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I gotta put on my economics professor hat for this one.

 

There is a difference between Scarcity and Shortage. Scarcity is when aren't enough goods or services to satisfy demand. A shortage is what happens when the demand for a particular good or service suddenly exceeds supply. An oil embargo is scarcity. The empty shelves before a hurricane is a shortage.

 

I think we are actually seeing scarcity right now, not necessarily a shortage. Why?

 

Ammo prices have been going up for a few years as the price of basic components go up. There is only so much copper (the most expensive component in ammunition) so ammo makers are forced to bid against other companies for copper on the spot market.

 

Take a look at the 5 year copper spot.

 

spot-copper-5y-Large.gif

 

You can see how the price of copper tanked in 2008 as people stopped building houses and the demand for pipe and wire flattened. But the price of copper has gone up steadily. We had another big collapse back in the fall of 2011. I remember you couldn't throw a rock without hitting an ammo sale at Dicks Sporting Goods back then.

 

But I also think that our currency is slowly being devalued and one hedge against this is metals. As our currency devalues, the price of commodities goes up because it takes more dollars to buy the same thing.

 

If you think I'm wrong, go to Dicks Sporting Goods and look at there ammo. I'll bet you that you will find 12 gauge Buckshot and slug, but no .22, 9mm, or .45ACP. Why? Because the shotgun cases are made of plastic.

 

So all it takes is a little panic to put a strain on the system. We have a little shortage after that horrible day at Newtown because everybody goes out and buys up all of the ammo in the pipeline. Now companies have to outbid each other to replace what was in the pipeline and it's not easy.

 

I think if this had happened in August of 08, we probably would have gotten through this fine and there would have been plenty of ammo on the shelf.

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I gotta put on my economics professor hat for this one.

 

There is a difference between Scarcity and Shortage. Scarcity is when aren't enough goods or services to satisfy demand. A shortage is what happens when the demand for a particular good or service suddenly exceeds supply. An oil embargo is scarcity. The empty shelves before a hurricane is a shortage.

 

I think we are actually seeing scarcity right now, not necessarily a shortage. Why?

 

Ammo prices have been going up for a few years as the price of basic components go up. There is only so much copper (the most expensive component in ammunition) so ammo makers are forced to bid against other companies for copper on the spot market.

 

Take a look at the 5 year copper spot.

 

spot-copper-5y-Large.gif

 

You can see how the price of copper tanked in 2008 as people stopped building houses and the demand for pipe and wire flattened. But the price of copper has gone up steadily. We had another big collapse back in the fall of 2011. I remember you couldn't throw a rock without hitting an ammo sale at Dicks Sporting Goods back then.

 

But I also think that our currency is slowly being devalued and one hedge against this is metals. As our currency devalues, the price of commodities goes up because it takes more dollars to buy the same thing.

 

If you think I'm wrong, go to Dicks Sporting Goods and look at there ammo. I'll bet you that you will find 12 gauge Buckshot and slug, but no .22, 9mm, or .45ACP. Why? Because the shotgun cases are made of plastic.

 

So all it takes is a little panic to put a strain on the system. We have a little shortage after that horrible day at Newtown because everybody goes out and buys up all of the ammo in the pipeline. Now companies have to outbid each other to replace what was in the pipeline and it's not easy.

 

I think if this had happened in August of 08, we probably would have gotten through this fine and there would have been plenty of ammo on the shelf.

 

All I got from this was "Chester Copperpot" from Goonies popping into my head.

 

Just kidding. Thanks for taking the time to do that. Pretty informative.

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It's ludicrous to blame this "lack of ammo" on the shelves on copper prices or that it's made out of metal or plastic.

 

There is no ammo because people are buying it, mostly for handguns and ARs. The last few months have both set records for the number of NICS checks. People who never bought guns, finally did. personally know of quite a few people who never had ANY interest in guns until they realize the federal government was about to take them away. THESE are the people who drove those NICS checks up and THESE people are the same who are trying to catch up on ammo stockpiles. Sure most of us here will pick up extra as we see it, but there are a lot of people who bought a gun with 1 box of ammo and realize how fast you can go through it.

 

My mid 40s cousin and her daughter, who never once expressed an interest in firearms both bought 4 guns in the past 30 days(they don't live in NJ). My best friend's wife, who again, never had any interest in buying a gun, bought two and is getting her CCW(lives in NV) with another girlfriend. There are coworkers who have come to me and asked about it...all of them women. There are others as well. My spidey sense is telling me that whatever happened to the collective consciousness of the USA, lit a fire under a bunch of women. These are first time buyers, who are now looking for ammo. That demand on top of the regular "a democrat is in office" panic, completely eliminated the supply.

 

The woman are buying pistols, the men, ARs.

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I was at cabelas in PA yesterday. There ammo section is wiped. Some odd sized stuff but majority gone. Even rifle ammo was getting cleaned. The gun dept was looking bare too. Pistols are reduced to 5-6 glass cases. Used rifles and shotguns are still there no as many to chose from and new rifles and guns still has a decent selection

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I would love to know who is buying this stuff at these prices..

Average day at the range for someone who recently bought an AR

1. Mid grade AR = $1,500

2. One magazine =$50.00

3. Fire one string of 15 rounds 5.56 = $15.00

Not to mention range rental or yearly membership

 

Sad how the frenzy had made shooting a rich mans game

 

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I think its a case of all of the above. Pricing is due to more demand than supply PLUS the fact that our worthless sack of crap government in DC is printing $85 billion of money a month. When you print money like that the cost of things go up, yes it is that simple. Demand is due to more customers than before plus many of these new customers (I'm one of them) buying stuff because they don't have any and want some. I see that I can buy online right now, much cheaper than I can buy in-person and want to have some on-hand in-case the fools in Trenton decide that they will no longer let me buy online which will just raise my cost without providing any benefit to citizens of our state.

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The woman are buying pistols, the men, ARs.

 

This I believe, especially in free states.

 

It's ludicrous to blame this "lack of ammo" on the shelves on copper prices or that it's made out of metal or plastic.

 

I respectfully disagree.

 

Just In Time inventory works great - as long as everything is humming along normally. Throw a curveball and your whole supply chain comes crashing down.

 

There is a term in investing called a "Black Swan Event" which is basically an event that is difficult to predict and deviates from what is normally expected in any situation. Now I would say that Newtown was a predictable event, but what company is going to plan their inventory around a mass shooting of children? I can only picture the looks that manager would get if he brought up that possibility in the boardroom. "Hey, guys. We need to plan for a mass killing of kids so that we can scale our supply chain more efficiently."

 

#1. Copper is the key to dragging China into the 21st century. They are consuming about 40% of all of the world's copper right now.

 

#2. You can't transmit electricity without copper. Yes, you can use aluminum and silver to some extent, but their is no substitution for Copper.

 

#3. People don't want big stinky coal plants in the backyard. That means the coal plants have to go someplace else. That means more high tension wires and more copper.

 

#4. Every new car you buy has about 100 pounds of copper inside of it. Over 8.26 million new cars were sold in China last year. That's a lot of Copper.

 

Right now, you have ammo companies bidding with Korean Car Companies on raw and recycled copper. The only problem is that US companies are chasing copper with devalued dollars.

 

So Copper prices are on their way up (due to currency devaluing) and and BAM! Something like this happens. Now the ammo companies get together and start screaming for more Copper. They can add more capacity and add more workers, but there is simply no Copper to fill the increased demand. I think this is why companies are "backordered" out to 6 months. There is just not enough copper out there to buy .

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I respectfully disagree.

 

Just In Time inventory works great - as long as everything is humming along normally. Throw a curveball and your whole supply chain comes crashing down.

 

There is a term in investing called a "Black Swan Event" which is basically an event that is difficult to predict and deviates from what is normally expected in any situation. Now I would say that Newtown was a predictable event, but what company is going to plan their inventory around a mass shooting of children? I can only picture the looks that manager would get if he brought up that possibility in the boardroom. "Hey, guys. We need to plan for a mass killing of kids so that we can scale our supply chain more efficiently."

 

#1. Copper is the key to dragging China into the 21st century. They are consuming about 40% of all of the world's copper right now.

 

#2. You can't transmit electricity without copper. Yes, you can use aluminum and silver to some extent, but their is no substitution for Copper.

 

#3. People don't want big stinky coal plants in the backyard. That means the coal plants have to go someplace else. That means more high tension wires and more copper.

 

#4. Every new car you buy has about 100 pounds of copper inside of it. Over 8.26 million new cars were sold in China last year. That's a lot of Copper.

 

Right now, you have ammo companies bidding with Korean Car Companies on raw and recycled copper. The only problem is that US companies are chasing copper with devalued dollars.

 

So Copper prices are on their way up (due to currency devaluing) and and BAM! Something like this happens. Now the ammo companies get together and start screaming for more Copper. They can add more capacity and add more workers, but there is simply no Copper to fill the increased demand. I think this is why companies are "backordered" out to 6 months. There is just not enough copper out there to buy .

 

I have some skepticism with your thoughts, but won't claim I can say for a fact that you're wrong. It's just that,

 

1) I'm not aware of any ammunition manufacturer having cited copper availability as a significant contributor to the shortage. That doesn't prove it's not happening, but what would be the manufacturer's motivation for sitting on that information?

 

2) When in doubt, I try to fall back on an occam's razor thought process. To that end, your copper-specific explination relies on assumptions that I myself haven't witnessed first hand. By contrast, I've absolutely seen a change in how much ammo the average gun owner is interested in purchasing, when given the chance to buy ammo. Guys that were normally content to just sit on a few extra boxes are suddently desperate to buy as many cases of ammunition as possible.

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A shortage/scarcity leads to hoarding and increased demand which leads to further scarcity/shortage. It's a viscous cycle.

 

You see the same thing with flu vaccines. When there is lots of vaccine, the shot is not so popular. When the media reports a flu vaccine shortage, people run out to get their shot. A little snow in forecast and eggs, milk and bread disappear from store shelves.

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This I believe, especially in free states.

 

 

 

I respectfully disagree.

 

Just In Time inventory works great - as long as everything is humming along normally. Throw a curveball and your whole supply chain comes crashing down.

 

There is a term in investing called a "Black Swan Event" which is basically an event that is difficult to predict and deviates from what is normally expected in any situation. Now I would say that Newtown was a predictable event, but what company is going to plan their inventory around a mass shooting of children? I can only picture the looks that manager would get if he brought up that possibility in the boardroom. "Hey, guys. We need to plan for a mass killing of kids so that we can scale our supply chain more efficiently."

 

#1. Copper is the key to dragging China into the 21st century. They are consuming about 40% of all of the world's copper right now.

 

#2. You can't transmit electricity without copper. Yes, you can use aluminum and silver to some extent, but their is no substitution for Copper.

 

#3. People don't want big stinky coal plants in the backyard. That means the coal plants have to go someplace else. That means more high tension wires and more copper.

 

#4. Every new car you buy has about 100 pounds of copper inside of it. Over 8.26 million new cars were sold in China last year. That's a lot of Copper.

 

Right now, you have ammo companies bidding with Korean Car Companies on raw and recycled copper. The only problem is that US companies are chasing copper with devalued dollars.

 

So Copper prices are on their way up (due to currency devaluing) and and BAM! Something like this happens. Now the ammo companies get together and start screaming for more Copper. They can add more capacity and add more workers, but there is simply no Copper to fill the increased demand. I think this is why companies are "backordered" out to 6 months. There is just not enough copper out there to buy .

 

 

I'm trusting mcbethr on this. I took a year of Econ and everything he's saying jives with the textbook.

 

Break down ammo into its components: brass, primer, powder, copper (am I missing something?). Pick the most expensive component and see where the logic takes you.

 

Thanks for the economist's perspective!

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yeah.. but all commodities are going up because of the big bad China appetite.. i don't know if that makes something not available though..

 

Obama election + Sandy + Newtown causing a shortage.

 

Copper can stay that dollar price 6 months from now, and i bet ammo will be more abundant after we get some clarity on new laws..

 

the more important question will be WILL PRICES EVER COME BACK DOWN? Unfortunately once distributors got a taste of the gold in those rounds, they are loathe to want to lower.. i'm not saying they won't get lower from here.. but i doubt October 2012 prices will be ever seen again. *fingers crossed though*

 

(sorry if i went off topic).

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Tin Foil hat people will say otherwise.....

 

But it is just hoarding..... We cleaned out the "pipeline" ..... it will settle down.

No tin foil hat here, I agree completely.

 

Rising prices for ammo component commodities will increase the price of ammo, but it won't cause a shortage. This shortage is all about hoarding, no one saw Newton coming, and it was worse than any of the previous tragedies in recent history. This will all settle down with enough time (and no more incidents occurring), but ammo prices will not likely go completely back to pre Newton prices because as the world economy recovers from the great recession demand for copper and lead will increase, driving prices higher.

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