Gun debate a window into the US soul
After the Newtown massacre at an elementary school in December, Americans rushed to buy guns. I rushed to buy US gun stocks.
The temporary plunge in the share prices of such weapon makers as Sturm, Ruger & Co and Smith & Wesson was predictable. So were their record profits, which quickly translated into rising share prices. It's counterintuitive and difficult for outsiders to understand, but Barack Obama's two-term presidency - with his leaning towards tougher gun control - has helped create a gun investment bubble.
The Newtown killing, unlike previous campus shootings, involved very young children and turned public sentiment. As gun control looked more likely, people rushed to buy guns before new regulations set in. This was the same reaction when Obama was first elected president and again when he was re-elected. As soon as it was clear he wasn't about to do anything drastic, gun buying slowed and share prices dropped. Newtown pushed Obama into action. But it didn't turn the US Senate, which last week effectively ended a major federal push to impose tougher gun-control regulations.
I was salivating over more stock price rises and profits after the Senate vote. No tough regulations must be good for the US gun industry, I thought. Well, I immediately took heavy losses. Virtually all gun-related shares, except Smith & Wesson, went down. I failed to learn the lesson of US gun regulations: the threat of tough control was what pushed people to buy more guns and earned their manufacturers record profits. Now that a major push for control of guns has been soundly defeated, the market thinks it's back to business as usual, or at least until the next massacre - and hence the plunge in the universe of gun-related stocks.
Americans have a longstanding love-hate relationship with government regulation. Regulatory fights have played out in almost every major US industry - whether it was steel and rail in the late 19th century, food and drugs in the early 20th, banking regulation in the 1930s and deregulation in the '90s, and intellectual property in the film and music industries in late 20th century. The gun debate accentuates this recurrent pattern of US political capitalism and is a good place to look into its soul.