Is gun-shopping like playing the stock market?

[cchris]

It seems like in today's day and age, firearms are starting to resemble the stock market. Obama gets elected and the price of guns soars. Everyone runs out and buys firearms, and the prices start to drop. I can see the price going up again if a bill comes on the table.

Plus, firearms are also a great investment. They hold their value much better than other investments (i.e. cars, non-waterfront real estate, etc.) and can more easily be kept up with and maintained, for a fraction of the cost of keeping up with the two aforementioned.

After reading a thread on the Saiga 12 and seeing the price drop $100, I thought "hm, I'll wait until it drops more. Then if it starts to go up I'll just buy then." At that point, I immediately thought of the stock market and the general method for buying stocks.

Now I don't buy stocks, but my friends do and that's the generally "safe" way to do it, as I recall. So what do you think, do stocks and firearms have something in common?

 

[Tamlin]

"Do stocks and firearms have something in common?" Well, rifles have stocks!

 

[DoubleTapDrew]

I imagine some gun shows after the election may have resembled the floor of the NYSE with folks waving cash and trying to buy.
I don't consider firearms investments unless you plan to sell them and make money, which I don't, unless it's something I really don't ever shoot and have no attachment to (and then I just want to break even if possible).
I hate speculators driving up the prices at the fuel pumps and I hate speculators driving up prices at the gun shops. Plus this one is a constitutional right that enabled creating the United States, yet many people today seem to enjoy destroying it.

 

[GRIZ22]

Supply and demand are terms more appropriate to firearms.

 

[LemmyCaution]

No.

When your speculative firearms 'investments' don't pan out, the federal government will not give you a bail out (it's not a bail out... It's a bail up!)

 

[Shooter973]

No!!! I've never lost money on any guns, can't say the same for stocks....

 

[Tommygunn]

Stocks are generally a good investment, over the long haul. Right now, we're in a recession, and we're hurting, so people will sour on stocks. Last March the DOW was down to @6,200 or so, and when you realize it had been up to the 14,000 level, that's a horrible shock.
I was severely hurting, as thousands and thousands of others were. Now the DOW is @ 8500, and seemingly stuck in that vicinity.
But if the experts are right and the economy improves later in the year, that might change.


A few guns become more valuable. But that's not why we buy them. A gun is not that kind of investment. It's a tool. We use them to hunt, for target practice, to defend ourselves with.
Any gun likely to be valuable probably already costs an arm and a leg right now, anyway.

 

[danprkr]

Well, viewed in one way, yes guns can be a good investment. Like someone else said I've never lost money on a gun. I've never went shopping for one as an investment, but I have bought some I knew I was buying to sell simply because the money was too good to pass up. And, I'd do the same again tomorrow if you have something to sell.

But on top of that they are a durable good, that holds their value well. Probably on the whole you'd do good to break even with inflation etc, but that's better than many so called legitimate investments. I can see someone putting a part of their portfolio into guns as a hedge. Much as some put part of their portfolio into gold as a hedge. Assuming I hit the lottery I might do the same. Who knows? Especially if the 2010 election changes the political situation such that the costs come down, I might buy some stuff to throw in the safe for the next round of madness.

 

[Speedo66]

I wouldn't compare them to the stock market, more like a commodity. Prices go up, prices go down, except guns seem to be more stable in the long run.

However, you can't take a commodity certificate out and have fun with it while you're waiting for it to go up, big plus to guns!

 

[hardluk1]

I have bought 6 guns this year and bought all under retail but then again the bonds that i have bought also sold at under face value. and tax free. wopeee

 

[cchris]

Well I do see everyone's point. I'd never feel particularly attached to a stock, whereas I do become attached to my guns and I don't want to get rid of them. I have a friend who can't keep anything for more than a year before he sells it, and he doesn't have to work, simply because his "job" is buying stuff for cheap and selling it for twice the value. Ever since he got his SC driver's license (he's from NY originally), I got him into guns, and he's already sold one for twice what he paid, since he bought it before the "frenzy" and sold it during it. So for him, I suppose you'd say they're a good investment. For the rest of us who feel attached to what we own, probably not the same case.

 

[Texpatriate]

Insofar as "buy low, sell high" is a wise principle for both guns and stocks or comodities (and a whole lot of other things), yes.

However, hoarding a bunch of black rifles in "hopeful expectation" of a future assault weapons ban is down right treasonous if you ask me. Hoping to profit from the curtailment of civil liberties guaranteed in the Bill of Rights is an attitude Benedict Arnold would be proud of. I'm not saying that is what you want to do, but some are.

I'm not saying that you shouldn't have the right to sell at price that is appropriate for demand, or that you shouldn't "invest" in firearms though.

 

[huntsman]

It seems like in today's day and age, firearms are starting to resemble the stock market. Obama gets elected and the price of guns soars. Everyone runs out and buys firearms, and the prices start to drop. I can see the price going up again if a bill comes on the table.

These are abnormalities that have affected the gun market.

What is really the concern is the loss of purchasing power of the dollar.

This in itself is the best reason to buy guns and ammo now, not only will you not be able to get the same gun for the same money but it may come to a point were new guns just aren't available because they cost to much to make.

 

[benEzra]

Only if you're buying guns to sell later. If you're buying them to own and use, I don't see many parallels.

Although I will say that I wish I had put all those 401(k) contributions 2003-2008 into guns...I'd have come out WAY ahead. Of course, I'd have also come out ahead if I had thrown half the money in the trash and stuck the other half in my mattress...

 

[Lone_Gunman]

However, hoarding a bunch of black rifles in "hopeful expectation" of a future assault weapons ban is down right treasonous if you ask me. Hoping to profit from the curtailment of civil liberties guaranteed in the Bill of Rights is an attitude Benedict Arnold would be proud of. I'm not saying that is what you want to do, but some are.

Or, you could look at it as patriotic.

If the manufacture and sale of new assault rifles is banned, then our supply will depend on how many are sold before the ban. So if everyone who wants one AR bought three, they would be able to pass the other two onto future gun owners after the ban.

This of course assumes that these weapons would be grandfathered in.

So it could be patriotic, from a certain point of view.

Right before the 1986 closure of the machine gun registry, many people bought several class III weapons. Those are the only weapons that newcomers are now able to buy.

 

[Oro]

As a former institutional stock and futures broker, and investment manager, I can say pretty condifently buying guns in general is NOT like buying stocks. Used gun prices do not move based on fundamental economic growth and intrinsic value - they move based on the price of new guns and/or some perceived collector value.

Used gun values lately have gone up out of proportion to past rates for one reason - technology. The internet has changed the used gun marketplace from from local penny-saver ads and gun shows to a national electronic marketplace. More buyers can now find used guns for sale and the gap has closed between new/used prices somewhat. This rate of change will decrease in the future as internet sales reach the saturation point, and I think we are almost there.

Plus, firearms are also a great investment.

Guns make pretty bad investments over the long term. They basically just keep up with inflation. Here's an example:

My dad sold a very mint 1975 Colt Series '70 Government model in 1980 for $275. I bought a very mint 1974 Colt Series '70 Government Model last month for $700. If you do the math on the inflation, that's almost exactly the same price.

Here's another example. In 1902, a new S&W M&P would set you back $13.75. In good condition, that gun will sell today at auction or at a gun show for about $300 to $350. The value of $13.75 in 1902 in today's dollars is about $340.

There are guns that don't follow this perfectly, but most do, actually. If you had put your money in a savings account and just kept even with inflation, you'd have done exactly the same. If you do this for lots of guns, you'll discover there isn't a huge annual upside/downside to used guns. And if you factor in wear and tear (e.g., you actually use the gun regularly instead of keeping it in a safe or drawer the whole time), the price is generally negative.

So the best you can really say for most guns is they are an OK savings vehicle, but not a "great investment." There are always inefficiencies in the marketplace, like C&R mil surp guns you coul buy and then flip later as people start to appreciate them (like AKs and SKS's, for example). But again, as more people now know about C&R licenses and have internet access to wholesaler's inventories, this too will start to disappear rapidly. There are indeed guns that the market under-appreciates and you can buy and turn an inflation-adjusted profit on, but that requires the same skill set as a stock investor - the ability to find value where others don't see it and the patience to wait until others catch up to your insight. There are certain guns I've laid away like that over the years and genuinely made money on, but that is not the same as just broadly trusting that "guns are a good investment."

So, I never worry about buying a (quality) used gun and loosing money on it over the long term. But as far as broadly trying to make money on guns as an investment vehicle, that's not too wise.

 

[Lone_Gunman]

So the best you can really say for most guns is they are an OK savings vehicle, but not a "great investment."

This is true. However, you can also be certain that the value will never drop in value to zero, assuming no change in the current political environment. Additionally, in times of economic hardship and political uncertainty, guns tend to hold their values better than some other forms of durable goods and real estate. For example, diamond rings have fallen in price as the demand for them shrinks as unemployment rises and businesses collapse. The prices of diamonds rings will fall further as we slide deeper into socialism. Economic hardship and political uncerty actually increase the value of firearms.

I am certain my guns are about the only part of my assets that have not suffered a loss in value over the last year. Your AIG and GM stock may fall to nothing, but a Colt 1911 is always going to be worth something. Plus, a gun is a whole lot more fun to play with than a stock certificate.

I don't think it is unreasonable to consider your gun collection a part of your overall portfolio. Mainly I see them as a hedge.

 

[jad0110]

Good post Oro, you beat me to it.

I remember doing the same calculation a while back, and I drew the same conclusion. I think the guns I sampled had an average annual return of a little under 4%, basically the inflation rate.

Most CDs or tax free muni bonds do better. Not to mention the stock market over a long time period.

This is true. However, you can also be certain that the value will never drop in value to zero

First, unless you are a serious investor, I'd stick to mutual funds with a proven track record over single stocks. But seriously, the odds of my mutual funds going to zero are pretty close to nill. In order for that to happen, all the companies that make up that portfolio would have to basically become worthless. If such a situation were to happen, then things will have gotten so bad (ie, an asteroid strike or thermonuclear war) that no one will really care what their gun collection is worth: just that we have them as VERY necessary tools for survival.

So guns make great tools, and of course are just plain fun to collect and shoot. But I'll stick to boring mutual funds with proven management in Roth IRAs for retirement. Eventually, I may consider adding paid-for real estate to my retirement plan.

 

[Lone_Gunman]

So guns make great tools, and of course are just plain fun to collect and shoot. But I'll stick to boring mutual funds with proven management in Roth IRAs for retirement.

I will never have as much of my money invested in any stock market related product as I did before the current melt down. I think the current melt down should be a wake up call to many of us on what we need to be doing with our money. If you were heavily invested in stock market, and are 50+, I do not believe you will have enough time before retirement for you money to get back to where it was.

If such a situation were to happen, then things will have gotten so bad (ie, an asteroid strike or thermonuclear war) that no one will really care what their gun collection is worth

If things get that bad, I think the guy with 10 ARs in the safe will be the richest man in town.

 

[hardluk1]

Anyone pay'n retail or higher for a gun is impulse buying. There is no reason not to buy from the a local guy who will allmost allways offer a discount and my sell whats on the wall with some reduction of cost to. Maybe not as good as ordering and If not you need to go some where new. I have not found a smaller town gun shop that is hard to deal with and it did not matter withit was gun ,bow or fishing stuff. Stay out of stocks unless have money to just play with.

 

[LightningJoe]

Guns aren't like stocks. They can be an investment, but they're a commodity like oil or gold. They've got advantages over commodities that have no intrinsic value or which could lose their value if things go really wrong. Oil's no good if the global economy collapses and gold isn't worth anything if what you really need is food.


Guns, on the other hand, would retain their value even in a Mad Max situation. As long as you can get ammo, that is. If your potential trading partners don't think ammo is going to be available, the value of your guns could take a hit.


In a good economy, though, guns probably aren't much of an investment. That's why gun stores sell guns instead of hoarding them. Still, there is such a thing as diversification. Having some guns as part of your portfolio might make at least some sense.

 

[danprkr]

If such a situation were to happen, then things will have gotten so bad (ie, an asteroid strike or thermonuclear war) that no one will really care what their gun collection is worth

If things get that bad, I think the guy with 10 ARs in the safe will be the richest man in town.

So true. And, I hope to be that man.

Seriously, a few guns a couple of months food in long term storage, and if TWAWKI ends, and you're fortunate enough to be a survivor suddenly you will find that you are a rich man. Problem is how to survive until that time, and as I said initially (Lone_Gunman, Oro didn't beat you to it until after I did. He just went into more detail ) as an investments guns are probably a good hedge, and certainly more fun than stock, but not going to do much more than pace inflation. Of course it is also true that they'll never be worth zero, but it would take a huge social upheaval to make them more comparatively valuable than any other commodity.

 

[Texpatriate]

Or, you could look at it as patriotic.

I see what you're saying, and I could agree with you if someone is "benevolently hoarding" for the purpose of passing rifles on to children or grandchildren (I have done this myself), or even to have extra rifles to give or sell (at a reasonable price) to fellow citizens if the time were to come for the people to rise up in armed resistance against an oppressive government.

That's not representative of a lot of what we've seen since the election however. What we've seen is a lot of guys buying up stripped lowers (for example) in hopes of selling them for $500 a pop "when the ban comes", and dealers speaking in hushed tones about "you better get one now before Obama bans it". As recently as two months ago, I've seen asking prices on stripped lowers for as much as $300. This is nothing more than speculators driving up prices similar to what we saw with oil last year.

Do I think that someone has the "right" to speculate on firearms? Yes, that's how our economy works (supply and demand). Do I like it, or think it's ethical? No, I don't.