Economic Woes .. STILL

Economic Woes just won't go away…..

• Federal Reserve Chairman Ben Bernanke sketched a bleak picture of the U.S. economy Tuesday — and warned it will darken further if Congress doesn't reach agreement soon to avert a budget crisis.

• Without an agreement, tax increases and deep spending cuts would take effect at year's end. Bernanke noted what the Congressional Budget Office has warned: A recession would occur, and 1.25 million fewer jobs would be created in 2013.

• The Fed is prepared to take further action to try to help the economy if unemployment stays high, he said. Bernanke didn't signal what steps the Fed might take or whether any action was imminent. And he noted there's only so much the Fed can do.

•  Fed chairman made clear his most urgent concern is what would happen to the economy if Congress can't resolve its budget impasse before the year ends.

• Cuts in taxes on income, dividends and capital gains would expire. So would this year's Social Security tax cut and businesses tax reductions. Defense and domestic programs would be slashed. And emergency benefits for the long-term unemployed would run out.

• All that "would greatly delay the recovery that we're hoping to facilitate," Bernanke said near the end of two hours of testimony to the Senate Banking Committee.

• Bernanke noted that the economy, after growing at a 2.5 percent annual rate in the second half of 2011, slowed to roughly 2 percent from January through March. And it likely weakened further in the April-June period.

• Congress needs to resolve its impasse well before the year ends, Bernanke said. "Doing so would help reduce uncertainty and boost household and business confidence," 

• The cuts that would kick in next year could cost as many as 2 million jobs, a trade group that represents manufacturers said in a report released Tuesday. The report came from the Aerospace 

What is the next step?

How do we get out of this?

Are We In For A Worldwide Economic Slowdown?

Are We In For A Worldwide Economic Slowdown?

After dropping $25 in a straight line from the beginning of May to the end of June, WTI crude oil has recovered some of the losses and found an uneasy price balance in the mid $80s a barrel. The catalysts behind crude's two-month plunge have been all over the front page of your morning newspaper and fall under the umbrella of a terrifying Global Slowdown. The European recession, now believed to include Germany, is getting worse by the day. Baby steps towards some centralized Eurozone bank may assuage markets on any given day, but there's little reason to believe economic strength will drive demand for crude higher in our immediate future.

Beyond Europe the economies that once served as a backstop to the world are showing glowing signs on stress. On Wednesday Brazil issued its 8th consecutive rate cut down to 8% as the country finds itself in the unfamiliar position of trying to restart once unstoppable growth. Also this week South 

Korea cut rates for the first time in three years in an effort to stay ahead of the Chinese efforts to keep its soft landing from becoming a horrific crash.

Yet another negative is dollar strength. On Thursday morning the Euro (EUR/USD) dropped to a 2-year low against the greenback when it dropped under $1.22. The dollar isn't just gaining against the Euro. The US Dollar Index has run from below 74 to the mid-80s since last October. In currency terms such a move is enormous.

Against all the headwinds stands the prospect of QE3. Otherwise emboldened crude oil bears have learned not to bet against Ben Bernanke's Bazooka. Additional easing would almost certainly fail to drive growth and might not even be enough to weaken the dollar in light of the printing going on in the rest of the world. Traders don't care whether or not another round of stimulus would work because they know from past experience that Bernanke can drive prices higher, if only in the short term.

if the jobs trend doesn't improve, the Fed will act on its promise and step in.  The Fed won't tolerate a declining rate of employment. They're not going to wait too long and get behind the curve to try to resuscitate economic activity  Really then the debate about more easing becomes a matter of when, not if. Whether you personally support the idea - or deplore it - investors need only anticipate the market's response to QE3. Markets would 'receive the launch of another round of quantitative easing rather well but diminishing returns compared to the previous rounds of stimulus could make the Fed look like it's running out of ammo..

What are your thoughts on these trying economic issues?

Autism Health Insurance In California

Autism Health Insurance In California

California’s historic move to require insurance companies to cover behavioral interventions for autism could still leave thousands with limited access to the expensive therapy.

Starting this month, most plans will have to cover the intervention, called applied behavioral analysis and widely believed to be one of the most effective treatments for the autism and other developmental disorders. 

The therapy involves working intensely with a child or adult to break down even the most simple of social and vocational tasks into tiny steps that can be learned by most people.

But even though the goal was to make the intervention available to most Californians through their insurance, many plans will not offer it. That’s because most of the largest employers are exempt from state requirements under a 1970s-era law that was actually meant to protect privately funded pension plans.

The law says that any company that is self-insured – meaning that they pay for the care that their employees through a fund they’ve set up to handle those expenses – are subject to federal regulation, but exempt from many regulations imposed by the states.

Most large employers fall into this category, which means that covering behavioral therapy for autism will be voluntary for them.

Some large companies have decided to comply with the law anyway. There’s starting to be huge pressure on companies to cover this, but it’s absolutely voluntary. They do it because the families need it.

Until now, families have either had to rely on public assistance to pay for the services, or shoulder the cost themselves. Because a behaviorist will work with a child for 25 hours per week or more, the treatment can cost thousands of dollars per month.

To find out if your insurance will cover the therapy, don't just speak to customer service. Instead, call and ask for the autism unit. Workers there will be more likely to know if the plan will cover behavioral interventions in compliance with the new law.

Many families whose insurance will not cover the therapy will be able to receive it through a series of state agencies known as regional centers. These are the same agencies that have been covering it for some children through the public sector.

But not all people with autistic-like tendencies can get for services from the regional centers, which are overstretched financially and have in recent years been forced to cut back.

Others may find that they do have insurance coverage for the therapy, but that the co-payments put it out of reach anyway.

The regional centers, meanwhile, have been told by state lawmakers that it would be illegal for them to fund behavioral services for people who are covered under their insurance.

So thousands of families received notifications in June that they will be dropped from the state-funded program unless they can show that they are not covered.

Even more confusing, each regional center is responsible for implementing its own version of the law, so there is no clear answer to questions about whether there will be help with co-payments, or whether services will be interrupted as children transition from state-provided benefits to private ones.

How is your health insurance working for you and your Autistic Child?

Skidding off "Monetary Cliff"

Skidding Off "Monetary Cliff"….

Just when we were getting our heads around the idea that we're speeding down Fiscal Street and about to go careening off of "fiscal cliff," a new - and similar - risk has been added to the mix this morning.

According to Goldman Sachs economist Jan Hatzius, the Federal Reserve is essentially driving down Monetary Road and there's a good chance we're about to also have an accident at "monetary cliff," following Wednesday's moves that slashed the growth target and extended the rate-rejigging plan called Operation Twist.

What this means is, if there's not an unexpected improvement in the jobs market and economy in the back half of the year, then come 2013, the Fed will have no choice but to lever up and undergo another round of quantitative easing or QE3. If true, it would be a move rife with political, economic and inflationary risks as well as one that might not even work.

"I question how much additional quantitative easing, as well as what the Fed did yesterday, really impacts the real economy," says Jerry Webman, Chief Economist at OppenheimerFunds in the attached video. "I'm not sure there's a lot they can do that's going to really goose the economy at this point."

From Webman's point of view, Ben Bernanke has already repeatedly urged Congress to help carry the load and address the aforementioned fiscal dangers that have been brought on by uncertainty surrounding tax and budget policy, arguing that the Fed chief needs to say again, "guys this is not entirely up to us," in terms uncertain.

The risk in unambiguously asking for help, however, is spooking the markets by making the problem seem as if it is beyond the Fed's control. That the so-called "Bernanke put," that implies the Fed will always be there to save the day, may be about to expire.

To be sure, not everyone feels QE3 is a done deal for Q1, but it is clear that a new derby of sorts has begun and the wagering will be set on a data-point-by-data-point basis from now on.

"I think it's also a still a question of 'if,'" Webman says about the prospects for QE3. "I mean, if the economy continues its slog forward, I think the Fed wouldn't want to attempt some kind of policy that would have a marginal effect and open them up to the criticism of being politicized."

Of course, even if they do nothing, the Fed still risks being politically labeled, or worse, inept.

Lawrence Goldfarb

415-233-8621

Is there anything the Fed should do?