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Pros Say: Economy Needs 'Coddling' to Avoid a 'W-Shape'

Stocks turned mixed in afternoon trading Thursday as the bump from the encouraging business-inventories report faded and cracks emerged in the rally. Also, jobless claims rose unexpectedly by 4,000 to 558,000. A couple of retailers beat earnings expectations, including retail titan Wal-Mart.

Equities & Dollar Drive Oil

Equities and a weak dollar continue to give direction to oil traders, said Victor Shum at Purvin & Gertz. He expects a seasonally weak autumnand fundamentals to weigh in, pushing oil down to the $60s.

“Crude has been tracking the broader market equities and the almighty weak U.S. dollar so if you ignore the linkage to the stock and currency markets…oil should be trading around $49-50,” Shum said.

Counterpoint:

Economy Needs 'Coddling'

Anthony Chan of JPMorgan’s Private Wealth Management said the third and fourth quarters in the U.S. economy will be stronger than France and Germany’s economic results. “That doesn’t mean the economy doesn’t need some coddling,” he said. “If we don’t get some coddling, a W-shaped recovery is always the risk.”

Planning the Fed’s Exit Strategy

Former Federal Reserve Board Gov. Randall Kroszner shares his insight on the Fed’s exit strategy. “The foundation is there…if you look at the Fed’s balance sheet: it bloomed last year, almost tripling with all the lending that was being done, [but now] has come down by almost $1 trillion,” he said. “That shows that the Fed’s balance sheet is quite nimble and can move with market circumstances.”

Guaranteed Wall Street Bonuses Acceptable

There’s nothing wrong with having guaranteed bonuses on Wall Street, said employment attorney Jim Batson. “Wall Street compensation is not unlike major league baseball,” he said. “These traders are free agents and if I want my company to succeed…and if guaranteed contracts are what it takes, then that’s what I’ve got to bid for.”

Problem With Public Option Health Care

"The public option to me is a two-part option where you wind up with socialized medicine,” said Allan Miller of United Health Services. “I can't imagine that an employer who is offered a lower price and a higher price coverage would not go to the lower price.” He said most people will end up choosing the public option and ultimately, insurance companies will be unable to stay competitive.

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