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gold Corporations In Strong Position In 2011; Global Growth To Support Commodities

احدث اجدد واروع واجمل واشيك gold Corporations In Strong Position In 2011; Global Growth To Support Commodities

gold Corporations In Strong Position In 2011; Global Growth To Support Commodities
Corporations are sitting on record piles of cash and with the U.S. and global economies likely to grow in 2011, those firms will likely deploy that money in several ways that put them in strong positions for the future.

Global growth will also increase the need for raw materials, which will support commodities across the board this year. On the other hand, U.S. state and local governments will do poorly to very poorly as they are saddled with massive debts and must manage without federal stimulus dollars to plug those gaps.

The stock market should benefit from the strength in corporations, said Robert Froehlich, senior managing director at The Hartford Financial Services Group. In fact, he said the Dow Jones Industrial Average should end the year at 14,000. It's around 11,700 currently.

"There are three things in place that you can't stop" that bode well for growth: a pickup in business and consumer spending and a booming global economy, Froehlich said.
He spoke as part of an economic outlook panel for 2011 and beyond, sponsored by The Executives Club of Chicago on Thursday.

Froehlich said companies have been sitting on cash reserves during the economic downturn, and now that the U.S. and global economies are starting to grow, institutional investors for these public companies will demand those funds are put to use. That will happen three ways, he said. One, companies will either establish or raise dividends, there will be stock buybacks and there will more merger and acquisition activity. "This will be a great time to buy market share," he said.

Diane Swonk, chief economist and senior managing director at Mesirow Financial, agreed that the cash position for firms is strong. However, she and Froehlich both said that doesn't mean these companies will be hiring new employees with their wealth. Swonk said it's likely to be redeployed for purchases of equipment, and Froehlich said most companies will probably look to technology to improve productivity.

"We're at a crossroads in business. They can either hire back or spend on technology…. Ninety-percent will spend on technology," he said.

Because companies aren't likely to rehire laid-off workers, Swonk believes the unemployment rate in the U.S. will hold above 9%. She said if the jobless rate declines, it will be from workers who have given up looking for jobs after not being able to find any. The U.S. unemployment rate only counts those who are seeking employment and haven't found any, not those who are jobless and have stopped looking for work because they are discouraged.

Further, those who have exhausted their 99 weeks of jobless benefits are also no longer counted on unemployment. "They are not being counted…. Those are the people I worry about. What will happen to them? Will they become homeless, or go on welfare?" she asked.

Froelhich also said consumer spending is rising as the wealthy start buying again and those who are receiving unemployment benefits spend money. The ones who are not spending are those who have jobs, but their houses are not worth as much. They have stopped spending and are paying down debt, he said.

Emerging markets will continue to grow and that benefits corporations that either export or have exposure outside the U.S. Swonk expects trade in developing nations to pick up "as the world needs to develop."

Froelich said emerging markets will consume raw materials as they grow, which is bullish for commodities in the larger picture. "In the next five to 10 years, 2 billion people will move from below poverty to above poverty… that's extremely bullish for commodities," he said. "When people move above poverty they do two things, they change the way they eat and their mode of transportation. That's extremely bullish for agriculture and energy."

Commodities that benefit from this demographic shift, in descending order, are agriculture, energy, industrial metals and precious metals.

Dark spots in the economic outlook will be state and local governments, Swonk said. Tax cuts have been extended, but the federal stimulus is ending, she pointed out.  Many U.S. state and local governments are dealing with big deficits and won't have extra money from the federal government to help in fixing their budgets.

Noted commodities investor Jim Rogers, who also spoke at the panel, said he is "very keen" on some areas of the American economy – particular areas which produce goods.

But he is concerned about the level of debt in the U.S. and the amount of federal spending to support the economy.

The number one question people ask her, she says, is about how to reduce the deficit. "The problems are substantial, but they're not insurmountable," she said.

She's hopeful, though, that something will be done. She pointed to the deficit commission put together last year which suggested ways to tackle it. While not everyone agreed with the ideas, there was agreement that something needs to be done, adding that the first step in fixing a problem is to acknowledge it exists.

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