A Documentary For A Day Like Today

If you are an investor in the stock market, the last few days including today have been a little unnerving. At one point this morning, the Dow Jones Industrial Average was down by 1,100 points. As I write this, the DJIA is down by over 450 points after recovering earlier to about 150 points down.

I suggest a deep breath and a glass of bourbon or a libation of your choice is in order. To go along with that glass of bourbon is this trailer for a new documentary on bourbon entitled NEAT.

As The Stock Markets Tumble….

The stock market is seeing an across the board sell-off today. As I write at approximately 12pm EST, all major stock market averages – the Dow, S&P 500, and the NASDAQ – are down approximately 2.3%. Part of it is news from Europe that a recession there is all but a certainty and part is the election results along with the “fiscal cliff”.

Coal stocks, as might be expected given Obama’s jihad against coal, are down even more.

But guess what two companies are seeing strong increases in their stock prices.

That’s right – Ruger and Smith & Wesson. Currently, Ruger (RGR) is up $2.40 or a 5.38% increase while Smith & Wesson (SWHC) is up 77 cents or an 8.14% increase over yesterday. Both of these are pure plays on the firearms market.

The ammo makers Olin (Winchester) and ATK (Federal) are down. However, they have other businesses besides just ammunition production. ATK, in addition to making ammunition, is a significant defense contractor while Olin is a big producer of chlor-alkali.

UPDATE: Bloomberg TV has noticed just how well gun makers’s stock is doing today as well.

Weak Industry?

Josh Sugarman, Executive Director of the Violence Policy Center, had an article in the Huffington Post on Monday with his analysis of the retracted Freedom Group IPO. Based on this one company, he said the gun industry was in decline due to a “a cratering gun market”.

I guess the folks at Sturm, Ruger didn’t get the message that their market was “cratering”. They announced on Monday the results of the share repurchase program.

Sturm, Ruger & Company, Inc. (NYSE-RGR), today announced that during the first quarter of 2011 the Company repurchased 133,400 shares of its common stock for $2.0 million in the open market. The average price per share repurchased was $14.94. These repurchases were funded with cash on hand. At the end of the first quarter of 2011, $8.0 million remains authorized and available for share repurchases and 18.9 million shares remain outstanding.

Rarely do weak companies repurchase their own stock. The primary reason is that they don’t have the cash on hand for the transaction. You will note that Ruger used cash on hand to fund these repurchases.

Stock repurchases generally increase shareholder value and are a positive thing. Ruger paid an average price of $14.94 per share. Yesterday’s closing price for Ruger (RGR) stock was $23.00 per share. That is a 53.9% increase.

The stock market obviously doesn’t perceive that Ruger is in a “cratering gun market”. According to website Seeking Alpha, in mid-March when the S&P 500 dropped 4.3%, Ruger was one of the companies that bucked the trend.

The bottom line is that certain segments of the firearms market are stronger than others. Handguns are the hot segment of the firearms market. This is especially true of smaller, more concealable handguns. Freedom Group – other than Remington’s 1911R1 – is not in the handgun business. Ruger is in the handgun market and has moved strongly into the smaller pistols and revolvers. The results of that move are evident in its stock price.

Padding the Jobs Report Numbers

Inspector General’s Memo: Census Says It Hired More Workers Than It Needed As a ‘Cost-Saving Measure’

(CNSNews.com) – The U.S. Census purposefully hired more workers than it needed, telling the Office of the Inspector General of the Commerce Department that it did so as a “cost-saving measure,” according to a memorandum that Todd J. Zinser of the inspector general’s office sent to Census Bureau Director Robert Groves last week.

If the Obama Administration thought the financial markets would react well to the padding of the jobs numbers, they were sadly mistaken. On Friday, all the major stock indices were down by over 3% with the Dow Industrials losing 323 points. Even bonds were down on the news. The only thing that went up was gold. Go figure.

Anyone who thought that stock traders would just look at the aggregate numbers of the jobs report and not delve a little deeper into composition is a fool. When 411,000 out of 431,00 “new jobs” are due to the U.S. Census, it does not mean the US economy is expanding. Stunts like this may have worked in Chicago but it doesn’t work for the rest of the world.