. Frank Harris at Kahr Arms said they are shipping their .380 pistols. Frank said that one of the biggest European police forces gives Kahr’s to their undercover officers. The Kahr’s are highly dependable, but they are not what European crooks think of as "police guns," and are thus good for undercover cops.

Mr. Mark Shore at Konus showed me their two new 1X handgun scopes. All of the Konus scopes have etched glass reticles that make the Konus handgun scopes especially durable and trouble free. For the tactical game players, Konus has a great new scope, the M-30 3X12 56. It’s a true 30mm tube, ultra blue illumination, locking tactical turrets, and good on anything up to and including .50 calibers. The M-30 is the perfect mean looking scope for a James Bond movie. Mr. Shore wanted to remind dealers that Konus does NOT sell in big box stores, and only through independent firearms retailers.

EAA has several new classic hunting rifles and shotguns. They have a Russian made double rifle in .308 for under $1000.

Mr. Chris Killoy at Ruger showed me their "Tactical" Mini-14.  Yes, Ruger took the original "fun gun" and finally made it look tactical, including a Ruger 20 round magazine. The world is changing. Ruger is also introducing a brand new caliber and gun, the 416 Ruger.

Mr. Michael Kassnar at KBI showed me his brand new CD9 pistol. It’s something like the H&K P7 but with a Glock like safety trigger and not the P7 grip safety. The CD9 has everything, and the dealer price will only be around $369.  Remember the K.B.I. Jericho line of pistols? They became the "Baby Desert Eagles." Sold by Magnum Research. Magnum is moving all of the big Desert Eagle production from Israel to Minneapolis MN, and Israel Military Industry (IMI) is angry at Magnum, so now the Baby Desert Eagles are back with K.B.I.  The Jerichos are steel guns, very dependable, and in 9mm, .40 and .45. They are Baby Desert Eagles but with a new name and lower prices. K.B.I. has also expanded its line of AR15 rifles and has a Mil Spec model. Also new, a .22 conversion kit for 1911’s that’s only $269 dealer, and a new K.B.I. tactical shotgun.

Mr. David Nance at Security Equipment Corporation (SABRE) has some great, brand new, items for dealers; a new "Home & Away" combination protection kit that sells two items at once. Unfortunately, street crime has already started to increase, and will get much worse in the years ahead. SABRE has an extensive line of products that should be in every gun store for family members who don’t want to carry a gun, but need protection.

Keep reading AFI for the insider news.

2009 AND BEYOND

PREDICTIONS 

PREDICTION. Although many former Clinton administration watered downed communist are flowing back into Washington D.C. I think there’s three out of four chances that President Obama will be smart enough to stay away from the firearms issue, and will control the radicals in his own party.

WILL PRESIDENT OBAMA BE ACTIVELY ANTI-GUN?  As my regular readers know, I was born on the South side of Chicago and was a "Daley foot soldier in the early 1960’s" One afternoon, the original Major Daley was giving a training lecture to some of the party’s promising soldiers, like myself. Major Daley said, "One of the biggest differences between a smart politician and a dumb politician is that dumb politicians always rush to be in the middle of every fight. When two sides have an argument usually neither side gets exactly what they want, and if you put yourself in the middle, then both sides will blame you for what they didn’t get. If you don’t have to be in the middle of an issue, do NOT go there – keep out of it!"

DO NOT LOOK FOR FIGHTS.

For now, I’m hoping that President Obama is a good enough Chicago politician to not get in the middle of the firearms no-win issue.  As a side observation, the Middle East always was (and still is) a no-win argument for the USA. There was never a valid reason for America putting itself in the middle of Iraq.  President Bush, was (is) in Major Daley’s words, a "dumb politician" who put America into the middle of a no-win fight when we never had to be there. Vietnam was exactly the same – America never had to be there.

PREDICTION. Firearms sales at

the FFL level have gone up every month  for the last five years. Firearms sales for 2008 will be

considerably up over 2007 sales. However, by mid 2009 firearms sales at the FFL level will flatten out, and overall sales could turn 5% to 8% down by the end of 2009.

PREDICTION. For over a year I’ve been saying that for the general economy 2009 will be worse than 2008. I stand by that prediction. Do not rush out and buy stocks or real estate. They are going lower.

PREDICTION. For over a year I’ve said that the "adjustments" to the American economy will last ten years. Within the current ten-year overall downturn (2007 – to at least 2017) there have been, and will continue to be, sucker rallies. The biggest sucker rally of the last 100 years was right in the middle of the great depression. In late 1932 the Dow was 42.  The Dow went UP 340% to 187 in 1937. Then it crashed again in 1938. Personally, I’ve given up on long stocks in America. I have one long stock left, BP Prudhoe NYSE an Alaskan oil trust company. At the price I paid to acquire the stock, it’s paying 18% interest. That’s my only "keeper" on the long side.

WORLD-CLASS GOOD ADVICE.

A year ago in the pages of this publication I recommended playing the ProShare and Rydex long-term shorts rather than long stocks. That was world-class excellent advice, and its still good advice because America’s problems are only beginning. Warning, you have to be a real cowboy to ride with some of the ProShare and Rydex long term shorts because some of them go up or down by 20% from day to day. However, the ProShare and Rydex long-term shorts are up 75% to 280% over the last seven months. ProShare Ultra Short Basic Materials went form 26 in July 2008 to 95 today (250% up). ProShares Ultra Short Russell 2000 Value went from 80 in July 2008 to 146 today (79% up). ProShares Ultra Short S&P 500 went from 51 in July 08 to 105 (102% up).  ProShare Ultra Short Real Estate went from 79 in May 08 to 175 today. Rydex Funds Inverse NASDAQ-100 2X went from 12 in July 08 to 27 today (107% up). I recommended the above funds to my readers when they were still low. There will be more sucker rallies, but I stand by my 2007 prediction when I said that 2009 is going to be a very bad year for long stocks. 

PREDICTION. For the next 18 months to two years America will have deflation of asset values. After that, it depends on what kinds of mistakes the government is making at the time.

PREDICTION. There are two kinds of "recessions." Inventory recessions and balance sheet recessions. Inventory recessions are the common kind. They are a build up of excess inventory/capacity and are relatively mild and quick. Balance sheet recessions are rare. 1929 was a balance sheet recession. 2007-2008 is a balance sheet recession, and they can turn into depressions. I’m hoping for the best with Mr. Obama, but there’s a 50-50 chance that 2009-2010 could turn into a depression.  A lot of stock traders have, and still are, making the core mistake of thinking that 2008 is an inventory recession, and they have been getting killed in the market.

PREDICTION. The military budget will take a major hit under President Obama. I expect the military budget to be down by 50% four years from now. The big glamour weapons

systems will take most of the cuts.

PREDICTIION. There’s going to be a major increase in scapegoating over the next three years. Most of those blamed for America’s troubles will be mainly irrelevant to the true and real cause of the problems.

PREDICTION. America’s economic and social excesses will continue to unravel well into 2010.  After 1929 the economy contracted for three and a half years.  Looking back, the depression of 1837 deepened for four years.  The depression of 1873 deepened for five years.

PREDICTION.  Recessions are mainly local, but depressions are worldwide. Recessions are basically inventory imbalances and are self-correcting. Depressions are balance sheet problems that are unmanageable,and require major contractions. America could go into a depression.

PREDICTION. I am 99% sure that basic materials: steel, gold, copper, oil,etcetera will continue to edge downward through 2009. Even though the ProShares Ultra Short Basic Materials that I recommended eight months ago is up by 250%, when the next sucker rally hits and the above fund goes down by 20% in one day, if you can stomach bucking bulls you might think about buying some.

PREDICTION. This is not 1929 – it’s worse. In 1929 the Federal Government had almost no debts. There were only some meager veterans benefits. Today, the Federal Government is sitting on top of $35 trillion worth of debts and promises!

GRAND STRATEGY THOUGHTS.  Frankly, I am very worried. I keep asking myself, "What’s going to turn America around?"  The con game of borrowing foreign money with sub prime securitization fraud – that’s over.  Are "income transfers" to America’s slum class going to turn the economy around? Will the Chinese keep financing America’s consumption forever?  Is taxing the productive, and thus destroying entrepreneurship in America; is that going to turn the economy around? My question to Mr. Obama is, "Exactly what is America going to be producing to pay for all of our debts?"

THE JOKE BECOMES THE REAL WORLD. For years I’ve had a personal joke. When I’m in a

friendly argument with left wing Democrats (and I used to be a Democrat and in many ways I’m still liberal) I used to joke by saying, "I have the perfect election winning Democratic Party program. We put EVERYONE in America on welfare. Then everyone has money to spend, the economy has lots of money, and nobody has to work."  Now, I’m not laughing.

Ah, it’s a great life so long as you don’t weaken.

All the best

Andrew Molchan