The Intersection of Guns and High Finance
There are real consequences to every action. Right now, we are about to see the consequences of one insane person’s actions on an entire industry, at a time when we can ill-afford job losses, let alone the crippling of an entire business sector. In earnest desire to at least appear to be doing something about a tragedy, our leaders are considering actions to further control the weapons industry in this nation. That is an important distinction to understand in the heated arguments that are on the horizon – this is not really about solving a problem. On the contrary, more likely than not, any actions that are taken in the coming months by the Obama administration and Congress will do very little, if anything at all, to prevent another insane person or garden-variety criminal from killing anyone. But, it is certain that any additional gun control measures will have a very real impact on the firearms industry – from the manufacturers all the way down to the small gun shops scattered across this country.
The financial consequences have already started to become apparent, as Cerberus Capital Management has indicated that it intends to sell its interests in Freedom Group, Inc.– a conglomerate of several arms and ammunition manufacturers including Remington, Bushmaster, and Barnes Bullets. Freedom Group employs over 3,000 people, and sells products in over 80 countries, making it the largest manufacturer of commercial firearms and ammunition.
That mere intention, of course, lead Standard & Poor’s to place Freedom Group, Inc. on CreditWatch, reflecting the ratings firm’s reservations about the future of that conglomerate.
Developing implications means we believe ratings on Freedom could go down or up. In the event Cerberus’ sale of Freedom is a leveraging event, we could lower ratings. Our measure of lease- and pension-adjusted leverage was 5x at Sept. 30, 2012. In addition, if it becomes clear over the next few months that additional regulation or distribution challenges may hurt some of Freedom’s product lines, we could lower ratings. In recent days, there has been a significant increase in calls for additional firearm regulation and a halt in sales by a retailer of modern sporting rifles in response to the event in Newtown. In the event Cerberus sells Freedom to a buyer of higher credit quality, we could raise ratings.
‘We will resolve the CreditWatch listing once we are confident we can estimate
the impact of the planned sale, and any impact from possible additional firearm industry regulation or distribution challenges,’ said Standard & Poor’s credit analyst Ariel Silverberg.
One thing is certain in all of this – due to the fact that Cerberus is looking to sever its relationship with Freedom Group, Inc., it can be assumed that no other financial management corporations that manage retirement funds for large teacher unions will be interested in investing. That is, after all, what started this move in the first place. California teachers’ unions had been distressed over the fact that their retirement monies were being invested in weapons manufacture.
The financial effects of the situation have already hit Main Street as well, since there have been scattered reports about gun shops selling out of stock on various weapons, and certain ammunition. Pittsburgh Tactical Firearms had essentially sold out of stock in the days following the shootings. “There are a lot of weapons that won’t be available if there is another assault weapon ban like in the 1990’s,” stated Erik Lowry, the owner of Pittsburgh Tactical Firearms. The liberal media taking advantage of the situation, and giving the public inaccurate ideas about the real nature of weapons and the current laws controlling their sales is not helping either. Lowry went on to say, “People’s perception on what’s legal, and what’s not, it’s unreal. It boggles my mind… Just so we are clear ‘assault weapons’ are by definition select fire weapons and require a $200 tax stamp as well as up to 1 year wait time. The prices of these weapons range anywhere from $5,000 all the way up to $50,000 per gun. So the people buying them are usually extremely wealthy. Hence they are mostly collectors.” He is, of course, speaking about gun sales in the Commonwealth of Pennsylvania, but differences among the states as far as cost of the weapons is concerned is not significant. And none of the weapons used in the latest tragedy were legally considered “assault weapons”, and the assailant broke existing laws in using them. More importantly, as stated from the beginning here, making stricter gun laws will not have an appreciable effect on crime, at least not in the way liberals think.
Beyond the financial implications, there is the reality of the numbers on the ground already. As Kyle Becker at Independent Journal Review has pointed out, “Less guns do not mean less crime.” Where there are armed law-abiding citizens, there is less crime, here in the U.S and abroad. Add to that the probability of significantly increasing the unemployment rate, and gun control simply isn’t a logical response to the situation. Sometimes tragic events occur, and there simply isn’t anything for society to do about them but mourn.