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The Wall Street Journal 28 August 2017

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Last week: DJIA 21813.67 À 139.16 0.6%
WSJ.com
MONDAY, AUGUST 28, 2017 ~ VOL. CCLXX NO. 49
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Rain, Floods Deluge Texas
What’s
News
First responders rushed to make 3,000 In Rockport, those who rode out the
rescues across sprawling Houston A4 hurricane face shattered landscape A4
Business & Finance
Storm poses new hazards to giant U.S.
flood insurer burdened with debt A5
U
ber’s board approved Expedia Chief
Executive Dara Khosrowshahi as its new CEO,
capping a tumultuous
nine-week search. A1, A10
U.S. producers are now
shipping more coal abroad
than at any time in the
past two years as China reemerges as an importer. B3
OSHA is reducing its reporting of fatalities, cutting
back on what is made public
about workplace accidents. B6
The minimum wage in St.
Louis is set to decline Monday, bucking the trend of municipal pay floors rising above
federal and state levels. B6
Shares of energy companies are on track for their
biggest monthly decline
since the end of 2015. B12
China’s financial markets
are sending conflicting
signals about the health of
the nation’s economy. B7
Perfumania is seeking
bankruptcy protection with
plans to reorganize around
better-performing stores. B3
Facebook drew a rebuke
from a U.N. agency for allowing an objectionable
video on its website. B4
The weekend’s box-office results were one of the
most dismal in 16 years. B5
World-Wide
Houston and surrounding
areas faced epic flooding
and more days of heavy rain
from Tropical Storm Harvey, which required rescues
for thousands. A1, A4-A5
Harvey knocked almost
15% of U.S. refinery capacity
out of commission, which
threatens to boost fuel
prices across the country. A1
The storm poses new
hazards to the National
Flood Insurance Program. A5
As Trump drew criticism
from several top Republicans for his pardon of Arpaio, the ex-sheriff said
GOP lawmakers should rally
around the president. A1
The administration is considering major reductions in
cultural-exchange programs,
including those for au pairs
and summer workers. A3
Iraqi forces have driven
Islamic State from Tal Afar,
the Iraqi military said, clearing
one of the extremist group’s
remaining strongholds. A6
Congress is set to confront the government-debt
limit and spending legislation
required to prevent a federalgovernment shutdown. A3
A German woman died
from injuries suffered from
the Barcelona attack, elevating the death toll to 16. A9
A Guatemalan constitutional court temporarily
barred the president from
expelling a U.N.-backed anticorruption prosecutor. A7
The Navy recovered the
remains of all 10 sailors who
went missing when the USS
John S. McCain collided with
a tanker a week ago. A10
CONTENTS
Business News B2,3,5,6
Crossword.............. A14
Heard on Street.... B11
Life & Arts....... A11-13
Markets................ B7,12
Money & Investing B10
Opinion.............. A15-17
Outlook....................... A2
Sports....................... A14
Technology............... B4
U.S. News............. A2-4
Weather................... A14
World News....... A6-9
>
s Copyright 2017 Dow Jones &
Company. All Rights Reserved
RISING WATERS: Houston Police SWAT officer Daryl Hudeck rescued Connie Pham and her 13-month-old son, Aiden, from their flooded home in Houston on Sunday. Below,
residents made their way along the inundated Telephone Road in the southeast of the city, as thousands of people around the region were forced to seek higher ground.
Remnants
Of Harvey
Devastate
Houston
Energy
Firms
Brace for
Fallout
HOUSTON—The nation’s
fourth-largest city and surrounding areas faced epic
flooding and days more of
heavy rain from Tropical
Storm Harvey, which turned
freeways and roads into rivers,
inundated homes and required
rescues for thousands of
stranded people.
BY DAN MOLINSKI
AND ALISON SIDER
By Bradley Olson,
Arian Campo-Flores
and Miguel Bustillo
“This disaster will be a
landmark event. FEMA will be
there for years,” Federal
Emergency
Management
Agency administrator William
Long said on CNN.
Five deaths believed to be
storm-related had been reported in the Houston area as of
Sunday evening, and more than
3,000 water rescues had been
performed, officials said. Bands
of the storm repeatedly lashed
the flood-prone city, spawning
numerous tornadoes and pouring as much as 24 inches of rain
in 24 hours onto areas that had
been soaked the previous day.
More rain was forecast in
the coming days; the city could
receive a total of as much as
50 inches of rain—about equal
to its annual average total. The
disaster swamped businesses,
including patches of the energy industry, and will disrupt
travel this week.
The White House said President Donald Trump plans to
travel to Texas on Tuesday to
survey the damage.
Houston Mayor Sylvester
Turner on Sunday said only one
death in the city was confirmed
Uber Picks CEO
From Expedia
BY GREG BENSINGER
Uber Technologies Inc.’s
board has voted to appoint Expedia Inc. Chief Executive Dara
Khosrowshahi as its new CEO,
capping a tumultuous nineweek search after Travis Kalanick resigned in late June, according to people familiar with
the matter.
Uber’s board was deciding
on Sunday between Mr. Khosrowshahi and Meg Whitman,
chief executive of Hewlett
Packard Enterprise Co., ultimately electing the lesserknown executive who has been
at the helm of Expedia since
2005.
Representatives for Uber
didn’t return requests for comment and an Expedia spokeswoman declined to comment.
The decision caps a remarkably chaotic leadership search
for the world’s most valuable
venture-funded startup, one
that has been shaken by an internecine war on the Uber
board. Benchmark Capital, one
of Uber’s biggest and earliest
investors, first led the ouster in
June of co-founder Mr. Kalanick, then sued him to try to
force him off the board. Other
investors chose sides, exchanging accusations and counterclaims that remain unresolved.
If he accepts the job, Mr.
Khosrowshahi, 48 years old,
will have the task of repairing
Uber’s image after months of
scandal at the ride-hailing firm.
The company is grappling with
the fallout from allegations of
sexism and sexual harassment,
depleted executive ranks and a
lawsuit by Google parent Alphabet Inc. alleging that Uber
used design secrets for its selfPlease see UBER page A10
CEO honed skills as deal
maker with Diller.................. A10
so far as storm-related. He said
a woman drove into high water
in southwest Houston and
drowned while trying to escape.
Even in a city accustomed to
flooding and bracing for the
impact of the storm, the rapidly
rising waters caught many offguard, raising questions about
whether the city should have
been evacuated.
“No one thought it would
be this bad,” said Aeisha
Brimzy, a stay-at-home mom
plucked from the rising waters
around her apartment building
by constables, who also rescued her six daughters,
INSIDE
mother and sister. The family
went to the George R. Brown
Convention Center downtown,
which the city had turned into
a giant evacuation center.
Rescued families sat on
folding chairs or laid on the
floor, many still clutching
white towels they had been
given with which to dry off as
they received assistance from
the Red Cross.
Mr. Turner said the city
was also opening libraries,
community centers and other
locations as “lily pads” to provide safe harbor from the waPlease see STORM page A4
BY PETER NICHOLAS
AND SHANE HARRIS
AMAZON IS
HUNGRY FOR
PRICE CUTS
BUSINESS & FINANCE, B1
THE BITCOIN
VALUATION
BUBBLE
OPINION, A15
Harvey knocked almost 15%
of U.S. refinery capacity out of
commission, which threatens to
boost fuel prices across the
country.
Energy markets could be in
for a bumpy ride when they
open Monday as investors try
to gauge the impact of the disruption. After slamming into
Texas on Friday and causing
massive flooding in Houston
over the weekend, the storm
was moving east Sunday toward a refining hub near the
Louisiana border. That could
shut down even more of the
U.S. energy infrastructure.
Gasoline futures jumped in
electronic trading Sunday evening, rising 10.25 cents, or
6.15%, to $1.7691 a gallon on the
New York Mercantile Exchange.
U.S. crude futures slid from
gains to slight losses, trading
down 10 cents, or 0.21%, at
$47.77 a barrel.
Please see FUEL page A5
Arpaio’s Pardon
Widens GOP Split
VYACHESLAV PROKOFYEV/TASS/ZUMA PRESS
A group of large companies is warning against one
option as Republicans try
to write rules for taxing foreign profits of U.S. firms. B1
DAVID J. PHILLIP/ASSOCIATED PRESS; THOMAS B. SHEA/AGENCE FRANCE-PRESSE/GETTY IMAGES (BELOW)
Borrowers are getting
comfortable again with the
idea of tapping their
homes for cash, due to a
strong housing market. B1
As President Donald Trump
drew criticism from several top
Republicans for his pardon of
former Sheriff Joseph Arpaio,
the Arizona lawman said Republican lawmakers should rally
behind a president who he said
would be counted among the
greatest in history.
“They’re trying to go after
the president. He’s a great guy
and I’m with him and will always be with him,” said Mr. Arpaio, a longtime sheriff in Maricopa County, Arizona, in an
interview Sunday. “I’m sad what
they’re doing to him. It’s sad.”
Several prominent Republican lawmakers objected to the
pardon over the weekend, saying it short-circuited the legal
system and undermined the
rule of law. Among the critics
of Mr. Trump’s move were Arizona’s two GOP senators, John
McCain and Jeff Flake, and
House Speaker Paul Ryan of
Wisconsin.
Mr. Arpaio voiced disappointment in Mr. McCain’s position, saying, “It’s probably
payback time” because Mr. Arpaio had campaigned for the
senator’s Republican opponents in both of Mr. McCain’s
presidential bids. As for Mr.
Ryan, Mr. Arpaio said, “He
ought to get on board and
support our president.” Sen.
McCain’s staff didn’t respond
to a request for comment.
If lawmakers are upset
about the pardon, Mr. Arpaio
said, they should hold hearings into his legal case and
look into the “bias” that he
said he was shown.
Please see ARPAIO page A2
Pressure mounts for Senate
Republicans................................. A3
Tillerson says U.S. pledged to
equality.......................................... A3
A2 | Monday, August 28, 2017
* ***
THE WALL STREET JOURNAL.
U.S. NEWS
THE OUTLOOK | By David Harrison
Jobless Rate’s Decline Hints at Shift
Protesters
Clash in Bay
Area Rallies
BY IAN LOVETT
AND PATIENCE HAGGIN
BERKELEY, Calif.—A mass
protest opposing a right-wing
rally that had been planned
here turned violent on Sunday,
as black-clad activists clashed
with a handful of rally-goers.
The protest in Berkeley on
Sunday, which drew thousands
of people who were chanting
antifascist slogans and denouncing white supremacists,
was the second major action
in the Bay Area by left-wing
groups this weekend.
Several thousand protesters
also gathered in San Francisco
on Saturday, in response to a
right-wing group’s plans to
hold a rally there. Both of
those rallies were ultimately
canceled, with organizers citing fears of violence against
their supporters.
While Saturday’s events
were mostly peaceful, they
turned violent Sunday, leading
to several arrests in Berkeley.
The Berkeley police said 13
people were arrested on Sunday afternoon, but the department couldn’t confirm the
names of those arrested.
ARPAIO
Continued from Page One
Mr. Trump’s pardon bucked
routine but was within his powers under the Constitution to
set aside punishment, even for
crimes against courts, legal experts said.
Mr. Arpaio, an early supporter of Mr. Trump’s presidential campaign, was convicted
last month for disobeying a
2011 federal court order to halt
immigration raids. He was to be
sentenced in October and faced
up to six months in jail.
He said that he hadn’t requested a pardon but had told
the White House he would accept one if it were offered. With
his legal troubles behind him,
he said he wasn’t looking for a
job in the Trump administration
but wouldn’t turn it down if the
president were to call.
“It’s tough to turn down a
president of the United States
when they need you,” he said. “I
may not turn down this president because I’d probably do
anything for him.”
A senior White House official
on Sunday defended Mr.
Trump’s decision. Tom Bossert,
whose portfolio includes border
security, said that previous
presidents had also issued controversial pardons, and that Mr.
Trump weighed Mr. Arpaio’s
long record of public service in
making his decision.
“I think it’s pretty straight-
workers, who are better
trained than younger workers
and tend to be more settled
in their jobs. With a large
portion of the workforce in
older age groups, it might be
the case that the economy
can handle a lower jobless
rate.
O
ther factors could be at
play. Globalization
might help drive unemployment down at home
without affecting broader inflation trends. U.S. workers
now compete with workers
from around the world. An
abundance of low-wage workers in China and other developing economies could hold
down wages and prices in the
U.S. in ways that didn’t happen a decade or two ago.
Likewise, technology could be
reshaping the interplay of unemployment and inflation:
Amazon.com Inc., the internet retailing giant, plans
price cuts at Whole Foods
Markets Inc., which it recently purchased.
“Digital technology was
finding its way on the factory
work floor and offices in a
big, big way in a very positive, broad fashion,” Charles
Evans, president of the Federal Reserve Bank of Chicago,
said in an interview.
This is a hot topic at the
Federal Reserve because inflation isn’t behaving the way
officials expect it to behave
with such a low jobless rate.
In the past 12 months, the
jobless rate has dropped from
4.9% to 4.3%. That decline
suggests inflation should be
picking up. Instead, a measure of underlying inflation—
the personal consumption expenditure price index
excluding food and energy—
has dropped over that period
from 1.7% to 1.5%.
When the jobless rate is
higher than the natural rate,
Fed officials tend to keep
borrowing costs low to drive
down unemployment. But
when the jobless rate drops
below the natural rate, it
might signal inflation—and
officials push up interest
rates. The current low rate
underpins the Fed’s plan to
keep raising rates. But the
fact that inflation is so low is
making some officials wonder
if they can afford to let the
jobless rate continue to drop
and slow the pace of rate increases. The Fed has raised
interest rates four times since
2015 and penciled in another
rate increase this year and
three more next year.
Robert Kaplan, president
of the Federal Reserve Bank
of Dallas, said the natural
rate is probably lower than it
has historically been and the
wage and price pressures
typically associated with low
unemployment are muted due
to technological change and
globalization. He sees the
jobless rate continuing to fall.
“We’re living an experiment now [where] the unemployment rate is falling and
it’s fallen below the point
that people where would
have predicted an inflation
pickup,” said Laurence Ball, a
Johns Hopkins University
economist. “You can imagine
the experiment continuing:
unemployment going even
lower and inflation still not
picking up.”
T
hat might be the case,
but history offers some
warnings. The jobless
rate bottomed out at 3.8% in
April 2000. It spent nine
months at 3.4% in 1968 and
1969. But in both cases, recessions weren’t far behind,
one driven by a technology
bubble in the 1990s and rising inflation in the 1970s.
—Ben Leubsdorf
contributed to this article.
TUESDAY: The Conference
Board releases its index on U.S.
consumer confidence for August. The measure rose sharply
in July, as Americans expressed
increased faith in the economy.
WEDNESDAY: The Commerce Department releases a
second estimate on secondquarter U.S. gross domestic
product, after initially reporting
a 2.6% rise. Since then, reports
on key ingredients in GDP have
signaled growth.
Economists surveyed by the
Journal forecast a revised reading of 2.9%.
THURSDAY: The Commerce
Department releases its July
personal-income report, offering
insight into consumer spending
and inflation. Consumer spending showed only modest growth
in June.
FRIDAY: In recent months,
U.S. job growth has remained
robust, while the unemployment rate has hovered near a
16-year low. Economists forecast that the Labor Department’s August employment report will show the economy
added 175,000 jobs in August,
while the unemployment rate
remained at 4.3%.
The Institute for Supply
Management releases its manufacturing report for August.
Manufacturing has proven resilient this year, thanks in part to
a weakening dollar. U.S. factory
activity expanded for the 11th
consecutive month in July, ISM
reported.
Central Bankers Can’t Savor Their Success
BY KATE DAVIDSON
AND BEN LEUBSDORF
JACKSON HOLE, Wyo.—
Central bankers have been
looking forward for years to a
moment when the world economy is growing steadily
again, allowing them to unwind extraordinary monetary
stimulus from global markets.
They are now in such a moment, but at the Federal Reserve’s annual retreat here
over the weekend they found
their
attention
turned
to other challenges, including
a possible leadership transition at the Fed next year and
the risk of a government shutdown or debt-ceiling crisis
in Washington next month.
Congress returns to Washington in September with a few
short weeks in which to raise
the federal borrowing limit and
authorize new funding to keep
the government operating beyond Oct. 1. Signs of angst over
the debt limit are beginning to
rise in financial markets
amid worries lawmakers won’t
be able to close a deal on time.
Treasury officials have urged
Congress to raise the borrowing limit by Sept. 29.
“What’s being discussed regarding the shutdown and the
debt ceiling, we have to moniforward what the president
did,” Mr. Bossert said on ABC
News “This Week.” Mr. Bossert
is the most senior administration official to comment on the
pardon.
Through a spokesman, Mr.
Ryan said Saturday he “does
not agree with the decision.”
“Law-enforcement officials
have a special responsibility to
respect the rights of everyone
in the United States. We should
not allow anyone to believe that
responsibility is diminished by
this pardon,” said Mr. Ryan’s
spokesman, Doug Andres.
Mr. McCain, an Arizona Republican, said Friday that the
president “undermines his
claim for the respect of rule of
law as Mr. Arpaio has shown no
remorse for his actions.”
The state’s junior senator,
Mr. Flake, whom Mr. Trump has
publicly attacked as weak on
border security, said in a Twitter message Friday that he
would have “preferred that the
president honor the judicial
process and let it take its
course.”
Mr. Bossert rebuffed those
critics. “I certainly don’t think
it’s fair to characterize [Mr.
Trump] as not caring about the
rule of law,” he said.
He didn’t say whether he
personally supported the president’s decision.
Mr. Arpaio became one of
the most celebrated figures
among immigration hard-liners
for his tough and unapologetic
treatment of inmates in his
tor very carefully,” Dallas Fed
President Robert Kaplan said
in an interview on the sidelines of the conference. Fed
governor Jerome Powell
warned in a television interview that failing to raise the
debt ceiling would be a “major
shock to the economy,”
while Treasury Secretary Steven Mnuchin told reporters at
a White House briefing Friday
he was “100% confident” Congress would act in time.
Fiscal brinkmanship comes
as the Fed is preparing to take
the next step in its gradually
unfolding plan to withdraw
monetary stimulus from the
economy. It has raised shortterm interest rates four
times since December 2015.
Next month it is expected to
announce it will start shrinking its portfolio of mortgage
and Treasury securities by allowing some to mature without reinvesting the proceeds
into new bonds.
“The base case for me is
that we should begin the rolldown of the balance sheet
very soon,” Mr. Kaplan said.
“Obviously I’m monitoring closely, though, events in
D.C., and I’m hopeful they
won’t have an effect on our efforts to begin that process.
But we’ll have to see.” The Fed
next meets Sept. 19-20.
Fed Chairwoman Janet Yellen did nothing to dispel the
market’s expectation that the
Fed will start shrinking the
portfolio next month. Her remarks Friday focused instead
on bank regulation in the post
financial crisis era. President
Donald Trump has vowed to
roll back regulation across
sectors, but Ms. Yellen defended the Fed’s efforts since
the crisis to toughen oversight
of banks, which she said has
bolstered lending and economic growth.
Rather than focusing on
near-term monetary policy issues, most of the conference
dealt with long-term challenges, such as rising protectionism, growing inequality
and the ability of fiscal policy
makers to respond to the next
recession—issues over which
central bankers may have limited influence.
On
the
sidelines
of
the meeting, participants
buzzed about the potential for
a leadership shake-up at the
Fed next year, as Ms. Yellen closes in on the final
months of her four-year term
as the leader of the U.S. central bank.
Ms. Yellen is a top con-
Pardon Lies Within
Presidential Powers
Article II of the Constitution
empowers the president to issue
“pardons for offenses against the
United States, except in cases of
Impeachment.” The Supreme
Court has held that the president’s clemency powers “cannot
be modified, abridged, or diminished by Congress,” and that he
can pardon criminal contempt of
court, a crime determined by the
judiciary without a jury.
Rachel Barkow, a professor at
New York University School of
Law, said a legal challenge to a
pardon would have to fit inside
“a really narrow window where
you’d have to show the grant independently violated the Constitution.”
Presidents rarely grant clemency without a recommendation
from the Justice Department,
which has administered the
power since before the Civil War
and has created a routine for
vetting applicants and making
recommendations. But “there is
nothing in the Constitution that
prevents [the president] from
disregarding the established process and issuing pardons at any
time,” wrote Daniel Kobil, a professor at Capital University Law
School in Columbus, Ohio, in a
blog post for the left-leaning
American Constitution Society.
Under current Justice Department policy, applicants for clemency are ineligible for consideration until at least five years
after they exit prison.
—Joe Palazzolo
state. Some were held outdoors
during sweltering conditions.
Others were forced to wear pink
underwear or were subjected to
other treatment that critics said
was humiliating.
Mr. Arpaio was also one of
the leading proponents of the
false claim that President Barack Obama wasn’t born in the
U.S., an assertion Mr. Trump
embraced and tried to prove for
years before becoming president.
But it was Mr. Arpaio’s use
of racial-profiling tactics that
landed him in a federal court.
U.S. District Judge Susan Bolton
ruled last month that he had
“willfully violated” a 2011 court
order that barred his deputies
from stopping and detaining Latinos without reasonable suspicion that they had committed a
crime.
Mr. Trump pardoned Mr. Ar-
paio before he was sentenced
for his crime, and the former
sheriff has shown no public remorse for his actions.
Justice Department policy
states that “in general, a pardon
is granted on the basis of the
petitioner’s demonstrated good
conduct for a substantial period
of time after conviction and
service of sentence.”
That period is at least five
years after a conviction or release from confinement.
The Constitution gives presidents broad authority to grant
pardons, and it doesn’t require
them to follow the Justice Department guidelines.
Other Republicans have applauded Mr. Trump’s actions
and said opponents are inconsistent in their criticism.
“What’s on display here is
frankly the hypocrisy from the
left,” Arizona state Sen. Steve
Montenegro, a Republican, said
on CNN’s “State of the Union.”
“We had President Obama
pardoning hundreds of thugs...
Where was the outrage from
the left when he was pardoning
thugs and murderers and unrepentant terrorists like that?”
Mr. Montenegro said.
Mr. Obama, in his final days
in office, commuted the sentences of more than 1,700 nonviolent drug offenders as part
of his administration’s efforts to
address criminal justice reform.
The offenders weren’t granted a
pardon, which is forgiveness for
a crime.
Mr. Obama pardoned 212
people out of approximately
3,400 applications, which is a
relatively low percentage for
presidents in recent decades.
—Alexa Corse and Yuka
Hayashi contributed to this
article.
DAVID PAUL MORRIS/BLOOMBERG NEWS
The unemployment rate
has fallen to a
16-year low of
4.3% and may
not be done
falling. The question is
whether that is good news
because it means the economy is still operating below
capacity and has plenty of
room to run, or bad news because it means the economy
is close to overheating and
heading for trouble.
A study by the Federal Reserve Bank of San Francisco
finds that over the past century, the jobless rate’s “natural” level—meaning the level
that signals an evenly balanced economic expansion—
has fluctuated in a relatively
narrow band between 4.5%
and 5.5%. If it goes much
above that range it means recession, and much below it
could signal inflation or other
economic excesses building.
It’s now been below that level
for four straight months,
without obvious evidence of
overheating.
Structural changes in the
economy could alter this theoretical natural rate, meaning
the jobless rate might have
room to go lower without
throwing the economy off
balance. One reason is the aging workforce. Jobless rates
tend to be lower for older
ECONOMIC
CALENDAR
Bank of Japan’s Haruhiko Kuroda and Janet Yellen in Wyoming
tender for another term as Fed
chair, Mr. Trump has said. He
has praised her stance on interest rates and said he liked
her. But Ms. Yellen’s remarks
Friday highlighted a difference
in their views on regulation,
which could lead Mr. Trump in
another direction.
Mr. Trump has said his top
economic adviser, National
Economic Council Director
Gary Cohn, along with “two or
three” other candidates he declined to name, are also being
considered, leaving markets
and Fed watchers guessing
about where policy might be
headed beyond early next year.
Analysts have theorized
about a handful of dark horse
candidates who may be in the
mix, several of whom attended
this year’s Jackson Hole gathering, including former Fed
governor Kevin Warsh.
Among her peers, Ms. Yellen earned high marks for her
steady approach and clear
communication as the Fed unwinds its crisis-era stimulus program.
“President Trump has to
take his own decision, and
that’s his prerogative,” Bank of
Mexico Gov. Agustín Carstens
said. “But I can speak for myself, and I can say that she has
done an outstanding job.”
CORRECTIONS AMPLIFICATIONS
Readers can alert The Wall Street
Journal to any errors in news
articles by emailing
wsjcontact@wsj.com or by calling
888-410-2667.
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THE WALL STREET JOURNAL.
Monday, August 28, 2017 | A3
* *
U.S. NEWS
Cultural Exchange Visas Under Review
Trump administration
is considering cuts to
summer work-travel
and au pair programs
BY LAURA MECKLER
WASHINGTON—The Trump
administration is considering
major reductions in cultural
exchange programs, including
those for au pairs and summer
workers, that allow young
people from foreign countries
to work in the U.S., people familiar with the administration’s planning said.
President Donald Trump’s
“Buy American and Hire
American” executive order, issued in April, calls for a review of U.S. immigration rules
to ensure that the interests of
domestic workers are protected. No decisions have been
made, but supporters of the
program worry changes will
be made without a full public
debate.
A White House-led interagency working group is particularly focused on five employment-based programs that
are part of the J-1 visa exchange visitor program, according to people familiar
with the discussion.
The review includes the
summer work-travel program,
which brings more than
100,000 students to the U.S.
each summer, often stationed
in tourist destinations. It also
includes the smaller au pair
program, through which foreigners live in American
homes and provide child care
as well as take classes and
participate in intercultural exchanges with their host families. Other programs under
discussion include those for
camp counselors, interns and
trainees.
The J-1 visa program includes 10 other categories that
don’t involve work, such as
those for college students,
which aren’t under review, people familiar with the talks said.
The visa was instituted by
statute, but the individual categories were created by past
administrations and could be
changed or eliminated by executive action. Some changes
might need to go through the
regulatory process, which provides an opportunity for public comment.
Options on the table include
eliminating these visa classes,
as well as imposing new re-
quirements on participants.
For instance, employers could
be required to show that they
couldn’t find Americans for
these jobs, as is required for
other visa programs, according to the people who are
tracking the internal debate.
A recent directive to the
agency at the State Department responsible for these
programs instructs officials to
rewrite regulations in a way
that would effectively end
these five categories of the J-1
visa program, according to an
administration official. It was
unclear whether the intent
was to move forward with
such a regulation or if the request was aimed at facilitating
internal discussion.
A State Department official
declined to comment on the
debate and referred questions
to the White House. “Presently, we continue to implement the J-1 visa programs at
the same levels we have for
the past few years, and we appreciate the support that
American businesses have
shown for the program and its
value to their local communities,” the official said.
White House press secretary Sarah Huckabee Sanders
said she had “nothing to announce at this time.”
Supporters view these programs as facilitating cross-cultural exchanges while filling
gaps in the U.S. labor market.
They give young people from
foreign countries the opportunity to come to the U.S. and
gain exposure to American
culture and values before returning home.
The program also fills the
Pressure Mounts for Senate Republicans
BY SIOBHAN HUGHES
AND KRISTINA PETERSON
Tillerson
Says U.S.
Pledged to
Equality
BY FELICIA SCHWARTZ
KAT RUSSELL/THE PADUCAH SUN/ASSOCIATED PRESS
SHELBYVILLE, Ky.—Tensions between President Donald Trump and Senate Republicans are rising, as lawmakers
are being blamed by the president, House colleagues and
many voters for the party’s
failure to pass a major legislative initiative.
“I’m sick of them,” said
Matthew Walters, a 58-yearold construction worker who
lives in Shelbyville, Ky., and
has been eager for the GOP to
repeal the Affordable Care Act
as his wife’s insurance premiums jump. “They’ve said for
six years if we get a Republican in the White House we’re
going to get this repealed.
What is the problem? What
are the excuses? I’m sick of it.
We elected Donald Trump for
change.”
Similar sentiment is being
expressed in town hall meetings and street-corner conversations, ratcheting up the
pressure on GOP lawmakers as
they face a difficult September.
Next month, the Republican-led Congress must pass a
measure to keep the government funded beyond Sept. 30,
when a current law expires,
and raise the borrowing limit
to guard against the risk of
failing to pay its bills on time,
including payments to Social
Security beneficiaries, government employees, troops and
U.S. debtholders.
Mr. Trump is complicating
that work by threatening to
reject any funding bill that
doesn’t include $1.6 billion toward construction of a wall on
the nation’s southern border, a
move that likely would result
in a partial government shutdown.
“We’re going to get our
wall,” Mr. Trump said at a
rally in Phoenix last week. “If
we have to close down our
government, we’re building
that wall.”
Some House Republicans
say that the GOP-led Senate
need for summer workers, said
Denise Beckson, director of
human resources at Morey’s
Piers, which operates amusement park rides and restaurants in Wildwood, N.J.
“They allow us to have the
types of hours and provide the
offerings that guests coming
for their summer vacation expect to have,” she said.
Critics of the program include conservatives who want
to restrict immigration but also
some liberals who worry about
the impact on U.S. workers.
Sen. Bernie Sanders (I., Vt.)
singled out the J-1 program
during a 2013 Senate debate
over immigration, saying at the
time it had “morphed…into a
low-wage jobs program to allow corporations…to replace
young American workers with
cheaper labor from overseas.”
Protesters at an event in Graves County, Ky., earlier this month where Senate Majority Leader Mitch McConnell was one of the speakers
needs to scrap its procedural
traditions, which require 60
votes to pass most legislation,
and allow for bills to pass on a
simple majority—even though
the Senate wasn’t able to find
a majority for its health plan.
“The rules fundamentally
paralyze the U.S. Senate, and
Mr. McConnell should be
ashamed of allowing that to
occur,” said Rep. Trent Franks
(R., Ariz.), in a reference to
Senate Majority Leader Mitch
McConnell (R., Ky.) Mr.
McConnell has said he won’t
change the Senate rules.
Debbie Thomas, an educator who attended Nebraska
Republican Rep. Don Bacon’s
town hall this weekend in
Omaha, said she supported Mr.
Trump’s willingness to shutter
the government to extract
funding for the border wall.
“If that’s what it takes to
get somebody to listen,” said
Ms. Thomas, a conservative.
Mr. Bacon told reporters Saturday he didn’t want to shut
down the government.
Republican senators have
defended each other from Mr.
Trump’s criticisms, and over
the recess have responded the
way many did when they were
up for re-election last year, focusing on local issues.
Sen. John Cornyn (R.,
Texas) spent the weekend
helping Texans who were hit
by the hurricane, and Sen. Rob
Portman (R., Ohio) went fishing in Lake Erie to argue
against Mr. Trump’s proposed
cut to a federal program to restore the Great Lakes.
Some voters take their side
over Mr. Trump’s.
“I don’t see [the president]
slowly all across history.
“When you’ve been given
the responsibility of governing, people expect an outcome,
but the process along the way
is oftentimes pretty challenging,” Mr. McConnell said at a
Kentucky Republican dinner.
“A lot of people look at all
that and find it frustrating,
messy. Well, welcome to the
democratic process,” he said.
“The only reason people are so
focused on it now is 24-hour
cable news and the internet.”
The president has also
lashed out at Arizona’s two
Republican senators, Jeff Flake
and John McCain, and Sen.
Bob Corker of Tennessee. In
addition, Sen. Dean Heller of
Nevada, one of the most vulnerable Republicans, has been
target of Mr. Trump’s frustrations.
coming to the table and working with people,” said Melanie
Roll, a Millard, Neb., resident
who runs a small business and
voted for Mr. Bacon in last
year’s election. “I see him stirring the pot over and over.”
At the center of the GOP infighting is Mr. McConnell, who
failed by a single vote to pass
a measure aimed at repealing
the ACA.
“The only problem I have
with Mitch McConnell is that,
after hearing Repeal & Replace
for seven years, he failed! That
should NEVER have happened!” Mr. Trump said in a
tweet last week.
On Saturday, Mr. McConnell
said that voter frustration
over congressional inaction
had been fanned by the media
and obscured the fact that legislative change has come
WASHINGTON—Secretary
of State Rex Tillerson, in an
interview Sunday on Fox
News, said the U.S. maintains
its commitment to freedom
and equal treatment of people
around the world after receiving international criticism for
the White House’s various responses to a white-supremacist rally in Charlottesville,
Va., earlier this month.
“I don’t believe anyone
doubts the American people’s
values, or the commitment of
the American government, or
the government’s agencies to
advancing those values and
defending those values,” Mr.
Tillerson said.
Asked about the values of
President Donald Trump, Mr.
Tillerson said “the president
speaks for himself.”
Mr. Trump has delivered
several responses to the rally
and subsequent violence that
led to the death of one
woman. He initially blamed
both the white supremacists
and counterprotesters for the
violence. He subsequently has
made statements rejecting racism and bigotry and denouncing some of the groups that
participated in the protest of
the removal of a Confederate
monument.
Pressed on whether he was
separating himself from Mr.
Trump, Mr. Tillerson referred
to remarks he made about racism and diversity at the State
Department after the violence
in Charlottesville.
A United Nations panel last
week criticized the Trump administration for its Charlottesville response, saying the
U.S. failed “at the highest political level...to unequivocally
reject and condemn” racist violence.
Congress Faces Deadlines on Debt Ceiling, Shutdown
When Congress returns after
Labor Day, it will immediately
confront a pair of critical fiscal
issues: the U.S. government debt
limit and spending legislation
required to prevent the shutdown of the federal government
on Oct. 1.
In addition, GOP congressional leaders and the Trump administration hope this fall to begin work in earnest on taxoverhaul legislation.
Congress is deeply divided,
and President Donald Trump has
repeatedly criticized the Republican leadership of the House
and Senate in recent weeks, adding uncertainty ahead of lawmakers’ deadlines.
Lawmakers return from August recess on Sept. 5, but both
chambers of Congress have
breaks later in the month.
The government is funded
through Sept. 30, the end of the
2017 fiscal year. On the debt ceiling, Treasury Secretary Steven
Mnuchin has warned the federal
government will reach the limit
of its authorized borrowing by
about Sept. 29.
That leaves just 12 days when
both chambers will be in session
to pass the two critical pieces of
legislation.
BRYAN WOOLSTON/REUTERS
BY SIOBHAN HUGHES
AND RICHARD RUBIN
Senate Majority Leader Mitch McConnell (R., Ky.) has said he doesn’t expect to pass a bipartisan tax bill.
What is happening with basic
government funding?
The government is funded
through the end of the fiscal
year under a temporary measure
passed in May that gave Mr.
Trump some of his priorities—
like higher military spending
and more money for border security—but that didn’t pay for
the wall he wants to build along
the Mexican border.
Mr. Trump recently insisted
on the wall funding as a condition for keeping the government
open.
If Congress fails to pass a new
spending bill by Sept. 30, most
nonemergency functions of the
U.S. government would halt, furloughing workers, closing office
buildings and public facilities,
delaying paperwork, and more.
The Republicans who control
both chambers of Congress have
no appetite for a shutdown.
They are planning to advance an
interim spending bill that would
delay a fight over money for Mr.
Trump’s border wall.
Such temporary spending
measures are despised in Washington because they extend current spending without giving
federal agencies flexibility in
how they spend their budgets.
But Republicans see such a measure, known as a continuing resolution, as better than a politically
and
economically
damaging shutdown.
What about raising the borrowing limit?
The last time Congress dealt
with this issue was October
2015, when it suspended the
debt limit, then at $18.1 trillion,
until March 2017. Since March,
the Treasury has been using
emergency cash-management
techniques to avoid breaching
the limit.
Such maneuvers only work
for so long, and Mr. Mnuchin has
said the debt ceiling needs to be
raised by Sept. 29 to guard
against the risk the government
will be unable to pay its bills.
The Congressional Budget Office
and the Bipartisan Policy Center
have said that the Treasury
could run out of maneuvering
room in early to mid-October.
Federal Reserve and Treasury
Department officials in August
2011 had privately formalized a
plan to make on-time payments
on Treasury debt and delay paying other government bills if
Congress and the White House
failed to reach an agreement on
raising the borrowing limit, according to a transcript of a Fed
meeting at the time.
Mr. Mnuchin has said prioritization would be neither practical
nor desirable.
What are Congress’s options
on the debt ceiling?
Republicans could seek
spending cuts as part of any
measure to raise the debt ceil-
ing, but Senate Democrats would
need to go along in order to ensure that Republicans, who hold
only 52 seats, could garner the
60 votes needed to pass legislation through that chamber.
Another option is to tuck the
debt measure into other legislation, perhaps must-pass legislation like a spending bill.
Will Congress also turn its attention to taxes next month?
The Republican congressional
leadership badly wants a major
legislative victory during Mr.
Trump’s first year in office, before lawmakers turn to the 2018
midterm elections.
After the failed effort to pass
a health-care law over the summer, their goal now is to pass tax
legislation. Senate Majority
Leader Mitch McConnell has
said he doesn’t expect to pass a
bipartisan tax bill.
In order to pass a tax bill with
a simple 51-vote majority instead
of the usual 60 votes, Congress
must first pass a budget resolution that unlocks procedures
known as reconciliation.
Under reconciliation procedures, Congress can pass a tax
bill in the Senate with only 51
votes. But Republicans are beset
by infighting over their budget,
and may not be able to agree on
a spending blueprint.
A4 | Monday, August 28, 2017
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THE WALL STREET JOURNAL.
****
STORM BATTERS TEXAS
Rescue Efforts Tax Houston Resources
County official urges
residents to help
rescue their neighbors;
‘we need your help’
HOUSTON—As the waters
rose around them this weekend, families headed to attics
and rooftops, where they
called for help, overwhelming
emergency call centers.
Frantic friends and relatives worried about stranded
loved ones took to social media to plead for aid. The city
of Houston’s Twitter feed grew
into a litany of urgent appeals
Sunday. “Please help! Parents
and 4 children in danger of
drowning,” read one post.
As first responders rushed
to perform 3,000 rescues
across the sprawling city—
which covers an area larger
than Manhattan, Chicago, Philadelphia and San Francisco combined—a chaotic picture was
emerging from the floodwaters
of Harvey as the region faces
days of more rain while the disaster continues to unfold.
For a city that is prone to
flooding, the severity and pace
of the rainfall from Harvey
caught even longtime residents off guard and raised
questions about whether
Houston should have been
evacuated.
As of Sunday afternoon, the
city had received nearly 6,000
calls for help, said Houston
Mayor Sylvester Turner. Since
Saturday night, 911 operators
had received more than
56,000 calls, compared with a
typical 24-hour volume of
8,000, he said.
Some personnel as well as
STEVE GONZALES/HOUSTON CHRONICLE/ASSOCIATED PRESS
By Arian CampoFlores, Dan Frosch
and Erin Ailworth
Neighbors in Friendswood, Texas, used their own boats to rescue Jane Rhodes on Sunday, as Harvey, downgraded to a tropical storm on Saturday, battered the state.
boats and rescue vehicles that
Houston officials had hoped to
receive from the state didn’t
arrive as a result of roads being blocked by flooding, Harris
County Judge Ed Emmett, the
county’s chief executive, said.
He urged Houstonians to help
rescue their neighbors. “Those
of you who have boats and
high-water vehicles that can
be used to help people out of
harm’s way, we need your
help,” he said.
In a Houston neighborhood
near Buffalo Bayou, Tim Dodson, who runs a disaster and
recovery
service,
drove
through water 3- to 4-feet
deep in his large truck Sunday afternoon. He was preparing to rescue seven elderly
Catholic nuns who were stuck
in the Cenacle Retreat House.
A while later, Ryan Oakley
arrived in the area carrying a
yellow kayak. He said he was
heading to a friend’s house to
rescue a family, including 6and
9-year-old
children,
trapped on their roof. As he
prepared to paddle away, he
gathered a yellow rope.
“We can tie it up and support it on the roof and have
the kids climb down,” Mr. Oakley said. “Because there’s no
way to get a ladder out there.”
The 911 system was overwhelmed by the volume of
calls on Sunday, said Chief
Darryl Coleman of the Harris
County Sheriff’s Office at a
news briefing. Some calls were
dropped and unable to connect, he said. Officials were
bringing in additional operators and trying to return all
dropped calls.
Sharon O’Neal struggled to
get through to a 911 operator
to seek help for her brother,
who lives in a northern Houston neighborhood. The water
in his first-floor apartment
had reached his knees
by Sunday morning, and he
had spent the night sleeping
on his dining table, she said.
Ms. O’Neal took to social
media, posting on Twitter,
Facebook and Snapchat that
he needed help.
“My brother is very nonchalant,” she said. But “my
mom and sister and I are going crazy.”
—Bradley Olson, Russell Gold
and Miguel Bustillo
contributed to this article.
Those Who Stayed Behind Face Damage With Grit
ROCKPORT, Texas—As lashing rains and 130-mile-an-hour
winds battered the concrete
and steel home Max Rinche
helped build, he frantically
hammered nails into plywood
planks that other men struggled to hold over a broken
window.
While the Category 4-rated
Hurricane Harvey raged outside, Mr. Rinche’s worried wife
scribbled his Social Security
number on his arm—just as
the mayor of this coastal city
had urged residents to do if
they defied evacuations orders. If they were killed Friday
night, at least someone would
be able to identify them.
On Saturday, Mr. Rinche, his
tool belt dangling from his hip
like a holster, walked through
the torn-up streets, eyeing
mangled homes, and chatting
with other locals to get the
latest updates on which house
got hit and how bad.
“There’s going to be a lot of
chain saw work,” the 32-yearold said. “If you got tools, use
’em. If you’re breathing, you
can work. This is Rockport.
We’ll be fine.”
Up and down the central
coast of Texas, a string of small
cities and beach towns remained unnervingly populated
as Hurricane Harvey bore
down. Many thousands had
obeyed evacuation orders and
fled inland to hotels and shelters; meanwhile, some had
stayed—out of necessity, fear of
looters or sheer stubbornness.
Others who chose to ride
out the storm were older residents, their memories hardened by past storms they had
endured.
So far, local officials said
they knew of one person killed
in the storm in Rockport, the
small fishing and resort community devastated by Hurricane Harvey. There, the storm
tangled power lines and felled
hulking oaks that now cluttered the streets. Roofs, garage doors and even entire
homes were crumpled by Harvey’s power.
As the storm pressed north,
those who remained on the
coast emerged to take stock of
the damage, count their bless-
ings and face the next challenge: the aftermath.
“We lost what we had,” said
Juan Hernandez, who stayed
in his Aransas Pass, Texas,
home with his family. They sat
Max Rinche
didn’t leave. ‘If
you’re
breathing, you
can work. This
is Rockport.
We’ll be fine.’
in the dark, watching as the
storm took their fence line.
Then they noticed the leaks in
their roof.
“That’s when everything
started caving in,” said Mr.
STORM
Hernandez, a 65-year-old pipe
fitter. “We’ve got one room
good: that’s the kitchen.”
Mr. Hernandez said his family has food, but he was hoping help would arrive soon.
“We survived,” he said,
searching for a cellphone signal in the parking lot of a
damaged Wal-Mart. “At least
nobody got hurt.”
The flashing red “Open”
sign paired with the handwritten message posted on a
boarded window—“HOT COFFEE”—was a beacon in the
dark, broken disaster zone of
this Rockport neighborhood.
Matthew Otero posted the
message Saturday morning
when he opened Rockport Donuts, the business he and his
wife have run for nearly six
Measuring the Downpour
years.
“My first thing was, ‘thank
God the building survived,’ ”
he said as he served the occasional customer the promised
hot coffee as well as kolache
pastries hand-rolled by his
wife and mother-in-law.
Outside, in areas where water hadn’t pooled, debris had:
downed poles and power lines,
pieces of buildings and broken
trees.
Inside the shop, a generator
whirred, keeping it powered.
Amid the tables and chairs, a
small orange inflatable boat
caught dripping water from a
leak in the roof caused by the
storm.
“What can you do, you
gotta wipe off your knees and
keep going,” Mr. Otero said.
By the Numbers
Highest rainfall totals for hurricanes and tropical storms in the U.S.
Hiki (Hawaii 1950)
52 inches
Harvey (forecast)
DANIEL KRAMER FOR THE WALL STREET JOURNAL
Continued from Page One
ters in neighborhoods.
“This is a storm that is
testing the city of Houston,”
he said.
Most rescues were from vehicles that got stranded after
driving into floodwaters, with
responders assisting on foot,
in large vehicles, by boat and
via helicopters.
By Sunday morning, officials
warned that 911 services were
at capacity and urged people
to take whatever steps they
could to find safety. When
their calls couldn't get
through, families issued pleas
over social media for help.
Wireless networks along
the Texas coast suffered outages, federal regulators said.
State officials on Sunday evening said a widespread power
outage caused a sewage overflow into a Corpus Christi creek.
The U.S. Coast Guard said
its Houston sector had received
more than 300 requests for urban search and rescue and was
asking for additional HH-60
Jayhawk Helicopters from New
Orleans and Air National Guard
support to assist its current
five MH-65 Dolphin Helicopters
conducting rescues in the area.
“This is historic, devastating
rainfall,” said Jeff Lindner, a
meteorologist for the Harris
County Flood Control District
who is working with emergency
personnel. “There is water in
homes that have never flooded
before, and we’ve received reports of water going into the
second story of homes.”
Texas Gov. Greg Abbott
warned on Sunday afternoon
DAN FROSCH/WSJ
BY DAN FROSCH
AND ERIN AILWORTH
Water from Buffalo Bayou flooded this Houston highway Sunday.
that the worst of the flooding
might not be over, with more
days of heavy rain forecast.
Mr. Abbott and other state
officials have disagreed over
the past few days with local
Houston
officials
about
whether the region should be
evacuated. On Friday, Mr. Abbott urged coastal residents,
including residents of Houston, to “strongly consider
evacuating.” But city officials
said that wasn’t necessary.
Mr. Turner defended the
decision not to order a mandatory evacuation, saying it
would have been more dangerous for so many residents to
try to travel through the heavy
rains. Harvey was also pummeling San Antonio and Austin, the logical locations for
fleeing Houstonians.
“You cannot put, in the city
of Houston, 2.3 million people
on the road,” said Mr. Turner,
a Democrat. “You give an order to evacuate, you are creating a nightmare.”
Harris County Judge Ed Em-
mett, the area’s top emergency
official, asked citizens with
boats to help rescue people
trapped by rising water in their
neighborhoods. Boats and
other vehicles the city hoped to
receive from the state couldn’t
arrive because roads were
blocked by flooding, he said.
He also said Ben Taub Hospital, Houston’s main public
hospital, was being evacuated
because of flooding. Later,
Bayshore Medical Center in
Pasadena, Tex., on the outskirts of Houston, said it was
evacuating nearly 200 patients
because of rising water.
Mr. Emmett, a Republican,
bristled at criticism that the
city should have evacuated.
“To suggest we should have
evacuated two million people
is an outrageous statement.
What we’re facing now is an
effort to respond to a tragedy.…We’ve never seen water
like this before,” he said.
Forecasters said the storm
might drop even more rain than
initially expected over Texas.
50
Amelia (Texas 1978)
48
Easy (Florida 1950)
45
Claudette (Texas 1979)
45
Allison (Texas 2001)
41
Paul (Hawaii 2000)
39
Georges (Florida 1998)
38
Danny (Alabama 1997)
Unnamed (Texas 1960)
Debby (Florida 2012)
37
30
29
Sources: NOAA National Centers for Environmental Prediction;
National Hurricane Center (Harvey)
THE WALL STREET JOURNAL.
How to Aid Victims
Of Harvey Flooding
To make a donation to relief
efforts, contact these charities:
The United Way of
Greater Houston:
Visit www.unitedwayhouston.org/flood or text UW-
More than 150 roadways
were flooded throughout
Houston on Sunday, and both
of Houston’s airports closed.
Tristan Berlanga was preparing to move his family to
another home they own on
higher ground in the neighborhood. He said he was also concerned about a natural-gas leak
in the neighborhood, where the
smell of gas was noticeable.
The mass flooding was reminiscent of Tropical Storm Allison in 2001, which killed
more than 20 people in the
Houston region.
FLOOD to 41444.
American Red Cross:
Visit www.redcross.org. Call
1-800-RED-CROSS. Or text the
word Harvey to 90999 to
make a $10 donation.
Salvation Army:
Visit www.helpsalvationarmy.org, call 1-800-SAL-ARMY
or text STORM to 51555.
As has occurred two other
times in recent years, including during the Memorial Day
holiday in 2015, the city’s bayous and creeks, meant as a
drainage system, failed to
withstand the onslaught from
a tremendous downpour.
The impending danger from
continued rainfall will be
made worse by several factors
that have contributed to major
flooding events in recent years
in the city. While excessive
rainfall has been a primary
trigger, some of the challenge,
as with flooding in New Or-
50
Average annual rainfall in
Houston, in inches
50
Maximum rain amount forecast
for the region from Harvey
6.5
How many millions of people are
threatened with flooding in the
Houston area
3,000+
Number of people rescued from
cars and homes over the
weekend due to the storm
leans after Hurricane Katrina,
is of the man-made variety.
The city has added an average of more than 30,000 people
a year since 2010, which has
brought about a building boom.
That boom has covered previous flood-absorbing land with
concrete for apartment buildings and other developments.
Flood protection has also
failed to keep pace with the
construction.
—Dan Frosch, Erin Ailworth,
Christopher M. Matthews
and Russell Gold
contributed to this article.
THE WALL STREET JOURNAL.
Monday, August 28, 2017 | A5
* * * *
STORM BATTERS TEXAS
BY RACHEL WITKOWSKI
AND LESLIE SCISM
Hurricane Harvey poses
new hazards to a giant U.S.
flood insurer already facing
mounting debt and a reauthorization fight in Congress.
The National Flood Insurance Program, created about
50 years ago because private
insurers were unwilling to risk
catastrophic flood losses,
could be inundated with billions of new claims following
Harvey’s initial Category 4
winds and colossal rainfall.
Yet the U.S. program is
scheduled to expire on Sept.
30 and has just $5.8 billion
left it can borrow from the
Treasury to meet new claims,
according to January figures
reported to Congress. Many
people buy the government
policies through private-sector
insurers, which are compensated for that service.
Members of Congress are
discussing a number of options, ranging from a temporary renewal of the program
to a more-comprehensive fix
designed to return the program to solvency. Congress returns from recess on Sept. 5.
“From a public-policy perspective, Hurricane Harvey reinforces the narrative of why
the national flood-insurance
program is so important and
needs to be addressed,” said
Christopher Gillott, legislative
director for Sen. Bill Cassidy
(R., La.).
What makes the debate in
Washington so challenging is
that the program already has a
debt of roughly $25 billion
from earlier weather disasters. Much of that is from Hur-
FUEL
Continued from Page One
Exxon Mobil Corp. closed its
Baytown refinery, located on
the Houston Ship Channel,
when floodwaters from Harvey
paralyzed large portions of the
area after Harvey was downgraded to a tropical storm from
a hurricane.
The plant is the second-largest refinery in the country, processing as much as 560,000
barrels of oil a day and feeding
fuel into pipelines and barges
that move it across the southeastern U.S. and up the East
Coast.
Harvey’s projected path as of
Sunday night included an even
bigger refinery in Port Arthur,
Texas, that is owned by Saudi
Arabian Oil Co. and produces
600,000 barrels of fuel a day.
Several other companies
confirmed that they stopped
making fuel at plants in areas
hit by Harvey, including Royal
Dutch Shell PLC in Deer Park,
Texas, and Brazil’s state-controlled oil company, Petróleo
Brasileiro SA, in Pasadena,
Texas. Those plants produce a
total of 435,000 barrels a day.
Some plants are still running
but at reduced output. LyondellBasell said its refinery in
Houston wasn’t damaged by
Harvey but is making less fuel
than normal because of logistical constraints in the Houston
Ship Channel.
It isn’t clear how long affected refineries could stay
closed. When plants flood, as
they did in Louisiana during
Hurricane Katrina in 2005, it
can take weeks or months to
get new electrical equipment
and other parts installed.
Some plants that are capable
of reopening could stay shut as
ricane Katrina in 2005 and superstorm Sandy in 2012.
Sandy alone cost $8.4 billion
initially, according to the Federal Emergency Management
Agency, which manages the
program.
The program had to borrow
another $1.6 billion from the
Treasury in January just to
pay interest on its debt and
storm claims, according to
FEMA.
It will take days, if not
weeks or longer, for claims to
emerge from Hurricane Harvey. More than 200,000 homes
along the Texas coast could be
at risk, according to information and analytics firm CoreLogic. In 30 Texas counties labeled disaster areas by the
state’s governor there are
nearly 450,000 NFIP policies
covering $125.7 billion in insured value, according to the
program’s website. More than
half that value is in heavily
populated Harris County,
which includes Houston.
Previous interruptions of
the flood-insurance program
have triggered delays in thousands of home sales during
the lapses.
Sticking points in Congress
include whether lawmakers
will address the federal program’s finances in part by increasing rates gradually for
homeowners who currently
pay well below the actuarial
risk of flooding.
Program critics have said
many policyholders are getting bargain rates compared
with what private-sector insurers would require and that
taxpayers in drier parts of the
country are subsidizing those
in flood-prone states.
NICK WAGNER/ASSOCIATED PRESS
New Dangers
For Flood
Insurance
Emily Zurawski cried while inspecting her home in Port Aransas, Texas, on Sunday. Wind and rain hit the coastal city hard.
Strong Capital
Cushions Industry
The damage from Hurricane
Harvey, which hit the Texas
coast on Friday, is far from being tallied. But the insurance
and reinsurance industry has a
fatter-than-ever cushion to absorb losses from the Category
4 storm, executives and analysts say.
Harvey’s timing is good for
insurers and insurance customers from one perspective: Personal and commercial insurers
have record levels of capital,
the money they have on hand
that isn’t required to back obligations. With insurers’ overall
strong position, Harvey is unlikely to cause extensive damage to the industry’s financial
strength, though it could hurt
quarterly earnings for those
carriers with blocks of business
in hard-hit areas.
Most residential flooding
isn’t covered by private-sector
insurers, but is the responsibility of the U.S. government’s National Flood Insurance Program.
Many carriers, however, do sell
flood insurance to businesses.
Analysts estimate it would
take $100 billion or more of
losses in a 12-month period to
cause distress within the insurance industry. Hurricane Katrina
in 2005, the costliest hurricane
in U.S. history, caused nearly
$50 billion in insured losses in
2016 dollars, according to Wells
Fargo Securities LLC.
“You would need to see a
significant level of insured losses
to have an impact on the excess
capital of the industry [and]
have a material impact on the
pricing environment,” said Elyse
Greenspan, an analyst at Wells
Fargo Securities, last week.
Years of moderate damage
from natural disasters have bolstered insurers’ capital bases.
U.S. property-and-casualty
insurers had $709 billion in surplus in the first quarter of the
year, a record high, according to
the Insurance Information Institute, a trade group.
While the industry is strong
overall, there could be some hit
to insurers with large Texas operations. Insurers are preparing
for hundreds of thousands of
claims from homeowners, car
owners and businesses.
—Nicole Friedman
and Leslie Scism
Roughly a dozen senators
are proposing legislation that
would adjust homeowners’
rates to be more in line with a
property’s risk, and create incentives for private insurers to
take on more policies. But that
package, led by Sen. Bob Menendez (D., N.J.), is unlikely to
pass next month since Con-
gress would have only a few
weeks to address it, according
to Senate staff members.
More-traditional home insurers are increasingly willing
to take on flood exposure instead of leaving that risk to
the federal government—
thanks to improved flood
models and other tools.
“We developed a comfort
level in underwriting it,” said
Matthew Power, a senior executive at American International Group Inc., among the
private-sector carriers with an
alternative to the federal policies.
But the private-sector market isn’t big enough to fill the
gap if the U.S. government
were to let the federal insurance program lapse. AIG for
now has about 20,000 floodinsurance policyholders nationwide. The U.S. program, by
comparison, has roughly 5 million policyholders.
—Nicole Friedman
contributed to this article.
western states.
The worst impact might be
still to come. Four big fuelmaking plants are located in
the Port Arthur area. Harvey is
expected to linger over Texas
until Thursday.
Analysts said fuel prices
could climb if flooding and high
winds prompt more refinery
shutdowns and prevent fuel
from flowing to other parts of
the U.S. Harvey’s damage to the
energy infrastructure could exceed the damage caused by Katrina and Rita more than a decade ago, the analysts said.
“The market next week is
going to be quite awful,” said
Philip Verleger, an energy economist.
Harvey’s impact might be
cushioned by a relatively large
stockpile. U.S. refiners churned
out record amounts of fuel during the summer, and there is
enough gas in storage to cover
23.7 days of demand, compared
with 20.5 days in the weeks before Katrina, according to the
U.S. Energy Information Administration.
East Coast storage tanks
hold more than 63 million barrels of gasoline, a supply of
more than two weeks, compared with about 52 million before Katrina.
The global impact of Harvey
could be more dramatic. Gulf
Coast refineries have become
more important suppliers of
fuel around the world, with 17%
of the gasoline and 39% of the
diesel generated in the region
sold to overseas buyers, according to consulting firm
Turner, Mason & Co.
Harvey also shut down several offshore oil and gas platforms in the Gulf of Mexico,
where roughly 22% of offshore
oil production has stopped.
—Christopher M. Matthews
contributed to this article.
Airports
Stay Shut,
Flights Are
Canceled
Into the Oil Patch
Harvey is making its way through one of the busiest areas of the petroleum industry.
50 miles
LOUISIANA
TEXAS
2 p.m. Wednesday
Houston
San Antonio
Projected path
2 p.m. Monday
2 p.m. Tuesday
Gulf of Mexico
Corpus Christi
Harvey’s path
Petroleum infrastructure
Major pipelines
Terminals
Refineries
Offshore platforms
Notes: Storm path data as of 5 p.m. Sunday. All times Eastern.
Sources: NOAA (path); Energy Information Administration (infrastructure)
they wait for ports to rebuild
and reopen so ships bringing
oil deliveries in and taking deliveries out can resume operations.
Phillips 66, which shut down
its refinery in Old Ocean, Texas,
said it would provide as much
fuel as possible from other
plants and storage tanks. It
urged stations not to unfairly
hike prices.
Energy companies said they
are still assessing the damage.
Even if their plants don’t sustain much damage, they count
on the Houston Ship Channel, a
vital waterway for the U.S. energy industry, to move imported crude oil into the state
and refined fuels out. It has
been shut since Friday.
All the refineries in the
hard-hit Corpus Christi, Texas,
area are closed, so the additional shutdowns in the Houston area are likely to deepen
concerns about the possibility
of fuel shortages. Harvey’s
overall toll on fuel-making capacity is estimated to be at
least 2.2 million barrels a day.
Valero Energy Corp. said its
two refineries in the Corpus
Christi area that were shut before Harvey came ashore Friday
didn’t sustain much damage, so
the company was looking for a
way to restart operations.
Bringing them back also requires the port to be functional.
Valero didn’t estimate when the
two plants would go back into
service.
THE WALL STREET JOURNAL.
Harvey’s path cuts right
through the heart of the U.S. oil
infrastructure. The Texas coast
is home to nearly 30% of the
country’s refining capacity. Half
of that is produced by plants in
the Houston area.
Houston is also the starting
point of the Colonial Pipeline, a
massive fuel-moving artery
that takes gasoline, diesel and
jet fuel as far north as New
York. As of Sunday afternoon,
there was no impact to the
pipeline’s operations.
Magellan Midstream Partners, which runs several oil and
fuel pipelines in and out of
Houston, suspended many of its
operations. Midstream’s refined
petroleum pipelines carry gasoline and other fuels to 12 Mid-
Evacuation Disaster Influenced Decision to Stay
BY CHRISTOPHER M. MATTHEWS
HOUSTON—A split between
Texas Gov. Greg Abbott and
Houston Mayor Sylvester
Turner over whether the metropolis should have been evacuated is raising questions about
officials’ response to damaging
floodwaters as a catastrophe
continues to engulf the region.
Mr. Turner, a Democrat, and
other local officials urged residents to stay in their homes as
Hurricane Harvey, which has
since been downgraded to a
tropical storm, approached.
But at a Friday news conference, Gov. Abbott, a Republican, suggested otherwise.
“Even if an evacuation order
hasn’t been issued by your local official, if you’re in an area
between Corpus Christi and
Houston, you need to strongly
consider evacuating.”
The offices of Messrs.
Turner and Abbott didn’t respond to requests for comment.
Families were stranded on
rooftops, and parts of the city
that residents say hadn’t
flooded before were submerged.
Looming over the decision
not to evacuate was Houston’s
experience with Hurricane Rita.
More than 100 people died
while evacuating as 2.5 million
people fled that storm in 2005.
Some of the stories were horrific—23 nursing home patients
were killed as a bus evacuating
them caught fire and exploded
near Dallas. Houston hasn’t ordered evacuations ahead of
hurricanes since then.
Retired Army Lt. Gen. Russel Honorè, who led the Department of Defense response
to hurricanes Katrina and Rita,
said that experience has made
officials wary of ordering an
evacuation. But, he said, officials should have evacuated
flood-prone neighborhoods as
well as vulnerable populations
like the elderly and homeless.
He also said Gov. Abbott
should immediately mobilize
the entire National Guard. So
far, 3,000 guardsmen have
been activated. Mr. Honorè
said the state would need
closer to 15,000.
Mr. Turner defended his decision on Sunday, saying it
would have been foolish to
evacuate 6.5 million people
from Houston and surrounding
areas without knowing the
course of the storm.
Gov. Abbott said at a press
conference that there was
good communication between
state and local officials.
BY SUSAN CAREY
Hurricane Harvey is expected to disrupt U.S. air
travel this week as Houston’s
two airports remain closed
and heavy rain continues to
fall across Texas.
United Continental Holdings
Inc. canceled all flights to and
from its hub at Houston’s
George Bush Intercontinental
Airport through Monday at
noon. The Federal Aviation
Administration
said
the
smaller William P. Hobby Airport closer to downtown
Houston would stay closed until Wednesday as historic rainfall drenching the fourth-largest U.S. city continues.
Southwest Airlines Co. said
its flights at Hobby are canceled until Monday. The discount airline said it recommends
that
passengers
“shelter in place” at Hobby.
Flight-tracking
website
FlightAware.com said 1,664
flights were canceled as of
midday Sunday as a result of
the storm.
About 817 flights were delayed, an uncharacteristically
small number for such a
weather event, kept in check
by the large number of flights
airlines canceled pre-emptively.
According to FlightAware,
89% of the flights scheduled to
leave Bush Intercontinental
were scrubbed Sunday, or 547
flights, and 539 planes scheduled to leave, or 88%, also
were canceled. At Hobby, 96%
of scheduled outbound and incoming flights, 160 each, were
scratched, according to FlightAware.
American Airlines Group
Inc. said it canceled 110 flights
Sunday, mostly to and from
Houston. The nation’s largest
airline by traffic has a hub in
Dallas/Fort Worth International Airport, which wasn’t
affected.
Airlines continued to give
fliers the chance to change
their travel dates without incurring change fees, and in
some cases to rebook without
encountering higher fares.
A6 | Monday, August 28, 2017
THE WALL STREET JOURNAL.
WORLD NEWS
Iraq Forces Take Islamic State Stronghold
Militants are cleared
from Tal Afar, once a
way station between
Mosul and Raqqa
ERBIL, Iraq—Iraqi forces
have driven Islamic State from
the town of Tal Afar, the Iraqi
military said Sunday, clearing
one of the extremist group’s
few remaining strongholds in
the country.
Operations
continued
against the militants in a handful of surrounding villages, a
military statement said. Army
officials had said Saturday
night they were nearly in full
control of Tal Afar’s historic
center, moving toward the
northern neighborhoods still
held by Islamic State.
The surprisingly swift conclusion on Sunday came just
one week into the battle for
Tal Afar, which once served as
a way station between the
group’s de facto capitals Mosul
in Iraq and Raqqa in Syria.
As U.S.-backed Iraqi forces
penetrated Tal Afar, it became
clear Islamic State fighters either had abandoned the city
ahead of the battle to seek refuge elsewhere, or had laid down
their weapons to blend in with
the local population, according
to Iraqi military officials. While
the militants fought back, their
challenge was weaker than expected, the officials said.
“It looks like Iraq isn’t [any
longer] a priority [for Islamic
State],” said Rasha al-Aqeedi,
a researcher at Al Mesbar
Studies and Research Center, a
Dubai think tank focused on
Islamic movements. “They’re
losing and have lost their veteran networks. The fighters
probably won’t stay in Iraq to
defend their remaining networks, they’re not strong
enough to fight for. They’ll opt
to stay underground instead.”
AHMAD AL-RUBAYE/AGENCE FRANCE-PRESSE/GETTY IMAGES
By Ali A. Nabhan in
Erbil, Iraq and Maria
Abi-Habib in Beirut
Fighters of the Hashed al-Shaabi, or Popular Mobilization Forces, which unite several of Iraq’s powerful Shiite militias, advanced through Tal Afar on Saturday.
Al Qaeda in Iraq resurfaced
in 2013, morphing into Islamic
State. The Sunni Muslim militant group seized about onethird of Iraq’s territory in a
summer 2014 blitz, establishing its caliphate across Iraq
and Syria. It since has carried
out attacks across the Middle
East and Europe.
Despite being uprooted
from most of the territory it
controlled over the past two
years, Islamic State has been
able to rely on a mix of operatives and supporters with no
connection to the group, in-
spired to carry out attacks.
One of the last large, strategic Iraqi towns under Islamic
State control is Hawijah, in the
oil-rich province of Kirkuk. It
is likely to be the next offensive for the Iraqi military and
the U.S.-led coalition that is
providing support, according
to Iraqi military statements.
The group’s remaining resources in Iraq are concentrated heavily along the border with Syria.
Military spokesman Brig.
Gen. Yahya Rasool credited the
experience of the battle-hard-
ened Iraqi military in retaking
Mosul—a nine-month-long operation that ended in July—for the
victory in Tal Afar. The strategy
of surrounding and cutting off
Tal Afar for nearly a year also
contributed to the swift victory
by severing Islamic State supply
routes while U.S.-led coalition
airstrikes helped destroy important targets, he added. Some
200,000 people were living in
Tal Afar as of June 2014.
Meanwhile, in Lebanon, a
separate battle against the extremist group, also launched a
week ago, was coming to a
For ISIS, a Trail
Of Lost Ground
CAROL GUZY/ZUMA PRESS
The group has been driven
from its urban redoubts
over the past several years
A boy found in the rubble after the liberation of Mosul was rescued by Iraqi army soldiers.
A timeline of major urban
victories against Islamic State in
Iraq, including Sunday’s in Tal
Afar.
Mar. 31, 2015: Tikrit falls to
Iraqi forces, Islamic State’s first
major loss in Iraq and biggest
setback since seizing swaths of
territory across Iraq and Syria in
2014. Fighting for the city, symbolic as the birthplace of former
dictator Saddam Hussein, takes
three months.
surprisingly quick conclusion
as well, marking the likely end
of the terror network’s hold in
that country. The army, which
is fighting to expel Islamic
State from its foothold there,
on Sunday announced a ceasefire with the extremist group.
The military is using the
cease-fire to negotiate an end
to its fight against Islamic
State by expelling the remaining militants to the eastern
Syrian province of Deir Ezzour, which is still largely in
control of Islamic State. Their
removal was expected to come
in exchange for the retrieval of
the bodies of eight Lebanese
soldiers kidnapped and killed
by the extremists in 2014.
Deir Ezzour is quickly becoming Islamic State’s last stronghold in its self-styled caliphate,
as its fighters and leadership
converge there from Iraq and
other parts of Syria—and now,
Lebanon. The Syrian Democratic
Forces, a U.S.-backed group led
by Kurdish militants, on Friday
announced they would begin an
offensive on Deir Ezzour “very
soon,” according to local media
reports.
Nov. 13: Iraqi Kurdish fighters
stream into Sinjar after announcing its retaking from the
extremist group. The battle for
the northern city is a then-rare
victory against Islamic State in
Iraq and involves some 7,500
Kurdish forces backed by the
U.S.
Dec. 28: Iraqi forces declare
victory in Ramadi, the capital of
Anbar province. Fleeing residents
describe near-starvation and use
as human shields.
June 26, 2016: Fallujah is declared liberated by Prime Minister Haider al-Abadi. The city,
once used as a staging ground
by Islamic State, is widely seen
as a test of the army’s preparedness for a coming battle to re-
take the much larger city of
Mosul.
July 11, 2017: Islamic
State’s Iraqi stronghold Mosul,
the country’s largest city, is declared liberated by Mr. Abadi.
The more than nine-month
battle triggers an epic humanitarian crisis, as hundreds of
thousands of residents are displaced.
Aug. 27: Tal Afar, the militants’ last key Iraqi redoubt
and a former transit point between Mosul and Raqqa, falls
after just one week of fighting.
Iraqi military officials cite for
the swift victory factors including Islamic State’s depleted resources.
—Karen Leigh
Businesses Flee Brazil Rules for Paraguay
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CIUDAD DEL ESTE, Paraguay—This remote country,
long known for contraband traffickers and a 35-year dictatorship, is now becoming something else: a manufacturing hub.
Paraguay has attracted
scores of foreign factories since
2013, as predominantly Brazilian companies respond to new
incentives by flocking to this
gritty border city.
Koumei SA, a family-run
Brazilian light-fixtures company, is typical. Its owners
moved the plant and about 150
jobs here last year, saying they
were fed up with Brazil’s high
taxes and complicated labor
rules. “It’s just easier here,”
said Seijii Abe, who directs the
company with his father.
The shift from Brazil comes
as Latin Americas’s biggest
country is trying to stabilize an
economy that has contracted
7.2% in the past three years. A
series of corruption scandals
has also roiled the political
class, leaving Brazilian President Michel Temer in a tenuous
position as he tries to revamp
the economy.
Brazil ranked 123rd out of 190
in the World Bank’s 2017 survey
on ease of doing business. Companies there say they are bedeviled by rules that smother entrepreneurial impetus.
“The regulations are absurd,” said João Carlos Komuchena, owner of Kompar SA,
a company that makes small
On the March
Exports by foreign companies
operating under Paraguay's
maquila program have soared
since President Horacio Cartes
came to power in 2013 and
added new incentives.
$350 million
JEFFREY T. LEWIS/THE WALL STREET JOURNAL
BY JEFFREY T. LEWIS
2017*
$208.1 million
300
250
200
150
100
50
0
2001 ’03 ’05 ’07 ’09 ’11 ’13 ’15 ’17
*Through the end of June.
Source: Paraguay Ministry of
Industry and Trade
THE WALL STREET JOURNAL.
plastic bottles used for packing
soy sauce and other products
that moved to Paraguay from
Brazil last year. “We need to
wake up in Brazil; there is a lot
of prejudice against business.”
Enter Paraguay. Ruled until
1989 by dictator Alfredo Stroessner, it was long known for corruption, violent crime and drugs,
tobacco and armaments smuggling, as well as its commodity
agricultural exports. Paraguay
began trying to attract manufacturers in 2000 with a series of
incentives President Horacio
Maida Soto at the Koumei plant in Ciudad del Este in July
Cartes has hawked enthusiastically since he took office in 2013.
Paraguay’s sales pitch to
manufacturers: cheap electricity, less onerous labor rules,
zero import taxes and only a 1%
levy on the value of finished exported products.
To be sure, Brazil, with
thousands of factories and 65
times the economic power of
Paraguay, still dwarfs its neighbor. But for a small, landlocked
country of nearly seven million
people the shift is significant,
not least for the 13,000 employed directly by the factories.
Maida Soto is among those
benefiting from a Paraguayan
factory job in a Brazilian-owned
plant, allowing her to continue
her nursing studies while providing her with enough of a salary to buy a motor scooter.
“The work conditions here are
better” than in the hospital
where she previously worked,
she said, taking a break from
drilling holes in a lighting fixture at the Koumei plant.
Brazil acknowledges the
flow of manufacturing investment into Paraguay and agrees
it is a result of the red tape,
bureaucracy and taxes Mr. Temer’s administration is trying
to overhaul.
Finance Minister Henrique
Meirelles said the administration
wants to change bankruptcy law,
simplify the tax system and reduce the cost of credit. But the
government doesn’t have broad
backing for its efforts and has
put in place only 12 of 213 proposed business reforms since
taking office last year, Mr. Temer’s office said.
THE WALL STREET JOURNAL.
Monday, August 28, 2017 | A7
WORLD NEWS
BY DUDLEY ALTHAUS
MEXICO CITY—Guatemala’s
political crisis deepened on
Sunday when a constitutional
court temporarily barred President Jimmy Morales from expelling a United Nations-backed
anticorruption
prosecutor
probing allegations of illegal financing in the president’s 2015
election campaign.
Several cabinet members
resigned to protest the president’s expulsion order, and
hundreds of protesters in Guatemala City gathered outside
the presidential palace and the
foreign ministry as Mr. Morales held an emergency meeting with remaining members
of his government.
Earlier in the day, Mr. Mo-
The president ordered
an expulsion two
days after a request
to lift his immunity.
rales said he was acting “in
the interests of the Guatemalan people, the rule of law and
institutionality” by ordering
Ivan Velásquez, the Colombian
prosecutor who heads the
U.N.’s anticorruption agency in
Guatemala, to leave the country and declaring him “persona non grata.”
The expulsion order came
two days after Guatemala’s attorney general and Mr. Velásquez asked the country’s Supreme Court to remove the
president’s immunity from
prosecution for alleged electoral crimes.
Mr. Morales, a popular television comedian who had never
held public office before winning the presidency, has denied
any wrongdoing. In a televised
speech late Sunday afternoon,
Mr. Morales said he acted because Mr. Velásquez had “exceeded his authority,” adding
that fighting corruption and
impunity was “not the work of
one, two or three people but of
the entire nation.”
U.N. Secretary General
António Guterres was shocked
by the expulsion order, a
spokesman said, reiterating
Mr. Guterres’s support for Mr.
Velásquez’s work.
Mr. Velásquez’s agency—the
International
Commission
Against Impunity in Guatemala, or Cicig—is tasked with
helping local prosecutors take
on the country’s endemic corruption and organized-crime
networks, which critics describe as a parallel government
in the country of 15 million.
A respected Colombian prosecutor, Mr. Velásquez was appointed to his post four years
ago., and his current mandate
runs to September 2019.
The attempt to expel Mr.
Velásquez, who has received
strong support from across
Guatemalan society and from
the U.S. and other foreign governments, has sharpened the
country’s constitutional crisis
over the corruption probe, analysts say.
Besides Sunday’s court injunction against his expulsion
order, Mr. Morales has also
faced resistance from within
his own government. The
president said he had fired
Foreign Minister Juan Carlos
Morales, who isn’t related to
him, and the deputy prime
minister, after they refused to
implement the order, according to local media reports. The
ministers couldn’t immediately
be reached for comment.
“[Morales] has completely
isolated himself,” Eric Olson, a
Central America expert at the
Woodrow Wilson Center in
Washington, said of the Guate-
LUIS ECHEVERRIA/REUTERS; JOHAN ORDONEZ/AGENCE FRANCE-PRESSE/GETTY IMAGES (BELOW)
Guatemala Faces
Political Crisis
Over U.N. Probe
Demonstrators protesting President Morales on Saturday, above; U.N. workers outside Cicig headquarters Sunday, in Guatemala City.
Commission Has
Powers, Popularity
malan president. “The international community is completely united and it looks like
they are going to take a very
hard line on this.”
Mr. Velásquez and Attorney
General Thelma Aldana announced Friday that investigators have identified at least
$825,000 in anonymous contributions to the president’s
election campaign that went
unreported to regulators. As
secretary-general of his political party, Mr. Morales is le-
gally liable for the alleged
transgression, they say.
If the high court approves
the request, Mr. Morales’s immunity could subsequently be
revoked by a two-thirds vote
in Congress.
The gathering crisis echoes
a scandal two years ago that
led to the resignation of thenPresident Otto Pérez Molina,
his vice president and other
officials. Mr. Velásquez at that
time was investigating a customs-fraud ring.
The United Nations-affiliated commission at the center
of Guatemala’s latest political
crisis was created 10 years ago
to help the country’s fragile
public institutions take on
criminal networks that had
their origin in the country’s decadeslong military dictatorship
and civil war. The International
Commission Against Impunity
in Guatemala, or Cicig, was the
first commission of its kind
ever created by the U.N.
Under the 1996 peace pact
that ended the conflict, which
killed some 200,000 people,
the government agreed to dismantle shadowy counterinsurgency groups tied to the army.
But in the ensuing years,
the networks morphed into
criminal gangs, using their ties
to the intelligence agencies and
military to penetrate the government and carry out crimes
from fraud to murder and drug
trafficking. Human-rights activists and Guatemalan officials—
backed by the U.S. and other
governments—requested help
from the U.N., which created
Cicig in 2007 to take on
groups that “threaten human
rights as a result of their criminal activities and capacity to
act with impunity.”
The agreement gave Cicig
unprecedented power within a
sovereign state, including the
right to launch probes and act
as a plaintiff in criminal cases.
Cicig’s two-year terms have
been renewed five times to
date. While opinion polls have
indicated that Cicig is among
Guatemala’s most trusted institutions, it has faced pushback
by some in the government
and in corrupt business circles.
“Cicig showed them that all
people can be judged under
the law, and that’s significant,”
said Adriana Beltrán at the
Washington Office on Latin
America.
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THE WALL STREET JOURNAL.
A8 | Monday, August 28, 2017
World-Class CEOs in the Rarest of Company. Each Other.
The Wall Street Journal CEO Council is an exclusive membership for Chief Executive Officers from the world’s
largest and most influential companies collaborating on the most pressing issues in global business today.
Dennis Abboud
Readerlink LLC
Eric Foss
Aramark Corporation
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Stanley Black & Decker
Serge Pun
SPA Myanmar
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American Electric Power
Simon Freakley
AlixPartners
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Westfield Corporation
Joel Quadracci
Quad/Graphics
Keith Allman
Masco Corporation
Adena Friedman
Nasdaq, Inc.
Elie Maalouf
IHG
Thomas Quinlan
LSC Communications, Inc.
Mukesh Ambani
Reliance Industries Limited
Jack Fusco
Cheniere Energy, Inc.
William Mansfield
MUFG Securities Americas, Inc.
Karan Rai
ASGARD Partners
Carl Armato
Novant Health, Inc.
Mark Ganz
Cambia Health Solutions
Gracia Martore
TEGNA, Inc.
D. Rajkumar
Bharat Petroleum Corp Ltd.
Johan Aurik
AT Kearney, Inc.
Robert Garrett
Hackensack Meridian Health
Timothy Mayopoulos
Fannie Mae
Nitin Rakesh
Mphasis Ltd.
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Mobileye
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Amdocs Limited
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Con Edison, Inc.
Punit Renjen
Deloitte
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Nielsen
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VMware, Inc.
Solange Pinto Ribeiro
Neoenergia SA
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Western & Southern Financial Group
Mike George
QVC
Terry McCallister
WGL Holdings, Inc.
and Washington Gas
George Barrett
Cardinal Health, Inc.
Eric Gernath
SUEZ
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McKinsey & Company
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Air Products & Chemicals, Inc.
Patrick Bass
thyssenkrupp North America, Inc.
Susan Gilchrist
Brunswick Group
Inga Beale
Lloyd’s of London
Daniel Glaser
Marsh & McLennan Companies
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Bechtel Corporation
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Johnson & Johnson
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Green Plains, Inc.
CP Gurnani
Tech Mahindra Limited
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Singapore Economic
Development Board
Mauricio Gutierrez
NRG Energy, Inc.
Jim Hagedorn
The Scotts Miracle-Gro Company
Marc Benioff
Salesforce
John Haley
Willis Towers Watson Plc
Aneel Bhusri
Workday, Inc.
Tom Hayes
Tyson Foods, Inc.
Richard Bielen
Protective Life Corporation
Gregory Hayes
United Technologies Corporation
Ståle Bjørnstad
Cxense
James Hebenstreit
Bartlett and Company
Benjamin Breier
Kindred Healthcare, Inc.
Edward Heffernan
Alliance Data Systems, Inc.
Vincent Brun
Vacheron Constantin
Michael Burke
AECOM Technology Corporation
Gregory Cappelli
Apollo Education Group, Inc.
Jo Ann Jenkins
AARP
Anil Chakravarthy
Informatica
Alan Joyce
Qantas Airways Ltd.
Andrew Collins
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Steven Collis
AmerisourceBergen Corporation
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NewYork-Presbyterian Hospital
Francisco D’Souza
Cognizant Technology Solutions
Bal Das
BGD Holdings LLC
Hikmet Ersek
The Western Union Company
Jacques Esculier
WABCO Holdings, Inc.
Thomas Farrell
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ResMed Corporation
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Cubic Corporation
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Wellmark, Inc.
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World Fuel Services Corporation
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The Options Clearing Corporation
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Turkish Airlines
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Yes Bank Limited
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Teneo Holdings
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Transnational Diversified
Group Incorporated
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HR Certifcation Institute
Lisa Hook
Neustar, Inc.
David Hunt
PGIM
Terrence Cavanaugh
Erie Insurance Group
Michael Dowling
Northwell Health
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Highmark Health
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Fortune Brands Home & Security, Inc.
Daniel Knotts
R.R. Donnelley & Sons
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Sutter Health
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Tata Communications Ltd.
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Veritiv Corporation
Donald Layton
Freddie Mac
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Ambac Financial Group
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The Boston Consulting Group
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Dow Jones & Company
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Dover Corporation
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Hancock Prospecting Group
Bill McDermott
SAP SE
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C. R. Bard, Inc.
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Strayer Education, Inc.
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JDA Software
Tom McGee
ICSC
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IBM
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VSP Global
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Konecranes Plc
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Gilbane, Inc.
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Mack-Cali Realty Corporation
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Unum Group
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KlÖckner & Co SE
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Genworth Financial, Inc.
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PricewaterhouseCoopers LLP
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RMZ Corp.
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Cravath, Swaine & Moore LLP
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Fluor Corporation
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21st Century Fox and News Corp
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Bridgewater Associates
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THE WALL STREET JOURNAL.
Monday, August 28, 2017 | A9
WORLD NEWS
Ex-Premier’s Flight Lifts Thai Military
Yingluck’s departure
before verdict in
negligence trial eases
threat of mass protests
BANGKOK—Thailand’s military junta might have got the
result it wanted when former
leader Yingluck Shinawatra
fled the country before a court
could hand down a verdict in
her negligence trial last week.
Her flight freed the generals from the risk that she
could be viewed as a martyr if
she were convicted and jailed
for allegedly mismanaging a
botched multibillion-dollar
rice subsidy. Ms. Yingluck, 50
years old and the mother of a
young son, was facing up to 10
years in prison for a crime she
says she didn’t commit. Thousands of supporters, many of
whom benefited from the subsidy before her government
was ousted in 2014, converged
on Bangkok to hear the verdict
last Friday, matched by as
many if not more police.
While the prospect of mass
disturbances appears to have
been averted, many people
here say the political forces
Ms. Yingluck and her older
brother Thaksin Shinawatra
unleashed with their policies
favoring the poor will continue to pose a threat to Thailand’s militarist old guard.
And the turmoil that has hamstrung what was once one of
Asia’s fastest-growing economies will likely continue.
ATHIT PERAWONGMETHA/REUTERS
BY JAMES HOOKWAY
Former Prime Minister Yingluck Shinawatra greeted supporters as she left the Supreme Court in Bangkok earlier this month.
“The Shinawatras left a crucial imprint upon Thailand of
waking up the political aspirations of Thailand’s rural majority with the implementation of
welfare policies. Rural voters
are not likely to forget this,”
said Paul Chambers, an expert
on the country’s politics and
lecturer at the College of Asean
Studies at Naresuan University.
The government didn’t respond to requests for comment.
People familiar with the mili-
tary’s thinking said the junta
had grown wary of mass protests erupting if Ms. Yingluck
were jailed. They feared a repeat of the rioting in Bangkok
after a 2006 coup ousted Mr.
Thaksin, who fled the country to
evade a corruption conviction.
It isn’t yet clear where Ms.
Yingluck has gone. Her brother
Mr. Thaksin spends much of
his time in Dubai. She couldn’t
be reached for comment.
A person close to the Shina-
watra camp suggested that
Ms. Yingluck’s decision to
leave was left to almost the
last minute after it became
clear there was a very real risk
of her being jailed. Previously
she had said in interviews that
she intended to pursue the
case to the end. “It’s better for
all sides if she just disappeared,” this person said.
In the short term, the country’s junta will gain from Ms.
Yingluck’s exit from the politi-
cal stage, Mr. Chambers said.
Prime Minister Prayuth Chanocha, the former army chief
who ousted Ms. Yingluck’s
government three years ago, is
making the most of the situation. “If she’s not guilty she
should stay and fight,” Gen.
Prayuth said.
The Shinawatras’ political
machine isn’t finished. The family has dominated politics since
the turn of the century after
tailoring economic policies to
appeal to the poorer segments
of Thai society who had largely
been ignored. A onetime telecommunications billionaire, Mr.
Thaksin introduced cheap credit
and health-care programs to
help boost living standards and
remains the only Thai premier
to have been re-elected.
After Mr. Thaksin fled the
country following the 2006
coup, Ms. Yingluck was elected
in a landslide and put in place a
rice subsidy that involved paying farmers up to double the
market price for their crops.
The program was wildly
popular among farmers, who
enjoyed a surge in living standards. It helped the economy,
too, for a time. Around 40% of
Thailand’s workforce depends
on agriculture and Ms. Yingluck
repeatedly defended the policy
in court as a way of redistributing wealth for the benefit of
all Thais. Her government intended to pay for the program
by withholding its new stocks
of rice from the global market,
steering prices higher.
Instead, India entered the
market after a long absence and
Vietnam expanded production.
Thailand fell from its position
as the top rice exporter, and the
government was left with vast
stockpiles it had to sell at loss.
Officials estimate the program
cost Thailand at least $15 billion, and the army and its allies
in Bangkok’s royalist establishment used the shortfall as an
argument for removing Ms.
Yingluck as a political force.
In October, the junta ordered
Ms. Yingluck to pay nearly $1
billion in civil damages.
U.K.’s Labour Advocates Prolonging Some Europe Ties
LONDON—Britain’s opposition Labour Party is coming
off the fence over Brexit, putting pressure on Prime Minister Theresa May to pursue a
closer relationship with the
bloc than many supporters of
her ruling party want.
Emboldened by the surprise
results of a June election that
delivered a rebuke to Mrs.
May, Labour is showing signs
it is prepared to more directly
challenge her, taking a stronger stand on several pivotal issues. The party on Sunday
said it would support Britain’s
continued membership in the
EU’s single market and customs union during a transition
period out of the bloc, and
possibly permanently, marking
a clear divide from the Conservatives’ stance.
The government can usually
rely on its own members of
Parliament to toe the party
line. But after Mrs. May’s
party lost its majority she has
less room if a handful of proEU Conservatives choose to
side with Labour lawmakers.
Labour has been in a difficult situation because its supporters are divided, with many
traditional working-class voters in the heartland backing
Brexit and cosmopolitan city
dwellers and trade unions
hoping to retain strong ties
with Europe. More than a
third of Labour Party supporters voted for Brexit, according
to an estimate by pollster YouGov PLC, though the party
supported staying in the EU.
Labour leader Jeremy Corbyn—who expressed only
tepid opposition to Brexit before last year’s referendum—
has been largely quiet in recent weeks. But other top
party figures are speaking out
postelection, sending significant signals.
Mrs. May’s government
wants Britain to leave the tariff-free single market and customs union to take control
over immigration, including
during a planned “interim” period meant to enable an orderly transition to a new economic relationship. Brexit
Secretary David Davis will
meet with the EU’s chief nego-
Brexit and the
Economy
Public expectations of the impact
of Brexit on economic growth
Worse Off
Better Off
No difference
40%
30
20
10
0
J
F
M
A
M
J
Source: YouGov online polls, most recent of
1,670 adults conducted June 21-22; margin of
error: +/-3 pct. pts.
THE WALL STREET JOURNAL.
Labour’s Brexit spokesman Kier Starmer has been more vocal.
tiator Michel Barnier on Monday and will call on both sides
to use “imagination” as they
hash out solutions to difficult
issues like how Brexit will affect the Irish border.
Mr. Corbyn last month took
a similar line to the Conserva-
tives on Brexit, saying Labour
wanted the U.K. to leave the
single market. But senior
party figures, including its No.
2 and its point man on Brexit,
in recent weeks shifted that
stance, keeping open the possibility of staying during the
Woman Succumbs to Injuries,
Bringing Barcelona Toll to 16
BY JEANNETTE NEUMANN
partment of Catalonia, the
Spanish region where the attacks unfolded. Government
officials had previously said
they thought the death toll
could rise given the severe injuries of many of the
wounded.
Thirteen people were killed
Aug. 17 when a white van
jumped the curb of Las Ramblas, Barcelona’s most famous
street, and the driver picked
up speed as he drove about
2,200 feet along a pedestrian
promenade.
The driver fled the van and
then killed another man by
stabbing him. He stole the
man’s vehicle and used it as a
getaway car. After a four-day
manhunt, the driver, 22-yearold Younes Abouyaaqoub, was
MATTHIAS OESTERLE/ZUMA PRESS
MADRID—A
51-year-old
German woman died from injuries suffered when a man
plowed a van through pedestrians in Barcelona, elevating
to 16 the number of people
killed in Spain’s deadliest terrorist attack in more than a
decade.
Health officials announced
the death on Sunday but
didn’t provide additional information on the woman.
Two dozen people remain
hospitalized following the
Aug. 17 attack in Barcelona
and another, hours later, in the
seaside town of Cambrils.
Five of those hospitalized
remain in critical condition,
according to the health de-
A demonstration Saturday in Barcelona in support of the victims
JEFF OVERS/BBC/REUTERS
BY JENNY GROSS
shot and killed by police.
Hours later, in the seaside
town of Cambrils, alleged terrorists also hit people with a
vehicle, killing one woman.
Five suspects were then killed
in a shootout with police.
It was the worst terrorist
incident in Spain since 2004,
when terrorists blew up four
commuter trains in Madrid,
killing 191.
Ten people suspected of being involved in plotting and
executing the attacks are either in jail or dead. Prosecutors and police are now focusing on piecing together the
plot and on the international
connections the suspects had.
On Saturday, hundreds of
thousands of people gathered
in Barcelona for a peace
march.
About 500,000 people demonstrated Saturday afternoon
close to Las Ramblas.
The marchers chanted “I’m
not afraid” in Catalan, one of
the languages of the region, as
they walked through Spain’s
second-largest city.
Prime Minister Mariano Rajoy and King Felipe VI were
present. They were greeted by
some whistles in protest from
the crowd, reflecting existing
tensions between the city and
Madrid that have increased
during the inquiry into those
responsible for the attack.
transition. On Sunday, the
party went further.
“No mixed messages,” Labour’s Brexit spokesman
wrote in an article in the Observer newspaper. “Labour
would seek a transitional deal
that maintains the same basic
terms that we currently enjoy
with the EU.”
Labour has also demanded
Mrs. May allow the European
Court of Justice to continue to
have a role in disputes between the U.K. and the bloc,
which businesses say will ease
trade barriers. The party’s
platform issued ahead of the
election didn’t mention the
court, which has been a central concern of Mrs. May.
The party has called on
Mrs. May to retain membership in a handful of EU agencies that regulate or coordinate policing, medicine and
nuclear energy.
Brexit
secretary
Keir
Starmer has increasingly spoken out, saying last month he
would work with lawmakers
across the political spectrum
to pressure Mrs. May to stick
to the EU treaty that governs
nuclear energy.
A U.K. government spokesman declined to comment on
Labour’s stance. A spokesman
for the Conservatives said Labour’s plan is “a weak attempt
to kick the can down the
road.”
A10 | Monday, August 28, 2017
* *****
THE WALL STREET JOURNAL.
IN DEPTH
Ask Not for Whom the Bell Tolls. They Won’t Answer.
i
i
i
Smartphone-savvy millennials and Gen Zers are so used to texting upon arrival that the sound of a ringing doorbells freaks them out.
Chanan Walia, a sophomore
at University of California,
Berkeley, can’t remember the
last time he used a doorbell or
even knocked on a door.
It’s not as if they aren’t
there. At home, his father installed a fancy, Wi-Fi-connected doorbell. Mr. Walia, 19
years old and a computer science major, says he just isn’t
comfortable ringing them. He
and his friends have become
so accustomed to texting one
another upon arrival, he says,
that the sound of a doorbell
feels like an unexpected jolt.
“Doorbells are just so sudden. It’s terrifying,” says Tiffany Zhong, 20, the founder of
Zebra Intelligence, which helps
companies conduct custom research and gather insights on
people born in the past two
decades.
There’s no published research about doorbell phobia,
but it’s a real thing. In a poll
by a Twitter user earlier this
month that got more than
11,000 votes, 54% of respondents said “doorbells are scary
weird.” Some millennials and
Gen Zers say they won’t even
consider answering a ring at
the door until they’ve checked
the security camera.
The doorbell freak-out reflects the ascendance of mediated communication, which
means people interacting
through technological devices
rather than directly. It’s not so
much about screen time versus face time as it is a merger
of the two.
Smartphones provide extra
information thought by users
to be vital to day-to-day interactions. Without smartphones
to help, encounters can feel
fraught.
“Typically, doorbells are for
outsiders,” says Ms. Zhong,
whose LinkedIn profile describes her as a “teen whis-
RING; DAVID GOLDMAN/ASSOCIATED PRESS (BELOW)
BY CHRISTOPHER MIMS
A Wi-Fi-linked doorbell and camera made by Ring, above, allows communication without eye contact. UPS drivers still ring the bell.
perer.” “A text signifies it’s a
friend.”
An entire smartphonewielding generation has begun
communicating primarily via
mobile device, even when
other means are available.
According to Pew Research
Center, 92% of Americans between the ages of 18 and 29
own a smartphone, the highest
percentage of any age group.
Just 42% of Americans who
are at least 65 own a smartphone.
Many of the latest apps and
services are tethered to mediated communication, from
hailing a ride through Uber
Technologies Inc. to ordering
food on GrubHub Inc. to swiping left or right on Match
Group Inc.’s Tinder. There are
companies where the desk
phone is optional but Slack
Technologies Inc.’s Slack chat
app isn’t.
People in general are making fewer phone calls to one
another, but the trend is mov-
ing especially quickly in customer service. The number of
customer-service calls declined 17% from 2015 to this
year at 1,351 businesses in 80
countries surveyed by consulting firm Digital Data.
Those calls are being supplanted by chat, bots and selfservice options. Phone calls
with actual humans are now
just 54% of all customer-ser-
vice interactions with businesses, says Digital Data.
The communication shift
has affected the company that
rings more doorbells than any
other in the U.S.: United Parcel
Service Inc. UPS still trains its
drivers to ring any doorbell
available when making deliveries, but drivers don’t wait
for a live human unless a signature is required.
Continued from Page One
driving program.
He will also have to contend
with a deeply divided board
and shareholder base over the
future of the company, as well
as his predecessor, Mr. Kalanick, who sits on Uber’s board
and wishes to have strong input into the company’s direction.
Mr. Khosrowshahi, an Iranian-American who has run Expedia for more than a decade,
stands to potentially make a
fortune at Uber if he can steer
the company to a successful
public offering. It isn’t clear
when Uber, valued last year by
investors at around $68 billion,
may file for an IPO—but it is
first working to shore up its finances to appeal to potential
investors.
In 2015, Mr. Khosrowshahi
was one of the most highly
compensated chief executives
in the S&P 500, receiving a pay
package valued as much as
$94.6 million in mostly longterm stock options designed to
get him to stay for several
years.
In Mr. Khosrowshahi, Uber
would get a longtime internet
executive with deal-making experience and a track record of
steady growth. He started his
career at investment bank Allen
& Co., impressing media mogul
Barry Diller, chief executive of
DAVID RYDER/BLOOMBERG NEWS
UBER
Uber’s board approved Dara Khosrowshahi as the firm’s new CEO.
IAC, with his financial acumen.
He joined Mr. Diller’s company
in 1998, became financial chief
of IAC, then called USA Networks, in 2002 and took over
the CEO job of Expedia when it
was spun off in 2005.
Mr. Khosrowshahi would inherit a 15,000-employee global
concern that is still deeply unprofitable. It had losses of more
than $3 billion last year and
nearly $1.4 billion in this year’s
first half. It is still increasing
sales, including reporting last
week $1.75 billion in revenue
for the second quarter, up 17%
from the first quarter. Full-year
sales last year were $6.5 bil-
lion.
Expedia, by comparison, had
sales of $8.77 billion last year,
up 31% from the year before,
with net income of $281.8 million, which was down by 63%
from a year earlier.
The choice of Mr. Khosrowshahi was a surprise given
other, bigger candidate names
that surfaced in the media.
Over the weekend, directors
met with Ms. Whitman and
General Electric Co. Chairman
Jeff Immelt for final presentations detailing their visions for
the company in the top job.
Mr. Immelt removed himself
from consideration on Sunday
morning after observing disorder and divisions among different factions of Uber’s board,
according to a person familiar
with the matter.
Others said it was a facesaving move after he was advised he would not get the
votes necessary to be elected to
Uber’s top job.
Ms. Whitman’s candidacy
was a source of bitter fighting
among directors after she
stated publicly in July on Twitter and last week in The Wall
Street Journal that she wasn’t
interested in the position.
Some directors felt Ms. Whitman’s re-emergence was being
pushed by Benchmark Capital,
which has had a close relationship with her since her time as
eBay Inc. CEO.
Benchmark has denied it advocated for Ms. Whitman. The
firm earlier this month sued
Mr. Kalanick, claiming he knew
about misbehavior at the company when he persuaded the
venture-capital firm and other
shareholders to add three
board seats under his control.
Mr. Kalanick and Matt Cohler, a
partner at Benchmark, are both
on the board and five-member
CEO search committee. Mr. Kalanick has said the lawsuit is
without merit.
The lawsuit, and competing
claims and accusations among
Uber’s biggest shareholders,
served as a distraction as the
board aimed to complete the
CEO search by early September.
UPS also offers customers
the ability to receive an email
or text when a package is on
its way. Customers can even
track the location of the delivery truck. UPS says it built the
technology because customers
demanded it.
Since it launched its online
service in 2009, GrubHub has
given customers the option to
specify that delivery persons
text instead of ringing the
doorbell, says a GrubHub
spokeswoman.
Some young people say
they shun the doorbell simply
because they see no need for
it. “It’s like antiquated, knocking on doors is so far back
that it predates any experience people my age have ever
had,” says Drake Rehfeld, a junior at the University of
Southern California.
The doorbell isn’t about to
disappear. The National Association of Home Builders says
there is no sign that new
houses are being built without
doorbells, and they often are
required by local building
codes.
Like supermarket checkout
lines and bank tellers, though,
doorbells are being forced to
change with the technologically disruptive times.
“When we call a car [using
Uber], we watch it come to
us,” says James Siminoff,
founder and chief executive of
Ring, which makes a Wi-Ficonnected doorbell with an
embedded camera.
He says Ring is primarily
about giving people a way to
have two-way communication
with someone at their front
door without ever actually
having to make eye contact
with the person.
Jean Twenge, a psychology
professor at San Diego State
University, says such innovations could further the decline
in face-to-face interaction by
teenagers and young adults.
“Electronic communication
supplies some feelings of connection, but studies find it
does not equal face-to-face interaction for emotional closeness or mental health,” says
Ms. Twenge, whose book
“iGen” is about how smartphones may contribute to an
epidemic of anxiety and unhappiness in young people.
Mr. Walia, the UC Berkeley
sophomore, says he and his
friends also don’t ring doorbells because they’d rather not
run into each other’s parents.
Other young people say the
doorbell is a loser when it
comes to efficiency. Why not
just text to say you’re about to
get to the door?
“You carry your phone with
you everywhere,” says Adriane
Kaylor, a freelance writer who
lives in a New York City suburb. “It’s basically the teddy
bear for adults. I personally
sleep with my phone under my
pillow. It just makes sense to
get the most out of it.”
CEO Honed Skills as
Deal Maker With Diller
BY DREW FITZGERALD
Uber Technologies Inc.’s
next chief executive, Dara
Khosrowshahi, isn’t usually
counted among the A-list of
Silicon Valley chiefs, but the
longtime internet executive
brings a history of deal making and a track record of
steady growth to the job.
Mr. Khosrowshahi, 48 years
old, is closely tied to the media mogul Barry Diller, who
hired the merger expert in
1998 when he was a young analyst at investment bank Allen
& Co. He took over as CEO of
Expedia Inc. in 2005 shortly
after Mr. Diller spun out his
travel properties.
Expedia has been a voracious acquirer ever since, especially over the past three
years. It has swallowed Orbitz
and Travelocity and bought
vacation-rental service HomeAway to stave off Airbnb, another multibillion dollar
startup. Expedia’s market capitalization swelled to $23 billion, second in the U.S. only to
archrival Priceline Group
Inc., though it is dwarfed by
Uber’s latest private valuation.
Mr. Khosrowshahi forfeits a
generous pay package to work
for Uber. The travel company
in 2015 awarded him compensation valued at nearly $95
million over five years, though
he would have needed to meet
several aggressive performance targets each year to
collect it all.
Born in Tehran, Mr. Khosrowshahi moved to New York
state after the Iranian Revolution made it unsafe for his
family, which ran several manufacturing businesses, to return from a vacation that happened to coincide with the
coup. “We understood that we
were incredibly lucky to be in
the U.S.,” he told The Wall
Street Journal.
Mr. Khosrowshahi studied
engineering at Brown University but switched to finance
when he moved to New York.
His big break came when he
was a junior executive at Allen. Mr. Diller’s QVC shopping
network launched a hostile
tender offer for Paramount
Communications Inc. The bid
ultimately failed, but the
young
adviser’s
number
crunching impressed Mr.
Diller, whose company he
joined in 1998.
He couldn’t immediately be
reached for comment on Sunday. Expedia didn’t immediately respond to a request for
comment.
WORLD WATCH
U.S. Navy Recovers
Sailors’ Remains
The U.S. Navy says it has recovered the remains of all 10
sailors who went missing when
the USS John S. McCain collided
with a tanker near Singapore a
week ago.
The Navy said its divers had
recovered all of the bodies. Diving teams had been painstakingly combing through flooded
compartments inside the destroyer, after a multinational
search at sea for the missing
sailors turned up empty-handed.
The Navy identified the dead
sailors as junior ranking servicemen mostly working as electronics and communications technicians, ranging in age from 20 to
39.
The McCain, a destroyer in
the Navy’s Japan-based Seventh
Fleet, had been steaming to
Singapore from an operation to
challenge Chinese and other
claims in the disputed waters of
the South China Sea in the early
hours of Aug. 21 when it collided
with the Alnic MC, a civilian
tanker also on its way to the
city-state.
The Alnic emerged lightly
damaged, while the destroyer
suffered a blow to its rear left
side that crushed and flooded
crew berthing and other areas.
The bodies of the missing sailors were found by divers inside
the ship.
It was the latest in at least
three collisions of Seventh Fleet
ships in the past year.
In June, the USS Fitzgerald
hit a merchant ship, the ACX
Crystal. Seven American sailors
died in that accident.
—Jake Maxwell Watts
UNITED KINGDOM
Attacker Near Palace
Questioned in Probe
Police said they had launched
a counterterrorism investigation
after three officers were injured
arresting a man with a 4-foot
sword outside London’s Buckingham Palace.
Counterterror police are questioning the 26-year-old suspect,
who drove a car in front of a police van in a restricted area near
Queen Elizabeth’s official residence
late Friday, police said on Saturday.
The man reached for the
sword after the unarmed officers
approached the car and challenged him, police said, adding
that the man repeatedly shouted
“Allahu akbar”—Arabic for “God
is great.” During a struggle, the
officers sustained minor injuries.
—Jason Douglas
RICHARD JAMES M. MENDOZA/PACIFIC PRESS/ZUMA PRESS
SINGAPORE
GRIEF AND RAGE: Mourners turned the funeral of 17-year-old Kian Loyd Delos Santos—shot and killed
by police—into a protest against Philippine President Rodrigo Duterte’s bloody crackdown on drugs.
THE WALL STREET JOURNAL.
Monday, August 28, 2017 | A10A
NY
* *
GREATER NEW YORK
BY PAUL BERGER
If you have ever had trouble
hailing a yellow cab in Midtown Manhattan during the
evening rush hour, blame a decades-old rule requiring drivers to lease a car for 12 hours.
Many leases begin or end at
5 p.m., leading to a dearth of
cabs during the evening rush
as drivers head to and from
garages in the outer boroughs.
That could start easing a
bit on Monday as the city’s
Taxi and Limousine Commission begins testing a pilot program allowing drivers to lease
a cab for shorter periods. They
can do so for a prorated fee or
for a 35% commission on fares.
12
Number of hours drivers were
required to take out a yellow cab.
GETTY IMAGES
NYC Taxi Group, based in
Brooklyn, will be the first to
implement the program, which
would expand if others sign up.
The commission announced
the pilot program in October
2015, but this is the first time
a fleet operator has signed up.
“There was a lot of industry
reluctance to change,” said
Taxi and Limousine Commission Chairwoman Meera Joshi.
Industry skepticism remains.
Michael Woloz, a spokesman
for the Metropolitan Taxicab
Board of Trade, which represents thousands of taxicab owners, warned that commissionbased leasing, which favors
driving during the most lucrative hours, “could result in less
service during certain times and
may have other implications on
a fleet’s overall ability to adequately serve the riding public.”
The first company to enter
the program is doing more
than offering drivers leasing
flexibility.
Aleksey Medvedovskiy, the
chief executive of NYC Taxi
Group, has spent two years developing an app that unchains
drivers from the garage model
altogether. Mr. Medvedovskiy,
who is 35 years old, is outfitting
his fleet of more than 260 cars
with technology that allows
drivers to locate and unlock vehicles wherever they are parked.
Instead of a cab being
based at Mr. Medvedovskiy’s
garage in Brooklyn, drivers
can park a cab close to home.
A driver who wants a car
can use the app, called Lacus
Driver, to see all vehicles that
aren’t in use on a map. He can
book that car, unlock it with
his phone and begin driving
straight away.
Aziz Nizomov, a taxi driver
who has beta tested the app
for two months, said it has improved his working life.
It has cut hours of commuting to and from the garage
and waiting in line for an
available car. And it has reduced pressure because, working on commission, he no longer begins his day in the red
having paid between $100 and
$150 in fees and taxes.
“I want all the drivers to
experience what I experienced,” he said.
The yellow cab industry is
struggling amid the rising popularity of ride-sharing apps such
as Uber and Lyft. Yellow taxi
farebox revenue declined 7.5% in
2015 and 8.8% in 2016, according to an analysis by Matthew
Daus, a former NYC Taxi and
Limousine Commissioner.
Mr. Daus said that unlocking drivers from a 12-hour
shift should lead to better distribution of cabs during peak
demand hours. He noted that
it was safer for passengers too,
because drivers wouldn’t feel
compelled to work a full shift
even when they were tired.
Pilot program could make it easier to catch an evening rush-hour cab.
STEVE REMICH FOR THE WALL STREET JOURNAL (2)
Taxi Drivers Get
New Lease on
Their Work Life
Marlon Peterson practiced last week with the D'Radoes Steel Orchestra in Brooklyn in preparation for their J’Ouvert performance.
Parade Sparks Fear, Hope
The NYPD is boosting
security for J’Ouvert,
an event that has been
marred by violence
BY ZOLAN KANNO-YOUNGS
Marlon Peterson tapped out
melodies on old steel drums in
a yard near a Brooklyn garage
on a recent weeknight as he
prepared for J’Ouvert, a 33year-old parade that signals the
start of Carnival for New York
City’s Caribbean community.
For Mr. Peterson, playing
steelpan in the annual predawn event, which draws
about 250,000 people each Labor Day weekend, is a way to
celebrate Caribbean history
and culture.
“People who were impoverished, people who people
thought nothing of or were considered criminal created this instrument,” said Mr. Peterson, 37
years old. “They literally made
music out of garbage.”
Less than 10 feet away, Lester Nicholson was preparing
the tenor section of the D’Radoes Steel Orchestra for the
Sept. 4 procession, held just
before the city’s West Indian
Day Parade. But when the band
marches, Mr. Nicholson won’t
be there. “Part of the reason is
the violence that has happened
over the years,” he said.
Those dueling views mirror
a long-simmering debate
about the predawn celebration
in Brooklyn’s Crown Heights
neighborhood.
J’Ouvert celebrations traditionally commemorate the end
of slavery in Trinidad. The
Brooklyn festivities began in
1984, when a group of performers broke off from the
West Indian Day Parade to
perform strictly steelpan music without DJs, said Yvette
Rennie, president of J’Ouvert
City International, the event’s
organizer. The party draws
Mother Mourns the
Loss of Daughter
A 17-year-old man and 22year-old woman died during last
year’s J’Ouvert celebration in
Brooklyn, even as police doubled
their presence at the festival.
Vertina Brown, the mother
of the slain woman, Tiarah
Poyau, initially called for the
annual event to be shut
down. She later changed her
mind and decided to get involved with community meet-
ings to improve security at
the celebration.
Ms. Brown, who is 42 years
old, said she thinks security will
be better this year, but added
that “no one can really say this
festival will be 100% safe.”
“Every mother out there
feels my pain, and I’m pretty
sure they’re not going to want
their child to even go to J’Ouvert in fear that people have
been dying for years,” Ms.
Brown said. “And to be honest,
I don’t blame them.”
—Zolan Kanno-Youngs
large crowds, including gang
members aware their rivals
are likely to attend, and in recent years, the revelries have
been marred by a series of
shootings and stabbings.
In response to the violence,
city officials have said they
plan to use security tactics
similar to those employed during the New Year’s Eve celebration in Times Square. But
for many participants, those
precautions detract from the
event and its traditions.
“People have been doing
this for years to replicate
something that they loved
about home,” said Angela
Howard, 52 years old, who has
played in a steel band at J’Ouvert for 15 years. “We’re seeing it constantly shoved into a
smaller and smaller box.”
In the past, steel bands
gathered at Grand Army Plaza
near Prospect Park at about 2
a.m. Donning flamboyant costumes, bands would blast music and splash paint as they
marched along the parade’s
two-mile route between 4 a.m.
and 10 a.m.
This year, the event start
time has been pushed to 6 a.m.,
and the route will be closed to
the public the night before.
Participants and spectators will
be screened at 12 entry points
with metal detectors along the
parade route. The New York Police Department said it would
add 10% more uniformed officers and 30% more light towers
to streets.
“We have a sacred responsibility to keep everyone safe,”
said Mayor Bill de Blasio. “We
believe this plan, developed
with community leaders and
community members, strikes
the right balance.”
Since 2006, 20 people have
been shot during the celebration in the precinct where
J’Ouvert takes place, according
to the NYPD. Four of those died
from their wounds, including
Carey Gabay, a 43-year-old
lawyer in New York Gov. Andrew Cuomo’s administration
who was caught in the crossfire of a gang shootout in 2015.
Past violence has caused city
officials to consider the future
of the festival before. When
asked recently about the potential cancellation of J’Ouvert,
Mr. de Blasio said he wouldn’t
“deal in hypotheticals.”
Kernel Simon, 34, has been
practicing daily with the Despers U.S.A. steel band, but is
unsure he’ll join them for
J’Ouvert. Mr. Simon isn’t as
worried about safety as he is
about the later start time,
which he says takes away from
the parade’s cultural significance. “As far as I see it, I
think I’m seeing the end of
J’Ouvert,” he added.
Ms. Howard, the longtime
participant, said she’s approaching this year’s festival
with an attitude that is embodied by the lyrics of “Full Extreme,” a song her steel band
will play at J’Ouvert. “The lyrics
say, ‘The city will burn down,
we’re jamming still,’ ” she said.
BY MIKE VILENSKY
Andrea Catsimatidis has a
bold idea for Manhattan Republicans: win elections.
“In 1993, (former Mayor Rudolph) Giuliani proved a Republican can be competitive in
an overwhelmingly Democratic
city,” Ms. Catsimatidis told donors and activists last week.
“We can be victorious again.”
Ms. Catsimatidis, an executive at her father John Catsimatidis’
multibillion-dollar
company Red Apple Group, is
the front-runner to become the
new chair of the Manhattan Republican Committee, offering a
fresh perspective to a club that
has struggled locally despite
the party’s national gains.
While the national GOP has
never counted on liberal Manhattan to help it gain power,
the island holds a symbolic significance and serves as a fundraising stop for both parties.
“It’s the most important
county in the country, no matter if you’re a Democrat or a
Republican,” said Mr. Catsimatidis, a donor to the Manhattan
GOP who ran for mayor in 2013.
A 27-year-old moderate, Ms.
Catsimatidis cuts an unusual
figure for the chair role.
An heir to a fortune her father grew by founding supermarkets, she would be the
youngest chair of a major
party’s New York City county
committee. Her past forays
into political activism include
Andrea Catsimatidis
is the front-runner
for the chair of the
GOP Committee.
running the New York University Republican Club as an undergraduate business student
and working on Mitt Romney’s
2012 presidential campaign.
While a lifelong Republican,
Ms. Catsimatidis hosted Bill
and Hillary Clinton, friends of
the family, at her 2011 wedding to Richard Nixon’s grandson, Christopher Nixon Cox,
who she divorced in 2014. She
describes her politics as “cen-
ter-of-the-road.”
Local Republicans are hoping Ms. Catsimatidis can help
them expand the party as they
face off with energized Democrats out of power in Washington. “She appeals to a broader
constituency that we need to
win seats,” said Queens Councilman Eric Ulrich.
If elected chair by a few
hundred committee members,
Ms. Catsimatidis has her work
cut out for her. Of Manhattan’s
1.6 million people, Republicans
hold 112,000 registrants to the
Democrats’ 780,400, according
to the elections board.
In an interview, Ms. Catsimatidis touted growing the
NYU GOP by bringing in out-ofthe-box speakers and networking. “At NYU I learned the animosity we face as Manhattan
Republicans,” she said, “but
that makes us work harder.”
Winning elections would be
her priority as chair. She said
she would recruit “pro-business”
candidates tailored to local issues such as public transit.
There are no Republican
politicians currently repre-
BESS ADLER FOR THE WALL STREET JOURNAL
Heiress Believes in Manhattan GOP
Andrea Catsimatidis, second from right, with her family. She hopes to become Manhattan GOP chair.
senting Manhattan on the
council, in the New York state
Legislature, in U.S. Congress,
or in any New York citywide
or statewide elected offices.
The landscape isn’t poised
to get easier for Manhattan’s
GOP under Republican President Donald Trump, who is
opposed by Manhattan liberals
such as Democratic Mayor Bill
de Blasio and some local moderate Republicans.
The outgoing chairwoman,
Adele Malpassis is moving to
Washington as her husband
takes a job in the Trump administration.
Ms. Catsimatidis said she
supports the president but “any
political figure you’re going to
disagree with part of the time.”
The election for chair is expected to be held in September. Another candidate may
emerge, but Ms. Catsimatidis
is backed by a powerful group,
including Mr. Giuliani, former
Gov. George Pataki, New York
state GOP Chairman Ed Cox,
and Ms. Malpass.
Democrats say they are not
intimidated. “Our party has
successfully aligned itself with
the interests and values of
Manhattan voters,” said Barry
Weinberg, the executive director of the Manhattan Democratic Committee.
A10B | Monday, August 28, 2017
NY
THE WALL STREET JOURNAL.
* *
GREATER NEW YORK
Think Outside the Cubicle
Businesses are beginning to
design office spaces that increase the amount of square
footage per employee when
shared work settings are taken
into account.
That is one of the conclusions of a new report by Ted
Moudis AssociPROPERTY ates, which analyzed 2.4 million
square feet of
the architecture and design
firm’s office projects.
Many companies are expanding the selection of alternative places to get work done
such as cafe and kitchen areas,
informal living-room spaces
and quiet zones, according to
a 2017 Workplace Report.
“Five to 10 years ago it was
all about how many people
can I get in this space,” said
Jamie Feuerborn, associate director of workplace at Ted
Moudis. “Now some of that efficiency is a given, and everyone from the top level executive down is focused on the
employee experience.”
The amount of space at av-
erage assigned workstations
hasn’t increased. But the study
says the average “seat” has increased from 142 square feet
in 2016 to 165 square feet in
this most recent study.
Seats include workstations
and other office spaces such
as conference rooms and living room-style seating areas.
Seating in these shared
work settings has overtaken
the number of traditional, assigned workstations. In the offices analyzed, 52% of the
seats were devoted to these
alternative work settings and
48% to assigned workspaces.
More companies are
designing offices
with communal
spaces for workers.
Office-space designers and
planners say they are seeing
this shift across a wide range
of industries.
The Boston Consulting
Group, an international management-consulting firm, has
outfitted its new Manhattan office at 10 Hudson Yards with
comfortable
conversation
nooks, living-room settings,
huddle rooms and a large cafe
offering free food where some
employees often spend the entire day working, said Amy
Kotulski, director of hospitality,
operation and marketing excellence at Boston Consulting.
Workers at the Midtown
Manhattan office of media
agency Orion Worldwide LLC
are able to change their work
setting to suit their mood and
the work they happen to be
doing. Some employees hold
meetings as they walk around
the four-lane indoor track that
is among the options of work
settings offered.
The company rule: Don’t sit
in the same spot every day.
“If your employees feel 10%
happier with the workplace,
that could have a bigger impact
on the bottom line than a 5%
reduction in square footage,”
said Johnathan Sandler, director of workplace strategy at
Gensler, which designed Boston
Consulting’s new offices.
In recent years, many busi-
ALEXANDER COHN/THE WALL STREET JOURNAL
BY KEIKO MORRIS
A cafe at the Boston Consulting’s new Manhattan office is used as workspace by some employees.
nesses have moved to more efficient workspaces. But a
growing number of companies
are realizing that the cost savings of such a design often
had diminishing returns in
worker productivity, designers
said. Now, an increasing number have opted to make offices
more attractive by adding
communal spaces.
“People are saying we tried
Chocolate Giant Seeks Innovation at Cornell
An Italian manufacturer of
sweets and chocolates is setting up an innovation outpost
at Cornell University’s technology campus on Roosevelt
Island in New York City.
Global chocolate giant Ferrero International SA plans
to bring its open innovation
science division to the Bridge
at Cornell Tech, according to
Forest City New York, which
developed and manages the
commercial building.
Ferrero will join investment
firm Two Sigma Investments
LP and Citigroup Inc. at the
building, which is set to open in
September as part of the first
phase of the $2 billion campus.
At first glance, Ferrero may
not seem to fit the mold of a
typical technology firm, but
the company and its techno-
CLAUDIO PAPAPIETRO FOR WSJ
BY KEIKO MORRIS
The facade of the Bridge at Cornell Tech on Roosevelt Island.
logical pursuits are compatible
with the broader mission of
the Bridge, said Ali Esmaeilzadeh, head of Forest City New
York’s commercial leasing.
The building was designed
to foster connections among
Cornell Tech faculty and students, established companies,
startups, government agencies
and nonprofits. The goal is to
attract companies from a wide
range of sectors looking to tap
into entrepreneurial ideas and
new technologies generated by
Cornell Tech, as well as to recruit graduates.
Ferrero will take 4,200
square feet of space at the
Bridge. Cornell Tech will oc-
cupy about 39% of the 230,000
square-foot building, which
features a grand staircase in
the lobby, an entrance area
with plenty of spots to socialize and a rooftop common
area with 360-degree views of
New York City.
Ferrero’s team plans to explore improvements of products and operations, as well as
ways to enhance farming methods and sustainable food production, Mr. Esmaeilzadeh said.
Ferrero hopes to expand its
innovation team on the campus in part by hiring Cornell
Tech graduates, he said.
“We will develop cuttingedge research and technologies that will have transformational effects on our products
and business,” Giovanni Battistini, Ferrero vice president of
open innovation science, said
in a statement.
the open plan, and there is a
lot of virtue in having people
connect,” said Lenny Beaudoin,
senior managing director of
workplace strategy at real estate services firm CBRE Group
Inc. “But if you can’t get work
done, that is problematic.”
Office workers on average
sit at their desks 60% to 65%
of the time, so employers can
still find savings with shared
spaces that are used much
more frequently, according to
workplace consultants and
designers.
Many companies invest
these savings in technology to
create a more mobile office
worker, as well as amenities
such as free meals, barista service and healthy office tools
such as stand-up and treadmill
desks.
GREATER NEW YORK WATCH
SCHOOL VANDALIZED
school district’s 10 buildings.
—Associated Press
Police Investigate
Anti-Semitic Graffiti
NEW JERSEY
Swastikas and other anti-Semitic messages were spray
painted on walls, doors and windows of a Long Island high
school, police said.
The vandalism at Syosset
High School occurred between 2
a.m. and 4 a.m. Sunday, Nassau
County police said.
“MS13” and profanities also
were found painted in the rear
of the school, police said. MS-13
is a street gang that has been
blamed for more than 20 killings
on Long Island in the past year
and a half. It wasn’t immediately
clear who was responsible for
the graffiti.
Syosset School Board trustee
Joshua A. Lafazan said he would
call for increased security at the
Convicted Murderer
Will Get New Trial
A New Jersey appellate court
ordered a new trial for a man
convicted of murder because
witnesses who testified on his
behalf wore prison attire and
were handcuffed.
Keevin David was convicted
in the January 2011 shooting
death of Tyrell Coleman in Orange, N.J. Mr. David is serving a
55-year-sentence.
His attorneys argued that the
jail uniforms and handcuffs undermined the witnesses’ credibility and prejudiced the jury.
Prosecutors said they won’t
appeal but will retry the case.
—Associated Press
Photo by Deborah Samuel from PUP, published by Chronicle Books www.chroniclebooks.com
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THE WALL STREET JOURNAL.
Monday, August 28, 2017 | A11
KAGAN MCLEOD
LIFE&ARTS
THERE ARE TWO TYPES of people in this country, and their differences have nothing to do with
politics.
“There are those who love fall
and those who hate it,” says Harvard psychiatrist John Sharp, who
wrote “The Emotional Calendar,”
which explores how we feel about
the seasons and why.
Fall marks the end of the relaxed summer, which some people
mourn, and the return to routine
and order, which others relish.
Kim Petrolo doesn’t like fall because it means shorter days. “I
enjoy coming home from work
while it is still light and having
time to take a leisurely walk with
the dogs, or at least not feel like I
need to eat dinner and go
straight to bed in preparation for
the next day,” says Ms. Petrolo, of
Pittsburgh.
A street away, Laura McGaha,
who grew up in Texas and worked
summers for her father’s homebuilding business, can’t wait for
fall: “I hate the summer months,
because in Texas the low was 85
degrees at 5 a.m. [I] longingly wait
for the first day of fall.”
Even those who live near the
season-less equator or where
temperatures are more constant
have layers of memories and traditions associated with different
times of the year that influence
their emotions. In the Jewish
faith, whether you live in Arizona
or upper Minnesota, fall marks
Rosh Hashana, the new year and
a time of reflection and fresh
starts. Personal experience, too,
affects how we feel. If someone
close died in the fall, the season
may always carry some sadness.
The most common fall memory
TURNING POINTS | By Clare Ansberry
Feelings of Fall:
Love It or Leaf It?
Autumn marks the end of the carefree summer, which some people
mourn, while others relish the return to routine and order
is going back to school, a pattern
for years of our early lives. “I
think it makes a lot of people feel
industrious and energized about
possibilities. Things become more
linear, and some people find that
really works for them,” Dr. Sharp
says. “Others don’t.” Thirty years
after graduating, some adults still
get a bad feeling in the pit in their
stomach because it reminds them
of leaving for college or struggling
to get good grades.
When September approaches,
Lana Shami, also from Pittsburgh,
feels uneasy. “It used to be because it meant another dreadful,
challenging school year and the
end of carefree summers,” she
says. She’s been out of school for
years, and her own children are
eager to return to classes. But
the vexing feeling remains. Now
she dreads the back-to-school
preparation, mothers’ PTA-related responsibilities and regimented schedules.
Dr. Sharp likes fall, something
he traces to being one of those ea-
ger and prepared children who
sharpened all their pencils before
school started. He finds himself
getting anxious when summer
drags on too long.
A few years ago, a cousin visited him at a Nantucket summer
cottage the last week of August.
“I have the opportunity
to be more indulgent”
during autumn months,
chef Joshua McFadden
says of his ingredients.
She was ready to barbecue and eat
ice cream and he was over that. “I
was so ready for the fall that I was
a little bit of a grump,” Dr. Sharp
says. He recognized his grouchiness and realized he should enjoy
his remaining vacation rather than
worry about tasks ahead.
Managing emotions when seasons change is a lesson he offers
his patients. One, a retired professor, loved teaching and felt lost
when fall approached. To fill the
void, the professor scheduled fall
trips and language classes. “There
is usually some accommodation
you can make,” he says. If you
don’t like fall because your loved
one spends every Sunday watching football, treat yourself to
something you like. Hit the bike
trail. Go shopping.
Joshua McFadden, an executive
chef and restaurateur in Portland,
Ore., recently completed his first
cookbook, “Six Seasons: A New
Way With Vegetables.” His aim
was to encourage people to eat
what is in season and avoid buying
things like tomatoes in the winter.
Fall is bittersweet, he writes,
with leaves and temperatures
dropping and plants shriveling.
But it’s also much more relaxing
after the chaos of summer, when
new vegetables peak every few
weeks. To that end, his cookbook
allots summer three seasons—
early, mid and late.
In the fall, “I have the opportunity to be more indulgent,” he
says. He is now thinking about
what he will do with the coming
bounty—Brussels sprouts, mushrooms, chard. Good summer tomatoes need little preparation. Beets
need to be roasted and artichokes
braised. “It’s labor-intensive, but
in a really fun way,” he says.
For some, fall boils down to “almost winter.” Alice Barrett, a poet
who taught English as a second
language, lives in western Massachusetts, where “it’s stunningly
beautiful” when the leaves change,
she says. But after a few weeks,
the pretty leaves fall, and it’s a
slow descent to dark and dreary
winter. “I don’t ski. I don’t skate. I
stay in the house,” Ms. Barrett
says. She has written many poems,
but devoted only one to the seasons. It’s called “I Hate Autumn,”
which describes why. “Hard earth,
rotten crab apples, smacked pumpkins. Cold floor in the morning.”
Children can be slightly more
ambivalent about the season, balancing the pluses of getting back
together with classmates and trick
or treating with the minuses of
school demands.
“Overall, I fall somewhere between love and hate,” says Dom
Deniziuk, who is entering fifth
grade in a Pittsburgh suburb. He
doesn’t like September.
“The first month back to school
is really the worst one,” he says.
New teachers, homework and the
strict bedtime. “It just dawned on
me that I will have to start going
to bed at 9:30 again.” But the rest
of fall is good, because it means
playing soccer.
MUSIC
Greg Allman, seen
during a 2014
performance at
Atlanta’s Fox
Theater.
GREGG ALLMAN’S
STUBBORN FAREWELL
PATRICIA O’DRISCOLL
BY ALAN PAUL
GREGG ALLMAN had been working on “My
Only True Friend” with guitarist Scott Sharrard for a few months when they met for a
songwriting session in Mr. Allman’s New
York hotel room in March
2014. The Allman Brothers
Band was in the midst of its final year of performances, after
which Mr. Allman would dedicate himself to performances
with his solo band, for which
Mr. Sharrard was the musical
director.
As they settled down with
acoustic guitars, Mr. Allman
dropped some heavy news: He
had terminal liver cancer. Though he wished
to keep the news secret, it seemed to shift
his songwriting ideas.
“He scratched out a line of the song and
added a new one: ‘I hope you’re haunted by
the music of my soul when I’m gone,’” Mr.
Sharrard recalls.
With the new lyric, “My Only True
Friend” transformed from a classic road
song to an aching farewell to his fans. It is
now the lead single and emotional centerpiece of “Southern Blood,” the final solo album by Mr. Allman, who died
on May 27 at age 69. The album is set for release Sept. 8.
“As soon as I heard ‘My Only
True Friend,’ I thought the
song was a shockingly honest
confessional, that he was laying himself out and standing
naked,” producer Don Was
says. “He was telling you the
key to his life, because he
wanted to tie up the loose ends
for the people who had stuck with him for
decades and also for himself. He was making
sense of the totality of his life.
“Gregg was fully realized when he was on
Please see ALLMAN page A13
THE WALL STREET JOURNAL.
A12 | Monday, August 28, 2017
LIFE & ARTS
RAMIN RAHIMIAN FOR THE WALL STREET JOURNAL
Wait, So Is it
Ping Pong or
Table Tennis?
WHAT’S YOUR WORKOUT? | By Jen Murphy
Table Tennis for One
A winemaker calls the sport central to his fitness routine for its help with agility and core strength
BOB BLUE’S table tennis opponent
never gets offended by his trash
talking. That’s one of the many upsides of playing against a robot.
Mr. Blue, 61, grew up in a family
of table tennis fanatics and played
avidly with friends through high
school. It wasn’t until 2007, when
his wife died, that he thought to
dust off his paddle again. “I turned
to exercise as a way of coping,” he
says.
As the founding winemaker of
Bonterra Organic Vineyards in
Ukiah, Calif., Mr. Blue oversees all
aspects of the winemaking process,
from harvest to bottling. Long, unpredictable hours, particularly during harvest season, made it nearly
impossible to find a table tennis
partner. “Hitting balls off the wall
isn’t very satisfying,” he says. He
nearly gave up on the game, turning
to swimming and spinning for fitness. In 2014 he saw an online
video of a table tennis-playing robot
called the Newgy Robo-Pong.
“As soon as it went on sale, I
bought one,” he says. The device is
a robotic cousin of a baseballpitching machine, with controls for
ball speed, placement and frequency. A net captures the returns
from its human partner and recycles balls for continuous play that
simulates a high-intensity rally. “It
doesn’t replicate the spin of playing another person, but without an
evenly-matched opponent, the robot is the next best thing,” Mr.
The Diet
Blue says. “Plus, I don’t have to
chase balls all over the yard.”
Mr. Blue says he was shocked to
discover how much his reflexes had
eroded since his teenage years. “As
I get older, it’s important to train
my fast-twitch muscles,” he says.
He credits the game not only with
improving his hand-eye coordination, agility and attention. He even
says it helps keep his core engaged
while moving back and forth behind
the table.
Unlike swimming or spinning, activities where the mind can wander,
he says table tennis forces him to
stay focused. He has also learned to
play ambidextrously.
He occasionally takes on his
children, ages 29 and 26, when
they come home to visit, and recently signed up for an upcoming
local tournament.
The Workout
Mr. Blue moved his table tennis
setup to the winery so he can pop
in for games throughout the workday. He usually faces his robot
three times a week for 30 minutes
a session. The workout consists of
random drills of 100 balls at varying speeds and intervals, alternating backhand and forehand with
both his left and right hands. He’ll
also simulate games.
(As to the question of whether to
call his favorite sport table tennis
or ping pong, he says, “As a kid it
was the game ping pong, but today
I view it more as a sport and use
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Don’t even think of calling table tennis ping pong in front of
serious players.
While the game is virtually
the same, table tennis is an
Olympic sport. Ping pong is
more what you might see in a
hipster bar (played with a beer
in hand) and offices of trendy
tech startups, those close to the
sport say.
“The real difference is that
table tennis refers to a professional, competitive sport and the
term ‘ping pong’ is a term associated with the social game,”
says Matt Hetherington, communications director of USA Table Tennis in Colorado Springs,
Colo., and a coach. He is also a
former member of New Zealand’s national table tennis team.
When table tennis is played
with intensity, it delivers a serious physical and mental workout, Mr. Hetherington says. Professional matches can last as
long as an hour and involve not
just quick hand-eye coordination,
but also fast footwork.
“It’s an intense cardio workout, and you need strong legs
and core muscles, because you
are constantly transferring
your body weight through the
legs and core to attack the
ball,” he says.
“When you play casually,
your feet may barely move. In a
pro match, you’re lunging and
sprinting.”
Mr. Hetherington says core
exercises, squats and lunges,
and explosive footwork drills
can all improve play.
Mr. Blue has a soft-boiled egg for
breakfast and takes an apple or orange for lunch. Sometimes he’ll
grab tacos from a nearby truck. He
keeps carbs out of the house. “Too
much temptation,” he says. Mr.
Blue enjoys cooking from scratch.
“The creativity of cooking is like
blending wine,” he says. He grows
tomatoes in his garden to make
homemade pasta sauce and often
grills chicken breast with Italian
or Mexican spices. Sometimes he
and his girlfriend splurge on dryaged steak for the grill, which he
pairs with asparagus.
He always has one glass of
white wine and one glass of red
wine with dinner.
The Gear & Cost
When Bob Blue of Bonterra Organic Vineyards in Ukiah, Calif., couldn’t find a
regular tennis table partner, he bought a robotic one.
the term table tennis.”)
Mr. Blue also takes a 50-minute
spin class at 5:45 a.m. two to three
times a week at the Redwood
Health Club of Ukiah. “I feel like
the speed work helps reverse the
clock a bit,” he says. “And spinning
takes me to an intensity I normally
wouldn’t get to on my own.”
Three to four nights a week he
returns to the club after work,
around 9 p.m., to swim. He spends
10 to 15 minutes in the hot tub to
warm up and then performs calis-
thenics in the pool to loosen his
hips and lower back. He does 15
minutes of freestyle swimming,
starting with a gentle pace, then
increasing the intensity for eight
minutes and ending with sprints of
25 yards, with a break of 15
breaths between sets, for about
five minutes.
“It’s a relaxing way to end the
day,” he says.
Three to four times a week he
walks the vineyards for lunch, between 30 and 50 minutes.
Mr. Blue purchased his Newgy
Robo-Pong 2050 digital table tennis robot on sale for $550. It retails for $950. His Cornilleau 300S
Crossover table cost $1,200. He
bought his BaBo Ball Boy Tube,
which picks up ping-pong balls, on
Amazon for $24 and he buys sets
of 12 Newgy Robo-Balls on Amazon
for $65 a set. He has four Donic
Persson Powerplay paddles, which
cost $43 each.
He wears Adidas Barricade tennis shoes (retail $140) though admits that in the summer he often
plays in Birkenstock sandals. He
swims with Aqua Sphere Kayenne
goggles (retail $28). His health
club membership is $67 a month.
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THE WALL STREET JOURNAL.
Monday, August 28, 2017 | A13
LIFE & ARTS
BY LEE LAWRENCE
EXHIBITION REVIEW
A Cerebral Art Form
That Went Delightfully Astray
Cleveland
FOR SOME 200 years, Korean kings broadcast their
heavenly mandate by sitting
before a painted screen
showing five mountains
flanked by a red sun and a
white moon. But King
Jeongjo, who
reigned from 1776
to 1800, invoked another source of authority: books. Besides amassing a
large library and
overseeing the publication of more
than 4,000 books,
he commissioned
screens depicting
bookcases brimming
with tomes. Rising
behind the throne,
they reinforced an
oft-expressed concern: People, he believed, should read
Confucian and other
classics; avoid romance novels, Cath- A six-panel Chaekgeori from the late 1800s, above, and an eight-panel Chaekgeori from the late 1800s, top
olic writings, and
low tables. Glance up at a
other corrupting texts flowopen, as though the reader
the nine large screens and
ing in from China; and eshas just set it down. Altwo paintings in Cleveland’s bookshelf painting, and you
see the underside of upper
chew using “Chinese objects though the books in Jeongjo’s iteration effectively convey
shelves. You also get a betto show off their highbrow
screens reportedly bore tithe galvanizing variety of a
ter feel for the painting’s
culture.”
tles, these do not (scholars
quirky off-shoot whose orioverall impact. As in much
None of Jeongjo’s screens have found only one excepgins owe much to China.
of East Asia, screens served
survive, but they spurred a
tion). People would have nevEvery year, some 200 to
as portable décor to imbue a
vibrant genre that evolved
ertheless immediately recog300 Korean officials and
in ways the king could never nized the large-format books
technocrats (painters among space with mood or message. Some act as symbolic
have imagined nor, for that
with abstract patterns as Ko- them) accompanied court
portraits—in one, a woman’s
matter, condoned. “Chaekrean and the smaller ones en- envoys to Beijing’s Forbidperfume and cosmetic congeori: Pleasure of Possesveloped in brocade as Chiden City, where they saw
tainers jostle with glasses,
sions in Korean Painted
nese. They would also know
“cabinets of many treaink brushes, books and
Screens,” at the Cleveland
that most of the “things”
sures,” including Western
other signs of erudition—
Museum of Art, illustrates
were imported from China:
innovations such as the
styles artists developed as
the bronzes and incense
reading glasses we see in a
their patronage expanded
burners, calligraphy brushes
number of screens. Visiting
from court officials to rich
and ink stones, ceramic
Koreans also marveled at
merchants in the 19th and
bowls and vases, lacquer
European perspective and
early 20th centuries. Eightboxes and carved jade seals,
trompe l’oeil techniques in
and 10-paneled screens
paintings rolled up and parpaintings by Jesuit missionrange from trompe l’oeil
tially unfurled.
aries. What Koreans saw in
paintings of filled bookcases
The CMA is the show’s
China didn’t stay in China.
to idiosyncratic still-life
last venue—previously it
Back home, artists got busy.
compositions that defy the
was at the Charles B. Wang
Since people would have
laws of physics and optics.
Center of Stony Brook Univiewed screens while sitting
They all share the same
versity in New York and the
on cushions or low platsubject: Chaekgeori, which
Spencer Museum of Art at
forms, it behooves you to
means “books and things.”
the University of Kansas. It
crouch. The perspective, for
The former are shown lying
was co-curated by scholars
one, will snap into place.
flat, enclosed in box-like cov- in all three institutions, and Look straight on, and you
ers and often stacked, with
only the catalog has the full
might spy a painting, a frog,
perhaps one volume askew or complement of works. Still,
or slippers tucked beneath
while others set a celebratory tone with bright colors,
flashy patterns, and symbols
of good fortune.
More appealing even than
their meaning is their inventiveness. In one style, exemplified by an embroidered
screen, books and precious
items float against a plain
background, filling the air
around us like thoughts. In
the “stacked” or “table”
style, artists created still
lifes, sometimes reversing
the principles of linear perspective so that books appear to be zooming toward
us. And in the “bookcase”
style, some artists found a
way to sign their work while
preserving the fiction. As
two pieces in the show illustrate, they depicted a stone
or jade seal, turned on its
side, revealing the painter’s
moniker carved on its
base. Even today,
some artists harken
back to the chaekgeori—witness the
books without titles
and the amassed collectibles in Kyoungtack Hong’s “Library
3” (1995-2001) and
“Library—Mt. Everest” (2014).
King Jeongjo
would have bemoaned
how far from his ideals the genre would
stray. Had he known,
he might never have
required that top-tier
court painters excel
in this genre (a practice that lasted until
1879). And Korea’s
elite and wealthy might
never have commissioned
such works.
Chaekgeori: Pleasure of
Possessions in Korean
Painted Screens
The Cleveland Museum of Art,
through Nov. 5
Ms. Lawrence writes about
Asian and Islamic art for
the Journal.
FROM TOP: SONGOK MEMORIAL HALL, SEOUL, KOREA; PRIVATE COLLECTION
ALLMAN
Continued from page A11
stage playing for his fans.
What you saw on stage was
the real guy, and all the
troubles he encountered had
to do with not knowing what
to do with himself the rest
of the time,” Mr. Was says.
“Southern Blood” was recorded with Mr. Allman’s
touring band at Fame Studios in Muscle Shoals, Ala.
The band played live with
Gregg Allman singing along,
and most of the performances on the album were
captured in the first or second takes.
A noted perfectionist, Mr.
Allman planned to do vocal
overdubs, to add his voice
to two more completed musical tracks and to finish
some tunes he was working
on with Mr. Sharrard and
keyboardist Peter Levin. Mr.
Sharrard says there were
also plans to write with
Bonnie Raitt, Jason Isbell
and others.
All of this was rendered
impossible by Mr. Allman’s
health struggles, so aside
from “My Only True Friend”
and one other Allman/Sharrard song, “Southern Blood”
leans heavily on covers.
Most of the material has an
autumnal feel and underlying theme of mortality, notably Bob Dylan’s “Going,
Going, Gone,” the Grateful
Dead’s “Black Muddy River”
and “Once I Was” by Tim
Buckley, the California folkie who had a large influence on Mr. Allman’s songwriting. The album closes
with a duet with Mr. Allman’s old friend Jackson
Browne on Mr. Browne’s
elegiac “Song for Adam.”
“The sessions were powerful because we all knew
what he was singing about
and why we were there,” Mr.
Was says. The producer, who
has worked with the Rolling
Stones, Van Morrison, Ms.
Raitt and many others, grew
emotional discussing the
monumental task of helping
Mr. Allman achieve his dying
vision.
‘He did not like
confrontation, but
he faced death like a
strong soldier.’
“Even in such a heavy atmosphere, we had a lot of
fun, and the mood was effusive because we knew we
were getting it,” Mr. Was
says. “Gregg was digging in
deep and he was oozing
heart and soul, even in spots
where he might not have had
the lung power that he once
had. He wanted to do vocal
overdubs, but honestly if he
had been able to, maybe we
would have cleansed away
some of the soul.”
By the time of the recording sessions, in March 2016,
Mr. Allman had already outlived his diagnosis by several
years. In 2012, two years after undergoing a liver transplant, he learned that he had
a recurrence of liver cancer
and was given 12 to 18
months to live, according to
manager Michael Lehman.
“The doctors said the cancer could not be cured, but
treatment could extend his
life. But radiation treatment
would have risked damaging
his vocal cords and he refused, because he wanted to
play music as long as he
could,” Mr. Lehman says.
“He wanted to enjoy his life
and to perform until he simply could not.”
Mr. Allman played his final show in Atlanta on Oct.
29, 2016. As he rested and
eventually received hospice
care in his Georgia home,
Mr. Was worked to finish the
album, adding minimal overdubs. Until the end, Mr. Allman discussed his illness
with just a handful of people. Chank Middleton, a
friend of almost 50 years
who was a near constant
companion and was with him
in his final weeks, says that
Mr. Allman remained upbeat
until almost the very end.
“I knew for a few years
and it was hard for me to accept, but he was the one
with strong words,” Mr. Middleton says. “I never saw
him stand up to anything or
anyone as he stood up to
death. He did not like confrontation, but he faced
death like a strong soldier.
“He looked it in the eyes
and said, ‘Death, I’m not
scared of you and I’m not
ready for you.’ ”
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THE WALL STREET JOURNAL.
A14 | Monday, August 28, 2017
SPORTS
BOXING | By Jason Gay
When Boxing Goes Low, I Go High
Our columnist makes a (legally!) altered visit to the absurd Floyd Mayweather-Conor McGregor tangle in Nevada
MARK J. REBILAS/REUTERS
Las Vegas
I was somewhere
outside of the T-Mobile
Arena when the drugs
began to take hold.
My proposal had
been simple and innocent: travel
to Las Vegas for the ridiculous
Floyd Mayweather-Conor
McGregor match on Saturday.
And before the fight, partake in
a little of Sin City’s latest indulgence: legalized marijuana.
I’d keep it low-key. No fear. No
loathing. I asked my Journal boss
if it’d be OK.
“I’ve assumed you were smoking something whenever I’ve read
pretty well anything you’ve written,” he said. “Fine with me.”
Friday night, upon arrival, I
made the buy. Vegas stinks of
weed dispensaries now; Nevada
went recreational-legal on July 1
and they’re popping up everywhere, like Taco Bells. I chose one
called Reef, not far from the Strip.
The world’s happiest line curled
out of the door, like a nightclub’s.
Inside: It was crazy. Or rather:
It was crazy because it wasn’t
crazy at all. The showroom resembled an Apple store…actually, you
know that store at the airport
where you can buy an iPhone charger, or a pair of headphones? It
looked like that. Clean lines, well
lit, friendly store associates, samples of the merchandise in jars to
smell (no smoking inside!)
and…menus.
I knew I wanted edibles, i.e.
candy or a snack infused with
THC. Edibles would be simple,
easy to carry, no smoke, no mess.
I tried to be cool talking to the
store associate: Yeah I want something, you know, chill, like to go to
the…um…movies.
Of course, I look like a Dad taking other Dads to a Dad Convention in a Dad Car.
“Gummies,” she recommended
sweetly.
I went with two gummy packets, to have options: mango edible
chews and grape hybrid sour gummies. The whole shopping experience was blisteringly normal; it’s
more intimidating to go to the
butcher. My purchase was sealed
in a white 8x11 packet, like a set of
wedding photos.
The total was $44.38. I believe I
can expense this.
Fight night, I was ready. Now I
know what you’re thinking, my
Journal gang: You got to take it
easy with edibles, man. I knew
that. I didn’t want to have a bad
trip like Maureen Dowd; I worry
she’s still curled up on that hotel
bed in Denver. Popping special
gummies like regular gummies
would be a terrible idea.
Especially in Vegas. “This is not
a good town for psychedelic
Floyd Mayweather Jr., left, lands a hit against Conor McGregor during Saturday’s bout in Las Vegas.
drugs,” Hunter S. Thompson had
written in his 1971 masterpiece.
“Reality itself is too twisted.”
I would be on approximately
1/100,000th of what the good doctor had been on, but I was careful.
I had half a gummy after dinner.
Another half closer to fight time.
Then word began to spread that
the Mayweather-McGregor fight
might be delayed because of payper-view TV issues. Oh man, this is
going to ruin everything, I worried.
In the meantime, I texted with
friends. I chatted with a nice guy
from Sports Illustrated. I watched
the NBA superstar James Harden
walk in. I saw the hip-hop star
Quavo. I also saw the hairy Sasquatch from those beef jerky commercials. That messed with my
brain a little.
I want to be clear: just like the
woman at the store promised, this
buzz was mild. I hate “Reefer Madness”-style hysteria about drugs
and this was absolutely nothing
like that. It felt warm and mellow,
like a good drink by a fireplace.
There was nothing jarring or worrisome. I may have enjoyed staring
at colorful lights a little bit more
than normal.
Basically, the gummies amplified everything: the lights, the
noise, the ridiculousness. Which
was perfect for this fight, which
was loud from its genesis, its social media call-outs and promises
of history and its press tour via
dueling private jets. The fight offended purists, the news conferences were crude, it was wildly
overpriced and the arena didn’t
sell out. Nothing about this fight
was quiet or neutral. Being stoned
was definitely the way to go.
The room darkened suddenly
and the crowd roared. Pay-perview crisis apparently averted,
McGregor and then Mayweather
wound their way to the ring. I
couldn’t believe this cuckoo stunt
was actually happening.
By now you know McGregor lost
via technical knockout in the 10th
round, but acquitted himself
rather well. That’s the verdict, and
I guess that’s true. Or true-ish. I
don’t believe this is the gummies
talking when I say Mayweather appeared utterly in control the whole
Weather
The WSJ Daily Crossword | Edited by Mike Shenk
Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.
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CONTAIN YOURSELF! | By Celia Smith
Across
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band
26 Ointment
additive
30 First game in a
series
5 Take-out meal?
31 Sites for gold
diggers
6 Baseball bat
wood
32 Incline
8 Apiece
37 “Blowin’ in
the Wind”
songwriter
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40 Paid respect to
7 Carnival city
10 Puts aboard,
as cargo
42
47
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Cold
41
28 Grove growth
3 Long skirt
4 Reacted
derisively
16
20
47 City of Oklahoma
11 Prevailing
westerly winds
of middle
latitudes
42 User of a
double-bladed
paddle
44 Hunky-dory
45 Doesn’t wolf
down, perhaps
12 Captain Hook’s
helper
49 Diesel in the
movies
13 Trueheart who
married Dick
Tracy
50 Help in mischief
18 Koala’s coat
51 Back of the neck
52 Additional
amount
19 MGM co-founder 54 Nota ___
Marcus
55 Third-largest city
23 “Serpico” star
in France
24 Following a
56 “Happy
twisty path
Motoring!” gas
brand
26 Mushroom cloud
29 Contentious
issue
48 Biscuits topping
in Southern
diners
10 Endure
33 Hawk or dove
50 Long, for short
14 Country on the
Arabian
Peninsula
34 Crime syndicate
boss
53 Practical, as a
plan
35 Hammer target
15 Former Detroit
Piston Thomas
36 Eggs in a fertility
clinic
16 “It’s ___!” (“My
treat!”)
59 Magazine with
57 Really funny time 27 Wife of
Augustus
a fold-in
60 Fencer’s weapon
Previous Puzzle’s Solution
61 Cheering loudly
37 Harley rider
5 Removes rinds
17 Memorable prop
in “Forrest
Gump”
20 Downhill course
21 Some
sweatshirts
22 Stumbles
25 Course final,
for one
38 Genetic material
62 Grandson of
Adam and Eve
39 Vietnam’s Ho Chi
___ City
63 Ready for driving,
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AGENT.
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46 Helper: Abbr.
2 In a frenzy
Solve this puzzle online and discuss it at WSJ.com/Puzzles.
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s...sunny; pc... partly cloudy; c...cloudy; sh...showers;
t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice
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61 51 c
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80 67 pc 83 70 c
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78 69 r
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77 62 pc 72 60 sh
Boise
100 69 s 100 71 s
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70 57 s
68 60 pc
Burlington
78 54 s
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78 66 c
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77 63 t
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80 62 sh 77 62 t
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86 71 c
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76 72 r
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73 60 pc 77 60 s
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Sioux Falls
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night, even in the early rounds,
when a handful of McGregor’s
awkward swings landed and got
the crowd buzzing. By the middle
of the battle, the Irish fighter was
gassed. For the patient Mayweather, now uncharacteristically
on the offensive, it was matter of
When, not If.
The When came in the 10th, after a flurry of Mayweather
punches. McGregor thinks the referee stopped the fight too early,
but that’s absurd. The referee did
him a favor, letting him finish on
his feet.
Shocker: The experienced boxing professional beat the guy
who’d never boxed professionally.
What most of the “experts” and
talking heads predicted would happen, actually happened. It was like
America in 2015.
And everyone won, really—Mayweather, McGregor, boxing, the
UFC, Las Vegas. The people who
thought we were idiots for watching still get to think we’re idiots.
The people who watched don’t feel
as foolish as they worried they
might.
“He’s a lot better than I thought
he was,” Mayweather said when it
was over. “He’s a tough competitor.”
“I’ve been here before,”
McGregor said, referring to a UFC
loss a couple of years ago. “I’ve
been strangled on live TV and
came back.”
Both men seemed chipper, and
why not? Reportedly, they’ll collect nine-figure paydays for the
half-hour or so of trouble. Mayweather, now 50-0, said he’s
“done,” retired for good, and
McGregor said he’ll wind his way
back to the UFC, but we’ve seen
this movie too many times to rule
anything out, especially with the
fight’s charitable afterglow of that
wasn’t as terrible as I thought it
would be.
That’s what the world has come
to, folks. From sports, to air travel,
to reading the world news headlines in the morning, “That wasn’t
as terrible as I thought it would
be” is the new “This is great!”
Gummy haze still kicking, I
headed out of the arena with the
end of the crowd. In the plaza in
front of the entrance, a cluster of
McGregor fans wrapped in Irish
flags merrily danced. A pair of
men passed by in matching Versace bathrobes. Fight T-shirts
were on sale for a price-slashed
$10.
As I got around the corner, outside of the New York-New York
Hotel and Casino, I saw it: a
ghastly replica of the Brooklyn
Bridge, the actual magnificent version of which is just a few blocks
from my home. It did not soar like
the real thing; it merely stood
there, as if embarrassed for itself.
It had a sign for Bud Light at its
top, and nearby, a store called Stupididiotic.
Why did anyone think this fight
didn’t make sense? It made perfect
sense, especially here, another
brilliantly inane proposition in a
city that is itself an inane proposition. Stupididiotic is what people
love about this town—from gambling away the rent, to 36 oz. margaritas, to legal and candidly fantastic grape hybrid sour gummies,
Las Vegas has always been a comical representation of our national
id. Loud, shameless and driven by
money, Floyd Mayweather boxing
Conor McGregor was exactly the
sporting event America deserved
in 2017.
Buy the ticket, take the ride,
Thompson had written all those
years before.
That’s what I thought about as
the desert night wound down on
the madness.
I also stared for a long time at a
water fountain, and ate a whole
bag of potato chips back at the hotel.
follow “double” to make familiar phrases appear in
the grid crossing themselves: DATE, BAG, BED,
CHIN and TAKE. The crossing letters spell the
contest answer.
THE WALL STREET JOURNAL.
Monday, August 28, 2017 | A15
OPINION
The Bitcoin Valuation Bubble
By Andy Kessler
T
he price of a Bitcoin
broke
$4,000
this
month. It’s up 400% in
2017, and only two years ago
it stood at around $230. With
16.5 million Bitcoins in “circulation,” and the potential for
4.5 million more, the market
value of Bitcoin is now a
whopping $72 billion. Sister
currency Ethereum is worth
another $32 billion.
Early Snapchat investor
Jeremy Liew thinks Bitcoin
will reach $500,000 by 2030.
Tech eccentric John McAfee
believes it’ll take only three
years. That’s $1 trillion of digital coins. Now companies
with an idea for applications
built on top of these currencies are raising hundreds of
millions through initial coin
offerings. Is Bitcoin the greatest rocket ship ever or will it
end up a giant smoking hole
in the ground?
In its simplest form, Bitcoin
enables financial-transaction
services on a peer-to-peer
network that no one controls.
Decentralized and anonymous,
it uses an innovative software
structure known as the blockchain to store a public ledger
across an ever-growing network of servers. Unlike Visa
or Mastercard, no single company buys computers. Instead,
an ingenious incentive system
pays entrepreneurs fees and
rewards in a made-up currency to add servers to run
the intense math of cryptography algorithms. Many sit in
places where electricity is
cheap, like Iceland, to minimize operating costs. This
blockchain is the future and
the path for decentralized innovation to roll out on the
cheap.
And how does one value
Bitcoins? Those who own them
believe they are a currency or
Faithful techies think
in coming decades one
digital coin will be
worth $500,000.
an asset like gold, valued for
its scarcity. Others like the Securities and Exchange Commission and the Internal Revenue Service view them as a
security to be regulated and
taxed.
But Bitcoin is actually a
business. It’s software as a
service—transactions for a
price, like credit cards. To record a transaction on the
blockchain, a customer pays
an average recommended fee
of 450 satoshi per byte. (A satoshi is one hundred millionth
of a bitcoin.) Miners also get
bitcoin rewards for adding
blocks to expand capacity.
Around 1,700 bitcoins are
paid daily in rewards. But
business-wise, this is more
like being paid in equity. Each
day sees about $1 million in
fees and $7 million in rewards.
Visa and Mastercard, who
have a combined 75% of the
credit-card market, get paid
close to a 3% fee when you
buy gas or stuff on Amazon.
That is a ridiculously high fee
in this day and age, and it is
precisely what Bitcoin hopes
to destroy. Visa and Mastercard have a combined $377
billion market capitalization.
Bitcoin can go up five times
just stealing their market
share, right?
Wait a second: Visa’s value
is based on those high 300basis-point fees. I’ve been elbow deep into Bitcoin accounting, studying transaction
fees, rewards and $1 billion in
daily transaction volumes.
Bitcoin fees come to less than
one 10th of a basis point—
some 3,000 times less than
Visa—and I’m rounding up.
Let’s generously assume these
fees will rise to one basis
point. That means even if Bitcoin and other cryptocurrencies take the entire credit
card market, this business is
probably worth no more than
a few billion. That pegs one
Bitcoin’s value at around
$100, assuming everything
goes right.
Or looked at another way,
Bitcoin is a $400 million a
year software-as-a-service
business like Salesforce,
which sells for around eight
times its sales. That implies a
$3 billion value. Potential
profits might be 30% net and
even at 50 times earnings you
get at most $6 billion or $300
for each bitcoin in enterprise
value.
I’ve spoken to developers
who tell me they aren’t seeing
much traction with merchants
accepting Bitcoin. Most transactions on the blockchain are
still mining and trading. Silk
Road used Bitcoin to transact
illegal drug sales. Bitcoin is a
favorite of money launderers
and those evading capital
controls and I think much of
the rise in price is from Chinese and other foreign buyers
trying to move capital out of
their economies. Sixty percent
of Ethereum was bought with
Korean won. That’s scary.
I’m not here to burst anyone’s bubble. The blockchain
will radically alter financial
services, much as Napster
changed the music business.
But at some point the market
will wake up and apply rational valuation techniques. That
price—$4,361—implies a lot
of belief in Bitcoin as a longterm store of value well beyond the economic value of
the transaction platform.
Solid currencies are based on
the growth and productivity
of their countries. You can’t
simply declare a currency
value—not at $72 billion,
much less a trillion. Sure, Bitcoin could trade to $10,000,
$100,000, who knows? I just
can’t get there. Maybe coin
owners should appeal for taxexempt status if the IRS
would consider Bitcoin a
faith-based organization.
Mr. Kessler writes on technology and markets for the
Journal.
Google’s Broken Promise to Cubans
During
his
March 2016
visit to Cuba,
Barack Obama
raved about
an impending
AMERICAS Google-Cuba
deal “to start
By Mary
setting
up
Anastasia
more Wi-Fi
O’Grady
access
and
broadband access on the island.” Greater access, he predicted, would mean
“more information [that] allows [the Cuban people] to
have more of a voice.”
Eighteen months later Mr.
Obama’s forecast looks worse
than a hollow platitude.
Google has become a supplier
of resources to the regime so
that Raúl Castro can run internet at faster speeds for his
own purposes. Meanwhile the
company appears to be wholly
uninterested in the Cuban
struggle for free speech, as
the island democracy project
“Cuba Decide” learned last
month.
Google started out making
big promises to Cubans. In a
March 2016 blog post, Brett
Perlmutter, “Cuba Lead” for
Google Access, boasted that
the company was “thrilled to
partner” with a regime-owned
museum, featuring a Castroapproved artist. “New technologies and improved internet access can . . . help
harness a country’s creativity
and ingenuity,” Mr. Perlmutter
wrote without the slightest
irony.
By then Google must have
understood that the dictatorship had no interest in mass
internet access. In July 2015
the Miami Herald reported
that Mr. Perlmutter had visited Cuba and pitched a proposal to build an island-wide
digital infrastructure. The
government reportedly rejected the proposal and
warned of internet imperialists seeking to “destroy the
Revolution.”
In December 2016 Google
sealed a deal with Castro’s
monopoly telecom company
(and internet service provider) Etecsa to put Google
servers in Cuba. Google fired
up those servers in April, emphasizing the improvement
they bring to viewing video
because they allow Google to
store content locally. A fiberoptic cable from Venezuela
has also increased internet
speeds.
Access is another matter.
The internet in Cuba remains
tightly controlled and, according to the 2017 “Freedom in
the World” report, the regime
has “cracked down” on “diverse independent digital media” and often blocks “critical
blogs and websites.”
The report noted some of
the creative ways that Cubans
get around Etecsa’s blocking,
including the use of virtual
private networks. But that
doesn’t work when Google is
blocking access.
Rosa María Payá is the
daughter of the late awardwinning Cuban dissident Oswaldo Payá. He was killed,
most likely by the regime, in a
suspicious 2012 car crash. In
2015 Ms. Payá launched Cuba
Decide, a project calling for a
national plebiscite to ask Cubans if they want free elections and free speech. In the
Miami Herald in March, Cuban-exile writer Jose Azel
called the project “a strategic
tool” to “spotlight . . . the
people’s prerogative . . . to decide their form of government.”
Yet Cubans cannot access
the Cuba Decide website, and
Google is to blame.
The company denies
access to a prodemocracy website,
blames the embargo.
On July 22 Ms. Payá tweeted
“google joins censorship in
Cuba,” along with the screenshot of the Google error message that Cubans get when
they try to go to her website. I
retweeted Ms. Payá’s tweet,
noting “Google bows to Cuban
censorship.”
Mr. Perlmutter’s response
was not only condescending
and arrogant. It was lazy. “id
[sic] do more research,” he
tweeted, accusing me of trafficking in “fake news,” and by
extension slapping down Ms.
Payá. “Definitely nothing to
do w Google,” he wrote in a
follow up tweet. “This type of
error is generated by Chrome
often when sites are blocked
bc of US embargo.”
Mr. Perlmutter did not cite
any provision of the U.S. embargo that requires the blocking of a nonprofit citizens’
initiative—because there is no
such provision. On Wednesday
a Google spokesperson told
me “we can’t say for sure
what’s causing the issue with
that site but it isn’t something we’re doing on our
end . . . If you want more details, I recommend you check
with the ISP.”
By Friday the company was
no longer blaming the ISP. Instead, Google told me—in a
paradox that must be delicious for Castro—that it is
Cuba Decide’s use of Google’s
Project Shield that is causing
the problem. The shield is offered at no charge for “news
sites and free expression”
against “distributed denial-ofservice” attacks. When it is
used, it triggers the use of
Google’s App Engine even if
Google is not the website’s
host—which it isn’t in this
case—and Cubans cannot access the site.
The company claims this is
because of sanction restrictions, i.e., the embargo. But
there is no reason to block a
website that exists purely to
promote freedom and civic
participation. If Google wanted
to advance the cause of free
speech it could have reached
out to Ms. Payá to find a solution rather than fire off a
snotty tweet.
Google told me that Mr.
Perlmutter’s Twitter comments “do not represent an
official Google position.” It
said they were made “before
all the facts of the specific situation were known.” Talk
about fake news.
Write to O’Grady@wsj.com.
Llamas Magazine Is a Great Collector’s Item
By Donald Altschiller
F
inding a rare item unexpectedly is every collector’s fantasy. While philatelists (who save stamps)
and numismatists (who amass
coins and other currency)
spend hours patrolling hobby
stores and auction houses, a
lucky few stumble onto something special through sheer
serendipity.
In 2012, Karl Kissner and his
cousin Karla Hench were cleaning out their grandfather’s
house in Defiance, Ohio, and
came across a box of rare baseball cards known as the E98
series. They had been printed
in 1910 and were in pristine
condition. The cards were
worth an estimated $3 million.
In 1885, a 14-year-old Swedish boy named Georg Wilhelm
Baeckman discovered the
“Treskilling Yellow” postage
stamp in his grandmother’s attic. Issued in Sweden in 1855,
it was printed in yellow by
mistake instead of the intended green. It’s considered
one of the rarest and most expensive stamps in philatelic
history.
In 2013, David Gonzalez was
renovating a fixer-upper home
he had bought in Elbow Lake,
Minn., and found, ensconced in
the wall insulation, a copy of
Superman’s 1938 debut in Action Comics No. 1. It sold for
$175,000.
And have you heard
about the newsletter
for deaf atheists?
My lucky finds aren’t quite
so remunerative. I collect magazines, quirky and arcane journals and newsletters. Some
years ago, while browsing the
exhibit booths at the national
convention of the American Library Association in Chicago, I
stopped by the table of an atheist organization. There I found,
hidden in the large display, a
remarkable publication, DAMN:
Deaf Atheist Material News, a
newsletter for deaf atheists.It
featured a page-one article detailing the two main problems
with silent prayer: It is a profanation of silence and, even
more troubling, it involves
prayer. Unbelievable! I’m from
Cambridge, Mass., a bastion of
cultural sensitivity, and even I
never thought about this double offense to deaf atheists.
But, thank Whomever, I now
have this deliciously obscure
newsletter in my collection.
Over the years, I have also
owned: Falling Leaf, a magazine for collectors of aerial
propaganda; Elevator World,
aimed at professionals in the
building transportation industry; Llamas magazine, read by
lovers of this camelid species;
the Highway Evangelist, aimed
at Christians who drive big
rigs; and the newsletter of the
International Association of
Black Yoga Teachers.
Though I have no price
guide to assess the value of my
collection, I know it wouldn’t
draw much on the open market. Nonetheless these offbeat
publications make me happy.
“O bliss of the collector, bliss
of the man of leisure!” Walter
Benjamin once wrote. “Ownership is the most intimate relationship that one can have to
objects. Not that they come
alive in him; it is he who lives
in them.”
The serendipity of chancing upon oddball journals and
newsletters is half of what I
enjoy. Alas, the internet has
diminished this pleasure. I
suspect that many publications, ripe for my collection,
have been digitized and are
awaiting hits on the electronic screen. But I have no
desire to check. The joy of
thumbing through a print
copy, often acquired through
happenstance, is my special
quest.
Some time ago, I noticed an
announcement about an organization of lesbians and gay men
who speak Esperanto. I wonder
if they have a newsletter.
Mr. Altschiller is a librarian
at Boston University.
BOOKSHELF | By Melanie Kirkpatrick
Business in a
Common Tongue
The Language of Global Success
By Tsedal Neeley
(Princeton, 188 pages, $26.95)
O
n March 1, 2010, Hiroshi Mikitani, the chief
executive of Japanese e-commerce giant Rakuten,
used a video link to address a meeting of the
company’s 10,000 employees world-wide. Speaking in
English, he announced that Rakuten henceforth would be
an English-only organization. In two years’ time, he said,
every interaction, spoken and written, would be
conducted in English—even among the 7,100 workers
whose first and often only language was Japanese.
“Our goal is to catch up with the global market,” Mr.
Mikitani said. He explained that a common language was
the only way to share business knowledge quickly and
effectively across Rakuten’s international operations.
“Englishnization”—a term he coined—was an essential
aspect of the company’s
growth strategy, he said.
The CEO further
announced a draconian
measure to enforce his new
mandate: Employees who
did not, within two years,
score above 650 on the 990point Test of English for
International Communication
would face demotion or
dismissal.
After the passage of those
two years, it was clear that Mr.
Mikitani’s radical move was
working. Some 90% of Rakuten’s
Japanese workforce met the language
requirement, and those who didn’t were given a sixmonth grace period to improve their scores. The
company was globalizing at a fast pace, expanding its
operations in the U.S. and entering other countries.
How did Rakuten do it—and was it worth it? Tsedal
Neeley, a professor at Harvard Business School, provides
a detailed account in “The Language of Global Success.”
Ms. Neeley spent five years interviewing Rakuten
managers and workers around the globe—in Japan, the
U.S., Europe, South America and Asia. Her book is an
interesting read, despite frequent lapses into HBS casestudy-ese.
One of her most intriguing findings has to do with the
effect of the English mandate on Rakuten’s corporate
culture. Mr. Mikitani believed in “changing perspectives
by changing language,” Ms. Neeley writes. By forcing
employees to speak English, the CEO wanted to move his
company “away from its traditional Japanese hierarchical
system, one characterized by rules, deference to
authority, and perceptions of status, toward a perspective
that would enable openness and assertion.” He saw
English not just as a tool to advance Rakuten’s global
expansion by facilitating communication around the globe
but also as a way to create a more outspoken, egalitarian
mind-set among Japanese employees.
The CEO of a Japan-based company declared
that, henceforth, every interaction, spoken
and written, would be conducted in English.
A year or so into the English mandate, Mr. Mikitani
also began to emphasize Japanese practices and cultural
concepts that were essential to Rakuten’s way of doing
business. These ranged from something as mundane as
the company’s requirement that every employee wear a
name-badge—a policy loathed by Rakuten’s American
employees in the U.S.—to the more elusive concept of
omotenashi, which translates roughly as “hospitality.”
Now English-speaking Japanese workers were able to
communicate the importance of wearing badges,
practicing omotenashi and following other Japanese
customs to non-Japanese colleagues, who were
encouraged to accept them.
The Rakuten example, Ms. Neeley concludes, shows
that Western culture doesn’t have to dominate in an
English-speaking global company. At Rakuten, English
became a “decoupling force between language and
culture,” she writes, allowing the Japanese company to
“forcefully assert its cultural identity.”
The English mandate was most difficult for Japanesespeaking employees, who had to work hard to reach the
required level of fluency in just two years. They
succeeded, Ms. Neeley says, for two reasons: Management
stayed on message, explaining repeatedly why English
was essential for the company’s success; and Rakuten
provided intensive language classes, which employees
attended during their workday. Mr. Mikitani had learned
English as a child in the U.S. when his father was a
visiting scholar at Yale, and he believed that immersive
learning was the best way to learn a language.
From the outset, Mr. Mikitani had envisioned his plan
for Englishnization at Rakuten as a kind of test bed for
other Japanese companies. He saw English as a way to
help insular Japanese firms become globally competitive,
thereby assisting in the revival of the Japanese economy.
The jury is out on that goal, as it is on another of his
objectives—improving the English skills of the wider
Japanese population.
For a long time, Japanese schools haven’t taught
English very well, as I discovered when I was living in
Tokyo in the mid-1970s. I became a minor celebrity
among the junior-high-school set due to my appearance
on a national TV show that taught English. Wherever I
traveled in the country, I’d run into kids who would run
up to me and shout, “This is a pen!”—the first line in our
textbook. Few youngsters were able to say much else in
English. More recently, Ms. Neeley notes a 2009 study of
English proficiency in 30 Asian nations in which Japan
ranked second from the bottom.
Mr. Mikitani has advised Prime Minister Shinzo Abe on
improving English-language education in Japan. Mr.
Abe—whose own English is good—wants more of his
countrymen to speak fluent English by the time of the
2020 Tokyo Olympics. If the prime minister takes his cue
from the Rakuten example, there’s a decent chance he’ll
succeed. As I learned to say during my time in Tokyo:
“ganbatte,” or “good luck.”
Ms. Kirkpatrick is a senior fellow at the Hudson
Institute and a former deputy editor of the Journal’s
editorial page. She is the author of “Thanksgiving:
The Holiday at the Heart of the American Experience.”
THE WALL STREET JOURNAL.
A16 | Monday, August 28, 2017
OPINION
LETTERS TO THE EDITOR
The Arpaio Pardon
Short-Term Health Insurance: Not Right Rx
andidate Donald Trump promised to lied to him and judicially appointed monitors.
abide by the rule of law that took a beat- Hence the criminal contempt citation, which
ing under the Obama Administration, Judge Snow said was needed “to vindicate the
and that theme may have
Court’s authority by punishing
Liberal hypocrisy
helped him win the election.
the intentional disregard for
President Trump’s pardon late
authority.” Criminal condoesn’t justify disdain that
Friday of deposed Maricopa
tempt is the only way to hold
for the rule of law.
County Sheriff Joe Arpaio ungovernment officials persondermines that promise and
ally responsible for violating
further politicizes the law.
court orders.
The 85-year-old Mr. Arpaio became a hero of
Mr. Arpaio may be right that the Obama Jusmany conservatives with his brazen style and tice Department relished his prosecution, and
tactics targeting illegal immigrants. His aggres- some evidence presented at the trial was irrelesive enforcement drew a lawsuit and court in- vant to the case. But Judge Bolton considered
junction, culminating in a contempt conviction the merits and, based on the evidence, deterlast month. While Mr. Trump praised Mr. Ar- mined that Mr. Arpaio had demonstrated a “flapaio’s long career of public service, that hardly grant disregard” for the law.
justifies the sheriff’s defiance of the law he
Mr. Trump’s power to pardon is undeniable,
swore to uphold.
but pardoning Mr. Arpaio sends a message that
In 2008 the American Civil Liberties Union law enforcers can ignore court orders and get
sued the sheriff’s office for racially profiling La- away with it. All you need is a political ally in the
tinos during traffic and saturation patrols. After White House or Governor’s mansion. Down that
several years of litigation, federal Judge Murray road lies anarchy. Attorney General Jeff Sessions
Snow ordered the sheriff’s office to stop detain- understands this, which is why he reportedly
ing individuals who had not committed a state urged the President to let the judicial process
crime merely based on the suspicion that they play out. Mr. Trump short-circuited the courts
are in the country illegally.
by pardoning Mr. Arpaio before he was senTwo years later the judge found officers had tenced or granted an appeal.
violated his preliminary injunction and ordered
Some of our friends on the right say Mr.
anti-bias training, a court-appointed monitor Trump’s liberal critics had no problem dismissand patrol cameras, among other remedies. In ing Congress’s contempt citations against for2016 Mr. Arpaio was held in civil contempt for mer Attorney General Eric Holder and IRS offiflouting the judge’s orders. He was also repri- cial Lois Lerner as political. The left also
manded for withholding video evidence.
supported the commutation of Bradley Manning,
Then last August Judge Snow referred Mr. Ar- who leaked military intelligence.
paio to the Justice Department for criminal conAll true and deplorable, but since when does
tempt proceedings. In his defense, Mr. Arpaio ar- liberal hypocrisy justify conservative disdain for
gued that the court orders were unclear to him the law? Mr. Trump should be setting a better
or officers. Because his violations were suppos- standard than imitating Barack Obama, but poedly unintentional, he said criminal charges larized politics is leading America to a bad place
were unwarranted.
where policy agreement or political support
It’s true there was some confusion as to what makes right. You pardon your lawbreakers and
officers were allowed to do under state and fed- we’ll pardon ours.
eral law. A 2010 state law required officers to
Mr. Trump may hope the pardon will energize
check the immigration status of individuals dur- supporters, but it is also dividing the GOP. Even
ing a “lawful stop, detention or arrest” when before the contempt citation, Sheriff Arpaio’s
there’s probable cause they’re in the country il- aggressive tactics were becoming unpopular,
legally. Federal judge Susan Bolton blocked the and in November he was defeated by 13 points.
state law in 2010, but the Supreme Court in 2012 Mr. Trump’s disdain for federal judges also isn’t
upheld a central provision obligating officers to making friends in the federal judiciary that will
check individuals’ immigration status.
have to rule on his decisions in the coming years.
In any case, the legal uncertainty doesn’t The Arpaio pardon is a depressing sign of our hygainsay Judge Snow’s charge that Mr. Arpaio per-politicized times.
A
Disaster and the Wealth of Nations
mericans watched in shock and sympa- attention will focus on clean up and rebuilding.
thy on the weekend as Hurricane Har- Red Cross and private companies are also dovey poured record amounts of rainfall ing what they can and will be doing more as
on south Texas and especially
people need food and tempoTexans will rebound
Houston, America’s fourthrary shelter.
largest city.
The costs will be enormous
from the awful flooding in losses
The aerial scenes of floodto property as the rewith their usual élan. gion dries out, but the good
ing in the sprawling city are
astonishing, as highways benews is that a rich country like
came rivers and whole neighthe United States has the reborhoods were submerged amid 24 inches of sources to respond. The means to cope with dirain in 24 hours with as much as 50 inches or saster, natural or man-made, is one reason that
more expected by the National Weather Service. we put so much focus in these pages on policies
By Sunday experts were calling the flooding the that promote sustained economic growth and
worst disaster in Texas history, with days of the wealth that flows from it.
possible rain ahead.
Immunity from nature’s fury is an illusion
The government—federal, state and local— that humans cultivate until we are forced to
seemed to be responding well under the condi- confront that fury again. We forget the damage
tions, at least to the extent one can tell from that storms and earthquakes can do. Complex
afar. The blame-shifting between state and fed- societies can better cope with the damage if
eral officials that sometimes attends disasters they have a reservoir of accumulated wealth
wasn’t apparent. Officials were rightly focus- that governments and private sources can deing first on search and rescue for those threat- vote to alleviating the suffering and helping
ened by floodwaters, but in the days ahead the communities rebuild.
F
The End of the Chaebol Era
riday’s conviction of the head of Sam- bol abuses, but the problem has been lax ensung symbolizes a turning point in South forcement.
Korea’s political economy. A court senThe founding families own a small percentage
tenced Lee Jae-yong, grandson
of the overall equity of their
Korea’s conglomerates groups and typically exercise
of the company’s founder, to
five years in prison for paying are forced to change, as a control through a web of cross$7.9 million in bribes to an asshareholdings. Inheritance
Samsung verdict shows. taxes further dilute family
sociate of former President
Park Geun-hye. The Park govholdings, so the chaebols have
ernment allowed a merger that
relied on regulatory forbearfacilitated Lee family control over Samsung, an ance to reconstitute their hold on key subsidiarexample of what the court called “corrupt ties” ies after a generational transition.
between businesses and politicians.
In Samsung’s case, the notorious 2015 merger
The chaebols, as the conglomerates are between its construction arm and a holding
known, drove South Korea’s postwar develop- company cost minority shareholders an estiment, but they are also notorious for abusing mated $7 billion. That deal would have failed
power. That is starting to change as voters insist without the support of the government-conthat their leaders enforce the laws equally and trolled National Pension Service, which holds
investors demand that companies pass along $500 billion in assets. The former head of the
higher returns to shareholders.
pension service and a senior executive were conPresident Moon Jae-in, elected in May after victed in June for abuse of power.
Ms. Park’s impeachment, has pledged not to parSamsung has since begun to clean up its cordon Mr. Lee and other chaebol leaders. He has porate governance, canceling “treasury shares”
also appointed Kim Sang-jo, a former economics held in reserve to defeat shareholder initiatives.
professor and shareholder-rights activist, as Investors have bid up Samsung shares and those
head of the Korea Fair Trade Commission.
of other chaebols taking similar measures. The
The new President is decidedly left-wing, and “Korea discount,” the low share prices of Korean
Mr. Kim is known as “the chaebol sniper.” But so companies relative to international peers, is
far at least their program of chaebol reform is shrinking.
measured. As Mr. Kim said when he took office,
The chaebols will continue to exist in some
“I will pursue chaebol reforms through a positive form and even thrive, as Samsung Electronics
campaign where companies voluntarily create showed by reporting record quarterly profits
exemplary cases.”
last month. And they will try to slow the pace of
This reflects that the chaebols still have change. Samsung is resisting a holding-company
plenty of defenders in the National Assembly. structure demanded by investors such as AmeriPresident Moon’s Democratic Party controls 40% can hedge fund Elliott Associates.
of the legislature, far short of the three-fifths
But the fact that the leader of South Korea’s
needed to pass contentious legislation. So the most valuable business group is now in prison
President must use regulatory powers, but- shows that the tide has turned. Political and ecotressed by the public’s demand for reform. South nomic pressure is bringing the era of chaebol imKorea’s laws provide the leverage to stop chae- punity to a close.
Your Aug. 15 editorial “A ShortTerm ObamaCare Fix” correctly notes
that additional steps must be taken to
help Americans facing higher healthinsurance premiums and too few
choices. But the solution you offer—
expanding the use of short-term, limited policies for up to a full year—
would have an opposite, harmful
effect.
Short-term policies sold for up to a
year would allow healthy individuals,
whose health status would be strictly
screened, to purchase these plans and
then, if they develop an illness, switch
to a more comprehensive policy that
meets the requirements of current
law. This would cause rates to skyrocket, making coverage unaffordable
for everyone who needs broad coverage. And because these plans screen
out people with existing health conditions who need coverage the most,
they would not offer a reasonable
choice for those in areas served by
few, if any, insurers. Even healthy people would soon discover that coverage
is minimal, often excluding prescription drugs and setting strict caps on
payment for common procedures.
A better way to protect consumers
and stabilize the current individual
marketplace is for lawmakers to work
toward solutions that create a competitive and affordable market for everyone. This requires sustained funding to help pay for the care of those
with significant medical needs, financial support to help lower-income individuals with their out-of-pocket
costs and ensuring there are strong
incentives for everyone to maintain
coverage year-round.
SANDY PRAEGER
Lawrence, Kan.
Mr. Prager is a former president of
the National Association of Insurance
Commissioners.
Short-term and other limited policies are quite often bad deals for the
people who buy them, with long lists
of exclusions and limitations that
aren’t always clear at the time of purchase. More important, research we
have supported suggests they may
have negative consequences for the
broader market. A quick look around
the country reveals that states with
adverse market outcomes such as
poor carrier participation and large
premium increases tend to have a few
things in common: They have permitted the sale of short-term policies and
other limited coverage, and have retained pre-ACA “grandmothered”
products. As a rule, states with betterfunctioning markets permit neither.
You observe that the ACA’s “central
conceit” is that the healthy must subsidize the sick, but pooling risk is the
central feature of any well-functioning insurance market. This point is
quite evident when comparing outcomes in states which permit the
fragmentation of their risk pool with
those that do not.
KATHERINE HEMPSTEAD
Robert Wood Johnson Foundation
Princeton, N.J.
There Are No Political Prisoners in Hong Kong
Regarding your editorial “Hong
Kong’s Political Prisoners”
(WSJ.com, Aug. 17; Asia, Aug. 18;
U.S. Aug. 19):
The three defendants were imprisoned by the Court of Appeal (not the
government) after a fair, open and
transparent judicial process. They
were convicted and sentenced not
because they exercised their right to
demonstrate, but for their unlawful
conduct during the protest. They are
not “political prisoners.”
Freedom of speech and assembly
are fundamental rights protected in
Hong Kong. However, the court
pointed out that one must also respect the law when exercising such
rights, and should not overstep the
boundary allowed under the law.
The prosecution’s application to
review the sentences of the defen-
dants was made on legal grounds set
out in our laws and it was handled
as soon as the defendants abandoned their appeal against convictions. When imposing the sentences,
the court has taken into account that
the defendants have served their
community service orders in their
original sentences.
The claim that the prosecutions
were politically motivated is completely groundless. Any suggestion
that our judges were under political
influence and were forced to “send
democratic activists to jail” is an insult to our judiciary, which is internationally recognized for its independence, quality and
professionalism.
CLEMENT LEUNG
Hong Kong Commissioner to the U.S.
Washington
Old King Coal May Rightly Be Merry Again
It is refreshing to see an assessment (“Coal Makes a Comeback,” Review & Outlook, Aug. 17) recognizing
that policy matters greatly, especially
when it distorts energy markets. The
Obama administration rules on mercury emissions from power plants,
for example, had little to do with
mercury, and everything to do with
shortening the economic life of reliable-baseload coal power plants.
Most of the costs—almost $10 billion
annually—related to emissions the
Environmental Protection Agency admitted posed no harm to public
health.
The Trump administration’s
prompt attention to reset the regulatory framework for coal has indeed
instilled confidence that will allow
the industry to perform to its true
potential. Those who continue to
Merck’s Frazier Resigned
Because of Strong Values
As a long-time member of the
Merck board of directors, I want to
leave no doubt about the off-base
sentiment in Holman Jenkins, Jr.’s
“Trump Loses Corporate America”
(Business World, Aug. 16) in which
he suggests that Merck CEO Ken
Frazier’s domino-leading resignation
from the president’s advisory council was somehow driven by political
calculation rather than the fundamental American values eloquently
referenced in Ken’s resignation
statement. This is simply wrong. As
one of our country’s most effective
and highest ranking African-American executives, Ken’s capabilities,
values and rise from modest means
have been well documented.
For Mr. Jenkins to suggest that
Ken’s courageous, prompt and decisive statement may be concealing a
“greater honesty” or have been
sculpted by “risk-averse advisers”
has no basis in fact. Ken’s actions
were a function of the transparent,
values-based and sense-of-urgency
leadership that has continually characterized his outstanding career.
PETER C. WENDELL
San Francisco
Letters intended for publication should
be addressed to: The Editor, 1211 Avenue
of the Americas, New York, NY 10036,
or emailed to wsj.ltrs@wsj.com. Please
include your city and state. All letters
are subject to editing, and unpublished
letters can be neither acknowledged nor
returned.
BLOOMBERG NEWS
C
REVIEW & OUTLOOK
Coal miners smile again as coal prospers.
deny the impact of regulatory policy
ignore data from the Energy Information Administration showing that
dismantling the Clean Power Plan
will preserve 240 million tons of annual coal production. This also
means saving tens of thousands of
high-wage jobs at coal mines and
throughout the coal value supply
chain.
Coal serves a major role in ensuring our nation’s energy security
through a lower cost, more diverse
and reliable electricity supply. The
prospects of achieving American energy security are dim without fully
leveraging the nation’s largest single
energy resource—coal. They are nonexistent when politically motivated
policies are used to obstruct energy
supplies.
HAL QUINN
President and CEO
National Mining Association
Washington
Pepper ...
And Salt
THE WALL STREET JOURNAL
THE WALL STREET JOURNAL.
Monday, August 28, 2017 | A17
OPINION
Why the Left Can’t Let Go of Racism
By Shelby Steele
Liberals sell innocence
from America’s past.
If bigotry is pronounced
dead, the racket is over.
But Americans don’t really trust
the truth of this. It sounds too selfexonerating. Talk of “structural” and
“systemic” racism conditions people
to think of it as inexorable, predestined. So even if bigotry and discrimination have lost much of their
menace, Americans nevertheless
yearn to know whether or not we
are a racist people.
A staple on cable news these days
is the “racial incident,” which stands
as a referendum on this question.
Today there is Charlottesville. Yesterday there were the deaths of
Trayvon Martin, Michael Brown,
Freddie Gray and others. Don’t they
reveal an irrepressible racism in
American life? At the news conferences surrounding these events
GETTY IMAGES
I
s America racist? It used to be
that racism meant the actual
enforcement of bigotry—the
routine implementation of racial inequality everywhere in
public and private life. Racism was a
tyranny and an oppression that dehumanized—animalized—the “other.”
It was a social malignancy, yet it carried the authority of natural law, as
if God himself had dispassionately
ordained it.
Today Americans know that active racism is no longer the greatest barrier to black and minority
advancement. Since the 1960s other
pathologies, even if originally generated by racism, have supplanted
it. White racism did not shoot more
than 4,000 people last year in Chicago. To the contrary, America for
decades now—with much genuine
remorse—has been recoiling from
the practice of racism and has
gained a firm intolerance for what
it once indulged.
At a protest in Lancaster, Pa., May 20.
there are always the Al Sharpton
clones, if not the man himself, ready
to spin the tale of black tragedy and
white bigotry.
Such people—and the American
left generally—have a hunger for
racism that is almost craven. The
writer Walker Percy once wrote of
the “sweetness at the horrid core of
bad news.” It’s hard to witness the
media’s oddly exhilarated reaction
to, say, the death of Trayvon Martin
without applying Percy’s insight. A
black boy is dead. But not all is lost.
It looks like racism.
What makes racism so sweet? Today it empowers. Racism was once
just racism, a terrible bigotry that
people nevertheless learned to live
with, if not as a necessary evil then
as an inevitable one. But the civilrights movement, along with independence movements around the
world, changed that. The ’60s recast
racism in the national consciousness
as an incontrovertible sin, the very
worst of all social evils.
Suddenly America was in moral
trouble. The open acknowledgment of
the nation’s racist past had destroyed
its moral authority, and affirming
democratic principles and the rule of
law was not a sufficient response.
Only a strict moral accounting could
restore legitimacy.
Thus, redemption—paying off the
nation’s sins—became the moral imperative of a new political and cultural liberalism. President Lyndon
Johnson turned redemption into a
kind of activism: the Great Society,
the War on Poverty, school busing,
liberalized welfare policies, affirmative action, and so on.
This liberalism always projects
moral idealisms (integration, social
justice, diversity, inclusion, etc.)
that have the ring of redemption.
What is political correctness, if not
essentially redemptive speech?
Soon liberalism had become a cultural identity that offered Americans a way to think of themselves
as decent people. To be liberal was
to be good.
Here we see redemptive liberalism’s great ingenuity: It seized proprietorship over innocence itself. It
took on the power to grant or deny
moral legitimacy across society. Liberals were free of the past while conservatives longed to resurrect it, bigotry and all. What else could “Make
America Great Again” mean? In this
way redemptive liberalism reshaped
the moral culture of the entire Western world with sweeping idealisms
like “diversity,” which are as common
today in Europe as in America.
So today there is sweetness at
the news of racism because it sets
off the hunt for innocence and
power. Racism and bigotry generally
are the great driving engines of
modern American liberalism. Even a
remote hint of racism can trigger a
kind of moral entrepreneurism.
The “safe spaces” for minority
students on university campuses are
actually redemptive spaces for white
students and administrators looking
for innocence and empowerment. As
minorities in these spaces languish
in precious self-absorption, their
white classmates, high on the idea
of their own wonderful “tolerance,”
whistle past the very segregated areas they are barred from.
America’s moral fall in the ’60s
made innocence of the past an obsession. Thus liberalism invited people to internalize innocence, to become synonymous with it—even to
fight for it as they would for an ideology. But to be innocent there must
be an evil from which to be free. The
liberal identity must have racism,
lest it lose innocence and the power
it conveys.
The great problem for conservatives is that they lack the moral
glibness to compete with liberalism’s “innocence.” But today there
are signs of what I have called race
fatigue. People are becoming openly
cynical toward the left’s moral muscling with racism. Add to this liberalism’s monumental failure to come
even close to realizing any of its
beautiful idealisms, and the makings
of a new conservative mandate become clearer. As idealism was the
left’s political edge, shouldn’t realism now be the right’s? Reality as
the informing vision—and no more
wrestling with innocence.
Mr. Steele, a senior fellow at
Stanford University’s Hoover Institution, is author of “Shame: How
America’s Past Sins Have Polarized
Our Country” (Basic Books, 2015).
How Well Do We Know Kim Jong Un?
By Robert Scales
And Steve Israel
F
or U.S. officials navigating the
standoff with North Korea,
Sun Tzu’s know-your-enemy
maxim might seem impossible. Kim
Jong Un, hidden behind his regime’s
shroud of secrecy and isolation, is
often described as too irrational
and erratic to predict. But details of
the North Korean leader’s background and circumstances make it
possible to discern his motives—
and counteract his strategy.
Regime preservation and forcible
reunification of the Korean Peninsula have been the Kim family’s
overarching goals since 1948. Those
doctrines have been handed down
from each generation to the next,
and Kim Jong Un was weaned on
them. They are as much a part of
his worldview as democracy and
freedom are in the West.
Mr. Kim’s dream of a reunified
nation is obstructed by the approximately 35,000 American troops,
and advanced weaponry including
B-1 bombers, based at Andersen Air
Force Base in Guam. He believes
that South Korea’s front door can
only be unlocked when the U.S. vacates the premises.
Mr. Kim doesn’t need hyperbolic
rhetoric to know that a nuclear
strike on American soil—or on
America’s allies and interests—will
provoke an annihilating response.
But he may not believe he has to
go that far. He may think that
proving he has a bomb—and the
wherewithal to deliver it—will be
enough to force the U.S. to leave
the neighborhood. In his view, no
American president would ever risk
a nuclear attack on Seattle to protect Seoul.
The oft-repeated claim that Mr.
Kim is so deranged that he might
impulsively lob a missile at the U.S.
doesn’t add up. He may not actually be considering the costs and
benefits of a nuclear confrontation.
He may think all he needs to do is
scare the Americans. Frightening
the U.S., he may think, will force
America’s hand.
The North Korean’s game
of nuclear blackmail is
potentially catastrophic—
but it isn’t unpredictable.
This regime has been in power
for almost 70 years and understands the value of the long game.
Mr. Kim wants to play nuclear
blackmail. It’s evil, it’s dangerous,
it’s potentially catastrophic—but it
isn’t unpredictable.
By Stephen Miller
A
fter hitting the age of 76, I
decided to reread Hemingway’s “The Old Man and the
Sea.” But I didn’t like it any better
than when I read it 40 years ago.
It’s a tedious novel full of self-pitying thoughts about growing old and
banal sentiments about the human
condition.
I spend no time at sea and a lot
of time in playgrounds with my 3year-old grandson. Recently I took
him to Bennett Park, in the Washington Heights neighborhood of
Manhattan, but on the way he fell
asleep in his stroller. So I spent almost an hour sitting on a bench
and staring at the passing scene.
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infrastructure. But right now America has to attack his thinking. Mr.
Kim is “rationally irrational.” He
calculates his moves, assesses
threats and leverages his strengths.
He’s not unpredictable. The more
the U.S. understands and exploits
his thinking, the more predictable
the outcome may be.
Sun Tzu’s proverb about knowing the enemy was wise. It could
prevent a catastrophe in North Korea.
Mr. Scales, a retired major general and author of “Scales of
War” (Naval Institute Press),
served as commandant of the U.S.
Army War College and a field artillery battalion commander in
South Korea. Mr. Israel, a Democrat, was a U.S. representative
from New York, 2001-17, and now
chairs the Global Institute at Long
Island University.
Hemingway Needed a Jungle Gym
Rupert Murdoch
Executive Chairman, News Corp
Matthew J. Murray
Deputy Editor in Chief
The U.S. can neutralize the
blackmail threat by rapidly ramping
up its defensive ballistic-missile capabilities. Israel’s three missile interceptor systems—Iron Dome, David’s Sling and Arrow—aren’t yet
able to bring down an intercontinental ballistic missile. Nevertheless, America should build on those
technologies to supplement its already impressive capability to
strike missiles at various phases of
launch, trajectory and orbital penetration.
Congress and the president
should expand the economic sanctions regime against North Korea
and build out the alliance with
China. Keep in mind that Mr. Kim
doesn’t care about the 25 million
North Koreans he’s starving. He
maintains power by enriching the
elite network around him.
One day, the U.S. military may
have to attack Mr. Kim’s military
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Playgrounds obviously are great for
children, but it struck me that they
are pretty good for adults, too.
A few feet back from the slide
and the jungle gym, conversation
flourished. “In the playgrounds
Playgrounds are built for
kids, but there’s a lot of
life in them for parents
and old guys, too.
with my kids,” Emily Raboteau
wrote last year in the New Yorker,
“I talk with people I would otherwise never have spoken to.”
Tommy Wilhelm, the distraught
main character in Saul Bellow’s
“Seize the Day,” describes a therapeutic trip to Central Park: “My
head was about to bust and I just
had to have a little air, so I walked
around the Reservoir, and I sat
down for a while in a playground.
It rests me to watch the kids play
potsy and skiprope.”
For me the activity and noise of
playgrounds don’t provide rest so
much as rejuvenation. I’m always
striking up a conversation with
someone—a parent or grandparent.
Bennett Park has a village feeling
to it. So many people seem to know
each other. One day I was there
with my daughter—my grandson’s
mom—and a woman told her about
a neighborhood website where one
can buy and sell stuff, find babysitters, handymen, and so forth.
A few days later I took my grandson to Jacob Javits Playground, at
the entrance to Fort Tryon Park.
Once again he fell asleep in the
stroller. I didn’t have a book with
me, so again I sat and stared. In the
distance I could see the Hudson
River and the cliffs of the Palisades.
Two or three helicopters whirred
by, heading north. But the main
show was the people: Little kids
were yelling and laughing while
coming down slides or climbing up
slides, riding scooters or playing
tag. A high-quality basketball game
was going on.
That day I heard several languages: English, Spanish, Russian,
and—I think—Korean. The park
draws a multicultural crowd:
whites, blacks, East Asians, South
Asians. A group of Orthodox Jewish
boys arrived, dressed in black pants
and white shirts.
Three weeks later I took my
grandson to a playground in J.
Hood Wright Park, a few blocks
south of the George Washington
Bridge. This time he did not fall
asleep in the stroller. He wanted to
go on a swing first. After that he
climbed on an elaborate jungle gym
that looks like a replica of the
nearby bridge. He slid down the
same slide again and again. I told
him to try another, but this was the
only slide for him.
A few minutes later I too went
down the slide—yelling all the way.
My grandson squealed with laughter. Maybe Hemingway, who suffered from acute depression, should
have spent less time at sea and
more time on the monkey bars.
Mr. Miller’s latest book is “Walking New York: Reflections of American Writers from Walt Whitman to
Teju Cole.”
Powerbull:
The Lottery
Loves Poverty
By Arthur C. Brooks
W
hat is America’s national antipoverty strategy? Apparently, the Powerball lottery.
All across the country last week, millions of people lined up for hours to
get their shot at a payout that would
end their financial struggles. On
Wednesday night, one ticketholder
won a $759 million jackpot. That
sounds like a lot until you hear the
government’s take.
Powerball—the lottery shared by
44 states, the District of Columbia
and two territories—is just one of the
sweepstakes run by 47 jurisdictions in
the U.S. These games produce nearly
$70 billion a year in government revenue and enjoy profits of about 33%—
much higher than margins in the private gambling industry.
It’s bizarre: States push
lotto tickets on the poor,
earn $70 billion, and then
put the buyers on welfare.
Who are these lotteries’ most loyal
customers? Poor people. Lots of folks
buy the occasional ticket, but studies
have long shown a steady association
between poverty and lottery play.
Many scholars report that the poorest third of Americans buy more than
half of all lotto tickets, which is why
states advertise so aggressively in
poor neighborhoods.
Harmless entertainment, you may
say, but poor people don’t see it that
way. They tend to view lottery tickets
as an investment. Duke University social scientists Charles Clotfelter and
Philip Cook reported in a 1990 study
that people earning less than $30,000
a year are 25% more likely to say they
play the lottery for the money rather
than the entertainment.
Hardly a surprise, since this is the
idea that lottery advertising is selling. In California, the slogan is,
“Imagine what a buck could do!” In
New York? “Hey, you never know.”
Scholars have dug up evidence that
states intentionally direct such ads at
vulnerable citizens. A marketing plan
for Ohio’s lottery some years back
recommended scheduling campaigns
to coincide with the distribution of
“government benefits, payroll and
Social Security payments.”
These kinds of ads seduce poor
people with the illusion of riches. Even
if someone feels compelled to throw a
financial “Hail Mary,” the lottery is a
terrible choice. The odds of winning
last week’s jackpot were about 1 in
292 million. And the average return
from $1 spent on lottery tickets is 52
cents, according to a 2002 paper by
Melissa Kearney, an economist now at
the University of Maryland.
But this isn’t easy to see for those
with low levels of education. My own
analysis of survey data from the National Gambling Impact Study Commission suggests that someone who
didn’t attend college may think the
return on lottery tickets is 40%
higher than the estimate given by a
person of similar demographics who
holds a degree.
Another common mistake is the
“hot-hand fallacy.” The lottery is totally random, yet players are attracted
to stores that previously sold winning
tickets, as if they were lucky. A 2008
study by Ms. Kearney and Northwestern’s Jonathan Guryan showed that a
winning ticket can boost a store’s
lotto sales by 38% in the week after
the announcement. This is especially
true among populations with high
proportions of high-school dropouts
and households on welfare.
What’s the social cost of all this?
Ms. Kearney says lottery players finance their tickets largely by cutting
spending on necessities. After a state
introduces the lotto, the bottom third
of households shift about 3% of their
food expenditures and 7% of their
mortgage payments, rent and other
bills. Effectively, the lottery works like
a regressive tax.
It might strike you as bizarre that
the government spends billions on
nutrition and housing programs for
the poor while simultaneously encouraging poor people to move their
own money away from these necessities and toward the state’s gambling
monopoly. In fact, that $70 billion in
annual lottery revenues is strikingly
close to what the government spends
on food stamps. Is there any set of
policies more contradictory than
pushing lotto tickets on poor people,
and then signing them up for welfare
programs that make them financially
dependent on the government?
Politicians who profess a desire to
alleviate poverty often lament how
few levers they have to pull. So here’s
a novel idea: Stop selling poor people
a mirage of the American dream at
the end of a convenience-store line.
Mr. Brooks is president of the
American Enterprise Institute.
A18 | Monday, August 28, 2017
THE WALL STREET JOURNAL.
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THOUSANDS OF
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IBM and its logo, ibm.com and Watson are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. See current list at ibm.com/trademark. Other product and service names might be trademarks of IBM or other companies. ©International Business Machines Corp. 2017.
TECHNOLOGY: NINTENDO FACES SWITCH SHORTAGES B4
BUSINESS & FINANCE
© 2017 Dow Jones & Company. All Rights Reserved.
Last Week: S&P 2443.05 À 0.72%
S&P FIN À 0.74%
THE WALL STREET JOURNAL.
* *
S&P IT À 0.97%
DJ TRANS À 0.42%
WSJ $ IDX g 0.57%
Monday, August 28, 2017 | B1
LIBOR 3M 1.318 NIKKEI 19452.61 g 0.09%
Tapping Homes for Cash Is Back
Borrowing Builds
Home-equity line of credit
originations, quarterly
$120 billion
100
80
60
40
20
0
2007
’10
Source: Equifax
Rising home prices are
making borrowers comfortable
again with the idea of tapping
their homes for cash.
Home-equity lines of credit
and cash-out mortgage refinances, two products that let
consumers spend the windfall
of home ownership, are back
in vogue. That reflects growing confidence and is a potential benefit to the U.S. economy as homeowners have
more money to spend.
“If customers feel like their
home values are stable or increasing, and if they feel like
their job prospects are good—
that they will have the ability
to pay back a loan they take—
then they will start to take out
more home-equity lines,” said
Mike Kinane, head of U.S. consumer-lending products at TD
Bank. “That is what we are
starting to see.”
Home-equity line originations rose 8% to nearly $46
billion in the second quarter,
their highest level since 2008,
according to credit-reporting
firm Equifax. Borrowing
via cash-out mortgage refinances hit $15 billion, up 6%
from a year earlier, according
to data from Freddie Mac.
The main engine driving
demand: rising home prices.
The median sale price of an
existing home rose to
$263,800 in June, the highest
on record, up 40% from
$187,900 at the start of 2014,
according to the National Association of Realtors.
Banks insist the increased
borrowing doesn’t herald a return to housing-bubble days
when consumers came to view
their homes as cash registers.
Banks say they are being more
cautious in how they make
such loans and some add they
are encouraging borrowers to
tackle renovations or consolidate debt—uses that are considered investments rather
than luxuries.
“We continue to watch
what’s going on and the way
it’s being done, but it’s much
different from before the crisis,” said Tom Wind, head of
U.S. Bancorp’s home-mortgage division. Mr. Wind added
that the bank expects this type
of borrowing to keep rebounding because the equity in people’s homes is “meaningful
and people want things like
renovations.”
A home-equity line is similar to a credit card, where a
borrower can spend as much
or as little of the available
credit as they wish—but with
the house as collateral. In a
Please see HELOC page B2
PATRICK T. FALLON/BLOOMBERG NEWS
THE WALL STREET JOURNAL.
BY CHRISTINA REXRODE
The e-commerce giant’s strategy for its newly acquired Whole Foods division will put pressure on traditional players in the extremely competitive business.
Amazon Rewrites Rule Book for Grocers
Price cuts on staples
at Whole Foods are
aimed at boosting
traffic at rivals’ expense
BY HEATHER HADDON
AND LAURA STEVENS
Chicago Stock Exchange second-floor trading room, circa 1894.
Chicago Exchange’s
Chinese Deal Stalls
BY DAVE MICHAELS
AND ALEXANDER OSIPOVICH
The Chicago Stock Exchange is a relic of history,
trading less than 0.5% of U.S.
stocks and in such straits that
it has been looking for a buyer.
That isn’t how U.S. officials
see it. After a group of buyers
emerged last year to rescue
the exchange—led by Chongqing Casin Enterprise Group,
a Chinese conglomerate—lawmakers demanded that the
deal be halted on national-security grounds. The Securities
when competing with booksellers and other retailers,”
says Chris McCabe, a former
Amazon performance evaluation and policy enforcement
investigator who now works
with sellers on the retailer’s
marketplace. “They take out
their revenue stream by killing
them slowly on price.”
Amazon and Whole Foods
declined to comment.
The Amazon-Whole Foods
deal, sealed about 10 weeks after its announcement, has
weighed on the grocery sector,
pushing food-retail stocks
down 20% this year. Consumer-packaged good shares
have fallen about 7% as legacy
Please see AMAZON page B4
Supermarket Sweep
E-commerce food sales are still small but growing rapidly, while those
at most physical retailers are falling
Annual sales change of food and consumables
E-commerce
Supercenters
–5.9%
–0.3%
–12.5%
–5.2%
2016
24%
2021 projected
25%
5.6%
3.1%
Traditional supermarkets
Mass merchants
Source: Inmar Willard Bishop Analytics
THE WALL STREET JOURNAL.
Firms Try
To Shape
Debate on
Profits Tax
BY RICHARD RUBIN
WASHINGTON—Congressional Republicans are trying to
write new rules for taxing foreign profits of U.S. corporations, and a group of large, influential companies is warning
against one prominent option.
Under current law, companies owe the full 35% corporate-tax rate on their worldwide earnings and have to pay
it on any profits they bring
back to the U.S. That system
encourages companies to book
profits overseas and leave
them there. The issue is often
a flashpoint in debates over
changing the tax code.
Republicans want to lower
the corporate-tax rate and let
companies bring future global
profits home without paying
U.S. taxes on top of foreign
taxes. They are searching for a
way to do that without giving
companies an incentive to
move more operations and
profits to countries with far
lower taxes.
One alternative Republicans
are considering is a minimum
tax on those profits. But such
a tax would have “unintended
and adverse consequences,”
the business group, which includes companies such as Eli
Lilly & Co., United Technologies Corp. and United Parcel
Service Inc., told top lawmakers this month in a previously
undisclosed policy paper.
The comments by the Alliance for Competitive Taxation
are an early sign of the competing pressures lawmakers
will face as they seek to overhaul the U.S. tax code.
As part of that overhaul,
Republicans want to exempt
foreign corporate income from
U.S. taxes to a large extent.
Other countries, including the
U.K., have shifted to similar
systems in recent years and
Republicans want to follow
that trend. The 35% rate
would come down and the
minimum rate would be set
below the new U.S. corporate
tax rate. Republicans may also
be considering other rules beyond a minimum tax, and they
haven’t made any final decisions.
A minimum tax would act
as a “safety net” against companies trying to pay little or
no tax on some foreign income, said Ed Kleinbard, a tax
law professor at the University of Southern California.
“The United States does not
encourage competitiveness
when it simply subsidizes inPlease see TAX page B2
INSIDE
RYERSON & BURNHAM/ARCHIVES/ART INSTITUTE OF CHICAGO
Amazon.com Inc. will bring
lower prices to its new Whole
Foods Market Inc. division Monday. It also will bring a new rule
book.
While Amazon doesn’t need
to make money from its grocery
division yet, food sales are crucial for traditional players like
Kroger Co., Wal-Mart Stores
Inc. and Target Corp. The ex-
tremely competitive food-retail
business demands high capital
investments for low margins.
Supermarkets’ success has
mainly relied on getting customers into conveniently located
stores with deals.
By cutting prices on highvolume staples like bananas,
eggs and ground beef in 470
Whole Foods stores, Amazon is
signaling it will compete for
that traffic. Even if it loses
money, it hopes it can bring
shoppers into stores, win their
loyalty to the whole company
and prompt them to spend
more money, say former Amazon executives.
“Amazon’s using the same
playbook they always have
See more at WSJMarkets.com
and Exchange Commission issued a last-minute freeze that
put the $20 million transaction on indefinite hold.
The 135-year-old exchange’s
efforts to win approval for the
sale highlight mounting U.S.
resistance to Chinese deal
making, especially when it involves firms inside the plumbing of the U.S. financial system.
“When you take into account
the risk of cyber-market manipulation and the gamut of concerns we have with China…you
certainly have to be wary of
Please see CHINA page B2
BOEING,
NORTHROP VIE
ON MISSILES
AVIATION, B5
SPY
CHINA’S
MARKETS TELL
TWO TALES
INVESTING, B7
LIQUIDITY
RESILIENCY
PERFORMANCE
THE WALL STREET JOURNAL.
B2 | Monday, August 28, 2017
INDEX TO BUSINESSES
These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.
Google ......................... B4
GrubHub....................A10
Alibaba Group.............B4
H
Alphabet......................B4
Herbalife ................... B10
Samsung Electronics
................................ B11
Amazon.com.....B1,B4,B6
J
Slack Technologies...A10
Anadarko Petroleum
................................ B12
JD.com.........................B4
Jefferies Group...........B7
T
Target.....................B1,B4
B
Bank of America.........B2
Blue Apron Holdings .. B6
Boeing ......................... B5
C
L
TD Bank.......................B1
Lockheed Martin.........B5
Twitter......................A10
M
U
Match Group.............A10
McDonald's..................B6
Microsoft.....................B4
Uber Technologies
...........................A1,A10
Campbell Soup............B6
Chesapeake Energy .. B12
Concho Resources.....B12
ConocoPhillips...........B12
S
N
Nintendo......................B4
Northrop Grumman....B5
United Continental
Holdings....................A5
U.S. Bancorp ............... B1
W
P
Wal-Mart Stores...B1,B4
Whole Foods...............B1
G
Perfumania Holdings..B3
Pioneer Natural
Resources................B12
GameStop....................B4
R
F
Facebook......................B4
Whiting Petroleum...B12
Z
Zebra Intelligence.....A10
INDEX TO PEOPLE
D
Deckelbaum, David...B12
Donofrio, Paul.............B2
Dove, Timothy .......... B12
Kalanick, Travis .......... A1
Kinane, Mike...............B1
L
Shen Meng..................B7
Shen Yuan...................B7
Simpson, Terry..........B12
Lu, Shirley...................B4
T
F
M
Teng, Major.................B7
Freedman, Marc..........B6
Mehan, Daniel.............B6
Monforton, Celeste.....B6
Vail, John .................. B12
I
Immelt, Jeff................A1
N
J
Natkin, Mark...............B4
Jae-yong, Lee............B11
Jurkash, Brian...........B12
K
P
Palmer, David..............B6
Pang, Iris.....................B7
S
Katz, Michael..............B3
CHINA
Continued from the prior page
this acquisition,” Rep. Robert
Pittenger (R., N.C.), a leading
congressional critic of the deal
and other Chinese acquisitions,
said in an interview.
Foes of the deal say granting a Chinese company a stake
in a U.S. stock exchange would
create a back door for statesponsored theft of Americans’
financial data or hacks of critical market infrastructure.
Casin—which is seeking to
buy 20% of the exchange’s parent company, CHX Holdings
Inc., with other Chinese and
U.S. investors buying the
rest—says it is independent of
the Chinese government. Based
in the inland city of Chongqing, it is active in businesses
ranging from banking to tourism to sewage treatment.
CHX denies the acquisition
will endanger the security of
U.S. markets and says its policies will prevent confidential
data from being shared with
the new Chinese owners. The
current CHX management
team will remain in place if the
deal goes through, said William Ruben, a CHX spokesman.
The deal got approval in December from the Committee
on Foreign Investment in the
U.S., or CFIUS, a multiagency
Bit Player
The Chicago exchange's share of
U.S. stock trading has shrunk.
6%
5
4
2017*
0.4%
3
2
1
0
1990 ’95 2000 ’05
’10
’15
*Through July 31
Source: Tabb Group
THE WALL STREET JOURNAL.
Range of Concerns
Cloud CHX Proposal
President Donald Trump
criticized the Chicago exchange
deal during last year’s presidential campaign, tying it to
U.S. factory jobs fleeing the
country. Since taking office, he
has pressured Beijing on trade
and criticized China for failing
to rein in North Korea’s nuclear
program.
Listing in Chicago could
give Chinese companies an alternative to going public in
their home country, where the
government tightly controls
the offering process.
Rep. Robert Pittenger (R.,
N.C.) and other critics fear
such companies could seek to
defraud U.S. investors. “There
are many concerns that a Chinese-controlled exchange
would be able to list companies that would otherwise not
have access to our markets,”
Mr. Pittenger said.
Both Casin and CHX said
they would protect investors
V
Slowing U.S. SUV Sales Signal Turn
BY MIKE COLIAS
AND CHRISTINA ROGERS
As auto-industry growth
stalls and family sedans go
the way of the flip phone,
one silver lining had been
the trusty “crossover” SUV.
Sales in the
THE WEEK category
AHEAD
boomed amid
lower gasoline
prices and
higher demand for spacious
wagons with all-wheel drive.
But more clouds seem to
be gathering as the summer
car-selling season comes to
an end. Incentives on SUVs
are skyrocketing amid rising
inventories, a trend that
promises to dent the fat
profits the segment has long
returned.
Auto makers report sales
on Friday, and August volume is expected to rise 2%
compared with the same
month in 2016, but only because dealers have an extra
selling day this year. On an
adjusted basis, the rate of
retail sales—stripping out
deliveries to fleet buyers—
will hit the lowest point of
2017, according to J.D.
Power, despite hefty sales incentives and new model offerings.
The U.S. auto market’s
slowdown isn’t a new story,
as analysts widely expected
a seven-year growth streak
to end and for sales to plateau at roughly 17 million a
year for the foreseeable future. Red flags for the crossover market, however, represent a whole new set of
headaches, particularly for
companies like General Motors Co.
The company’s GMC Terrain hit dealerships this
summer amid high expectations. One of four crossover
SUVs the auto giant is
launching, the Terrain’s muscular design, slick touch
screen and advanced safety
gear are expected to help
fetch higher prices.
The problem is nearly all
auto makers are betting the
crossover can take the place
of the sedans and coupes
losing favor with American
buyers, and the resulting
traffic jam of options is
sparking a price war. Crossovers are designed to look
like a sport-utility vehicle
and use all-wheel drive, but
ride on the lighter and more
efficient chassis designs that
typically underpin cars.
“The industry is wildly
overweight on crossovers,”
John Murphy, an auto analyst for Bank of America
Merrill Lynch, said in a recent presentation. The number of crossover models sold
in U.S. dealerships is expected to rise to 110 nameplates by late 2020, up from
78 today, he estimated.
Auto makers like GM—
long dominant in the SUV
market—have relied on bigger or heavier vehicles with
higher price tags to drive
profits, and offset the losses
that result from sales of
family sedans or compact
cars. But in the first half of
2017, incentives for SUVs
shot up 33%, according to research website Edmunds.com, with the average
discount or rebate in the
segment reaching $3,200.
Ford Motor Co. is currently offering a $3,500 cash
rebate on the Ford Escape,
along with 0% financing for
72 months. A Ford spokesman said the SUV market is
“increasingly competitive,”
noting average transaction
prices last month fell $400
compared with a year earlier.
Sales for GMC, one of the
few brands that sell only
trucks and SUVs, have increased 1.6% through July, or
slower than the growth in
the wider light-truck market.
The brand, which sells Sierra
pickups and Yukon familyhaulers, had 93 days’ supply
of unsold vehicles on dealer
lots at the end of July.
“Everyone is either redoing [their crossovers] or has
new ones coming,” said Phil
Brook, marketing chief from
GM’s GMC brand.
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Weinswig, Deborah .... B4
Wind, Tom...................B1
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panel that reviews acquisitions
of U.S. companies for nationalsecurity concerns. Several Chinese takeover bids this year
have failed to get timely CFIUS
approval. These include a $1.2
billion purchase of MoneyGram International Inc., of Dallas, by Ant Financial Services
Group, which is controlled by
Chinese billionaire Jack Ma, a
co-founder of e-commerce giant Alibaba Group Holding Ltd.
SEC commissioners put the
Chicago exchange deal on hold
on Aug. 9, freezing a staff decision earlier that day to greenlight the deal following a 240day review period. CHX Chief
Executive John Kerin told the
SEC in a letter Friday, “CFIUS
conducted a thorough, deep,
and wide-ranging investigation”
of the deal and “concluded that
there were no unresolved national security concerns.”
The CHX deal’s supporters,
including members of the Chicago City Council, say it will
revitalize the institution
founded in 1882 as a place for
Midwest manufacturers and
railroads to sell their shares.
CHX Holdings has around 80
employees and 2015 revenue
of $19.5 million, according to
financial statements reviewed
by The Wall Street Journal.
Casin hopes to turn CHX
into a listings venue where
smaller Chinese and other
overseas companies can sell
shares to U.S. investors.
The deal “is an opportunity
for investors from the two largest economies to work together,”
Jackson Xiao, chief executive of
Casin’s North American subsidiary, said in emailed comments
forwarded by a U.S.-based lawyer for the company.
CHX executives spoke by
phone on Aug. 21 with aides to
SEC Chairman Jay Clayton,
people familiar with the matter said. The SEC officials told
CHX they couldn’t give any
feedback on why commissioners halted the staff’s decision
or when the full commission
would vote on the proposal,
the people said.
by imposing strong listing
standards, the rules that govern which firms can offer
shares. Such rules would need
SEC approval.
“CHX firmly believes that
the safest way for U.S. investors to get exposure to foreign
emerging growth companies is
through a U.S. listing that is
regulated by the SEC,” a
spokesman for CHX said.
Market veterans point to
the wave of accounting scandals that hit U.S.-listed Chinese
companies half a decade ago,
which cost investors billions of
dollars. Many of the companies
in the debacle listed on Nasdaq
Inc. or the New York Stock Exchange through a reverse
merger, in which a firm buys a
publicly traded shell company
to take its spot on an exchange.
“Historically, exchanges have
been very poor gatekeepers,”
said Soren Aandahl, director of
research at Glaucus Research, a
short seller that has targeted
Chinese companies. “Why
should the Chicago Stock Exchange be any different?”
SAUL LOEB/AGENCE PRESSE-PRESSE/GETTY IMAGES
Apple...........................B4
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The 2018 GMC Terrain SUV. Auto makers report sales on Friday. Incentives on SUVs are skyrocketing amid rising inventories
HELOC
Continued from the prior page
cash-out refi, borrowers refinance an existing mortgage
into a new one with a higher
principal balance, putting cash
in their pocket.
Marc Yu took out a homeequity line to buy an investment property, a house he now
rents out at a profit. He has
thought about paying off the
line early, but instead decided
to keep it open as long as interest rates stay relatively low.
“I wanted to use the equity” in the first house, rather
than “it just sitting there,”
said Mr. Yu, who works in digital forensics in the Atlanta
area.
Low interest rates are another draw. For example, the
average interest rate on a
home-equity line is roughly
5.6%, according to Bank-
rate.com, a personal-finance
website. Credit cards average
16.7%.
There are risks. A cash-out
refi can extend the length of a
mortgage and cost a borrower
more in interest over the life
of the loan. If home prices fall,
a borrower who has tapped
home equity can risk the
mortgage being greater than
the value of the home—a scenario that caught many in the
financial crisis.
Those dangers aren’t lost
on borrowers. Some bankers
say wariness about the products have made home-equity
lines and cash-out refis a
tougher sell than they had expected. “Would I like to see it
pick up more? Absolutely,”
said TD’s Mr. Kinane.
Further increases in interest rates also could make both
products less appealing. Many
home-equity lines have rates
that rise and fall with shorterterm borrowing benchmarks.
Rob Cash used a home-equity line to pay for upgrades
on his Maryland home. But he
paid it off as quickly as he
could. He didn’t like having
the debt hanging over his
head, and didn’t want to get
used to having the extra cash.
“It’s easy to…see it as more
money,” said Mr. Cash, who
works in construction, “when
it’s just more debt.”
For banks, increased originations aren’t yet strong
enough to stop continued declines in the overall level of
outstanding home-equity-line
debt. This is a hangover from
the surge of such borrowing
during the housing bubble.
Lenders originated a combined
$720 billion of home-equityline credit in 2006 and 2007,
according to Equifax data.
Borrowers typically only
pay interest on these loans for
the first 10 years. In subsequent years, both principal
and interest is due.
Given that, borrowers often
look to repay or refinance
home-equity lines at or around
the 10-year mark. Because of
this, and the huge amount of
such debt that was originated
around a decade ago, new
originations haven’t been
enough to offset repayments.
The result: U.S. banks’ holdings of about $387 billion in
revolving home-equity loans
as of early August are down
more than 35% from a peak of
around $610 billion in early
2009, according to Federal Reserve data.
“Home-equity originations
are up nicely, but continue to
be outpaced by pay-downs” of
old lines, Bank of America
Corp. finance chief Paul
Donofrio told analysts in July
on the firm’s second-quarter
earnings call. That sentiment
was echoed by other banks
and means it could be another
year or two before the drag
from crisis-era loans fades.
TAX
Continued from the prior page
ternational tax avoidance,” he
said.
But the alliance argues that
a minimum tax would focus
too much on U.S.-based companies and that the rules
wouldn’t match how other
major countries treat their
home companies. A minimum
tax, the alliance contends,
would give foreign-based
firms an advantage.
“We would continue to
have a tax code that is out of
step with the rest of the
world,” said David Lewis, vice
president, global taxes, at
drugmaker Eli Lilly. “Let’s get
it done right and not settle for
anything less. And right
means U.S. companies can
compete, thrive and win in the
global marketplace.”
Under the current system,
U.S. companies get tax credits
for payments to foreign governments and only pay the
difference between lower foreign rates and the U.S. rate if
they repatriate profits.
The system encourages U.S.
companies to book profits
abroad and leave them there.
They can often pay the
same tax rates outside the
U.S. as their foreign competitors do, but they can’t move
SEONGJOON CHO/BLOOMBERG NEWS
A
Aerojet Rocketdyne....B5
BUSINESS & FINANCE
An engine made by Pratt & Whitney, a United Technologies unit.
cash freely around the world
or distribute it to shareholders without triggering the
need to pay U.S. taxes. To
companies, that is a significant problem and it drives
their dissatisfaction with the
current system.
Lilly, for example, had an
18.9% tax rate in 2016 and a
13.7% rate in 2015, driven
largely by lower foreign tax
rates. The company now has
$28 billion in stockpiled profits
that haven’t faced U.S. taxes.
Eliminating the tax on foreign profits would allow U.S.
companies to bring future foreign profits home without
paying U.S. taxes. But that
kind of system would give
companies a bigger incentive
to shift profits abroad because
they could reap the benefits of
lower foreign tax rates. Lower
U.S. corporate-tax rates would
reduce that incentive, but
wouldn’t remove it.
“You still need to have
meaningful rules that define
the income earned in your jurisdiction,” said Tom Neubig, a
former official and corporatetax specialist at the Treasury
Department and the Organization for Economic Cooperation
and Development.
The countries that use tax
systems Republicans want to
emulate allow their home
companies to bring back cash
with little or no tax.
They use a variety of rules
to prevent companies from
seeking to pay less tax by
moving operations or profits
abroad, but generally don’t
have minimum taxes on active
foreign profits.
Minimum taxes have been
floated in recent years by former president Barack Obama
and former House Ways and
Means Committee Chairman
Dave Camp (R., Mich.).
Corporate executives say
they want a system that
doesn’t put their companies at
a disadvantage.
“It’s got to be fair. It’s got
to be competitive. And it’s got
to recognize that you’ve got to
protect the U.S. base,” said
Greg Hayes, the chief executive officer of United Technologies.
The basic architecture of the
GOP plans calls for lowering
tax rates and removing tax
breaks, which would raise taxes
on low-tax industries such as
pharmaceuticals and lower
them for higher-taxed retailers.
But that isn’t the relevant
comparison, said Mr. Lewis,
who said he is trying to keep
up with Novartis AG of Switzerland and U.K.-based GlaxoSmithKline PLC—not domestic
retailers.
“The most important consideration is how you stack up
against your foreign competition,” he said.
Monday, August 28, 2017 | B3
THE WALL STREET JOURNAL.
BUSINESS NEWS
Perfumania Files
For Bankruptcy
Coal at a rail yard in West Virginia. Chinese buying has helped solidify a business threatened by a spate of bankruptcies.
China Spurs Coal Rebound
Revenue at publicly
traded companies that
mine the fuel rose 19%
in first half of year
BY TIMOTHY PUKO
China’s re-emergence as a
coal importer has boosted the
fortunes of U.S. producers who
are now shipping more coal
abroad than any time in the
last two years.
The trend has helped solidify a business that at the beginning of last year was suffering
through a spate of bankruptcies and threatened with more.
Revenue at publicly traded U.S.
coal companies grew by 19% in
the first half of this year compared with the same period a
year ago, and the biggest gains
came at companies helped the
most by exports, according to
data compiled by Doyle Trading Consultants, a coal-marketanalysis firm.
That growth comes at a time
when President Donald Trump
has vowed to end a long decline in the U.S. coal business.
Hundreds of mines have closed
in recent years largely because
of increasing competition from
other fuels, and the Trump administration has pushed to cut
regulations that make coal
even less competitive.
Market forces, especially
China, have a much bigger influence than anything the
Trump administration has
done, analysts said. While that
has worked in the administration’s favor so far, it could also
overwhelm its deregulation efforts and put the coal industry
into retreat if those factors
swing back the other way.
“China is 100% the key determinant,” said Mark Levin,
analyst at Seaport Global Securities LLC. “That’s difficult for
anyone in the United States to
get a clear angle on.”
China set the rebound in
motion a year ago as global
prices and U.S. exports were
bottoming out. In the middle of
a world-wide glut, China used
new environmental rules to
limit the number of days its domestic mines could work. And
new price controls that increased intervention as prices
moved outside a “green” zone
of $70 to $80 a ton also curtailed production. Sharp capacity cuts hit as industrial demand took off and global
benchmark prices are up 50%
to 100% from about a year ago.
As China imported more, it
shifted trade and prices rose
world-wide. Russian, African
and South American coal that
once went to Europe has been
going to China, analysts said.
Importers all over the world
have to pay more to fill the gap
left behind.
The chain reaction led to
more U.S. exports going to every continent. U.S. exports to
Europe hit 11 million tons in
the first quarter, up 70% from
the first quarter in 2016. Exports to Asia rose by about half
to 6.4 million short tons, U.S.
government data show.
A year ago Cloud Peak Energy Inc. was selling so little
coal abroad that it had to take
losses on its contracts with
shippers and pay them for doing nothing in lieu of taking
coal. Now the company is back
to being one of the largest exporters in the western U.S.,
raising exports from almost
nothing a year ago to an expected 4.5 million tons in 2017.
That increased its revenue
nearly 20% in the first half of
the year even while domestic
sales have fallen.
“We’ve had a good and stable year, which in our environment is a good year,” said
Heath Hill, the company’s finance chief.
Industry leaders say that
good fortune has been backed
up by a change of sentiment
led by Mr. Trump. Business
would have been worse and future prospects would be lower
under a Democratic administration that used new rules to
move consumers further away
from coal, they said.
But the rebound has been so
dependent on exports that U.S.
producers face a big risk if
China undoes last year’s policy
changes. Chinese coal production is showing signs of picking
up again and the government is
starting to block some imports
to support domestic miners, researchers at Italian ship broker
Banchero Costa said Wednesday.
Mall-based retailer chain
Perfumania Holdings Inc.
has sought chapter 11 protection with plans to reorganize
around its better-performing
stores.
“Unlike many retailers who
have filed for bankruptcy,
Perfumania sees a viable path
forward,” Chief Executive Michael Katz said in court papers filed Saturday.
The company plans to
close 64 of its 226 stores during the bankruptcy process,
court papers show. Despite
closing nearly 100 stores
since 2015, the company still
took losses each year, Mr.
Katz said. Its stores will remain open while under bankruptcy protection.
Perfumania’s Parlux and
Five Star Fragrance subsidiaries aren’t included in the
bankruptcy filing.
Mr. Katz said in court papers the company has been
affected by “many of the
same macroeconomic challenges plaguing the retail industry as a whole,” such as
declining mall traffic, more
consumers shifting to online
shopping, changing trends
and expensive leases.
Perfumania is known for
selling brand-name and designer fragrances at dis-
counted prices up to 75% below
the
manufacturers’
suggested retail prices. Each
store is said to have about
2,000 different fragrances,
under designer names like
Burberry, Christian Dior,
Dolce & Gabana, among many
others.
The public company plans
to turn over control to a new
undisclosed investor, which
will provide a new roughly
$14.3 million equity infusion.
The Bellport, N.Y., company
has about $199 million in
debt—including $18.78 million owed under a $175 million revolver with Wells
Fargo N.A., Wells Fargo Capital Finance, Regions Bank and
RBS Business Capital, and
$125.4 million in subordinated promissory notes plus
$54.8 million in unpaid interest.
In addition, Perfumania
has received an $83.75 million bankruptcy loan from
Wells Fargo, which it plans to
use to repay its prebankruptcy revolver, subject to
court approval. Following its
emergence from bankruptcy
protection, the bankruptcy
loan is slated to be replaced
by a new $100 million revolver, court papers show.
All unsecured creditors
will either be reinstated or
paid in full in cash.”
RICHARD B. LEVINE/ZUMA PRESS
ANDREW HARRER/BLOOMBERG NEWS
BY LILLIAN RIZZO
Perfumania sells brand-name and designer fragrances at low prices.
DEFEND
HER
FUTURE
Right now she’s unstoppable, but when she’s older she’ll need help securing her financial future.
Which is why we’re committed to arming advisors with insights, tools and investment solutions to solve the
toughest retirement challenges at every stage. Learn how at jpmorgan.com/funds/defendherfuture
LET’S SOLVE IT.
J.P. Morgan Asset Management is the marketing name for the asset management business of JPMorgan Chase
& Co., and its affiliates worldwide. JPMorgan Distribution Services, Inc. member FINRA/SIPC
B4 | Monday, August 28, 2017
* *
THE WALL STREET JOURNAL.
TECHNOLOGY
WSJ.com/Tech
Nintendo Faces Switch Shortages
Production of game
Game On
machine can’t keep up Nintendo Switch sales have
with demand from
lagged in Japan because of supply
shortages but are picking up.
Japanese, U.S. users
600,000 units
500,000
400,000
300,000
By Takashi Mochizuki
in Tokyo and
Sarah E. Needleman
in New York
200,000
100,000
games and its flexibility—it
works as both a living-room
console and a hand-held device.
But the real challenge for
gamers has been actually getting their hands on it. Production isn’t keeping up with demand in Japan, resulting in
blockbuster queues and lotteries there. Over weekends in
July and early August, tens of
thousands of fans lined up at
stores for a one-in-10 chance
to buy the $300 console at
events that have become a
form of entertainment.
In the U.S. too, scarcity has
only made the Switch more
sought after. Some fans have
spent months trying to find a
Switch, and sellers on Amazon.com are getting $380 or
more for a unit. Wal-Mart
Stores Inc., Target Corp. and
GameStop Corp. said they
0
M*
A
M
J
J
*Switch went on sale March 3, 2017
Source: Famitsu
BY DEEPA SEETHARAMAN
MARK RALSTON/AGENCE FRANCE-PRESSE/GETTY IMAGES
Nintendo Co.’s latest videogame machine, the Nintendo
Switch, is winning fans for
both its lineup of popular
THE WALL STREET JOURNAL.
Nintendo’s stock price is up more than 50% since the Switch went on sale March 3.
have struggled to meet demand both in stores and online.
“We continue to see strong
demand for the Switch and sell
out our inventory in a matter
of days of it being available in
our stores and our websites,”
Tony Bartel, GameStop chief
operating officer, said in a
quarterly earnings call Thursday. “We believe that this will
continue through the holiday.”
Supply in Europe seems
somewhat better, with electronics retailers’ websites in
France, Germany and Italy
showing the console is available. In June, though, British
videogame retailer Game Digital PLC issued a profit warning
partly blaming lower-than-expected Switch supplies to the
U.K.
Nintendo’s official target is
to ship 10 million Switch units
in its current fiscal year ending in March 2018. People involved in the supply chain say
they have been told to prepare
for 18 million units. One executive in the supply chain said
his company was ready to pick
up the pace of production if
asked.
“We’re doing everything we
can to make sure everyone
who wants to buy a Nintendo
Switch system can do so,” Nintendo said in a statement. “We
will ramp up production for
the holiday period, which has
been factored into our forecast.”
One delicate balance for
Nintendo: The more it tries to
boost output quickly, the more
it has to bow to the terms of
parts makers, some of whom
are also busy with orders for
Apple Inc.’s next iPhone.
Nintendo’s stock price is up
more than 50% since the
Switch went on sale March 3,
giving the company a market
capitalization of more than
$45 billion.The scarcity of the
Switch—whether by design or
not—adds to the hype.
Aki Natsume, a 26-year-old
singer, was one of more than
2,000 people a few weeks ago
standing in line at the large
Bic Camera store in Tokyo’s
Akihabara district for a chance
to buy the Switch.
Ms. Natsume got lucky—her
number was one of 200 selected in the lottery. She
bought a Switch, even though
she said she wasn’t particularly passionate about it. She
already owns a rival console
from Sony Corp. “I’m busy
with playing a PlayStation 4
game.”
Amazon Battles for Firmer Grip in China
In launching its Prime
membership program in China
last fall, Amazon.com Inc. was
betting that the lure of hardto-find Western goods and
free international deliveries
AMAZON
Continued from page B1
brands struggle with American
consumers’ increasing interest
in the fresh and natural foods
sold at stores such as Whole
Foods, along with Kroger, WalMart and a growing number of
traditional supermarkets.
Wal-Mart, no stranger to Amazon’s rivalry, is confident in its
strategy and is spending billions
of dollars to lower prices,
spokesman Randy Hargrove
said. The retailer is working to
spruce up its stores and offer ecommerce pickup options at
1,100 of its roughly 4,600 stores
by year-end. Wal-Mart in the
past has moved quickly to meet
challenges from Amazon, most
recently acquiring a string of ecommerce startups—including a
ZHANG PENG/LIGHTROCKET/GETTY IMAGES
By Liza Lin in Shanghai
and Laura Stevens
in San Francisco
would be enough to get traction in the world’s largest ecommerce market.
That hasn’t happened, according to retail analysts, underscoring the difficulties
faced by U.S. technology companies as they try to compete
in a country with high hurdles
for outsiders and increasingly
sophisticated competitors.
Companies including Facebook Inc. and Alphabet Inc.’s
Google have struggled with
stringent government controls
and censorship, while Apple
Inc. has seen its iPhone market share decline as Chinese
smartphone makers offer lessexpensive, high-performing
smartphones.
“Over time, companies from
Apple to Microsoft are seeing
Chinese rivals move up the
value chain and narrow the
gap between them and their
products,” said Mark Natkin,
managing director of Marbridge Consulting in Beijing.
Retail analysts say it is
largely Chinese competition,
and not the ground rules of
doing business, that has challenged Amazon’s efforts here.
Membership programs aren’t
popular in China, and consultants say Amazon’s app for
mobile phones—the shopping
cart of choice in China—lags
behind its competitors in ease
of use and appeal.
What’s more, the company’s
main pitch to Chinese consumers—authentic Western goods
shipped free from abroad—is
being weakened as Chinese rivals strengthen their offerings
and dangle discounts.
Chinese competitors Alibaba Group Holding Ltd. and
JD.com Inc. have invested
Facebook
Gets Heat
From U.N.
On Videos
Amazon’s relatively bare mobile platform can be a turnoff for Chinese consumers, an analyst says.
heavily to improve their selection of products and spent liberally on promotions and discounts this year, said Jason
Yu, China general manager at
Kantar Worldpanel, a consumer-research firm.
In its most recent analysis
in June, Kantar estimated that
Amazon had a 1% share of
China’s fast-moving consumable goods, such as diapers
and food, unchanged from a
year earlier.
Free delivery, even internationally, isn’t much of a selling
point in China either, because
overseas shipping costs are
free or generally low. An 800gram can of Aptamil infant
formula, for instance, is free
to ship from Germany to
Shanghai on Alibaba’s Tmall
and JD’s platforms via bonded
warehouses. A similar product
is shipped free by Amazon.
In China, Amazon Prime’s
offerings don’t stand out, said
Shirley Lu, a Shanghai-based
analyst focusing on retail at
Euromonitor International.
“Local e-commerce provid-
ers have fast deliveries, good
customer service and very
competitive pricing,” Ms. Lu
said. “These are areas Amazon
will find hard to beat.”
A spokeswoman for Amazon said the company has had
a “strong response” to Prime
from Chinese customers since
its launch last October, with
membership figures more than
doubling since the beginning
of the year. She declined to
provide figures.
Amazon in October last
year sweetened its offer by
discounting its China Prime
membership fee to $30, or half
$3.3 billion deal for Jet.com—
and testing same-day deliveries.
“Amazon is really good. We
certainly have respect for
them, and we have experience
competing with Whole Foods,”
said Steve Schmitt, Wal-Mart’s
vice president of investor relations, when speaking to shareholders earlier this month.
Executives at Kroger, whose
shares are among the hardest
hit in recent weeks, say they
haven’t changed their strategy
following Amazon’s push into
grocery, but now feel a heightened urgency to invest in technology to better tailor promotions to shoppers and expand
online-grocery pickup.
The U.S.’s largest traditional
supermarket chain is also sacrificing profits in select markets. “If we have to sell a can
of corn for 40 cents, we’ll figure out a way to sell a can of
corn for 40 cents,” said Mike
Schlotman, Kroger’s chief financial officer, during a recent
interview.
Kroger, which reports earnings next month, has lost more
than $7 billion in market valuation since it reported a disappointing financial outlook in
June. Its stock is down by 36%
since the start of the year.
News of the Amazon deal
has also hurt Target’s stock,
and the retailer is putting renewed focus on its grocery
business. Target has hired a
number of food-retail executives and put more attention to
its assortment this year after
grocery had declined in sales.
Amazon has focused on the
long term when it enters a new
business, with a pledge to make
bold investments to gain market leadership. While Amazon’s
grocery plan is still unclear, the
company wants to draw customers into stores with lower
prices and more convenience,
adding perks like Amazon
pickup lockers and Prime membership benefits, according to
former executives.
Online grocery sales remain
small, but they are growing fast.
Same-store sales for online ordering at supermarkets are
growing 26% year-over-year,
with an average online transaction size of $148—much higher
than the $35 average for in-store
purchases, according to internal
market research by consultancy
Brick Meets Click.
Whole Foods had one of the
poorest price perceptions
among 13 national food retailers,
according to a Morgan Stanley
survey of 2,900 U.S. grocery
shoppers last month, which also
found its customers were nearly
twice as likely to earn upward of
Tough Customers
Amazon has struggled to win over Chinese consumers.
Market share for Chinese
online retailers in 2016
Amazon's China market share
Others
28.7%
2.5%
Alibaba
47%
2.0
1.5
1.0
0.5
JD.com
20%
VIP 3%
Amazon
1.3%
Source: Euromonitor
0
2011 ’12
’13
’14
’15
’16
THE WALL STREET JOURNAL.
its standard list price. Prime
membership costs $99 annually in the U.S.
But membership programs
are also a tough sell in China,
where high-profile scandals involving beauty chains and
health clubs have made consumers wary, said Deborah
Weinswig, New York-based
managing director at Fung
Global Retail & Technology.
JD and Alibaba also offer
memberships, but on those
sites you don’t have to be a
member to qualify for free
shipping on most purchases
beyond $15. Alibaba’s 88 Membership program is free and
rewards frequent shoppers on
their site with discounts for
high-end brands and free concert tickets. JD’s Plus program
costs $22 and dangles unlimited e-books and free exchanges and returns, on top of
free shipping for all purchases
five times a month.
Euromonitor’s Ms. Lu also
said that most Chinese consumers shop on their smartphones, and that Amazon’s relatively bare mobile platform is
a turnoff for Chinese consumers used to seeing a kaleidoscope of colors and attentiongetting deals.
Mobile-phone shopping will
account for over 60% of
China’s total e-commerce this
year, or $720 billion, Boston
Consulting Group estimated.
Wang Hao, a 38-year-old internet entrepreneur in Shanghai who buys steaks and computer parts online, said he
found Amazon’s site “as bland
as plain water.” JD’s website, a
riot of red and orange hues,
“makes one feel festive and in
the mood to shop,” he said.
Finally, the video-streaming
service included in Amazon
Prime—with its award-winning original content—isn’t
available in China because of
censorship rules.
Still, China is important for
Amazon in its plans to haul
and deliver packages and
cargo globally for others as
well as itself.
$125,000 a year than Kroger
shoppers. Whole Foods began to
lower its prices in 2015 as its
sales slipped, but the promotions did little to woo back customers. Those cuts weren’t as
extensive as analysts expect to
20%
The decline in food-retail stocks
so far this year
see this week.
Still, Americans increasingly
want to eat better, and the
Whole Foods name continues to
symbolize quality. “The brand is
incredibly aspirational. Amazon
knows this,” said Scott Mushkin, managing director at Wolfe
Facebook Inc. is again in
hot water for allowing objectionable videos on its website, this time drawing a rare
rebuke from a United Nations
agency.
The U.N. migration agency
hammered the social network
for allowing what it said was
a “horrifying” video showing
gangs in Libya threatening to
harm a group of terrified migrants, many from Somalia
and Ethiopia. One migrant in
the video is lying on his chest
with a concrete block on his
back, and the video shows the
faces of some migrants without their consent in a way
that they can be identified.
The smugglers also are issuing threats to the migrants’
families over WhatsApp, a
messaging app owned by
Facebook, according to Leonard Doyle, spokesman for the
International Organization
for Migration.
Mr. Doyle said the video
surfaced in June, after which
his organization issued a
press release condemning it.
He said that should have
prompted Facebook to take
down the video.
“On what possible grounds
can you show these poor, vulnerable people?” he said in
an interview, adding that it
was very rare that the U.N.
agency would specifically
criticize Facebook in this
manner. Facebook officials
reached out to his agency on
Friday to discuss the issue after the Times of London published a story on the video,
but the company as of Sunday hadn’t removed the
video.
Facebook said it allowed
the video to stay up because
the footage was shared by a
The incident revives
questions about
Facebook’s handling
of sensitive videos.
journalist to shed light on human rights violations around
the world. The company said
part of its role is to be a
place where its more than 2
billion monthly users can
raise awareness about important issues.
“This specific video was
posted to condemn smuggling
and raise aware (awareness) of the issue, so we
would not consider it a violation of our policies,” a Facebook spokeswoman said in an
email. “We realize the video
is disturbing so we have
added a warning screen and
the video’s distribution will
be limited to those aged 18
and over.”
The episode marks the latest in a string of examples of
Facebook’s video tools being
used to promote and showcase violence and revives
questions about Facebook’s
handling of sensitive videos.
Earlier this year, Facebook
was widely criticized by users
and civil rights groups for allowing violent videos to be
broadcast live on its platform, including one showing
a man in Cleveland committing murder and one of a man
in Thailand murdering his
baby daughter.
Research, LLC.
Slashing prices is an easy
first move, but more telling
will be if Amazon can determine how to use data and algorithms for real-time price
matching and better identifying what consumers are willing to pay in store, said Greg
Portell, lead partner in the retail practice of A.T. Kearney.
If Amazon can figure out
what Whole Foods shoppers
are willing to spend for organic tomatoes and grass-fed
beef, it could result in more
regular visits from customers
including Elizabeth Alderman,
a 37-year-old senior product
manager from Chicago.
“We don’t buy their meat all
the time, because it is really
expensive and we have other
options,” she said, something
she is willing to change if
prices drop.
THE WALL STREET JOURNAL.
Monday, August 28, 2017 | B5
* * * * * *
BUSINESS NEWS
Boeing, Northrop Vie on Missiles
BY DOUG CAMERON
BY ASSOCIATED PRESS
PHILIPPE LOPEZ/AFP/GETTY IMAGES
The Pentagon is pitting two
American contractors against
each other as it looks to replace the nation’s land-based
intercontinental ballistic missiles.
But with Russia and China
modernizing their nuclear
forces and North Korea becoming a potential nuclear threat,
some defense experts say a
better plan would be to make
Boeing Co., Northrop Grumman Corp. and others work together to confront mounting
challenges.
This past week, the Pentagon picked teams led by Boeing and Northrop to vie for the
latest piece of its overhaul of
the country’s nuclear force,
with almost $700 million in
contracts for design work to
develop replacements for aging Minuteman 3 missiles deployed in silos across the Great
Plains.
Lockheed Martin Corp. was
eliminated from the contest
for the Ground-Based Strategic
Deterrent program, which is
expected to eventually cost
$85 billion. Lockheed could
lodge a protest, as it did unsuccessfully after Northrop
bested its joint bid with Boeing
to build a new long-range
bomber in 2015, though it declined to comment ahead of a
debrief from Air Force officials.
The Pentagon is due to decide in 2020 which team will
build the intercontinental ballistic missiles and new communications infrastructure, as
well as refresh the silos.
Richard Safran, an analyst
at Buckingham Research
Group, said the project could
still draw Lockheed and other
defense firms, including General Dynamics Corp. and Orbital ATK Inc., into the project
under Boeing or Northrop
leadership. Aerojet Rocketdyne Inc. recently said it
would provide the rocket motors for the Northrop offering.
Maj. Gen. Roger Burg, who
retired from the Air Force in
2010 after a career that included heading the ICBM units,
‘Hitman’s Bodyguard’
Leads Dismal Weekend
About $700 million in contracts for design work are up for grabs in the missile-system overhaul.
Back in the Silo
The U.S. stockpile of nuclear warheads continues to shrink with
successive arms reduction treaties.
Land-based missiles
Launchers
2018
2010
Warheads
Submarine-based weapons
Air-launched weapons
0
300
600
900
Number of launchers/warheads
THE WALL STREET JOURNAL.
Source: Congressional Research Office
said pooling the work of multiple companies under one joint
effort is desirable, as many of
the experts who built the original system in the 1970s have
retired.
“We probably have just
enough capability to have one
really good team,” said Gen.
1,200
Burg, who advised two of the
teams in the ICBM contest.
After years of delays caused
by budget cuts, the Pentagon
is pressing ahead with a simultaneous refresh of all three
legs of the nuclear triad defense system: land-based missiles, bomber-launched mis-
siles and those on a fleet of
submarines. The Pentagon
plans by 2020 to select one
contractor to build 600 missiles, with 400 of those to be
deployed on alert and the balance held for testing.
The total bill is estimated
by some outside experts to be
more than $500 billion over
the next 20 years—some 5% of
the total defense budget. The
Pentagon hasn’t disclosed a final estimate as most of the
programs are classified, and
officials declined to comment
on future contracting arrangements.
Pushing ahead with the
programs could lead to a sustained increase in military
spending or prove to be a double-edged sword for defense
contractors, with some concerned that other contracts for
new ships and jet fighters
could be crowded out by a singular focus on the nuclear
overhaul.
President Donald Trump has
supported the Pentagon push
even as critics such as former
Defense Secretary William
Perry have said plans to replace the missiles are too
costly.
NEW YORK—Hollywood effectively took the weekend off,
resulting in one of the most
dismal box-office results in 16
years.
An already slow August
came to a screeching halt at
the multiplex, where no major
new releases were unveiled.
That left the Samuel JacksonRyan Reynolds action-comedy
“The Hitman’s Bodyguard” to
top all films for the second
week with an estimated $10.1
million in ticket sales.
But the entire slate of films
grossed only about $65 million
in North America and the top
12 films generated just $49.6
million. There have been similarly slow weekends in recent
years, including early September in 2014 and in 2016. But
not since September 2001
have the numbers been quite
so dreadful.
Mid-August through early
September is historically the
sleepiest time of the year for
the movie business, but it has
been especially so this year.
This August is down a whopping 35% from last year, according to comScore. Next
week is expected to be just as
bad: No new wide releases are
scheduled for Labor Day weekend.
For many, the weekend’s
top entertainment option was
Saturday night’s Floyd Mayweather-Conor
McGregor
match. The Fathom Events simulcast of the fight was one
of the more popular offerings
in theaters, taking in $2.4 million from 481 screens.
But the bigger problem was
the death of significant releases. The six major studios
have released only two new
wide-release films this August:
Sony’s poorly received Stephen King adaptation “The
Dark Tower” and Warner
Bros.’s successful horror
spinoff sequel “Annabelle: Creation.” The latter came in second this weekend with $7.4
million, bringing its threeweek total to $77.9 million.
The Weinstein Co. animated
release “Leap!” was one of the
few new films to hit theaters.
It earned a scant $5 million,
according to studio estimates
Sunday.
“It’s a black eye for Hollywood but not a knockout
punch,” said Paul Dergarabedian, senior media analyst
for comScore. “Make no mistake about it; there was little
foot traffic in theaters this
weekend. But the story line
will change in two weeks when
‘It’ opens.”
That second recent Stephen
King adaptation is the only
near light on the horizon for
theaters, which are struggling
through the lowest-grossing
summers in years. ComScore
estimates that this will be the
first summer in a decade not
to cross $4 billion in domestic
ticket sales. The summer as a
whole is running 14% behind
last year—and the deadly
quiet August is a big reason.
Estimated Box-Office Figures, Through Sunday
SALES, IN MILLIONS
FILM
1. The Hitman’s
Bodyguard
2. Annabelle:
Creation
3. Leap!
4. Wind River
5. Logan Lucky
DISTRIBUTOR
WEEKEND* CUMULATIVE % CHANGE
Lions Gate
$10.1
$39.6
-53
Warner Bros.
$7.4
$77.9
-53
Weinstein Co.
Weinstein Co.
Bleecker Street
$5
$4.4
$4.4
$5
$9.8
$15
-48
-43
*Friday, Saturday and Sunday
Source: comScore
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THE WALL STREET JOURNAL.
B6 | Monday, August 28, 2017
BUSINESS NEWS
OSHA Cuts Down
Fatality Reporting
In the Workplace
JIM SALTER/ASSOCIATED PRESS
BY ALEXANDRA BERZON
Protesters of the minimum-wage rollback outside a McDonald’s in St. Louis. Many workers in the city will lose a raise they got in May.
City Cancels Wage Increase
BY ERIC MORATH
The minimum wage in St.
Louis falls by $2.30 an hour
Monday, making it a rare city
to buck the national trend of
municipal pay floors rising
above federal and state levels.
Many low-wage workers in
the Gateway City will lose
raises they received in May,
when the minimum wage increased to $10 an hour. A state
law taking effect Monday mandates that Missouri municipalities follow the state minimum
of $7.70 an hour, nullifying the
higher wage St. Louis officials
had sought since 2015.
Some business owners have
already pledged to maintain
the higher wage in a region
where the jobless rate is lower
than the national average.
Others have told their employees to expect cuts.
Rolling back an already-implemented raise shows the effectiveness of some business
groups and state lawmakers in
pushing back on a wave of municipal minimum-wage increases since 2014 that
spanned more than 30 cities
and counties from Portland,
Maine, to Pasadena, Calif.
“We can’t let the biggest
economic engine in the state,
St. Louis, become an island
that employers avoid due to
higher labor costs,” Missouri
Chamber of Commerce & Industry President Daniel Mehan
said in an interview Friday. Elevated city minimum wages
would cost workers jobs, encourage businesses to automate and create confusion
along city borders, he said.
The law also bars Kansas
City from setting a $10-anhour minimum wage approved
by voters in that city, but not
enforced. In recent years, several states, including Ohio and
Oklahoma, have banned cities
from setting their own wages,
often in response to a campaign to establish new local
rates. But very few municipalities have been turned back
once a wage was in effect. It
occurred earlier this year in
Iowa’s Johnson County, when
state lawmakers reduced the
county’s rate to match the federal minimum of $7.25 an hour
from $10.10. Iowa and 20 other
states follow the federal rate.
Missouri Gov. Eric Greitens
and other Republican lawmakers said allowing St. Louis and
Kansas City to establish their
own rates would cost the state
jobs. St. Louis Mayor Lyda
Krewson, a Democrat, said cities need to have the flexibility
to address unique issues, and
that a higher wage floor would
benefit low-income families.
Bettie Douglas, a worker at
a St. Louis McDonald’s restaurant, expects to take a pay cut
in the federal minimum would
raise the pay of 16.5 million
workers who kept their jobs.
Schnucks, a St. Louis-based
chain of supermarkets, is reducing wages Monday for
some workers at eight stores
within the city. The chain will
return to paying the wages set
in union contracts.
“We informed teammates
when the city’s minimumwage ordinance took effect in
May that this would happen if
the ordinance was reversed,”
company spokesman Paul Simon said. “Schnucks remains
committed to ensuring a fair
and competitive wage and
benefits package.”
Hourly employees with the
company more than a year
earn $14.27 an hour, when including health-care and pension benefits, he said.
Casey Miller raised wages
in May for some workers at
Vista Ramen, a restaurant she
owns on St. Louis’s trendy
Cherokee Street, to comply
with the minimum-wage law.
She plans to maintain the
higher rate, even though it’s
not legally required.
“Taking it back would be a
pretty grinchy thing to do,”
she said. “I don’t want to risk
employees leaving or cutting
back hours so they can take a
second job.”
The unemployment rate in
the St. Louis region was 4% in
June, suggesting some businesses are challenged to find
available workers.
OSHA is issuing
fewer press releases
publicizing
enforcement actions.
Last week, OSHA removed
links to reports going back to
2009 from its website. Instead, the agency posted a
more limited set of information about U.S. workplace fatalities that resulted in citations for companies dating to
the beginning of the year. An
OSHA spokeswoman said the
new fatality-data listing respects the privacy of surviving family members because
they don’t give out the name
of the worker who died.
OSHA’s weekly reports
were, for some, an important
regular reminder of the human cost of workplace accidents and a source of information about workplace
safety.
“It’s really important
pieces of information just for
raising public awareness,”
said Celeste Monforton, an
occupational health lecturer
at George Washington University who writes extensively
Choosier Customers Vex Campbell
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this week, though she said her
manager hasn’t informed her
of a new rate. Before May, the
59-year-old received $7.90 an
hour, she said. Ms. Douglas, an
activist seeking higher minimum
wages
nationwide,
earned about $63 more a week
because of the higher wage
floor, money she said allowed
her to have her water turned
back on and buy school supplies for her teenage son.
“It’s made a big difference,”
she said Friday. “It’s still a
struggle, but I had a little extra to pay my bills.”
A
McDonald’s
Corp.
spokeswoman and the franchisee that operates the store
where Ms. Douglas works both
declined to comment. In the
past, the chain has said it is
up to local operators to set
wages. In its company-owned
stores, McDonald’s says it pays
above the prevailing minimum
wage.
Economists and policy makers see costs and benefits of
minimum-wage
increases.
While the policy puts more
money in the pockets of lowwage workers, it gives employers less incentive to add to
their payrolls, leaving some
workers behind.
A 2014 study by the nonpartisan Congressional Budget
Office found raising the federal minimum wage to $10.10
an hour would reduce job creation by 500,000 over two
years. At the same time, the
report estimated the increase
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All Rights Reserved.
BY AUSTEN HUFFORD
Campbell Soup Co. is striving to remain a pantry mainstay even as what, where and
how consumers eat undergoes
a transformation.
The comINDUSTRY
pany, known
FOCUS
for its eponymous canned
soups, is also
facing investor pressure to reverse a yearslong revenue decline and lift its share price,
which has fallen 15% this year.
When Campbell reports its
fourth-quarter results Thursday, investors and analysts
will be looking to see if the
company can end 10 straight
quarters of declining revenue.
Analysts polled by Thomson
Reuters are expecting a modest 0.1% revenue increase from
the prior year’s quarter.
Campbell and other packaged-food companies are facing difficulties in attracting
consumers who increasingly
want foods they see as healthier, more natural and more environmentally sustainable.
At an investor day last
month, Chief Executive Denise
Morrison laid out the company’s ultimate goal: to become the leading health and
well-being food company.
“In this environment, companies and brands must differentiate themselves or risk extinction,” Ms. Morrison said.
Campbell and its peers are
also slogging through a changing food-retail environment,
with the rise of meal-kit companies such as Blue Apron
Holdings Inc., the growth of
deep-discount chains in the
U.S. and the food-selling ambitions of Amazon.com Inc. as it
BRENDAN MCDERMID/REUTERS
St. Louis bucks trend,
rescinds $2.30 an hour
rise in pay floor,
effective Monday
The Occupational Safety
and Health Administration is
reducing its reporting of fatalities in the U.S., part of a
series of moves by the
agency to cut back the
amount of information about
workplace accidents made
available to the public.
The U.S. Chamber of Commerce, which had long complained about the practice,
asked OSHA to roll back some
of the information in the fatality reporting and other initiatives when the Trump administration took over.
The publication of the reports—listing the names, locations, employers and circumstances of people who
were reported to OSHA as
having died in apparent accidents at work—began early in
the Obama administration.
Before that, OSHA did compile some information about
fatalities, according to former
OSHA officials. But they said
Obama administration officials made the reports more
publicized and included additional information.
about OSHA.
To some companies, however, the release seemed an
overreach of government that
could produce unfair black
marks on employers before
the deaths had been fully investigated.
Under the Obama administration, “they saw this as a
way to scare employers
straight,” said Marc Freedman, executive director of labor law policy for the U.S.
Chamber of Commerce. The
idea was that companies
would work harder on compliance if they knew the details
of any accidental deaths at
their facilities would be made
public. The chamber disagreed with that approach
and thought that it unfairly
maligned some employers.
With the election of President Donald Trump, OSHA
has taken several steps that
have cut down on publicizing
information about workplace
accidents. In addition to the
change in fatality reporting,
OSHA has begun rolling back
a regulation that went into
effect Jan. 1 of this year to require workplaces to electronically file to the government
the injury logs they keep at
their work site. OSHA had
planned
to
eventually
post some data from the
forms online.
OSHA also has reduced the
number of press releases it
issues to publicize enforcement actions against employers. In December, the agency
had 30 such press releases. In
January,
that
number
dropped to 18, and February
and March had no enforcement releases from the
agency. OSHA has put out five
enforcement releases in August.
Under the new fatality reporting system, OSHA is posting links to fatality citations,
which don’t include the name
of the worker who died, for
accidents only in states regulated directly by the federal
agency. It doesn’t include
states that operate their own
OSHA programs, which is
about half. Previously, the site
included most workplace fatalities, regardless of whether
they were under the control
of federal OSHA.
Waiting until after citations are issued also creates a
lag time of up to six months
and limits the fatalities listed
to only those that result in citations.
The packaged-food industry faces challenges including discounting and meal-kit companies.
completes a takeover of Whole
Foods Market Inc.
Amazon is set to begin
slashing prices on groceries at
Whole Foods this week, raising concerns that a price-war
could affect Campbell.
One question, said RBC
Capital Markets analyst David
Palmer, is that if Amazon is
willing to make less money as
it cuts prices on items, will retailers then “ask food companies to share in those price investments?”
“There is certainly an argument that major food companies are going to be channelagnostic or even supportive of
the rising role of e-commerce,” Mr. Palmer said.
Campbell executives have
said they intend to use acquisitions and investments in new
products to help lift the company’s fortunes.
In July the company said it
would buy organic-soup maker
Pacific Foods for $700 million,
as part of its natural-food
push. It has also invested in
some food-related startups,
such as Habit, which is developing an at-home testing kit
designed to make personalized
diet recommendations.
Still, there have been some
missteps. A 2012 move to buy
juices, baby-carrots and saladdressings maker Bolthouse
Farms Inc. for $1.55 billion has
been somewhat marred by execution issues, including a recall of some of its drinks.
“In terms of the vision,
they’ve definitely been ahead
of the peer group,” Wells
Fargo Securities analyst John
Baumgartner said.
Campbell has also drawn
attention for its actions outside of the supermarket. The
company said last month it
would leave the Grocery Manufacturers Association amid a
disagreement with the trade
group. Campbell supports
alerting customers when food
products contain genetically
modified organisms on packages, which the trade group
has lobbied against.
Ms. Morrison also left a
manufacturing-advisory council to the Trump administration earlier this month, before
it disbanded hours later. She
said Mr. Trump should have
been unambiguous in calling
out white-supremacist groups
for racism and violence in
Charlottesville, Va.
THE WALL STREET JOURNAL.
Monday, August 28, 2017 | B7
MARKETS
Hits
China Markets Tell Disparate Tales Euro
Highest
Stocks, commodities
reflect optimism on
economy, but bond
investors are cautious
Spread on Chinese bond yields
BY SHEN HONG
Shanghai Stock Exchange 50
index
4.0%
2800
China's bond markets are signaling pessimism about the country's
economy even as other asset classes are buoyant.
10-year bond
3.5
2600
3-year bond
Spread
3.0
2400
2.5
2200
J
QILAI SHEN/BLOOMBERG NEWS
SHANGHAI—China’s financial markets are sending conflicting signals about the
health of the world’s No. 2
economy, where a strengthening
currency,
EQUITIES buoyant stocks
and
soaring
commodities
contrast with the pessimism
common among the country’s
bond investors.
The country’s latest economic data have made the picture even murkier. The pace of
industrial output, retail and
housing sales and investment
growth all decelerated in July.
Some economists, however, argue the weakness was temporary and due to an unusually
hot summer that affected construction work.
A closer look suggests bond
investors’ cautious outlook
may win out. That is because
the recent rally in other asset
classes has come partly thanks
to policies designed to preserve financial stability ahead
of a key Communist Party political meeting this fall, and
partly due to potentially excessive optimism about structural reforms.
“Although on the surface
the markets are telling different stories about the Chinese
economy, the overarching
theme remains that the economy faces bottlenecks like a
relatively primitive growth
model and fresh drivers,” said
Shen Meng, director at Chanson & Co., a Beijing-based
boutique investment bank.
The Chinese currency’s resurgence has been one of the
year’s big surprises. The yuan
now trades at a near one-year
high and is up more than 4%
against the dollar in 2017, after dropping 6.6% last year.
The yuan’s rise has some
logic behind it: The dollar has
Bonds Stand Out
F
M
A M J
J
A
J
F M
A M J
J
A
Commodity futures in China
How many yuan a dollar buys*
5,000 yuan a metric ton
6.6
4,000
6.7
3,000
Steel rebar
6.8
An electronic stock board at a securities brokerage in Shanghai
been weak against a range of
global currencies in recent
weeks as expectations for U.S.
rate increases are pared back.
Still, some say the yuan’s
recent strength could also reflect Beijing’s desire to reduce
frictions with the new administration of President Donald
Trump, who repeatedly accused China of keeping its currency artificially weak during
last year’s campaign.
“One can’t simply apply
textbook explanations to Chinese markets because based on
economic fundamentals, the
yuan doesn’t have any basis for
appreciation,” Mr. Shen said.
The yuan’s rise also reflects
Beijing’s desire to deter rapid
capital outflows. The People’s
Bank of China sets a daily
level for the yuan against the
dollar and then allows it to
trade in a 2% range on either
side of that level.
“The yuan is a different
story because the market is
guided by the Chinese central
bank everyday with a clear
policy agenda,” said Iris Pang,
an economist at ING Bank NV
in Hong Kong.
China’s stock market has
also done well in the past two
months. The SSE 50, a widely
watched index that tracks the
50 most valuable companies
listed in Shanghai—almost all
of which are state-owned—has
surged 16% this year to its
highest level in more than two
years.
While some analysts have
cited signs of a resumption of
long-stalled reforms of the
country’s inefficient state-run
enterprises as a factor, others
point to Beijing’s political
agenda as a more important
reason for the market’s bull
run. Some market participants say state-backed investment funds, nicknamed the
“national team,” have been
stepping in to prop up the
market.
“If you want to stabilize the
market, you need to stabilize
these large stocks, and that’s
why the national team has
been putting money in them,”
said Major Teng, chief equities
strategist at Everbright Securities, referring to investments
by state-backed funds.
In contrast, the tech-heavy,
Nasdaq-style ChiNext board in
Shenzhen is down 7.6% for the
6.9
2,000
Coke
7.0
1,000
J F M A M J
J
A
J
F
M
A M J
J
A
*Scale inverted to show strengthening yuan Note: 1,000 yuan = $150
Source: Wind Info
THE WALL STREET JOURNAL.
year. China’s notoriously
frothy commodities markets
are rising again: Steel-rebar
futures have rallied 32% so far,
while coke futures have surged
80% since June, on hopes that
Beijing’s clampdown on overproduction by mining and
steel producers will reduce
supply.
Some say investors are
trusting too much in the central government.
“Whether the capacity cuts
will work and higher production costs can be passed on to
consumers remains a question
mark. The commodities traders are just betting on policies
and there is a lot of speculation,” said Shen Yuan, special
adviser at ZYR Investment, a
Nanjing-based private-equity
firm.
China’s bond market is
sending a more chilling message.
The yield on China’s 10-year
government bond is just 0.09
percentage point above that
on the three-year paper, giving
the spread, or yield curve, its
flattest shape in three years. A
flat yield curve usually reflects
investor pessimism about a
country’s long-term growth
and inflation prospects.
“The flat yield curve does
reflect caution among investors because as long as China’s
various reforms aren’t completed, there will be uncertainties over the economy,” said
ING’s Ms. Pang.
The fact that the vast majority of buyers and sellers in
China’s $9 trillion bond market are more sophisticated institutional investors partly explains the different view
expressed there as opposed to
those in the more speculative
stock and commodities futures
markets, analysts say.
—Yifan Xie contributed
to this article.
Since 2015
BY CHELSEY DULANEY
The U.S. dollar slid Friday
while the euro rallied to its
highest level since 2015 as investors parsed speeches from
global central bank officials.
The WSJ
CURRENCIES
Dollar Index,
which measures
the
U.S. currency against 16 others,
fell 0.6% to 85.62. The euro rose
1.1% to $1.1928, its highest level
since January 2015.
Investors had been anxiously
awaiting the speeches from Federal Reserve Chairwoman Janet
Yellen and European Central
Bank President Mario Draghi—
delivered at the Fed’s annual
conference in Jackson Hole,
Wyo.—as they seek clues on the
outlook for monetary-policy
changes.
Ms. Yellen’s speech didn’t address the outlook for U.S. interest-rate increases, disappointing
some investors who had hoped
the central bank chief would
sound a hawkish tone.
“There is slight disappointment,” said Brad Bechtel, a currency strategist at Jefferies
Group. “There was hope she
would perhaps touch on policy.”
Investors see only a 42%
chance that the Fed sticks to its
projection for another rate-increase this year, CME Group
data show. Expectations that
U.S. rates will remain lower
have weighed on the dollar this
year by making U.S. assets less
attractive to yield-seeking investors.
The dollar’s losses deepened
Friday after a speech from Mr.
Draghi later in the day. Mr.
Draghi avoided giving new clues
as to when the ECB might wind
down its stimulus programs but
acknowledged that the eurozone’s economic recovery is
gaining ground.
Hopes that the central bank
will soon announce a tapering
of its bond-buying program
have driven the euro up nearly
15% against the dollar this year.
DEFEND
THE
FUTURE
She’s as active as ever—and she needs the benefits of an active partner. Which is why we’re
committed to arming advisors with insights, tools and investment solutions to solve the toughest
retirement challenges at every stage. Learn how at jpmorgan.com/funds/defendherfuture
LET’S SOLVE IT.
J.P. Morgan Asset Management is the marketing name for the asset management business of JPMorgan Chase
& Co., and its affiliates worldwide. JPMorgan Distribution Services, Inc. member FINRA/SIPC
THE WALL STREET JOURNAL.
B8 | Monday, August 28, 2017
MARKETS DIGEST
S&P 500 Index
Dow Jones Industrial Average
Last Year ago
Last
2443.05 s 17.50, or 0.72% last week
High, low, open and close for each of
the past 52 weeks
21813.67 s 139.16, or 0.64% last week Trailing P/E ratio 20.02
P/E estimate *
18.38
High, low, open and close for each of
Dividend yield
2.28
the past 52 weeks
19.94
17.98
2.54
All-time high 22118.42, 08/07/17
Year ago
Trailing P/E ratio 23.53 24.71
P/E estimate *
18.73 18.59
Dividend yield
2.01
2.11
All-time high: 2480.91, 08/07/17
23000
2450
22000
2375
65-day moving average
65-day moving average
21000
2300
19000
Monday's open
t
Friday's close
200-day moving average
2150
UP
Friday's close
t
DOWN
Monday's open
Week's low
18000
2075
17000
2000
16000
1925
Bars measure the point change from Monday's open
J
F
M
A
M
J
J
t
NYSE weekly volume, in billions of shares
A S
A
Primary
market
t
D
Composite
O
N
D
J
F
M
A
M
J
J
O
N
D
J
F
M
A
M
J
J
A
Financial Flashback
The Wall Street Journal, Aug. 28, 1995
30
20
10
0
A S
A
Major U.S. Stock-Market Indexes
Nasdaq Composite
Latest Week
Close
Net chg
Low
% chg
52-Week
Close (l)
Low
Dow Jones
Industrial Average 21912.83 21600.34 21813.67
Transportation Avg 9213.45 9010.19 9133.75
Utility Average
749.36 737.46
746.48
Total Stock Market 25339.14 24943.65 25237.43
634.33
Barron's 400
636.96 626.69
139.16
38.44
8.10
207.17
4.29
0.64
0.42
1.10
0.83
0.68
17888.28
7755.40
625.44
21514.15
521.59
High
l 22118.42
18.6
16.7
11.9
12.5
14.9
10.4
1.0
13.2
8.4
5.4
8.5
2.6
10.2
6.6
5.6
6422.75
5950.73
20.1
21.7
16.4
19.7
11.2
12.7
2480.91
1791.93
876.06
12.6
9.6
10.1
9.1
2.9
-1.2
6.9
6.1
7.4
l
9742.76
l
746.48
l 25692.25
l
661.93
last week
6300
6250
6308.72 6177.19
5879.00 5750.50
6265.64
5822.53
49.12
31.62
0.79
0.55
5046.37
4660.46
l
2454.77 2417.35
1713.58 1686.25
829.50 814.00
2443.05
1708.97
827.65
17.50
16.67
9.27
0.72
0.99
1.13
2085.18
1476.68
703.64
l
1351.20 1377.45
11678.21 11812.03
501.91
509.73
3770.29 3883.95
513.75
520.46
92.52
94.20
84.32
85.82
118.06
121.97
1057.17 1080.50
11.28
11.10
19.66
112.20
5.74
96.78
5.81
0.96
1.92
2.55
8.60
-2.98
1.45
0.96
1.14
2.56
1.13
1.03
2.28
2.13
0.80
1156.89
10289.35
455.65
2834.14
463.78
69.71
73.03
117.79
768.37
9.36
l
6200
Standard & Poor's
500 Index
MidCap 400
SmallCap 600
l
l
-20.90
l
1450.39 11.3
l 12000.02
9.9
l
533.62
5.6
l
4075.95 17.8
l
549.2 -0.5
l
99.33 32.7
l
101.55 -10.4
l
192.66 -24.1
l
1138.25 34.8
l
22.51 -17.4
International Stock Indexes
Close
Latest Week
% chg
2831.89
367.07
249.44
The Global Dow
DJ Global Index
DJ Global ex U.S.
0.77
0.93
1.05
Stoxx Europe 600
Stoxx Europe 50
Eurozone
Euro Stoxx
Euro Stoxx 50
Austria
ATX
Belgium
Bel-20
France
CAC 40
Germany
DAX
Greece
Athex Composite
Israel
Tel Aviv
Italy
FTSE MIB
Netherlands AEX
Portugal
PSI 20
Russia
RTS Index
South Africa FTSE/JSE All-Share
Spain
IBEX 35
Sweden
SX All Share
Switzerland Swiss Market
U.K.
FTSE 100
374.07
3042.38
373.88
3438.55
3231.20
3905.71
5104.33
12167.94
835.30
1396.08
21746.50
517.42
5165.92
1060.49
56655.88
10345.30
554.29
8906.18
7401.46
Asia-Pacific
Australia
China
Hong Kong
India
Japan
Malaysia
Singapore
South Korea
Taiwan
5743.90
3331.52
27848.16
31596.06
19452.61
1769.17
3259.57
2378.51
10515.51
EMEA
S&P/ASX 200
Shanghai Composite
Hang Seng
S&P BSE Sensex
Nikkei Stock Avg
FTSE Bursa Malaysia KLCI
Straits Times
Kospi
Weighted
–0.03
–0.23
–0.22
–0.49
–0.19
–0.31
–0.43
–0.39
–0.39
328.80
2730.05
0.02
317.93
2935.25
2311.65
1.67
3426.21
4332.45
10259.13
0.02
551.93
1.27
1363.50
0.11
16135
439.07
4370.84
944.96
3.18
2.44 48935.90
8607.1
496.66
0.47
7593.20
0.36
6665.63
1.06
–0.06
1.92
2.96
0.23
–0.09
–0.40
0.23
0.85
1.88
•
•
•
•
•
2390.11
311.55
206.73
503.67
0.92
3.43 56820.77
14349.10
0.69
44364.17
0.58
3127.54
1.17
588.81
71073.65
15055.99
51373.23
3932.62
DJ Americas
Sao Paulo Bovespa
S&P/TSX Comp
S&P/BMV IPC
Santiago IPSA
52-Week Range
Close
Low
5156.6
2980.43
21574.76
25765.14
16251.54
1616.64
2787.27
1958.38
8902.30
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
High
2878.99
371.21
251.16
11.9
12.6
16.6
596.96
71132.80
15922.37
51713.38
3932.62
9.0
18.0
–1.5
12.6
22.0
396.45
3276.11
392.06
3658.79
3280.48
4041.03
5432.40
12888.95
858.08
1478.96
22048
536.26
5330.60
1195.61
56655.88
11135.4
596.72
9176.99
7547.63
3.5
1.1
6.7
4.5
23.4
8.3
5.0
6.0
29.8
–5.1
13.1
7.1
10.4
–8.0
11.8
10.6
3.7
8.3
3.6
5956.5
3331.52
27854.91
32575.17
20230.41
1792.35
3354.71
2451.53
10579.38
1.4
7.3
26.6
18.7
1.8
7.8
13.1
17.4
13.6
Consumer Rates and Returns to Investor
Selected rates
A consumer rate against its
benchmark over the past year
New car loan
t
Prime rate
1.96%
877-682-4273
UniBank for Savings
Whitinsville, MA
2.24%
800-578-4270
3.00
TrustCo Bank
Orlando, FL
2.37%
407-422-7129
2.50
BB&T
Raleigh, NC
2.59%
919-716-9000
3.50
t
2.00
S O N D J FMAM J J A
2016
2017
Interest rate
Cambridge Savings Bank
2.59%
Cambridge, MA
888-418-5626
Yield/Rate (%)
Last (l)Week ago
Federal-funds rate target
1.00-1.25 1.00-1.25
Prime rate*
4.25
4.25
Libor, 3-month
1.31
1.32
Money market, annual yield
0.29
0.29
Five-year CD, annual yield
1.45
1.47
30-year mortgage, fixed†
3.89
3.84
15-year mortgage, fixed†
3.12
3.06
Jumbo mortgages, $424,100-plus† 4.33
4.31
Five-year adj mortgage (ARM)† 3.30
3.35
New-car loan, 48-month
2.86
2.87
HELOC, $30,000
5.03
4.93
3-yr chg
52-Week Range (%)
Low 0 2 4 6 8 High (pct pts)
0.25 l
l
3.50
0.83 l
0.24 l
1.17 l
l
3.44
l
2.70
l
4.02
l
3.10
l
2.85
l
4.57
1.25
4.25
1.32
0.36
1.47
4.33
3.50
4.88
4.03
3.36
5.22
Close
Net chg
570.21
177.83
0.83
0.33
47.87
%Chg
24900
YTD
% chg
-0.79 -1.62 -10.89
92.52
-0.91 -0.98 -9.48
85.63
-0.49 -0.57 -7.86
Euro, per dollar
0.8387 -0.0116 -1.36 -11.78
Yen, per dollar
U.K. pound, in dollars
109.36
0.13 -6.54
0.14
1.29 0.0005
0.04
52-Week
Low Close(l) High
DJ Commodity
508.27
TR/CC CRB Index
166.50
l
Gold, $ per troy oz.
l
2.56
589.81
0.48
3.93
l
0.73
1349.40 -2.19
92.52
l
103.25 -3.10
WSJ Dollar Index
85.63
l
93.56 -0.98
0.84
l
Euro, per dollar
Yen, per dollar
0.96 -6.10
100.31
l
1.20
l
U.K. pound, in dollars
118.18
1.00
1.00
1.08
-0.10
0.11
-0.41
-0.31
-0.26
-0.22
-0.34
0.44
Bankrate.com rates based on survey of over 4,800 online banks. *Base rate posted by 70% of the nation's largest
banks.† Excludes closing costs.
Sources: SIX Financial Information; WSJ Market Data Group; Bankrate.com
1
3 6
month(s)
One year ago
1 2 3 5 710
years
maturity
Yen, euro vs. dollar; dollar vs.
major U.S. trading partners
10%
1.50
–5
0.75
–10
0.00
–15
30
s
WSJ Dollar index
Euro
Yen
2016
2017
Sources: Ryan ALM; Tullett Prebon; WSJ Market Data Group
Corporate Borrowing Rates and Yields
Bond total return index
Spread +/- Treasurys,
Yield (%)
in basis pts, 52-wk Range
Last Wk ago
Last
Low High
10-yr Treasury, Ryan ALM
DJ Corporate
Aggregate, Barclays Capital
High Yield 100, Merrill Lynch
Fixed-Rate MBS, Barclays
Muni Master, Merrill
EMBI Global, J.P. Morgan
2.169
2.933
2.450
5.216
2.740
1.772
5.415
2.196
2.951
2.470
5.300
2.760
1.787
5.483
42
341
30
10
322
4.01
22.92
–0.3
–1.8
0.4
–2.8
26.15
63.4
12.1
7.4
–1.5
PetlQ
PETQ July 21/$16.00
Calyxt
CLXT July 20/$8.00
14.74
84.3
31.0
–27.1 –17.3
Other Stock Offerings
Secondaries and follow-ons expected this week in the U.S. market
None expected this week
“Shelf registrations” allow a company to prepare a stock or bond for
sale, without selling the whole issue at once. Corporations sell as
conditions become favorable. Here are the shelf sales, or takedowns,
over the last week:
Issuer/Industry
Takedown date/ Deal value Registration
Registration date ($ mil.)
(mil.)
Precipio
Healthcare
Aug. 22
Feb. 6,315
$6.0
Bookrunner(s)
Aegis Cptl
$50.0
Public and Private Borrowing
Treasurys
Tuesday, August 29
40
309
10
-5
315
48
490
34
18
407
Final
maturity Issuer
Total Return
52-wk
3-yr
-2.78 2.60
1.43 3.89
0.30 2.66
7.552 3.316
0.63 2.47
0.717 2.965
3.999 5.205
Sources: J.P. Morgan; Ryan ALM; S&P Dow Jones Indices; Barclays Capital; Merrill Lynch
Total
($mil.)
Rating
Bookrunner/
Fitch Moody’s S&P Bond Counsel(s)
Aug. 28 prelim.
Chabot-Las
Positas Comm
Coll Dt
160.0 N.R.
N.R.
N.R. Piper
Jaffray/—
Aug. 28 prelim.
Massa chusetts
200.0 N.R.
N.R.
N.R. Barclays
/—
Aug. 28 prelim.
Ohio Higher
Ed Fac
Commission
160.0 N.R.
Aa2
AA J P Morgan
Securities
LLC/—
Aug. 29 prelim.
Prince
Georges CoMaryland
480.8 AAA
Aaa
AAA Preliminary/—
Sept. 1 prelim.
California
2,500.0 N.R.
N.R.
N.R. Goldman &
Co/—
Sept. 1 prelim.
Greater
Orlando
Aviation Auth
950.0 N.R.
N.R.
N.R. RBC Cptl
Mkt/—
Sept. 1 prelim.
Illinois
Finance
Authority
558.5 N.R.
N.R.
N.R. BoA Merrill/—
Sept. 1 prelim.
Metropolitan
Transport Auth
(MTA)
500.0 AA-
A1
AA- Citi/
Nixon Peabody LLP/
D Seaton & Associates
Sept. 1 prelim.
Wisconsin
Hlth & Ed Fac Auth
(WHEFA)
307.9 N.R.
N.R.
N.R. BoA Merrill/—
1.34 -1.94
Plus, get deeper money-flows data and
email delivery of key stock-market
data.
All are available free at
WSJMarkets.com
Friday
RBB Bancorp
RBB July 26/$23.00
Venator Materials
20.07
VNTR Aug. 3/$20.00
Clementia Pharmaceuticals 16.11
CMTA Aug. 2/$15.00
7.39
Real-time U.S. stock
quotes are available on
WSJ.com. Track mostactive stocks, new
highs/lows, mutual
funds and ETFs.
0
8.0
7.7
% Chg
8.37
54.45
l
1127.80
4.34
U.S. Dollar Index
5
25.2
19.24
195.14 -4.45
l
Crude oil, $ per barrel 42.53
Natural gas, $/MMBtu
2.25
60.7
Zealand Pharma
ZEAL Aug. 9/$17.87
0.15 0.52
0.19 -7.63
WSJ Dollar Index
3.00
14.7
–1.5
Public and Municipal Finance
U.S. Dollar Index
3.75%
t
Chase Bank
Seattle, WA
4.00%
65.9
14.00
25200
Benchmark Yields and Rates
Treasury yield curve Forex Race
2.87%
Bankrate.com avg†:
Redfin
24.89
RDFN July 28/$15.00
Sienna Biopharmaceutic 24.10
SNNA July 27/$15.00
Ranger Energy Svcs
RNGR Aug. 11/$14.50
YogaWorks
YOGA Aug. 11/$5.50
Auction of 5 year note;
announced on August 24; settles on August 31
Natural gas, $/MMBtu 2.892 -0.001 -0.03 -22.34
Gold, $ per troy oz.
1292.50 6.80 0.53 12.39
Yield to maturity of current bills,
notes and bonds
–3.4
% Chg From
Friday3s Offer 1st-day
close ($) price close
Company SYMBOL
IPO date/Offer price
25350
s
New car loan
18 21 22 23 24 25
August
Crude oil, $ per barrel
t
U.S. consumer rates
% Chg From
Friday3s Offer 1st-day
close ($) price close
Company SYMBOL
IPO date/Offer price
Sale
TR/CC CRB Index
Source: SIX Financial Information;WSJ Market Data Group
180 days
Deals of $ 150 million or more expected this week
DJ Commodity
WSJ
.COM
43.9
Performance of IPOs, most-recent listed first
25050
Commodities and
Currencies
Last Week
YTD
% chg
218.5
Sources: Dealogic; WSJ Market Data Group
Auction of 2 year note;
Auction of 7 year note;
announced on August 24; settles on August 31 announced on August 24; settles on August 31
s
Americas
Brazil
Canada
Mexico
Chile
1.5
5.7
6.8
2.4
0.7
0.6
26.3
8.1
8.1
0.1
2.6
9.5
8.8 -4.4
-33.6 -25.1
19.2 19.2
-19.7 -1.2
16.00
HLNE
Auction of 13 and 26 week bills;
Auction of 4 week bill;
announced on August 24; settles on August 31 announced on August 28; settles on August 31
s 207.17, or 0.83%
Sources: SIX Financial Information; WSJ Market Data Group
Region/Country Index
Aug. 28 March 1, ’17 Hamilton Lane
Monday, August 28
DJ US TSM
last week
Philadelphia Stock Exchange
World
6150
18 21 22 23 24 25
August
Other Indexes
Russell 2000
1380.60
NYSE Composite
11845.50
Value Line
510.94
NYSE Arca Biotech 3930.37
NYSE Arca Pharma
522.88
KBW Bank
94.91
PHLX§ Gold/Silver
86.52
PHLX§ Oil Service
122.54
PHLX§ Semiconductor 1091.84
CBOE Volatility
14.74
Offer Offer amt Through Lockup
Symbol price($) ($ mil.) Friday (%) provision
Issuer
Off the Shelf
s 49.12, or 0.79%
% chg
YTD 3-yr. ann.
% chg
Nasdaq Stock Market
Nasdaq Composite
Nasdaq 100
Lockup
expiration Issue date
Sources: WSJ Market Data Group; FactSet Research Systems
Chase Manhattan completed its merger with Chemical
Banking Corp. to create the country’s largest bank at the
time, with $300 billion in assets.
Weekly P/E data based on as-reported earnings from Birinyi Associates Inc.
High
Below, companies whose officers and other insiders will become eligible
to sell shares in their newly public companies for the first time. Such
sales can move the stock’s price.
IPO Scorecard
200-day moving average
Week's high
N
None expected this week
2225
20000
O
IPOs in the U.S. Market
Lockup Expirations
Current divisor 0.14602128057775
A S
New to the Market
Public Offerings of Stock
Source:Thomson Reuters/Ipreo
A Week in the Life of the DJIA
A look at how the Dow Jones Industrial Average component stocks
did in the past week and how much each moved the index. The DJIA
gained 139.16 points, or 0.64%, on the week. A $1 change in the price
of any DJIA stock = 6.85-point change in the average. To date, a
$1,000 investment on Dec. 31 in each current DJIA stock component
would have returned $33,307, or a gain of 11.00%, on the $30,000
investment, including reinvested dividends.
The Week’s Action
Pct Stock price Point chg
chg (%) change in average Company
Symbol Close
3.52
2.89
2.36
2.20
2.08
1.07
4.04
1.45
0.72
0.99
7.33
27.67
9.93
4.93
6.78
Cisco Systems
IBM
Merck
Pfizer
Verizon
CSCO $31.44
IBM 143.74
MRK 62.94
PFE 33.39
VZ
48.68
1.86
1.82
1.70
1.64
1.50
3.54
1.48
1.71
1.75
2.36
24.24
10.14
11.71
11.98
16.16
UnitedHealth Group UNH
DuPont
DD
Walt Disney
DIS
Chevron
CVX
Apple
AAPL
194.36
82.66
102.41
108.23
159.86
1,225
1,144
990
945
1,402
1.46
1.27
1.26
0.82
0.67
2.16
1.15
1.43
0.84
1.06
14.79
7.88
9.79
5.75
7.26
Home Depot
J.P. Morgan Chase
Caterpillar
Visa
McDonald’s
HD
JPM
CAT
V
MCD
149.65
91.89
115.35
103.35
158.82
1,131
1,083
1,275
1,333
1,325
0.46
0.14
0.11
0.10
0.05
0.33
0.32
0.09
0.08
0.12
2.26
2.19
0.62
0.55
0.82
Microsoft
MSFT 72.82
Goldman Sachs
GS 222.47
American Express AXP 85.47
Exxon Mobil
XOM 76.72
Boeing
BA 235.89
1,194
935
1,169
872
1,557
0.04
–0.22
–0.24
–0.36
–0.69
0.04
–0.10
–0.06
–0.41
–1.40
0.27
–0.68
–0.41
–2.81
–9.59
Procter & Gamble
PG
92.51
Coca-Cola
KO
45.57
General Electric
GE
24.49
United Technologies UTX 115.07
3M
MMM 202.13
1,128
1,119
787
1,069
1,155
–0.72
–0.86
–0.97
–1.11
–1.91
–0.95
–0.68
–0.34
–1.42
–1.05
–6.51
–4.66
–2.33
–9.72
–7.19
Johnson & Johnson
Wal-Mart Stores
Intel
Travelers
Nike
JNJ 131.68
WMT 78.63
INTC 34.67
TRV 126.47
NKE 53.90
1,168
1,163
977
1,045
1,068
$1,000 Invested(year-end '16)
$1,000
$1,070
889
1,086
1,059
942
Sources: WSJ Market Data Group; S&P Dow Jones Indices. For more information on the Dow Jones
Industrial Average and the 30 industrials, please visit www.djindexes.com
THE WALL STREET JOURNAL.
Monday, August 28, 2017 | B9
CLOSED-END FUNDS
Listed are the 300 largest closed-end funds as
measured by assets.
Closed-end funds sell a limited number of shares and
invest the proceeds in securities. Unlike open-end
funds, closed-ends generally do not buy their shares
back from investors who wish to cash in their holdings.
Instead, fund shares trade on a stock exchange.
a-The NAV and market price are ex dividend. b-The
NAV is fully diluted. c-NAV is as of Thursday’s close. dNAV is as of Wednesday’s close. e-NAV assumes rights
offering is fully subscribed. f-Rights offering in process.
g-Rights offering announced. h-Lipper data has been
adjusted for rights offering. j-Rights offering has
expired, but Lipper data not yet adjusted. l-NAV as of
previous day. o-Tender offer in process. v-NAV is
converted at the commercial Rand rate. w-Convertible
Note-NAV (not market) conversion value. y-NAV and
market price are in Canadian dollars. NA signifies that
the information is not available or not applicable. NS
signifies fund not in existence of entire period.
12 month yield is computed by dividing income
dividends paid (during the previous twelve months for
periods ending at month-end or during the previous
fifty-two weeks for periods ending at any time other
than month-end) by the latest month-end market price
adjusted for capital gains distributions.
Source: Lipper
Friday, August 25, 2017
52 wk
Prem Ttl
Fund (SYM)
NAV Close /Disc Ret
General Equity Funds
Adams Divers Equity Fd ADX 17.04 14.63 -14.2 19.9
Boulder Growth & Income BIF 11.89 9.95 -16.3 22.6
Central Securities CET 29.79 24.80 -16.8 24.3
CohSteer Opprtnty Fd FOF 13.69 12.93 -5.6 16.8
Cornerstone Strategic CLM 12.95 13.98 +8.0 7.5
EtnVnc TaxAdvDiv EVT 22.07 21.51 -2.5 12.0
Gabelli Dividend & Incm GDV 23.08 21.54 -6.7 15.2
Gabelli Equity Trust GAB 6.29 6.24 -0.8 19.4
Genl American Investors GAM 40.66 34.43 -15.3 15.8
Guggenheim Enh Fd GPM 8.63 8.34 -3.4 15.6
HnckJohn TxAdv HTD 26.57 26.08 -1.8 15.8
Liberty All-Star Equity USA 6.41 5.62 -12.3 18.8
Royce Micro-Cap RMT 9.49 8.32 -12.3 13.7
Royce Value Trust RVT 16.00 14.33 -10.4 20.9
Source Capital SOR 43.14 38.96 -9.7 10.1
Tri-Continental TY
28.10 24.91 -11.4 20.8
Specialized Equity Funds
Adams Natural Rscs Fd PEO 20.94 18.07 -13.7 -4.3
52 wk
Prem Ttl
Fund (SYM)
NAV Close /Disc Ret
AllnzGI NFJ Div Interest NFJ 14.44 13.19 -8.7 11.9
AlpnGlblPrProp AWP 7.16 6.45 -9.9 24.8
ASA Gold & Prec Metals ASA 13.51 11.93 -11.7 -17.5
BlkRk Enh Cap Inco CII 15.98 15.05 -5.8 17.0
BlkRk Engy Res Tr BGR 13.79 12.54 -9.1 -5.1
BlackRock Enh Eq Div Tr BDJ 9.45 8.75 -7.4 17.1
BlackRock Enh Gl Div Tr BOE 14.21 13.12 -7.7 16.8
BlkRk Intl Grwth&Inco BGY 6.82 6.34 -7.0 16.1
BlkRk Health Sci BME 34.59 35.56 +2.8 11.1
BlackRck Rscs Comm Str Tr BCX 9.54 8.55 -10.4 13.4
BlackRock Science & Tech BST 25.51 23.68 -7.2 38.5
BlackRock Utility & Infr BUI 21.31 21.38 +0.3 19.1
CBREClarionGlblRlEstIncm IGR 8.80 7.71 -12.4 -1.1
Central Fund of Canada CEF 13.63 12.74 -6.5 -7.8
ClearBridge Amer Engy CBA 8.72 8.02 -8.0 -0.9
ClearBridge Engy MLP Fd CEM 14.69 14.58 -0.7 -3.5
Clearbridge Engy MLP Opp EMO 12.13 11.65 -4.0 -2.4
Clearbridge Engy MLP TR CTR 12.59 12.03 -4.4 0.1
Cohen & Steers Infr Fd UTF 25.77 23.32 -9.5 20.5
C&S MLP Incm & Engy Opp MIE 10.73 10.01 -6.7 3.4
Cohen & Steers Qual Inc RQI 13.58 12.69 -6.6 5.4
CohnStrsPfdInco RNP 22.78 20.87 -8.4 8.4
Cohen & Steers TR RFI 13.46 12.73 -5.4 2.3
CLSeligmn Prem Tech Gr Fd STK 20.26 21.81 +7.7 34.0
Divers Real Asset Incm Fd DRA 19.66 17.82 -9.4 9.1
Duff & Phelps DNP
10.20 11.41 +11.8 16.3
Duff&PhelpsGblUtilIncFd DPG 18.26 16.35 -10.5 3.4
Eaton Vance Eqty Inco Fd EOI 14.11 13.29 -5.8 10.8
Eaton Vance Eqty Inco II EOS 14.91 14.88 -0.2 20.6
EtnVncRskMngd ETJ 9.80 9.24 -5.7 6.5
Etn Vnc Tax Mgd Buy-Write ETB 15.98 16.30 +2.0 9.5
Eaton Vance BuyWrite Opp ETV 14.45 15.19 +5.1 11.9
Eaton Vance Tax-Mng Div ETY 11.65 11.14 -4.4 13.4
EatonVanceTax-MngdOpp ETW 11.36 11.58 +1.9 18.0
EtnVncTxMngGlDvEqInc EXG 9.27 9.13 -1.5 15.2
Fiduciary/Clymr Opp Fd FMO 12.12 12.36 +2.0 -5.2
FT Energy Inc & Growth Fd FEN 23.44 24.08 +2.7 4.3
FstTrEnhEqtIncFd FFA 16.00 14.73 -7.9 14.6
First Tr Engy Infr Fd FIF 18.92 17.95 -5.1 8.2
First Tr MLP & Engy Incm FEI 14.53 14.96 +3.0 2.4
Gabelli Hlthcr & Well GRX 11.48 10.19 -11.2 0.1
52 wk
Prem Ttl
Fund (SYM)
NAV Close /Disc Ret
Gabelli Utility Tr GUT 5.58 7.02 +25.8 17.9
GAMCOGlblGoldNatRscs&Inc GGN 5.45 5.58 +2.4 0.8
GoldmanSachsMLPIncOpp GMZ 9.16 9.15 -0.1 4.0
Goldman Sachs MLPEnergy GER 6.57 6.68 +1.7 1.1
John Hancock Finl Opps Fd BTO 33.68 33.93 +0.7 27.1
Macquarie Glbl Infrstrctr MGU 28.37 25.70 -9.4 24.0
NeubergerBermanMLPIncm NML 10.00 9.25 -7.5 11.1
Neubrgr Brm Rl Est Sec Fd NRO 5.88 5.46 -7.1 3.6
Nuveen Dow 30 Dynamic DIAX 17.75 16.58 -6.6 19.5
Nuveen Core Eq Alpha JCE 15.72 15.34 -2.4 14.9
Nuveen Diversified Div JDD 12.90 12.80 -0.8 14.5
Nuveen Engy MLP Fd JMF 11.28 11.97 +6.1 5.4
NuvNASDAQ100DynOver QQQX 21.74 21.53 -1.0 23.3
Nuveen Real Est Incm Fd JRS 11.38 11.14 -2.1 3.6
NuvS&P500DynOverwrite SPXX
15.26 NA 15.7
NuveenS&P500Buy-Write BXMX 14.08 13.67 -2.9 11.2
Reaves Utility Fund UTG 35.52 36.13 +1.7 29.3
Tekla Hlthcr Investors HQH 24.83 24.09 -3.0 2.2
Tekla Healthcare Opps Fd THQ 19.43 17.79 -8.4 10.7
Tekla Life Sciences HQL 20.52 20.65 +0.6 15.6
Tekla World Hlthcr Fd THW 14.77 13.86 -6.2 1.6
Tortoise Energy TYG 25.49 27.63 +8.4 -3.9
Tortoise MLP Fund NTG 16.91 17.53 +3.7 -4.1
Voya Gl Equity Div IGD 8.16 7.81 -4.3 20.5
Income Preferred Stock Funds
Calamos Strat Fd CSQ 12.25 11.71 -4.4 21.0
Cohen & Steers Dur Pfd LDP 27.19 26.18 -3.7 10.8
Cohen & Strs Sel Prf Inco PSF 27.85 27.82 -0.1 10.1
FT Interm Duration Pfd FPF 24.97 24.69 -1.1 14.7
Flaherty & Crumrine Dyn DFP 26.41 26.12 -1.1 12.4
Flaherty & Crumrine Pfd FFC 20.41 21.09 +3.3 6.0
John Hancock Pfd Income HPI 21.38 21.55 +0.8 1.3
John Hancock Pfd II HPF 21.14 21.59 +2.1 1.7
John Hancock Pfd Inc III HPS 18.86 18.63 -1.2 0.4
JHancock Pr Div PDT 16.03 17.02 +6.2 8.6
LMP Cap & Inco Fd SCD 15.23 14.00 -8.1 11.0
Nuveen Preferred & Incm JPI 25.74 24.87 -3.4 7.7
Nuveen Pfd Incm Opps Fd JPC 10.73 10.51 -2.1 9.0
Nuveen Pfd Secs Incm Fd JPS 10.29 10.17 -1.2 14.8
TCW Strategic Income Fund TSI
5.68 NA 10.6
Virtus Global Dividend ZTR 12.74 13.00 +2.0 22.9
Borrowing Benchmarks | WSJ.com/bonds
Money Rates
August 25, 2017
Key annual interest rates paid to borrow or lend money in U.S. and international markets. Rates below are a
guide to general levels but don’t always represent actual transactions.
Week
Latest ago
Inflation
July index
level
Chg From (%)
June '17 July '16
U.S. consumer price index
244.786
251.936
All items
Core
–0.07
–0.03
1.7
1.7
International rates
Latest
Week
ago
Treasury bill auction
0.940 0.940 0.990 0.160
1.000 1.015 1.180 0.250
1.115 1.115 1.140 0.420
4 weeks
13 weeks
26 weeks
Secondary market
Fannie Mae
52-Week
High
Low
Prime rates
U.S.
Canada
Japan
30-year mortgage yields
30 days
60 days
4.25 4.25 4.25 3.50
2.95 2.95 2.95 2.70
1.475 1.475 1.475 1.475
Latest
0.00
0.50
0.25
1.50
0.00
0.50
0.25
1.50
0.00
0.50
0.25
1.50
0.00
0.50
0.25
1.50
1.15
U.S.
1.13
1.38
0.15
Six month
One year
—52-WEEK—
High Low
1.45500 1.45639 1.46544 1.23150
1.72789 1.72622 1.82761 1.53656
Euro Libor
One month
Three month
Six month
One year
-0.400
-0.374
-0.307
-0.206
-0.400
-0.378
-0.304
-0.205
-0.371
-0.319
-0.203
-0.071
-0.405
-0.378
-0.308
-0.206
One month
Three month
Six month
One year
52-Week
high
low
-0.371
-0.329
-0.272
-0.159
Latest
-0.371
-0.329
-0.271
-0.158
Value
Traded
-0.366
-0.297
-0.191
-0.050
-0.375
-0.332
-0.274
-0.163
52-Week
High
Low
DTCC GCF Repo Index
3.00
3.00
3.00
2.25
Treasury
MBS
Commercial paper (AA financial)
1.22
1.23
1.28
1.152
1.161
26.500 1.366 0.244
95.550 1.506 0.257
Open Implied
Settle Change Interest Rate
0.62
DTCC GCF Repo Index Futures
Libor
One month
Three month
U.S. government rates
Week
ago
Call money
90 days
Overnight repurchase
Week
Latest ago
Euro interbank offered rate (Euribor)
3.393 3.384 3.865 2.832
3.419 3.411 3.899 2.861
Other short-term rates
Policy Rates
Euro zone
Switzerland
Britain
Australia
—52-WEEK—
High Low
1.23556 1.23500 1.23611 0.51322
1.31778 1.31472 1.31778 0.83344
Treasury Aug
Treasury Sep
Treasury Oct
98.875 unch. 3335 1.125
98.850 unch. 2426 1.150
98.770 unch. 1692 1.230
Discount
1.75
1.75
1.75
1.00
1.1700
1.3125
1.0500
1.1600
1.1700
1.2000
1.3125
1.1600
1.1700
1.1900
0.3300
0.5625
0.2000
0.2800
0.3000
Federal funds
Effective rate
High
Low
Bid
Offer
1.1700
1.3125
1.0900
1.1500
1.1700
Notes on data:
U.S. prime rate is the base rate on corporate loans posted by at least 70% of the 10 largest U.S. banks,
and is effective June 15, 2017. Other prime rates aren’t directly comparable; lending practices vary
widely by location; Discount rate is effective June 15, 2017. DTCC GCF Repo Index is Depository
Trust & Clearing Corp.'s weighted average for overnight trades in applicable CUSIPs. Value traded is in
billions of U.S. dollars. Federal-funds rates are Tullett Prebon rates as of 5:30 p.m. ET. Futures on the
DTCC GCF Repo Index are traded on NYSE Liffe US.
Sources: Federal Reserve; Bureau of Labor Statistics; DTCC; SIX Financial Information;
General Electric Capital Corp.; Tullett Prebon Information, Ltd.
52 wk
Prem Ttl
Fund (SYM)
NAV Close /Disc Ret
Convertible Sec's. Funds
AdvntClymrFd AVK
16.02 NA 15.9
AllianzGI Conv & Incm NCV 6.59 6.94 +5.3 16.6
AllianzGI Conv & Incm II NCZ 5.91 6.20 +4.9 20.5
AllianzGI Div Incm ACV 21.78 20.89 -4.1 22.5
AllianzGI Equity & Conv NIE 21.90 20.10 -8.2 13.0
Calamos Conv Hi Inco Fd CHY 11.65 11.76 +0.9 14.7
Calamos CHI
11.05 11.29 +2.2 18.1
World Equity Funds
Alpine Tot Dyn Div AOD 9.63 8.65 -10.2 21.7
Calamos Global Tot Ret Fd CGO 12.92 NA NA NA
Cdn Genl Inv CGI
29.06 21.76 -25.1 21.1
China Fund CHN
22.33 20.68 -7.4 33.2
Clough Global Opp Fd GLO 11.86 11.19 -5.6 27.2
EtnVncTxAdvGblDiv ETG 17.58 16.63 -5.4 18.4
EatonVance TxAdv Opport ETO 23.75 23.65 -0.4 17.5
First Trust Dynamic Eur FDEU 19.59 18.40 -6.1 19.0
Gabelli Glbl Multimedia GGT 9.46 9.21 -2.6 33.4
GDL Fund GDL
11.67 10.16 -12.9 10.3
India Fund IFN
30.97 27.63 -10.8 19.5
Japan Sml Cap JOF 13.82 12.24 -11.4 32.4
Korea Fund KF
45.00 40.38 -10.3 19.6
Mexico Fund MXF
18.03 NA 10.6
Morgan-Stanley Asia-Pac APF 19.80 17.17 -13.3 18.2
MS China a Shr Fd CAF 26.60 22.48 -15.5 23.6
MS Emerging Fund MSF 19.38 17.12 -11.7 20.0
MS India Invest IIF
38.46 34.60 -10.0 28.7
New Germany Fund GF 19.44 17.47 -10.1 30.8
Swiss Helvetia Fund SWZ 13.91 12.67 -8.9 23.5
Templeton Dragon TDF 24.83 22.14 -10.8 31.0
Templeton Emerging EMF 18.35 16.35 -10.9 33.6
Virtus Total Return Fund ZF 13.67 12.74 -6.8 17.8
Voya Infr Indls & Matls IDE 16.08 15.05 -6.4 28.8
Wells Fargo Gl Div Opp EOD
6.31 NA 15.6
Prem12 Mo
Fund (SYM)
NAV Close /Disc Yld
U.S. Mortgage Bond Funds
BlackRock Income Trust BKT 6.72 6.30 -6.3 5.0
Nuveen Mtg Opp Term Fd JLS 26.67 25.64 -3.9 5.2
Investment Grade Bond Funds
Blackrock Core Bond Tr BHK 14.87 13.98 -6.0 5.5
BlkRk Credit Alloc Incm BTZ 14.80 13.39 -9.5 6.3
John Hancock Income Secs JHS 15.65 14.75 -5.8 5.5
MFS Inc Tr MIN
4.53 4.27 -5.7 9.0
WstAstClymr InfLnkd Fd WIW 12.65 11.16 -11.8 3.4
WstAssetClymr InflLnk Sec WIA 12.94 11.49 -11.2 3.0
Loan Participation Funds
Apollo Sr Fltg Rate Fd AFT 18.07 16.79 -7.1 7.2
BlkRk Debt Strat Fd DSU 12.65 11.62 -8.1 6.7
BlackRock FR Incm Strat FRA 14.92 14.07 -5.7 5.6
Blkrk FltRt InTr BGT 14.41 13.71 -4.9 5.4
BlackstoneGSO Strat Cred BGB 16.97 15.81 -6.8 8.3
Blackstone GSO Sr Float BSL 17.61 17.59 -0.1 6.5
Eagle Point Credit ECC NA 20.57 NA 8.7
Eaton Vance FR Incm Tr EFT 15.48 14.72 -4.9 5.6
EatonVnc SrFltRate EFR 15.13 14.66 -3.1 6.0
Eaton Vance Sr Incm Tr EVF 7.14 6.60 -7.6 5.7
First Trust Sr FR Fd II FCT 14.19 13.28 -6.4 6.0
FT Sr Floating Rate 2022 FIV 9.83 9.80 -0.3 NS
Invesco Credit Opps Fund VTA 12.92 11.76 -9.0 7.1
Invesco Senior Income Tr VVR 4.86 4.44 -8.6 6.0
Nuveen Credit Strt Inc Fd JQC 9.19 8.42 -8.4 7.2
NuvFloatRteInco Fd JFR 11.63 11.77 +1.2 6.7
Nuv Float Rte Opp Fd JRO 11.56 11.61 +0.4 6.9
Nuveen Senior Income Fund NSL 6.88 6.61 -3.9 6.8
Pioneer Floating Rate Tr PHD 12.50 11.85 -5.2 6.1
Voya Prime Rate Trust PPR 5.67 5.20 -8.3 5.9
High Yield Bond Funds
AllianceBernstein Glbl AWF 14.04 12.90 -8.1 6.9
Barings Glbl Short Dur HY BGH 21.07 20.07 -4.7 9.0
BlackRock Corp Hi Yd Fd HYT 12.16 11.08 -8.9 7.8
BlackRockDurInco Tr BLW 16.95 15.98 -5.7 8.0
Brookfield Real Assets RA 25.32 NA NA NS
Credit Suisse High Yld DHY 2.77 2.83 +2.2 9.5
DoubleLine Incm Solutions DSL 21.59 20.72 -4.0 8.4
Dreyfus Hi Yd Strat Fd DHF 3.56 3.51 -1.4 8.9
Fst Tr Hi Inc Lg/Shrt Fd FSD 18.14 16.93 -6.7 7.4
Guggenheim Strat Opps Fd GOF 19.72 21.11 +7.0 10.3
Ivy High Income Opps Fund IVH 16.26 15.55 -4.4 9.3
Neuberger Berman HYS NHS 13.30 11.95 -10.2 7.7
NexPoint Credit Strat Fd NHF 24.41 21.97 -10.0 11.4
Nuveen Credit Opps 2022 JCO 9.88 9.98 +1.0 NS
Nuveen Gl Hi Incm Fd JGH 18.35 17.02 -7.2 8.3
Nuveen High Incm Dec18 JHA 10.11 10.06 -0.5 5.6
Nuveen High Incm Dec19 JHD 10.27 10.24 -0.3 5.8
Nuveen Hi Incm Nov 2021 JHB 10.12 10.04 -0.8 NS
Pioneer High Income Trust PHT 10.71 9.85 -8.0 8.7
Prud Gl Shrt Dur Hi Yd GHY 16.48 14.87 -9.8 7.8
Prudentl Sh Dur Hi Yd Fd ISD 16.67 15.21 -8.8 7.9
Wells Fargo Incm Opps Fd EAD NA 8.56 NA 8.8
Wstrn Asset Glbl Hi Inco EHI NA 10.10 NA 9.5
Wstrn Asset High Inco II HIX 7.71 7.17 -7.0 8.8
Wstrn Asset Opp Fd HIO NA 5.09 NA 7.4
West Asst HY Def Opp Fd HYI NA 15.28 NA 7.9
Prem12 Mo
Fund (SYM)
NAV Close /Disc Yld
Other Domestic Taxable Bond Funds
Apollo Tactical Incm Fd AIF 17.44 16.20 -7.1 8.8
Ares Dynamic Credit Alloc ARDC NA 16.36 NA 7.5
Barings Corp Investors MCI NA 16.02 NA 3.9
BlackRock Multi-Sector IT BIT 19.75 18.26 -7.5 9.5
BlackRock Taxable Mun Bd BBN 23.72 23.71 0.0 6.7
Doubleline Oppor Credit DBL 22.42 24.52 +9.4 8.1
Duff & Phelps Utl & Cp Bd DUC 9.83 9.22 -6.2 6.4
EtnVncLtdFd EVV
15.15 13.99 -7.7 7.2
Franklin Ltd Duration IT FTF NA 11.92 NA 10.3
GuggenheimTaxableMuni GBAB 23.48 23.12 -1.5 6.6
Invesco High Incm 2023 IHIT 10.17 10.03 -1.4 NS
John Hancock Investors JHI 18.82 18.76 -0.3 7.1
KKR Income Opps Fund KIO 18.18 NA NA 9.0
MFS Charter MCR
9.34 8.64 -7.5 8.6
MFS Multimkt MMT 6.69 6.19 -7.5 8.6
Nuveen Build Am Bd Fd NBB 22.34 21.62 -3.2 5.9
PIMCO Corporate & Incm PTY NA 16.71 NA 10.2
PIMCO Corporate & Incm PCN NA 16.71 NA 9.8
PIMCO HiInco PHK
NA 8.48 NA 12.6
PIMCO Inco Str Fd PFL NA 12.05 NA 8.8
PIMCO Incm Strategy Fd II PFN NA 10.54 NA 8.9
Putnam Mas Inco PIM NA 4.72 NA 6.6
Putnam Premier Income Tr PPT NA 5.40 NA 5.7
Wells Fargo Multi-Sector ERC NA 13.36 NA 8.7
World Income Funds
Abeerden Asia-Pacific FAX 5.56 5.16 -7.2 7.7
Etn Vnc Short Dur Fd EVG NA 14.39 NA 7.2
Legg Mason BW Glbl Incm BWG 15.53 13.52 -12.9 5.9
MS EmMktDomDebt EDD 9.16 8.18 -10.7 8.2
PIMCO Dynamic Credit PCI NA 22.45 NA 11.3
PIMCODynamicIncomeFund PDI NA 30.09 NA 13.2
PIMCO Income Opportunity PKO NA 25.80 NA 9.7
PIMCO Strat Income Fund RCS NA 9.83 NA 8.7
Templeton Emerging TEI 12.99 11.39 -12.3 5.3
Templeton Global GIM 7.38 6.69 -9.3 6.5
Wstrn Asset Emerg Mkts EMD 17.77 NA NA NA
Wstrn Asset Gl Def Opp Fd GDO 19.17 18.20 -5.1 7.5
National Muni Bond Funds
AllianceBrnstn NtlMun AFB 15.05 14.04 -6.7 4.6
Blackrock Invest BKN 15.92 15.25 -4.2 5.2
BlackRockMun2030Target BTT 24.05 22.75 -5.4 4.1
BlackRock Municipal Trust BFK 14.51 14.40 -0.8 5.6
BlackRockMuni BLE 15.14 15.37 +1.5 5.6
BlackRockMuni Tr BYM 15.25 14.39 -5.6 5.3
BlkRk MuniAssets Fd MUA 14.21 15.22 +7.1 4.5
BlkRk Munienhanced MEN 12.01 12.10 +0.7 5.5
BlkRk MuniHldgs Inv MFL 14.87 14.97 +0.7 5.6
BlkRk MuniHldgs Qlty II MUE 14.21 14.15 -0.4 5.4
BlkRk MuniVest MVF 9.72 9.78 +0.6 5.8
BlkRk MuniVest II MVT 15.37 15.75 +2.5 5.7
BlkRk MuniYield MYD 14.94 15.26 +2.1 5.5
BlkRk MuniYld Quality MQY 15.90 15.82 -0.5 5.4
BlkRk MuniYld Qlty II MQT 13.96 13.46 -3.6 5.4
BlRkMunyldQltyIII MYI 14.52 14.53 +0.1 5.5
Deutsche Mun Income Tr KTF 12.74 12.93 +1.5 6.2
Dreyfus Mun Bd Infr Fd DMB 14.20 13.35 -6.0 4.9
Dreyfus Strat Muni Bond DSM 8.46 8.63 +2.0 5.6
Dreyfus Strategic Munis LEO 8.67 8.92 +2.9 5.6
Eaton Vance Mun Bd Fd EIM 13.84 12.89 -6.9 5.0
Eaton Vance Mun Income EVN 13.53 12.98 -4.1 5.3
EV National Municipal Opp EOT 21.97 22.23 +1.2 4.5
Invesco Adv Mun Incm II VKI 12.26 11.75 -4.2 5.6
Invesco Mun Incm Opps Tr OIA 7.59 7.90 +4.1 5.1
Invesco Mun Opportunity VMO 13.64 13.25 -2.9 6.0
Invesco Municipal Trust VKQ 13.62 12.94 -5.0 5.7
Invesco Qlty Mun Inco IQI 13.75 12.86 -6.5 5.5
Invesco Inv Grade Muni VGM 14.13 13.66 -3.3 5.6
Invesco Value Mun Incm Tr IIM 16.41 15.14 -7.7 4.9
MainStay DefinedTerm MMD 20.28 20.12 -0.8 5.3
MFS Munl Inco MFM 7.41 7.16 -3.4 5.2
Nuveen AMT-Free Quality NEA 15.14 13.87 -8.4 5.4
Nuveen AMT-Free Mun NVG 16.42 15.49 -5.7 5.7
Nuveen Mun Credit Incm Fd NZF 16.05 15.22 -5.2 5.8
Nuveen Enhncd Mun Val Fd NEV 15.13 14.77 -2.4 5.7
Nuveen Intermed Dur Mun NID 13.81 13.48 -2.4 4.8
NuveenMuniIncoOpp Fd NMZ 13.45 13.56 +0.8 6.1
Nuveen Muni Value Fund NUV 10.33 10.17 -1.5 3.8
Nuveen Qual Mun Incm Fd NAD 15.48 14.26 -7.9 5.6
Nuveen Sel Tax Free NXP 15.43 14.66 -5.0 3.7
Nuveen Sel TF NXQ 14.87 13.97 -6.1 3.6
PIMCO MuniFd PMF 13.00 14.11 +8.5 6.1
Pimco Muni Inc II PML 12.24 13.35 +9.1 5.8
PIMCO Muni Inc III PMX 11.15 11.92 +6.9 5.9
Pioneer Mun Hi Inc Adv Tr MAV 12.00 11.53 -3.9 5.6
Pioneer Mun Hi Incm Tr MHI 12.84 12.09 -5.8 5.1
Putnam Tr PMM
NA 7.56 NA 5.4
PutnamMuniOpportunities PMO NA 12.58 NA 5.2
Wstrn Asset Mngd Muni MMU 14.03 14.22 +1.4 5.3
WesternAssetMunTrFund MTT 21.46 23.08 +7.5 4.7
Single State Muni Bond
BlackRock CA Municipal Tr BFZ 15.40 14.51 -5.8 5.2
BlkRk MuniHldgs CA Qlty MUC 15.61 14.84 -4.9 5.0
Blkrck MunHl NJ Qlty MUJ 15.65 14.75 -5.8 5.4
BlRk MuHldg NY Qlty MHN 14.88 14.24 -4.3 4.9
BlkRk MuniYld CA Fd MYC 15.69 15.45 -1.5 5.1
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Prem12 Mo
Fund (SYM)
NAV Close /Disc Yld
BlkRk MuniYld CA Quality MCA 15.80 15.38 -2.7 5.1
BlkRk MuniYld MI Qlty MIY 15.51 14.09 -9.2 5.4
BlRk Muyld NY Qlty MYN 14.28 13.25 -7.2 4.9
Eaton Vance CA Mun Bd EVM 12.58 12.00 -4.6 5.0
Invesco CA Value Mun Incm VCV 13.58 12.95 -4.6 5.0
Invesco PA Value Mun Incm VPV 14.15 12.45 -12.0 5.0
Invesco Inv Grade NY Muni VTN 14.73 13.78 -6.4 5.0
Nuveen CA AMT-Free Qual NKX 15.88 15.75 -0.8 5.0
Nuveen CA Muni Value NCA 10.44 10.38 -0.6 4.0
Nuveen CA Quality Muni NAC 15.74 15.16 -3.7 5.3
Nuveen MD Qual Muni NMY 14.64 13.03 -11.0 4.9
Nuveen MI Qual Muni NUM 15.52 13.83 -10.9 4.8
Nuveen NJ Qual Muni NXJ 15.82 13.86 -12.4 5.1
Nuveen NY AMT-Free NRK 14.62 13.30 -9.0 4.9
Nuveen NY Qual Muni NAN 15.21 14.21 -6.6 5.0
Nuveen OH Qual Muni NUO 16.76 15.14 -9.7 4.6
Nuveen PA Qual Muni NQP 15.29 13.54 -11.4 5.2
Nuveen VA Qual Muni NPV 14.52 13.17 -9.3 4.3
PIMCO California Muni PCQ 14.30 16.87 +18.0 5.4
PIMCO California Mun II PCK 8.73 10.18 +16.6 5.4
52 wk
Prem Ttl
Fund (SYM)
NAV Close /Disc Ret
General Equity Funds
Specialized Equity Funds
Griffin Inst Access RE:A 26.80 NA NA 5.2
Griffin Inst Access RE:C 26.40 NA NA 4.3
Griffin Inst Access RE:I 26.94 NA NA 5.4
Griffin Inst Access RE:L 26.79 NA NA NS
Griffin Inst Access RE:M 26.69 NA NA NS
NexPointRlEstStrat;A 20.17 NA NA 5.1
NexPointRlEstStrat;C 20.10 NA NA 4.3
NexPointRlEstStrat;Z 20.12 NA NA 5.4
Resource RE Div Inc:A 10.17 NA NA 4.3
Resource RE Div Inc:C 10.15 NA NA 3.5
Resource RE Div Inc:D 10.32 NA NA 3.8
Resource RE Div Inc:I 10.60 NA NA 3.7
Resource RE Div Inc:L 10.17 NA NA NS
Resource RE Div Inc:T 10.13 NA NA 3.5
Resource RE Div Inc:U 10.18 NA NA 4.4
Resource RE Div Inc:W 10.32 NA NA 4.0
SharesPost 100
25.53 NA NA -2.4
Tot Inc+ RE:A
29.46 NA NA 6.5
Tot Inc+ RE:C
28.74 NA NA 5.7
Tot Inc+ RE:I
29.77 NA NA 6.8
Versus Cap MMgr RE Inc:F 27.49 NA NA 4.6
Versus Cap MMgr RE Inc:I 27.55 NA NA 4.9
Wildermuth Endwmnt Str 12.43 NA NA 9.3
Wildermuth Endwmnt S:C 12.29 NA NA 8.5
Wildermuth Endwmnt S:I 12.43 NA NA NS
Income Preferred Stock Funds
The Relative Value:CIA VFLEX 25.20 NA NA NS
Convertible Sec's. Funds
Calmos Dyn Conv and Inc CCD 20.37 20.22 -0.7 11.0
World Equity Funds
BMO LGM Front ME 10.17 NA NA 12.1
Prem12 Mo
Fund (SYM)
NAV Close /Disc Yld
U.S. Mortgage Bond Funds
Vertical Capital Income 12.69 NA NA 3.1
Loan Participation Funds
504 Fund
9.82 NA NA 3.5
FedProj&TrFinanceTender 10.06 NA NA NS
FS Global Crdt Opptys D NA NA NA 2.5
Invesco Sr Loan A
6.64 NA NA 4.4
Invesco Sr Loan B
6.64 NA NA 4.4
Invesco Sr Loan C
6.65 NA NA 3.7
Invesco Sr Loan IB
6.64 NA NA 4.7
Invesco Sr Loan IC
6.64 NA NA 4.5
Invesco Sr Loan Y
6.64 NA NA 4.7
RiverNorth MP Lending RMPLX 25.31 NA NA NS
Sierra Total Return:T SRNTX 24.95 NA NA NS
Voya Senior Income:A 12.56 NA NA 5.4
Voya Senior Income:C 12.54 NA NA 4.9
Voya Senior Income:I 12.52 NA NA 5.7
Voya Senior Income:W 12.57 NA NA 5.7
High Yield Bond Funds
Griffin Inst Access Cd:A NA NA NA NS
Griffin Inst Access Cd:C NA NA NA NS
Griffin Inst Access Cd:I NA NA NA NS
PIMCO Flexible Cr I;Inst NA NA NA NS
PionrILSInterval
10.68 NA NA 9.5
WA Middle Mkt Dbt
NA NA NA 11.4
WA Middle Mkt Inc WMF NA NA NA 11.3
Other Domestic Taxable Bond Funds
Capstone Church Capital 11.82 NA NA 1.2
CION Ares Dvsfd Crdt;A NA NA NA NS
CION Ares Dvsfd Crdt;C NA NA NA NS
CION Ares Dvsfd Crdt;I NA NA NA NS
CNR Select Strategies 10.13 NA NA NS
GL Beyond Income
3.88 NA NA NE
Palmer Square Opp Income 19.34 NA NA 6.0
Resource Credit Inc:A 11.18 NA NA 6.4
Resource Credit Inc:C 11.29 NA NA 5.6
Resource Credit Inc:I 11.20 NA NA 6.6
Resource Credit Inc:W 11.17 NA NA 6.1
THE WALL STREET JOURNAL.
B10 | Monday, August 28, 2017
MONEY & INVESTING
DEALPOLITIK | By Ronald Barusch
Insider-Trading Spotlight
Trading by ‘insiders’ of a corporation, such as a company’s CEO, vice president or director, potentially conveys
new information about the prospects of a company. Insiders are required to report large trades to the SEC
within two business days. Here’s a look at the biggest individual trades by insiders, based on data received by
Thomson Financial on August 25, and year-to-date stock performance of the company
KEY: B: beneficial owner of more than 10% of a security class CB: chairman CEO: chief executive officer CFO: chief financial officer
CO: chief operating officer D: director DO: director and beneficial owner GC: general counsel H: officer, director and beneficial owner
I: indirect transaction filed through a trust, insider spouse, minor child or other O: officer OD: officer and director P: president UT:
unknown VP: vice president Excludes pure options transactions
Biggest weekly individual trades
Based on reports filed with regulators this past week
Date(s)
Company
Symbol
No. of shrs in Price range ($) $ Value
trans (000s) in transaction (000s)
Insider
Title
Close ($) Ytd (%)
J. Stafford
J. Stafford
J. Tisch
BI
BI
DI
148
41
100
19.93-20.96
19.67-19.74
24.56
3,008
808
2,456
20.80 -21.0
B. Friedman
B. Friedman
R. Mochizuki
DI
DI
D
110
90
175
17.87-18.16
17.59-17.96
8.75
1,981
1,590
1,531
17.55 -41.2
9.20
19.9
E. Rady
E. Rady
J. Shanahan
CEOI
CEOI
O
37
34
77
39.87-40.35
40.05-40.41
17.92-18.16
1,504
1,370
1,397
40.82
-5.2
Buyers
Aug. 16-18 Xencor
Aug. 21-22
Aug. 22
General Electric
XNCR
Aug. 17-21 Fiesta Restaurant Group
Aug. 22-24
Aug. 21
United Security Bancshares
FRGI
GE
UBFO
Aug. 17-18 American Assets Trust
Aug. 21-23
Aug. 22-23 First Data
AAT
24.49 -22.5
18.16
28.0
Aug. 21
Accelerate Diagnostics
AXDX
J. Schuler
DOI
50
21.34-21.76
1,072
22.55
8.7
Aug. 21
Milacron Holdings
MCRN
T. Goeke
CEO
65
15.41
1,002
15.92 -14.5
Aug. 18
Kennametal
KMT
C. Rossi
CEO
30
33.42-33.47
1,000
35.20
12.6
Aug. 17
Hilton Grand Vacations
HGV
D. Johnson
D
28
35.16
985
35.96
38.3
Aug. 17
Snyders-Lance
LNCE
P. Warehime
DOI
21
37.25
792
35.86
-6.5
Aug. 21
Tallgrass Energy Partners
TEP
D. Dehaemers
CEOI
17
44.64
775
45.76
-3.6
Aug. 17
Aug. 17
Aug. 21
Luby's
LUB
C. Pappas
H. Pappas
M. Westerhold
CEO
DO
DI
190
190
15
2.80
2.80
35.00
532
532
525
34.92
2.7
D. Humphrey
16.6
FDC
First Mid-Illinois Bancshares
FMBH
2.77 -35.3
Sellers
DOI
8,499
28.72
244,088
28.39
FNGN
M. Martin
DI
4,109
33.05
135,807
32.85 -10.6
Aug. 22-24 Willis Towers Watson
Aug. 17-21
Aug. 17
Paylocity Holding
WLTW
J. Ubben
J. Ubben
J. Diehl
DI
DI
DI
650
106
1,155
148.98-149.47
148.76-150.04
45.00
97,072 148.88
15,800
51,975 46.64
Aug. 22
Acadia Healthcare Company
Aug. 22
Aug. 22
Aug. 21-22 Wal-Mart Stores
Aug. 21-22
Aug. 21-22
Aug. 22
Estee Lauder
ACHC
EL
C. Gordon
R. Waud
J. Jacobs
S. Walton
A. Walton
J. Walton
F. Freda
DI
DI
CEO
DOI
BI
BI
CEO
998
50.69
984
50.69
500*
50.69
474
80.01-80.04
474
80.01-80.04
474
80.01-80.04
300 105.21-107.14
50,611 45.57
49,883
25,345
37,942 78.63
37,942
37,942
31,731 106.50
Aug. 21-22 Regeneron Pharmaceuticals
REGN
P. Vagelos
CB
Aug. 17-18 Liberty Broadband
Aug. 21
Aug. 17-18 Liberty Interactive
LBRDK
DO
DO
DI
Aug. 18
Genpact
Aug. 22
Financial Engines
G
PCTY
WMT
QVCA
J. Malone
J. Malone
M. Vadon
Aug. 22
Tesla
TSLA
S. Jurvetson
Aug. 23
Ichor Holdings
ICHR
D. Deb
56
470.23-483.00
182
99.86-100.50
112* 100.58-100.74
762
21.15-21.38
D
45
339.82-340.80
DOI
800
18.50
21.8
55.4
37.7
13.8
39.2
26,672 477.80
30.2
99.26
34.0
18,278
11,264
16,185
21.86
9.4
15,240 348.05
62.9
19.88
83.7
14,792
* Half the transactions were indirect **Two day transaction
p - Pink Sheets
Buying and selling by sector
Based on actual transaction dates in reports received this past week
Sector
Basic Industries
Business services
Capital goods
Consumer durables
Consumer nondurables
Consumer services
Energy
Buying
184,960
405,978
0
642,741
10,224
4,459,187
1,548,310
Selling
9,925,779
15,114,743
0
858,902
50,199,623
128,078,510
279,548
Sector
Buying
Finance
Health care
Industrial
Media
Technology
Transportation
Utilities
4,943,082
1,990,646
3,757,633
227,060
1,534,301
611,345
1,600
Selling
77,185,603
75,529,807
14,493,766
33,443,457
59,352,480
5,515,577
2,517,940
Sources: Thomson Financial; WSJ Market Data Group
Herbalife Filing Is Sketchy
Herbalife
raised a cloud
of mystery
last week
when it announced a
new development in the enduring war between the
company and activist Bill
Ackman.
When it started a self-tender for around 10% of the
shares outstanding, Herbalife teased that it had been in
extended discussions to go
private. It said those discussions had been “formally
terminated,” holding out the
possibility that some informal work on a deal could
continue or start up again
down the road.
The company threw in a
sweetener, offering a socalled contingent value
right, or CVR. If Herbalife is
sold within two years, the
CVR provides those who tender a payment equal to the
difference between the deal
price and the tender price.
Predictably, shares of the
nutritional-supplements
seller soared on the news.
But there has been no disclosure of the price ranges
involved or the identity of a
buyer, or how far the negotiations went—except that a
confidentiality agreement
was signed in December, under which the company allowed the potential buyer to
perform due diligence.
And then there are these
statements adding to the
murky picture: The little disclosure that is provided is “a
representative overview of
the nature of the discussions
that transpired” and “from
time to time” the company
has talked about going-private transactions with “various parties.”
The one thing we know is
that Carl Icahn, who has become Herbalife’s best friend
in the battle with Mr. Ackman and a big shareholder
as well as a director, isn’t
selling his shares in the tender offer. He has also agreed
to limit his ownership to
50% or less—unless he buys
the whole company.
For those shareholders
who choose to sell shares
into the tender, Herbalife
would argue—and I would
tend to agree—that getting
the CVR should make them
indifferent to whether or not
there is a deal in the next
two years.
But of course Herbalife
shares trade every day on
the New York Stock Exchange and the company has
disclosure obligations to all
investors and not just those
accepting the tender offer.
How are those investors
A company can keep
merger talks secrets
as long as it doesn’t
trade in its shares.
supposed to evaluate the
likelihood and pricing of a
potential deal?
What disclosure is required is straightforward—
at least in the wording of
the rule.
A company is entitled to
keep merger discussions secret as long as it doesn’t
trade in its shares. The selftender obviously made that
problematic.
Once disclosure is made, a
company can’t omit a material fact necessary to ensure
the statements it makes
aren’t misleading. Since materiality is judged on the basis of what a reasonable investor would want to know
in making a decision to purchase or sell shares, in my
view it seems hard to argue
that information on pricing,
the identity of the prospec-
tive buyer and what caused
the negotiations to “formally” break down earlier
this month wouldn’t be required.
Herbalife might argue no
one is being misled; investors know how little they
know about how close the
company is to going private.
However, a seller in the
market who won’t have the
benefit of a CVR might feel
misled if the company is
later sold at a higher price.
And if the company isn’t
sold, a buyer of shares on
the market might feel the
company’s disclosure left
too optimistic an impression
of the odds of a buyout.
Generally, merely telling
investors you are withholding important information
isn’t sufficient to comply
with securities-law obligations.
The mere fact that the
company could have remained silent about merger
discussions absent a selftender doesn’t mean that,
once disclosure is made, material information can continue to be withheld.
And let’s not forget that
hinting at a sale of the company could squeeze Mr. Ackman because, having bet
against Herbalife, an increase in the stock might
pressure him to exit his bet.
That makes it all the more
relevant for investors to
know how close to a deal
Herbalife really got.
The staff of the Securities
and Exchange Commission
typically reviews tender-offer material on a real-time
basis. This would seem to be
an opportune time to ask
Herbalife to complete the
picture it has started to
paint.
Mr. Barusch is a retired M&A
lawyer who writes about
deal making for The Wall
Street Journal.
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Monday, August 28, 2017 | B11
THE WALL STREET JOURNAL.
HEARD ON THE STREET
Email: heard@wsj.com
FINANCIAL ANALYSIS & COMMENTARY
Cash Is Piling Up at Buyout Funds
Private equity has a $600
billion problem.
That is the record amount
of uninvested cash that buyout
funds are sitting on, according
to the research firm Preqin, after a bout of fundraising that
included the biggest buyout
fund ever: Apollo Global Management’s $23.5 billion vehicle
wrapped up in June.
The problem is how to
spend it. Although loan markets are flooded with cheap
money and loose terms, company valuations are very high
and buyout deal volumes have
slipped since 2015.
The big risk for private-equity investors is that their deal
makers might do something
dumb. With so much cash to
invest, and no growth in the
pool of people to invest it, a
new era of megadeals could be
in the cards.
The last great wave of supersize buyouts was a decade
ago, just before the global financial crisis. Deal volumes
then reached more than $600
billion in both 2006 and 2007.
Deal flow recovered after 2010
but remains far below those
heady days. The best recent
Burning a Hole
Total uninvested money committed to private-equity buyout funds
North America
Europe
Asia
Rest of the world
$600 billion
400
200
0
2007 ’08
’09
’10
’11
’12
’13
’14
’15
’16
’17
Note: Note: 2017 is amount as of Wednesday.
Source: Preqin
THE WALL STREET JOURNAL.
year, 2015, saw $303 billion of
buyouts backed by private equity, which slipped to $239 billion last year. That pace has
ticked up to $190 billion so far
this year, according to ThomsonReuters.
The last cycle peaked with
KKR’s $45 billion buyout of
Texas energy group TXU,
which went bankrupt in 2014
and is only now being sold off
in pieces. But even with such
big blowups, private equity
has given fund investors better
returns than public stock markets throughout the past decade, according to Bain & Co.
Even now, it is just about producing double-digit returns,
which is why so many remain
so eager to invest.
Very large deals have been
scarce recently. There were
none worth more than $10 billion announced in 2016 and
only a handful worth more
than $5 billion. In 2017, the
U.S. power-generation company Calpine has just agreed
to be bought in a deal worth
$17 billion including debt, but
beyond that, just four other
deals have cost more than $5
billion, according to Dealogic.
Big deals also carry less
debt now than a decade ago,
partly due to restrictions on
aggressive bank lending imposed by the Federal Reserve.
However, valuations paid by
private equity are rising. Deal
values, as a multiple of underlying earnings, hit 11 times
earnings among U.S. buyouts
late last year, according to
Bain, versus an average multiple of nine between 2007 and
2015.
In this environment, maintaining discipline will get
harder. Alongside the glut of
funds in private equity’s
hands, more competition is
coming from traditional asset
managers and pension funds
hunting for better returns.
With that work done, private-equity investors and managers could get itchy trigger
fingers. They will have to work
hard to balance discipline with
the desire to put money to
work.
—Paul J. Davies
OVERHEARD
If the use of its network
as a bully pulpit by the
president of the United
States can’t save Twitter
then what will? Maybe
stopping its use as a bully
pulpit.
President Donald Trump’s
tweets have made it the
go-to-place for news from
the White House. He has
sent out over 35,000
tweets and has nearly as
many followers as two
nemeses, CNN and Oprah
Winfrey.
But Valerie Plame
Wilson, the CIA agent
famous for allegedly being
“outed” by the George W.
Bush administration, has
been raising money to buy
a “controlling interest” in
Twitter for $1 billion to kick
Mr. Trump off.
It seems like a quixotic
quest, in part because she
had raised just $65,000 by
Friday afternoon on her
GoFundMe page and
because $1 billion would
buy her less than 8% of the
much-diminished company
at current prices.
U.S. Banking Data Suggest Economy May Be Losing Steam
U.S. banks are sending
signals that the country’s
economic expansion is
getting long in the tooth.
Being a key transmission
mechanism for savings,
investment and spending,
the banking sector is worth
watching as a barometer for
the health of the overall
economy.
Lately it has been acting
as one would expect toward
the end of an expansion
phase.
Most glaringly, after
strong lending growth for
several years, momentum
clearly is slowing. In its
quarterly report on the
sector, the Federal Deposit
Insurance Corp. found that
total loans and leases by
banks and other insured
institutions rose just 3.7%
from a year earlier at the
end of June. That is the
third consecutive quarterly
deceleration and is down
from a 6.7% pace of growth a
year ago.
In a statement, FDIC
Chairman Martin Gruenberg
explicitly linked the
slowdown to the fact that
the economy is now in its
ninth year of expansion. But
it is more than just a
symptom.
Slower lending growth
means less fuel for business
investment and personal
consumption, potentially
weighing on economic
performance.
After a period of strong
lending, it is also typical for
defaults to start ticking up
as levels of indebtedness rise
and bills come due. This is
indeed happening, at least
among consumers. Creditcard charge-offs soared by
24.5% in the second quarter,
according to the FDIC,
marking the seventh straight
increase. Charge-offs on
loans to commercial and
industrial borrowers,
however, declined 9.7%,
possibly due to a recovering
energy sector.
Despite these headwinds,
banks are doing well for
themselves. The nearly 5,800
banks and savings
Downshift
Net loans and leases by
FDIC-insured institutions,
change from year earlier
8%
6
4
2
0
2015
’16
’17
Source: FDIC
THE WALL STREET JOURNAL.
institutions that the FDIC
monitors reported $48.3
billion of combined net
profits in the second quarter,
up 10.7% from a year earlier.
This was mostly due to
higher interest rates. Banks
have been quick to raise
rates on loans but slow to do
so on deposits, widening
their lending margins.
While good for the banks,
rising interest rates are also
a symptom of a late-phase
expansion, and a potential
trigger for an economic
slowdown.
These signs of advanced
age in the credit cycle don’t
mean a recession is
imminent, but they do mean
it is time to be on the
lookout for other signals of
an economic downturn.
Expansions don’t die of old
age, as they say. They also
can’t live forever.
—Aaron Back
WSJ.com/Heard
Samsung
Needs Boss
Not in Jail
Are your bosses ever
worth their paychecks?
Maybe not, judging by recent
events at Samsung Electronics. The South Korean technology giant has been doing
just fine without a leader for
months, with its de facto
boss Lee Jae-yong awaiting
trial on charges of bribery
and embezzlement. Still, the
guilty verdict and five-year
prison sentence handed to
Mr. Lee on Friday should
cause investors to rethink.
The long-running corruption scandal that involved
former President Park Geunhye doesn’t appear to have
hurt Samsung to date. It reported its best ever quarterly
earnings in the three months
ended June 30. Its share
price has gone up 25%, outpacing the broader Korean
market and rivals like Apple,
since Mr. Lee’s arrest in February.
A big organization with
well-defined responsibilities
can keep daily operations going as normal even during a
leadership crisis. Yet any
long-term absence for its
leader could still leave Samsung disoriented.
Tech, it hardly needs saying, is a fast-moving business that often requires nimble leadership: Witness the
big changes in areas from artificial intelligence to selfdriving cars currently taking
place. And South Korea’s big
conglomerates, of which
Samsung is the biggest, face
uncertainty with the country’s new president, Moon
Jae-in, promising reforms.
A prison cell hardly seems
the best place from which to
handle all this. Samsung may
carry in an autopilot mode
for a while. Unless Mr. Lee
can change his fate, it will
need to find a new driver
soon.
—Jacky Wong
MARKETS
THE TICKER | Market events coming this week
Gross domestic product
2nd qtr. adv. est. up 2.6%
2nd qtr. sec. est. up 2.9
Tuesday
Consumer confidence
Jul,, previous
121.1
Aug., expected
Chicago PMI
Jul., previous
Aug. expected
Percentage change, annual rate
No major events are
scheduled
Personal income
Jun., previous
0.0%
Jul., expected
up 0.3%
GDP Deflator
2nd qtr. adv. est. up 1.0%
2nd qtr. sec. est. up 1.0%
Personal spending
Jun.., previous
up 0.1%
Jul., expected
up 0.4%
120.3
Earnings Expected*
Earnings Expected*
Estimate/Year Ago($)
Estimate/Year Ago($)
Analog Devices 1.14/0.82
0.63/0.57
Brown-Forman 0.39/0.36
H&R Block (0.62)/(0.55)
Keysight Tech. 0.61/0.63
Best Buy
Wednesday
Mort. bankers indexes
Purch., previous down 2%
Refinan., prev.
up 0.3%
EIA status report
Earnings Expected*
Thursday
Initial jobless claims
Previous
234,000
Expected
236,000
Crude oil
Gasoline
Distillates
down 3.3
down 1.2
unchanged
ISM mfg. index
Jul., previous
Aug. expected
56.3
56.1
U. Mich consumer index
Aug., prelim.
97.6
Aug. final
97.0
Nonfarm payrolls
Jul. previous
209,000
Aug., expected 175,000
Unemployment rate
Jul. previous
4.3%
Aug., expected
4.3%
Friday
Previous change in stocks in
millions of barrels
Construction spending
Jun.., previous down 1.3%
Jul., expected
up 0.6%
Estimate/Year Ago($)
Campbell
0.55/0.46
Cooper Cos.
2.57/2.30
Dollar General 1.09/1.08
Lululemon
0.35/0.38
Palo AltoS Network
0.79/0.50
0.15/(0.04)
Workday
Aug., expected 16.6 mil.
58.9
58.9
SIMON DAWSON/BLOOMBERG NEWS
Monday
EIA report: natural gas
Total vehicle sales
Previous change in stocks in
domestically produced, at an
billions of cubic feet
annual rate
Jul., previous
up 43
16.7 mil.
* FACTSET ESTIMATES EARNINGS-PER-SHARE ESTIMATES DON’T INCLUDE EXTRAORDINARY ITEMS (LOSSES IN PARENTHESES) ADJUSTED FOR
STOCK SPLIT
NOTE: FORECASTS ARE FROM DOW JONES WEEKLY SURVEY OF ECONOMISTS
Shoppers at a Lululemon store in London. The company is scheduled to report earnings Thursday.
Currencies
U.S.-dollar foreign-exchange rates in late New York trading
Country/currency
US$vs,
YTDchg
Fri
in US$ per US$ (%)
Country/currency
Americas
Vietnam dong
Argentina peso
.0581 17.2222 8.5
Brazil real
.3166 3.1590 –2.9
Canada dollar
.8011 1.2483 –7.1
Chile peso
.001576 634.40 –5.3
Colombia peso
.0003420 2924.25 –2.6
Ecuador US dollar
1
1 unch
Mexico peso
.0568 17.6164 –15.0
Peru new sol
.3088 3.239 –3.4
Uruguay peso
.03469 28.8300 –1.8
Venezuela b. fuerte .100150 9.9851 –0.1
Europe
Asia-Pacific
Australian dollar
.7930 1.2610 –9.2
China yuan
.1504 6.6482 –4.3
Hong Kong dollar
.1279 7.8186 0.8
India rupee
.01562 64.005 –5.8
Indonesia rupiah .0000749 13348 –1.3
Japan yen
.009145 109.36 –6.5
Kazakhstan tenge .002998 333.59 –0.03
Macau pataca
.1242 8.0547 1.7
Malaysia ringgit
.2341 4.2725 –4.8
New Zealand dollar
.7241 1.3810 –4.4
Pakistan rupee
.00949 105.358 0.9
Philippines peso
.0196 51.019 2.8
Singapore dollar
.7375 1.3559 –6.3
South Korea won .0008916 1121.58 –7.1
Sri Lanka rupee
.0065359 153.00 3.1
Taiwan dollar
.03322 30.106 –7.2
Thailand baht
.03009 33.230 –7.2
US$vs,
YTDchg
Fri
in US$ per US$ (%)
Czech Rep. koruna
Denmark krone
Euro area euro
Hungary forint
Iceland krona
Norway krone
Poland zloty
Russia ruble
Sweden krona
Switzerland franc
Turkey lira
Ukraine hryvnia
UK pound
.00004399
22733 –0.2
.04568 21.889 –14.8
.1603 6.2392 –11.7
1.1924 .8387 –11.8
.003920 255.10 –13.3
.009515 105.10 –7.0
.1289 7.7553 –10.3
.2799 3.5732 –14.7
.01706 58.615 –4.3
.1255 7.9651 –12.5
1.0454 .9566 –6.1
.2908 3.4389 –2.4
.0391 25.5550 –5.6
1.2881 .7763 –4.2
Middle East/Africa
Bahrain dinar
Egypt pound
Israel shekel
Kuwait dinar
Oman sul rial
Qatar rial
Saudi Arabia riyal
South Africa rand
2.6522 .3770 –0.03
.0565 17.7040 –2.4
.2791 3.5834 –6.9
3.3121 .3019 –1.2
2.5958 .3852 0.1
.2717 3.680 1.1
.2666 3.7503 –0.01
.0768 13.0178 –4.9
Close Net Chg % Chg YTD%Chg
WSJ Dollar Index 85.63 –0.51–0.59 –7.86
Sources: Tullett Prebon, WSJ Market Data Group
10
The number of consecutive weeks during
which investors pulled money from U.S.
stock funds, the longest streak since
2004, according to Bank of America
Merrill Lynch.
Outflows Hit Stocks
Investors are pulling a steady
stream of money from the U.S.
stock market, the latest sentiment shift to cause unease
among market bulls.
Mutual funds and exchangetraded funds that invest in U.S.
equities marked their 10th consecutive week of net outflows
during the seven days ended
Wednesday, good for the longest
such streak in 13 years, according to Bank of America Merrill
Lynch data.
The $2.6 billion pulled from
U.S. equity funds in the latest
week helped push withdrawals
to $30 billion since late June, per
Bank of America. Data provider
EPFR found that the outflows
were concentrated most heavily
in actively managed funds.
The steady stream of withdrawals adds to concerns about
a bull market that looks expensive by many measures. The
S&P 500, which is up 9.1% this
MONEYBEAT
year to close at 2443 Friday,
trades at a far-above-average ratio to the next 12 months of expected earnings.
Other indicators have also
signaled caution, such as a decline in the number of U.S.
stocks that are hitting new highs
along with the broader market.
Dow transports, traditionally
thought to rise and fall with the
economy, have been on a downtrend, lagging behind their peers
in the Dow industrials. Those
and other technical factors have
some predicting more turbulence.
Investors have instead been
hotter on international stocks. In
the latest week, they put $3.1 billion into Japanese equity funds,
the biggest inflow in five months,
according to Bank of America.
European equity funds had six
straight weeks of inflows
through mid-August, though they
experienced $200 million in outflows in the most recent week.
Still, it is worth remembering
that investors, stung by losses
during the financial crisis, have
been hesitant to put money into
U.S. stocks for much of the bull
market that began in early 2009.
That hasn’t stopped the market
from plowing higher anyway.
—Ben Eisen
ONLINE
WSJ
.COM
For more
MoneyBeat blog
posts, go to
blogs.wsj.com/
MoneyBeat
THE WALL STREET JOURNAL.
B12 | Monday, August 28, 2017
MARKETS
Terrible Month for U.S. Energy Shares
Sector down 5.7% as
quarterly reports
disappoint investors
and oil prices languish
BY MICHAEL WURSTHORN
Shares of energy companies
are on track for their biggest
monthly decline since the end
of 2015, showing that stabilizing earnings aren’t enough to
attract investors.
Energy companies in the
S&P 500 are off 17% so far this
year, making it the index’s
worst-performing sector. August has been particularly
painful, with energy shares
shedding 5.7% through Friday.
The sector has given back
nearly all the gains it made
last year, when it rose 24% as
oil prices rebounded from
multiyear lows. The rally in
energy companies reflected
expectations that oil would
continue to rise, bolstered by
an agreement by the Organization of the Petroleum Exporting Countries and other major
producers to curb output.
But such shares lost much
of their appeal this year when
oil prices started to fall again,
even as earnings have generally improved off a low base.
U.S. crude prices are down 11%
this year and are languishing
below $50 a barrel.
About $2.7 billion has
flowed out of energy-focused
stock funds for the year
through July, according to
data from Morningstar, after
roughly $5.8 billion flowed in
last year.
Analysts and investors
pointed to quarterly reports
from companies including Pioneer Natural Resources Co. as
key contributors to the sector’s
sagging stock prices this month.
Some companies talked
about not hitting production
levels, which “spooked a lot of
investors,” said Terry Simpson, a multiasset investment
strategist at BlackRock.
Pioneer cut its production-
Sapped
Shares of energy
companies in the S&P 500
have tumbled this month
as earnings disappointed
investors and U.S. crude-oil
prices languished below
$50 a barrel.
Nymex crude
Monthly percentage change*
Months in which
crude prices and
the energy sector
didn’t move
in tandem
S&P 500 energy sector
25%
20
15
10
5
0
–5
–10
–15
–20
–25
2014
’15
’16
The sector has given back nearly all the
gains it made last year, when oil prices
rebounded from multiyear lows.
’17
Investors are yanking money from energy
funds after three years of inflows.
S&P 500 energy sector
Estimated net flows into and
out of U.S. energy-stock funds
600
$10 billion
There are signs the oil glut is easing, but
U.S. inventories are still relatively high,
keeping pressure on prices.
U.S. crude-oil inventories
600 million barrels
500
5
400
400
0
200
0
–5
300
2016
’17
2012
’13
’14
’15
’16
’17†
2010 ’11
*August 2017 data are through Friday. †Through July
Sources: WSJ Market Data Group (crude); FactSet (energy sector); Morningstar (flows); U.S. Energy Information Administration (inventories)
growth guidance after running
into drilling problems that
caused delays. Shares of Pioneer fell 11% Aug. 2, even
though it reported a higher
profit that beat analysts’ expectations. Pioneer is down
28% for the year, with most of
that decline coming in August.
Pioneer President Timothy
Dove attributed the production issues to “train-wreck
wells” that have caused “all
kinds of problems,” when he
discussed earnings results
with analysts. Pioneer said it
now takes more time to drill
those wells, and it has in-
creased costs, too.
“Driving down costs continues to be a primary focus for
us,” a Pioneer spokesman said.
Chesapeake Energy Corp.
exceeded analysts’ expectations on quarterly profit and
revenue earlier this month,
but its production increase fell
’12
’13
’14
’15
’16
’17
THE WALL STREET JOURNAL.
short. Chesapeake shares have
tumbled 24% in August.
Whiting Petroleum Corp.
said it expects production to
increase later this year after
the company reported a drop
in second-quarter production,
which contributed to its eighth
consecutive quarterly loss.
Whiting, which isn’t in the
S&P 500, has shed 63% so far
this year.
Analysts said such woes
dragged down shares of other
companies—especially those
that, like Pioneer, operate in
the Permian Basin of West
Texas and New Mexico. Concho
Resources Inc., which drills in
the Permian, fell more than 8%
the day after it reported better-than-expected profit and a
higher output forecast. Shares
are off 17% for the year.
“These companies attracted
fund flows because of production growth,” said David Deckelbaum, an energy analyst
with KeyBanc Capital Markets.
“Now they’re in this Catch-22
situation where investors also
don’t want companies increasing supply dramatically” because of a global glut that has
been pressuring prices.
After having a low exposure
to the energy sector for several years, Invesco Ltd. has
been building up its position
over the past 18 months, said
Brian Jurkash, a portfolio
manager there.
Mr. Jurkash said more companies are embracing spending
cuts as a way of coping with
lower oil prices and higher
costs tied to well drilling, contributing to the firm’s decision
to buy more shares of energy
companies. Anadarko Petroleum Corp. and ConocoPhillips, for example, said they recently shaved a combined $500
million from their budgets.
“These guys don’t need to
be increasing rigs, drilling
more wells and spending more
money when they’re not generating cash flow,” Mr.
Jurkash said.
John Vail, chief global
strategist at Nikko Asset Management, said that with depressed oil prices, the rosy
growth prospects priced into
energy shares may not pan
out. “Overall, our team does
not think energy equities look
cheap at all,” he said.
—Alison Sider contributed
to this article.
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