Well, this is an unhappy subject to be writing about: the unrest in Ferguson, Missouri. I read the other day that Taser International (TASR) rallied on the news of the protests. I had to investigate further.
But first, let's go back in time to the security stock mini-bubble of 2003 that gave birth to Taser. I'm not really sure what started it, but Taser was the biggest football of them all in 2003, an awfully strange time for speculative activity, because we were just coming out of the long, awful bear market that began in 2000. At the time, I was auditioning for a spot backing up Lehman's small-cap trader. I remember looking over his shoulder, watching Taser explode higher. We were both surprised.
Taser gained popularity as a non-lethal use of force option for police departments aside from batons and pepper spray. (I do have a little knowledge here, as a former federal law enforcement officer.) I've never really understood the attraction of running an electric current through someone, when pepper spray is virtually harmless and baton strikes do no lasting damage if applied properly. And Taser has had plenty of critics (including the UN, which considers it to be a torture device), but it never really made a dent in the business model. So, whatever, Taser was the darling stock that year, this newfangled thing that incapacitated the suspect harmlessly.
Fast forward to today, and the reason why people are getting excited about Taser again is because Taser also makes officer body cameras, which are getting a lot of attention as a result of Ferguson. There is evidence that officer body cameras inspire much better behavior from both the officer and the suspect. Generally, most things in life are better when exposed to more sunshine. I'm not being glib, but I think everyone is much happier with how baseball has worked out this year with the instant replay.
But I have to wonder if this isn't just another example of the stock market getting ahead of itself. I mean, I don't think we have enough information to figure out if Ferguson is good for Taser or not. But basically what the market is doing is taking the cost of an officer cam and multiplying by the number of police officers and arriving at a really big number. And maybe Taser will sell a bunch of officer cams.
But you have to look at this in the larger context of what has been a very long bull market in law enforcement, going back to the mid-1990s, when the federal government provided funding to hire more officers and provide them with military equipment. This issue of police militarization is very real, and I suspect that we are in the very early stages of a backlash against law enforcement. Maybe we get more cameras but fewer Tasers or other stuff.
Running and gunning Taser is like a national pastime, but you have to keep in mind that this is a small company with very real warts that is at the very center of the law enforcement debate. It's not clear to me that the chart resolves itself higher.