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America to Recession: Make My Day

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Citizens increasingly locked, loaded and armed to the teeth.

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In a bone-chilling trend, sales of handguns have been soaring in recent months. People are arming themselves in preparation for the apocalypse.

This alarming upswing has been attributed to 2 factors: Gun owners are purchasing firearms in the last twilight hour before President Obama passes stricter gun-control laws - or the recession is engendering fear of crime and nameless mayhem. To be fair, it's more reasonable to assume the former is to blame.

Still, handgun manufacturers and gun shops are reporting strong demand. Along with weapons, ammunition is also in short supply.

"Handguns are crazy right now," Tammy Wilson, manager of Express Huntin' N Fishin' (a sportsman's supply store in Sebastian, Florida) told a local newspaper. "A lot of them are on back order."

It's no surprise that Florida and California, among other states, are seeing this craze firsthand. Their McMansion-scarred exurban communities are well on their way to becoming new American ghettos - deserted and lawless.

This isn't an exaggeration: In California's Inland Empire -- as the landlocked southeastern region of the state is known -- foreclosures are close to 20% in some parts. Squatters are occupying vacant million-dollar houses and scrounging metal to sell to scrapyards.

In Florida, the state government has actually abetted the surge in handgun sales to homeowners. A state legislative panel recently approved spending $3.8 million to expedite the processing of a huge backlog of concealed weapons-permit applications. Background checks for gun purchases in Florida more than doubled after the election, going from 32,381 in September to 63,936 in November, according to the Florida Department of Law Enforcement. The number dropped somewhat in January.

Nationally, the FBI completed more than 1.5 million background checks in November - a 41.6% increase over the same time last year.

The recent earnings report of handgun maker Sturm Ruger (RGR) suggests this is a national trend: Over the last year, the company saw its order book grow by almost 50%, from $156 million to over $233 million. Demand is hot: Out of the 776,000 units ordered, Sturm Ruger reported over 175,000 of them were on backorder.

Sturm Ruger's stock, though incredibly volatile, is near its 52-week high (but still sharply lower than it was 2 years ago). Smith & Wesson (SWHC) has also seen its stock rise, as speculative fervor has built on the apocalyptic scenario.

Even Cabela's (CAB), the outdoor-sports-and-equipment retailer, recently defied Wall Street expectations on the force of strong firearm and ammunition sales; its same-store sales rose 2.2% in the quarter. (It would be interesting to see if its camouflage gear was also in high demand.)

Few other retailers could claim such brisk shopping in this economy. Then again, unlike Cabela's, they can't dress you like Mad Max - a getup that might become recession-era de rigueur.
No positions in stocks mentioned.

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