We are recommending a signifi cant reduction in equities, with emphasis on US and Emerging Markets shares. The reasons for the US reductions have been covered. The EM reduction is because we fear that food infl ation will worsen and this will have worse effects on EMs than on OECD nations. We remain of the view that Japan has probably completed its Triple Waterfall Crash that began 21 years ago. Canada and Australia are both commodityexporting nations, but Canada has larger manufacturing and short-term tourism because of its ties to the US, which means that, on balance, it is less tied to commodity prices.

1. Reduce overall equity exposures, particularly to non-Canadian fi nancial stocks.

2. Maintain commodity stock weightings in balanced portfolios, because their value proposition is clearer than that of most groups.

3. Hold high exposure to gold and gold stocks—the bad news investments. The protection they offer is going to be more valuable in coming months. It has been a long time since the stocks outperformed bullion but that could be coming: in the Seventies, it took years for the stocks to catch up. Silver and silver stocks are for those of speculative bent.

4. Maintain strong weighting in energy stocks, emphasizing oil and coal producers. Canada’s oil sands producers were in the winners’ circle after the Canadian elections, in which the electors voted for fi nancial stability, good management, and economic growth. The oil sands companies are Canada’s biggest private sector capital spenders, and their strategic value to North America is becoming clearer to all but the idiotic.

5. It is no secret to our clients that we have been big boosters of agricultural stocks since 2006. The investment case for this sector is stronger than ever, and the problems for the economically-sensitive commodity sectors make food—at the farm gate—a particularly appetizing investment theme. Underweight exposure to packers and processors, who may have great difficulty in passing along their raw food costs.