Since 2007 when I first started tracking the price of gold, I have never been more bullish than I am right now.

Basically, I see no downside risk at all. Back in the fall of 2008, there was VERY STRONG buying pressure when gold fell below $900. I mean, so strong that there were gold shortages everywhere. Even the Indians were buying, and buying more than usual! So I can't possibly imagine gold going below $900 ever again.

According to my own research, the right price of gold is somewhere around 2000 current US dollars. That's where the upside potential equals the downside potential.

Basically, to calculate where the price of gold should top out, take the $850 price it was in January 1980, multiply by the change in money supply, and then multiply by the change in demand and divide by the change in supply. This calculation gives me $4700, using the supply & demand data from 1979.

The supply & demand data is available at Kitco's website, and M3 is available at nowandfutures.com.

Now I already identified $900 as a key support level. So now taking the geometric mean of $900 and $4700 I get just over $2000. That's the price necessary for the downside risk to equal the upside risk. Below that, gold is undervalued. Above that, gold is overvalued.

I'm pretty sure I can even put a date to when gold will go above $1000. Gold will be above $1000 by April of next year (2010). My guess is it will happen well before that date. Probably this summer.

Let the debate begin!

Here's my 3-part YouTube video series:

Part 1

Part 2

Part 3

It was 2001 when I first started developing with Win32 API. Back then, Win32 API was the only way to develop a Windows application. Sure, you could use a variety of different wrappers, including MFC and Borland's OWL. However, the Win32 API was always at the core of the application. This resulted in applications having a very consistent look & feel. Every application looked like it belonged in Windows.

In 2002, a new phenomenon started, called the .NET Framework. The .NET Framework was supposed to be Microsoft's decision to improve developer's lives by replacing C++ with managed code (written in any language). At least that's what I hoped back in 2002. However, from the very beginning it became clear that Microsoft's intent was not to replace Win32 API with .NET but in fact to carry two separate development frameworks, and ultimately to confuse and alienate Windows users and Windows developers.

Let's look at what "mistakes" MS made with .NET that have been causing ongoing pain for Windows developers.

1. Not including .NET in Windows.

Microsoft has an ongoing policy of keeping .NET & Windows separate. For some bizarre reason, Microsoft will not distribute the latest version of .NET with the latest version of Windows. Windows XP SP1 could have included .NET 1.1. It didn't. Windows XP SP2 could have included .NET 2.0. It didn't. .NET should've been a required update from the very beginning. It should've been an inextricable component of Windows, just like IE. Though it's unclear which version of .NET will ship with Windows 7, what is clear is that when a later version is released, Microsoft will make damn sure that users won't even know about it.

2. Not making the Win32 API obsolete.

With Windows Vista, Microsoft could've made all new APIs available only to .NET developers. Why do that? To discourage Win32 API development. To make it clear to developers that .NET is the future. Starting with Vista, Microsoft should've moved all of its innovation into .NET. Instead, they added new features to Win32 API! Features that they didn't add to .NET! In other words, they showed that Win32 API is still the only way to develop Windows applications.

3. Not setting an example.

Microsoft could have migrated all of its apps to .NET. Office 2007 should've been entirely written in .NET. Visual Studio .NET (first version) should've been written in .NET! Microsoft should've set an example, that .NET is the future. Instead, they keep writing apps in MFC or Win32 API. Clearly, MFC and Win32 API is still the future. I challenge you to find any major Microsoft application written in .NET.

4. Reinventing the wheel.

Rather than using native Win32 API controls in .NET WinForms applications, Microsoft instead decided to reinvent the wheel, coding an entire UI toolkit from scratch using managed code. What for? Sun already did that! It's called Java!

The inconsistencies in look & feel in .NET are hideous, but even worse are the inconsistencies in behaviour. .NET 1.1 was notorious for its non-standard controls. It's the reason I developed NetXP. It's the reason why I had to write a gigantic .NET wrapper around Win32 API. .NET itself should've been that wrapper. Here's an exercise: Try popping up a balloon tooltip (a feature of Win32 API in Windows XP) in .NET 1.1.

This is the biggest issue with .NET, and Microsoft still hasn't fixed it. Take the XAML menu for example. It's totally different from the standard WinAPI menu. Even the ClearType looks different in a XAML app! This decision by MS not to enforce OS UI conventions will lead to a wide range of UI variation on Windows, and will ultimately lead developers (and users) away from Windows, and toward Mac or even Linux.

Conclusion - My Message to Microsoft

It's painful to develop apps in Windows API (or MFC) in 2009. You (Microsoft) could've changed that. You had the opportunity, with .NET, to create a new way of programming Windows. You blew it. Until you fix the 4 issues above, I will be programming in Java. Java is everything .NET is and more. Java is cross-platform, free software, and has a wider user base. Why should I limit myself to Windows when the choice I have is between Windows API (a 25-year-old technology) and .NET (a clone of Java that runs only on Windows)?

To those out there who remember Visual Basic, .NET is another Visual Basic. VB was great for RAD (Rapid Application Development). So is .NET. But the problem with VB was that it was non-standard. It didn't wrap the Win32 API well enough. The same is true for .NET. Now, if .NET was going to be cross-platform, I'd understand. But it was never intended to be cross-platform. Microsoft totally blew it with .NET. Developing a Windows application in .NET is as ridiculous as developing a Windows application in Visual Basic.

Windows 7: A Review

By Dan Tohatan

In 1994, Microsoft unveiled a user interface that was truly revolutionary at the time. Code-named "Cairo", it was to become the interface of the new Windows 95 operating system. When Windows 95 came along in July of 1995, the new shell (Windows Explorer) totally surpassed the old Program Manager / File Manager combination, which had been a staple of Windows since Windows 3.0. Windows 95's unparalleled multimedia capabilities became evident very quickly.

I remember how amazed I was when I first saw the Windows 95 boot-up screen, in all its 256-color beauty. Microsoft got it. The world was moving toward true color displays. No longer were UIs going to be boxed into the 16-color (or less) paradigm which had dominated displays since the 1980s. A revolution was beginning, and Windows 95 was going to lead it.

Fast-forward to the present, and a new revolution is beginning. This time, it's a move from bitmapped graphics to vector graphics. It's a move toward 3D-accelerated vector graphics. You can see it in the new Web 2.0 websites out there: smooth gradients, subtle 3D effects, animations, and heavy use of mouse-over events. You could call this the second UI revolution.

Windows Vista was supposed to bring in this new UI revolution. However, Microsoft bit off more than it could chew. Vista over-promised and under-delivered. The result was, as everyone now knows, a total disappointment. Today, almost 3 years after Vista's release, the market share held by Windows Vista is around 25%. The market share held by XP? 60%. What's even worse for Microsoft is that Mac OS X and Linux have been gaining feverishly thanks to Vista's lack of stability and incredibly slow performance.

Windows 7 is what Vista should have been. It is to Windows XP what Windows 95 was to Windows 3.1. I would encourage everyone reading this review to go out and download & install the Windows 7 Release Candidate. I have (so far) only used the OS for a day, and I am extremely impressed.

The most interesting thing about Windows 7 is that it's the first Windows OS to have lower system requirements compared to the previous version. While it has been demonstrated that Windows 7 can be installed on a system with only 512 MB RAM, it's not a realistic requirement if you want to run the latest applications. A system with 1 GB of RAM or more should be able to run Windows 7 at least as fast as it would run Windows XP. Also, while Windows 7 requires 16 GB of free disk space to install, it only ends up using about 9 GB, which is far better than Vista.

I'm going to start this review by looking under the hood - at how the OS performs. One of my biggest problems with Vista is the size of the WinSXS folder. Apparently, in order to solve "DLL hell", Microsoft decided to keep every single version of every DLL forever. Before I installed Windows 7, my Vista SP1 WinSXS folder was 7 GB, with no apps installed. This was after I ran the SP1 clean-up tool. Before that, it was over 10 GB. With Windows 7, it's only 4 GB. Seems MS was able to cut out a whole 3 GB from the WinSXS folder, which is excellent.

Another thing that MS improved with Windows 7 is the speed of shutdown. While boot-up is about the same as Windows Vista, shutdown is noticeably faster. Also, the speed of installation (if you're doing clean install) is much faster than a comparable Vista installation. I remember when I installed Vista that it seemed to take longer than an equivalent XP install. Windows 7 actually installs faster than XP.

I remember with Vista having issues with the TrustedInstaller. It would just start up randomly and my hard drive would start thrashing, and my system would slow to a crawl. Windows 7 seems much more quiet (in terms of hard disk activity) and CPU usage is actually at 0% most of the time! It's incredible how Windows 7  release candidate (not even final release) outperforms Vista so much. The final release will probably be even better.

Moving on to the UI, the first thing you notice about Windows 7 is how much cleaner it is compared to Vista. Gone are the incessant notification popups or the glaring UI inconsistencies that made Windows Vista such a pain to use. UAC is totally gone. In Vista, just about everything you did would pop up a UAC dialog. It was extremely annoying. In Windows 7, the UAC prompts, even where you would obviously expect them (e.g. Task Manager), are totally gone. It's a mystery what MS did here, but it's a really good thing. I really hope that this is permanent and that UAC doesn't come back in the final release.

The other pleasant surprise I had with Windows 7 was that MS added new accessories! This is the first time MS did something like this since (probably) Windows 95! Not only that, but the existing accessories (Wordpad, Paint) have been totally revamped. You will also notice the UI consistency in Windows 7 (versus Vista). Finally, I'm pleased to announce that MS has finally removed the "Install New Font" dialog that still had a Windows 3.0-like UI. This calls for a major celebration! This dialog existed in Windows - unchanged - since 1990! Now it's finally gone!

What I really like about Windows 7 is its new Libraries feature. A library is a special folder that is actually the aggregate of multiple folders. Libraries makes organizing files so much easier. Microsoft also implemented a fairly complete set of filters (or views) for each library. For example, you can view your music by artist or by album. The views are customized to fit each library type. For example, the Music library only has views that are relevant to music.

But it's the small things that make Windows 7 so impressive. For example, when copying files, the progress is shown in the taskbar as the background of the taskbar button, and it updates in real time. So you can just look at the taskbar to see the progress. You no longer have to Alt+Tab. Also, the extensive use of mouse-over effects really adds to the usability of the OS. For example, hovering over a taskbar button shows you a preview of the window that corresponds to that button.

Windows 7 is probably the first Windows OS for which screenshots aren't enough. This is because of the extensive use of mouse-over effects. Screenshots just don't do it justice. When I looked at various screenshots of Windows 7, I thought "what a bad UI design!" But in practice, the UI design is very usable. Not only is it usable - it's fun! This is the first time I'm having fun using Windows since Windows 95!

To conclude, you really have to use it to fully appreciate it. There are many pleasant surprises in this OS. When I switched to Ubuntu back in 2007, I never thought I'd see another version of Windows as great as Windows XP was. Well, it turns out I was wrong. Windows 7 is the new Windows 95. Windows XP was an evolutionary change. Windows 7 is a revolutionary change. Windows 7 leaves its competition in the dust. In the end, Microsoft still gets it.

Mike Shedlock is suggesting that US treasuries are a good buy at this point. Let's see if he's right...

Currently yields are at 4%. If yields drop to 2%, that means the price of 30-year treasuries would be double the current price. Could it happen? Short-term, based on this chart, it sure looks like a possibility.

Short-term (i.e. within the next 12-18 months), the outlook for US treasuries is quite bullish.

But let's look at the longer term. Since 1980, yields on US treasuries have been going down. We have a 29-year unbroken uptrend (bull market) in treasuries (downtrend in yields). The current bull market in treasuries seems just a tad ancient. When this trend finally reverses, look out below.

Fundamentally, you'd be mad to own US treasuries right now. The average rate of inflation in the US since 1971 has been 7% per year. A long-term yield of 4% makes absolutely no sense. Ignoring inflation when buying bonds is like ignoring P/E ratios when buying stocks.

Buying US treasuries now would be like buying dot-com stocks in 1999. Sure it might go up 100% in three months, but if you don't time the trade perfectly you'll be wiped out. You better get the timing exactly right, or else you could lose your money.

By 1999, the US stock market had been in an unbroken uptrend for 16 years. In 2000 the trend finally reversed, and all the suckers that got in after 1997 have yet to make any return on their investments.

Don't be a sucker.

Right after I posted my "worst case scenario" calling for exchange controls by fall of 2009, Jim Rogers (in this Bloomberg article) is basically saying the same thing!

"
May 12 (Bloomberg) -- A rally in the U.S. dollar has run its course and a currency crisis may take place in the fall, investor Jim Rogers said.

“We’re going to have a currency crisis, probably this fall or the fall of 2010,” Rogers, 66, said in an interview with Bloomberg Television in Singapore. “It’s been building up for a long time. We’ve had a huge rally in the dollar, an artificial rally in the dollar, so it’s time for a currency crisis.”

Rogers may consider buying the yen and prefers the euro to the dollar or the pound, he added.
"

Jim Rogers correctly predicted the dollar rally last fall.

I've taken the time to compile a timeline of global economic stats for 2009. It will be an interesting year. I'm not ready to drink the kool-aid that the worst is over. The worst is yet to come. After a quiet summer, the next leg of the collapse will start at some point in August. I really hope what I say does not come true, because if it does, it will be a living nightmare.

• Unemployment figures (officially) in the US will hit 10% by July. However - the government may massage the figures, keeping them under 10% until late September.
• I'm expecting very little volatility in the markets over the summer, until early August when unemployment figures in the double-digits will be first released. I'm expecting the Dow to continue somewhere between 9000 and 10,000, and gold between $900 and $1000, until at least early August.
  
• Watch out on August 8, 2009. This is exactly a year after the Georgia incident. Russia may again try to attack Europe, in retaliation to growing NATO influence over former Warsaw-pact territory. The men behind the curtain may give Russia the green light, in light of the horrendous economic stats coming out. In other words, to make a quick buck and prevent social unrest, the corrupt banksters may choose to start a third world war.
  
• By fall it will become clear that the world is in total economic collapse. In September, 2009, the Dow will begin to crash violently, along with the US dollar. News will be coming out that US unemployment has just hit 12% and the US economy is expected to contract 15% in 2009.
• From a high of 9000, the Dow will end up at 4000 by November. US treasuries will go into hyperinflation in October, 2009. The entire world will enter a World War II-like state economically starting in October.
  
• In October, 2009 a dangerous new influenza virus begins to spread. It begins by claiming 200-300 lives every day. It is clear that it is a bioweapon, because it is spread by way of covert agents, appearing simultaneously on different continents. By December, this mystery flu is killing 1000-2000 people every single day. It has a kill rate of 40%. This means 40% of people who become infected die. The government encourages vaccination, not knowing that the vaccine also has a kill rate of 40%. It will turn out to be the worst pandemic the world has ever seen.
  
• Somewhere in early October, gold will definitively cross the $1000 barrier while the Dow crosses 4000 on its way down. Shortly after that, the COMEX will be shut down and all markets in the US will be closed. All commodities will be declared illegal. The US will be under full martial law. No person will be allowed to own property, and all land will be seized by the US Federal Government. Movement will be strictly controlled with military checkpoints. UN peacekeeping forces will be deployed worldwide to contain civil unrest.
  
• Although no longer reported, unemployment will continue to climb, reaching 16% by the end of 2009 (by official measures) or 30% according to shadowstats.
• It will not be visible, but the US dollar will reach hyperinflationary collapse by November, 2009. The US dollar will only be exchangeable on the black market. Exchange controls will be in place worldwide. Gold will sell for over $4000 USD on the black market.
• At some point in October, 2009, there will be a concerted effort to take down the Internet. ISPs will be forcefully shut down for allowing "subversive" material to be downloaded. If the attempt is successful, there will be mass riots. 70% of every city's population will be violently protesting. All economic activity will go underground. The Internet may be forced to go underground.
• Be prepared for widespread long-lasting power outages starting in August, 2009. Remember what happened in 2003. It will be similar to that, but it will last longer. Blackouts may end up lasting for weeks. It's quite possible that by the end of 2009, reliable electricity service will be a thing of the past.
• One also needs to prepare for food shortages and shortages of other essential goods. The government and corporations will hoard all food for themselves and possibly give some out in small rations (e.g. you are allowed 3 eggs per month). The blackouts will make it hard for supermarkets to continue operating. The fixed exchange rate and worthless fiat currency will mean that imports & exports will be impossible.
  
• By November, 2009 nearly every country on the planet will have instated a total military draft. Every single citizen will be openly apprehended and forced into either military service or civilian service (forced labour).
• The speed with which all this happens will make "shock & awe" seem like slow motion.

I suggest to everyone (including myself) to prepare for all of these possibilities. What do you do if your city's power goes out for 2 weeks? Or if the Internet is shut down? What if all the local grocery stores close down for 3 weeks? What if all your paper currency becomes worthless, or you're no longer allowed to withdraw money from your bank account? And lastly, what are you gonna do... when they come for you?

Peace. Love. Understanding.
Hope for the best. Prepare for the worst.

It's tax refund time, and my suggestion to you all (especially US citizens) would be to spend 50% of your tax refund on precious metals. Here's a little known fact: The average rate of inflation in the US over the past 40 years has been 7% per year. This means in 10 years you lose half your money.

The case for precious metals as an inflation hedge really doesn't need to be re-stated. But before you get into precious metals, here are some important things to know:

1. The COMEX price means nothing. Be prepared to set your own price.
The COMEX is just one of many markets for precious metals. Other markets are eBay and Craigslist. The COMEX is in fact a very small market. Use the COMEX price (like all other prices) to your advantage. When the COMEX price is the lowest, buy from the COMEX (or from dealers who base their price on the COMEX price). The primary objective here is to always buy low and sell high.

2. For buying, coin shops and bullion dealers are the most reliable & usually the cheapest.
eBay is very expensive these days, mainly because of cash-back. If you're in the US, take advantage of the cash-back offer. Otherwise, forget about eBay. Craigslist rarely has bullion up for sale and if it is, it's usually local pickup and quite expensive (because the seller knows how valuable bullion really is).

3. Always tally up all your costs (shipping, exchange rates, and other fees) before determining price.
It's often easy to forget about shipping costs, customs fees, eBay fees (for selling), or exchange rate arbitrage. Typically, exchange rate arbitrage is 3% of the price (if you're paying in a currency other than your bank's).

4. Always prefer domestic dealers over foreign. But not necessarily local.
There's certainly more risk involved in sending precious metals across international borders. You could be hit with customs fees or run into some kind of draconian restriction on imports. Now, in Canada, if you choose a dealer within your own province, you'll have to pay provincial sales taxes. So it's usually better to buy from dealers outside of your province (or other regional jurisdiction) to avoid taxes.

5. Do not sell anything unless you must.
Given the uncertainty of a fiat monetary system, you never know if something is a bubble or if it's hyperinflation. There's really no way to judge if precious metals have become overvalued. The best exit strategy is to never sell. However, there are those cases where you desperately need some money. In such a case, you are forced to sell. There are also situations where you may find a better investment (e.g. a stock or a piece of property) but don't have enough money to invest in it. In that case, again, you are effectively forced to sell to raise cash.

6. There is such a thing as having too much.
Keep enough cash lying around so that you won't be forced to sell in the event of some minor setback (e.g. losing your job). The problem with selling precious metals is that in many cases you are hit with taxes & fees, on top of the premiums you paid originally to purchase the metals. Therefore, too much buying & selling will cause you to lose all your money.

7. Keep yourself busy.
Sometimes it's tempting to obsess about the daily spot prices or constantly second-guess your investment decisions. To avoid such foolishness, you should keep your mind occupied. Basically, forget about the fact that you have precious metals and go on with your life.

There is another question precious metals investors struggle with, and that is, "Which metals should I buy?" My belief in this regard is that the oldest metals, those that have been money for thousands of years, need to be given priority. You should have a much larger proportion of gold & silver relative to platinum & palladium.

Deciding between platinum & palladium is quite easy. Palladium can be substituted for just about every use of platinum and it's much cheaper. Plus, Russia controls much of the palladium supply, meaning it could create artificial scarcity quite easily, raising prices dramatically. Palladium can be used to produce the cold fusion effect observed in 1989 by Fleischmann & Pons. There's also a growing palladium jewellery market in Asia. I would recommend palladium over platinum any day of the week.

Now, deciding between gold & silver is more tricky. On the one hand, gold is owned by central banks and is therefore more capitalized. It's more liquid & less volatile. The problem with silver is it's a wild ride. If you don't like wild rides, you should keep more gold than silver. However, silver has the potential to go much much much much higher than gold. Silver can be substituted for all other precious metals, and there's less silver bullion out there than gold bullion! So if you want maximum upside, you should go with silver. And because silver is correlated with gold, you won't miss out on gold's upside by owning silver. However, I would recommend holding some gold because of its low volatility. In cases where you need to sell something, you would sell the gold & keep the silver.

Historically, the best performing portfolio is 50% gold, 20% silver, 5% platinum, and 25% palladium. However, it's also very volatile & illiquid because of palladium and not very well exposed to silver. So instead, I would recommend a portfolio of 40% gold, 40% silver, 5% platinum, and 15% palladium.

In the end it's up to you. Remember: DYODD (Do Your Own Due Diligence).

My word is not gospel. Amen.