There was joy in toyland this week — albeit muted — after the Trump administration said it would postpone tariffs on toys made in China until after the holiday rush.
Why it matters: The industry, still recovering from the demise of Toys “R” Us, had feared a 10% tariff would force it to raise prices, hurting consumers and killing profits. But a sudden reprieve will let toy companies focus instead — for now — on big holiday trends, like unicorns, collectible dolls, scented slime and electronic finger-puppets.
The big picture: While toy sales have slumped, the second half of 2019 is expected to bring “a complete reversal of the negative trends,” according to Juli Lennett of the NPD Group, who tracks the sector.
Several “license-friendly” movies are being released, most notably “Frozen 2” in November.
Popular video games like Fortnite are spinning off toys.
Hot products like L.O.L. Surprise! dolls, which children must “unbox” to see what they're getting, are driving sales.
Grown-ups are pushing children toward playthings instead of screens. “We have this generation of parents on our side,” Steve Pasierb, head of the Toy Association, a trade group, tells Axios.
Walmart, Amazon and Target have picked up some slack from the liquidation of Toys “R” Us last year, which cost 33,000 retail jobs.
Target has expanded floor space for toys and baby goods.
Kohl’s, Wegmans, Meijer and other retailers have pitched in, too.
Amazon published a big holiday toy catalog last year.
But: While 75% of sales volume from Toys “R” Us has migrated to other channels, 25% “has been lost,” Pasierb says.
Sales in the U.S. toy industry dropped 9%, to $7.4 billion, in the first half of 2019 compared with 2018, according to NPD.
What’s next: The Trump administration’s tariff reprieve is set to expire Dec. 15, after which all bets are off.
"Toymakers are already looking ahead to next year’s holiday season, and fretting about the crippling uncertainty that the president’s on-again, off-again trade policy has created for them," according to the NYT.
The toy industry will keep lobbying against tariffs. "If you're going to buy shoes and clothing and back-to-school stuff for your kids, how much money is left for toys if everything is more expensive?" Pasierb tells Axios. "That collection of toys under the Christmas tree is going to get smaller."
Data: LIMRA Secure Retirement Institute; Chart: Harry Stevens/Axios
The younger you are, the less retirement security you’re likely to have, as employers accelerate efforts to shed costly pensions and replace them with alternatives that make workers shoulder more of the risk and responsibility.
Why it matters: Millennials and members of Generation Z will face less prosperous golden years than their parents, given the retirement accounts they get now — unless they are diligent about allocating money, investing it wisely, and not blowing it when they gain full access.
The backstory: Companies have long been moving away from traditional pensions, where retirees are guaranteed a certain level of benefits, and replacing them with 401(k)s and other retirement savings accounts, which are more vulnerable to the ups and downs of the stock market. But lately, those changes are happening even faster.
What’s happening: A perfect storm of circumstances, from lower interest rates to higher longevity rates, is prompting corporations to offload their pension plans — by selling them to insurance companies and offering lump-sum payments to some workers.
Deal volume in the “pension risk transfer” business, in which a big company like Lockheed Martin or FedEx sells all or part of its pension obligations to an insurer like Prudential or Metropolitan Life, was the biggest ever in 2018, and is on track to be bigger still this year.
The insurance company pays retired workers an annuity that is equal in value to the pension they’ve earned, but the workers lose certain safeguards, like the backstop of the Pension Benefit Guaranty Corporation, the agency that steps in if a company can’t pay.
“Companies are looking to get those defined benefit plans off their books,” Robert Falzon, vice chairman of Prudential, tells Axios. “It’s a multi-trillion dollar market that will continue for some period of time.”
If your pension is sold to an insurance company, there are “potentially terrible consequences,” Norman Stein, a law professor at Drexel University and policy advisor to the Pension Rights Center, tells Axios.
“What happens if the insurance company gets into trouble?” he said. “What happens if you find out that your benefit was miscalculated and you’re entitled to more than the company sold your pension for?”
By the numbers: Among Fortune 500 companies, only 81 sponsored a pension plan in 2017, down from 288 in 1998, according to Prudential.
At the same time, the number of pension risk transfer deals rose to 493 in 2018 from 203 in 2012, according to the LIMRA Secure Retirement Institute, a nonpartisan research center.
In the public sector, many pension plans are dangerously underfunded.
Between the lines: 401(k)s and other defined contribution plans are cheaper for the firms than pensions and more onerous for the employees. Consumer advocates say that the swapping pensions for 401(k)s is a raw deal for workers — particularly in an uncertain economy.
When the next recession hits, a falling stock market will drive down the value of 401(k) and IRA accounts invested in equities.
While pension plans are run by professionals whose fees are paid by the corporate sponsor, consumers with IRAs or 401(k)s must figure out their own investment strategies and pay fees.
Despite the tax penalties, many consumers raid their 401(k)s to pay pre-retirement expenses, something they can’t do with a pension.
Unless you buy an annuity — which comes with its own plusses and minuses — it’s hard to know what to do when you reach retirement age and have to parcel out your savings to last a lifetime.
“A lot of people don’t know what to do with a lump sum,” Chantel Sheaks, executive director of retirement policy at the U.S. Chamber of Commerce, tells Axios.
Silver lining: For younger people, who are less likely to stay at the same job for decades, a 401(k) or IRA can offer more flexibility.
The bottom line: Despite these issues, people with either a defined benefit or a defined contribution plan from their employer should consider themselves lucky.
A quarter of non-retired Americans had no retirement savings or pension in 2018, according to the Federal Reserve, while “six in 10 non-retirees who hold self-directed retirement savings accounts, such as a 401(k) or IRA, have little or no comfort in managing their investments.”
In the first signs of a mounting threat, criminals are starting to use deepfakes — starting with AI-generated audio — to impersonate CEOs and steal millions from companies, which are largely unprepared to combat them.
Why it matters: Nightmare scenarios abound. As deepfakes grow more sophisticated, a convincing forgery could send a company's stock plummeting (or soaring), to extract money or to ruin its reputation in a viral instant.
Imagine a convincing fake video or audio clip of Elon Musk, say, disclosing a massive defect the day before a big Tesla launch — the company's share price would crumple.
What's happening: For all the talk about fake videos, it's deepfake audio that has emerged as the first real threat to the private sector.
Symantec, a major cybersecurity company, says it has seen three successful audio attacks on private companies. In each, a company's "CEO" called a senior financial officer to request an urgent money transfer.
Scammers were mimicking the CEOs' voices with an AI program that had been trained on hours of their speech — culled from earnings calls, YouTube videos, TED talks and the like.
Millions of dollars were stolen from each company, whose names were not revealed. The attacks were first reported in the BBC.
And in March, a Twitter account falsely claiming to belong to a Bloomberg journalist reportedly tried to coax personal information from Tesla short-sellers. Amateur sleuths said the account's profile photo had the hallmarks of an AI-generated image.
Big picture: This threat is just beginning to emerge. Video and audio deepfakes are improving at a frightening pace and are increasingly easy to make.
There's been an uptick in sophisticated audio attacks over the past year, says Vijay Balasubramaniyan, CEO of Pindrop, a company that protects call centers from scammers.
But businesses aren't ready, experts tell Axios. "I don’t think corporate infrastructure is prepared for a world where you can’t trust the voice or video of your colleague anymore," says Henry Ajder of Deeptrace, a deepfakes-detection startup.
Even if companieswere clamoring for defenses, few tools exist to keep harmful deepfakes at bay, says Symantec's Saurabh Shintre. The challenge of automatically spotting a deepfake is almost insurmountable, and there are hurdles still ahead for a promising alternative: creating a digital breadcrumb trail for unaltered media.
Pindrop monitors for audio attacks like altered voices on customer service lines.
Symantec and ZeroFOX, another cybersecurity company, say they are developing technology to detect audio fakes.
What's out there alreadyisn't cheap.
New Knowledge, a firm that defends companies from disinformation, says its services can run from $50,000 to "a couple million" a year.
Just monitoring the internet for potential fakes comes at "a substantial cost," says Matt Price of ZeroFOX. "And that's not even talking about the detection piece, which will probably be fairly expensive."
As a result, businesses are largely defenseless for now, leaving an opening for a well-timed deepfake to drop like a bomb.
"If you're waiting for it to happen, you're already too late," New Knowledge COO Ryan Fox tells Axios.
