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ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero
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It makes a lot of sense. The comparison to Tyson in the chicken industry is spot on. This seems to be a pretty objective economic not emotional analysis of the pandemic, market factors, regulation and loose collusion in the ammo industry. The way prices for 9mm have bottomed out to $.30 a round for brass cased ammo which is now available everywhere just about everyday seems to support what he is saving. We have hit the floor and that floor is right be artificial and not really tied to supply and demand. I pulled a few quotes from the article that are illustrative of the gist of what the author is saying.
Like a lot of industries, there are cost pressures in ammunition; the price of raw materials, like brass, have gone up. Additionally, the State Department has blocked imports from Russia, adding to the pricing pressure. But the cost story is really a sideshow; the pricing increase is going almost entirely to profit. For Vista, margins skyrocketed in 2020, and continued to increase in 2021. As the CFO of Vista, Sudhanshu Shekhar Priyadarshi, told investors in November, margins rose to a record 27% in Q2 of 2021, on top of an already extraordinary 2020....
Vista has set up two pricing programs to ensure high prices and stability. The first is a subscription service for ammunition, which gives them a steady flow of ammunition demand and lets them plan production more easily. The second is, well, an informal form of price-fixing, or output reduction. They aren’t totally explicit about it, but they use code words to make the point. Here’s Metz explaining that they collude with their competition to keep capacity lower than it should be.
"Now with ammunition being the largest part of our business. I mean, clearly, buying a Remington, we've created what we feel like is an even more disciplined industry now as we go forward. We've got, I think, like competitors in the sense that they watch growth, they watch their margin profiles. And we feel like we've got a disciplined industry." And I've mentioned previously that we studied, as best we can…industry capacity and making sure that we're not only managing our capacity, but very mindful of what's being brought into the industry, so we don't get over our skis, if you will.
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