China's Secret Fort Knox

Guar Gum Launches 2,800%!

If you think the corn chart was showing a price spike, you should check out this heavily used commodity. 

I had never heard of guar gum before a few months ago when Haliburton (HAL) blamed an earnings miss on high prices of this little known stuff.

Haliburton was one of my favorite stocks during the Bush years, just as GE is one of my favorite stocks during the Obama years. Both have benefited from cosy relationships with the president.

Chew on This

Guar gum, also called guaran, is made from the ground endosperm of guar beans. The seeds are dehusked, milled and screened to obtain the guar gum – an off-white powder.

Eighty percent of guar beans come from India – some 800,000 tons annually – and they are heavily dependent on the monsoon. You may have read the name on the back of a food label, as it is used in everything from ice cream and chocolate to cosmetics, drugs, explosives, fire retardant, and paper.

As you can see from the chart above, it makes the run-up in corn prices look like a joke.

According to the Houston Chronicle:

The big bump in demand now stems from guar gum’s role in the shale boom. It is a key component in the mix of sand, water and chemicals used in hydraulic fracturing.

Halliburton, the world’s largest provider of hydraulic fracturing services, says prices for some varieties of guar gum have surged more than 800 percent since January 2011. Guar powder has jumped from $1 a pound two years ago to $12 today.

Halliburton said that its second-quarter margins will be down as much as 5.5% from the first three months of the year due to higher costs.

As I’ve written about many times in the past, the fracking drillers continue to get squeezed while those that benefit from the low cost of energy will benefit. You should own drilling servicers instead.

More Big Government Lies

The U.S. Government has no end of lies, thievery, and cover-ups. It sold guns to Mexican drug lords, sold your grandchildren into debt slavery, won’t audit the Fed, manufactured catalysts for military adventures in third world hell holes, and continues to ignore the Constitution.

Former NJ Governor, and $1.5 billion (alleged) thief, Jon Corzine is still walking free bundling money for the current president’s campaign.  The fact that there has yet to be a perp-walk by a banker makes the point loud and clear who is really running this country.

Given the blatant arrogance and high-handed attitude as they sneer down their noses at those of us who are not connected – well, it’s getting time to pull out the torches and pitch forks. And just when you’d think it couldn’t get any worse, we get this poke in the eye.

According to the Financial Times:

A four-year investigation into the possible manipulation of the the silver market looks increasingly likely to be dropped after US regulators failed to find enough evidence to support a legal case, according to three people familiar with the situation.

The Commodity Futures Trading Commission first announced that it was investigating “complaints of misconduct in the silver market” in September 2008, following a barrage of allegations of manipulation from a group of precious metals investors.

In 2010, Bart Chilton, a CFTC commissioner, said that he believed there had been “fraudulent efforts” to “deviously control” the silver price.

But after taking advice from two external consultancies, the first of which found irregularities on certain trading dates that it believed deserved more analysis, CFTC staff do not have sufficient evidence to bring a case, according to the people familiar with the situation…

JP Morgan (JPM) skates again.

From the whistleblower who reported the story to the athorities:

There is something else that you may find strange. During month-end December, we were all told by our managers that this was going to be a dismal year in terms of earnings and that we should not expect any bonuses or pay raises. Then come mid-late January it is made known that everyone received a pay raise and/or bonus, which is interesting b/c just a few weeks ago we were told that this was not likely and expected to be paid nothing in addition to base salary. January is right around the time we started increasing our short positions quite significantly again and this most recent crash in gold and silver during Bernanke’s speech on February 29th is of notable importance, as we along with 4 other major institutions, orchestrated the violent $100 drop in Gold and subsequent drops in silver.

Nothing to see here, citizen, move along.

The funny thing is that we are few years out from when JPM (allegedly) orchestrated the silver crash, and it is now selling at a massive discount. I suggest you buy some.

China’s Secret Gold Vault

You may not have heard about it, but China is building a Fort Knox in Hong Kong.

According to Bloomberg, the vault is being built near the airport due to an unending river of gold that is flowing from the west into China. In 2011, gold demand in China increased by 20% – and that’s only the portion of gold that is reported. Most Chinese smuggle their gold without letting the authorities know about it.

The new gold vault is designed to hold 1,000 metric tons (tonnes) of gold, worth about $51 billion at today’s price. 

The Chinese have bigger ambitions than just holding wealth. They want to take the gold market away from London and put it back where they think it rightfully belongs – in the financial hub of South East Asia.

All the best,

Christian DeHaemer

Check us out on YouTube!

Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.