Obscenities du jour
Gun Industry Executives Say Mass Shootings Are Good for Business
Behind closed doors, speaking with investors and Wall Street analysts, the gun industry views mass shootings as an opportunity to make lots of money.
Ordinary people are despairing about the frequency of tragic events like the murderous rampage in San Bernardino on Wednesday, or the Planned Parenthood massacre last week. And the cycle of mass killing, media frenzy, and political stalemate starts anew each time.
But meanwhile, gun sales continue to break records, a fact that has not gone ignored by financial analysts.
The Intercept reviewed investor transcripts for gun companies, ammunition manufacturers, and sporting stores, and found many instances of industry executives discussing mass shooting incidents and the resulting political dynamics as lucrative.
Here’s how it works. Following a mass shooting, there is talk of gun control, which the National Rifle Association and other gun advocates attack as an assault on the Second Amendment. Notably, gun and ammunition manufacturers often donate, either directly or as a portion of each sale, to the NRA. The fear of losing gun rights leads to panic buying, which brings greater profits to gun retailers, gun companies and their investors.
“The gun business was very much accelerated based on what happened after the election and then the tragedy that happened at Sandy Hook,” Ed Stack, the chief executive of Dick’s Sporting Goods, a leading gun and ammunition retailer, said in September 2014 at the Goldman Sachs Global Retailing Conference. Stack noted that the industry saw “panic buying” when customers “thought there were going to be some very meaningful changes in our gun” laws. The new sales “didn’t bring hunters in” but rather “brought shooters into the industry,” he added.
In 2012, 20-year-old Adam Lanza fatally shot 20 children and 6 adult staff members at Sandy Hook Elementary School in Newtown, Connecticut.
Last year, Tommy Millner, the chief executive of Cabela’s, a retailer that sells guns, boasted at an investor conference in Nebraska that his company made a “conscious decision” to stock additional weapons merchandise before the 2012 election, hoping Obama’s reelection would result in increased sales. After the election, the Newtown mass shooting happened, and “the business went vertical … I meant it just went crazy,” Millner said, according to a transcript of the event. Describing the “tailwinds of profitability,” Millner noted Cabela’s “didn’t blink as others did to stop selling AR-15 platform guns,” and so his company “got a lot of new customers.” The AR-15 is a high-powered assault rifle based on the military’s M-16 model but without the full automatic capacity,
Steven Miller, the chief executive of Big 5 Sporting Goods, another gun retailer, was asked by investor analysts in 2013 to describe the state of the market during a conference call that year. The “real surge” in firearm sales, Miller said, “took place following the tragedy in Sandy Hook.”
Gun and Ammunition Manufacturers
Smith & Wesson chief executive James Debney, speaking to the Roth Capital Partners conference in 2013, explained that “the tragedy in Newtown and the legislative landscape” resulted in sales that were “significantly up.” The “fear and uncertainty that there might be increased gun control,” Debney said, “drove many new people to buy firearms for the first time.
“You can see after a tragedy, there’s also a lot of buying,” Jeff Buchanan, the chief financial officer of Smith & Wesson, told investors at the RBC Capital Markets conference in September of this year. Buchanan noted that the political landscape of 2016 is uncertain, but that fear of gun control could be on the horizon.
Michael Fifer, the chief executive of Sturm Ruger, one of the largest gunmakers in America, discussed the role of politics in gun sales during a conference call with investors in 2013. “If you look back at historical patterns back in late ’08, early ’09, you saw a huge spike in accessory sales which then tapered off, and then we saw it again with the really tragic events at Sandy Hook that started again as soon as the politicians started talking about restricting legal gun use,” Fifer said.
Wall Street Analysts
Market analysts, including consultants who often hold executives accountable to investors, have been keen to ask gun companies about how they are able to respond to surging sales following mass shootings.
Gautam Khanna, an analyst with Cowen & Co., an investment banking and market research firm, interviewed Mark DeYoung, then the chief executive of ATK, an ammunition manufacturer, at the Cowen Aerospace conference in 2013. Khanna asked DeYoung if he would make pricing decisions based in part by the “Newtown shooting tragedy.”
DeYoung responded that “obviously we are all shocked” by “what happened in Newtown and what happened in Aurora, Colorado, and what happened in Tucson, Arizona, with Gabby Giffords.” But, he added, the company will continue to “respond to market pressures,” including increases in demand. On a separate conference call that year, DeYoung noted that certain “spikes” in demand have driven sales.
James Holmes killed 12 people and injured more than 70 others after opening fire in an Aurora, Colorado, movie theater in 2012.
In 2011, Jim Barrett, a financial analyst, asked Ruger’s Fifer during a call with investors if the “recent shooting incident in Tucson” — referring to the shooting that year of Rep. Gabby Giffords — “has stirred gun owners and prospective gun owners to go visit the stores?”
Bob Sales, another analyst, asked Fifer how his company was preparing for future gun sales, given that “a combination of the election in 2012 and the Sandy Hook incident … spurred a massive binge of gun buying.”
On a conference call with investors, Millner, the chief executive of Cabela’s, fielded a question about the Aurora mass shooting from an analyst with Imperial Capital, who asked him if the incident had “any impact on your business.” Millner responded, “I would say that the trends that you read about in the press, we are experiencing at least thus far since the incident.”
The business rhetoric around mass shootings “doesn’t surprise me at all,” says Ladd Everitt, the director of communications of the Coalition to Stop Gun Violence. Everitt noted that the National Rifle Association, which is funded by gun manufacturers, often uses similar language following mass shootings.
“This just shows the guys in the suits understand this and are utterly cynical about it.”
Lee Fang and Zaid Jilani
Major defense contractors Raytheon, Oshkosh, and Lockheed Martin assured investors at a Credit Suisse conference in West Palm Beach this week that they stand to gain from the escalating conflicts in the Middle East.
Lockheed Martin Executive Vice President Bruce Tanner told the conference his company will see “indirect benefits” from the war in Syria, citing the Turkish military’s recent decision to shoot down a Russian warplane.
The incident, Tanner said, heightens the risk for U.S. military operations in the region, providing “an intangible lift because of the dynamics of that environment and our products in theater.” He also stressed that the Russian intervention would highlight the need for Lockheed Martin-made F-22s and the new F-35 jets.
And for “expendable” products, such as a rockets, Tanner added that there is increased demand, including from the United Arab Emirates and Saudi Arabia because of the war in Yemen.
Listen to Tanner’s remarks to the Third Annual Industrials Conference below:
Wilson Jones, the president of the defense manufacturer Oshkosh, told the conference that “with the ISIS threat growing,” there are more countries interested in buying Oshkosh-made M-ATV armored vehicles. Speaking about a recent business trip to the Middle East, Jones said countries there “want to mechanize their infantry corps.”
Raytheon Chief Executive Tom Kennedy made similar remarks, telling the conference that he is seeing “a significant uptick” for “defense solutions across the board in multiple countries in the Middle East.” Noting that he had met with King Salman of Saudi Arabia, Kennedy said, “It’s all the turmoil they have going on, whether the turmoil’s occurring in Yemen, whether it’s with the Houthis, whether it’s occurring in Syria or Iraq, with ISIS.”
The last bit of good news for the contractors is the latest budget deal in Congress. After years of cuts following the budget sequester, the deal authorizes $607 billion in defense spending, just $5 billion down from the Pentagon’s request, which DefenseNews called a “treat” for the industry.
“Our programs are well supported [in the budget],” said Lockheed’s Tanner at the conference. “We think we did fare very well.”
Embracing The Awful Irony At A Huge Counter-Terrorism Fair In Paris Days After ISIS Attacks
...But the surveillance industry is showing off all kinds of advanced digital kit, as companies bid for a slice of the ever-expanding market. The video surveillance market alone has an estimated worth of $15 billion and is expected to grow to more than $40 billion by 2020. The radar market was said to be worth $6.08 billion in 2014 and will reach $8.61 billion by 2020. The lawful interception game, where private firms help police hack suspects’ systems, is growing fast and is expectedto hit $2.1 billion by 2020. Not to mention the drones, passive surveillance systems, analytics, and myriad other sub-markets that form part of the huge commercial spy game. And anything cyber is hot – the total cybersecurity market is worth $74 billion this year, and could rise to $101 billion by 2018.
The continued growth is partly the result of a growing global government obsession with cyber, an infatuation only spurred on by the Paris attacks. They provided an excuse for crypto-technophobics to crow about the need to increase spying powers, and to decry terrorists’ use of technology to both hide, plot and carry out attacks. Just a matter of days after the tragedies, CIA director John Brennan called on Europe and the US to look at how certain technologies might be aiding terrorists and how surveillance could be expanded. “There has been a significant increase in the operational security of a number of these operatives and terrorist networks as they have gone to school on what it is that they need to do in order to keep their activities concealed from the authorities,” Brennan said.
“I do think this is a time for particularly Europe, as well as here in the United States, for us to take a look and see whether or not there have been some inadvertent or intentional gaps that have been created in the ability of intelligence and security services to protect the people that they are asked to serve.”
In the UK, though not a direct response to events in Paris, Chancellor of the Exchequer George Osborne delivered a talk at GCHQ’s spy hub in Cheltenham, announcing an increase in cybersecurity spending to £1.9 billion by 2020, 1,900 new staff across Brits’ three agencies – GCHQ, MI5 and MI6 – and the first National Cyber Centre, “the country’s first dedicated cyber force”. Anyone wondering whether the Snowden leaks would convince governments to slim down the surveillance state rather than expand it to deal with terror threats was given a definitive answer: terror always wins...