Protecting Collection Value

[ExecDirector]

One of the most common refrains heard about the NFATCA is that it is just a collection of good old boys trying to protect the value of their collections. The truth is SO different from that. Even the barest scrutiny shows the economic fallacy of that meme. The only ones trying to protect their investment are those that are invested in the low end of the pond...

One of the most oft-repeated memes heard in casual conversation and internet discussion forums regarding National Firearms Act (NFA) topics is that the founders and leadership of the National Firearms Act Trade & Collectors Association (NFATCA) are a bunch of good old boys that are colluding to keep machine gun prices high in order to protect their investments. That certainly makes for a meaty conspiracy theory that sets tongues wagging and fists pounding. Fortunately, it's just not true. Many machine gun prices are high, but the NFATCA leadership actually supports the elimination of 922(o) (commonly referred to as the Hughes Amendment), the bit of legislation that capped the number of fully transferable machine guns at today's current total of around 180,000 weapons. So why does the good old boy meme persist?

Frankly, it persists because perpetuating this bit of hyperbole is ever so much easier to get hyped up over than actually understanding the truth. So let's take a moment and examine the actual economic impact of the restrictions in place that result from the segregation of machine guns into groups that can and cannot be owned. NFA ownership is increasing each and every day. A review of ATF's NFA Branch workload will clearly show this. With a finite supply of eligible machine guns and an increasing base of potential owners interested in acquiring them, market prices continue to escalate. This is true for pretty much all transferable machine guns. Many of us boggle at the thought of HK sears, a tiny bit of registered metal, selling for nearly $20,000 today, as opposed to the $500 or so twenty five years ago. One looks at the price of a transferable M16 and easily concludes that those folks who have these machine guns would take a huge wallop if the registry were opened up and everyone could now buy new, cheap machine guns. There is some economic truth to that. In all candor, there are a lot of common machine guns with little to no intrinsic value that absolutely would take a value hit if 922(o) suddenly vanished. But the other part of the economic truth is that there are a lot of machine guns that would easily sustain their value and even see their value continue to rise. We will look at that in a moment.

The current machine gun market is eerily similar to a precious metals commodity pit. There is never any time when all 180,000 weapons are for sale all at once. At best, there is but a tiny sliver of guns for sale and when those guns become available, potential buyers can whip up a tsunami of astonishing cash offers. Add the reach of the internet and suddenly that cozy club of knowing somebody that could get you hooked up vanishes and you wind up competing with 100's (1,000's?) of folks all after the same thing. The prices continue to escalate. Yelling, screaming, frenzied bidding. We are now at the point where nobody is surprised to see prices tags of $50,000, $100,000 or $200,000. One just shrugs at seeing MAC's pushing $5,000. Surely, the good old boys don't want to see this vanish, right?

[ExecDirector]

Imagine a United States where 922(o) did vanish and the NFA registry was now opened up to any and all machine guns. Anyone eligible to purchase an NFA item could now go through the purchase process and acquire as many new, plentiful and affordable machine guns as their budgets (and spouses) would allow. A brand new M4? Done. A spiffy and cheap, AK-47? Yep. Genuine, all-German MP5's under $2,000? Batter up. One could even pony up the funds to land a genuine M240B, in all its belt-fed glory, and not lay out the equivalent of the price of a modest home in the suburbs of Houston. An enterprising manufacturer/SOT could even set up shop and start cranking out brand new reproductions of venerable classics such as a 1928 Thompson or a Maxim 08/15 or even the Browning M1917. The ability to acquire and afford a machine gun would now be within the reach of just about anyone who had the desire to pursue such an endeavor.

And this is where the good old boy conspiracy falls apart. The vast majority of the founders and leaders of the NFATCA do have a financial interest in the commercial aspect of NFA. They are dealers. As dealers, they make money (hopefully) off of each and every sale. That is the nature of commerce. In a market where the supply of saleable items is restricted, the opportunity for sale is also restricted. If only a small portion of the available items are available for sale... and if there are always more folks competing to acquire those limited items... Fewer sales are going to be made. Ask any NFA dealer that has been around for more than a few years: they are selling fewer machine guns than ever. Sure, the prices of the guns that do sell are eye-popping. But it's hard to make a living when you only sell a few of those each year. It is not uncommon to hear stalwarts of machine gun sales lament the fact they were selling 100's of machine guns per year awhile ago and will be lucky to sell two dozen this year. If 922(o) vanished right now, these dealers, our founders and leaders, could start moving lots of machine guns. Not a few extra, but a veritable bonanza of guns. The limit on how many could be sold would no longer be the number of available guns; the limit would be the number of available customers. Profit would soar. Instead of hoping to eke out a 5% cut off of a brokered sale of a few $20,000 M16's, the dealer is now making $50,000+ in profit off of the same margin on selling a few hundred $1,100 M16's. This is an economic principle known as fast nickels. Fast nickels maximizes profit potential by increasing the number of potential sales, even if individual sale dollars are smaller. It is almost always more advantageous to aim for fast nickels because having an unlimited customer base is simply more profitable than having a greatly restricted supply. Make an occasional sale on a few guns whose prices are kept artificially high as the result of a ridiculous piece of legislation or sell a practically unlimited supply of guns to anyone at reasonable prices? It's not a tough choice to make.

But there are going to be a bunch of guns that are going to take a hit in value, right? Absolutely. Those HK sears are going to crash. Same for the MAC's, the M16's and all of the rest of the relatively common guns that can be pumped out the minute 922(o) is excised from the canon of federal firearms impediments. You know what is not going to lose value? The really collectible stuff. The Maxim 08/15, the M1917, the genuine 1928 Thompson, the Stoner 63A. Even with brand spanking new reproductions on the market, the real examples of these guns are going to retain their value. And the value of these collectible pieces will continue to rise because you will never be able to make more of the "real" thing. Guess what the good old boys are not sitting on a pile of? They are not sitting on a pile of HK sears or MACS or M16's. They move these as fast as they can (when they can get them). The real value of their investments is sitting in the Stoner in the back of the safe, the Swiss Maxim MG11 (with a complete set of all the goodies and accessories that can be used to pay for a very nice wedding) perfectly preserved in the man cave. Successful dealers understand the economics of increasing the supply of available product and making that supply available to as many people as possible. Getting rid of 922(o) means that those dealers make more money. Some folks that currently own the "common" guns are going to take a hit in the value of their purchases. But dealers, those good old boys, are simply not "invested" in the stuff that's going to be vulnerable.

[ExecDirector]

The good old boys want 922(o) to vanish. The NFATCA wants 922(o) to vanish. We have studied the potential scenarios of engaging a legislative effort to make just that happen. You know what? It's expensive. And likely very time consuming. Estimates project tens of millions of dollars and possibly a decade or more of effort. That's going to require a lot of funding and a lot elbow grease. Also a lot of grants, corporate donations and individual contributions. And as we all know, it's the groundswell of individual contributions that make or break the success of such an effort. We know that the leadership of NFATCA can nail down some grants and also dig down deep in their own wallets, get some corporate involvement, ally with other organizations and count on the good old boys to contribute to the possibility of increasing their livelihood. Can we count on the support of the guy in Yuma, Arizona, who just sold his tricked out Camaro to buy a $19,000 HK sear to help us out?

[ExecDirector]

The above posts are from an article written over a year ago. Prices have gone up. The truth is still the same.