The Great Ammo Bubble of 2013: popping soon

[Hohn]

Hang in there, everyone. It won't be much longer. This ammo will pop, and sooner than you might think. Earlier I was thinking it would be popped by the fall, but now I'm thinking it might be more like Memorial Day.

A couple points to back up my claim, using basic economics.

1. The marginal utility of ammo is diminishing. Your second case is less valuable than your first case, and the third even less than the second. People who are hoarding ammo will eventually decide that their hoard is not worth adding to at current prices. At some point, the next 1000 rounds just isn't worth the money. The demand peaks and starts going back down.

2. Ammo flippers have to be able to MOVE the product they hoard in order for it to be worth their while. Because of #1, eventually people get all they will demand at that higher price, and they quantity demanded will not go up until price comes down. Like those who bought into flipping houses circa 2005, those ammo flipper who are latest to the game will lose BIG. Bubbles cannot last. Home prices crashed, and so will ammo prices. Eventually, some poor schmuck won't be able to sell a box of .45 for $50. He'll have to drop the price to move it, because inventory is negative cash flow-- it's money you spent and got only a storage problem in return. Not until it SELLS does it actually have any benefit at all.

3. The higher price tends to both stimulate supply and suppress demand. Both are good for leveling the market out.

4. Gov't contracts are almost all filled, so more production capacity will be coming online for the rest of us pretty soon. This is particularly relevant for 9mm and .40SW. There's not much .45 in use with police gov't agencies, relatively speaking.



I'm looking forward to being able to get .40SW for less than $20 a box.

 

[Superfly100]

hop your right.

I have a new 9mm and no ammo to go to the range.

 

[jwh20]

Yes, what you said. Oh wait, no, I just need one more case...

 

[Broom_jm]

Those are some interesting thoughts. The supply chains DO seem to be seeing some return to normalcy, but mainstream primer manufacturers are still several months behind on their orders. I think your optimism is admirable, but a wee bit premature. I hope I'm wrong.

 

[andski3]

Its on the internet.. IT must be true. (purple)

For real though, I hope you're right.

 

[Dj15802]

It's slowly trickling back in stock. I see Walmart getting more regular shipments from all the posts on here.
I was stocked before all this hit but it would be nice to see it on the shelves again at the LGS.

 

[itsgreg]

the ammo manufactures are still 6 months behind so I wouldnt expect any sharp turn around. It started with .223 and other rifle rounds then moved to 9mm and 40. 22lr ,45acp and most HP are now hard to find, but its always good to be optimistic.

 

[BogWalker]

It'll be a good number of months before we see normalcy, but I'm definitely seeing more items in stock. Seeing a good number of hi-cap mags in stock. Still pricey, but in stock nonetheless.

 

[treeman22]

You are right, but it won't be anytime soon.
Last I heard Aquilla .22 sales were booked solid until Jan 1 2014.
If you're willing to wait maybe a year, ammo will be back on the shelves at reasonable prices. However, you better have some stashed away until then, because it is going to be slim pickings in the meantime.

 

[ghostdncr]

The supply/demand curve crashes just like an ocean wave. Demand outstrips supply, which creates a trough. Supply rushes/ramps up to meet demand, which soon overcomes demand. Supply rises quickly above demand and then crashes, destroying the seller's market. This is a fairly standard economic principle and will play out in the coming months, unless the UN occupies the country, or some other such foolishness that causes us to expend every single round we can lay hands on.

 

[indykid]

I agree, but I must have at least 10,000 rounds of ammo for each firearm I own!

Hard to believe I know people who actually think like that!

 

[Dj15802]

I agree, but I must have at least 10,000 rounds of ammo for each firearm I own!

Hard to believe I know people who actually think like that!

Only 10,000.... Are you an underachiever?

 

[warthog]

look, another thread about the ammo shortage.

 

[Dj15802]

look, another thread about the ammo shortage.

WAIT!!.... There's a shortage?

 

[warthog]

WAIT!!.... There's a shortage?

https://www.indianagunowners.com/forums/ammunition_and_reloading/280971-supply_and_demand.html

therein you will find my thoughts on the Bubble... and how to make it burst.

 

[38special]

Wait! How can this be?!

We need price controls!

JAIL the gougers!

 

[Hohn]

https://www.indianagunowners.com/forums/ammunition_and_reloading/280971-supply_and_demand.html

therein you will find my thoughts on the Bubble... and how to make it burst:
While I applaud you for your willingness to stand up like this, you are going to hear it from the ole "Freemarketeers" who seem to think that this is good for us. I see the who thing aa GREED pure and simple. People see a chance to make a fast buck and could care less about what it is doing to the Firearms Community as a whole. In the end, this is why we loose more often than win in the legislature. We call ourselves a community but we aren't one at all. We are a bunch of people who all enjoy firearms one way or another and that's where our relationship ends. It would be nice if we moved as once in times like these but we in-fight too much for that to happen.

Folks, one of the ways discussed by Barry O and the Brady's was to make it too expensive to shoot. They planned on this sort of think as a back up if they didn't get their way in the legislature banning all of those ban "Assault" guns. If we can't feed them, the firearms wind up paperweights and door props. So unless we can get together as a group and stop trying so hard to make money off of one another by hoarding and buying ammo faster than it can be produced, we are sure to see a very large increase in the price of ammo in general once things get closer to "normal". Those who assure us that once supply catches up to demand, the prices will go back to what they were before this happened aren't really thinking this through veery well. That or they took an economy class once and think this makes them economists. Well it doesn't and I have watched enough of these to assure you that prices are going to stay high though how high is only a question of how long we continue to act like frightened rabbits buying everything they see whether it's of use or not in case they can parlay it into something they need.

So, let's see if we can't fool the anti's and stop this now. Let's help those new gun owners find ammo so they don't have to pay through the nose to shoot the new gun they have and let's act like a COMMUNITY for once in our lives and make all of this stop. It isn't going to stop overnight. WAe can make it end a lot faster than it otherwise would. We just have to stop being driven by greed and fear and start acting like rational adults and everything really will even out and become more normal for all of us much faster than it otherwis would..

Thanks for sharing your thoughts.

A couple questions for you:

-- How exactly does one hoard something at a rate faster than it is brought into existence? Doesn't something have to exist before I can try to hoard it?

-- Greed?

http://youtu.be/RWsx1X8PV_A

I'm not an economist. But Milton Friedman was, and history has vindicated him like no other modern economist.

 

[Broom_jm]

The supply/demand curve crashes just like an ocean wave. Demand outstrips supply, which creates a trough. Supply rushes/ramps up to meet demand, which soon overcomes demand. Supply rises quickly above demand and then crashes, destroying the seller's market. This is a fairly standard economic principle and will play out in the coming months, unless the UN occupies the country, or some other such foolishness that causes us to expend every single round we can lay hands on.

Normally, your analogy would hold true, but when you consider that ammunition companies were already struggling to meet demand before this double-whammy of the Obama Election and Sandy Hook, what you're seeing right now is unprecedented. Demand has so radically exceeded supply that the part where is "rises quickly above demand" simply isn't happening, because the ammo/component manufacturers didn't have any spare capacity to ramp up with.

It's more like the effects of a tsunami, maybe?

 

[dukeboy_318]

Normally, your analogy would hold true, but when you consider that ammunition companies were already struggling to meet demand before this double-whammy of the Obama Election and Sandy Hook, what you're seeing right now is unprecedented. Demand has so radically exceeded supply that the part where is "rises quickly above demand" simply isn't happening, because the ammo/component manufacturers didn't have any spare capacity to ramp up with.

It's more like the effects of a tsunami, maybe?

Exactly. While the bubble will burst eventually and they'll get caught up, the chances of that happening within the next 6-8 weeks is slim. And it wont happen overnight. I see a gradual increase in common rounds like 9mm and .223 before I see less common ammo runs being done.

Think of it this way, manufacturers are going to produce what is their largest sellers. Same reason that S&W is only making M&P pistols and rifles right now while models such as the 629s are not getting produced.

I think it will burst, but again, it'll be by fall/winter of 2013. Sadly, we can only hope there's not another incident like Sandy Hook, for all the reasons.

 

[Hohn]

.......because the ammo/component manufacturers didn't have any spare capacity to ramp up with.

Isn't this also something that would seem to also be changing? Don't you think that Starline is considering in additional brass-making capacity? You don't think CCI/ATK is considering how to make more primers?

At some point, these capacity investments WILL become profitable and they will be made-- if (and a big "if") the demand remains high.

Manufacturers don't want to invest in extra capacity only to have it sitting unused in two years. So they are willing to endure (and make us endure) a shortage like this for a good bit because they have to have some idea that there is a permanent increase in demand that will justify the additional capacity not just now, but next year and the year after that.


I don't give much weight to the anecdotes about two-year backlogs and such. So many of these orders are just markers to get in line because a reseller has no idea when things will get back to normal a little. Backlogs tend to be self-reinforcing on the macro scale: when someone hears there is a shortage, it spurs more demand (get it while you can!) and exacerbates the shortage. Everyone is scrambling to get their place in line, as if it's one of those Black Friday absurdities you read of that occur on the day formerly known as Thanksgiving.

But once it passes a tipping point, it will also self-reinforce. Once resellers see that they can actually get some product, they won't feel the need to have someone hold their spot in line, so to speak. Very many of those orders backlogged will be cancelled. They cancel, and the backlog shortens.

Word gets out that the backlog is shortening and others who were similarly "holding a spot in line" cancel their orders as well.

If the orders are placed on credit (as is usually done), it take more time for the cancellations to ramp up. If, however, there is an actual cash flow ding, then those cancellations will ramp up very quickly.

The bottom line is that the backlogs and shortages can go away almost as quickly as they came.

I don't think it will be that fast this time-- but faster than the conventional wisdom says it will be.


JMO