Monday, May 18, 2020

This is how fast Americans are spending their stimulus checks — and here’s a breakdown of what they’re buying 
Published: May 16, 2020 By Andrew Keshner

Economists looked at the spending and saving habits of more than 1,600 people who received their stimulus check by April 21
When Americans received stimulus checks during the Great Recession, studies indicated many spent at least of portion of their money on cars.
During the 2008 stimulus program, up to 90% of the rise in durable good spending had to do with auto spending, according to previous research by the American Economic Association. (At that time, the government paid an individual between $300 and $600 and couples received between $600 and $1,200. The government paid $300 per child as well.)
When Americans received their $1,200 stimulus check, as many have used it to keep a roof over their head and food on the table, according to new research by a team of economists. In late March, lawmakers passed the $2.2 trillion CARES Act, which included $290 billion in direct payments. The program allowed $1,200 for people making less than $75,000 and couples making less than $150,000. It also paid $500 per child.
‘Given the size of the 2020 stimulus checks, we might have expected large impacts on categories like automobile spending, electronics, appliances, and home furnishings.’
“Given the size of the 2020 stimulus checks, we might have expected large impacts on categories like automobile spending, electronics, appliances, and home furnishings,” according to economists at Columbia University, Northwestern University, the University of Chicago and the University of Southern Denmark.
“Instead, it seems that individuals are catching up with rent and bill payments as well as engaging in spending on food, personal care, and nondurables.”
Looking at the spending and saving habits of more than 1,600 people who received their stimulus check by April 21 in an approximate 6,000-person sample, the researchers found:
• In the first three days after the stimulus-check receipt, spending increased between $50 to $75 apiece on expenditures like food and non-durable goods, a category that includes supplies like laundry detergent, pens, paper and other items with a shorter life span.
• During that same time, the purchase of durable goods increased by $20 in those first three days. This category includes cars, appliances, furniture and others things meant for longer use.
• On the whole, households spent around one quarter to one third of their stimulus check money within 10 days of receipt.
• If people had less than $500 in their account, they went through almost half of their money within 10 days. People with over $3,000 in their accounts had essentially no extra spending after getting their check.
• A person who made less than $1,000 a month was twice as likely to spend money after getting their check, compared to someone making at least $5,000, researchers noted. That fits a historical pattern from past stimulus programs, the study said.
In the wake of stimulus bills during 2008 and 2001, “households with either larger declines in net worth or households with lower levels of assets also tend to respond more strongly to stimulus checks.”
It’s too soon to see what the stimulus checks accomplish for families and the economy as a whole, Columbia Business School Professor R. A. Farrokhnia, the study’s co-author, told MarketWatch. “What we can tell for fact is consumer behavior is different,” compared to their 2008 stimulus spending habits.
‘Household spending on food delivery was one category in particular that increased following the receipt of a stimulus check.’
Researchers looked at anonymous data from users at SaverLife, a financial-technology company that incentivizes savings through things like cash rewards.
Farrokhnia noted many have been hit hard in the past two months, but didn’t necessarily find it alarming that more money was going to food, rent, bill and nondurables compared to durable goods. After all, he noted, a family might not want a stranger coming in to install a new washing machine or they might not have a reason to buy a new car with fewer places to visit.
Farrokhnia and his fellow authors wrote that many outlets for consumer spending were shuttered by government orders, but restaurants stayed open for pickups and deliveries. “Household spending on food delivery was one category in particular that increased following the receipt of a stimulus check,” the study said.
Time will tell how people use all their stimulus money, Farrokhnia said, noting the spending trailed off 10 days from receipt; many people might be holding onto the rest to see what the future holds, he added. However, he does wonder whether these $1,200 checks will be enough “to spur consumer spending to fuel economic recovery.”
The study, distributed this week by the National Bureau of Economic Research, is another look at how the coronavirus outbreak and its economic consequences suddenly left many American families cash strapped — especially those making lower incomes.
On Wednesday, Federal Reserve Chairman Jerome Powell said 40% of people in households making less than $40,000 per year in February lost their jobs in March. When April’s rent came due, nearly one-third of renters struggled to pay it, data said.
The Internal Revenue Service has distributed more than 128 million checks and paid over $218 billion as of early May.
The new study comes as lawmakers debate another bill addressing the outbreak’s economic repercussions. The Democrat-backed $3 trillion HEROES act would, among other things, authorize another round of $1,200 direct payments per eligible individual. Payouts would be capped at $6,000 per household.
It’s scheduled for a Friday vote in the Democratic-majority House of Representatives.
Senator Mitch McConnell, the Republican majority leader, is already brushing off the bill, calling it “the aspirations of the Democratic majority in the House.”
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CONSUMERS KEEP CAPITALISM FUNCTIONING
 NOT BILLIONAIRES AND NOT WALL ST.

35% of Americans say they’re making impulse buys to cope with coronavirus stress — ‘It is part of self-care in a weird way’

By   

‘When this pandemic ends and you’re $10,000 in debt, it’s going to be a real wake up call’

‘It is a really cute and creative cat bed, but I also can’t think of a practical reason for a cat to need a functional tent,’ said Carrie Harris, who impulsively bought a cat tent, pictured.

Carrie Harris, 31, never thought she would buy a $60 cat tent.
“I was zooming ZM, +4.12% with my friends from college and I admired one of their cat beds in the background that sort of resembled a tent,” Harris, a Fairfield, Conn.-based polar scientist, said. “A different friend then told us about this Australian company that made tiny realistic tents for cats that her co-worker had bought.”
“We all looked at the website and jokingly picked out a tent for my cat. They all know I’m very into camping and very into my cat, but I’m not sure they believed that I actually purchased it until it showed up a few weeks later.”
The site she bought it from, catcamp.co, has seen “an uptake in sales over the past couple of weeks, which has been great for our small business,” Cat Camp co-founder Jaclyn Benstead told MarketWatch.
“With everything that is going on in the world right now, people are wanting to spend money on the little things that can bring some joy or happiness during quarantine, even if it’s a present for their cats,” Benstead said.
Over the past two weeks, the company has seen a 110% increase in sales compared to early April, Benstead said, adding that “April sales were up 50% higher than March, so we are pretty happy.”

Carrie Harris, pictured, said made an impulse of $60 for a cat tent.

 Carrie Harris
Although Harris’ cat, Milo, seems to enjoy napping in her new tent alongside Harris while she is working, she says she wouldn’t have bought the feline-oriented outdoor gear if she wasn’t “on lockdown” because of the coronavirus pandemic.
“It is a really cute and creative cat bed, but I also can’t think of a practical reason for a cat to need a functional tent,” she said.
Harris is hardly alone.
Some 35% of Americans say they have made impulse purchases to cope with the stress of the coronavirus pandemic, according to a recent survey conducted by Credit Karma, a personal-finance website where consumers can check their credit score.
Despite the fact that consumer sentiment has taken a huge dive and more than 33 million Americans have filed for unemployment over the past month and a half, nearly one in five people say they are spending more money now than before the coronavirus outbreak hit, Credit Karma found. Among the people who said they’re spending more, 1 in 10 said they have gone more than $1,000 over their budgets since sheltering in place.
Impulse purchases and a hoarding mentality make “complete sense” to Kelly Goldsmith, an expert on consumer behavior in the face of scarcity, and a former contestant on the TV show “Survivor”.
‘When people started seeing pictures of empty shelves at stores, many for better or worse stocked up on necessities because they feared they wouldn’t have access to them in the near future’
When shelter-at-home orders began in several states in early March, consumers flocked to supermarkets and stores like Walmart WMT, +2.04%, Costco COST, -0.17%, BJ’s BJ, -0.42% and placed orders on sites like Amazon AMZN, +0.87% and eBay EBAY, +0.17%.
Goldsmith, who teaches marketing at Vanderbilt University, refers to this as the “secure the basics phase”.
When people started seeing pictures of empty shelves at stores, many for better or worse stocked up on necessities because they feared they wouldn’t have access to them in the near future, she said.
After panic buying and hoarding mentality began to wane, and foot traffic slowed at brick-and-mortar stores, phase two began: comfort buying.
Making impulses purchases is one way consumers feel they regain their sense of control in the face of unprecedented uncertainty stemming from the coronavirus pandemic. “Since most of us aren’t leaving our homes, it’s not even about looking good at this point, it’s about feeling good,” Goldsmith said.
This was certainly the case for Heidi Hudson, 42, a scheduling coordinator and adjunct American history professor at Hawkeye College, a community college based in Waterloo, Iowa.
On Saturday she went to Menards, a chain home improvement store, intending to purchase a hammock and wooden base. Instead, she came home with two garden gnomes which cost $99 each.
“I could not decide between the two so I bought them both,” Hudson said. “Three years ago when I bought my house [Menards] had a giant gnome and I wanted it, but just couldn’t do it at the time. So when I saw these I literally jumped at them.”

Heidi Hudson of Waterloo, Iowa, purchased these two garden gnomes for $99 each.

 Heidi Hudson
‘It is part of self-care in a weird way. It makes me smile to see [the gnomes] in my yard...This will be over someday, but until then I am doing what I can to make myself feel happy.’
The next day she went back to buy the hammock and stand for another $99. Hudson has been working from home since early March and said she wanted the hammock so she would have an excuse to go outside more, especially during the summer.
Like Harris, she said if she wasn’t social distancing, she wouldn’t have purchased the hammock and the gnomes, but she doesn’t regret her decision.
“It is part of self-care in a weird way,” Harris said. “It makes me smile to see [the gnomes] in my yard and the sun warms my soul in my hammock. This will be over someday, but until then I am doing what I can to make myself feel happy.”

Heidi Hudson intended to buy a hammock, but instead spent $200 on garden gnomes.

 Heidi Hudson
‘It’s like gaining a pound here or there and saying ‘when life gets back to normal I’ll look fine.’ But if you have to lose 20 pounds that’s going to be really hard.’
— Kelly Goldsmith, marketing professor at Vanderbilt University
Spending a couple of hundred dollars here and there “feels inconsequential at a time and place when so many scary things are looming in future,” Goldsmith added. But if people continue to spend impulsively it could become problematic.
“It’s like gaining a pound here or there and saying ‘When life gets back to normal I’ll look fine.’ But if you have to lose 20 pounds that’s going to be really hard.”
The same goes for debt.
Already millions of Americans are skipping their credit-card and mortgage payments as the coronavirus pandemic puts them out of work.
“When this pandemic ends and you’re $10,000 in debt, it’s going to be a real wake up call,” Goldsmith said. But people won’t likely realize the damage they’ve done until their application for a credit card or a loan is declined because of a lower credit score.
How you can stop yourself from making impulse purchases
One way to stop yourself from purchasing something impulsively is to wait 24 hours to see if you still want to make the purchase, said Credit Karma CEO and founder, Ken Lin.
Another good rule of thumb is to consider whether you have enough cash on hand to make the purchase in the first place. “If you have to borrow or are thinking about a buy now, pay later option to make it work, you should probably sit on the purchase and save up for it instead,” Lin said.
Finally, don’t be tempted to buy things based on what your friends are posting on Instagram or Facebook FB, +1.96% FB, +1.96% or other forms of social media.
“Don’t buy something just to keep up with friends or influencers on social media, it isn’t worth it,” Lin said. “Ask yourself if you’d want to make the purchase if you hadn’t seen it on social media.”

 
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CPPIB, PSP participating in financing round for cancer testing business
Staff | May 8, 2020

The Canada Pension Plan Investment Board and the Public Sector Pension Investment Board are participating in a $390-million series-D round of financing for Grail Inc., a U.S. health-care company focused on cancer testing.

The financing is aimed at boosting the company’s balance sheet to support its continued development, as well as the commercialization of its cancer testing method.

Read: CPPIB invests in cancer drug royalties, food manufacturing

“GRAIL is making significant progress with our blood-based, multi-cancer early detection test,” said Hans Bishop, chief executive officer at Grail, in a press release. “Nearly 80 per cent of cancer deaths result from cancers for which there is no screening test today and Grail’s mission is to change that through the early detection and localization of more than 50 cancers.”

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitsc
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Miners’ union seeking court guarantee for Dominion Diamond to meet pension obligations

123rf_Wawrzyniec Korona
Kelsey Rolfe | May 11, 2020
The union representing 400 Dominion Diamond Mines employees is attempting to guarantee that the company honours its multi-million dollar pension shortfall as it goes through a court-ordered creditor protection process.
If the shortfall isn’t prioritized, the Union of Northern Workers said it’s concerned that active members and pensioners would all face reduced pensions. “How much that would affect those pensioners and the current participants is not known, and would have to go through the court process to wind up and assign those assets,” says union president Todd Parsons.
He said the union is attending all of Dominion Diamond’s court hearings to advocate for its members. “The union will take the position [that] the pension earnings should be a priority before creditors are considered, in the event that this company is unable to succeed.”
According to its most recent valuation, Dominion Diamond’s defined benefit pension plan had $90.3 million in assets and a $99.5-million windup liability as of Jan. 1, 2019, leaving the company with a roughly $9-million shortfall.
However, according to a sworn affidavit by Kristal Kaye, Dominion Diamond’s chief financial officer, the deficit had risen to $20.3 million as of Dec. 31, 2019, with its obligations sitting at $111.6 million and its assets at $91.2 million. Kaye noted those figures “may have changed materially given recent market volatility and interest rate changes.”
The Union received documentation on the $9-million shortfall in April, says Parsons, but only learned about the larger deficit figure through Kaye’s submission to the court. “The union is trying to better understand that number and we’ve requested additional documentation from [Dominion Diamond].”
The company, which operates two diamond mines in the Northwest Territories, sought creditor protection in April when it couldn’t pay a US$20-million interest payment and another $16-million payment to its joint venture partner on one of its operations. Missing those payments could have led to a cascade of defaults, said Kaye in the affidavit, and could ultimately bankrupt the company.
In an emailed statement to Benefits Canada, Pat Merrin, chief executive officer of Dominion Diamond, said the company’s commitments to employees and local communities remain a priority. “We are working diligently to secure sufficient financing to continue operations and allow Dominion to emerge from the [Companies’ Creditors Arrangement Act] process an even stronger company.”
Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com
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CPPIB buying stake in French wind farms

Staff | May 12, 2020
The Canada Pension Plan Investment Board is acquiring a 49 per cent of the entity that holds Enbridge Inc.’s stake in Éolien Maritime France SAS, Enbridge’s partnership with EDF Renewables.
The investment is set to support the development of three offshore wind farms in France. The CPPIB is paying €80 million for its stake, with a further €120 million committed to follow-on investment as the first project moves through construction. It may also make an additional €150 million investment in two other wind farm projects. Together, the planned wind farms will have a total-installed capacity of close to 1.5 gigawatts and are expected to become operation in phases between 2022 and 2024.
“France has established renewables as a cornerstone of its long-term energy plan and this partnership with Enbridge represents significant opportunities to invest in and develop flagship offshore wind projects across France, alongside France’s premier energy company EDF Renewables,” said Bruce Hogg, managing director and head of power and renewables at the CPPIB, in a press release. “This investment will provide additional diversification to our existing portfolio of assets and deepen our access to future high-quality offshore wind development projects in Europe and Asia.”
The investment builds on previous deals the CPPIB has made with Enbridge. In May 2018, the fund finalized an agreement to acquire a 49 per cent stake in the company’s North American onshore renewable power assets, as well as a 49 per cent interest in two of the company’s German offshore wind projects.
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Regulatory reform required to address today’s workplace pension landscape: report

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Kelsey Rolfe  | May 14, 2020
Canadian pension rules and regulations are in need of reform in order to properly address the reality of the 21st century workplace pension landscape, according to a new report by the C.D. Howe Institute.
The report, authored by Bob Baldwin, a pension industry veteran and chair of the C.D. Howe’s pension policy council, argued that the age-old debate between the merits of defined benefit and defined contribution pension plans obscures the myriad plan design changes that have taken place on both sides over the years and the risks that plan members face in all cases.
“The diversity in the design of the plans, combined with current financial and economic circumstances, has varied results for all types of pension and retirement savings plans, making it difficult to generalize the merits of each plan,” said Baldwin in a press release.
The most important priority, according to the report, is to assess plan members’ retirement income needs and the risks they face and “make sure they are addressed in a way that is fair among plan members and is reasonable in terms of the level and volatility of required contributions.”
The exclusive focus on pension plans’ gross replacement rate is too limited because contributing to a pension plan affects members’ living standards before and after retirement. “In the pre-retirement period, we have to be concerned with the extent to which the pension plan is depressing the ability of plan members to buy goods and services,” wrote Baldwin. “Ideally, the pre-retirement sacrifice will combine with post-retirement benefits so that living standards will be the same in both periods.”
Instead, he noted, it would be more appropriate to focus on a net replacement rate, which takes into consideration expenses plan members have during their working lives that they aren’t likely to face during retirement — such as mortgage payments, financial support for their children, a higher tax burden and pension contributions — and the support they’ll receive from government pension programs including the Canada Pension Plan or Quebec Pension Plan and old-age security.
“The [net replacement rate] comes much closer to defining the actual standard of living enjoyed in the pre- and post-retirement periods than does a [gross replacement rate]. An appropriate target [net replacement rate] would be close to 100 per cent,” he wrote.
The report also suggested that plan sponsors add employer contributions into the calculation of what plan members sacrifice during their earning years in order to see a better pension in retirement. “In most situations, it is fair to surmise that an employer is most worried about total labour costs not the component parts of the cost. To the extent this is true, a rational employer will discount other elements in the compensation package of employees to take account of the contributions to the pension plan that are predictable. Thus, the economic burden of employer contributions will be shifted from employers to employees — rather like sales taxes being shifted from vendors to consumers.”
While DC plan sponsors generally have predictable employer contribution rates, DB plan sponsors don’t have that same certainty and may suddenly be hit with special contribution requirements after an actuarial valuation report, noted Baldwin.
As well, muted investment returns, lower interest rates, rapid growth in wages and salaries and increasing life expectancies have all placed an upward pressure on DB contribution rates and played a role in the shift from DB to DC plans in the private sector. These factors have also pushed a move in the public sector to place more financial risk on the benefit side of the plan and to introduce target-benefit plans.
Baldwin urged plan sponsors to adopt measures that would help reconcile the uncertainty between pension contributions and benefits. He also suggested they make their plans more transparent, including establishing a clear appreciation of existing and future members’ financial needs through their retirement, balancing their retirement income requirements with the impact on their pre-retirement living standards to achieve continuity between them.
Plan sponsors should also be clear about cross-subsidization within the plan and be clearer with members about what will happen to contributions and benefits if liabilities increase substantially and/or investments don’t provide sufficient returns.
“Pension plan design is more like a spectrum of choice rather than a binary choice between clearly defined DB and DC plans,” wrote Baldwin. “The position of plans on the spectrum will be established by the way that financial risk is allocated between contribution and benefit variability and between and within cohorts of plan members and employers — to the extent that the latter bear financial risk. Plan governors have to decide where they will fit on the spectrum.” 
Regulatory and tax policy should also be adapted to allow for that spectrum of choice and the incorporation of both DB and DC elements, he added.
He called on regulators to incorporate measures already identified as good practice for plan sponsors, such as requiring them to identify an outer limit of acceptable contribution rates, set out a process for what happens when that limit is reached and assess and disclose the likelihood of hitting that limit.
On the target-benefit side, while such plans have previously been restricted to multi-employer pension plans, Baldwin suggested that the provinces that are adopting or looking at the option for single-employer plans only allow for a reduction in accrued benefits if joint governance is in place.
He also recommended that regulatory law be revised so jointly governed plans face a more “principles-based” regulation. Plans that have employer-dominated governance structures should continue to be rules-based. Plans choosing to incorporate flexibility around benefits and financing rules should be encouraged to turn to a joint-governance model to ensure safety for plan members.
“The regulatory law that governs [workplace pension plans] was crafted at a point in time when most members of [workplace pension plans] in both the public and private sector belonged to DB plans,” wrote Baldwin. “The objective of the law was to protect DB plan members from errors and/or abuse by employers. . . . [Regulatory law] needs to be complemented by more flexibility to adapt to changing circumstances.”

THE C.D. HOWE INSTITUTE IS NAMED AFTER THE FAMOUS WWII LIBERAL GOVT MINISTER OF EVERYTHING. AND IRONICALLY MR. HOWE WAS NEVER A FREE MARKETEER, HE WAS A STATE CENTRAL PLANNING NATIONALISING CANADIAN INDUSTRY....UNLIKE THE CONS WHO RUN THIS INSTITUTE 
Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com
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