Throughout the “sh*t hitting the fan” events of last fall, and the subsequent policy response, we’ve listened intently on what this Canadian had to say. The picture he paints today is one of bearish conviction. That’s exactly the reason he’s come under recent criticism as his ilk of ivory tower economists have started calling an end to this recession.

Though we don’t think he has anything to prove, he released a special report reaffirming his key points. You can read it in full here. But if you don’t have the time to peruse the twenty-two page (slightly wonkish) document, we’ve broken down the basic takeaway for you.

The equity markets have moved too far, too fast, and a correction is coming. Rather than buy into this rally, you should look at commodities. That’s because David believes that since 2001commodities took off on a secular bull market run.

Also, rather than hold US dollars, Rosie bets that the Canadian buck is a safer bet due to Canada’s smaller national debt (26% of GDP vs. 62% in the US), smaller budget deficit (-3.4% of GDP vs. -11.2% in the US), stronger banking sector (no Canadian bank needed a bailout), lower unemployment, and an economy more reliant on commodity exports like lumber, oil, natural gas and precious metals.

But the scariest–for holders of US dollars—forecast Rosie makes is that the US has yet to use a power policy tool: the devaluing of the greenback.

As Obama continues to take pages out of FDR’s playbook, he’s yet to devalue the dollar as FDR did in 1933. Rosenberg doesn’t say that the US policy wizards will directly devalue the dollar. Rather, he thinks it will happen by the expansion of the Fed’s balance sheet and the creation of freshly printed dollars.

We think he’s dead on about this call. The US’s “strong dollar” policy has become the latest oxymoron to enter the American vernacular. There is only one direction the value of the US dollar is going over the long-term—down.

Where exactly should you invest amidst this economic malaise? Here are the seven places to park your cash. Not surprisingly, our favorite precious metal tops the list.

1.) Gold

2.) Commodities

3.) The Canadian dollar

4.) Resource sectors of the stock market

5.) US sectors that have high foreign exposure (materials, tech, staples, healthcare)

6.) Canadian sectors that benefit from lower import costs (consumer stocks) but lose export competitiveness (manufacturers)

7.) Canadian bonds (a higher Canadian dollar will keep inflation low, hence reinforcing positive fixed income returns)

Declining exports are chiefly to blame, as spending power in the United States – Canada’s chief trading partner – has significantly contracted since the onset of the credit crunch and subprime mortgage crisis last summer.

Exports – and in turn, the Canadian economy – started losing momentum in the second half of 2007. Cutbacks in manufacturing hurt exports, most notably motor vehicles, Statistics Canada reported today (Friday).

The slowing economy gives the Bank of Canada more reason to further cut overnight interest rates again at its next meeting June 10. Last month, Bank Governor Mark Carney cut rates by half a point to 3.0% for the second consecutive month.

“Some further monetary stimulus will likely be required to achieve the inflation target over the medium term. Given the cumulative reduction in the target for the overnight rate of 150 basis points since December, the timing of any further monetary stimulus will depend on the evolution of the global economy and domestic demand, and their impact on inflation in Canada,” the Bank said in an April 22 statement announcing its last rate cut.

The Bank projects the Canadian economy to grow by 1.4% in 2008, 2.4% in 2009 and 3.3% in 2010.

Why Canada Shouldn’t Be Too Worried

All this is kind of tragic for Canada, where its domestic demand remains strong because of rising incomes and commodity prices. Yet, all this is more or less offset by weakening exports.

But there’s a happy ending.

In today’s world, where interest rates are low and commodity prices are high, Canada’s in a very strong position for two reasons:

• It has oil reserves – somewhat larger than the Middle East – in the form of the Athabasca tar sands.
• And it’s the world’s largest producer of uranium, with 25% of the world market. For purposes of comparison, Australia is second, with about 23%.

Canada’s wealth of resources protects the country from the rampant inflation spreading around the world. Its core and total consumer price index (CPI) inflation are projected to be slightly below 2% in 2009 and 2% in 2010.

However, as strong as domestic demand is, the health of the U.S. economy is the ultimate indicator of Canada’s economic health.

“The economy here has not only ground to a halt, but is contracting. It’s weaker than the U.S. economy, which I think is probably a surprise to a lot of people,” Ted Carmichael, chief economist at JPMorgan (JPM) Canada, told Reuters.

Source: Canada’s Negative GDP in the 1Q Doesn’t Spell Disaster