What Shootings Teach Us about the Markets

A 21-year-old, white, troubled, male, who’s also a white-supremacist, walks into a Walmart and mercilessly murders 22 people and critically injures another 24.

He’s written an anti-immigration manifesto. His view on America is that it’s being overrun with Hispanic immigrants. He published this on the controversial online message board, 8-chan.

He’s also had access to and carried semi-automatic guns. It’s believed his weapon of choice was a variant of the AK-47. A traditional AK-47 has a muzzle velocity of 700 metres per second and can fire around 600 rounds per minute.

It’s believed the shooting started at 10:39am and the police arrived six minutes later. That’s enough time for the shooter to have shot 3,600 rounds.

Nothing about this makes any sense.

Within 24 hours another young, white, hate filled male shot up a bar, killing another nine people and wounding many more. It’s not known if he was racially motivated, but that doesn’t change the nature of his actions.

He was just 24 years old. Again, he had access to a high powered, semi-automatic rifle. And it was all bought legally. He then had it modified by a local arms dealer fitting it out with 100 round magazines. He was carrying 250 rounds with him, according to USA Today.

21 and 24 year olds shouldn’t be so full of hatred for humanity that they murder innocent people. They also shouldn’t be able to get access to high-powered semi-automatic and fully automatic assault rifles.

What’s even crazier about all this is the market response to these horrific mass shootings.

After mass shootings, you’d expect ardent crack down on gun laws. You’d expect some kind of increased restriction on access to firearms, with greater background checks, scrutiny and monitoring. You’d expect that the sale of automatic weapons typically used in war zones would simply be banned from sale to the public.

And you’d expect this to have a trickle-down effect on stocks like gun manufacturers such as American Outdoor, Sturm Ruger & Company, Vista Outdoor. You’d think.

  • Sturm closed on Friday at US$45.86.
  • American Outdoor closed at US$8.64.
  • Vista Outdoor closed at US$7.38.

The shootings occurred over the weekend. On Monday…

  • Sturm opened at US$47.60.
  • American Outdoor opened at US$9 with a high of US$9.29.
  • Vista Outdoor opened at US$7.50 with a high of US$7.58.

Note: Almost universally across the board on Monday, US stocks fell. The Dow Jones Industrial was down, the NASDAQ composite was down. Everything was down.

And it was down because of the ongoing trade war slap fight between the US and China.

US–China trade tensions have actually created some incredible opportunities for Aussie investors. Click here to discover three unique plays on the US–China trade war.

The market’s reaction doesn’t make sense

But not gun makers. They were up and completely bucked the trend of the markets. Why? Well, when there are shootings the natural reaction (in the US) is people buy more guns…to protect themselves against the next mass shooting.

Not about trying to prevent the next mass shooting, just trying to defend themselves when the next one inevitably comes.

And now in Texas, there will be even looser laws on gun ownership. Now you can take your Smith & Wesson M&P 380 Shield EZ M2.0 (or any other legal weapon) into church, your mosque, synagogue or even public school ground.

Money Morning

Source: Smith & Wesson, Smith & Wesson M&P 380 Shield EZ M2.0.
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None of that makes sense. The market’s reaction doesn’t make sense. And therein lies the secret to making money from the market. That’s how you beat the market in unpredictable times.

Play the nonsensical card. Expect the unexpected. And work to a strategy that to most people either seems ridiculous, or in a more technical sense, contrarian.

We’re not saying that with every mass shooting you should go and short term trade US gun stocks. You’d have to be an immoral idiot to do that. But clearly there’s plenty of those in the market, because you can see from the day trading that’s exactly where money gets made in these situations.

But what you can take away from this is common sense, public opinion (outside the US in this case at least) tells you one thing…and the markets do another.

That’s not an isolated situation, either. To buck popular opinion and to play the hand that the masses don’t expect, can put you in good stead when you’ve got an eye on the long game.

Plenty of people thought those ‘computers’ weren’t much good for home use back in the ‘70s. Just like that idea that digital cameras wouldn’t come close to replacing good old film.

Scientists would never be able to unravel the human genome. The idea of a car that drives itself, complete and utter nonsense…right?

Markets aren’t rational or sane. Some of the best investments ideas aren’t rational or sane, either. Sometimes you’ve got to be prepared to take on some risk, walk the line between genius and insanity and importantly, invest with conviction and confidence.

The contrarian, nonsensical opportunities are often the hardest to move on, but often work out to be some of the most lucrative.

Regards,

Sam Volkering,
Editor, Money Morning

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Sam Volkering is an Editor for Money Morning and is small-cap, cryptocurrency and technology expert. He’s not interested in boring blue chip stocks. He’s after explosive investments; companies whose shares trade for cents on the dollar, cryptocurrencies that can deliver life-changing returns. He looks for the ‘edge of the bell curve’ opportunities that are often shunned by those in the financial services industry. If you’d like to learn about the specific investments Sam is recommending in either small-cap stocks or cryptocurrencies, take a 30-day trial of his small-cap investment advisory Australian Small-Cap Investigator here, or a 30-day trial of his industry leading cryptocurrency service, Sam Volkering’s Secret Crypto Network here. But that’s not where Sam’s talents end. Sam specialises in finding new, cutting edge tech and translating that research into how the future will look — and where the opportunities lie. It’s his job to trawl the world to find, analyse, research and recommend investments in the world’s most revolutionary companies. He recommends the best ones he finds in his premium investment service, Revolutionary Tech Investor. Sam goes to the lengths of the globe and works 24/7 to get these opportunities to you before the mainstream catches on. Click here to take a 30-day no-obligation trial of Revolutionary Tech Investor today. Websites and financial e-letters Sam writes for:


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