* * * * * * Last week: DJIA 21813.67 À 139.16 0.6% WSJ.com MONDAY, AUGUST 28, 2017 ~ VOL. CCLXX NO. 49 NASDAQ 6265.64 À 0.8% STOXX 600 374.07 g 0.03% 10-YR. TREASURY À 8/32 , yield 2.169% OIL $47.87 g $0.79 HHHH $4.00 EURO $1.1924 YEN 109.36 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 firstname.lastname@example.org or by calling 888-410-2667. THE WALL STREET JOURNAL (USPS 664-880) (Eastern Edition ISSN 0099-9660) (Central Edition ISSN 1092-0935) (Western Edition ISSN 0193-2241) Editorial and publication headquarters: 1211 Avenue of the Americas, New York, N.Y. 10036 Published daily except Sundays and general legal holidays. Periodicals postage paid at New York, N.Y., and other mailing offices. Postmaster: Send address changes to The Wall Street Journal, 200 Burnett Rd., Chicopee, MA 01020. 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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 P W L C 10 11 12 H T G K B F A M 1 2 3 4 5 6 7 8 9 O I X X 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 Superior Business Accessories Achieve your goals in style with our vast selection of expertly crafted professional accessories, including exclusives you won’t ﬁnd anywhere else. Shop Levenger.com for special offers and sales on our products for professionals Professional Accessories Bags & Totes Home & Ofﬁce Furniture & Lighting Travel Essentials Folios & Notebooks Writing Instruments Levenger.com 800.544.0880 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. —Dudley Althaus He saw a world that celebrated our differences. 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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 James Loree Stanley Black & Decker Serge Pun SPA Myanmar Nicholas Akins American Electric Power Simon Freakley AlixPartners Peter Lowy 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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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 THE PLEDGE If you are ever trapped under a ton of rubble, I promise to sniff you out. I promise to be worth every cent of the $10,000 that it took to train me. I promise to ignore all other more fascinating smells and concentrate on the scent of live humans. I promise to go about my work with a wagging tail, even if my paws get sore. I promise never to give up. NATIONAL DISASTER SEARCH DOG FOUNDATION® Strengthening disaster response in America by teaming the most highly trained dogs with firefighters to save lives. To donate, call (888) 459-4376 or visit www.SearchDogFoundation.org ening Night Join us for Op the te as we celebra ary of rs e iv 20th Ann Stadium e h Arthur As uests with special g wain Shania T ti a ste. and Jon B SALE NOW N O S T E K TIC G R O . N E P O S U BE PART OF THE SEARCH® AUG 28 – SEPT 10 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 Wherever you go this summer, know your home is protected Vacations should be stress-free, right? But here’s the thing: burglars know what vacant homes look like. Which makes summer the best time to strike. With SimpliSafe Home Security, your home is covered. Each system is a wireless arsenal of security sensors that protects your entire home around the clock. You won’t get locked in a long-term contract. And with 24/7 professional monitoring, you’ll have all the reassurance you need that your home is protected. GET $100 OFF 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. GO TO WORK IN BLISSFUL COMFORT The Un-Sneaker™ goes to work. To your colleagues, it’s a fashion statement. To your feet, it’s an all-day festival of lush, leather-lined comfort. But let’s keep that confidential. THE SAFEGUARD PACKAGE NOW SimpliSafe.com/WS Free shipping and returns. Order online or call 844.482.4800. Hurry, oﬀer expires 9/3/17 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.’ ” Complexity of Time Patek Philippe Technical precision. Complicated movement. Greatest maker. This exceptional minute repeating split second chronograph is a highly coveted rarity of precision timekeeping. The 18K gold pocket watch was crafted by the iconic watchmaking firm of Patek Philippe. Among the most technically revolutionary in the world, complicated Patek watches of this caliber are exceptionally rare. Fully signed and numbered. 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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. <0 d t Edmonton 70s V Vancouver 60s Calgary 100s i Boise Paul Mpls./St.. Pa Pau 70s 70s 80s 70s Ph h Phoenix Tucson Tuc Santa ta FFe Albuquerque q 90s El P Paso Springfield p i fi ld Kansas Charleston Charles Ch h l t Topeka St.. Lou Louis City LLouisville Lo ill Wichita hit h Nashville Oklahoma k homaa City C Ft. Worth Anchorage A h g t Houston New ew w Orleans San an n Antonio A Raleigh i h C h l tt Charlotte U.S. Forecasts International City Amsterdam Athens Baghdad Bangkok Beijing Berlin Brussels Buenos Aires Dubai Dublin Edinburgh Today Tomorrow Hi Lo W Hi Lo W 78 59 pc 81 59 pc 93 77 s 93 73 pc 114 80 s 115 83 s 88 78 sh 88 78 t 80 57 pc 74 57 pc 71 53 s 76 58 s 82 62 pc 85 65 pc 75 65 t 73 47 r 110 90 s 107 88 s 70 49 sh 62 48 pc 67 49 sh 60 47 sh 6 7 8 9 10 15 17 11 12 13 18 19 21 22 23 24 26 27 28 29 33 25 30 31 34 36 32 35 37 39 40 38 44 T-storms 45 48 51 57 46 49 52 53 58 54 55 56 59 Stationary Snow 60 61 62 Showers Flurries 63 64 65 Ta p Tampa City Frankfurt Geneva Havana Hong Kong Istanbul Jakarta Jerusalem Johannesburg London Madrid Manila Melbourne Mexico City Milan Moscow Mumbai Paris Rio de Janeiro Riyadh Rome San Juan Seoul Shanghai Singapore Sydney Taipei Tokyo Toronto Vancouver Warsaw Zurich 90s Ice Today Tomorrow Hi Lo W Hi Lo W 79 59 pc 83 62 s 85 62 pc 87 64 s 89 71 pc 89 73 pc 87 80 sh 91 81 pc 86 71 s 84 69 pc 92 78 pc 91 77 sh 85 65 s 84 65 s 69 46 pc 72 53 pc 81 60 s 77 56 pc 77 62 t 76 63 pc 91 78 t 92 80 pc 51 41 c 57 44 pc 74 59 pc 72 58 c 92 69 pc 89 69 s 58 49 r 57 48 c 83 79 sh 83 80 r 87 63 pc 90 65 s 79 64 s 80 65 s 110 79 s 108 78 s 91 67 s 87 66 s 88 79 sh 89 79 sh 81 64 r 79 61 pc 95 80 pc 93 78 t 86 79 sh 88 78 t 60 47 pc 64 50 s 96 79 s 96 81 pc 82 77 c 86 77 c 72 58 c 72 58 c 77 58 s 78 57 s 68 48 pc 70 51 s 83 57 t 84 58 s CONTAIN YOURSELF! | By Celia Smith Across 1 Plays with the 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 9 Have as a goal 40 Paid respect to 7 Carnival city 10 Puts aboard, as cargo 42 47 Rain 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, as a golf ball maker V W B U G S O A P O P P E A R MA 58 Opponent I R R A D I A T E X M E N D O O N K S S B S E K E U P N K S S E D A T E WA S R I K I D I T E M T E R N O B T U B E I P O D E T E S C M I K C OM I I N A N G O N G H A N T O B MA B A G O N O L E D N S O A C H P A E B O X R E A S L R H Y M E I N T E L P O E T S P E N I N S U L A C H I N A S H O P S I C 41 Getting ___ years 64 Calls for S T A P 42 Highly developed, 65 City near Lake WA D Y Tahoe A K I R as eyesight M E E E Down P I U S 43 1998 Stephen The contest answer is AGENT. Five words that can King book 1 Applicants’ goals 46 Helper: Abbr. 2 In a frenzy Solve this puzzle online and discuss it at WSJ.com/Puzzles. s s...sunny; pc... partly cloudy; c...cloudy; sh...showers; t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice Today Tomorrow City Hi Lo W Hi Lo W Anchorage 61 51 c 59 52 r Atlanta 80 67 pc 83 70 c Austin 78 69 r 81 70 r Baltimore 77 62 pc 72 60 sh Boise 100 69 s 100 71 s Boston 70 57 s 68 60 pc Burlington 78 54 s 78 54 pc Charlotte 78 66 c 77 65 c Chicago 77 63 t 77 60 pc Cleveland 80 62 sh 77 62 t Dallas 86 71 c 87 71 pc Denver 89 60 s 92 59 s Detroit 73 63 t 74 61 c Honolulu 88 74 sh 89 76 pc Houston 76 72 r 80 73 r Indianapolis 81 64 sh 80 63 sh Kansas City 80 57 s 81 58 s Las Vegas 109 84 pc 107 84 s Little Rock 86 69 c 85 70 c Los Angeles 102 76 s 102 75 s Miami 91 79 sh 90 78 sh Milwaukee 75 64 sh 74 61 pc Minneapolis 73 60 pc 77 60 s Nashville 85 68 t 85 68 sh New Orleans 83 74 r 82 76 r New York City 75 61 pc 71 62 c Oklahoma City 83 61 t 85 61 s 5 14 50 Miami Today Tomorrow City Hi Lo W Hi Lo W Omaha 81 57 s 82 58 s Orlando 86 74 r 87 74 t Philadelphia 78 64 pc 74 63 c Phoenix 110 86 c 109 86 s Pittsburgh 76 60 c 74 59 sh Portland, Maine 73 50 s 71 52 pc Portland, Ore. 100 63 s 89 59 s Sacramento 106 68 s 102 61 s St. Louis 81 63 t 81 63 pc Salt Lake City 97 69 s 98 70 s San Francisco 77 59 s 72 58 s Santa Fe 82 54 t 82 55 t Seattle 89 62 pc 85 58 s Sioux Falls 79 54 s 78 57 s Wash., D.C. 77 66 pc 73 65 c 4 43 Warm l d Orlando 3 90s 100+ Richmond h d 90s 70s 80s hington hi gton D.C. DC Washington HARVEY Honolulu l l 70s JJacksonville k bil Mobile Austin A 60s Philadelphia Ph hil d lphi h Atlanta Atl t Little Rock Birmingham i h D ll Dallas Jackson Jack 70s 80s Columbia C l bbi 2 50s t Boston Hartford rtford ew Y New Yorkk Buffalo l Cleveland Cleve Cl l d 70s 1 40s A bany Albany b C h Chicago Pitts b gh Pittsburgh Indianapolis d p Mem phi Memphis 80s 30s 60s 80s Colorado C d Springs p g 80s 100s San an n Diego Omaha h T t Toronto 70s 30s Montreal Augusta A g t Ottawa Milwaukee k t Detroit Des es Moines Cheyenne y Denver LLas Vegas Ve g Los A Ange l Angeles oux FFalls ll Pierre Sioux Salt alt Lake City Sacramento San an Francisco 40s 50s 60s Bismarckk Billings 80s 20s 90s Helena l 100s 90s 100s 100s Reno 10s Winnipeg ip ttl Seattle P d Portland Eugene 0s 80s 70s 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 email@example.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. PUBLISHED SINCE 1889 BY DOW JONES & COMPANY Robert Thomson Chief Executive Officer, News Corp Gerard Baker Editor in Chief William Lewis Chief Executive Officer and Publisher DEPUTY MANAGING EDITORS: Michael W. Miller, Senior Deputy; Thorold Barker, Europe; Paul Beckett, Washington; Andrew Dowell, Asia; Christine Glancey, Operations; Jennifer J. Hicks, Digital; Neal Lipschutz, Standards; Alex Martin, News; Shazna Nessa, Visuals; Ann Podd, Initiatives; Matthew Rose, Enterprise; Stephen Wisnefski, Professional News Paul A. Gigot, Editor of the Editorial Page; Daniel Henninger, Deputy Editor, Editorial Page WALL STREET JOURNAL MANAGEMENT: Suzi Watford, Marketing and Circulation; Joseph B. Vincent, Operations; Larry L. Hoffman, Production EDITORIAL AND CORPORATE HEADQUARTERS: 1211 Avenue of the Americas, New York, N.Y., 10036 Telephone 1-800-DOWJONES 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 DOW JONES MANAGEMENT: Mark Musgrave, Chief People Officer; Edward Roussel, Innovation & Communications; Anna Sedgley, Chief Operating Officer & CFO; Katie Vanneck-Smith, President OPERATING EXECUTIVES: Ramin Beheshti, Product & Technology; Jason P. Conti, General Counsel; Frank Filippo, Print Products & Services; Steve Grycuk, Customer Service; Kristin Heitmann, Transformation; Nancy McNeill, Advertising & Corporate Sales; Jonathan Wright, International DJ Media Group: Almar Latour, Publisher; Kenneth Breen, Commercial Professional Information Business: Christopher Lloyd, Head; Ingrid Verschuren, Deputy Head 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. I CAN KNOW THOUSANDS OF With IBM Services and Watson, customer service ag gents canít exactly read minds, but they can know which customers to he elp ˇrst and how to help th hem better. This helped on ne company to reduce call re esolution times by 99% an nd saved another company $1 11.2 million a year. Find ou ut more at ibm.com/you Th his is customer service to o the power of IBM. 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. W Weinswig, Deborah .... B4 Wind, Tom...................B1 Whitman, Meg............A1 Y Yu, Jason.....................B4 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 Ring...........................A10 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 DEFEND HER FUTURE As she builds her career, she needs solutions that work hard for her. 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. 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 ADVERTISEMENT Legal Notices To advertise: 800-366-3975 or WSJ.com/classiﬁeds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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 LEGAL NOTICES ADVERTISE TODAY (800) 366-3975 sales.legalnotices @wsj.com For more information visit: wsj.com/classifieds © 2017 Dow Jones & Company, Inc. 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 WHEN THE BELL RINGS, COME OUT SWINGING. 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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. How to Speak Italian without saying a word? Drape yourself in a necklace you will call “bellisimo”. Handcrafted by Italian artisans, the look is “magnifico”...as is the price. Raffinato ™ ——— Italy he enduring legacy of family. In the 1960s at just 15 years old, Ferrini Pietro and Grotti Rodolfo began their journey as goldsmiths, honing their metalworking skills at a major workshop in Arezzo known for mentoring some of the best artisans in the world. 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Raffinato ™ 14101 Southcross Drive W., Dept. RFA128-01, Burnsville, Minnesota 55337 www.raffinatoitaly.com A collection of impeccable design & craftsmanship from Italy. Monday, August 28, 2017 | B11 THE WALL STREET JOURNAL. HEARD ON THE STREET Email: firstname.lastname@example.org 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. When the market calls, answer it. TD Ameritrade’s Mobile Trader, the #1 mobile trading app in the App Store, lets you set custom alerts and monitor your watch lists from anywhere. Get live updates straight to your devices so when the market moves, you’ll be ready to move with it. Our same great service along with a new, lower price of $6.95 per online equity trade. Open and fund an account and trade commission-free for 60 days. 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