The most popular (and esoteric) argument for gun stocks being overpriced seems based largely on a riddle that goes something like this:

“You tell me, what happens when gun legislation passes and the buyers realize everything will be okay?”

Which is lovely. I enjoy riddles. And word games. And the works of Nabokov. But this isn’t about playful respite; this is about making money and being right. It becomes my duty, therefore, to thrash you.

I now present three illuminating bullets (I just proofread this and realized I made a pun):

* Stocks like RGR are only trading where they were before sales went crazy
* This legislation will not be hindering gun makers – background checks are perfectly doable because they will most likely have maximum waiting periods attached (1 month or less or else all clear); that’s a minimum to get the measure through the House (if anything even can)
* And, the big shebang…RGR hasn’t raised gun prices and I’m not sure the others have either

Yeah, see that’s the big open secret here. Guns are selling out of stock, but RGR’s CEO was adamant that his company would not be raising prices because, as he phrased it, “gun buyers as a group have long collective memories.” He doesn’t want to prey off his customer base, so RGR hasn’t raised weapons prices at all.

Ergo, once this bill passes and people go “oh, wait, that’s not so bad,” there will be no price incentive for them to cancel their order (“I could sit back and wait for prices to calm down…”). That, right there, isn’t happening. The guns that have been jumping in price are private sales. So, in RGR’s case (and I suspect the other manufacturers as well), there’s no clear financial edge to back out.

There is, however, still the looming possibility that Republicans could lose more seats (remind me, what is the popularity of the GOP at the moment?)…

(I told you I like riddles too)

And so, I am afraid (I’m not actually afraid) that this robust bounty of profitability RGR and the gun market at large are seeing is very much sustainable for a duration of at least a year (possibly two). While eventually and inevitably these orders will slow down, I really couldn’t care less. You see, the stocks are not pricing in this raw influx of cash, and one solid year of the orders they’re experiencing is the equivalent of several years worth of business, all front loaded and with minimum inventory risk attached.

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You’ve got to be kidding me!? RGR didn’t just demolish earnings estimates. They vaporized them. They crushed all the analysts so badly, I don’t think the analysts have managed to figure out by how much yet. Was it 50%, or a whopping 77%?

So the stock is down a percent??

Look, do not lull yourself into thinking the earnings game is over for RGR. I flip on my television and see a multi-million dollar marketing campaign equivalent for RGR on C-SPAN this morning, as Feinstein and a half dozen brain dead Senators let a man so inundated by grief he can hardly stand steer their response to weapons in the USA.

These gun control measures are dead on arrival. They will not impact RGR or SWHC in the slightest. They are, however, FREE ADVERTISEMENT and the single greatest argument for a gun purchase the gun manufacturers could ever hope to make.

“Wait, assault weapons will be banished, but if you have one already it doesn’t count? So buy one now.”

Why does RGR even have a marketing division? I’d zero budget them immediately, on the grounds that their job is being done for them, at no cost to the company – the US Senate is that kind

The market is resting from yesterdays’ mighty run. We are not reversing lower, as far as I can tell. EU yields with respect to the problem children continue to subside.

South American countries are feeling the heat this morning, as their debt gets the Argentina treatment. But their economies are too small to matter. And, really, that’s what you deserve for investing in South America.

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RGR is reporting its first crop of earnings since the Sandyhook tragedy and the major push for gun control got underway. I’m looking around the room, and I’m seeing earnings getting lifted by 10% from the last round. And after that? Some analysts are even showing EPS dropping within the year. Look, let me ask you something, point blank.

Are you people out of your fucking minds?

You need to understand, Mr. Bloomberg analyst; I hate your guts.

It’s not that I have anything against your business don’t like you disrespect you…okay you know what, I’ve tried starting this sentence three times, so I’m just gonna call it quits here.

The problem is that you are a gigantic pussy. God it feels good to finally say that! Enough of this PC bullshit.

You are a gigantic bitch. You little New York dwellers hang out on your tiny little island with your thirty five thousand armed guards and no sense of how the rest of the country operates. You get all caught up in ten thousand fake Twitter handles that #DemandChangeNOW and miss, subsequently, what is staring you right in the face.

And why do you let this happen to yourselves? So that one day, maybe, Mike Bloomberg will say “hmm” to you while you shuffle breathlessly out of his way to the bathroom.

Now let me show you why your estimates are complete garbage

This is a real gun store, unlike the imaginary ones you’ve never set foot in

Now, do you notice how I can almost count on two hands how many guns they have left in this case?

You are busy lifting earnings estimates for gun manufacturers by a paltry 10% and meanwhile, gun inventories have been sacked by >80%. In this particular store, this was one case. They had another five that looked exactly like this. I can count on one hand how many Ruger handguns were left for sale. And meanwhile, you can only bring yourself to lifting EPS estimates by 10%, while viciously penning that “Bloomberg employee loyalist” piece hyping the ‘dangers’ to gun stocks that will just absolutely materialize from legislation and judiciary action. And of course reminding everyone that these sales levels cannot continue indefinitely.

DO YOU THINK I CARE IF THEY EXTEND INDEFINITELY!?

The company just sold a years’ worth of firearms in a fucking month. And, I revel in revealing this to you, but you’ve got two years until the midterm elections, and at the moment Republicans are looking vulnerable. That’s two years during which gun enthusiasts can panic and buy as many weapons as their budgets can handle. Two years, before you have any chance of stemming the flood, too…

RGR is backlogged with demand. They have so much F-ing demand, they need to expand their borrowing capacity just to try and keep up with it. Why, just Thursday they signed an agreement with Bank of America to expand one of their lines of credit by $15 million. You can expect more of that sort of thing, I can assure you. That’s at least 30,000 more weapons being made, all on sales that are being satisfied, really, before manufacturing or wholesale.

Think about that in shame the next time you think of writing up one of these moralizing trash pieces.

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I dropped my RGR purchase from yesterday, as it rallied more than 6% in under 48 hours. Still holding my core position. Cash stands back above 10%.

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Sitting by the wayside while men of action seize the day is not an appropriate response to opportunity.

As such, I depleted my cash position to a meager 5%, adding heavily to BAS, CLP and RGR.

This is a trade on a belief that we are making a quick bottom and have higher yet to go. I’ll take expedient profits or losses on this, as I am serious about maintaining at least 20% cash (before hedges) at most times; from now until Summer, be my judge.

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Alright, so the instant I switched over from “merely rapaciously expectant” to “full blown, mind numbingly jubilant”, the market turned on a dime and started punching participants in the face. That should have been clear before I did it. It always happens like that.

So on behalf of everyone whose kids can’t attend college now, I’d like to say, “I’m sorry.”

In times like this, it can always be difficult to answer that most important of questions. No not, “am I properly managing risk.” I’m talking about the even more important inquiry…”Whose fault is this?”

Now, there are several ways you could play this. Personally, I’ve decided to blame it on people using trailing stops. Dicks…littering their homes with half eaten burgers strewn around in McDonald’s bags all over the floor…all while smoking and ashing right on top of them…just begging to burn their house down…

There, you see how I did that? Make sure you ramble a little and trial off at intervals, to really get the “I’m-slightly-unhinged-talking-almost-to-myself” effect.

At any rate, the markets are getting lit up, and all is despair. If you’ve been living the Pisani lifestyle, I’m afraid you’ll be made to eat your hat by a short seller, who will watch you doing it while flinging small handfuls of sand in your eyes. It hurts, I understand. You have my sympathy.

Thankfully, I had the foresight to sell into the strength as opposed to throwing weight on the downdraft and cutting myself down by 5%+ all in one go.

My anticipation, for the moment, is that we will finish this selloff quickly and then surge higher.

I made a (now obviously) misguided purchase of AGQ a few days ago, but other than that I’ve been very good about holding that cash and keeping my hands off it. EUO, my hedge, is running, as this selloff seems to be driven as much by dollar strength as anything else.

The REITs are holding up decently well; AEC and CLP having nothing but cash and sterling operations.

BAS is not so fortunate.

If you owned BAS and didn’t know this quarter was going to be hard: please dispatch yourself in a grueling fashion. That was the most obvious loss in the history of loss-taking. Still BAS is way up from last year and I will consider adding on dips.

CCJ got hit yesterday as well, and RGR seems to be collapsing predominantly on profit taking. Both are buys; both will see much higher prices.

Finally, silver. Silver is the butt of jokes being told on Twitter; that place where everybody sees everything coming and makes 500% annually. Well, the jokes going to be on all of you. Silver is going to explode higher when you least expect it. I remember the circus at $15 /ounce. How it was going single digits. Then it lit you up.

I remember when it went from $50 to $25, and the same people were guffawing how it was going back to $15. Then it lit you up again.

Now it’s off to below $30 (meanwhile the Fed is dropping money like it’s worthless), and the same folks are howling that it’s all done for.

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