For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. MONDAY, DECEMBER 4, 2017 ~ VOL. CCLXX NO. 131 * * * * * Last week: DJIA 24231.59 À 673.60 2.9% NASDAQ 6847.59 g 0.6% STOXX 600 383.97 g 0.7% 10-YR. TREASURY g 6/32 , yield 2.363% OIL $58.36 g $0.59 When the Moon Hits Your Eye... What’s News VS agreed to buy Aetna for about $69 billion in cash and stock, in a bold move to transform the pharmacy company and capture more of what consumers spend on health care. A1 C Visa fired one of its most high-profile executives, citing behavior that violated company policy. B3 Rio Tinto has turned to Simon Thompson, a boardroom veteran, to succeed du Plessis as chairman. B9 An Obama-era official will continue litigation seeking to remove Mulvaney as acting director of the CFPB. B9 Greece and its international creditors reached a preliminary deal on measures Athens must adopt in exchange for fresh funds. A8 CVS Deal Roils Health Care $69 billion pact to buy Aetna combines insurer, provider of pharmacy services share, or $62, in stock, the companies announced Sunday. That represents a premium of about 29% to where Aetna shares were trading before The Wall Street Journal reported that the companies were in talks in October. The proposed deal is the latest and most dramatic sign of how the lines between traditional segments in health care are blurring as companies, saddled with mature businesses and in many cases restricted from buying rival companies, enter new areas in CVS Health Corp. agreed to buy Aetna Inc. for about $69 billion in cash and stock, in a move to transform the pharmacy company and capture more of what consumers spend on health care. Aetna stockholders are to receive $207 per share—$145 in cash and 0.8378 of a CVS U.S. to Unveil Security Plan World-Wide Senate Republicans, in their push last week to pass a sweeping tax bill, undermined a researchand-development tax credit many companies use to encourage innovation, and business interests are in revolt over the move. A1 Kelly has imposed discipline and rigorous protocols on a freewheeling White House, but the president has found ways around them. A3 GOP leaders in Congress hope to pass a two-week spending bill to avoid a looming government shutdown, but the bid faces hurdles. A4 German police said a bomb found in Potsdam on Friday was accompanied by an extortion demand aimed at Deutsche Post’s DHL. A8 The unraveling of the fragile alliance between Yemen’s former president and a Shiite rebel group picked up pace. A7 The pope said the nucleararms race has become irrational and immoral, decrying the construction of evermore-potent weapons. A6 CONTENTS Business & Finance B2 Business News....... B3,5 Crossword.............. A14 Heard on Street.... B12 Journal Report R1-14 Life & Arts....... A11-13 Markets...............B11-12 Opinion.............. A15-17 Sports....................... A14 Technology............... B4 U.S. News............. A2-4 Weather................... A14 World News....... A6-9 > s Copyright 2017 Dow Jones & Company. All Rights Reserved search of growth. Companies from insurers to hospital chains are also looking for ways to squeeze costs and bolster their leverage against other players in the food chain. That is creating opportunities, but also new fault lines as companies find themselves competing against erstwhile partners. “Everyone’s moving into one another’s space to position themselves for whatever happens,” said Lawton Robert Burns, a professor at the University of Pennsylvania’s Wharton School. The chief executives of CVS and Aetna said in a joint interview that by pairing Aetna’s medical expertise with CVS’s ubiquitous physical-store presence, the new company would be well positioned to curtail Please see CVS page A2 Heard on the Street: Aetna move tests positive............. B12 Capital Tempests Top aide to Mueller was reassigned......................... A4 Trump finds ways around Kelly’s curbs...................... A3 Bid to avoid shutdown.. A4 Venezuelans Transform Florida Politics BY JOSÉ DE CÓRDOBA AND ARIAN CAMPO-FLORES n- DORAL, Fla.—One August day, hundreds of Venezuelans packed the pews at a local church to hear Vice President Mike Pence and Sen. Marco Rubio preach against Venezuelan President Nicolás Maduro and pledge to help restore democracy in the oil-rich nation. “We will not stand by as Venezuela crumbles,” said Mr. Pence. “Libertad! Libertad!” many in the crowd shouted, waving tricolor Venezuelan yellow, blue and red flags, and giving the Republican officials standing ovations. Tens of thousands of Venezuelans, pushed by a failed economy and repression back home, are finding their way to South Florida. Their growing numbers and Venezuela’s dramatic implo- National Security Adviser Lt. Gen. H.R. McMaster previewed the White House’s coming national-security strategy. A6 no The Trump administration will roll out its first nationalsecurity strategy in the next few weeks, marking the beginning of what it calls a tough new approach. A6 By Sharon Terlep, Anna Wilde Mathews and Dana Cimilluca As exiles pour in, both parties aim to woo new voters in a state crucial to U.S. elections ALEX BRANDON/ASSOCIATED PRESS The FBI agent who was removed from his post for allegedly sending text messages critical of Trump during the campaign led the bureau’s Clinton email investigation and later served as the top agent on its probe into Russian election meddling. A4 WASHINGTON—Senate Republicans, in their push to pass a sweeping tax bill, undermined a research-and-development tax credit many companies use to encourage innovation, and business interests are in revolt. Late Friday, just hours before the Senate voted for the bill, Republicans decided to preserve the corporate alternative minimum tax instead of repealing it as planned. The change gave them money for lawmakers’ other priorities, but it could force many companies to lose tax breaks the bill’s authors intended to protect. Addressing this problem is one of many challenges congressional Republicans face as they shepherd a final tax bill with implications for middleclass households, American businesses and the health-care system. The House and Senate passed competing bills that will now be merged into one. Among other thorny issues, Republicans will wrangle over international tax rules, a new system for taxing pass-through businesses such as partnerships and the fate of the estate tax. Also surprisingly up for grabs: the corporate tax rate. Please see TAX page A4 ly . ...LIKE A BIG PIZZA PIE: A so-called ‘supermoon’ rose Sunday over the U.S. Capitol. These occur when the moon is full at the same time its orbit comes closest to Earth. According to NASA, the supermoon will return twice next month, on January 1 and January 31. co Fo m rp m e er rs ci on al a us l, e on Disney has re-engaged in discussions with Fox to purchase some of the media giant’s assets, and Comcast remains in the mix. B3 JIM LO SCALZO/EPA/SHUTTERSTOCK U.S. tech executives touted their commitment to China despite Beijing’s tightening grip on the internet in the Chinese market. B1 YEN 112.25 BY RICHARD RUBIN Foreign-investor money is pouring into the U.S. stock market at the fastest clip in years, providing a fresh boost to the rally. A1 The Richmond Fed is expected to pick McKinsey executive Thomas Barkin to serve as its next president, succeeding Lacker. A2 EURO $1.1896 Tax Plan Upends Business Credits Business & Finance U.S. banks have launched a project they hope will prevent a run on the financial system should one of them suffer a debilitating cyberattack. B1 HHHH $4.00 WSJ.com Hello, It’s the Post Office Calling. Your Package Made a Run for It i i sion could tip the political balance in this crucial swing state, where presidential elections are decided by the thinnest of margins. The arrival of the Venezuelans echoes an earlier era when Cuban exiles fleeing Fidel Castro’s Communist regime settled in Miami decades ago. Eventually they morphed into CubanAmericans and organized themselves into a potent economic and political force, particularly for the Republican Party. Venezuela’s meltdown, and the regime’s Cuban connection—Cuba’s President Raúl Castro remains Mr. Maduro’s closest ally and adviser—have focused the imagination of U.S. politicians of both parties. Many believe VenezuelanAmericans could develop into a powerful and perhaps captive voting bloc. INSIDE Foreign investor ﬂows into U.S. equities $40 billion 30 i 20 Clerks hunt critters that chew their way to freedom; a crocodile in the sorting bin 10 0 –10 BY ANUPREETA DAS with the force of a Muhammad Ali punch, heard a crack like a The U.S. Postal Service de- pliers on a crab leg.” Liquid livers millions of packages, started oozing down her calf. “One of them crazy bugs some of which contain live animals. As Pamela Schubbe had crawled up my dang pant found out, this category of leg!” recalled Ms. Schubbe, who now works at the post ofcargo can escape. fice in Clifton, Ill. “I The postal clerk don’t know if somewas distributing one had ordered packages for carrithem or they were ers’ cases one mornhitchhikers, but they ing at the Manteno, definitely came from Ill., post office when inside that box.” she noticed five Colleagues took to large cockroaches calling her “the bug had breached the slayer.” walls of the box Email has rethey’d arrived in Oriental cockroach placed many of the and were clinging to functions of snail mail. Unless the outside. Her fellow workers put the you actually want to send box in a bag, informed the car- snails through the mail. On any given day, the USPS rier and went about their day. An hour later, Ms. Schubbe felt might deliver day-old chicks, baby alligators, frogs, salamana tickle on her knee. “It took me an eighth of a ders, leeches, snails, hellgramsecond to guess what was mites, goldfish or bees. All of causing that tickle,” she said. those are permitted, with conPlease see MAIL page A10 “I slapped my hand on my knee Ramón Muchacho was a recent arrival in the crowd that day. As mayor of a key Caracas suburb, he fled Venezuela after the country’s Supreme Court convicted him in August for his alleged failure to stop antigovernment protests. He faced 15 months in prison. Mr. Muchacho liked what he heard from the vice president and Republican senator. “The vice president told us we could count on the Trump administration,” he said. Where Cubans once came by small boats, rafts made of inner tubes and planes, Venezuelans fly straight here from Caracas, their belongings in a few suitcases. Like the Cubans who came in the 1960s, the new arrivals say they are fleeing a land they love because they can no longer live in a country where Please see EXILES page A10 –20 WHEN IS IT TIME TO DASH INTO CASH? INVESTING IN FUNDS, R1 –30 –40 2007 ’08 ’09 ’10 ’11 Source: Deutsche Bank LIFE & ARTS, A13 ’13 ’14 ’15 ’16 ’17 THE WALL STREET JOURNAL. Overseas Buying Gives U.S. Stocks New Lift BY MICHAEL WURSTHORN AND RIVA GOLD PICASSO UNDER THE INFLUENCE ’12 Foreign-investor money is pouring into the U.S. stock market at the fastest clip in years, ending a long period of selling and providing a fresh boost to a more than eightyear rally. Overseas buyers have put $66.4 billion into U.S. stocks this year through September in their biggest buying spree since 2012, according to the most recently available data compiled by Deutsche Bank. Such buying was particularly robust heading into the fall, when investors bought $26.3 billion of stock in September. This interest marks a sharp reversal after four straight years of outflows, when these investors pulled billions of dollars out of shares of U.S. companies. Growing foreign-investor interest in U.S. stocks has Please see STOCKS page A9 For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. A2 | Monday, December 4, 2017 * **** THE WALL STREET JOURNAL. U.S. NEWS ECONOMIC CALENDAR THE OUTLOOK | By Michael S. Derby Digital-Currency Fever May Hit Fed U.S. WATCH The market value of bitcoin is a fraction of U.S. money supply, as measured by currency in circulation, time deposits and money funds. $13.165 trillion $13.774 2016 2017 $0.012 $0.174 M2 Bitcoin Sources: Federal Reserve (M2); Coindesk (Bitcoin) THE WALL STREET JOURNAL. ers. But the U.S. government also turns some of that into paper dollars and metal coins. The Fed issues no separate currency that exists only on the internet, without any tangible cash form. F ed officials have long held that bitcoin is no rival for the dollar, and they don’t see that changing. So far, it is neither stable in value nor universally accepted as a form of payment. Imagine trying to find a barber, for example, who accepts bitcoin and could reliably price the trim when the currency’s value oscillated wildly. But change is in the air. Some central banks, such as Sweden’s Riksbank, are weighing the creation of their own versions of digital currencies. San Francisco Fed President John Williams said last Wednesday the topic of a central bank digital currency would be “a very exciting area” of research over the next decade. Academics have already been laying the intellectual groundwork for official digital money. Central bank-issued digital money “can serve as a practically costless medium of exchange, secure store of value, and stable unit of account,” wrote economics professors Michael Bordo of Rutgers University and Andrew Levin of Dartmouth College in a paper published this year. They say central bank-issued digital money would be painless for those who want to use it. It could be accessed via accounts directly at the Fed, or more likely, from private banks in partnership with the central bank. The accounts would earn interest, which would allow the Fed to conduct monetary policy through interest-rate changes right at the consumer level, replicating the tools the central bank now uses via banks and money managers. Fed-issued digital money would also make payments fast and costless, removing the wait for money to clear into an account, or fees to move cash around. “It’s urgent for the Federal Reserve to move forward” on this matter, Mr. Levin said in an interview Friday. Given that it would, in many ways, be an extension of how the Fed already operates, implementation need not be that onerous, he said. Key Fed officials don’t share that urgency. Governor Jerome Powell, whom President Donald Trump has nominated to become Fed chairman, said in June about Fedissued digital money: “My approach to that would be very, very cautious.” The Fed’s regulatory leader, Randal Quarles, is on that same page. In remarks Thursday, he said there are a host of legal, technological and privacy issues that must be addressed before anything can move forward. “I am particularly concerned that a central-bank-issued digital currency that’s held widely around the globe could be the subject of serious cyberattacks and could be widely used in money laundering and terrorist financing,” Mr. Quarles said. It is also possible a central bank system could compli- cate the ability of banks to make loans and upend private efforts to create more efficient payment systems, he said. Mr. Quarles sees a more narrow path as likely. He called for more research into “limited-purpose” digital money that could, for example, be used to help settle transactions between banks. T here are also privacy worries. People and companies might not want to bank directly with a government arm such as the Fed if offered the chance. There is also the fact that, for many Americans, cash remains king. The rise of phone-based payment systems and merchants who are willing to take cards for small-scale purchases haven’t made much of a dent, according to data compiled by several regional Fed banks. Cash remains popular for small transactions, and if there is anything moving people away from cash, it is the shift from brick-and-mortar shopping to online purchases, the report noted. Mr. Dudley noted another impediment to U.S. government-backed digital dollars: compared with people in other developed economies, many Americans don’t even have bank accounts. ly . No Comparison co Fo m rp m e er rs ci on al a us l, e on I t is time to start thinking about Fedcoin. For years central bankers have seen digital currencies as a curiosity to keep an eye on. But now they are increasingly looking at whether they should create their own. “It’s really very premature to be talking about the Federal Reserve offering digital currencies, but it is something we are thinking about,” New York Fed President William Dudley said Wednesday. Mr. Dudley was speaking in the shadow of bitcoin, an electronic form of money that has soared in value this year, fueling an investment mania. Bitcoin is created privately, unlike national currencies such as the U.S. dollar and British pound that are issued by governments, typically through their central banks. Since central banks rely on their control of the money supply to guide their economies and electronic payment methods are rising in popularity, officials have begun pondering whether they might need to get in the game. The Fed and its foreign counterparts already create money electronically, working directly through private banks, which in turn loan money electronically to businesses, households and oth- TUESDAY: The Commerce Department releases data on U.S. international trade for October. Economists surveyed by The Wall Street Journal forecast a trade gap of $47.4 billion in October, up from $43.5 billion in September. WEDNESDAY: The Labor Department releases revised data on U.S. worker productivity for the third quarter. The first reading, released in early November, showed productivity rose at a 3% seasonally adjusted annual rate, up from a 1.5% growth rate for the second quarter. Economists surveyed by the Journal forecast third-quarter productivity rose at a revised 3.2% annual rate. FRIDAY: The Labor Department releases the November U.S. jobs report, days before the Federal Reserve’s monetary policy meeting of Dec. 12-13. Investors are penciling in a December interest-rate increase with near certainty, and the November employment figures could provide further ammunition for another rate increase. Economists surveyed by the Journal forecast the unemployment rate will remain 4.1% in November and nonfarm payroll employment will grow 190,000. The University of Michigan releases its preliminary reading on December U.S. consumer sentiment. The university’s consumer-sentiment index was 98.5 in November, down from 100.7 in October. Economists surveyed by the Journal expect a consumer sentiment reading of 99.4 in December. McKinsey Executive to Lead Richmond Fed Democratic Rep. Sander Levin of Michigan announced Saturday he won’t run for re-election next year after more than three decades in Congress. Mr. Levin said that after his term ends, he will join the University of Michigan’s Gerald R. Ford School of Public Policy. Mr. Levin, 86, arrived in the House in 1983 and became a leading Democratic voice on tax and trade issues. He joined the tax-writing House Ways and Means Committee in 1987. —Kristina Peterson FEDERAL RESERVE Policy Fails to Tamp Risk-Taking: Group The Federal Reserve Bank of Richmond is expected to pick Thomas Barkin, a senior executive at McKinsey & Co., to serve as its next president, according to people familiar with the matter. His appointment will likely be announced Monday, according to one person familiar with the matter. Mr. Barkin is chief risk officer at McKinsey and previously served as the global consulting firm’s chief financial officer. CVS Continued from Page One runaway health-care costs. These costs are growing at “an unsustainable rate,” CVS’s Larry Merlo said in the interview. The combined company “can meet an unmet need in terms of improving access and reducing cost and helping people achieve their best health.” Combining Aetna’s vast trove of data with CVS’s retail expertise will enable better treatment of costly chronic diseases, Aetna’s Mark T. Bertolini said. “This is about how to get the payer more involved at the local level,” he said. “As we look at 50% of the population driving 80% of cost, we need to find a more convenient and more effective way to meet customers’ needs.” Mr. Merlo will be chief executive of the combined company, which will maintain Aetna as a standalone unit. Mr. Bertolini won’t have an operational role, though he will take a seat on the CVS board along with two other Aetna directors. The deal—the biggest announced in more than a year— pulls together two giants from very different corners of the health-care industry. CVS, with annual revenue of $178 billion, is a major pharmacy-benefits manager in addition to operating a vast collection of drugstores, some of which already have retail clinics. Aetna, with revenue of around $63 billion, is the third-largest U.S. health insurer, providing coverage to around 22.2 million members enrolled in employer, Medicare, Medicaid and other plans. The logic of the deal centers on a plan to use CVS’s nearly 10,000 U.S. pharmacy locations to provide consumers with more local-care options. CVS, which has for years been seeking to move further into health care, plans to repurpose portions of its pharmacies into no The Federal Reserve’s rate increases don’t appear to have cooled financial markets and may not therefore be having much impact on the U.S. economy, the Bank for International Settlements said Sunday. In its quarterly report, the BIS said that despite the four increases in short-term policy interest rates since the end of 2015, asset prices suggest investors are just as willing to take on risk as before, if not more so. The BIS has long warned that interest rates are too low, fueling a dangerous buildup of debt. —Paul Hannon BY NICK TIMIRAOS AND JOANN S. LUBLIN VIRGINIA Police Response to Protest Is Criticized Police in Charlottesville, Va., failed to control violence during white nationalist protests in August resulting in “disastrous results,” according to an independent report commissioned by the city released Friday that called the police response “inadequate and disconnected.” In the 220-page report, Timothy J. Heaphy wrote that poor planning, bad orders and general incompetence exacerbated violent clashes that exploded at the “Unite the Right” rally of hundreds of white nationalists on Aug. 12. While the report addressed two other events, it focused on the August event in which a woman was killed when an alleged Nazi sympathizer drove his car into a crowd of counterprotesters. City Manager Maurice Jones said while Charlottesville doesn’t agree with all of the report, it is an important step in helping move forward. “We, and our law enforcement partner in the Virginia State Police, undoubtedly fell short of expectations, and for that we are profoundly sorry,” he said in a statement. —Cameron McWhirter Mr. Barkin, 56 tears old, would succeed Jeffrey Lacker, who resigned as the bank’s president in April after revealing his involvement in a 2012 leak of confidential information that sparked a criminal investigation. A spokesman for the Richmond Fed didn’t respond to inquiries Sunday night, and Mr. Barkin didn’t respond to requests for comment. Mr. Barkin’s likely selection was first reported by Bloomberg News. Mr. Barkin is based in McKinsey’s Atlanta office. His clients have been financial in- Thomas Barkin is the chief risk officer at McKinsey and previously served as the financial chief. stitutions and travel and transportation companies. He has spent about 30 years at McKinsey and before that worked at First Boston Corp. in New York. He is a member of the board of trustees at Emory University. SPENCER PLATT/GETTY IMAGES Veteran Congressman Won’t Run for Seat n- MICHIGAN CVS has nearly 10,000 pharmacy locations in the U.S. Healthy Mix CVS's deal for Aetna will bring together two huge health-care companies that are in largely different businesses. $178 billion $63.2 billion Annual revenue Larry J. Merlo Woonsocket, R.I. • Pharmacy-beneﬁts manager • CVS drugstores • MinuteClinic walk-in sites 2.4B CEO Mark T. Bertolini Headquarters Hartford, Conn. Businesses Details prescriptions ﬁlled in 2016 *Medical insurance members as of Sept. 30 2017 Sources: the companies; staff reports community health centers where customers can get answers about their health and coverage—and how to manage costs, the companies said. The pharmacies will have space dedicated to wellness and could • Health insurance, including employer • Medicare and Medicaid coverage 22.2M members* THE WALL STREET JOURNAL provide services in areas like vision, hearing and nutrition. The locations will be staffed variously by pharmacists, nurse practitioners and experts such as nutritionists. It is possible they will one day He studied economics as an undergraduate at Harvard University and earned law and business school degrees there as well. Mr. Barkin would be the first person chosen from outside the Richmond Fed to lead the institution, a bastion of conservative monetary philosophy. He served as chairman of the Atlanta Fed’s board of directors in 2013 and 2014. The heads of the Fed’s 12 reserve banks are chosen by the nonbank directors of each institution. Finalists must also interview with and win approval from the Fed’s Washingtonbased Board of Governors. The Richmond Fed began its search in January, when Mr. Lacker said he would retire this October. The Richmond Fed leader will serve as a voting member of the Fed’s rate-setting committee next year. The president of the New York Fed has a permanent voting seat on the body. Four other voting slots rotate each year among the other 11 regional bank presidents. include physicians, Mr. Merlo said, though there are no immediate plans for that. CVS faces the potential threat of Amazon.com Inc., which may enter the pharmacy business. The company’s retail business accounts for a shrinking share of overall sales, with most revenue now coming from its pharmacy-benefits manager, which acts as a middleman overseeing drug-benefit plans for employers and insurers. An antitrust challenge led Aetna earlier this year to give up its planned acquisition of Humana Inc. and the insurer has retreated from the unprofitable Affordable Care Act exchange business, leaving it with an unclear path to future growth, analysts say. It also lacks the diversity of larger rival UnitedHealth Group Inc., which has a fastexpanding health-services arm that includes a pharmacy-benefits manager as well as doctor practices and surgery centers. “This transaction is about growth and expansion, not contraction,” Mr. Merlo said. The companies expect $750 million in “near-term synergies” from the deal. The combination faces substantial challenges, including the huge task of knitting together the companies’ diverse operations to keep customer experiences smooth and seamless. The deal isn’t likely to deliver as many cost-cutting benefits as combinations with more direct overlap, such as Aetna’s scuttled bid to buy Humana, analysts said. It must also pass muster with regulators, which isn’t a sure thing especially after the Justice Department sued to block AT&T Inc.’s planned purchase of Time Warner Inc., another socalled vertical combination of companies in different parts of a supply chain. Mr. Bertolini said the companies had looked at the AT&T challenge “very thoroughly” and that the proposed tie-up was fundamentally different from an antitrust perspective. Barclays PLC and Goldman Sachs Group Inc. advised CVS and Centerview Partners advised its board. Shearman & Sterling LLP, Dechert LLP, and McDermott Will & Emery LLP provided legal advice. Lazard and Allen & Co. advised Aetna, and Evercore advised the company’s board. Davis Polk & Wardwell LLP provided legal advice to Aetna. Barclays, Goldman and Bank of America Corp. are providing $49 billion of debt financing. —Dana Mattioli contributed to this article. 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U.S. NEWS Trump Finds Ways Around Kelly’s Curbs President evades chief of staff’s controls with secret meetings; his wife also plays a role Chief of Staff John Kelly has restrained a freewheeling White House, but the president has found ways to circumvent the protocols. operates. He’s been less successful at that.” Still, White House staffers say Mr. Trump’s working relationship with Mr. Kelly remains strong and the two appear to have found an equilibrium that suggests Mr. Kelly could be in place for a long time, with the chief of staff focusing on running White House operations while the president takes a freer hand with his own agenda. Presidents have long made a point of staying in contact with friends and outside advisers; former President Barack Obama successfully argued with handlers to keep his BlackBerry to remain in touch with the world beyond the White House. What’s striking about Mr. Trump’s actions is that he is circumventing protocols that advisers say are intended to help him. Since arriving in July, Mr. Kelly has clamped down on ly . chant for what one confidant dubbed “workarounds” to the new White House protocols shows the limits of Mr. Kelly’s approach. “John has been successful at putting in place a stronger chain of command in the White House, requiring people to go through him to get to the Oval Office,” said Leon Panetta, a White House chief of staff under President Bill Clinton who worked with Mr. Kelly, a fourstar Marine general, in the Pentagon. “The problem has always been whether or not the president is going to accept better discipline in the way he ©T&CO. 2017 president. “If I don’t want to wait 24 hours for a call from the president, getting to Melania is much easier,” one person said. A spokeswoman for Mrs. Trump said: “This is more fake news and these are more anonymous sources peddling things that just aren’t true. The first lady is focused on her own work in the East Wing.” The White House declined to comment. Mr. Kelly has frequently said that it is his job to control the White House below the president, rather than the president himself. The president’s pen- co Fo m rp m e er rs ci on al a us l, e on WASHINGTON—Chief of Staff John Kelly over the past five months has imposed discipline and rigorous protocols on a freewheeling White House. But President Donald Trump has found some loopholes. The president on occasion has called White House aides to the private residence in the evening, where he makes assignments and asks them not tell Mr. Kelly about the plans, according to several people familiar with the matter. At least once, aides have declined to carry out the requested task so as not to run afoul of Mr. Kelly, one of these people said. The president, who values counsel from an informal group of confidants outside the White House, also sometimes bypasses the normal scheduling of phone calls that gives other White House staff, including Mr. Kelly, some control over who the president talks to and when. Instead, some of his friends have taken to calling Melania Trump and asking her to pass on messages to her husband, according to two people familiar with the matter. They say that since she arrived in the White House from New York over the summer, the first lady has taken on a more central role as a political adviser to the AARON P. BERNSTEIN/REUTERS BY MICHAEL C. BENDER practices that aides say made the White House’s internal operations chaotic. He told staff there will be no more patching through calls from Trump friends outside the White House who wanted to weigh in on the news; instead, they need appointments. And he stopped aides from wandering into the Oval Office to seek time with the president. Mr. Kelly has never aspired to control the president’s Twitter feed, however, which continues to create news and draw criticism. Just last week, Mr. Trump drew a rebuke from British Prime Minister Theresa May for retweeting videos posted by a far-right British nationalist group that purported to show violence committed by Muslims. On Nov. 12, with many of Mr. Trump’s senior military and diplomatic advisers arguing for diplomacy with North Korea, the president tweeted that the country’s leader, Kim Jong Un, was “short and fat.” Asked about the tweet, posted during the president’s trip to Asia, Mr. Kelly shrugged. “Believe it or not—I don’t follow the tweets,” he said, adding that he urges White House policy staff not to be influenced by the missives. THE NEW HOME & ACCESSORIES COLLECTION Education Revamp Stirs Opposition The House bill focuses on graduate earnings. Above, the Montana State University campus in October n- that does not undermine access to and the quality of postsecondary education at a time when the nation needs more of both,” Mr. Mitchell said. The bill aims to fundamentally reorient the college marketplace by focusing on student outcomes. It includes a provision that would require the publication of graduates’ salaries five and 10 years after school, breaking out data down to the academic-program level rather than just for an entire college. “It turns higher education into a market for programs and it breaks away the institution as the unit of value,” said Anthony Carnevale, director of the Georgetown University Center on Education and Work- no The sprawling, 542-page revamp of the Higher Education Act released Friday by Rep. Virginia Foxx (R., N.C.), chairwoman of the House Education Committee, kicks off what is likely to be a rocky and drawnout legislative process aimed at reshaping college education. The bill would update the Higher Education Act of 1965 by overhauling student-loan programs, mandating more transparency on graduates’ earnings and jettisoning much of the existing regulatory framework on for-profit colleges. The bill must work its way through the House, while an initial Senate version isn’t expected until 2018. Early reactions from colleges and student advocates— all with powerful lobbyists in Washington—suggest actually turning the wish list into law would be a steep uphill battle. Ted Mitchell, president of the American Council on Education and a former Education Department official under President Barack Obama, said he was pleased the bill includes many recommendations from a bipartisan task force aimed at simplifying federal mandates to ease administrative costs for schools. But Mr. Mitchell said he is “deeply concerned” the proposal would make college less affordable. He cited bill details that would increase interest charges for six million studentloan borrowers each year and eliminate the Federal Supplemental Educational Opportunity Grant, which goes to about 1.5 million students. “It is vital to undertake this complicated process in a way RACHEL LEATHE/ASSOCIATED PRESS BY DOUGLAS BELKIN AND MELISSA KORN force. “It will create transparency and give people choices; we’re going to have the information necessary to make markets work.” This transparency could have wide-reaching effects on schools, Dr. Carnevale said. Many humanities programs could be stung by the new information on graduate earnings. Schools also will have new latitude to cap loan amounts for students in programs where graduate earnings tend to be low and in which schools may worry about students’ ability to repay the debt—making it likely to hit art history majors harder than aspiring engineers. The bill doesn’t explain what mechanism it will use to create this earnings calculation, but there has been building bipartisan support for the general idea of better tracking graduate outcomes. The planned tool would only tally earnings for students who received federal student aid. The bill also would limit borrowing through Grad PLUS loans at $28,500, which is well below the cost of attendance for most graduate programs. “This bill really hits graduate students,” said Robert Kelchen, an assistant professor of higher education at Seton Hall University, citing the loan caps, elimination of loan forgiveness for individuals who take public-service jobs and overhaul to income-based repayment offerings. 800 843 3269 | TIFFANY.COM Citing Federal Gap, Chicago Forms Legal Unit BY SHAYNDI RAICE CHICAGO—City officials here are creating a special legal team to pursue cases against companies that Chicago says the U.S. isn’t taking up, or for the city to sue the federal government itself. The city joins a movement by some other municipalities, including San Francisco, to increase vigilance under the Trump administration. The unit was spurred by new Justice Department rules that threaten U.S. funding for socalled sanctuary cities such as Chicago, which refuse to detain undocumented immigrants at the request of federal authorities, said Edward Siskel, Chicago’s corporation counsel. The city has challenged the sanctuary rules in court. That effort has expanded to include legal cases involving companies where the city feels the administration is being slack, especially around environmental protection and consumer fraud, he said. The unit will be staffed by four lawyers. The Trump administration “is sending the message that they are not going to be watching what people are doing, and that the city is going to have to step up to take on that enforcement role if the federal government is not going to do so,” Mr. Siskel said. A Justice Department spokesman declined to comment. Chicago started to take a more aggressive stance on such lawsuits before it announced the new group. Last month, the city filed a notice of intent to sue U.S. Steel Corp. for a toxic spill in waterways that flow into Lake Michigan, alleging a violation of the federal Clean Water Act. U.S. Steel said at the time that “the event did not pose any danger to water supply or human health.” The city also is pursuing lawsuits against Uber Technologies Inc. and Equifax Inc. over data breaches that affected consumers. It recently filed a joint suit with the state of Illinois against the ride-hailing firm alleging consumer fraud and deceptive business practices over its failure to disclose the breach. Uber has said it plans to cooperate with state attorneys general on the matter. Chicago sued Equifax for consumer fraud over insufficiently protecting consumer data. Equifax didn’t respond to a request for comment. The legal community calls teams like the one in Chicago “affirmative litigation” teams. Such teams have become more popular with cities looking to take a more proactive approach in pursuing civil cases. “The more political polarization we have, the more cities find themselves with no alternative but litigation to deal with pressing social problems,” said Lawrence Rosenthal, a law professor at Chapman University in Orange, Calif., who used to work in Chicago’s law department. Donald Trump has attacked Chicago for its crime rates and San Francisco for its status as a sanctuary city. Dennis Herrera, the city attorney for San Francisco, said Mr. Trump’s rhetoric made it clear his office would need to defend itself against the administration’s policies. Starting at $1,950 www.baume-et-mercier.com For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. A4 | Monday, December 4, 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. U.S. NEWS Top Mueller Aide Was Reassigned Measure Targets President Trump called an FBI agent’s removal from the Clinton probe evidence of bias against him. Reporter Suspended For Flynn Account ABC News suspended investigative reporter Brian Ross for four weeks without pay after an erroneous report that former national security adviser Michael Flynn was prepared to testify that Donald Trump directed him to establish contact with Russian officials during his presidential campaign. The story, which caused the stock market to tumble Friday, was subsequently corrected by Questions about Mr. Strzok’s communications grew out of a review the Justice Department’s inspector general opened in January into Mr. Comey’s handling of the FBI’s now-closed probe into Mrs. Clinton’s use of the private email server while secretary of state. The inspector general’s office said Saturday that in the course of that review—which is determining whether the FBI made proper investigative decisions during the email probe—the office had come to review “allegations involving communications between certain individuals.” during Mr. Trump’s transition. Mr. Flynn has reached an agreement to cooperate with special counsel Robert Mueller, who is investigating Russian meddling in the 2016 election. This isn’t the first time Mr. Ross has made a significant error. In the aftermath of the 2012 mass shooting in a movie theater in Aurora, Colo., Mr. Ross incorrectly reported that the shooter had ties to the tea party. Mr. Ross said in a tweet that “his job is to hold people accountable and that’s why I agree with being held accountable myself.” Those include text messages allegedly critical of Mr. Trump that Mr. Strzok sent to Lisa Page, an FBI lawyer with whom he was romantically involved, people familiar with the matter said. The inspector general’s office, without naming Mr. Strzok or Ms. Page, said it would report its findings on the allegations about the communications between the individuals promptly upon its conclusion of the review. Mr. Strzok, who was considered a rising star at the FBI, was de facto demoted to a supervisory job in the bureau’s human resources division after Mr. Mueller learned that the Justice Department’s inspector general was scrutinizing messages he sent to another FBI employee expressing political opinions critical of then-candidate Mr. Trump, these people said. Mr. Trump seized upon Mr. Strzok’s removal as evidence of bias against him within the FBI, launching a public broadside on Twitter against the bureau’s credibility on Sunday, two days after Mr. Mueller struck a plea agreement with former national security adviser Mike Flynn and ALEX WONG/GETTY IMAGES no n- TAX Continued from Page One President Donald Trump, after insisting on a 20% rate and getting it, this weekend said maybe it would land at 22%. All this will happen under presidential pressure to conclude by Christmas. The tax plans aren’t retroactive, but they are largely scheduled to take effect Jan. 1. The House is expected to vote Monday to start a conference committee and name its negotiators. The Senate’s timing is less certain. For the GOP, the conference committee is the last remaining obstacle to a political victory that will bolster the party for the 2018 campaigns. That imperative creates pressure to move quickly and cut deals, but the ultimate version still needs 218 votes in the House and 50 in the Senate in a later vote. “We’ve been so focused on getting this through the Senate. I haven’t had a lot of opportunity to discuss this with the House,” said Sen. Pat Toomey (R., Pa.). “These are very, very similar bills...So I’m confident we’ll be able to work this out.” For companies, the conference committee is one last chance to pitch a special break or warn of consequences. For Democrats, there is one last chance to sway a few Republicans against the tax plan and point out its flaws. Sen. Ron Wyden (D., Ore.) said he expected Republicans to have a “conference in name only” and wasn’t sure whether there was much chance for the bill’s opponents to shape or stop it. “This is just one big set of ideological trophies. They have just put a dagger right in the heart of the Affordable Care Act,” he said, referring to the Senate bill’s repeal of the individual mandate to have health insurance. “[There are] gifts to the key constituencies, the biggest players on the far right.” Both bills provide about $1.4 trillion in tax cuts over a decade. They include deep, permanent cuts in the corporate tax rate, new tax reductions for pass-through businesses such as partnerships and temporary breaks for middle-income families. Both bills reshape international tax law and raise taxes ABC News, a unit of Walt Disney Co. “It was shortly after the election that President-elect Trump directed Flynn to contact Russian officials on topics that included working jointly against ISIS,” the network said. In a statement Saturday, ABC News said Mr. Ross’s story, which was broadcast Friday as a special report, “had not been fully vetted through our editorial standards process.” Mr. Flynn pleaded guilty Friday to lying to federal agents regarding his contacts with the Russian ambassador to the U.S. co Fo m rp m e er rs ci on al a us l, e on WASHINGTON—The Federal Bureau of Investigation agent who was removed from his post last summer for allegedly sending text messages critical of Donald Trump during the presidential campaign led the bureau’s investigation into Hillary Clinton’s use of a private email server and later served as the top agent on its probe into Russian interference in the 2016 election. Peter Strzok, 47 years old, was one of the highest-ranking agents at the bureau and was considered one of its most experienced counterintelligence experts. As the senior supervisor on the Clinton email investigation, he was in charge of running the probe, reviewing evidence and making recommendations to higher-ups, including then-FBI Director James Comey. He later joined the office of Special Counsel Robert Mueller, who is probing Russia’s meddling in the 2016 election. Mr. Comey’s public clearing of Mrs. Clinton, in which he described her behavior as careless but not criminal, was widely criticized as an unusual interference in the election, particularly by Republicans. His subsequent decision to publicly disclose that he had reopened the probe on the eve of the election was blamed by Democrats and Mrs. Clinton herself for helping Mr. Trump win. Colleagues of Mr. Strzok’s said they never detected any political bias from him and were unsure of his political bent. An associate said that the text messages were mostly reactions to controversial statements made by Mr. Trump during the campaign that were seen as being “outside the norms of proper behavior,” especially when he attacked the integrity of the FBI’s probe into Mrs. Clinton’s email server. SHAWN THEW/PRESS POOL BY DEL QUENTIN WILBER AND PAUL SONNE raised the legal stakes for the White House. “Report: ‘ANTI-TRUMP FBI AGENT LED CLINTON EMAIL PROBE,’” Mr. Trump wrote in a tweet on Sunday. “Now it all starts to make sense!” Mr. Trump described the investigation into Mrs. Clinton’s email server as “phony and dishonest” and said Mr. Comey’s leadership had left the bureau’s reputation in tatters. The president described Mr. Strzok as tainted and dishonest, quoting coverage from the Fox News morning show “Fox & Friends,” and reposted tweets naming Mr. Strzok and calling on the current FBI director to clean house. Both Mr. Strzok and Ms. Page worked on the special counsel’s investigation—Mr. Strzok as a top counterintelligence agent and Ms. Page as a lawyer temporarily detailed to the team. When Mr. Mueller found out about the allegations, he immediately removed Mr. Strzok from his team, according to Peter Carr, a spokesman for Mr. Mueller. Ms. Page had already “completed her brief detail and had returned to the FBI weeks before our office was aware of the allegations,” Mr. Carr said. At the time, the reasons for Mr. Strzok’s reassignment were tightly held, and his transfer befuddled many in the bureau. Several agents said the reassignment was evidence that Mr. Mueller would go to great lengths to protect the integrity of his investigations from any potential criticism. Mr. Carr didn’t say why the special counsel’s office didn’t disclose the reasons for Mr. Strzok’s removal from his post at the time. Neither Mr. Strzok nor Ms. Page could be reached for comment. Mr. Comey responded to the president’s disparagement of his leadership by posting a message on Twitter quoting testimony he gave to Congress in early June after his firing. “I want the American people to know this truth: The FBI is honest. The FBI is strong. And the FBI is, and always will be, independent,” Mr. Comey said. Senate Majority Whip John Cornyn (R., Texas) spoke to reporters Friday as the Senate prepared to vote on the tax overhaul. on upper-middle-class wage earners in high-tax states such as New York and New Jersey. Republicans have several kinds of decisions as they build a compromise between the House and Senate tax bills. Some are like on-off switches. The House bill repeals the student-loan interest deduction; the Senate bill doesn’t. They can pick. Some are like dials. The House bill sets the top individual tax rate at 39.6%; the Senate bill puts it at 38.5%. They could meet in the middle. Some are like swapping blueprints. The House and Senate bills have different approaches to taxing corporations’ foreign income and the tax treatment of pass-through businesses such as partnerships and S corporations. It would be simplest to pick one concept and amend it instead of melding the two. Among the most unexpected issues is the imbroglio over the corporate alternative minimum tax, a rarely used provision that had flown below the radar for most companies. The change sparked a furious effort among American corporations over the weekend to reverse it. “Everyone, very quickly, is worried,” said Eric Solomon, co-director of the national tax office at EY LLP, whose firm was fielding queries from confused clients on Saturday. “People were surprised, and they’re trying to figure out what it means for them.” The imbroglio over the corporate alternative minimum tax was unexpected. The alternative minimum tax is a parallel tax system with low rates and fewer tax breaks. Presently, the corporate AMT of 20% rarely applies. Most corporations face a higher 35% tax rate and can have lower effective rates by claiming breaks that aren’t affected by the AMT. The AMT is designed to make sure companies and individuals can’t use legal breaks to avoid all taxes. They calculate what they owe under both tax systems and pay whichever is greater. But the corporate rate is now proposed to be 20%, so the overhaul could drive many companies into the 20% AMT— and force them to lose some of their breaks in the process. The biggest consequence could be the research credit, often used by manufacturers, technology firms and pharmaceutical companies, and the National Association of Manufacturers said it was working with policy makers to address the issue. Under the credit, companies get money back from the government for what they spend on innovation, often for wages of scientists and engineers. Corporations will claim $10.3 billion in research credits in 2018, according to the congressional Joint Committee on Taxation. “Mistakes like this one happen when senators cut their deals 24 hours before the bill passes,” said Russ Sullivan, a former Democratic staff director at the Senate Finance Com- Looming Shutdown BY KRISTINA PETERSON WASHINGTON—Congressional GOP leaders hope to pass a two-week spending bill before the federal government runs out of money by Saturday, but resistance among conservative Republicans and some Democrats could derail their plans with little time to spare. On Saturday, House GOP leaders unveiled legislation to keep the government running through Dec. 22 and avoid a partial shutdown when its current funding expires at 12:01 a.m. Dec. 9. The House is expected to vote on the twoweek spending patch on Thursday. GOP leaders need a majority to pass the bill in the House and 60 votes in the Senate, where Republicans hold only 52 seats. Conservative House Republicans want to see a short-term spending bill that goes into early 2018, believing they will have more leverage to negotiate over spending levels in January, rather than in December, when lawmakers are rushing to finish the legislative year and return home. “The budgeting never goes good when everybody loads up the Christmas tree and there’s artificial pressure to get out of town,” said Rep. Dave Brat (R., Va.). “You’ve got to give me one heck of a good argument for a two-week [spending bill] and I haven’t heard it yet.” Democrats and a growing number of Republicans have said they would balk at funding the government into next year without providing protections for Dreamers, undocumented immigrants brought to the country as children by their parents. It isn’t yet clear whether Democrats will withhold their votes on the short-term spending bill to demand protections for the young immigrants. ly . Strzok, FBI agent who led Clinton email probe, was removed over texts critical of Trump mittee now at McGuireWoods LLP. Murray Energy Corp., an Ohio-based firm and the largest privately held U.S. coal-mining company, complained that the AMT decision and the Senate’s tougher limits on interest deductions made a “mockery out of so-called tax reform.” Robert Murray, the company’s chief executive officer, said the Senate tax plan would raise his company’s tax bill by $60 million. The Joint Committee on Taxation estimates keeping the corporate AMT will raise $40 billion over a decade, smaller than the value of incentives like the research and development credit. That suggests the provision won’t have the catastrophic effect tax experts and companies fear, said a congressional aide familiar with the decision to add the AMT provision. Some tax analysts say that $40 billion estimate is far too low. “Luckily, this is not the final bill,” said Reuven Avi-Yonah, a tax law professor at the University of Michigan who expects Republicans to fix the problem. Battle Lines Drawn for Dueling Bills BY RICHARD RUBIN WASHINGTON—Here are some of the more contentious differences between the Senate and House GOP tax bills that need to be reconciled: Alternative minimum tax: The House bill repeals the individual and corporate alternative minimum taxes. The Senate bill retains both, though it narrows the individual AMT. Health care: The Senate bill repeals the individual mandate to have insurance. The House bill has no such language. Child tax credit: The House credit is $1,600 a child, phasing out for married couples starting at $230,000 of income. The House also has a $300 credit parents could take. The Senate has a $2,000 per-child tax credit that starts phasing out at $500,000. Estate tax: Both bills double the exemption to about $11 million a person. But the House bill fully repeals the tax permanently in 2025. The Senate bill doesn’t fully repeal it and ends the larger exemption in 2026. State and local taxes: Both bills allow a $10,000 deduction for property taxes but no break for state and local income or sales taxes. Businesses pass-throughs: The House bill benefits passive owners of partnerships and other firms that pay taxes through their owners’ returns. It offers limited breaks for professional services firms. The Senate bill has a broader deduction that is more generous to active business owners and professional services firms. Interest expenses: The Senate bill’s limit on interest deductions is much more restrictive than the House version. International tax rules: Both bills both make major changes to the rules affecting U.S. companies’ foreign earnings and the rules for payments from U.S. companies and U.S. subsidiaries of foreign companies to related foreign firms. The architecture of the provisions is somewhat different. For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. 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For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. A6 | Monday, December 4, 2017 WORLD NEWS U.S. to Unveil National-Security Strategy SIMI VALLEY, Calif.—The Trump administration will roll out its first national-security strategy in the next few weeks, marking the beginning of what it calls a tough new approach to confront a raft of global security challenges. White House officials said the strategy encompasses the threat of North Korea’s nuclear arms, global terrorism and Iranian meddling, as well as China’s growing influence in Asia and Russian aggression and propaganda efforts in the West. The strategy will seek to set out the administration’s terms for expanding global partnerships, White House National Security Adviser Lt. Gen. H.R. McMaster said, making clear those alliances will only work if other nations do more. “An alliance in which the members shoulder more of the burden together is obviously stronger than an alliance that is not doing that,” Gen. McMaster told The Wall Street Journal in an interview on the sidelines of the Reagan National Defense Forum, a gath- JONATHAN ERNST/REUTERS BY JULIAN E. BARNES AND GORDON LUBOLD National Security Adviser H.R. McMaster in an interview said U.S. allies need to do more. ering of congressional and military leaders, where he previewed the strategy. The administration’s national-security strategy has been in development since Gen. McMaster joined the administration in March and was discussed by President Donald Trump’s top national-security advisers last week, officials said. The strategy has prompted critics to ask whether the new approach will try to do too much, avoiding hard choices. “A security strategy needs to not just tell you what you are going to do more of, but also what you are going to do less of,” said Todd Harrison, a defense analyst at the Center for Strategic and International Studies. Gen. McMaster broadly outlined the new security strategy, which includes four pillars, to the audience at the Reagan forum: Protecting the American people and homeland; advancing American prosperity through growth, trade and expanding the American industrial base; “preserv- ing peace through strength” to counter China, Russia, North Korea and Iran; and terrorism in the Middle East. “Confronting the security challenges of today will require us to reclaim our strategic confidence,” Gen. McMaster told the forum. The administration still faces the challenge of winning funding for its expanded military and national-security plans from a divided congress, analysts and other officials here said. Although Senate and House legislators have agreed to a $700 billion defense budget for 2018, that deal is premised on a separate agreement to raise budget caps put in place in 2011 that limit federal spending to lower levels. Failure to reach an agreement on raising caps would force either a government shutdown or what is known as a continuing resolution, allowing the government to continue functioning under existing funding, although no new programs can be established. Rep. Mac Thornberry (R., Texas), the chairman of the House Armed Services Committee, said a budget deal to allow more money to flow to the Pentagon is critical to making any new strategy meaningful. “If we don’t turn it around now, it is not going to happen,” he said. “We have widespread agreement we have cut too much. So if it doesn’t happen now, then I don’t see how it ever happens.” Some congressional critics have said a new administration strategy should focus on China and Russia, and rebalance some of America’s military might away from the Middle East, now that Islamic State’s control of land has been vastly diminished. But others believe the Trump administration must settle on a way to maintain a sustainable presence there. White House officials have said the new strategic approach recognizes the military is overstretched and needs more resources to confront threats in what it calls the Indo-Pacific region. But the strategy also prioritizes the threat of terrorism emanating from the Middle East as well as Iran’s destabilizing actions. Although the administration is embroiled in probes over Russia’s attempt to influence the 2016 U.S. presidential campaign and the Trump transition team, the new strategy aims to work with allies in Europe to combat Russia’s influence campaigns. Gen. McMaster also issued a blunt new warning to North Korea, saying it risked a war with the U.S. The administration is trying to balance a tough approach to China with efforts to get Beijing to help cut off Pyongyang and force it to roll back its nuclear program. ly . Officials say approach encompasses global threats, while seeking to expand partnerships co Fo m rp m e er rs ci on al a us l, e on Pope Calls Nuclear-Arms Growth Illegitimate ALESSANDRA TARANTINO/ASSOCIATED PRESS BY FRANCIS X. ROCCA temporary measures toward the goal of abolishing nuclear weapons. But, at a Vatican conference on nuclear disarmament last month, Pope Francis seemed to close off that justification. Considering the risk of accidental detonation, even the mere possession of nuclear weapons is to be “firmly condemned,” he said. “What has changed? Irrationality is what has changed,” the pope said on Saturday. “We have moved ahead. Today we are at the limit.” The pope stressed he wasn’t pronouncing official church teaching but expressing his “firm opinion” that nuclear arsenals must not be allowed to grow larger. He spoke only days after North Korea tested a ballistic missile that it said would be capable of reaching the U.S. —Francis X. Rocca no n- Pope Francis leads the Angelus noon prayer at the Vatican. Pope Francis on Saturday said the nuclear-arms race had become irrational and immoral, and the construction of ever-more-potent weapons is no longer justified by the purpose of deterrence. “We are at the limit of what is legitimate when it comes to having and using nuclear arms,” the pope said. “Because today, with such sophisticated nuclear arsenals, we risk the destruction of humanity, or at least a big part of it.” The pope made his comments to reporters while flying back to Rome after a sixday visit to Myanmar and Bangladesh. Two previous popes, St. John XXIII and St. John Paul II, taught that a state’s possession of nuclear arms could be justified to deter attacks by another power, but only as Introducing TRANSFORM by ® Caesarstone , a custom quartz surface overlay solution. TV personality & photographer Nigel Barker selected Frosty Carrina (5141) for his kitchen. Luxury quartz countertops in hours, not days. Vi s i t w w w. t r a n s f o r m y o u r k i t c h e n . c o m . For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. Monday, December 4, 2017 | A7 WORLD NEWS ISLAMABAD, Pakistan—An emerging religious movement is gaining political clout in Pakistan around the incendiary issue of blasphemy, posing a particular challenge to the country’s leadership because it springs from the nation’s mainstream Islamic sect. Religious activists led by a cleric with a weeks-old political party besieged Pakistan’s capital in late November and forced the government to give in to their demands, including promises of stricter implementation of blasphemy laws. “This is a mini-revolution,” said Ayesha Siddiqa, an expert on religious extremism. The antiblasphemy wave, supported by vigilantism and political activism, is reviving religious strife in the society and politics of Pakistan, which is gradually surfacing from a decadelong struggle with Islamist terrorism. This time the conflict comes in an inquisition over who is a proper Muslim. With national elections set to be held by September, the concessions to protesters underscored the threat that the movement could pose to Pakistan’s ruling party among voters and lawmakers, some of whom are threatening to leave the party over the issue. Laws prohibiting blasphemy—statements or actions against Islam—have long been on the books in Pakistan and other Muslim countries. But there are more cases recorded in Pakistan, with harsher punishments, including a mandatory death penalty for using derogatory language about the Prophet Muhammad. In Pakistan, the new campaign was ignited by a February 2016 decision by former Prime Minister Nawaz Sharif’s government to execute a police officer, Mumtaz Qadri, who had shot and killed a politician who had sought to make the blasphemy law less open to abuse. Some 300,000 people turned out for Mr. Qadri’s funeral. AAMIR QURESHI/AGENCE FRANCE-PRESSE/GETTY IMAGES; AGENCE FRANCE PRESSE/GETTY IMAGES (BELOW) SAN’A, Yemen—The unraveling of the fragile alliance between the country’s former president and a Shiite rebel group picked up pace on Sunday, as snipers took over rooftops in residential areas, tanks deployed and militiamen set up checkpoints. Five days of bombings and heavy gunfire have underscored the widening rift between Ali Abdullah Saleh and the Houthis. The two sides joined ranks three years ago and swept across San’a, forcing the country’s internationally recognized president to flee the country and seek military intervention led by Saudi Arabia. After months of political and military stalemate, the street battles between Mr. Saleh’s forces and the Houthi militiamen have marked a turning point in the conflict. The two sides had been enemies before the six-year war that began in 2004 when Mr. Saleh was president. Their alliance, in the eyes of many Yemenis, was doomed to fail, given their stark differences. Over the weekend, all of Yemen’s political players spoke about turning a new page and unifying against the Houthis— a new alliance that appeared to have been in the making for some time as the Shiite rebels have accused Mr. Saleh of working against them. Both sides have set up checkpoints, placed snipers on rooftops and sealed off entrances to the city. Bombings and sporadic gunfire rocked the southern part of San’a on Sunday, where Houthi militants stormed Mr. Saleh’s Yemen Today TV network, beat up its director, and held more than 40 journalists and crew members inside the building, Yemen’s Press Syndicate reported. BY SAEED SHAH Protesters from Tehreek Labbaik Ya Rasool Allah, above, demonstrated in Islamabad on Nov. 26. The religious group is part of an antiblasphemy movement that sparked the killing in April of a student, whose funeral is seen below; police found he hadn’t committed blasphemy. Khadim Rizvi, then a littleknown firebrand cleric at a small mosque in Lahore, seized on the moment, using social media to build a following and launch a group called Tehreek Labbaik Ya Rasool Allah, or Movement in Response to God’s Prophet’s Call. In recent weeks, Mr. Rizvi made the group a political party, which finished third in two by-elections, ahead of long-established parties. “There’s a big conspiracy, coming from Europe, to take Pakistan towards liberalism,” Mr. Rizvi said in an interview in November. He said there can be no forgiveness for blasphemy, and no punishment for anyone who kills a blasphemer. In November, Mr. Rizvi led a three-week sit-in protest in Islamabad to directly challenge the government and Mr. Sharif’s ruling Pakistan Muslim League-N party. His group has drawn most of its followers from the Barelvi sect of Islam, which is and positions for group representatives on the education boards that decide on the contents of school textbooks. An editorial in Dawn, a leading daily newspaper, described the agreement as “a surrender so abject that the mind is numb and the heart sinks.” Interior Minister Ahsan Iqbal on Tuesday said the deal “was not desirable but there was little choice,” as religious riots would have followed. The blasphemy laws apply to Muslims and non-Muslims in Pakistan. A professor of Urdu literature is currently on trial for blasphemy for asking his class, in a lesson on a poem on a religious theme, to consider whether the Quran’s description of heaven was to be taken literally or metaphorically. “In my religion, there isn’t any room for ‘free speech’,” said Rao Abdul Rahim, an Islamabad-based lawyer who specializes in prosecuting alleged blasphemers. ly . Associated Press Pakistan Steps Up Blasphemy Fight co Fo m rp m e er rs ci on al a us l, e on Clashes Escalate In Capital Of Yemen followed by the majority of Pakistan’s population and has been largely moderate. The U.S. in 2009 gave a Barelvi group a $36,000 grant to organize a rally against the Pakistani Taliban, according to the State Department. That group, the Sunni Ittehad Council, is now also part of the antiblasphemy movement. An accusation of heresy in Pakistan can trigger a mob: In April, a university student who described himself as a humanist was beaten to death by other students in the northwest of the country. A later police investigation found no blasphemy had been committed by the student. In the November protests in Islamabad, Mr. Rizvi’s group won concessions including the resignation of the law minister You were looking to retire by the water. Better yet, above it. Captain of your own ﬂoating home. That would be retiring like a boss. TOTAL USD BONDS IUSB no n- That would also be tough without a plan. WHEN INSPIRATION HITS, BUILD FOR WHAT’S NEXT. 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Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments. Buying and selling shares of ETFs will result in brokerage commissions. The iShares funds are distributed by BlackRock Investments, LLC. © 2017 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock. 285131 For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. A8 | Monday, December 4, 2017 THE WALL STREET JOURNAL. NY WORLD NEWS FRANKFURT—A bomb found in the city of Potsdam on Friday was accompanied by a note demanding payment of a sum equivalent to millions of euros from postal company Deutsche Post AG’s DHL courier service, police said, warning they believed the perpetrator could send further explosive devices. The bomb, a cylindrical device with batteries, nails and cables, was discovered in a pharmacy in the center of Potsdam, across the street from a Christmas market, police said. A bomb disposal squad destroyed the device with a high-power water jet after evacuating the market. Police said people in the pharmacy and market could have been killed or maimed had the device exploded. Authorities said they suspect the perpetrator lives in or near Berlin or Brandenburg state, a police spokesman said without elaborating. Potsdam, a city of 165,000 people, is the state capital of Brandenburg and is about 20 miles southwest of Berlin. Authorities in Potsdam on Sunday said they found a piece of paper near the bomb with a quick-response code, a symbol similar to a bar code, but which stores more data and can be read by a smartphone camera. The code contained an extortion demand for a sum equivalent to millions of euros addressed to DHL, authorities said. The note demanded an electronic transfer of funds rather than cash, a police spokesman said. The note didn’t demand payment in euros, the spokesman said. Authorities declined to provide further details. A DHL spokesman declined to comment on the bomb. DHL’s parent company, Deutsche Post DHL Group, based in Bonn, is one of the world’s largest postal delivery companies, with a 2016 net profit of €2.64 billion ($3.13 billion) on revenue of more than €57 billion last year. It wasn’t clear why the company’s DHL subsidiary was targeted, a police spokesman said. Recent ransomware cyberattacks, which make files on victims’ computers unusable Police cordoned off a Christmas market near where an explosive device was found on Friday in the German city of Potsdam. until a ransom is paid, have asked for payment in digital currency bitcoin. Bitcoin allows users to open an account without identifying themselves, although some people using the currency for illegal transactions have been caught. A police spokesman declined to comment on whether the perpetrator had asked for payment in bitcoin. Security services suspect the Potsdam bomb may be linked to a similar incident in November in Frankfurt Oder, a town of 55,000 people nestled on Germany’s border with Poland. That package, delivered to a small business, exploded, igniting a fire in the company’s postal room, but caused no injuries. The latest device was mailed from a self-serve machine at an unmanned package station in Potsdam early Thursday, according to police. German law limits video surveillance to train stations, public transport and high-crime areas, and most public streets in the country have no CCTV cameras. Further devices could be sent to small businesses, the spokesman said, although police wouldn’t rule out the possibility they would be sent to individuals. Police in Potsdam HONG KONG MARCH: Activist Joshua Wong, center, leads a protest against increasing curbs on political liberty in the city. Donald Trump’s son-in-law, Jared Kushner, said the president hasn’t decided whether to recognize Jerusalem as Israel’s capital or whether to proceed immediately in moving the U.S. Embassy from Tel Aviv to the holy city. Speaking Sunday at an event hosted by the Brookings Institution, a Washington think tank, no n- IT’S THE DIFFERENCE BETWEEN LAUNDRY IN THE APARTMENT AND LAUNDRY AROUND THE CORNER. GREECE Agreement Reached On Bailout Payment Athens and its international creditors reached a preliminary agreement on the measures Greece must adopt to qualify for the disbursement of around €5 billion ($5.95 billion) next month, bringing the country a step closer to the end of years of bailout regimes. A delegation from the European Commission, the European Central Bank, the eurozone’s bailout fund and the International Monetary Fund reached a technical agreement on Saturday with Greek officials. Eurozone finance ministers are expected to approve the measures on Monday. —Nektaria Stamouli INTERNATIONAL MIGRATION U.S. Quits Talks On a Universal Pact The U.S. has quit negotiations on a voluntary pact to deal with migration because the global approach to the issue was “simply not compatible with U.S. sovereignty,” said U.S. Ambassador to the United Nations Nikki Haley. “We will decide how best to control our borders and who will be allowed to enter our country,” she said Saturday. —Reuters purchase 8 top sirloin STEAKS FOR $69.99* AND RECEIVE 8 free STEAkburgers $ O DAY FFER LI 69 99 * RE 5 Trump Still Mulling U.S. Embassy Move Mr. Kushner said Mr. Trump continues to weigh his options ahead of an announcement expected this week. “The president...is still looking at a lot of different facts,” Mr. Kushner said. —Associated Press HO ISAAC LAWRENCE/AGENCE FRANCE-PRESSE/GETTY IMAGES co Fo m rp m e er rs ci on al a us l, e on WORLD WATCH ISRAEL urged the public to remain alert and not open unexpected packages from senders they don’t know. “The perpetrator takes damage to human life and health as a given cost,” Brandenburg police chief Hans-Jürgen Mörke said Sunday. Germany is on high alert for the Christmas season after a truck rampage killed 12 people at a market in Berlin last year. ly . BY WILLIAM WILKES SEAN GALLUP/GETTY IMAGES German Bomb Was Extortion Plot, Police Say G . $ 8 4. 9 YOU KNOW WHICH IS BETTER. REALTOR.COM HAS 20% MORE ACTIVE LISTINGS IN NYC THAN STREETEASY. 8 (8 oz) Top Sirloin Steaks (#V285) Now $69.99* ORD E R BY NOON (ct) DEC 19 th F O R C H R I S T M A S D E L I V E R Y KansasCitySteaks.com SEARCH PRIORITY CODE: A712W9 OR CALL 8 00 793 9144 Offer expires 12/31/2017. *$9.95 Shipping applies to standard delivery only. Limit of 5 shipments per customer. Steaks and 8 (4 oz) Steakburgers ship in the same cooler to the same address. Additional shipping charges apply for Overnight,Saturday,Alaska and Hawaii deliveries. Not valid with other offers. For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. Monday, December 4, 2017 | A9 NY WORLD NEWS An Argentine Submarine’s Final Hours Experts suspect an explosion caused by a battery problem killed the San Juan’s crew and sent the vessel to the seafloor MAR DEL PLATA, Argentina—Susana Miguens last spoke with her son in early November, when he called from the world’s southernmost city, Ushuaia, to say the submarine he served on would soon set out to chase down illegal fishing vessels in the frigid waters off southern Argentina. The ARA San Juan and crew leaving the port of Buenos Aires in June 2014. A ‘violent, nonnuclear event’ happened some 35 miles north of its last known location, reports say. Experts believe the Argentine sub took on water in rough seas at the surface, causing a short circuit and setting up conditions for a later catastrophic explosion. Snorkel system Main electric engine Diesel generators n- STOCKS DREW ANGERER/GETTY IMAGES ARGENTINA URU. Buenos Aires CHILE Planned destination Puerto Madryn 3 Comodoro Rivadavia 2 Stern batteries BRAZIL 300 km 1 Crew area Electrical controls 216 feet Mar del Plata Acoustic anomaly detected Last point of contact FALKLAND IS. Bow batteries Point of departure Ushuaia 1 Water enters the snorkel while sub is running its diesel engine on surface. 2 The water causes a short circuit and ﬁre in batteries, which the crew manages to isolate. 3 Backup batteries kick in, but three hours after ﬁre was out, vessel experiences what ofﬁcials believe was a major explosion. Source: Argentine Navy At 30 minutes after midnight on Nov. 15, sometime after resurfacing, the ship sent a report saying seawater came through the ventilation system and into contact with the batteries, “causing a short-circuit and the begin- FROM PAGE ONE The Dow and S&P gained in November for the eighth month in a row. been pulling money out of stocks in favor of safer investments like bonds as they approach retirement. Even with their recent buying, foreign investors own only about 14% of the U.S. stock market, according to a report compiled last year by the Treasury Department and Federal Reserve Bank of New York. Analysts closely track foreign purchases, in part because they have signaled a market top in the recent past. Overseas buying peaked in 2000 and 2007, with foreign investors piling into the U.S. market just before big sell- no Continued from Page One helped keep the long rally going, despite concerns this year over policy gridlock and valuations that some say look stretched. The Dow Jones Industrial Average last week powered through 24000, notching its fifth major milestone this year on renewed optimism about a tax cut and faster economic growth. The Dow edged slightly lower Friday after falling more than 350 points earlier in the session. The steep decline followed reports that former national security adviser Michael Flynn was cooperating with the specialcounsel probe into potential links between the Trump campaign and the Kremlin during last year’s election. Gains throughout November still pushed both the Dow and S&P positive for an eighth consecutive month. And there are signs that foreigners aren’t done buying. Allocations to U.S. equities among global fund managers recently surveyed by Bank of America Merrill Lynch rose in November—but remain below the historical average. “We’re very much making the case to our clients to have more exposure to the U.S. market,” said Michael Russell, a portfolio manager in London for Hermes Fund Managers. After focusing on emerging markets this year, Mr. Russell said a strong U.S. economic and corporate backdrop supports putting more money into U.S. stocks, especially financial stocks that can benefit from deregulation and an improving economy. Overseas investors could become an increasingly important factor for the U.S. stock market when other drivers of the long rally have been fading away. Corporate buybacks peaked in 2015 and have been falling since. U.S. stock mutual funds have been experiencing steady outflows, and aging baby boomers have 300 miles Calamity on the San Juan Approximate route The foreign interest marks a reversal after four straight years of outflows. offs. Some analysts say that could be a result of a “home bias” for foreign investors that creates challenges to investors who want to swiftly moving in and out of the U.S. market. The U.S. also tends to be a more defensive place to invest if there are concerns about a global downturn. “That has been the historical pattern and that in itself is worrying,” said Torsten Slok, chief international economist at Deutsche Bank. “As a leading indicator, it is something we are watching.” Still, many investors in Europe, Asia and the Middle East seem to be buying U.S. stocks for much of the same reasons as domestic investors, analysts say. U.S. companies boast some of the best profit growth in the developed world. Stocks in the S&P 500 are on track for earnings growth of 10.8% in 2017 and an additional 10.7% in 2018, according to CFRA Research. Those numbers could be stronger if Congress enacts a proposed tax overhaul that cuts the corporate tax rate. By comparison, earnings in the Stoxx Europe 600 increased 1.7% in the third quarter from a year ago, according to Thomson Reuters data, dragged down in part by a stronger euro that makes exports less competitive and sales to the U.S. worth less when translated back to euros. The weakening dollar, meanwhile, lifts U.S. exports. While growth in Asia, Europe and much of the rest of the world has been picking up, the U.S. economy shows few signs of slowing down. The Commerce Department said Wednesday that U.S. GDP expanded at a 3.3% annual rate in the third quarter, adjusted for inflation and seasonality. It was the strongest quarter in three years and exceeded forecasts. The U.S. stock market “has high-quality earnings, a good growth outlook, and a lot of the backdrop is more positive,” said Edward Park, investment director at Brooks Macdonald in London, who has been adding to his holdings in U.S. equities this year. THE WALL STREET JOURNAL. ning of a fire in the batteries tray,” according to a transcript of the crew’s message. Hours later, at 7:30 a.m., the sub sent another report that the crew had got the fire under control but lost use of the batteries in the ship’s bow. may have kept the submarine in deeper waters, making it harder for search-andrescue teams to find, some family members and Argentine media have said. Capt. Balbi disputes that criticism. “At no time did the commander of the ship, or his superior, see this as an emergency or an event of great magnitude because they were able to resolve the problem by using backup power systems,” he said. Other ports located due west of the submarine, he added, would have also been too shallow for it to dock. At 10:51 a.m. on Nov. 15— some three hours after the ship reported it had solved the fire problem—a “violent, nonnuclear event” occurred some 35 miles north of the sub’s last known location, according to reports from acoustic experts in the U.S. and at the Comprehensive Nuclear Test Ban Treaty Organization. Naval personnel’s concerns grew when they heard no more from the San Juan the next day. On Nov. 19, when the sub was due at Mar del Plata, there was no sign of the vessel. ly . Thyssenkrupp, in 1985, was being used by the Argentine navy to track illegal fishing in the South Atlantic Ocean. On the San Juan’s last mission, nothing seems to have gone wrong until the captain ordered the vessel to surface sometime on Nov. 14. That would normally have been a routine decision. Diesel-electric subs rely on a giant bank of batteries to glide silently underwater, making them hard to detect, said William Craig Reed, a former U.S. Navy diver and submariner. A diesel-electric sub’s batteries only hold a charge for about a week while submerged, so it must surface and “snorkel,” running its engines to recharge the batteries and ventilate stale air. In this case, the sub surfaced amid rough seas, with 23-foot-high waves that may have caused it to take on too much water through its snorkel, Argentine navy spokesman Capt. Enrique Balbi said. The snorkel is equipped with a flap to keep water out, but water can sometimes get in anyway, navy officials said. Atlantic O cean co Fo m rp m e er rs ci on al a us l, e on Argentine Navy Seaman Leandro Cisneros told her the vessel was in good shape, its 44-member crew well trained and prepared for any surprises. “We have everything we need to live underwater,” he reassured her. But just over a week later, the ARA San Juan dropped off the map. On Thursday, Argentina’s navy said it was officially giving up hope of finding the sailors alive and was looking only for wreckage. In recent days, Argentine authorities have gathered crucial evidence to piece together a theory of what happened after the San Juan left Ushuaia on Nov. 8, bound for its home base of Mar del Plata. They believe the sub took on water that caused a short circuit and a subsequent fire in a key battery compartment. The crew got the fire under control, but hours later there was a loud noise consistent with an explosion. Top Argentine officials now believe a blast instantly killed the sailors and sent the vessel to the seafloor. While no one knows for sure what caused the explosion, the batteries are the likeliest culprit, Argentine naval officials and outside experts say. A federal judge in Argentina has opened an investigation into the submarine’s disappearance. The battery-and-dieselpowered submarine, delivered by its German manufacturer, ARMADA ARGENTINA/REUTERS By Taos Turner, Jeffrey T. Lewis and Alberto Messer THE WALL STREET JOURNAL. That was the San Juan’s last communication. Back in Argentina’s naval headquarters, there wasn’t yet cause for major alarm, since there were backup batteries to charge the sub. When the crew reported the problem, a submarine commander on shore ordered the sub to continue sailing north to Mar del Plata instead of heading west on the shortest possible course to land. That decision For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. A10 | Monday, December 4, 2017 THE WALL STREET JOURNAL. * *** Applications by Venezuelans for political asylum during the fiscal year that ended Sept. 30 nearly doubled to 27,629, from 14,728 in 2016 and 5,605 in 2015, according to U.S. Citizenship and Immigration Services data. More people from Venezuela seek asylum in the U.S. than from any other country. The most recent U.S. census data from 2016 shows about 195,000 Venezuelans in Florida. Many believe the number has continued to increase sharply in the past year. “I feel comfortable saying the number may be as high as 250,000,” says Fernand Amandi, a Democratic pollster here. By comparison, Donald Trump’s victory margin over Hillary Clinton in Florida in the last election was some 113,000 votes. Mr. Rubio, a Cuban-American, has emerged as the point man in the Trump administration’s Venezuela policy. The Republican senator, who regularly blasts the Maduro government, has brought leading Venezuelan opponents to the White House and successfully pressed for additional sanctions against Venezuelan officials. A fluent Spanish speaker, Mr. Rubio in July delivered a speech on a privately owned Venezuelan television news channel assailing the corruption of Venezuelan leaders and their allies in the business world, some of whom live in South Florida. These leaders enjoy “ranches in Wellington, mansions in Gables Estates, private planes at local airports,” said Mr. Rubio, referring to wealthy South Florida communities. Democrats have also taken notice of the new arrivals, hoping to tap a fresh vein of VenezuelanAmericans could develop into a powerful voting bloc. Venezuelan exile Rafael Pineyro, right, who is running for city council in Doral, looks for votes at a Venezuelan-owned restaurant. 2,500 overall. In both Miami-Dade and next door Broward County, home to the Venezuelan enclave of Weston, Venezuelans are the largest foreign group of owners of residential real estate, according to a study released this year by the Miami Association of Realtors. Venezuelans own a weekly and a daily Spanish-language newspaper, and three cable channels, all aligned against the Maduro regime. There is a Venezuelan bookstore, a cultural center and a nightclub for traditional Venezuelan llanero music. “A lot of my friends have moved here,” says María Teresa Romero, a journalist and university professor, as her husband, Fernando, who still owns a struggling insurance business in Caracas, runs out to drive an Uber car. In the background, a talkshow host at a traditional Cuban radio station interviews a Venezuelan doctor about the meltdown in Venezuela’s health system. “Every day people die because there is no medicine,” says the doctor, ticking off a list of needed medicines. “It’s a silent death sentence.” Doral, nicknamed “Doralzuela” by locals, has a restaurant, El Arepazo, named after Big Spenders Top countries of origin for foreign property buyers in South Florida, 2016 Venezuela Argentina Brazil Colombia Canada Mexico France Peru Italy Ecuador grees and became chief of staff to two Doral mayors. “We might not be a lot of citizens that can vote right now,” he says. But “in the next five to 10 years, you will see a lot of Venezuelans able to vote. We will make a difference not only in local elections, but in state and federal elections.” In Miami-Dade County public schools, the number of Venezuelan students has soared in the past two years, almost doubling to 9,873 in August 2017, from 5,682 in August 2015, according to the school district. As of August, Ronald W. Reagan/Doral Senior High School had 950 Venezuelan students out of about Little Caracas 300,000 200,000 n- Florida total 147,006 0 2005 no 50,000 ’10 Miami area 99,691 ’15 Note: Includes people who identiﬁed as being of Venezuelan origin, both U.S.- and foreign-born Source: Pew Research Center analysis of U.S. Census Bureau data THE WALL STREET JOURNAL. MAIL Continued from Page One ditions, under the post office’s listing of “Mailable Live Animals.” Scorpions are allowed under limited circumstances. Snakes, turtles, poisonous bugs and large, warm-blooded mammals are not. The USPS has been delivering live animals since at least 1918, according to post-office records. In the past three years, the federal agency has processed roughly 26,000 such packages, a majority of which are bees and newly hatched chicks, says USPS spokeswoman Kimberly Frum. In 1954, a boy from Fostoria, Iowa, mailed his pet chameleon to the postmaster of Orlando, Fla., in a prestamped envelope because it was “to[o] cold for him here.” The postmaster, L.A. Bryant, wrote back to say the critter had been set free on the post office grounds, according to USPS historical records. The rules for mailing animals have since gotten more elaborate, requiring special boxes and clear labeling. That hasn’t deterred people from sending a mind-boggling variety of animals via the USPS, sometimes illegally. Accidents can occur. Sue Brennan still remembers the time, years ago, when an improperly packaged container carrying a beehive broke open on the processing machine at the Merrifield, Va., post office. The queen bee fell out and the drones followed, forming a protective swarm around her, said Ms. Brennan, who was then a postal clerk in Merrifield and is now a USPS spokeswoman. A professional bee keeper was called. Eventually, the bees were captured. No one was stung. Another time, a box full of crickets fell apart, and postal workers had to use a broom to sweep up the bugs, she said. In 2012, employees at a postal facility in Trenton, N.J., found a foot-long alligator in a sorting bin. It had escaped from an express mail package. The USPS provides a detailed list of mailable live animals as well as their packaging requirements. Nonpoisonous insects can be mailed as long as they’re enclosed, like most other live cargo, in a “275-pound test, double-wall, corrugated, weather-resistant fiberboard or equivalent” container constructed to prevent escape. Boxes have to be ventilated Ramón Muchacho in exile. and animals have to be able to survive without food or water during transport. “Small, harmless, coldblooded animals” including caimans up to 20 inches long are permissible under post-office rules. The poultry category is large—chickens, ducks, emus, pheasants, partridges, guinea fowl, quail and turkeys are allowed—but the birds either have to be day-old or fully grown. Scorpions are just about the only poisonous animals allowed to be sent via mail as long as they’re for medical research or antivenom production. They have to be placed in two containers, with the “inner receptacle... made of material that cannot be punctured by a scorpion,” according to the USPS website. Spiders don’t share the same privilege, as entomologists at the University of California, Riverside, discovered in 2013 after putting out a public notice asking people to mail in live or dead brown widow spiders for a research project. The entomologists had to settle for spiders delivered by hand after the USPS intervened to say the poisonous arachnids were banned, a university spokesman said. Snakes are downright illegal 3% 3% the Venezuelan corn cake staple. In keeping with Venezuela’s status as an oil country, it is connected to a gas station. In the parking lot, as in every town square in Venezuela, sits a statue of 19th century Venezuelan patriot Simón Bolívar. El Arepazo is a place of intrigue and rumor, where locals, visiting politicians and retired Venezuelan military officers go to discuss the latest news from Caracas. One day this summer, a retired top Venezuelan army officer discussed the possibility rebel officers in Venezuela might stage a coup. Days before, a small group of rebel military officers were captured after a failed revolt on a military base in the city of Maracay. But the officer concluded that military action by dissident Venezuelan officers is unlikely—too many leaks, too little discipline, too much disorganization. “We say to the press a coup is imminent,” said the retired officer. “It isn’t. It’s psychological warfare.” In an echo of Cold War rhetoric that was often heard in the 1960s around Miami regarding Cuba, the officer warned that if the U.S. doesn’t do “something,” it could “lose the whole of the Caribbean.” Mr. Maduro and his prede- cessor, the late Mr. Chávez, frequently blamed what they call the “Miami Mafia,” an alleged cabal of Venezuelan opponents and their CubanAmerican allies, for plotting to overthrow the Venezuelan regime. Mr. Chávez, in fact, shut down the Venezuelan consulate in Miami in 2012 in retaliation for the expulsion of a Miami-based Venezuelan diplomat by the U.S. “The day I left Venezuela was the toughest day of my life,” says Carlos Vecchio, who went into exile three years ago after he was accused, along with Leopoldo López, a Venezuelan opposition leader, of inciting street protests that left 43 people dead, in 2014. “I feel as if my life here is borrowed. Exile is the hardest thing after prison.” Aside from visceral foes of the Maduro regime, Miami is also home to a sizable number of wealthy Venezuelans who have made millions of dollars from their ties to the Venezuelan government. In February, the U.S. blacklisted one such entrepreneur for laundering hundreds of millions of dollars of alleged drug proceeds the U.S. said belonged to Venezuela’s Vice President Tareck El Aissami. So far, the U.S. says it has seized $500 million of Mr. El Aissami’s U.S. assets. Both men say they are innocent. Many of the seized assets are in Miami. but that doesn’t stop people from trying to mail them. In June, federal agents intercepted three king cobras, stuffed into potato chip cans and shipped from Hong Kong to California. The agents got suspicious after seeing the parcel move. Then, there was the 2008 case postal workers nicknamed “meet the beetles.” U.S. Postal Inspector Alexander Sylvester recalls getting a call from the Mohnton, Pa., post office about scratching sounds coming from a box. It turned out to contain about 25 exotic beetles from Taiwan, the largest of which measured half a foot. Some had partly eaten their way out of the box. “It was pretty gross,” Mr. Sylvester said of the beetles, a species not native to the U.S. that could potentially devastate crops. Since importing foreign animals without the proper paperwork is a federal violation, the offender was booked. The beetles were preserved and sent to the Smithsonian, he added. Technology investor Brian Paul Phillips, who keeps chickens and bees at his farm near Honesdale, Pa., said his local post office usually calls when his chickens arrive. Birds and animals do die from the stress of travel. The Intrigue and rumor SCOTT MCINTYRE FOR THE WALL STREET JOURNAL U.S. total 274,541 250,000 100,000 6% 4% 4% 4% Note: includes purchases mainly in Miami-Dade, Broward, Palm Beach and Martin counties Source: Miami Association of Realtors and National Association of Realtors report THE WALL STREET JOURNAL. More than a third of Venezuelans living in the U.S. are in the Miami area. 150,000 15% 11% 10% 10% In another wide-ranging investigation of Venezuelan corruption, Abraham Shiera, a businessman who lived in the tony Miami suburb of Coral Gables, pleaded guilty in 2016 to charges of bribery and wire fraud involving the sale of $1 billion of oil equipment and services to Venezuela’s state oil company. As part of his guilty plea, Mr. Shiera forfeited $18.8 million to the U.S. He is still awaiting sentencing. In Miami, like other points on the Venezuelan diaspora, the battles back home are being re-created. Current or former regime officials have been subjected to a type of public shaming, called “escraches,” by angry Venezuelans. Earlier this year, a former top Venezuelan finance official was chased out of a popular bakery in Doral, as dozens of patrons aimed cellphone cameras at him and shouted “thief.” The video went viral. Venezuelan immigrants have traditionally been wealthier and better educated than most other immigrants. But the impact of plummeting conditions in the country is beginning to show, says Patricia Andrade, director of Raíces Venezolanas, a nonprofit group that provides new arrivals with donated supplies ranging from bedsheets to appliances. One recent afternoon, Luis Gabante, a 42-year-old accountant who arrived in July with his wife and daughter, showed up at the organization’s supply site to pick up a large box of towels, housewares and toys. He said his family fled because of threats he faced from corrupt employees of the state oil company where he worked. He left behind the family’s apartment, car and other belongings. They had been staying in a hotel and just found an apartment. “We arrived here without anything,” Mr. Gabante said, breaking down in tears. “This isn’t easy.” ly . Political asylum U.S. FISH AND WILDLIFE SERVICE Continued from Page One the government has destroyed the economy, imprisoned opponents and killed protesters. Many Venezuelans are escaping to neighboring countries such as Colombia or back to the countries of their forefathers, including Spain. In the U.S., the destination of choice is Miami, which has an established Venezuelan enclave. Many enter with tourist visas and then change them to other types of visas or plead for asylum. co Fo m rp m e er rs ci on al a us l, e on EXILES votes and avoid mistakes they made with the Cuban diaspora. In August, Florida’s Democratic Senator Bill Nelson sent a letter to the Trump administration cosigned by another 21 Democratic senators and representatives urging it to grant Venezuelans “Temporary Protected Status” allowing them to stay in the U.S. because returning home would put them in harm’s way. There is a sense in local political circles that the Venezuelan vote remains up for grabs. In 2008, 62% of VenezuelanAmericans voted for John McCain, the GOP nominee, but four years later, they swung sharply the other way, with 76% voting for Barack Obama, according to exit polls by Mr. Amandi’s firm. More recently, he says, Mr. Trump’s hard line against the Maduro regime resonates viscerally with Venezuelan-Americans, though some may be put off by his anti-immigrant rhetoric. “The Republicans are mostly eating the Democrats’ lunch” in their outreach to new arrivals, he says. Rafael Pineyro, 33, in August announced his candidacy as an independent for city council in Doral, west of Miami. He was 15 years old when his family fled Caracas in 1999, soon after President Hugo Chávez took power. While his father worked as an electrician and his mother in retail, he studied and eventually earned bachelor’s and master’s de- SCOTT MCINTYRE FOR THE WALL STREET JOURNAL IN DEPTH A king cobra hidden in potato-chip can mailed from Hong Kong. USPS’s Ms. Frum said local post offices can ask customers to pick up live shipments rather than wait to have them delivered. “Field personnel have been asked to consider a four-hour limit for live animals in a delivery truck,” she said. Mailing live animals raises the hackles of animal-rights groups. Live creatures “can endure discomfort, confusion and even motion sickness from the movement of the containers when no one is paying attention,” Ingrid Newkirk, president of People for the Ethical Treatment of Animals, said in a statement. Cindi Cotton, a postmaster in Eureka, Ill., recalls working at the Topeka, Ill., post office window shortly after a customer had dropped off two boxes, each containing a rooster. As the next customer walked in, one of the roosters let out a “long, loud cock-adoodle-doo,” Ms. Cotton said, startling the customer. “I explained to her that someone had mailed some roosters and they must be getting antsy,” Ms. Cotton says. The rooster crowed a second time. By its third cry, just as Ms. Cotton was finishing up the transaction, the customer looked at her and asked, “‘Am I on Candid Camera?’” For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. Monday, December 4, 2017 | A10A NY * * * * * GREATER NEW YORK FROM TOP: STEVE REMICH FOR THE WALL STREET JOURNAL; MARK KAUZLARICH FOR THE WALL STREET JOURNAL Met Suspends Ties With Conductor Amid Abuse Probe BY ZOLAN KANNO-YOUNGS AND JENNIFER SMITH The Metropolitan Opera on Sunday suspended its relationship with renowned conductor James Levine, whom it is now investigating amid multiple accusations of sexual misconduct for alleged incidents spanning decades. The move comes as questions emerged over why one of New York City’s most powerful arts institutions didn’t act more quickly to investigate the allegations against Mr. Levine, who was the Met’s music director for more than 40 years. The Met said it has been aware of a Lake Forest, Ill., police investigation into Mr. Levine allegedly sexually abusing a teenager three decades ago since that probe began in October 2016. “At the time, Mr. Levine said that the charges were completely false, and we relied upon the further investigation of the police,” Peter Gelb, the opera’s general director, said in a statement Saturday. On Sunday, the Met said other incidents of sexual misconduct are alleged to have been committed by Mr. Levine from the 1960s to the 1980s, including in the early days of his conducting career at the Met. The opera hired Robert Cleary, a former U.S. attorney and head of the investigations practice at law firm Proskauer Rose LLP, to lead a probe into the alleged misconduct. “Based on these new reports, the Met has made the decision to act now, while we await the results of the investigation,” Mr. Gelb said in a statement Sunday night. “This is a tragedy for anyone whose life has been affected,” he said. Neither Mr. Levine, his manager, Andrea Anson, nor several board members responded to requests for comment. The Lake Forest Police Department declined to comment, saying a spokesman wasn’t available Sunday. Syeedah Mckenzie prepared her cot at the Friends Shelter, which serves the homeless in the gym of Manhattan’s Friends Seminary school. Troubling Trend The average number of people each night in New York City homeless shelters has risen over the past decade. 60,000 people 40,000 20,000 0 2005 ’10 ’15 Note: 2017 through October Source: New York City Department of Homeless Services Some supporters call it a five-star shelter. It likely would get six if it had a shower. The Friends Shelter opened in 1983 near Manhattan’s Gramercy Park, started by Quakers concerned about the city’s growing homeless problem. The program is hosted by the 15th Street Friends Meeting, part of the New York Quarterly Meeting, a Quaker group that owns the redbrick building dating from 1860. Friends Seminary, the school, uses the Quarterly Meeting’s space. At one time, they were part of a single organization, but officials from both entities said they agreed two years ago to separate when the school launched a $70 million expansion. The school spends about $35,000 a year providing dinners for the shelter and custodial staff, its officials said. Katy Homans, a former parent at the school who helps organize volunteers, said supporters raise another $30,000 annually for breakfasts, desserts, paper goods and other materials. The roughly 100 volunteers include a painter, architect, banker and lawyer. struggling that you don’t notice.” The guests come from a daytime drop-in center called Mainchance, a social-service agency in the Murray Hill section of Manhattan. The agency sends as many as 14 single adults on a bus to the Friends Shelter every night, after screening out those with addictions, severe mental illness and tuberculosis, a spokeswoman said. They leave on a bus before 7 a.m. after breakfast. On a recent night, a dozen women walked into the gym carrying backpacks and plastic bags. Each piled her things next to one of the cots. One guest pulled the sheet off her bed, sprayed its plastic mattress cover with her own bottle of disinfectant and wiped it vigorously. “There’s lots of flu going on,” she said. Some knew each other from previous visits and chatted during dinner. Several said they were glad no men were there, for a change, and predicted less snoring. “Just us ladies!” one said, clapping her hands. Patricia Farrelly, a 51-yearold with two children in col- lege, said she worked as a cleaner and was trying to get back on her feet. She said she had been coming to this shelter for months, and she appreciated the volunteers’ encouragement. “They make you feel on their level,” she said. “Nothing to be ashamed of.” Jessica Dugger, 43, previously had spent nights in a chair at the Murray Hill drop-in center. “This bed is definitely more comfortable,” she said. Students from Friends bake banana bread for the shelter guests, write notes to them and clean their cots, but usually don’t interact with them much outside of a yearly holiday party and fundraising concert. During school breaks, students’ families sign up to cook dinners so the shelter can stay open year-round. LaVon Kellner, a parent volunteer, said in the past she simply wrote checks to charity, but after selling her medical-education business, she was glad she could give her time. Helping at the shelter, she said, “‘is a daily reminder of how hard it is to be poor in this city. New York City has only half the affordable housing it needs for about one million very low-income families: Those needing an apartment costing $800 or less a month must search in a market with a vacancy rate below 2%. By the city’s count, more than 60,000 people stayed in city shelters on recent nights, roughly double the number 15 years ago. Advocates for the homeless say domestic violence, job loss, eviction and hazardous housing often trigger moves to shelters. Many others sleep in the streets. The mayor, who was reelected on Nov. 7, has pledged to improve the shelter system and build more affordable housing. Chloe Kellner, a 17-year-old senior at Friends Seminary who helped at the shelter one night, said its guests didn’t fit her expectations. She watched some women pull ironed clothes out of their bags so they could dress neatly in the morning. “If I had passed them on the street, I would never have realized they were struggling,” she said. “It makes me wonder…how many people are The Met knew of allegations against its famed longtime conductor since 2016. For many, Mr. Levine’s name was synonymous with the Met—one of the most famous opera houses in the world. He conducted more than 2,550 performances there, more than any other conductor. Mr. Levine was the Met’s music director from 1976 until last year, when he stepped down from the position for medical reasons. He has continued to work as the opera’s music director emeritus. Tino Gagliardi, president of the Associated Musicians of Greater New York, Local 802 AFM, said the union that represents musicians in the Met’s orchestra is “horrified and sickened” by the allegations against Mr. Levine. —Cameron McWhirter and Charles Passy contributed to this article. MICHAEL DWYER/ASSOCIATED PRESS THE WALL STREET JOURNAL. no By day, the sunny room serves as the gym of a private Quaker school, Friends Seminary in New York City, where annual tuition runs $42,700. By night, the same space fills up with as many as 14 homeless “guests,” who can savor organic dinners from the K-12 school’s cafeteria. A heaping buffet on a recent night featured tuna tacos, turkey pot pie, roasted vegetables and sauteed kale. In a city known for a vast gap between its richest and poorest residents, the Friends Shelter reflects some New Yorkers’ efforts to bridge those two worlds. Every evening volunteers roll cots covered with clean white sheets out of the gym’s closet, set up a dinner table and stay overnight to supervise. Its homeless fans call it a five-star refuge, a welcome alternative to big shelters where many fear theft and violence. At this site they can wash up at sinks using mini bottles of shampoo that donors collect at upscale hotels, including samples from L’Occitane en Provence and C.O. Bigelow Apothecaries. The pantry stocks camomile tea. “This is high end,” said Michelle, 62 years old, a former dance teacher who has been sleeping at the Friends Shelter for months and would only give her first name. “I love the way they treat us.” Many of the guests have jobs, including a cleaner, office clerk, security guard and restaurant employee. They are among thousands of working people in the city who can’t pay soaring rents. A report from Mayor Bill de Blasio’s administration this year said n- BY LESLIE BRODY Refuge Was Started By Quakers in 1983 co Fo m rp m e er rs ci on al a us l, e on Friends Shelter offers organic dinners and a safe place to sleep for New Yorkers in need ly . Private School Hosts the Homeless The New York Post first reported on Saturday the details of the police report, including that Mr. Levine allegedly molested an Illinois minor when he was a guest conductor at the Ravinia Music Festival outside Chicago in the 1980s. Mr. Levine, now 74 years old, was 28 when he made his Met debut in 1971. He will no longer be involved in any Met activities including conducting scheduled performances, company officials said Sunday night. Johanna Keller, an arts journalism professor for Syracuse University and music critic for the Hopkins Review, said Mr. Levine’s alleged sexual misconduct was “an open secret in the music field for decades.” The fact that the Met knew about the Illinois police report in 2016 and didn’t take action until now will be damaging, she said. James Levine conducting the Boston Symphony Orchestra in 2006. Construction Halted on Midtown Tower After Vote to Curb Skyscrapers Work on an 800-foot-tall tower in East Midtown that has been under construction for six months has been halted following a vote by the New York City Council to limit skyscrapers in the area, in a win for a grass-roots group that sought to block the project. Within minutes of the council vote Thursday, the city’s Department of Buildings posted a “stop work” order on a plywood fence at the construction site on East 58th Street near Sutton Place. Workers put down their tools and left. Construction of the tower, known as Sutton 58, is opposed by a group led by residents of a 450-foot-tall co-op known as the Sovereign, which is across the street from the site. The East River 50s Alliance, which worked with local elected officials and spent about $1 million on lawyers and consultants, drafted a proposed zoning change last year that would limit the construc- tion of tall towers on side streets to protect the area from oversize development. The council’s move was unusual because it overruled a provision adopted by the City Planning Commission just two weeks earlier that would have allowed Sutton 58 to be built. Jonathan Kalikow, president of Gamma Real Estate, which is building the tower, said the council’s action would immediately lead to the layoff of more than 100 workers. He said he would file an adminis- trative objection to the shutdown with the city’s Board of Standards and Appeals, but the process could take six months or more. Mr. Kalikow put much of the blame for the shutdown on the local councilman, Ben Kal- GAMMA REAL ESTATE BY JOSH BARBANEL Workers secured the construction site on East 58th Street on Friday, a day after a ‘stop-work’ order. los, a Democrat. Mr. Kallos signed the application for the zoning change, along with the East River 50s Alliance, and pressed officials to expedite it. Mr. Kallos’s support was crucial in the council as other members followed his lead on the issue, a courtesy usually extended on local land-use issues. “I take full credit for it,” Mr. Kallos said, after hearing of Mr. Kalikow’s complaints. He said the developer is welcome to pursue his rights under the law, but that eventually he might find there already are too many supertall buildings “intended for billionaires.” The city rules allow a building to continue construction after a zoning change only if the foundation was complete. Sutton 58’s foundation work was 95% finished, and would have been done in about 10 days, Mr. Kalikow said. He now has the right to ask the Board of Standards and Appeals to reinstate the project because “substantial prog- ress” had been made on the foundation. Beyond the immediate impact on the site, real-estate executives were concerned that the rezoning could have a chilling effect on other developers. John Banks, president on the Real Estate Board of New York, an industry group, said developers make “financial commitments of hundreds of millions of dollars” based on their right to build under existing zoning rules. Opponents of the Sutton 58 tower claimed victory. “This action represents the fulfillment of a yearslong effort,” said East River 50s President Alan Kersh, who lives across the street from Sutton 58. “For us this was never about just one building; it was a districtwide effort to prevent megatowers.” On Friday, a few workers at the site were sweeping up around long rows of steel bars awaiting installation, but construction was otherwise at a standstill. For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. A10B | Monday, December 4, 2017 NY THE WALL STREET JOURNAL. * * GREATER NEW YORK More Retailers Snag Leases for Short Stays BY KEIKO MORRIS QUEENS Police: Driver Stabs 2, Runs Into Pedestrians MARK KAUZLARICH FOR THE WALL STREET JOURNAL (2) Bulletin’s retail space in the Flatiron District of Manhattan. The company has had success finding shorter-term leases in the city. But Cushnie is still cautious and is close to negotiating a deal that likely will be less than a seven-year term, with options to extend the lease, Mr. Arnold said. “There are a couple of luxury brands who, years ago, spent a lot of money to build out the ideal store, and it wasn’t supportable in terms of sales,” Mr. Arnold said. The traditional long-term lease deal is far from dead. Developers of shopping centers such as Hudson Yards, The Shops at Columbus Circle, Brookfield Place and the Turnstyle Underground Market in the Columbus Circle subway concourse all said they are signing long-term deals. But they also are using temporary, flexible units and shorter-term spaces to bring in new concepts. Susan Fine, principal of Turnstyle, purposely reserves some spaces for three-year deals so she can keep the market fresh. “Part of leaving home and going shopping has to be the incentive to discover something new,” Ms. Fine said. A man angry about a parking dispute stabbed two people and then drove into a group of pedestrians on a sidewalk Sunday, leaving one person dead and several others injured, one critically, police said. Authorities said the driver was in custody. The altercation started around 4:30 a.m. outside a hookah lounge in Queens, when the driver of a white Hyundai sedan got out of his car and stabbed two other people, New York Police Department Assistant Chief David Barrere said. They were both stabbed in the chest, authorities said. A dispute ensued with others outside the club, and the man drove his car up onto the sidewalk and into a crowd of people before leaving the scene, Mr. Barrere said. One person was killed and five others injured, one of them critically, from getting hit by the car. The other people struck and the two people stabbed were in stable condition. Police didn’t release the identity of the person who was killed, but said he was 23 years old. —Associated Press ly . willing to take shorter-term tenants as vacancies rise. There were 197 available ground-floor spaces in Manhattan’s prime corridors in the third quarter, down from a peak of 212 in the first quarter but well above the 152 in the second quarter of 2016, according to CBRE. “It’s a way for the landlord to get cash flow for a period of time, when a store is vacant,” said Richard Hodos, a CBRE vice chairman. “It doesn’t make the landlord rich; it doesn’t kill the retailers and it makes everyone happy.” The retail shake-up has given rise to online services such as Appear Here, a website that allows merchants to search for short-term space, set up viewing and even sign agreements. The company is working with larger landlords such as Brookfield Property Partners and Simon Property Group Inc., which are looking for ways to drive shopping traffic to their centers, said Elizabeth Layne, chief marketing officer for Appear Here. The company co Fo m rp m e er rs ci on al a us l, e on When Alana Branston and Ali Kriegsman wanted a shortterm location to test Bulletin, a retail format that provides shop space for entrepreneurs, they set their PROPERTY sights high, first in Williamsburg, Brooklyn, then Manhattan’s Nolita neighborhood and now the Flatiron District. Just a few years ago, landlords likely would have turned away this young retail business in favor of a tenant willing to hunker down for a decade or longer. But times are changing, and short-term tenants are becoming more common even in New York’s swankiest retail corridors. Bulletin is “a newer concept that needed the freedom to test different things,” said Ms. Branston, Bulletin’s chief executive. “It was a pretty simple process, and we had a lot of options.” Bulletin, which now has leased the shop spaces in Williamsburg and Nolita for terms under six years, is among the retailers discovering that oncerare short-term deals are easier to find. Landlords like them because they help bridge gaps between longer-term tenants, help market the space and could lead to a longer-term deal with a short-term tenant. Retailers like them because they offer freedom to test concepts without locking into long-term commitments. “There is a space between the old retail model and the new model, and in that space people are trying to figure out what they are doing,” said Robin Zendell, a broker and chief executive of real estate services firm Robin Zendell & Associates. Deals for retail space with terms of less than three years made up about 20% of all Manhattan retail lease transactions in the third quarter, compared with less than 5% in the same period last year, according to real estate services firm CBRE Group Inc. Landlords increasingly are GREATER NEW YORK WATCH launched its New York operation this spring and now lists about 300 retail spaces for the area. “There is a new type of venture-backed brand looking to test retail in a different way,” Ms. Layne said. “They are using [brick-and-mortar] retail to build brand awareness and acquire new customers.” Luxury women’s apparel brand Cushnie et Ochs was able to refine its concept for its first permanent store in Manhattan with a three-month pop-up shop at Cadillac House at 330 Hudson St., said Cushnie Chief Executive Peter Arnold. The company was selected as part of a program by the Council of Fashion Designers of America Inc. and Cadillac, and the experiment helped prove to the board that it was ready to launch its own retail concept. NEW JERSEY First Responders Back From Puerto Rico Hundreds of state and local police and other first responders have returned from helping hurricane-hit Puerto Rico, New Jersey Gov. Chris Christie said. Nearly 200 state police officers as well as 133 county and local law enforcement, plus 20 civilians were part of the effort, the governor said. The officers helped deliver water, food and other supplies. Hurricane Maria devastated the U.S. territory of 3.4 million residents in September. —Associated Press 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 ™ no n- ——— Italy he enduring legacy of family. 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For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. co Fo m rp m e er rs ci on al a us l, e on ly . LIFE&ARTS WSJ PHOTO ILLUSTRATION; BAZ (CENTER); GETTY IMAGES (4) Monday, December 4, 2017 | A11 Metro Boomin, center, has worked with some of the biggest names in hip-hop, including, clockwise from top left, Drake, Future, Young Thug and Travis Scott. MUSIC BY NEIL SHAH The Rap Producer Shaping Pop Metro Boomin’s distinctive sound has ruled the singles charts in 2017. Now, he’s moving beyond the studio. n- worked with a who’s who of hiphop: Drake, Kanye West, Gucci Mane, Young Thug, Travis Scott. Known for eerie, cinematic productions, he has won “Producer of the Year” at the BET Hip Hop Awards, one of black music’s most important awards shows, for two years straight. According to an analysis by Royalty Exchange, an online marketplace for artist royalties, Metro Boomin is the most successful songwriter in the U.S. this year, through September, beating Ed Sheeran, Kendrick Lamar and Quavo, of the hip-hop trio Migos. Metro Boomin has production credits on five Top 10 Billboard 100 hits this year, including the No. 1 single “Bad and Boujee,” by Migos. Together, these five tracks have been streamed nearly 2 billion times on Spotify. His latest project, “Without Warning,” a collaborative album with rappers 21 Savage and Offset, from Migos, hit No. 4 on the Bill- no RAP SHOOK UP the music business this year, dominating popular culture like never before, and experts say Metro Boomin is a big reason why. The St. Louis-born, Atlantabased producer’s distinctive mix of heavy bass, rattling synthetic percussion and dark, gothic melodies has ruled the singles charts in 2017. On the Billboard Hot 100 dated Nov. 25, Metro Boomin produced 10 songs—10% of the chart—with four tracks in the Top 40. His sound has even permeated the highest echelons of pop music. Taylor Swift’s new album, “Reputation,” embraces the same Atlanta-style rap and includes a featured appearance by Future, a rap star Metro Boomin has worked with for years. “He is defining the sound right now,” says Tuma Basa, Spotify’s global head of hip-hop, who curates RapCaviar, a popular playlist. Record producers shape a musician’s work, often acting like editors or, in some cases, directors. In rap, they’re a big part of the creative process: They concoct beats, choose music samples and compose melodies, and are typically credited as songwriters. In rap’s laptop age, however, when MCs can make their beats at home, super-producers like Pharrell no longer play the same outsize role. Metro Boomin, born Leland Wayne, is an exception, observers say, a proven hitmaker with the potential to be an A-list artist. At 24 years old, he has already board 200 album chart after it was released on Oct. 31. The album’s spooky single “Ghostface Killers,” was Spotify’s most-streamed song in the U.S. just days after it came out, according to Mr. Basa. Now, Metro Boomin is branching out. He has recently released several collaborative projects where he shares equal billing with the rapper, he is touring as a DJ, and he is diversifying his sound. “A lot of producers feel unappreciated,” says Metro Boomin, who often teams up with other major producers, including Sonny Digital, DJ Esco and Southside. “There needs to be a balance,” between artists and producers, he says. “It’s not even just about status. It’s really about respect.” Last December, Metro Boomin signed a broad—and unusual—deal with Republic Records, a division of Universal Music Group, the world’s biggest music company. Republic, which distributes a majority of his work, will support Metro Boomin’s future projects—whether as producer, solo artist or signer of new talent to his label, Boominati Worldwide. “In this case, it was literally from the top—[Universal chairman and CEO] Sir Lucian Grainge...was heavily involved” in the deal, says Avery Lipman, Republic’s president and chief operating officer. He compares Metro Boomin to Drake, Taylor Swift and Adele. “One day, he’s going to be one of the leaders of our industry.” Though in his early 20s, Metro Boomin is already almost a decade into his career. An industrious teen inspired by Memphis hip-hop act Three 6 Mafia and Atlanta’s rap scene, he made contact with artists in Atlanta on social media. Soon, he was shuttling back and forth between his hometown of St. Louis and Atlanta—an eight hour trip—to make beats for rappers like OJ da Juiceman and Gucci Mane. He was 16, so his mother drove him. “She knew how serious I was,” he says. Rap production “was all I did.” Metro Boomin’s most fruitful partnership has been with Future, working with the rising Atlanta superstar on a barrage of high-profile projects that many music critics consider one of rap’s great runs. Future’s 2015 album “DS2,” which Metro Boomin was executive producer on, has racked up 2.3 billion on-demand audio and video streams, selling in total the equivalent of 2.2 million copies, according to Nielsen Music. Having lent his production skills to hip-hop and R&B’s brightest stars, Metro Boomin is now moving toward center stage—echoing, in some ways, the paths of other super-producers such as Mike Will Made-It and Kanye West. The producer released a song under his own name this year, “No Complaints,” featuring Drake and Offset. Last month, he collaborated with the rapper Big Sean on the single “Pull Up N Wreck,” and soon, the two will release a joint album, “Double or Nothing.” Industry watchers see the moves as just the start of an enduring career. “Hip-hop is in a place where rock was in the 1980s—there are so many one-hit wonders—but Metro is going to have longevity,” says Mali Hunter, chief operations officer and partner at Atlanta’s Tree Sound Studios, who has watched Metro Boomin for years. “He’s still the same guy, and I think that’s going to get him real far,” she says. “Metro Boomin is going to be playing Vegas.” TELEVISION REVIEW | By Dorothy Rabinowitz HBO (2) AN INK-STAINED IDOL’S CAREER AND CONFLICTS Ben Bradlee in the Washington Post newsroom during the 1970s, above; with John F. Kennedy, c. 1960, right. AS ANY RATIONAL person would expect, the subject of HBO’s “The Newspaperman: The Life and Times of Ben Bradlee”—the executive editor who presided over the Washington Post’s coverage of the Watergate scandal that drove Richard Nixon from office—quickly emerges as a heroic figure. What’s not so expected, what comes as something bordering on shock, of a gratifying kind, is how much else the film takes on in this buoyant and mercilessly frank look at Bradlee’s life and career. It takes on the Kennedy years and Watergate, as well as matters like the disaster that befell the Washington Post when its promising young journalist Janet Cooke won the 1981 Pulitzer Prize for her report on the tragedy of little Jimmy, already a heroin addict at age 8. The disaster had to do with the fact that everything in the story, including little Jimmy himself, had been fabricated. Bradlee was working for Newsweek when he and his second wife, Antoinette “Tony” Pinchot, first connected with their Washington neighbor John F. Kennedy—soon to begin his run for the presidency. It was the beginning of an intimate friendship, as well as of a spark of interest between JFK and Tony obvious enough to incite Jackie Ken- nedy to ask that the two stop making goo-goo eyes at one another. Despite everything already known to the world about Kennedy’s womanizing—he was involved in an afPlease see BRADLEE page A12 For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. A12 | Monday, December 4, 2017 LIFE & ARTS Repetitive movements can often lead to muscular imbalances, says Shawn Arent, director of the Center for Health and Human Performance at Rutgers University in New Brunswick, N.J. Most people favor a dominant side when they swing a golf club or throw a ball. Some sports favor certain muscle groups. “Rowing is back-dominant,” Dr. Arent says. “It engages a lot of pulling muscles, so you’d want to work pushing muscles such as the anterior deltoids and pecs.” Cycling is quad-dominant, he says, so working hamstring strength in addition to the glutes is important. Even sitting at your desk can create muscular imbalance, which often causes low-back pain, he says. “When we sit, the hips are flexed and the glutes stretched,” he says. “This shortens the area from the abs to the quads. Break the pattern by standing every so often and doing a quad stretch.” Dr. Arent says in most cases, a well-rounded resistance program can help keep the body in balance. “Think about the muscles used in your sport of choice and the stabilizing muscles you need to work to pull you back in line so you don’t overcompensate,” he says. He suggests meeting with a strength coach to help figure out the right balancing act. WHAT’S YOUR WORKOUT? | By Jen Murphy co Fo m rp m e er rs ci on al a us l, e on Pro bowler Shannon O’Keefe works out with the team she coaches at McKendree University in Lebanon, Ill. The Diet n- league. “That’s when I discovered there were cute boys that bowled, so I joined a league.” After leaving college early, she went on tour with the PWBA in 1999. At its simplest form, bowling is a sport where you stay behind a line and try to knock over pins. At the highest level, Ms. O’Keefe says, it’s a game of physics. “You need to think about ball speed, angles, axis tilt and how to manipulate and change them based on how the ball reacts in a lane,” she says. “To compete professionally, it’s important that you can repeat your shots. Being physically strong helps prevent muscle fatigue.” Ms. O’Keefe has a grueling schedule. Coaching begins in late August and the collegiate season begins in October and ends in April. She competes all summer on the PWBA Tour. no SHANNON O’KEEFE is the antiLebowski. When she checks her bowling bag for a flight someone almost always tells her that she doesn’t look like a bowler. Ms. O’Keefe’s response: “What does a bowler look like?” “The stereotype is that bowlers are out of shape and drink beer, like the Dude,” she says, referring to Jeff Bridges’s famous fictional slob in “The Big Lebowski.” “If you’re a pro, that’s not going to get the job done. I’ve always labeled myself an athlete.” Known for her signature skort, headband, and charcoal-lined eyes, Ms. O’Keefe, 38, has the hardware to back up that claim. She’s won six titles on the Professional Women’s Bowling Association Tour, including one major championship, and is also a 13-time member of the U.S. national bowling team. She says coaching the women’s team at McKendree University, a Division II school in Lebanon, Ill., and the defending NCAA champion, keeps her at the top of her game. “I do the same workouts they do,” she says. Fast-pitch softball was once Ms. O’Keefe’s sport of choice. She was a first-team All-America center fielder at Portland State University, but developed shoulder tendinitis at the end of her freshman season. “My entire arm would go numb trying to throw the ball to the infield,” she says. Throwing overhand was painful, but underhand didn’t bother her. Ms. O’Keefe’s father bowled professionally on a regional circuit and worked part time at a bowling alley. “I had no interest in the sport,” she says of her early teenage years. “I thought the rental shoes were disgusting.” When she was 16 she went to watch her brother’s bowling wood’s,” she jokes. Bowlers often have physical imbalances between their left and right sides, Ms. O’Keefe says. “I’m right-handed, so I throw with my right hand and finish on my left leg. I routinely go to the chiropractor to help keep everything aligned. Everything I do in my workouts is to help keep my body strength as even as possible on both sides.” ly . This Is How She Rolls “I drink so much coffee, I’m never hungry in the morning,” Ms. O’Keefe says. She makes herself have a high-protein meal replacement shake mixed with almond milk at home or regular milk on the road. Lunch might be a salad or tomato or chicken noodle soup. Dinner is lean protein with vegetables and a starch. She doesn’t like to compete with a full stomach, so on competition days she snacks on raw almonds, apples or Nature Valley Oats ’n Honey bars. “On tour, there aren’t a lot of places that are open late, so you end up at a fast-food spot exhausted and don’t make the right choices,” she says. She gained 9 pounds while on the road this summer, but lost it over the course of two months back home. Mexican food is her weakness. and spend a bowlingfree week in Jamaica this month. The Workout “In a typical week I practice Monday and Tuesday, travel to an event Wednesday, practice at an event Thursday, compete Friday and Saturday and travel home Sunday,” she says. “It’s a lot of sacrifice. I can’t tell you the last time my husband and I took a vacation.” Luckily, her husband, Bryan O’Keefe, is McKendree’s director of bowling. He convinced her to take time off after the 2017 World Bowling Championships in Las Vegas Hourlong, twice weekly workouts with her team begin with a dynamic warm-up, including walking lunges and high knees, and core activation drills, like trunk rotations. Speed and agility drills focus on lowerlevel moves, such as box jumps, or multilateral moves, like single leg jumps in different directions. Strength training includes squats, lunges, barbell cleans and bench press. Conditioning might include resisted sled pushes and high-intensity drills at the start of the week and lower-intensity cardio on the second day. She estimates that she’s on her feet 12 hours a day during a tournament and runs to build endurance. “I tell the team I want my legs to be fit like Carrie Under- The Gear & Cost Ms. O’Keefe is sponsored by DV8 Bowling and estimates she has about 90 bowling balls in her garage. She designed a skort, a skirt with shorts underneath, with sponsor High 5 Gear. “I’m an athletic bowler and have a deep knee bend, so I can’t be restricted,” she says. She wears Dexter bowling shoes with insoles. The Playlist “I listen to a lot of Christian music, and the ‘Rocky IV’ soundtrack is my go-to for running,” she says. Continued from page A11 fair with Mary Pinchot Meyer, Tony’s sister, even while pursuing Tony—the testimony here brings a new and raw dimension to that history. This was not the way JFK’s devoted admirer, Bradlee, would likely have looked at things. He treasured Kennedy’s friendship and, as he told an interviewer, the president’s assassination was the great tragedy of his own life. Not everyone shared his pleasure in this friendship. You can’t be a friend of the president and also be a reporter, an emphatic Jim Lehrer declares. Bradlee, who was running Newsweek, was driving his Time competitors crazy, Tom Brokaw recalls. “They’d get off the plane and there he’d be, side by side with the president.” Some of the most telling aspects of this portrait emerge only fleetingly, but their meaning is nonetheless unmistakable. Ben Bradlee Jr., child of Bradlee’s first marriage, remembers his father throwing him into a pool, where he flailed away until his father “breezed in” and scooped him up. He viewed his father’s act as perhaps a kind of tough love, he says carefully, in tones that suggest a certainty that love had nothing to do with it. MARK GODFREY/THE IMAGE WORKS/HBO BRADLEE Katharine Graham, Carl Bernstein, Bob Woodward, Howard Simons and Ben Bradlee on April 30, 1973. The elder Bradlee—who’d had a secure childhood and a loving father—reflects on leaving his first marriage and a child of 7 who loved and needed him, and wonders aloud if one man’s happiness can be worth causing that kind of misery. There is no answer to this nonquestion. The storIes of Bradlee’s three marriages are neatly woven into this history, though none with more color and detail than his last, to former Washington Post writer Sally Quinn, whose recent new book, “Finding Magic,” is not, despite its title, about being married to Ben. What’s magical is the never- fading fascinations of Watergate. The spell is on as soon as we hear a steely voice describe a late-night arrest at the Watergate involving five guys in business suits who spoke only Spanish, had hundreddollar bills in their pockets and tear gas in their fountain pens. You would have to be Richard Nixon himself, the voice declares, to believe that this wasn’t a story—a reference to the Nixon administration’s famous efforts to portray the break-in at the Democratic Party headquarters as a meaningless burglary. “The air is thick with lies,” we hear, “and the lead liar is the president.” The voice—like that in all the rest of the narration—is Bradlee’s, from the audio recording of his 1995 memoir, “A Good Life,” on which the film is based. Veterans of the Watergate period recall newsroom conversations of the time. When it was all over, one remembers, and it was clear that the Nixon presidency was finished, Bradlee had gone from desk to desk, telling everybody, “Don’t gloat.” The Watergate section is followed by the Janet Cooke Pulitzer history in all its grim, impossibleto-resist detail. Mayor Marion Barry is shown at a memorable press conference—held before the story’s fraudulence was revealed— in which the mayor assured the public that he knew where little Jimmy was and that the family was receiving help. The fabricated Pulitzer story had its consequences, not only to the Washington Post. ‘The Newspaperman: The Life and Times of Ben Bradlee’ Monday, 8 p.m., HBO WHITNEY CURTIS FOR THE WALL STREET JOURNAL Work to Keep Your Muscles in Balance For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. Monday, December 4, 2017 | A13 LIFE & ARTS ART REVIEW Picasso Under the Influence A show explores the artist’s omnivorous interest in non-Western art and its impact on his work no Mask, Ivory Coast (pre-1966); and Picasso’s ‘Male Bust’ (1907). From left: Inuit ritual mask, Greenland (1930-1934); Pablo Picasso, 'Head of a Bearded Man' (1938). casso found what he needed in these works, over almost seven decades. It’s impossible to imagine how his art might have evolved had he not wandered into the Trocadéro in 1907. The Nelson-Atkins is the only American venue for “Through the Eyes of Picasso.” If you can’t get to Missouri, there’s a handsome, copiously illustrated catalog. ‘Through the Eyes of Picasso,’ Nelson-Atkins Museum of Art Through April 8, 2018 Ms. Wilkin is an independent curator and critic. It confirms his debt over a long career to mainly African and Oceanic art. tion, in general, but also, more specifically, confirm that his formal vocabulary over his entire long career was informed by his appreciation of (mainly) African and Oceanic art. In all the works by Picasso on view, whatever their date or medium, we see echoes of the staring eyes of New Guinea paintings and the frontal, bent-kneed stance and swelling limbs of African sculptures, along with expressive simplifications, sexual forthrightness, and an eagerness to turn rounded forms into angular ones and vice versa, all of which have antecedents in non-Western art. Picasso, of course, knew nothing of the history or function of the masks and figures he admired within the cultures that produced them. He seems to have found them intense but threatening—perhaps a legacy of his traditional training—describing them as “weapons” conceived to counter malignant forces. An excellent section of “Through the Eyes of Picasso” contextualizes the exhibition’s “source” works with informative, capsule descriptions of their original, varied roles—communicating with ancestors, ensuring fertility, comic relief, and more. 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Backed by our unprecedented 125% Guarantee, we stand behind each and every piece. 2017 ESTATE OF PABLO PICASSO/ARTISTS RIGHTS SOCIETY (ARS)/RMN-GRAND PALAIS/ART RESOURCE (2); MUSEE DU QUAI BRANLY-JACQUES CHIRAC (MASKS) tional” art with the hieratic, full-length, black-clad female figure and the pair of small heads by Henri Rousseau that he acquired in 1908, and a few of the elementally simple third- and fourth-century B.C. Iberian stone heads he first saw in an exhibition at the Louvre, in 1905. The exhibition’s Picassos— ranging from 1907 studies for “Les Demoiselles d’Avignon,” with African mask-like faces, to a wide-eyed “Bust of a Man Writing” (1971), as fierce and curvilinear as the exhibition’s exorcism mask from Sri Lanka—make clear that the artist was fascinated, stimulated and perhaps liberated by the formal challenges nonWestern, nontraditional works offered to the classical ideals he had rapidly absorbed during his academic art education in Spain. Did the way the non-Western artists conjured up human bodies with confrontational poses, geometric forms, and reversals of concavity and convexity—for example—inspire Picasso’s innovations, or did it give him permission to pursue an already present desire for radical reinvention? We’ll never know, but the exhibition’s Picassos not only confirm his lifelong, daring experimenta- co Fo m rp m e er rs ci on al a us l, e on son-Atkins Museum of Art, Kansas City, Mo. In Kansas City, we begin with masks from the Trocadéro that Picasso might have seen. A selection ranging from Alaska and Greenland, to Ivory Coast and Nigeria, to New Guinea and Sri Lanka reminds us that it was not African art alone that interested the Spanish master. A brief film assembled from late 19th-century images of the museum documents how casually these potent objects were presented at the time. A well-known 1908 photograph of Picasso in his studio in Le Bateau Lavoir, flanked by sculptures from the Congo and New Caledonia—included in the show— continue the story, while a section titled “Disrupting Tradition” underscores the young Spaniard’s omnivorous appetite for “nontradi- n- Kansas City, Mo. IN 1907, the 25-year-old Pablo Picasso visited Paris’s Ethnographic Museum of the Trocadéro (now the Museum of Quai Branly-Jacques Chirac)—“by chance,” he later said. As period photographs reveal, the museum was a jumble of large vitrines packed with masks, small sculptures, pottery, skeletons and mummified bodies, plus models of “indigenous” peoples, with large sculptures placed outside the glass cases—a miscellany, identified only by place of origin, from Africa, Oceania, and Meso-America. It wasn’t Picasso’s first encounter with work of this kind. A year earlier, at Gertrude Stein’s, Henri Matisse had showed him a small seated male figure from the Congo, recently acquired from a curio shop. The young Spaniard is said to have held the sculpture for the rest of the evening. But the visit to the Trocadéro seems to have focused his interest in “exotic” art, and he is supposed to have returned many times. The rest, as they say, is art history. Much has been written about the powerful effect of non-Western art on Picasso. Now, the mesmerizing exhibition “Through the Eyes of Picasso” allows us to see many of the actual artifacts he encountered at the Trocadéro and in friends’ collections, as well as an ample selection of the more than 100 African, Oceanic and Meso-American works he collected and lived with, from 1908 on, together with paintings, drawings and sculptures he made in response. Seen earlier this year in Paris, the exhibition was organized by Yves Le Fur, director of the Department of Heritage and Collections at Quai Branly, in collaboration with the Picasso Museum, Paris. The associate curator was Julián Zugazagoitia, director of the Nel- ly . BY KAREN WILKIN For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. A14 | Monday, December 4, 2017 SPORTS COLLEGE FOOTBALL Alabama, Clemson Set For Rematch There was one question for the College Football Playoff committee. The answer, no matter which, would unravel a norm. It would undoubtedly get criticized. It would snub one of the sport’s biggest and best programs. Alabama or Ohio State? Alabama is in. Ohio State is out. The SEC has two teams. The Big Ten is on the sidelines. Despite not reaching the SEC title game, the Crimson Tide won the No. 4 seed and will play topranked Clemson on Jan. 1 in the Sugar Bowl. In the other semifinal, No. 2 Oklahoma will play No. 3 Georgia at the Rose Bowl. Three of these teams locked up playoff berths Saturday with conference championships. Clemson thumped Miami 38-3. Oklahoma eased past TCU 41-17. And Georgia got its revenge against Auburn 28-7. In the Big Ten, Ohio State’s 27-21 win against previously undefeated Wisconsin left no such certainty. The Buckeyes were conference champions in a league that had a case as the strongest in the country this year. But they also have lost twice this season. And a two-loss team had never made the playoff before. Which is why one-loss Alabama had a case for the fourth and final playoff spot. The arguments for the Crimson Tide were clear: They look and play like Alabama. They have one fewer loss than Ohio State. They only lost to an Auburn team that entered this week ranked No. 2. Still, while every other playoff hopeful got the chance for one final showcase, Alabama was on the sidelines. With the No. 1 seed, Clemson is in the driver’s seat for its second straight title. Dabo Swinney’s path there now runs through the team that the Tigers have met in the title game the past two years. They shocked the world last year. Everybody expected a rubber match between Alabama and Clemson all of this year. It’s just coming a week earlier than everyone thought. Wisconsin quarterback Alex Hornibrook is tackled by Ohio State’s Tuf Borland during the Big Ten Championship. COLLEGE FOOTBALL | By Jason Gay Indianapolis You can call me a red-and-white Pollyanna, a blubbering Madison sycophant, or Bucky Badger’s suck-up weasel cousin, but even now, in the fog of defeat, rudely ejected from the national playoff, I consider this to be a magical season for my Wisconsin football team. I’m not still drunk, I promise. At least I think so. But as I write this column outside the romantic Xanadu I call the Quoba Mexican Grill at the Indianapolis airport, I want you to hear me out: These football Badgers started 12-0, for crying out loud. They’d never done that, in history, and Wisconsin’s been around since a Woolly Mammoth could buy a bong on State Street. They marched through the regular season unblemished, and even if the college football skeptics thought Wisconsin’s schedule resembled a pre-K pillow fight, they still had to beat everyone—including a glorious win at home versus that Irksome Dad Style Victim from Michigan: Mr. Khakipants. On Saturday night in Indy, in a sloppy Big Ten championship game versus Ohio State that I won’t blame you if you turned off in exhaustion or disgust, Bucky had a late shot at victory, which was incredible, considering how close the Buckeyes had been to vacuuming Wisconsin off the field. And, on top of all that, we also stopper, but then Wisconsin got right out there and added a 2point conversion, cutting the Buckeyes’ lead to three. Paul Chryst’s team was somehow in this thing— remarkable, since it seemed like Ohio State should have been up by at least 800. The first half had felt like Urban Meyer chasing me down a corridor with a chain saw. And yet Bucky was alive. Alive! I’ll acknowledge that the 2017 Big Ten Championship was not a high-quality football contest. Had it been a pizza, you would have sent it back to the kitchen, with a stern note. No one’s going to send the film to the College Football Hall of Fame. I’d rather watch airline safety videos. It also took forrrrrrreverrrrrr. There’s nothing like watching a big TV football game in the flesh to make you realize how much standing around there is. Even without the Mesmerizing Turf Gardener, the game trudged, as if it were being played in wet cement. I imagined those college playoff decision makers sitting there in the evening, saying to themselves: Don’t fall asleep. Don’t fall asleep. Does anyone have any espresso? (Yes: at this point, I’m just finding stuff to complain about, because otherwise I have to give Urban Meyer and Ohio State credit.) The Badgers did not do it. Wisconsin got the ball a couple of times with a shot at a game-winning touchdown, but never got close. Wisconsin’s offense isn’t ex- actly, uh, electric, and scoring points in a hurry was always going to be an issue. It was an issue. Ohio State 27, Wisconsin 21. That’s the final, with the Buckeyes making a case for the final playoff slot and sending Nick Saban and Alabama off to the Cheribundi Tart Cherry Boca Raton Bowl or something like that. At least I thought they had sealed a spot, until that wacky committee decided otherwise—or maybe they were just annoyed at having to sit though that nine-hour game—and gave the slot to Saban and his lustrous hair. Oh well. Come here, my Buckeye friends. I think I have a half of a beer sitting around here somewhere. We can split it and whine about those SEC snobs. And Bucky? Bucky gets a bowl, too, though the playoff dream is done. I guess you could argue that Wisconsin finally ran into a powerhouse team, that they weren’t true Top 4 material, but that feels cruel and shortsighted. I believe these Badgers will bloom again. I’m going to be barf-tastically pretentious and close with a poem from the Mesmerizing Turf Gardener: The rain to the wind said, ‘You push and I’ll pelt.’ They so smote the garden bed That the flowers actually knelt, And lay lodged—though not dead. I know how the flowers felt. OK, fine. That may have been Robert Frost. DON JUAN MOORE/GETTY IMAGES co Fo m rp m e er rs ci on al a us l, e on got the amazing visual poetry of Mesmerizing Turf Gardener. The Mesmerizing Turf Gardener appeared early in the fourth quarter, after a Wisconsin touchdown which pulled the Badgers within five points. Wisconsin was celebrating on the sidelines when game officials seemed to notice something awry with a section of the end zone turf. The carpet had come loose. Uh-oh. That’s when the Mesmerizing Turf Gardener arrived, carrying the type of tall plastic bucket used to hold fish on a pier, or drum on a subway platform. He got down on his hands and his knees, and, with the attentiveness of a surgeon, and the finesse of a concert harpist, he got to work—repairing, patching, sprinkling, tending. Yes, this was national television; yes, there were nearly 70,000 people here, but the Gardener would not leave his station until he felt confident his turf was right. It brought to mind the old Orson Welles Paul Masson ad: the Mesmerizing Turf Gardener would serve no turf before its time. A colleague with a rake appeared, and began furiously raking. Tend, rake. Tend, rake. Watching at home, you may have thought you were hallucinating. What are those guys doing to that fake grass? In person, I found the scene charming. Soothing, even. The Badger fans around me worried that the Mesmerizing Turf Gardener would be a momentum- ly . Playoff Dream Gets Crushed n- Alabama quarterback Jalen Hurts 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. 10s V Vancouver Calgary 30s 40s 50s 20s 60s Reno l Helena Billings i Boise 20s Salt Lake L ke City C City 0s 10s 20s 30s t Montreal Ottawa 40s Topekk Topeka 50s t Detroit h g Chicago Spring p d Springfield A h g Anchorage 40s Honolulu l l 80s 60s U.S. Forecasts 30s 40s 24 70s 33 39 T-storms Stationary Snow 63 80s Miami Showers Flurries 66 City Omaha Orlando Philadelphia Phoenix Pittsburgh Portland, Maine Portland, Ore. 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Worth D 70s El P Paso 70s bil Mobile A ti Austin t Houston ew Orleans New Tampa an Antonio A San 70s L Las Ve Vegas 70s y Cheyenne Denver 20s Ange Los A Angeles 10s 30s Sioux Falls 20s 60s 0s 20s ps/ .P Paul Mpls./St. Pierre 20s San an Francisco San Diego Bismarckk 10s Sacramento <0 20s ip Winnipeg ttl Seattle Portland g Eugene 0s no d t Edmonton 20s 40s 32 Bed-andbreakfasts 33 Diana Ross do 34 State bird of Minnesota 35 Ace Hardware rival 36 MRI alternative 37 Lupino of “They Drive by Night” 38 Lacking a key, musically 40 Zodiac cat 41 First mate? 46 Naval engineer 47 Stamp on a bill 49 To-do list entries 51 Relieves (of) 52 “All My Children” character 53 From the area 54 Dodge 55 Taste or touch 56 Talladega event 59 Spoil 60 Walk-___ (minor parts) 61 Co. acquired by Bell Atlantic to form Verizon Down 1 Gather in a crowd 2 Uncontrollable anxiety 3 Crowd scene actor 4 Toss in 5 Once in a blue moon 6 Fantasy baseball league deal 7 Company discontinuing its AIM chat service at the end of the year 8 Popular aperitif 9 Topic for debate 10 Small desert whirlwind 11 Mythical matchmaker 12 Capitol Bldg. VIP 15 Kuwaiti bigwig 19 Father of Scout and Jem Finch 21 “Count me in!” 25 Mysterious glow 29 Carpet cleaner, for short 31 Robber’s take Previous Puzzle’s Solution G L O B I P A S S T O G A R O D E I P O D D E R I V D L E A I D M T U E D P R I V R E E A R S I G I N O N S M P O E A T M H I M R I C D U L I F E F G S A T S L I N F O F O S T I S E E T E R R A H O T E L S O T O E U R O D R A W E B A D A S S S I EWE A L O T S OWH L O I F F T A AM C H N E T O T L I G B Y F O Y U R E R E S T A R H O M E A R E A S T E X T S H U G E T R E K The contest answer is CLUE. As suggested by 1-Across and the final starred answer (FOURL I F T BY-FOUR), the first words of the starred O D O R answers can be put into a four-by-four C L U E grid to form a word square, missing one H E R E final word: CLUE. AJ MAST/ASSOCIATED PRESS BY ANDREW BEATON For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. Monday, December 4, 2017 | A15 OPINION Wall Street was supposed to have been cleaned up by now. In 2006 the investmentbanking firm Jefferies paid nearly $10 million in fines after lavishing gifts on Fidelity traders. These included “a booze-fueled bachelor party replete with strippers and dwarves,” according to the New York Post. Two years later the Securities and Exchange Commission charged Fidelity for “improperly accepting more than $1.6 million in travel, entertainment, and other gifts paid for by outside brokers courting [its] massive trading business.” The perks included “premium sports tickets to events including Wimbledon, the Super Bowl, and the Ryder Cup golf tournament.” Fidelity cleaned house. Who hasn’t fudged expenses? At one point companies could lower their taxes by deducting 100% of entertainment expenditures as legitimate business costs. Partly to cut back on those infamous three-martini lunches, Congress changed the law starting in 1987 to allow only an 80% deduction. In 1994 the government lowered it to 50%, where it stands today. I can’t think of any good reason why it isn’t zero. Think about it: If you have to ply your clients with gifts or meals to get them to do business with your firm, then your product probably isn’t worth its price. Why should taxpayers subsidize your company for producing lame products or you for being a lousy salesman? When the new Yankee Stadium opened in 2009, the 1,800 premium seats in the sections around home plate— as much as $2,500 a game at first—were nicknamed the Why not abolish the tax deduction for business entertainment? Goldman Sachs seats. This was during the financial crisis, and the optics of opulent bankers sipping champagne near the on-deck circle became too much. One Goldman partner told me at the time that if any of the firm’s employees were seen in those seats, with or without clients, they would be fired on the spot. Houston Mayor Sylvester Turner told the Houston Chronicle that this year’s Super Bowl LI brought $350 million into the city’s economy—in one weekend, and you know virtually all of it was expensed. Thank you, taxpayers. Vic Macchio, who runs a corporate dining network called Dinova, has estimated the “business dining spend in the U.S. to be $60+ billion annually.” I’ll bet that’s low. All this presents an opportunity. Why not zero out the tax deduction for business entertainment? Same for “sponsorships” and other client giveaways. That’s, by my calculations, tens of billions lost every year in exchange for unproductive schmoozing and bribes to buy bad products. Restaurants and bars will complain. So what? It would remove another distortion from the tax code. And some personal advice: A lot of people cheat on their expense accounts, but don’t do it. I can go on about moral responsibility but will instead note that software can make audits easy. Modern code could have quickly found my months of illusionary taxi rides. I’ll also remind you of Mark Hurd, Hewlett-Packard’s ex-CEO. In 2010 he was accused of sexual harassment by an outside contractor, an actress named Jodie Fisher. HP’s board found that Mr. Hurd didn’t violate the company’s sexual-harassment policy, but he got axed anyway—for $20,000 of irregularities with his expense accounts. The Left Sets Honduras on Fire n- sure of it too. That’s when he announced that his supporters would stay in the streets for years in protest unless he was declared the winner. With no concession, the uncertainty dragged on. Mr. Nasralla insists he was robbed. Never mind that this election had greater scrutiny by international observers than any contest in the region in recent memory. Or that Mr. Nasralla’s “Alliance of Opposition” had equal access to the tallying process. The Zelaya-Nasralla movement is using its phony cheating claim to justify a torrent of violence. Welcome to Central America, where even after Venezuela has succumbed to famine, the left remains committed to the tactics that brought the country to misery. The process is simple: win one election, then consolidate power and never leave. The strategy has been successful in Nicaragua, where Sandinista Daniel Ortega has been in power since 2007. He is as corrupt as any caudillo and has handily put an end to political pluralism, competitive elections, transparency and institutional independence. El Salvador may soon suffer the same fate. Former leftist guerrillas of the FMLN party, who are also allies of Venezuela, have governed since 2009. The party moderated its image to get to power, but last week the party secretary announced that its goal is to end capitalism—including the right of private property. In Guatemala a United Na- no Hillary Clinton’s favorite Central American was back in the news this week, as AMERICAS H o n d u r a s painstakingly By Mary counted balAnastasia lots in front O’Grady of international observers and tried to discern, with utmost transparency, the winner of the Nov. 26 presidential election. Amid the tension, leftwing candidate Salvador Nasralla cried fraud and called for an uprising. Soon, like a bad centavo, pro-Chávez Honduran former President Manuel Zelaya turned up in the midst of one angry mob. Recall that in 2009 Mr. Zelaya was kicked out of the country, with the support of his own party, for violating the constitution. Mrs. Clinton, who was then secretary of state, tried and failed to force Honduras to take Mr. Zelaya back. Last week he was seen again, wearing his signature cowboy hat and leading a bunch of hooligans trying to break into the warehouse where the electoral authorities had stored ballots and tally sheets from around the country for counting. The raid did not succeed, but the incident captured the spirit of ZelayaNasralla politics. Mr. Nasralla, a former game-show host, ran against incumbent center-right President Juan Orlando Hernández. By Friday it looked like Mr. Hernández had narrowly won. Mr. Nasralla seemed By Mike Kerrigan I tions prosecutor, who is in the country ostensibly to root out corruption, has teamed up with the local leftists to try to unseat a center-right president. The prosecutor has so far been unsuccessful, but he has generated dangerous instability. In Honduras, socialist hopes were on Mr. Nasralla, which is why his followers are taking his loss so badly. Socialists rampage through the country after an apparent election loss. Polls had widely anticipated that Mr. Hernández would win re-election, as the Economist wrote on Nov. 25. Yet the earliest returns, released on Nov. 27, showed Mr. Nasralla in the lead. Officials cautioned that with less than 60% of the vote counted it was too soon to declare a winner. When the electoral tribunal did not give the victory to Mr. Nasralla immediately, he called for rebellion. His supporters have blocked highways with burning piles of debris, destroyed cars, trashed storefronts, set highway tollbooths ablaze, and rampaged through the residential neighborhoods where electoral authorities live. On Friday a nighttime curfew was imposed for 10 days. Mr. Nasralla’s supporters flouted it. The violence is well-organized, raising suspicions of outside help. Exiled Venezuelan political science professor José Vicente Carrasquero warned in a video of Venezuelan “elements” seeking to undermine the integrity of Honduran institutions. That Mr. Hernández was behind in the early count was surprising but explainable. In the capital there were reports that thugs “instructed” neighbors not to vote. Most of his backing came from outside the big cities. Both sides had agreed before the election that the physical tally sheets had to be reviewed in Tegucigalpa. It took longer to get them from rural areas. Another charge is that Mr. Hernández is an ally of the U.S. and has been allowed to steal the election. But that doesn’t add up either. Observer teams from the Organization of American States and the European Union played a key oversight role. On Tuesday the European mission criticized the tribunal’s failure to communicate at regular intervals with the public. Yet it also noted that all parties had representatives on hand to monitor the process. Midweek, the two candidates came together to sign a document pledging that they would each respect the final outcome. Within hours Mr. Nasralla backtracked, alleging that he had been tricked. Hondurans speculated that the reversal came about because Mr. Zelaya did not approve. In other words, Hillary’s old friend is the one calling the shots. Write to O’Grady@wsj.com. The Use of Fatherly Force t is easy to look back askance at the way many fathers reared their sons a generation ago. But that would be a mistake. Teaching adolescents right from wrong will always be a primary duty of fatherhood, and it is a lesson learned faster when backed by the threat of force. My kid brother, Jack, and I were lucky. We didn’t have to wonder about our father’s place in our lives. He frequently reminded us: “I’m not your best friend, I’m your father.” Dad used gunboat diplomacy to steer us down the rapids of adolescence. He knew that for the threat of force to be real, occasionally the big guns had to fire. As teenagers, we provided many occasions for cannonade. Here’s one. Jack and I, both middle-schoolers, had just seen an evening movie with two friends, also brothers. We rode in the way-back Social Media, Weaponized War in 140 Characters By David Patrikarakos (Basic, 301 pages, $30) ‘O ur information environment is sick,” warns David Patrikarakos. “We live in a world where facts are less important than narratives, where people emote rather than debate, and where algorithms shape our view of the world.” Even in war. Mr. Patrikarakos’s “War in 140 Characters” details a new kind of conflict that puts traditional military dominance at risk by weaponizing social media in ways that Silicon Valley’s digital optimists never imagined. The author, a London-based journalist, realized a few years ago that the wars he was covering in the Middle East and Ukraine were fought through social media as much as through physical warfare. The book offers vivid profiles of individuals on both sides of the online battlefield. One of them is a young Russian journalist who was out of work after Vladimir Putin invaded Crimea in 2014 and occupied Russian-speaking eastern Ukraine following the ouster of Viktor Yanukovych, Ukraine’s pro-Russian president. Vitaly Bespalov was offered a highpaying job at a digital publisher. He was suspicious but joined the staff of the website worldukraine.com.ua anyway. He discovered that his job was to outrage Russian speakers in Ukraine and keep them on Mr. Putin’s side. The “.ua” web address falsely suggested that the site was based in Ukraine and staffed locally when it was, in fact, based in St. Petersburg and staffed by Russians. Mr. Bespalov found himself working in a troll factory operated by a Putin crony. On the first floor of the offices, a dozen news websites peddled disinformation. A team on the second floor created propaganda posts on Facebook, Twitter and the Russia-based messaging service VKontakte. Bloggers on the third floor wrote fake items pretending to be persecuted Russian speakers in Ukraine or pro-Putin Americans. Mr. Bespalov ultimately wearied of his deceitful job and wrote an exposé on his life as a troll. He tells the author that his parents, no doubt like many others, now assume that news and social-media posts are “probably almost all fake. Now no one believes anything anymore.” Twitter recently upped its character count to 280 from 140, which could make some fake-news tweets doubly effective. The Kremlin’s “dezinformatsiya” campaign—whether carried out against Ukraine, Estonia, Germany or the U.S.— involves “a bewildering array of narratives designed to distort truth and confuse its enemies,” Mr. Patrikarakos writes. And of course it isn’t just the Kremlin that operates in such a way. “Obfuscation has found its perfect platforms” in the realm of social media, he notes, reaching “audiences to a degree unprecedented in modern history.” The conditions are ripe: “In the postmodern Western world, where academics decry the notion of an ‘objective truth,’ where the lack of trust in institutions is lower than at any other time in living memory, this type of information finds a receptive audience.” co Fo m rp m e er rs ci on al a us l, e on It was almost a rite of passage. Soon after I started on Wall Street in the 1980s, sales folks INSIDE from the tradVIEW ing floor inBy Andy vited me to Kessler dinner. We met at one of those fancy New York steakhouses where French wines flow like tap water. I felt part of a new fun group. Until, that is, the bill came. Everyone looked at me and another new guy. “You know about the tradition, right?” I recall the senior salesman asking. “Last one in, pays.” At 26, I wasn’t sure my creditcard limit would be high enough. I sheepishly asked how to expense the enormous bill. Simple, I was told: Mark it down as a couple of cab rides a week. Oh, and welcome to Wall Street. This story came to mind last month after Navnoor Kang, a manager at New York’s state pension fund, pleaded guilty to fraud. He had been bribed to direct bond business to the trading firms Sterne Agee and FTN Financial. This included vacations, drugs and prostitutes. I kept thinking: How the heck did the salespeople at these firms write off all this stuff on their expense accounts? BOOKSHELF | By L. Gordon Crovitz ly . The Expense-Account Racket of their mom’s station wagon, where seat belts were nonexistent and prison rules applied. She dropped us at home. As we walked through darkness to our back door, we realized something. There was dad in his favorite reading chair, finishing his newspaper and shrouded in light. My brother and I decided to scare dad, and he decided to teach us a lesson. Our choice was simple. We could knock like gentlemen, or, as David Bowie put it, we could be heroes, just for one day. “Let’s scare him,” Jack said. “It will be legendary.” There weren’t more than 18 inches between dad and the window behind him. “Are you nuts?” I replied. “He’ll kill us. Dad hates being scared.” “Well, duh,” Jack observed. “Nobody likes being scared. Besides, what are you afraid of? You’re faster than I am.” I had to admit, the kid was making sense. “C’mon, let’s do it.” Against my better judgment, I agreed. “Wait,” I whispered, “let’s use our palms, not our fists. That way if we break a window . . .” I couldn’t finish the thought. “Fine, palms, whatever,” Jack agreed. “On three. Ready? One . . . two . . .” Did we regain our senses and call it off? Did cooler heads prevail? No. “Three!” The pounding on the glass began, and it was a cacophony. We never discussed it, but our feet got in on the act, kicking just below the panes. It was so intoxicating: we, a little satellite country, provoking the Soviet Union. Dad seemed to levitate out of his chair, like a Tibetan monk jacked on Mountain Dew. It was even better than we’d imagined. My brother and I enjoyed a congratulatory laugh and, in a fateful lapse of judgment, took our eyes off the old man. This proved costly. “Legendary!” Jack howled— then, just as quickly: “Wait, where’s dad?” Before I could answer, we each felt something grab us by the scruffs of our necks. We rose involuntarily, as if lifted by a tabby, yet neither of us believed a tongue-bath beckoned. There is no need to relive the particulars of the frontier justice meted out on that starless night. Let’s just say it’s not a scene Norman Rockwell ever felt compelled to paint. Guns fired, lesson learned. We never scared dad again. The three of us still laugh when we recall that night on visits to dad’s house. Visits where we always knock. Mr. Kerrigan is an attorney in Charlotte, N.C. False narratives are now reaching unprecedented numbers of people, stoking resentment, feeding conflict and aiding the enemies of the West. Mr. Patrikarakos profiles a teenager in Gaza, Farah Baker, whose use of Twitter made her famous in 2014 during Israeli attacks on Hamas following the terror group’s murder of three Israeli teenagers and rocket attacks on southern Israel. Everyone from Al Jazeera to NBC reported Ms. Baker’s tweets, in which she expressed her fears of Israel’s military response and promoted a narrative of persecution. “Social media platforms empowered individuals like Farah to become citizen journalists,” Mr. Patrikarakos writes, “uncensored by editorial guidelines, institutional policy, or even a need to remain impartial and unbiased.” The social-media unit of the Israeli Defense Forces stressed that Hamas caused the conflict, but less-informed popular opinion turned against Israel. Mr. Patrikarakos concludes that Israel’s approach of “dealing with facts—to give context to destruction, to combat images of suffering with images of causation,” amounted to fighting “sentiment with logic, which is an almost impossible task.” Another figure in Mr. Patrikarakos’s portrait gallery is Alberto Fernandez, who in 2012 was appointed head of the State Department’s recently created Center for Strategic Counterterrorism Communications. Under his guidance, the center produced a powerful video in Arabic titled “Welcome to ISIS Land,” showing jihadists committing terrible acts against fellow Muslims and, in its sardonic narration, urging Muslims to come to ISIS Land and learn “useful things,” such as “Blowing up mosques! Crucifying and executing Muslims!” It concluded: “Travel is inexpensive because you won’t need a return ticket!” But Mr. Fernandez ran into political correctness when his team tried to counter ISIS propaganda in English. “Once you start working in English, everyone’s a critic,” Mr. Fernandez tells the author. “Then it becomes about whether it passes the Washington Post test: Is it acceptable to polite society in Georgetown? It becomes a problem of propriety, good taste, and people don’t want the State Department logo on this.” The Obama administration closed the center in 2016. Mr. Patrikarakos’s profile of a British gamer turned online sleuth, Eliot Higgins, shows that private actors can be effective. Mr. Higgins adeptly used open-source data, including online videos of Russian convoys, to prove that Mr. Putin’s military provided pro-Russia separatists in Ukraine with the missile that, in July 2014, shot down Malaysia Airlines 17, killing almost 300 people. Mr. Patrikarakos doubts that Western governments alone can counter the disinformation on social media and proposes a network of hundreds of digital activists, on the model of Mr. Higgins, charged with rebutting propaganda and fake news. This method, he says, “is far more likely to succeed than a centralized bureaucracy.” The Silicon Valley billionaires who created the digital tools enabling this new form of warfare might also devote some of their philanthropy to funding a digital defense of the West. Without an equal and opposite deployment of social media, Mr. Patrikarakos warns, the West “will continue to lose the narrative war.” Mr. Crovitz, a former publisher of The Wall Street Journal, is co-founder of NewsGuard, a new company that will rate news brands online based on their journalistic legitimacy. For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. A16 | Monday, December 4, 2017 * *** THE WALL STREET JOURNAL. OPINION LETTERS TO THE EDITOR Let Them Not Bake Cake GOP Tax Plan Is Less Than Most People Want P Lois Lerner’s Secrets or the FBI—not to keep information about an abuse of power by public officials from the public. Every other party is united for disclosure: the defense (i.e., the government, which has admitted wrongdoing and apologized); the plaintiffs; and the Cincinnati Enquirer, which has filed a motion to lift the seal. In his initial decision in May, federal Judge Michael Barrett said he could see the wisdom of confining access to the testimony to the lawyers during discovery. But he added that others could ask to lift the order later, and Ms. Lerner and Ms. Paz would then “bear the burden of overcoming the presumption of access to court documents.” That moment is here. American taxpayers who will fork out $3.5 million for Ms. Lerner’s actions have a right to hear how she justified what she did at the IRS. no n- erhaps the National Security Agency should take some tips about keeping secrets from Lois Lerner. When news that the IRS had targeted conservative groups led to congressional hearings, the former director of the Exempt Organizations division declared her innocence and then clammed up. Now she and her former IRS associate, Holly Paz, are asking a federal judge to seal forever their depositions in a lawsuit that the IRS settled last month for $3.5 million. Ms. Lerner and Ms. Paz say they or their families have endured harassment or death threats. But Edward Greim, the attorney for the roughly 400 tea-party clients who sued, notes in reply that the last threat Ms. Lerner and Ms. Paz cited was from early 2014. Leave aside that the usual way of dealing with threats or harassment is to notify police T Regarding your editorial “Tax Reform, Growth and the Deficit” (Nov. 27): I am extremely disappointed by the GOP tax-reform proposals. People are already gaming the system with pass-through S corps by paying themselves minimal wages and showing the rest of their income as profit distributions which avoid Social Security and Medicare taxes. That method will become rampant if the 25% rate for pass-through entities is enacted, and we’ll have an ever more difficult time funding Social Security and Medicare. In 2013, Kansas started exempting pass-through income from all state income taxation. In the words of economists Jason Matthew DeBacker, Bradley Heim, Shanthi Ramnath and Justin Ross, who studied the change, “the behavioral responses were overwhelmingly tax avoidance rather than real supply side responses.” Tax revenues tanked and the state economy didn’t improve. We need to reduce rather than increase the growing disparity between the rich and poor in this country. The proposed changes will negatively impact struggling families and cause the national debt to balloon. I would much prefer that taxes on higher incomes be increased to provide help for lower-income individuals and affordable health care for everyone, even if it means my taxes would go up. JONATHAN D. WIEAND, CPA, CGMA Goshen, Ind. Unlike the mortgage tax deduction and other policy-driven features of the tax code, payments to state and local governments constitute money that never becomes available to the taxpayer. Taxpayers in high-tax states never exercise a choice to spend tax money that has been deducted from their income. Nor does elimination of the deduction for state and local taxes plausibly result in a laudable outcome—the voluntary reduction of taxes by state government. Much as we would like to punish the tax-and-spend crowds populating the legislatures and governors’ mansions in New York, California, New Jersey and other high-tax states, elimination of the deduction punishes only the taxpayers in those states, with an effective tax hike. Having spent decades building massive taxes into their budgets, the high-tax states couldn’t dramatically (much less quickly) lower their local taxes, even should they want to. The effort is folly. RANDALL BERGER Brooklyn, N.Y. The Organization for Economic Cooperation and Development cites that U.S. corporate taxes as a percentage of GDP are lowest of all of its 35 members. That’s a convincing argument that corporate tax rates don’t need to be reduced. JONATHAN KUTNER Dallas Rather than an automatic tax hike in year six if revenues don’t rise as anticipated by the authors of the tax reform bill, how about a massive cut in government spending if the revenues don’t rise? Why should taxpayers be punished for the failings of Congress and its inability to put the nation’s fiscal house in order? GAYE STATHIS Brookhaven, Ga. co Fo m rp m e er rs ci on al a us l, e on he Supreme Court on Tuesday will hear tistic expression, which is protected by the First Masterpiece Cakeshop v. Colorado Civil Amendment. And weddings for many people are Rights Commission, which ostensibly religious celebrations, and participation—or pits the government’s interest abstention—is itself an act of Does gay marriage in social equality against an expression. individual’s constitutional The Supreme Court has long trump the right to right to express his beliefs. held that the First Amendment religious expression? But these two democratic valprohibits the government from ues aren’t incompatible, ascompelling speech or the exersuming the Justices respect cise of religion. Its landmark America’s pluralistic tradition that lets people ruling in West Virginia State Board of Education of good faith disagree. v. Barnette (1943) protected the right of a JehoAt issue is whether baker Jack Phillips, who vah’s Witness not to participate in the Pledge of opposes same-sex marriage out of sincere reli- Allegiance. In Wooley v. Maynard (1977), the gious beliefs, can be compelled to custom design Court said New Hampshire could not compel a a cake for a gay nuptial. The Colorado Civil Jehovah’s Witness to display the state motto Rights Commission determined that Mr. Phil- “Live Free or Die” on his license plate since the lips’s refusal to bake a wedding cake for two First Amendment protects “the right of individumen violated the state’s public accommodation als to hold a point of view different from the malaw, which bars discrimination based on sexual jority and to refuse to foster . . . an idea they find orientation. The commission ordered Mr. Phil- morally objectionable.” lips to cease discriminating and required his emColorado relies heavily on Employment Diviployees to undergo compliance training. sion v. Smith (1990) in which a Native American Rather than violate his conscience, he stopped sought a religious dispensation under the First custom-baking wedding cakes and appealed the Amendment after being fired for smoking peyote. commission’s order. He contends that a custom- “The right of free exercise does not relieve an indesign cake constitutes art as well as symbolism dividual of the obligation to comply with a ‘valid that is protected by the First Amendment. The and neutral law of general applicability,’ ” Justice Colorado Court of Appeals rejected Mr. Phillip’s Antonin Scalia wrote for the majority. argument on grounds that the public accommoBut Colorado’s public accommodation law is dation law is neutral and generally applicable. not neutrally applied. It is applied selectively Such cases were inevitable after the Supreme to dictate ideological conformity. For instance, Court’s ruling in Obergefell v. Hodges (2015) that the commission has allowed three bakers to guaranteed a right to same-sex marriage. Writ- deny service to religious customers who reing for the majority, Justice Anthony Kennedy quested a cake criticizing same-sex marriage. held that “many who deem same-sex marriage Thus the state is punishing forms of speech it to be wrong reach that conclusion based on de- dislikes. cent and honorable religious or philosophical Yet the Court held in Obergefell that the govpremises . . . But when that sincere, personal op- ernment may not enshrine into law any viewposition becomes enacted law and public policy, point that can be used to “demean” or “stigmathe necessary consequence is to put the impri- tize” those with different mores—which is matur of the State itself on an exclusion that effectively what Colorado has done by censuring soon demeans or stigmatizes those whose own Mr. Phillips. Smith also stipulated several reliliberty is then denied.” gious exemptions from generally applicable laws States have since compelled florists, photog- including that “the government may not compel raphers, bakers and venue hosts to personally affirmation of religious belief” or “impose spesanction marriages that they find morally ob- cial disabilities on the basis of religious views jectionable. Those who don’t are stigmatized or religious status.” Colorado does both. and in some cases coerced. A ruling for Colorado could encourage other While some on the left liken Mr. Phillips to government burdens on First Amendment relihotel owners in the Jim Crow era, there’s no ev- gious rights, especially in this era of right-left idence of invidious discrimination. Mr. Phillips cultural polarization. Could the state compel and others who have denied wedding services Catholic doctors to perform abortions, or reto same-sex nuptials have consistently served quire Catholic adoption services to place chilgays in other contexts. Mr. Phillips said he dren with same-sex couples? would sell the gay couple other baked goods— As Justice Kennedy noted in Obergefell, the simply not a custom wedding cake. “Constitution promises liberty to all within its Mr. Phillips has also consistently conducted reach, a liberty that includes certain specific his business according to his moral scruples, rights that allow persons, within a lawful realm, including refusing to make cakes with vulgar to define and express their identity.” If this apmessages, which the state’s public accommoda- plies to same-sex marriage, which isn’t mention law allows. tioned in the Constitution, it certainly ought to The case raises significant First Amendment apply to religious belief, which is there in black concerns. Custom cakes can be construed as ar- and white. ly . T REVIEW & OUTLOOK The Coming Aluminum War he Commerce Department last week an- they’d create in the aluminum industry. That’s nounced a “dumping” investigation into what happened when George W. Bush raised Chinese aluminum imports. That’s one steel tariffs in 2002. more sign that the Trump AdHigher prices on $600 milTrump and Ross ministration is heading tolion worth of aluminum may ward a major escalation in not have a major effect on the tee up tariff brawls trade conflict that would hurt U.S. economy, but it signals the for the New Year. Americans. Administration’s willingness to Dumping investigations usustart a trade war. If the Comally start when a company petimerce investigation results in tions the government, but Tuesday’s action was anti-dumping duties, Beijing will have a strong self-initiated, the first such case in 25 years. Com- case to take to the WTO that could allow China merce Secretary Wilbur Ross told industry execu- to impose new duties on American goods. tives that this will accelerate the Administration’s Another Commerce investigation begun in fight against “dumped” goods. In October the April will determine whether aluminum and Commerce Department imposed duties of 97% to steel imports are a national security threat un162% on Chinese-made aluminum foil. der Section 232 of the Trade Expansion Act. U.S. officials are also dismissing traditional That decision, expected after the U.S. tax debate trade dispute channels. On Thursday U.S. Trade is finished, could give Mr. Trump significant latiRepresentative Robert Lighthizer decided not to tude to raise tariffs. attend a G-20 meeting aimed at reducing global In this case Mr. Ross’s target would be Ameriexcess steel capacity. The bilateral economic dia- can allies, since China didn’t even break into the logue with China is on hold. In August the U.S. top 10 sources of U.S. steel imports in the first stepped away from a World Trade Organization half of 2017. Canada provides 17% of U.S. im(WTO) case challenging Chinese subsidies for ports, and Germany, South Korea, Taiwan and aluminum production, although it may refile. Japan are all bigger suppliers than China. HitInstead, the Trump Administration keeps ting their companies would invite retaliation stacking up unilateral trade cases. The new Com- and undermine U.S. foreign policy. merce investigation concerns common alloy aluEuropean Union officials have already said minum sheet, which is crucial for industries that U.S. farm products would be a priority tarfrom construction to home appliances. The U.S. get in a trade war. In July American farmers uses 26 billion pounds a year, but domestic mak- wrote to the White House warning about tariff ers meet only 8% of that demand. blowback. U.S. officials might consider what’s Tariffs would raise costs for U.S. manufactur- more important: $600 million in aluminum or ers, which would likely lose more jobs than $160 billion in agriculture exports? Securitized Muni Bonds Can Make Good Sense Regarding your editorial “Have They Got a Bond for You” (Nov. 21 and the Letters of Nov. 28): The assertion that Chicago and Connecticut are borrowing a “debt trick from Puerto Rico” is misguided. Municipalities and states across America have used secured debt offerings to access the capital markets at a lower cost than unsecured bonds for decades. Secured debt backed by a dedicated revenue stream, such as local sales taxes, typically comes with a higher rating and lower interest rate than unsecured debt. Chicago’s new taxbacked bond issuance is expected to be 200 to 300 basis points cheaper than its general obligation debt, saving the city and its citizenry up to $100 million a year. Investors will accept a lower interest rate in exchange for property interest in collateral that will remain intact following any default or bankruptcy fil- ing. In fact, effective use of tax-backed secured debt, combined with renewed emphasis on fiscal discipline, allowed Washington, D.C., and New York City to raise affordable capital following downturns and avoid bankruptcy restructurings. Your editorial misrepresents the separate collateral pool for Puerto Rico’s Cofina bondholders and overlooks that the VAT proposed by the island’s last governor was voted down by the legislature before it ever went into effect. The editorial also omits that Detroit’s secured creditors received par recoveries precisely because our laws protect property interests. We cannot forget that not all bonds are created equal. MATT RODRIGUE New York The writer is financial adviser to a coalition of investors holding $2.6 billion of Cofina senior bonds. Put a Spike Through the CFPB’s Heart Now Regarding your editorial “Leandra Costanza” (Nov. 28): There is no denying the comedic value of Democrats challenging President Trump’s right to appoint an acting director for the Consumer Financial Protection Bureau, but the CFPB’s extraconstitutional structure is a not-sofunny aspect of the bureaucratic farce. Democratic nesting of the CFPB in the Federal Reserve system was a brilliant strategy for embedding a deep-state apparatus in a tamperproof package. If the Democrats regain the veto-proof power that they had when they created the CFPB, look for their extra-constitutional template to be used more aggressively as a means to insulate the administrative state from political oversight. The CFPB needs to be excised before it metastasizes, regardless of its vaudeville value. JAY GILBERT Raleigh, N.C. Sadly, the CFPB is but one of several totalitarian cancers planted in the Beltway bureaucracy by the Obama regime. After they deal with the CFPB, President Trump and Congress should focus on Medicare’s Independent Payment Advisory Board (IPAB), another star in the rogues’ gallery of Orwellian agencies. This insidious outgrowth of ObamaCare is dedicated to cutting billions from the Medicare budget and answers to no one. Any identified abuse the board inflicts on seniors must go through a torturous congressional hearing process that can take years to adjudicate. IPAB is much more dangerous than the CFPB because the lives of seniors are at risk—particularly those in need of surgery or other lifesaving protocols. Ezekiel Emanuel, one of IPAB’s creators, suggests limiting treatment for patients who are age 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. 75 and older to palliative carey—a guaranteed early death sentence. In the spirit of draining the swamp, unconstitutional federal entities must be brought to heel or eliminated. The CFPB and IPAB are great places to start. DICK STACK Huntley, Ill. The most remarkable bit of information about this week’s drama at the CFPB wasn’t the actions of Richard Cordray, Leandra English or President Trump, but the fact that the bureau has over 1,600 employees. Mick Mulvaney needed a bigger bag of donuts for his first day on the job. THOMAS C. THOMAS, III Nashville, Tenn. This “who’s in charge?” debacle is reminiscent of President Andrew Johnson firing Edwin Stanton and appointing a replacement as secretary of war. Stanton, with several senators pushing him, resolved not to leave the office, creating a period where the department had two opposing leaders. Johnson was impeached, though not convicted, for this. PAUL HERBERT Fairfax, Va. Pepper ... And Salt THE WALL STREET JOURNAL “Meanwhile, obsessing about productivity is way up.” For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. Monday, December 4, 2017 | A17 OPINION Ms. O’Connor, an assistant editorial features editor at the Journal, helps administer the @WSJOpinion Twitter account. By Walter Slocombe And Fay Vincent W hat the American public wants it usually gets, and it wants to bet on sports. Even though it’s illegal almost everywhere but Nevada, the best guess is that $150 billion annually is wagered nationwide. Pressure to claim some of that bonanza comes from casinos and racetracks, but also from owners of sports teams and revenue-starved states—all casting covetous eyes on untaxed and unshared money. Standing in the way of legalization is Papsa, the federal Professional and Amateur Sports Protection Act of 1992, which prohibits states from “authorizing” sports betting. (A grandfather clause exempts Nevada and makes a few other limited exceptions.) In the wake of the Pete Rose scandal, the sports industry enthusiastically supported federal action to stop gambling’s expansion. On Monday the U.S. Supreme Court hears a challenge to Papsa, Christie v. National College Athletic Association. New Jersey would like to permit sports gambling and argues that Papsa constitutes a federal “commandeering” of state resources in violation of the 10th Amendment. Matthew J. Murray Executive Editor Karen Miller Pensiero Managing Editor Jason Anders, Chief News Editor; Thorold Barker, Europe; Elena Cherney, Coverage Planning; Andrew Dowell, Asia; Neal Lipschutz, Standards; Meg Marco, Digital Content Strategy; Alex Martin, Writing; Mike Miller, Features & Weekend; Christopher Moran, Video; Shazna Nessa, Visuals; Rajiv Pant, Technology; Ann Podd, News Production; Matthew Rose, Enterprise; Michael Siconolfi, Investigations; Nikki Waller, Live Journalism; Stephen Wisnefski, Professional News; Carla Zanoni, Audience & Analytics 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 Mr. McConnell, a Kentucky Republican, is Senate majority leader. Papsa included a partial exception for New Jersey, which had legalized casinos in Atlantic City in a 1976 referendum. Congress gave the Garden State a year in which to change its law without falling afoul of Papsa, but the deadline passed with no action. Did Washington overstep its authority by ordering New Jersey to keep a prohibition on the books? Recently, however, with casinos in decline and the state treasury depleted, lawmakers in Trenton rethought their position. In 2012 they passed a law to exempt casinos and racetracks from the longstanding ban on sports gambling and set up a regulatory system for their operation. Five sports leagues, including Major League Baseball, promptly sued, claiming the new law violated Papsa. The Third U.S. Circuit Court of Appeals ruled against the state, holding that there was no commandeering because Papsa did not force the state to do anything other than refrain from authorizing sports gambling and setting up a legal structure to regulate it. The state tried again in 2014. But this time, instead of setting up a regulatory structure, it merely repealed the prohibition insofar as it applied to casinos and racetracks. The leagues sued again, and the Third Circuit again agreed. There was no unconstitutional commandeering, the judges wrote, because Papsa merely prohibited “authorization,” and in this case repeal amounted to the same thing. The Supreme Court had declined to review the earlier decision but accepted this time. New Jersey argues that under prior precedents the 10th Amendment bars Congress from forcing states to regulate or criminalize private activity, and that preventing a state from repealing an existing law is as much a commandeering as mandating that it pass a new one. The case’s outcome may have implications for other policy questions, such as marijuana legalization, gun control and “sanctuary cities.” A ruling in New Jersey’s favor could stimulate further state legislation in response to the massive level of nominally illegal sports betting. So much money is at stake that there are strong financial incentives for gambling interests and state governments to bring betting into the open—that is, to make it taxable. Even if New Jersey loses, Congress may take control of the gambling regulatory agenda. Legalization of sports betting, whether decided by Congress or by states, would pose countless policy issues. Will wagering be limited to casinos and betting parlors or allowed online? How is the revenue split among gambling enterprises, the leagues and state and federal law enforcement and tax collectors—and, for that matter, the players? How are those decisions made and reviewed and revised over time? Who will police this newly legal business to keep it honest? Will excessive regulation drive much of the betting back into the shadows? Will betting become legal only on professional games or college sports as well? May players bet? Even on games in which they participate? Against their own teams? How about owners? Game officials? League and team employees? If so, will there be disclosure requirements for insiders’ bets? It’s a good bet that some form of nationwide legal betting on sports is coming. The only question is when and how. Messrs. Slocombe and Vincent, retired lawyers, were partners in the firm Caplin & Drysdale. Mr. Vincent was commissioner of Major League Baseball, 1989-92. Anti-Israel Activists Subvert a Scholarly Group By Jesse M. Fried And Eugene Kontorovich E mails unearthed in a federal lawsuit appear to show that the American Studies Association’s decision to boycott Israel was orchestrated by a small cadre of academics who infiltrated the ASA’s leadership to demonize the Jewish state. The ASA website says the scholarly group “promotes the development and dissemination of interdisciplinary research on U.S. culture and history in a global context,” but in December 2013 it endorsed an academic boycott of Israel. The ASA’s leadership, called the National Council, backed the boycott resolution and put it to a membership vote. A third of the members voted, and two-thirds of those endorsed the resolution. PUBLISHED SINCE 1889 BY DOW JONES & COMPANY Rupert Murdoch Robert Thomson Executive Chairman, News Corp Chief Executive Officer, News Corp Gerard Baker Editor in Chief compliance costs and make it possible for job creators to reinvest more of their own money in their enterprises. It will help American businesses succeed in an increasingly competitive global market. In addition to these important provisions of the tax bill, the Senate also voted to deliver relief to lowand middle-income Americans by repealing ObamaCare’s individual mandate tax. For too long, families have suffered under this unpopular and unfair tax imposed under an unworkable law. The bill also includes a plan from Chairman Lisa Murkowski of the Energy and Natural Resources Committee that will further develop Alaska’s oil and gas potential in an environmentally responsible way. I proudly supported her proposal, which will strengthen national security, create The Supreme Court Takes Up Sports Betting no A year ago many Americans, including me, were uncomfortable with the president-elect’s tweets. “He’s going to have to learn how to be presidential,” we’d say. “At some point one of his aides will take him aside and tell him to stop tweeting. Somebody, take his phone away from him!” But here we are. Mr. Trump hasn’t stopped tweeting, and Twitter is promoting the man in the White House to users who don’t even follow him. Mr. Trump would probably call this “winning.” But the fact is, he’s driving traffic, so Twitter was willing to bet if they sent me that notification, I would open it. And I did. Mr. Trump isn’t alone in using Twitter to communicate in unorthodox ways. Last week the bio for @NYTOpinion announced that the New York Times editorial board “is temporarily taking over this acct. to urge the Senate to reject a tax bill that hurts the middle class and the nation’s fiscal health.” An editorial board usually makes such arguments in editorials—and @NYTOpinion’s tweets normally consist of links to editorials, along with signed columns and guest oped pieces. But not last Wednesday morning when they took to Twitter with their slogan #TheTaxBillHurts. Contrary to the Twitter bio, however, the Wednesday tweets weren’t directed at U.S. senators. Instead, they were an exercise in what is known as grass-roots lobbying. They exhorted voters to call their elected officials. “Contact @SenatorCollins,” one tweet read, giving an office phone number, “particularly if you live in Maine, and ask her to oppose the Senate tax bill because it would repeal Obamacare’s individual mandate, driving up the cost of health insurance.” Under the First Amendment a corporation has every right to engage in such politicking, as the U.S. Supreme Court recognized in Citizens United v. Federal Election Commission. But if it is unpresidential for Mr. Trump to use Twitter as a platform for announcing policy changes and pursuing personal rivalries, it is unjournalistic for the Times to tweet senators’ phone numbers. The era of Trump tweets has given Americans a unique window into the president’s head, although I still think they are unpresidential, especially when he sends them at 3 a.m. But as much as the Times editorialists loathe the president, last week they were imitating his social-media behavior—and thereby, as the Times might otherwise fret, helping to normalize it. Trump administration, everyone has agreed that middle-class families must be at the heart of our plan. They will benefit from tax rates that are lower, simpler and fairer. Our bill doubles the child tax credit, preserves the adoption tax credit for families that open their homes to children in need, and roughly doubles the standard deduction. Under the plan we passed, a median-income family of four could see a tax cut of nearly $2,200—money it could use for anything from helping a child through college to saving for retirement. Our plan will also help small businesses grow. That’s why it has the support of prominent advocates including the National Federation of Independent Business. Lower taxes will help small businesses create jobs, invest more, and spur economic growth. Simplifying the tax code will reduce good jobs, and provide new sources of energy, making the U.S. less dependent on foreign sources. Lowering taxes for families and small businesses is a central part of President Trump’s agenda, and we worked together toward this accomplishment for the American people. After a substantive and lengthy debate through an open process, we passed legislation that fulfills goals shared by congressional Republicans and the president. Democrats once claimed to support many of the foundational aspects of our legislation, like lowering taxes for the middle class and ending incentives for corporations to ship jobs overseas. But when it came time to vote, they chose partisanship over reform. I was disappointed to see that our colleagues on the other side of the aisle continue to oppose good ideas simply because they don’t like the current occupant of the White House. But as I’ve said before, we refuse to let partisan distractions stop us from delivering relief. I am proud that the Senate rose to take advantage of this historic opportunity to give a break to middle-class families through tax reform. Now we will work with members of the House to send a final product to Mr. Trump for his signature. Once we do, you will be able to keep more of your own hard-earned money. You and your neighbors will be free to pursue more opportunities, and employers across the country will have fewer reasons to move your job overseas. ly . A liberal newspaper’s editorial board sets aside journalism to engage in grass-roots lobbying. F or many Americans the legacy of the Obama economy is sluggish growth, stagnant paychecks and missed opportunities. A lost generation of workers still struggle with the consequences of the Great Recession and find it nearly impossible to get ahead. One of the biggest obstacles to their success has been our nation’s complex and outdated tax code. For too long it has dragged down our economy and taken too much from their paychecks. That’s why the Republican-led Senate passed a critical tax reform bill that will help make America an economic powerhouse again. We did that by putting more money into the pockets of hardworking families and small businesses, creating more jobs and economic opportunity, and taking steps to ensure that jobs and business stay in America. This was a once-in-ageneration opportunity that we could not let pass. The Senate Finance Committee, under the leadership of Chairman Orrin Hatch, produced legislation to rethink the tax code fundamentally. Mr. Hatch led his committee through years of work, dozens of hearings, and a full markup. It approved a good bill—one our constituents deserve and one I am proud the full Senate passed. I am grateful for Mr. Hatch’s consistent efforts to boost the economy, support workers and families, and accomplish our shared goals. Since Republicans in Congress began working on tax reform with the GETTY IMAGES ‘P resident Trump Tweeted for the first time in a while,” my iPhone alerts me. That depends on the meaning of “a while”: I swipe right to find that he tweeted 2 hours ago—and also 5 hours ago, 6 hours ago and 15 hours ago. Since I don’t follow @RealDonaldTrump, I wasn’t sure why Twitter would send me this notification. But it seems Mr. Trump’s communication method is successful. By Mitch McConnell co Fo m rp m e er rs ci on al a us l, e on By Cori O’Connor Tax Reform: What’s in It for You n- Guess Who’s Following Trump’s Twitter Lead William Lewis Chief Executive Officer and Publisher DOW JONES MANAGEMENT: Mark Musgrave, Chief People Officer; Edward Roussel, Innovation & Communications; Anna Sedgley, Chief Operating Officer; 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; Christina Van Tassell, Chief Financial Officer; Jonathan Wright, International DJ Media Group: Almar Latour, Publisher; Kenneth Breen, Commercial Professional Information Business: Christopher Lloyd, Head; Ingrid Verschuren, Deputy Head Last year four ASA members sued the organization, alleging the boycott violated its bylaws, the District of Columbia Nonprofit Corporation Act, and laws prohibiting nonprofits from exceeding their chartered purposes. Even putting legality aside, the boycott was out of step with the principle of academic freedom. The boycott generated an immediate rebuke from the executive council of the Association of American Universities. The ASA sought to have the suit thrown out, arguing that legal challenges violate the group’s First Amendment rights—a claim commonly made by Israel boycotters. A federal judge rejected that argument in March and allowed the case to proceed. A central figure in the boycott’s adoption was Jasbir Puar, an associate professor of women’s and gender studies at Rutgers University, according to emails cited in a public filing by the plaintiffs in the case. The emails appear to show that after joining the ASA’s nominating committee in 2010, Ms. Puar actively tried to stack the National Council with boycott backers. “Jasbir is nominating me and [University of New Mexico professor] Alex Lubin for the Council and she suggests populating it with as many supporters as possible,” reads a late 2012 email from Sunaina Maira, a professor of Asian American studies at the University of California, Davis. Ms. Puar appears to confirm the strategy in an email from the same time period. “I think we should prepare for the longer-term struggle by populating elected positions with as [many] supporters as possible,” she wrote. By the end of Ms. Puar’s term on the nominating committee in 2013, seven of the ASA’s 12 National Council members were public supporters of the anti-Israel Boycott, Divestment and Sanctions movement. “In my conversations with Jasbir it’s clear that the intent of her nominations was . . . to build momentum for BDS,” wrote Mr. Lubin in late 2012. The American Studies Association boycotted the Jewish state. It wasn’t by popular demand. The emails suggest that secrecy was part of the strategy. As nominees sought election to leadership in late 2012, many explicitly agreed to hide their anti-Israel agenda from the ASA’s voting members. “I feel it might be more strategic not to present ourselves as a pro-boycott slate,” Ms. Maira wrote. “I would definitely suggest not specifying BDS, but emphasizing support for academic freedom, etc,” wrote David Lloyd, a professor of English at the University of California, Riverside. But Nikhil Singh, a New York University professor of social and cultural analysis and history, cautioned Mr. Lloyd, Ms. Maira and others against subterfuge: “I think that not revealing something this important and intentional and then hoping later to use the American Studies Association national council as a vehicle to advance our cause will not work and may well backfire, because it will lack legitimacy.” The warning went unheeded. Only one BDS supporter running for a seat on the National Council mentioned his support for a boycott resolution in his candidate statement. He lost. Those, who hid their support won. More recent Israel-boycott campaigns at larger academic organizations like the Modern Language Association have failed. Emails cited in the court filings also show that ASA boycott supporters coordinated with outside anti-Israel activists, such as Omar Barghouti, a founder of the BDS movement. In the run-up to the vote, ASA leaders sent materials to Mr. Barghouti—who has no obvious previous connection to the group—and other anti-Israel activists before distributing them to the membership. Once in control of the National Council, supporters pushed for a boycott resolution and then manipulated the voting process. ASA leaders refused to give opponents an equal opportunity to make their case in meetings and on the ASA’s website. The National Council froze the membership rolls for about a month, until the end of the voting period, in an apparent attempt to block boycott opponents. These revelations have implications for other academic groups. They show that pressure on campus for a boycott of Israel is unlikely to reflect a vast popular movement. If the ASA case is representative, academic boycotts against Israel are driven by small groups of activists who pursue their pet cause at the expense of colleagues and the good of their organizations. Mr. Fried is a professor at Harvard Law School. Mr. Kontorovich is a professor at Northwestern University Pritzker School of Law. Both authors advised the plaintiffs’ counsel in the lawsuit against the American Studies Association. For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. co Fo m rp m e er rs ci on al a us l, e on I CAN READ 300,000 PAGES OF REGULATIONS WITHOUT BLINKING AN EYE. ly . THE WALL STREET JOURNAL. A18 | Monday, December 4, 2017 no n- With Watson, compliance ofˇcers can keep up with 20,000 new or modiˇed regulations a year and 200 revisions a day. Ongoing training by Promontory Financial Group, a marketleading risk management and regulatory compliance consulting ˇrm, allows Watson to help companies avoid costly ˇnes and penalties. Find out more at ibm.com/regtech This is compliance to 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. For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. TECHNOLOGY: VENTURE CAPITAL EXPRESSES RELIEF OVER TAX OVERHAUL B4 BUSINESS & FINANCE Last Week: S&P 2642.22 À 1.53% Monday, December 4, 2017 | B1 THE WALL STREET JOURNAL. © 2017 Dow Jones & Company. All Rights Reserved. S&P FIN À 5.16% S&P IT g 2.02% DJ TRANS À 5.89% WSJ $ IDX À 0.09% LIBOR 3M 1.495 NIKKEI 22819.03 À 1.19% See more at WSJMarkets.com Banks Create Cyber Doomsday System BY TELIS DEMOS U.S. banks have quietly launched a doomsday project they hope will prevent a run on the financial system should one of them suffer a debilitating cyberattack. The effort, which went live earlier this year and is dubbed Sheltered Harbor, includes banks and credit unions that have roughly 400 million U.S. accounts. The effort requires member firms to individually back up data so it can be used by other firms to serve customers of a disabled bank. While most people worry about their money being stolen in a hack, banks fear something more sinister: an attacker destroying, or even simply locking, data. Such moves could cripple a bank, leaving it unable to operate for hours, days or perhaps much longer. If people suddenly can’t access their accounts and money at one bank, customers at other banks could panic, thinking they might be vulnerable, too. This could prompt them to withdraw funds as a precaution and, in a worst-case scenario, spark a run on the wider banking system. “So far, most people think about cyber in terms of having a credit card stolen,” said Stuart Madnick, a professor of in- formation technologies at the MIT Sloan School of Management. “What you’re talking about now is a nuclear attack: if you can’t get to the ATM and get it to work.” While data was stolen rather than destroyed in the Equifax Inc. hack disclosed in September, that breach was a reminder of how vulnerable consumers are. The Equifax hack exposed vital personal information of potentially 145.5 million Americans. Especially troubling for banks is the possibility that the government could have difficulty tamping down a hack-induced panic. Agencies like the Federal Reserve and Federal Deposit Insurance Corp. have long had mechanisms meant to restore confidence in the banking and financial system. These include the Fed’s discount window, which allows banks to borrow Chicago Uses a Twist to Tap Bond Market The cash-strapped city makes a tempting offer to debt investors, but with an important caveat Cheaper Borrowing 1. Chicago creates corporate entity 2. Corporation issues new bonds CO RP OR AT ION CHICAGO Rating Scale Noninvestment Investment Grade Grade Moody's Investors Service Chicago Ba1 Sales Tax Securitization Corp. n/a S&P Global Ratings IL 4. Illinois sends 3. Chicago residents pay sales taxes to Illinois BBB+ AA 5. Corporate entity makes bond payments to bondholders sales-tax money to corporate entity Fitch Ratings BBBAAA $8 billion Chicago's general obligation debt burden has swelled since 2006. 6 4 Kroll Bond Rating Agency 2 BBB+ AAA 0 2006 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 Sources: bond sale documents (explanation); ratings companies (ratings); Chicago ﬁnancial documents (debt) police and emergency-services workers. The deal tests whether years of near-zero interest rates will send yield-starved KEYWORDS | By Christopher Mims investors into complex bond structures. And Chicago— with a school system that has teetered near bankruptcy and expenses greater than its revenues—could still face a funding gap down the line even if it manages to lower its borrowing costs, analysts say. n- no NEVERTHINK Safe Spaces Crop Up in a Hostile Internet America is finally waking up to the fact that the internet is an increasingly hostile and unsafe place to do business, hang out or share with friends. The epicenter of the problem tends to be at social media networks—specifically Twitter, YouTube and Facebook—where Russian bots, fake news, creepy ad tracking, political polarization, sketchy videos and oh so many internet trolls can be found. While the ad revenue is still pouring in, it’s no wonder people are limiting what they share and how they interact online. Evan Spiegel, chief execu- Chicago is issuing debt under a new entity called the Sales Tax Securitization Corp., which has received sharply different credit ratings from the city’s other debt. Chicago could lower borrowing costs with the creation of a corporation, which will issue new bonds. Bond investors are assured they will have ﬁrst dibs on some city sales taxes. But the deal also will test their appetite for complex bond structures. Neverthink has ‘channels’ of video content scoured from the internet. tive of Snap Inc., creator of Snapchat, articulated it well— if self-servingly—in a recent post: “The combination of social and media has yielded in- credible business results, but has ultimately undermined our relationships with our friends and our relationships with the media.” Mr. Spiegel unveiled a redesign of Snapchat that separates professional content from personal sharing. A new breed of apps and services takes this to heart. Having learned from the tech giants’ mistakes, they are emerging as islands in the internet storm—I call them “safe spaces.” They filter content without asking for personal data and without lulling us into the cycle of mindless engagement that mostly rewards advertisers. Smaller in scope, they are teams of people assisted by algorithms—not the other way around. Here are a few that exemplify this trend: App developer Ken Yarmosh is also the father of four children under the age of 6. Please see MIMS page B4 THE WALL STREET JOURNAL. For the $575 million in bonds being priced this week, Jefferies LLC is the underwriter, while Goldman Please see CHICAGO page B2 INSIDE DEAL TALKS ON FOX ASSETS PICK UP PACE MEDIA, B3 U.S. Firms Tout China Despite Web Curbs BY LIZA LIN WUZHEN, China—Beijing’s tightening grip on the internet has forced U.S. companies to recalibrate their efforts here, but there was little outward sign of friction as American executives on Sunday touted their commitment to the crucial Chinese market during the government’s annual cyberspace conference. Apple Inc. Chief Executive Tim Cook and Cisco Systems Inc. CEO Chuck Robbins were among those echoing the conference theme: “Developing digital economy for openness and shared benefits.” That theme “is a vision we at Apple share,” Mr. Cook said. “We are proud to have worked alongside many of our partners in China to help build a community to join a common future in cyberspace.” That common future has caveats. Despite the assertion of openness, China’s internet is walled off from the rest of the world, with Alphabet Inc.’s Google search engine and Facebook Inc.’s social network among the platforms blocked. A new cyberspace law tightened restrictions, leading Apple to remove programs from its Chinese App Store that enabled people to evade the internet firewall. Cisco, meanwhile, is one of many U.S. companies that has found it expedient to form a partnership with a Chinese company to do business here, a situation overall that some believe amounts to unfair trade practices. Mr. Robbins also sounded a cooperative note, touting the billions of dollars in local procurement Cisco has made in China. “In order to build this common future, we must also embark on a new area of global cooperation and new partnerships,” Mr. Robbins said. Messrs. Cook and Robbins both spoke to large crowds. Not Please see CHINA page B2 ly . Chicago is running a multimillion-dollar deficit and faces a pension-funding crisis that dwarfs many others around the country. Yet the nation’s third-largest city is on the verge of selling as much as $3 billion in bonds at a triple-A rating, the latest twist in the tale of cash-strapped U.S. municipalities adopting Wall Street financial engineering in their struggle to raise money in the market. Echoing methods adopted by Puerto Rico and New York, Chicago has created a new company to sell debt, offering a tempting pledge to investors: a dedicated first claim to the city’s sales-tax revenue. In theory, that should make the debt as secure as U.S. Treasury bonds. But there is a catch: Analysts and investors say in the scenario of a bankruptcy, it is difficult to predict whether owners of the new bonds would get paid back ahead of other creditors, pensioners or even co Fo m rp m e er rs ci on al a us l, e on BY GUNJAN BANERJI money in times of trouble, and the FDIC’s deposit insurance guarantees, which ensure many bank customers won’t be left in the lurch by a failure. These mechanisms, however, were designed to counter bank failures typically induced by questions about a firm’s solvency or liquidity. They don’t address the fear that a bank’s ATMs might one day stop working bePlease see BANKS page B10 SPY LIQUIDITY RESILIENCY PERFORMANCE For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. B2 | Monday, December 4, 2017 INDEX TO BUSINESSES G-H-I General Motors...........B5 Goldman Sachs....B1,B10 Grantham Mayo..........R4 Horizons DAX ETF......R6 Hulu.............................B3 J-L-M JPMorgan Chase.......B10 LendEDU......................R9 Massmart Holdings..B10 Matroid........................B4 McKinsey.....................A2 Menlo Ventures..........B4 Morgan Stanley........B10 N-P Nakumatt Holdings..B10 Newmont Mining........B9 Nissan Motor..............B5 Paddy Power Betfair..B2 Pantheon.....................R4 Partners Group ........... R4 PayPal..........................B3 Postmates.................R10 R-S Research Affiliates.....R4 Rio Tinto ..................... B9 SAIC Motor.................B5 Shoprite Holdings.....B10 Sky...............................B3 Snap.............................B1 Sony.............................B3 SPDR Euro Stoxx 50 ETF............................R6 SPDR Portfolio World ex-US ETF.................R6 SPDR SSGA Gender Diversity Index ETFR11 SPDR Stoxx Europe 50 ETF............................R6 T-U-V Tencent Holdings........B2 Thor Industries.........B12 3M ............................. B11 Time Warner...............B3 Trident Capital............B4 T. Rowe Price..............R9 T. Rowe Price Capital Appreciation Fund....R1 21st Century Fox........B3 Uber Technologies.A3,B4 UnitedHealth ..... B11,B12 U.S. Postal Serv....A1,B3 U.S. Steel....................A3 Vanguard FTSE Eur .... R6 Verizon........................B3 Visa..............................B3 Volkswagen.................B5 Volvo Cars...................B5 W-X-Z Walgreens Boots......B12 Walt Disney................B3 Waymo........................B4 William Hill.................B2 Winnebago................B12 Xtrackers Eurozone .... R6 Xtrackers MSCI Europe Hedged Equity ETF .. R6 Xtrackers MSCI Eurozone Hedged Equity ETF................R6 Zotye Automobile.......B5 INDEX TO PEOPLE H-J Holcomb, Ann ........... R12 Jacobs, Ric..................B4 Jerome Powell..........B10 Jones, Jeff .................. B4 K-L-M E-F-G Kadnar, Matt...............R4 Kelly, David.................R1 Kelly, Timothy.............B9 Khosrowshahi, Dara ... B4 Levin, Sander..............A2 Litfin, Matt.................R5 Locke, Mark.................B2 Lu, Yan ...................... R12 Madnick, Stuart..........B1 Ma, Jack......................B2 Ma, Pony.....................B2 Masturzo, Jim.............R4 Mat Henley.................B4 McCarthy, Jim.............B3 McInerney, Ryan.........B3 McQuaid, Chuck..........R5 Mohn, Robert..............R5 Montier, James...........R4 Mulvaney, Mick...........B9 Murdoch, Rupert.........B3 English, Leandra.........B9 Ferrise, Peter..............R4 Fleet, Peter.................B5 Noack, Arne ................ R6 Paolella, Garrett.........R6 D Dixon, Don...................B4 Donald Trump........A3,A4 Dunne, Michael...........B5 du Plessis, Jan............B9 N-P-R CHICAGO S-T Saleh, Ali .................... A7 Scherbina, Anna ....... R11 Schlusche, Bernd......R11 Schmidt, Craig ............ B5 Sen, Maya.................R11 Shiller, Robert...........R14 Shrier, Zach...............R10 Slok, Torsten...............A9 Smith, Malcolm ........ R12 Smith, Vaughan..........B2 Sotiroff, Daniel...........R6 Stalter, Kate...............R2 Taub, Robert ............... B3 Thompson, Simon.......B9 Travis, Mark................R2 Treussard, Jonathan...R4 A U.S. Supreme Court case this week could dramatically reshape the landscape of American sports betting, with significant ramifications for casino operators and European betting shops, as well as professional sports leagues and college athletics. A 25-year-old federal law restricts sports betting to Nevada and three other states, but a challenge THE WEEK to that ban by AHEAD the state of New Jersey has set the stage for the Supreme Court to decide whether the law is constitutional. If the justices decide the federal ban is an unlawful intrusion on states’ rights, such a ruling could open up more of the country to sports wagering. European sports books such as William Hill PLC and Paddy Power Betfair PLC, which already have footholds in the U.S., could stand to gain from a potential expansion. Analysts estimate an expanded legal marketplace for the sports-betting industry could generate between $7 billion and $15 billion annually in the U.S. That is up from a current $270 million in legal betting and an estimated $3 billion generated in unregulated black markets, including through unlicensed offshore operations in the Caribbean and elsewhere that take wagers online. “The illegal market has worked well for the customer,” said Geoff Freeman, president and chief executive of the American Gaming Association, which argues that more widely regulated sports betting would represent a new revenue stream for states. “They can access these sites just as easy as they can get an Uber,” he addded. In addition to generating new business for casinos in the U.S., where gambling revenue growth has slowed in recent years, supporters say A visitor to Monmouth Park racetrack in New Jersey watched a simulcast horse race last month. Leagues Get Help In Tracking Wagers U.S. sports leagues traditionally have distanced themselves from gambling because of concerns about the integrity of games. Gambling-industry proponents, however, say the advent of technology for spotting questionable activity in real time makes today’s landscape completely different than it was 25 years ago, when Congress outlawed most sports gambling. Several professional leagues have been working with companies that monitor betting patterns to detect ir- regularities. Genius Sports Group Ltd., a sports-betting monitor based in London and Los Angeles, has been working with Major League Baseball and the PGA Tour to analyze data on bets. Sportradar, a Swiss betting monitor that has operations in the U.S., does similar tracking for the National Basketball Association, National Hockey League and Major League Soccer. A regulated market makes it much easier to track questionable activity, these companies say. “There has got to be transparency about what’s going on in the market,” said Mark Locke, chief executive of Genius Sports. —Chris Kirkham sports betting could provide a boost for professional leagues in the form of licensing fees for game data and enhanced viewership among fans. Sports leagues, however, historically have been the primary opponents of sports gambling in the U.S. Professional leagues, along with the National Collegiate Athletic Association, lobbied for the 1992 ban at the center of the Supreme Court case after a series of scandals involving college athletes who tilted the outcome of games in exchange for money. The NCAA, along with Major League Baseball, the National Hockey League, the National Football League and the National Basketball Association, also sued to stop New Jersey from going forward with state-sanctioned sports betting, and they will argue against the state when the high court hears oral arguments on Monday. The case is a classic showdown between states and the federal government. In court filings, the leagues say there is nothing unconstitutional about Congress preventing states from sanctioning sports betting. The Trump administration also will argue in defense of the federal law, which is known as the Professional and Amateur Sports Protection Act. New Jersey argues that Congress improperly forced the states to carry out federal policy that prohibits sports wagering. By agreeing to hear the case, the Supreme Court signaled that it was interested in considering New Jersey’s arguments. A group of 18 state attorneys general and three governors filed a brief supporting New Jersey. The states said they wouldn’t all legalize sports betting if permitted, but that they were concerned about federal intrusions on state sovereignty. The Supreme Court’s decision is expected by June. New Jersey, New York, Mississippi, Pennsylvania and Connecticut already have passed legislation to position themselves for sports betting should the Supreme Court rule in favor of states, and about a half-dozen other states have considered similar measures. Under current law, betting on individual sports contests is legal only in Nevada; Oregon, Montana and Delaware offer more-limited wagering. W-Y-Z Waldinger, James.......R4 Wantrobski, Dan.........R5 Yadava, Tushar ........... R6 Yu, Frank...................R11 Zadeh, Reza................B4 The new debt, the first portion of which has maturities up to 26 years, could save the city more than $90 million in borrowing costs next year, according to the city. Chicago’s leaders emphasize in bond filings that the new company, dubbed the Sales Tax Securitization Corp., is separate from the city. Illinois currently doesn’t allow its municipalities to file for bankruptcy, though lawmakers introduced legislation in recent years that cleared the way for Chicago or its school system to file. Chicago declined to comment on the debt deal. Robert Christmas, a partner at law firm Nixon Peabody, which is advising the city on the sale, said investors shouldn’t compare Puerto Rico’s sales-tax bonds with Chicago’s offering, in part because the city has stronger protections for investors than the island territory had. Chicago’s deal also sheds light on how widely diverging views can emerge from credit-ratings firms in the municipal bond market. Moody’s Investors Service has graded the city’s debt as junk, but S&P Global Ratings, Fitch Ratings and Kroll Bond Rating Agency have given Chicago investment-grade ratings. For this latest issuance, Fitch and Kroll gave Chicago’s corporate entity an additional boost: a AAA rating, the highest possible grade and equivalent to U.S. Treasurys. S&P scored it two grades lower, although the firm still rates it five notches higher than other Chicago bonds. S&P also said in November it could change how it evaluates debt like Chicago’s latest issuance, meaning investors could end up with bonds that are later downgraded by the firm. Thornburg’s Mr. Ryon said Chicago’s new entity doesn’t deserve separate credit ratings from the city’s other debt. “It’s a bit of smoke and mirrors,” he said. no Continued from the prior page Sachs Group Inc. will lead the next batch, according to city presentations. Carole Brown, chief financial officer of Chicago and a former banker at Barclays PLC, told investors that she devised the plan to create the corporate entity to issue the bonds, according to a person who attended an investor luncheon for the sale. Through the sale, Chicago is tapping a tool New York’s leaders developed in the 1970s as the city faced the specter of a bankruptcy. Back then, Felix Rohatyn, a famed mergers-and-acquisition banker at Lazard, led an entity called the Municipal Assistance Corp., which allowed New York to borrow money even after major banks had choked off financing. Puerto Rico sold more than $15 billion in sales-tax bonds over the past decade. Rating firms considered the debt to be the island’s safest offering, and it was snapped up by investors. Now those bondholders are fighting in court against creditors owning general-obligation bonds, who say their claim on the island’s full faith and credit should include sales taxes also. Known by the acronym Cofina, those bonds recently traded at pennies on the dollar. “Sometimes greed overtakes fear” in the market, said Chris Ryon, a portfolio manager at Thornburg Investment Management, which oversees more than $10 billion in municipal bonds. “It’s a function of investors’ desire for income.” Earlier this year, Chicago issued more than $1 billion in bonds, with part of the deal yielding 6%, far higher than most tax-exempt municipal credits. The coming deals would allow Chicago to refinance some of its over $9 billion in debt with lower interest costs, city officials have said. Park, Edward...............A9 Phil Venables............B10 Prangley, Karin ......... R10 Rai, Prithvi..................B4 Ray, Sugata...............R12 Reed, Adam.................R1 Rhoads, Russell..........R5 Risman, Barbara.......R11 Rosenthal, James.....B10 Rupp, Gretchen...........R5 Russell, Michael.........A9 Ryon, Chris..................B2 BY CHRIS KIRKHAM AND BRENT KENDALL co Fo m rp m e er rs ci on al a us l, e on Fuller, Richard...........B10 Ganesan, Venky..........B4 Gaudio, Paul................R2 Giroux, David .............. R1 Grantham, Jeremy......R4 n- A-B-C Ackerman, Bob............B4 Agarwal, Vikas..........R12 Aguilar, Omar..............R2 Albert, Kevin...............R4 Alboher, Marci ............ R2 Andersen, Peter..........R2 Andreoni, James.......R10 Ashok, Pooja...............B4 Banister, Cyan...........R10 Barber, Brad..............R11 Bartolini, Matthew.....R6 Blake, Lynn ............... R11 Blue, Allen .................. B2 Bracken, Paul............B10 Brown, Carole ............. B2 Chintawongvanich, Pravit.........................R5 Chisholm, Kirk ............ R4 Choate, Natalie...........R2 Christmas, Robert ...... B2 Collamer, Nancy..........R2 Corbishley, Nicholas.B10 Cordray, Richard..........B9 Cronqvist, Henrik......R11 Sports Gambling in Focus JULIO CORTEZ/ASSOCIATED PRESS D-E-F Deutsche Post ............ A8 Deutsche Post DHL....A8 Dongfeng Motor ......... B5 Equifax...................A3,B1 Facebook......................B1 Ford Motor..................B5 Founders Fund .......... R10 Humana.....................B12 Intrepid Capital Fund..R2 iShares Core MSCI Europe ETF ............... R6 iShares MSCI Euro ..... R6 iShares MSCI Ger.......R6 CHINA Continued from the prior page so Google Chief Executive Sundar Pichai, who faced hundreds of empty seats during his panel discussion. Google has had limited operations in the country since it pulled out in 2010 amid a cyberattack it traced to Chinese hackers and complaints that its content was censored. As U.S. technology executives gather in Wuzhen, U.S. President Donald Trump’s trade team is considering actions against China for suspected trade violations, including alleged pressure by China on U.S. tech companies to turn over their intellectual property for access to the Chinese market. Now into its fourth year, the Wuzhen World Internet Conference is organized by the Cyberspace Administration of China, the powerful internet bureau whose job includes censorship of content and blocking access to unapproved websites. Since the conference began in 2014, China has used the three-day event to promote its view of a policed internet. This year, China announced an initiative that adds cyberspace to the transportation-infrastructure campaign it is promoting to make China the center of a new international trade hub. The initiative seeks to expand cooperation in 15 areas, including e-commerce, regulation and international standard-setting, with countries such as Thailand, Turkey and the United Arab Emirates. Wang Huning, the newly named member of China’s Politburo Standing Committee, gave his first speech since his appointment in October and called on countries to work together to promote compatible web policies and to cooperate on cybersecurity. A former politics professor, Mr. Wang now has the responsibility to handle party affairs including ideology and propaganda. Other executives participating Sunday included Alibaba Group Holding Ltd. Executive Chairman Jack Ma and Tencent Holdings Ltd. CEO Pony Ma. Facebook Vice President Vaughan Smith, LinkedIn Corp. Vice President Allen Blue and Microsoft Executive Vice President Harry Shum are among those scheduled to speak at sessions Monday and Tuesday. How much is your broker charging you? US Margin Loan Rates Comparison Commission Rates Comparison $300K Equity Trades 2.32% 1 $2.34 2 Fidelity 6.82% $4.95 Schwab 6.82% $4.95 TD Ameritrade 7.50% $6.95 Interactive Brokers Each ﬁrm’s information reﬂects the standard online trades pricing obtained from the respective ﬁrm’s websites as of 11/3/17. Pricing and offers subject to change without notice. To see the full comparison visit: ibkr.com/compare-us One World, One Account Interactive Brokers Rated Low Cost by Barron’s 16 years in a row* Trading on margin is only for sophisticated investors with high risk tolerance. You may lose more than your initial investment. AGENCE FRANCE-PRESSE/GETTY IMAGES A-B-C BUSINESS & FINANCE ly . 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. Aetna...................A1,B12 Alibaba Group.............B2 Allegis Cyber...............B4 Alphabet ................ B1,B4 Amazon.com ............. B12 Anglo American..........B9 AngloGold Ashanti ..... B9 Apple.................B1,B3,R5 AT&T............................B3 Bank of America.......B10 BlackRock....................R4 Boeing ....................... B11 BTS Group Holdings...B9 Camping World.........B12 Cigna..........................B12 Cisco Systems.............B1 Citigroup....................B10 Columbia Acorn Fund.R5 Columbia Wanger.......R5 Comcast.......................B3 CVS Health..........A1,B12 THE WALL STREET JOURNAL. * *** Apple CEO Tim Cook addressed Sunday’s opening ceremony. Member - NYSE, FINRA, SIPC – Supporting documentation for any claims and statistical information will be provided upon request. Services vary by ﬁrm. *Low Cost Rated by Barron’s 16 Years Straight - Low cost broker 2002 through 2017 according to Barron’s online broker reviews. For more information see, ibkr.com/info - Barron’s is a registered trademark of Dow Jones & Co. Inc.  IB calculates the interest charged on margin loans using the applicable rates for each interest rate tier listed on its website. For additional information on margin loan rates, see ibkr.com/interest.  The IB commission rates shown are the average of the client commissions for trades executed in Oct 2017 and are subject to minimums and maximums as shown on the IB website. Some of the ﬁrms listed may have additional fees and some ﬁrms may reduce or waive commissions or fees, depending on account activity or total account value. Under some commission plans, overnight carrying fees may apply. 11-IB17 1135 For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. Monday, December 4, 2017 | B3 THE WALL STREET JOURNAL. BUSINESS NEWS Visa Cites Behavior In Firing Executive Talks for Fox Assets Gain Speed BY ANNAMARIA ANDRIOTIS BY DANA MATTIOLI AND AMOL SHARMA Mr. McCarthy was with Visa for about 18 years. He had become an important face of the company within the technology community. The executive reported to Mr. McInerney, who reports to Visa Chief Executive Alfred Kelly. Both Messrs. McInerney and Kelly were involved in the decision to fire Mr. McCarthy, according to a person familiar with the matter. The behavior became known to Mr. McInerney in recent days, the person added. Mr. McCarthy’s firing was reported earlier by technology website Recode. Visa is the largest card network in the U.S. through which debit and credit-card payments run. Mr. McCarthy is being succeeded on an interim basis by Jack Forestell, Visa’s global head of merchant sales and solutions, the company said. Talks center on a range of operations that include movie, TV and cable. Michael Fassbender as an X-Men superhero, a Fox franchise. Once news of those initial talks surfaced, other potential acquirers began emerging. Comcast, Sony Corp.’s entertainment unit, and Verizon Communications Inc., are among firms that have expressed various levels of interest, the people familiar with the situation say. The extent of discussions with Sony and Verizon is unclear. A top Verizon executive last week played down the need for the company to do a big content acquisition. Disney and Comcast are in active talks with 21st Century Fox. It is possible the talks could fall through and a deal won’t be reached. 21st Century Fox and Wall Street Journal-parent News Corp share common ownership. The assets in play would give a buyer exposure to growth in international markets as the U.S. pay-TV industry reaches maturity. With the Twentieth Century Fox studio, they would also get a premier Hollywood content factory and strengthen their position as media consumption shifts to digital platforms. Also on the table in some of the discussions is Fox’s 30% stake in streaming service Hulu. Disney and Comcast each also own 30% of the company, so they could consolidate control by buying out Fox’s stake. Fox’s regional sports networks could also be sold off, the people familiar with the situation say. As the talks continue, 21st Century Fox is continuing to pursue a buyout of the portion of British pay-TV giant Sky it doesn’t already own. The Fox deal talks are happening as another big media deal, AT&T Inc.’s proposed takeover of Time Warner Inc., is headed for court. The Justice Department has sued to block the transaction, arguing it will reduce competition and harm consumers. Some industry observers thought that any major media deal-making would be on hold as companies wait to see the result of that litigation. ly . Jim McCarthy handled strategic partnerships with companies including PayPal and Apple. Walt Disney Co. has re-engaged in discussions with 21st Century Fox to purchase some of the media giant’s assets, and Comcast Corp. remains in the mix, with deal talks gaining momentum, according to people familiar with the situation. The talks center on the Twentieth Century Fox movie and TV studio, international assets such as Fox’s 39% holding in U.K. satellite TV provider Sky PLC and India’s Star TV, along with some U.S. cable networks. Fox News, the Fox broadcast network and sports network FS1 aren’t expected to be sold in any transaction, the people said. Rupert Murdoch and his family, who hold 39% of 21st Century Fox’s voting shares, expect to make a decision by year’s end on whether to pursue a transaction, the people said. Disney first reached out to 21st Century Fox about a possible deal several weeks ago, but the talks cooled after the two sides couldn’t agree on price, among other issues, people familiar with the matter have said. co Fo m rp m e er rs ci on al a us l, e on Visa Inc. fired one of its most high-profile executives on Friday, citing behavior that violated company policy. Jim McCarthy, who handled innovation and strategic partnerships for Visa with companies including PayPal Holdings Inc. and Apple Inc., was fired over unspecified behavior. The decision was announced in a memo that was sent to company staff by Ryan McInerney, Visa’s president. Mr. McCarthy couldn’t be reached for comment. TWENTIETH CENTURY FOX Disney re-engages in discussions for some media holdings; Comcast still a factor Postal Regulators Move to Speed Up Price Increases BY PAUL ZIOBRO The federal agency that oversees the U.S. Postal Service gave permission for the service to speed up its pricing increases over the next five years, an effort to shore up its finances as the amount of mail it delivers has plunged. The proposal by the Postal Regulatory Commission on Friday would allow the postal service to raise rates on “market-dominant” products, which include first-class mail, by up to 2 percentage points above inflation each of those years. Some other categories like periodicals and catalogs would see rates increase by steeper amounts. The USPS also could raise rates by another percentage point annually based on meeting certain efficiency and service goals. Federal law currently limits the USPS from raising rates by more than the rate of inflation on market-dominant products, which generated more than 70% of the service’s $69.6 billion in revenue in the 2017 fiscal year ended Sept. 30. The minuscule increases—the price of a first-class stamp is rising a penny to 50 cents next year—haven’t been able to offset steep declines in first-class mail volume as communications continue to shift online. The service delivered 58.75 billion pieces of first-class mail last fiscal year, down from 95.9 billion in 2007. “While the Postal Service has generally achieved shortterm financial stability, both medium-term and long-term financial stability measures have not been achieved,” the commission’s chairman, Robert Taub, said. The commission’s proposal enters a 90-day comment period before being finalized. The law limiting rate increases passed in 2006 but allowed for a review of its effectiveness after 10 years. no n- IF THERE ARE THREE TRADING THINGS YOU WANT, THEY’RE THESE THREE THINGS. POWER. VALUE. SERVICE. Want more information about Power E*TRADE? • Advanced trading platform with a seamless experience between desktop and tablet • $4.95 equity trades, $0.50 options contracts, $1.50 futures contracts1 • Licensed specialists and former ﬂoor traders who speak to you on your level Futures and options transactions are intended for sophisticated investors and are complex, carry a high degree of risk, and are not suitable for all investors. For more information, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure Statement for Futures and Options by visiting etrade.com/optionsdisclosure or calling 1-800-387-2331 prior to applying for an account. 1. Equities are not the only types of securities available. 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All rights reserved. For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. B4 | Monday, December 4, 2017 TECHNOLOGY WSJ.com/Tech Venture Capital Breathes Easier on Taxes MIMS Continued from page B1 They inspired him to build Jellies, a children’s video app that avoids many problems that the dominant service, YouTube Kids, suffers from. Costing $5 a month, Jellies has no ads. All the videos, which stream from other sites such as YouTube, are screened by two different editors. Algorithms help them find content, but what appears in each of the app’s age-graded channels is ultimately decided by a human, Mr. Yarmosh says. Jellies has only about 3,000 videos— far from the essentially infinite depth of YouTube—but that’s not the point, he says. Children should only consume so much content, after all. S oon after the launch of Jellies in October, sketchiness within YouTube Kids came to light—from insipid unboxing videos that feel like barely masked toy ads, to cartoons that recast Mickey, Peppa Pig and other beloved characters in disturbing ways. What many parents had assumed was a completely safe space got bungled by Big Tech. YouTube has said only a tiny fraction of videos have been removed from the site for being inappropriate, but it’s clear that screening content on the site through automatic filters, user feedback and reviews simply hasn’t been enough. A millennial-focused site, Neverthink has “channels” of video content scoured daily from all over the internet and streamed directly from their sources (typically YouTube) by a team of 15 editors. You can’t skip videos. It’s exactly like cable TV, except the content is very internet—short clips, fast cuts, lots of first-person narrative. Younger children who never knew television find it revelatory, says Aviv Junno, Neverthink’s co-founder. “For them, not having this choice of what to click on next means so much less stress,” he says. “To have all that choice means I’ll always keep looking, and that’s why people get hooked on scrolling endlessly and swiping.” Like Jellies, Finland-based Neverthink uses a number of tools and algorithms to help surface content for its human editors, but Mr. Junno contrasts his company’s approach ADVERTISEMENT Legal Notices To advertise: 800-366-3975 or WSJ.com/classiﬁeds Christmas. “Chairman [Kevin] Brady actually came out here and listened,” said Don Dixon, managing director at Trident Capital, of the House Ways and Means Committee chairman’s commitment to talk with Silicon Valley. Codified treatment of carried interest as long-term capital gains requiring a threeyear holding period, versus a one-year holding time, is seen by many venture-capital investors as a reasonable compromise, particularly amid concerns over removing the deduction altogether. “We want to encourage the long-term investing that leads to disruptive innovation,” said Bob Ackerman, managing director of venture firm Allegis Cyber, via email. Long-term holding requirements for the deduction might not be ideal in all situations, as some startups reach liquidity in a shorter period. “About 20% of deals get sold in less than three years,” Mr. Dixon said. Carried interest wasn’t the only thing at stake for Silicon Valley, as startup employees faced a potential tax on unvested stock options. Now All Jellies videos are screened by two different editors. Algorithms help them in finding content. with that of the internet giants. “Content that goes viral on Facebook is not necessarily what you need to know or is interesting or valuable to you, but it is the most engaging, so it keeps you on the platform,” Mr. Junno says. It’s the same on YouTube, he adds, where the algorithms may have priorities other than giving you the “best” content—like what you’re most likely to click on, or what will be appropriate for advertisers. friends about.” A spokesman for YouTube parent Google, a unit of Alphabet Inc., said search results and recommendations aren’t determined by whether a video is monetized or not. Human curation is how Otto Radio, launched in 2014, assures that the podcasts it surfaces are the highest quality, says CEO Stanley Yuan. The app offers a mix of breaking news, entertainment and information. Mr. Yuan says that while algorithms help Otto classify content, they can’t yet A Facebook spokesman said, “Whether posts on Facebook are authentic, informative, entertaining, and ultimately meaningful are the principles that guide how News Feed ranking works.” He continued, “It’s a mistake to ignore the fact that the overwhelming majority of stories people share on News Feed every day aren’t meant to go viral—but are meaningful stories people connect with their NOTICE OF REDEMPTION BY PS BUSINESS PARKS, INC. OF ALL OUTSTANDING DEPOSITARY SHARES REPRESENTING INTERESTS IN ITS 6.00% CUMULATIVE PREFERRED STOCK, SERIES T CLASS ACTIONS # !$ ! %&'(&)('&&*&+&&)'', '- # . $!$ / # ! %&'(&)('&&*&+0%)'''-# ! 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(“PS Business Parks”) and Section 2.8 of the Deposit Agreement dated as of May 3, 2012 (the “Deposit Agreement”) by and among PS Business Parks, American Stock Transfer & Trust Company, LLC, as Depositary (the “Preferred Stock Depositary”) and the holders from time to time of the depositary receipts issued by the Preferred Stock Depositary under the Deposit Agreement, PS Business Parks has called for redemption, and will redeem, on January 3, 2018 (the “Redemption Date”), all of the shares of 6.00% Cumulative Preferred Stock, Series T (“Preferred Stock”), and, in accordance with the Deposit Agreement, the Preferred Stock Depositary will redeem, on the Redemption Date, all of the outstanding depositary shares (the “Depositary Shares”) representing interests in the Preferred Stock. On the Redemption Date, (1) PS Business Parks will deliver, or cause to be delivered, out of funds legally available therefor, to the Preferred Stock Depositary $130,000,000 plus a sum equal to all accrued and unpaid dividends in redemption of all of the Preferred Stock, and (2) the Preferred Stock Depositary will pay to the holders of record of the Depositary Shares, in exchange for each Depositary Share, $25.00 plus a sum equal to all accrued and unpaid dividends from January 1, 2018 through the Redemption Date (the “Redemption Price”). Depositary Receipts representing the Depositary Shares, accompanied by proper instruments of assignment and transfer if payment is to be made other than to the registered holder(s), shall be surrendered for redemption at the following place: By Mail, Overnight Courier or By Hand American Stock Transfer & Trust Company, LLC 6201 15th Avenue Brooklyn, NY 11219 Delivery of the foregoing instruments and documents to any other address shall not constitute valid delivery. On or before the Redemption Date, PS Business Parks will deposit with American Stock Transfer & Trust Company, LLC the Redemption Price, in trust for the pro rata benefit of the holders of the Depositary Shares called for redemption. On and after the Redemption Date, all Depositary Shares and shares of Preferred Stock shall be deemed no longer to be outstanding; dividends thereon shall cease to accrue; and all rights with respect to the Depositary Shares and shares of Preferred Stock called for redemption shall forthwith at the close of business on the Redemption Date cease and terminate, except only the right of the holders thereof to receive the Redemption Price of the shares so redeemed, but without interest, upon surrender of their Depositary Receipts. Any moneys deposited by PS Business Parks and unclaimed at the end of five years from the Redemption Date shall, to the extent permitted by law, be repaid to PS Business Parks, after which repayment the holders of the Depositary Shares called for redemption shall look only to PS Business Parks for the payment thereof. December 4, 2017 PS BUSINESS PARKS, INC. ! 98 !3 ! !66! ! !1 8H 7 3 $ 8 ; $$ 7 ! 3 8 ! B 7 ; ! 6!E$ ! ! 9! ) (&): ! !$ 7 ;6 !$ ! ! 66 ! 1 $ 8/ 6! 7$! !< 6 ! 3 $ !< ; ! 7 6 ! < ! 8 7 ! 7 !$3 E $ 83 6 / / $ / 8 18 6!6! ! ! 98 8 / 3 !$ <! $ 3 B ; 7 ! ;$ ! ! 8 7 ! 7 !$3 E !1$ 83 6! 8 7 ! / !< B$ ; 7 I B 1!$1 !3 8 !$ ! 6!< 7 ! ! $!" ,, 9 F > ! $ ! E *44 > ,!$/!3 )0&& ! 1 0()&) )':&&'++0'+0&& ! $! 5 !$ F ,; +&+&+) < G +&(%%'+&+) )':++'4)&'40+) ///!$3! $ " <8 )= (&)= lawmakers propose deferring taxes until a liquidity event such as if the startup gets acquired or holds an initial public offering. Initially there were worries that employees would become liable for taxes without a liquidity event, said Reza Zadeh, founder of Palo Alto, Calif.-based Matroid, a machinelearning startup. “This change regarding option taxation is likely to be helpful to startups,” Mr. Zadeh said. “It will help us recruit world-class talent and let those employees share in our success.” JELLIES The Senate’s passage of a proposed overhaul to the U.S. tax code caps a period of uncertainty for the tech industry, spurring a sigh of relief from venture-capital investors. In the months leading up to the landmark bill, Silicon Valley was rife with uncertainty over how new provisions nesan, managing director at Menlo Ventures and former chairman of the National Venture Capital Association. The GOP tax plan, which passed 51-49 in the Senate on Saturday, was a big victory for Republicans, lowering the corporate tax rate to 20% from 35%. The tax measures, which also provide for a one-time tax cut to U.S. companies for repatriation of earnings and cash held overseas, stand to boost financial markets. It will still require House and Senate reconciliation of the different versions, which lawmakers aim to do before , J I PUBLIC NOTICES !"# $ %!& ' ( ) * ( *+ ,+ - )" $. /, # - - 0 $ 1 2 3" # - 4" 5 - ' #" ! " ##$ %&#!" '# ## ()*)%+ ,, - , 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. make good quality judgments. The human and machine “editors” of NPR One, which is owned by National Public Radio Inc. but includes content from a variety of sources, operate in a similar way: Humans decide what content everyone will hear on the service, while the algorithms personalize the content. One of its goals is to avoid “filter bubbles,” the tendency of algorithms to continue feeding us things we’ll like, rather than viewpoints that might expand our horizons, says Tamar Charney, NPR One’s managing editor. Snapchat is still primarily a messaging platform, owned by a $14 billion public company that makes money through advertising, but Mr. Spiegel is savvy to attempt to align it with this trend. Snapchat can’t pay humans to vet every piece of content that it surfaces. But clips that go into Snapchat’s news stories are fact-checked, a company spokeswoman says. Though Snapchat’s overhaul includes algorithmically curated news stories, all of them will be seen by a human before they go live. Messaging apps can still be conduits for fake news, but Snapchat’s lack of viral sharing mechanisms could make it less likely. ly . BY SCOTT MARTIN would treat partnership profits at venture firms and the taxation of employee stock options. Investors feared that changes to the carried-interest deduction, which is the roughly 20% share in the profits enjoyed by general partners of venture firms, would have weakened the incentives for taking risks on investment in private companies. “Six months ago, there were a bunch of proposals that felt hostile to the entrepreneurial ecosystem and seemed targeted to harm the innovation economy—we seem to have avoided most of them,” said Venky Ga- co Fo m rp m e er rs ci on al a us l, e on Overhaul clears up uncertainty over fate of carried interest; compromise is praised To the Policyholders of THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA Notice of Annual Election of Directors The Annual Election of Directors of The Guardian Life Insurance Company of America will be held at its Home Office, located at 7 Hanover Square, New York, NY 10004 on December 13, 2017. The polls will open at 10:00 AM and remain open until 4:00 PM on that day. Policyholders whose policies or contracts are in force on the date of the election and have been in force at least one year prior to the election date are entitled to vote in person or by proxy. Proxies may be obtained from the Office of the Corporate Secretary, The Guardian Life Insurance Company of America, 7 Hanover Square, H-27-A, New York, NY 10004 or through Guardian’s website at www.guardianlife.com/ about-guardian/corporate-governance. Harris Oliner Senior Vice President and Corporate Secretary Security Shake-Up At Uber BY GREG BENSINGER AND ROBERT MCMILLAN Uber Technologies Inc.’s security team is crumbling after a scandalous few weeks that included the surprise disclosure of a yearold data breach and a damaging letter from a former employee detailing clandestine operations. On Friday, Uber confirmed three members of its security team have resigned: Prithvi Rai, a senior security engineer; Pooja Ashok, chief of staff for the security team; and Jeff Jones, manager for physical security. An Uber spokeswoman said all the resignations were voluntary. Another manager, Mat Henley, who ran Uber’s global threat operations, is going on medical leave for an unspecified period, according to his attorney. Last week, Mr. Henley testified on Uber’s behalf in federal court in a contentious cross-examination in which he rebutted some of the claims made by his former subordinate, Ric Jacobs, in a 37-page letter to management. Mr. Henley didn’t respond to a request for comment. Reuters earlier reported the staff moves. Chief Executive Dara Khosrowshahi has in recent days taken a hard line on Uber’s prior handling of security practices. He recently revealed it paid hackers $100,000 in an effort to conceal a data breach affecting 57 million accounts a year ago, prompting the recently hired CEO to fire its chief security officer and deputy for their roles. The security team came under further scrutiny. Just days before Uber was to go to trial over what Alphabet Inc.’s Waymo unit alleges are stolen trade secrets, the case was thrown into turmoil over the emergence of a letter penned by an attorney for Mr. Jacobs. It said Uber maintained teams devoted to pilfering rivals’ technology. For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. Monday, December 4, 2017 | B5 NY BUSINESS NEWS Estimated Box-Office Figures, Through Sunday SALES, IN MILLIONS 1. 2. 3. 4. 5. FILM DISTRIBUTOR WEEKEND* CUMULATIVE % CHANGE Coco Justice League Wonder Thor: Ragnarok Daddy’s Home 2 Disney Warner Bros. Lions Gate Disney Paramount $26.1 $16.6 $12.5 $9.7 $7.5 Electric cars at the Baojun plant. GM and local partner SAIC have invested $2.4 billion in the plant. Local Car Makers Grab More Sales Chinese brands accounted for 38% of passenger-car sales in China in the first nine months of 2017, up from 30% in all of 2012, according to LMC Automotive, an auto intelligence company. With China’s passenger-car market expanding just 2% this year, tougher competition from local rivals has suddenly be- $108.7 $197.3 $88 $291.4 $82.8 Source: comScore -49 -60 -45 -43 -43 dramatically, with auto-rating firm J.D. Power finding in a recent buyer survey that the gap in quality between massmarket foreign cars and their Chinese equivalents had virtually disappeared. Baojun’s market share has grown the most among Chinese brands. It had a 3.6% market share in the JanuarySeptember period of this year. GM launched the brand in 2010 to compete against Chinese rivals. At the Liuzhou plant, director of manufactur- come a pressing concern for foreign manufacturers. “Domestic Chinese brands are getting stronger,” Håkan Samuelsson, the chief executive of Volvo Cars, said at the October launch of Polestar, the Swedish company’s new premium electric-car company, “and being squeezed in the middle is not a position we want to be in.” Volvo’s answer, he said, is to double down on the premium segment. Ford Motor Co. said in No- ing operations Craig Schmidt said GM know-how has given Baojun a critical edge. GM has another joint venture with SAIC, a 50-50 partnership through which it builds Buicks, Cadillacs and Chevrolets. But Cadillacs and Chevrolets are often too upscale to compete directly with local marques. Baojun overtook Chevrolet last year and at its current growth rate will pass Buick to become GM’s best-selling China brand within the next 520 WEST 41ST STREET 5 TIMES SQUARE $225 Million $200 Million n- *Friday, Saturday and Sunday LIUZHOU, China—As Chinese cars improve in quality and challenge foreign auto makers’ dominance in China, Detroit’s General Motors Co. has devised what it believes to be a winning strategy: build a local car of its own. Its Baojun brand, built through a joint venture in Liuzhou with local partner SAIC Motor Corp., has been the fastest-growing auto maker in China, the world’s biggest car market, over the past five years, and several other foreign car companies are now trying to emulate it. As a Chinese car with American technology, Baojun, or Precious Steed, has “no comparable competitors,” said Yale Zhang, managing director of Shanghai-based consultancy Automotive Foresight. GM and SAIC have invested $2.4 billion in the Baojun plant in Liuzhou, which can now build 800,000 Baojuns a year. However, GM owns a noncontrolling 44% of the joint venture, an arrangement some see as risky as the U.S. company shares American technology with its Chinese partner. Other foreign auto makers “are consistently taken aback by GM’s apparently generous technology sharing” when it comes to Baojun, said Michael Dunne, a former GM executive and now president of Dunne Automotive, a consultancy. “The open approach has engendered considerable goodwill but it also leaves GM vulnerable to the whims of its powerful Chinese partner.” GM China President Matt Tsien dismissed those concerns, saying that devoting expertise to build a Chinese brand was “in our interests” and the only way to make Baojun a first-rate car maker. Without a local brand it would have been hard to tap massmarket growth outside China’s wealthiest cities, he said. SAIC didn’t respond to questions. Once derided as shoddy, Chinese cars have improved NORIHIKO SHIROUZU/REUTERS NEW YORK—In a sleepy post-Thanksgiving weekend at the box office, Pixar’s “Coco” remained the top film for the second straight week while a number of Oscar contenders packed theaters in specialty release. “Coco” again easily led all films with $26.1 million in the U.S. and Canada, according to studio estimates Sunday. The acclaimed animated tale based on the Mexican holiday Dia de los Muertos (Day of the Dead) has dominated new releases both domestically and abroad. It has already racked up a global gross of $280 million, including record-breaking totals in Mexico and an impressive $75.6 million in China. With no major wide releases, Warner Bros.’ “Justice League” also held in second place with $16.6 million in its third weekend. With a domestic total of $197.3 million in three weeks, the DC Comics superhero team-up release isn’t going to catch Marvel’s “Thor: Ragnarok.” The betterreceived “Thor” sequel has proved far mightier, with nearly $300 million in five weeks of release. The family film “Wonder,” about a fifth-grade boy (Jacob Tremblay) with facial abnormalities, likewise stayed in third with $12.5 million. The sleeper hit of the season, also starring Julia Roberts and Owen Wilson, has taken in $88 million in three weeks for Li- BY TREFOR MOSS co Fo m rp m e er rs ci on al a us l, e on ons Gate. Among new releases, most successful was James Franco’s “The Disaster Artist.” The comedy opened with $1.2 million on 19 screens, good for a per-screen average of $64,254. The film, directed by and starring Franco, is about the making of the infamously bad cult movie “The Room.” With most studios staying clear ahead of the impending release of “Star Wars: The Last Jedi” (which some forecasts peg for a $200-million debut), much of the weekend’s action was with awards-season releases. They helped drive the biggest post-Thanksgiving weekend in five years, according to comScore. Greta Gerwig’s “Lady Bird,” which spent the week collecting honors from the New York Film Critics Circle, the Gotham Awards and the National Board of Review, added 403 theaters, for a total of 1,194. The A24 release, starring Saoirse Ronan and Laurie Metcalf, earned $4.5 million, bringing its total to $17.1 million. Fox Searchlight’s “The Shape of Water,” an acclaimed monster-movie fantasy from director Guillermo del Toro, opened in two New York theaters with $167,000. (The $83,400 perscreen average ranks as among the best of the year.) Searchlight’s “Three Billboards Outside of Ebbing, Missouri,” also expanded to 1,630 screens and grossed $4.5 million. The Frances McDormand-led film has grossed $13.7 million. Associated Press GM’s China Brand Surges couple of years. Baojun sales increased from roughly 100,000 in 2013 to more than 760,000 last year. Baojun’s offerings, including sedans and minivans, have a common theme: bargain prices. Its new 510 compact SUV starts at $8,250, far below Chevrolet’s newest China SUV, the Equinox, which retails for $26,300 and up. With 41,000 sales in September, the 510 outsold the Equinox 8 to 1, and became the third bestselling model in China. Mezzanine Loan no Mortgage and Mezzanine Loans vember that it would start a joint venture with local auto maker Zotye Automobile Co. to build electric vehicles under a new Chinese brand. It will target “younger consumers in lower-tier cities” who wouldn’t normally buy Ford-branded cars, said Peter Fleet, Ford’s Asia-Pacific vice president. Volkswagen AG also will launch a Chinese brand next year. Nissan Motor Corp. already operates a Chinese brand, Venucia, with local partner Dongfeng Motor Corp. ly . Pixar’s ‘Coco’ Remains At Top for Second Week RXR Realty Silverstein Properties 245 PARK AVENUE 60 CHARLTON STREET / 163 VARICK STREET PARK WEST VILLAGE $110.5 Million $73.4 Million $45 Million Mezzanine Loan Mortgage and Mezzanine Loans Mezzanine Loan HNA Property Holdings APF Properties Drake Street Partners The Chetrit Group Stellar Management 1 QUEENS PLAZA SOUTH 180 WATER STREET 95 MORTON STREET $37.5 Million $35 Million $25 Million Mezzanine Loan Mezzanine Loan Mezzanine Loan Property Markets Group Hakim Organization New Valley MetroLoft RFR $1.5 Billion of Debt Investments in 2017 For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. B6 | Monday, December 4, 2017 no n- co Fo m rp m e er rs ci on al a us l, e on ly . What Makes a Company Great? Introducing WSJ’s Management Top 250 report, based on a landmark ranking by the Drucker Institute. A brand-new report on which U.S. companies are most effectively navigating the current business climate and serving their workers, customers and shareholders. Read the full rankings and WSJ report on December 6. © 2017 Dow Jones & Co., Inc. All rights reserved. 6DJ6180 For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. Monday, December 4, 2017 | B7 MARKETS DIGEST Dow Jones Industrial Average S&P 500 Index Last Year ago 24231.59 s 673.60, or 2.86% last week Trailing P/E ratio 21.33 P/E estimate * 19.82 High, low, open and close for each of Dividend yield 2.17 the past 52 weeks 2642.22 s 39.80, or 1.53% last week High, low, open and close for each of the past 52 weeks 20.91 18.02 2.51 All-time high 24272.35, 11/30/17 Current divisor 0.14523396877348 Last Year ago Trailing P/E ratio 24.94 24.22 P/E estimate * 19.72 18.41 Dividend yield 1.90 2.12 All-time high: 2647.58, 11/30/17 24000 2600 Week's high 23000 Monday's open t Friday's close IPOs in the U.S. Market Initial public offerings of stock expected this week; might include some offerings, U.S. and foreign, open to institutional investors only via the Rule 144a market; deal amounts are for the U.S. market only Expected pricing date Filed UP Friday's close t DOWN Monday's open New to the Market Public Offerings of Stock 2525 65-day moving average 22000 2450 CURO N 6.7 14.00/ Credit Suisse, Jefferies, 16.00 Stephens 12/6 11/13 Odonate Therapeutics Pharmaceutical company developing cancer therapeutics. ODT Nq 5.9 24.00/ GS, Jefferies, 27.00 Cowen & Co 12/6 11/9 QTRX Nq 3.3 14.00/ JPM, Leerink Prtnrs, 16.00 Cowen & Co 12/7 11/13 Denali Therapeutics Developing medicines for Alzheimer's disease and other neurodegenerative diseases. DNLI Nq 8.3 17.00/ GS, MS, JPM 19.00 12/7 11/9 LBC Nq 11.4 2300 200-day moving average 19000 200-day moving average 2225 18000 2150 Bars measure the point change from Monday's open 17000 F M A M J J A S O D t NYSE weekly volume, in billions of shares Composite J F M A M J J A S O J F M A M J J A S O 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. Don Blankenship, the outspoken and controversial CEO of Massey Energy Co., unexpectedly said he would retire from the company Dec. 31. N Weekly P/E data based on as-reported earnings from Birinyi Associates Inc. Major U.S. Stock-Market Indexes High % chg 52-Week Close (l) Low Dow Jones Industrial Average 24327.82 23545.02 24231.59 Transportation Avg 10347.93 9565.44 10186.63 Utility Average 773.88 758.46 767.16 Total Stock Market 27539.11 26940.93 27375.90 705.27 Barron's 400 711.67 689.62 2.86 19170.42 5.89 8783.74 1.07 631.38 1.43 22782.81 1.25 583.16 673.60 566.43 8.09 385.36 8.70 6914.19 6737.16 6426.04 6244.84 6847.59 6337.87 -41.57 -71.41 2657.74 2598.87 1906.81 1855.89 948.48 912.33 2642.22 1894.58 937.31 39.80 35.39 10.06 -0.60 -1.11 1498.78 1537.02 12390.30 12614.56 547.27 557.14 4125.24 4255.89 536.89 543.43 98.67 104.68 78.96 79.66 128.99 137.90 1227.32 1258.65 11.43 9.53 June 8, ’17 Plymouth Industrial REIT PLYM 19.00 58.1 –5.3 180 days Dec. 10 June 13, ’17 Athenex ATNX 11.00 75.9 54.8 180 days June 13, ’17 TCG BDC CGBD 18.50 174.9 –0.4 180 days l 24272.35 l 10274.77 26.4 12.6 21.3 20.2 20.9 22.6 12.6 16.3 17.6 17.2 10.9 4.4 8.5 8.8 10.0 6912.36 6422.56 30.3 33.7 27.2 30.3 13.1 13.9 2647.58 l 1899.18 l 944.1 20.5 16.6 15.8 18.0 14.1 11.9 8.8 10.0 12.0 l 774.47 l 27433.82 l 708.56 Performance of IPOs, most-recent listed first 6925 6850 l 5255.65 4739.37 l 6775 1.53 1.90 1.08 1.18 1314.25 1.55 10838.58 1.48 497.05 0.90 3075.02 0.97 463.83 5.83 88.02 73.03 4.75 117.79 847.70 18.20 9.14 17.86 192.63 8.10 38.06 5.20 5.76 -1.80 -1.46 6.26 -83.04 -6.19 1.76 Philadelphia Stock Exchange l 2191.95 1624.79 809.35 6700 24 27 28 29 30 1 November % Chg From Friday3s Offer 1st-day close ($) price close Company SYMBOL IPO date/Offer price l 1544.14 17.0 l 12627.8 16.4 l 559.05 12.1 l 4304.77 35.1 l 560.52 16.4 l 104.68 18.6 96.72 -3.2 192.66 -23.4 l 1341.69 48.5 16.04 -19.1 –0.4 ... ... ... Big Rock Ptnrs Acquisition 10.00 BRPAU Nov. 20/$10.00 AMERI Hldgs 2.70 AMRH Nov. 17/$4.12 l l World Close Latest Week % chg 3007.96 389.60 259.51 The Global Dow DJ Global Index DJ Global ex U.S. 0.48 0.03 –1.37 l 52-Week Range Close Low 2459.09 318.80 208.83 529.44 57110.99 14951.88 44555.26 3137.71 634.08 72264.45 16038.97 47265.31 3808.61 –2.55 –0.43 –1.41 –0.32 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 100 383.97 3138.54 385.54 3527.55 3328.10 3964.28 5316.89 12861.49 748.66 1455.32 22106.10 535.57 5350.84 1133.33 59449.38 10085.00 570.10 9274.55 7300.49 339.36 2810.21 323.64 3015.13 2501.74 3427.61 4528.82 10513.35 608.79 3.52 1363.50 1.58 17050 –1.38 449.60 –0.94 4392.12 1.28 973.33 –2.81 48935.90 –1.45 8607.1 0.31 514.43 –1.21 7784.01 –0.55 6730.72 –1.47 Asia-Pacific Australia China Hong Kong India Japan Malaysia Singapore South Korea Taiwan 5989.80 3317.62 29074.24 32832.94 22819.03 1717.86 3449.54 2475.41 10600.37 EMEA S&P/ASX 200 Shanghai Composite Hang Seng S&P BSE Sensex Nikkei Stock Avg FTSE Bursa Malaysia KLCI Straits Times Kospi Weighted 1.21 –0.69 –1.01 –1.12 –1.50 –0.01 –0.53 –1.36 –1.52 n- DJ Americas Sao Paulo Bovespa S&P/TSX Comp S&P/BMV IPC Santiago IPSA no Americas Brazil Canada Mexico Chile 0.12 –1.08 –2.65 –2.51 1.19 0.04 0.21 –2.71 –2.34 5400.4 3052.79 21574.76 25807.10 18274.99 1617.15 2871.05 1963.36 9078.64 • • High • • • • • • • • • • • • • • • • • • • • • • • • • YTD % chg Consumer Rates and Returns to Investor U.S. consumer rates Selected rates A consumer rate against its benchmark over the past year 30-year mortgage, Rate 27300 “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: Takedown date/ Deal value Registration Registration date ($ mil.) (mil.) B Riley FBR Univest Corp of PennsylvaniaNov. 30 Finance Nov. 13,317 $65.0 ... Stifel US Foods Holding Food & Beverage Nov. 29 Sept. 13,317 $847.7 ... MS Tribune Media Telecoms Nov. 29 Nov. 29,317 $285.3 ... MS Gray Television Telecoms Nov. 29 May 12,317 $217.5 ... WFS Teladoc Technology Nov. 29 Nov. 28,317 $149.9 $175.0 Independent Bank Group Finance Nov. 29 June 16,317 $136.7 ... Stephens Scorpio Tankers Transportation Nov. 29 March 18,316 $90.0 ... Clarkson, BTIG, Pareto Sec iBio Healthcare Nov. 29 Nov. 20,314 0.61 -4.07 Atmos Energy Utility & Energy Nov. 28 March 28,316 $398.9 $2,500.0 1.10 9.18 Catalyst Pharmaceutical Healthcare Nov. 28 July 12,317 $50.0 $150.0 Piper Jaffray, SunTrust 52-Week Low Close(l) High % Chg Ardmore Shipping Transportation Nov. 28 Aug. 26,316 $45.2 $511.0 MS 8.95 IQVIA Holdings Technology Nov. 27 May 24,317 $766.9 ... MS 396.77 3276.11 400.44 3697.40 3445.23 4118.51 5517.97 13478.86 858.08 1478.96 23046 555.22 5475.67 1195.61 61211.52 11135.4 600.20 9325.60 7562.28 6.2 4.3 10.1 7.2 27.1 9.9 9.3 12.0 16.3 –1.1 14.9 10.8 14.4 –1.6 17.4 7.8 6.6 12.8 2.2 6049.4 3447.84 30003.49 33731.19 22937.60 1792.35 3449.54 2557.97 10854.57 5.7 6.9 32.2 23.3 19.4 4.6 19.7 22.2 14.6 t t Interest rate Fidelity Bank Trust Dubuque, IA 3.63% 563-557-2300 1.00 Supreme Lending Bellevue, WA 3.63% 206-963-4788 Best Rate USA Newtown Square, PA 3.75% 888-998-2451 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 1.47 1.49 Money market, annual yield 0.33 0.33 Five-year CD, annual yield 1.49 1.49 30-year mortgage, fixed† 3.89 3.90 15-year mortgage, fixed† 3.29 3.32 Jumbo mortgages, $424,100-plus† 4.30 4.28 Five-year adj mortgage (ARM)† 3.68 3.70 New-car loan, 48-month 3.00 3.18 3-yr chg 52-Week Range (%) Low 0 2 4 6 8 High (pct pts) 0.25 l l 3.50 0.95 l 0.26 l 1.19 l l 3.73 l 2.99 l 4.21 l 3.20 l 2.85 1.25 4.25 1.49 0.36 1.49 4.33 3.50 4.88 4.03 3.36 %Chg YTD % chg -2.58 -0.42 8.09 -1.53 -0.80 -0.95 58.36 -0.59 -1.00 0.15 8.64 4.97 -17.80 -8.50 -0.66 11.20 92.89 0.11 0.12 -9.12 86.49 0.08 0.09 -6.93 0.8407 0.0025 0.30 -11.57 112.25 0.68 1.35 0.0146 DJ Commodity 532.01 TR/CC CRB Index 166.50 l l Crude oil, $ per barrel 42.53 l 2.56 91.35 WSJ Dollar Index 84.49 0.83 616.58 195.14 -0.53 58.95 12.93 3.93 -10.91 l l 1127.80 U.S. Dollar Index 1346.00 8.82 l 103.25 -7.72 l 93.56 -5.23 0.96 -10.32 l 107.84 118.18 -1.11 l l 1.20 1.36 5.90 Real-time U.S. stock quotes are available on WSJ.com. Track mostactive stocks, new highs/lows, mutual funds and ETFs. 1.00 1.00 1.26 -0.10 -0.09 -0.05 0.16 0.06 0.39 ... 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 $4.5 $100.0 JPM, Jefferies, Piper Jaffray Aegis Cptl BofA ML, JPM Public and Private Borrowing Treasurys Monday, December 4 Tuesday, December 5 Auction of 13 week bill; Auction of 4 week bill; announced on November 30; settles on December 7announced on December 4; settles on December 7 Auction of 26 week bill; Auction of 52 week bill; announced on November 30; settles on December 7announced on November 30; settles on December 7 Public and Municipal Finance Deals of $ 150 million or more expected this week Sale Final maturity Issuer Total ($mil.) Rating Bookrunner/ Fitch Moody’s S&P Bond Counsel(s) Dec. 4 prelim. California 225.0 N.R. N.R. N.R. M. Stanley/— Dec. 4 prelim. Massachusetts New Jersey Turnpike Authority 200.0 N.R. N.R. N.R. Barclays/— 400.0 N.R. N.R. N.R. Loop Capital Markets/— Dec. 5 Dec. 13, 2018 Bergen CoNew Jersey 181.2 N.R. N.R. N.R. Preliminary/ Waters McPherson McNeill Dec. 6 Aug. 1, 2041 Texas 156.8 N.R. N.R. N.R. Preliminary/ McCall Parkhurst & Horton/ Mahomes Bolden PC Dec. 8 prelim. Arizona Board of Regents 200.0 N.R. N.R. N.R. Citi/— Dec. 8 prelim. California Dept of Wtr Resources 265.0 N.R. N.R. N.R. Goldman & Co/— Dec. 8 prelim. Central Florida Expressway Au 347.1 N.R. N.R. N.R. Wells Fargo & Co/— Dec. 8 prelim. Harris Cult Ed Facs Fin 206.9 N.R. N.R. N.R. BoA Merrill/— Dec. 8 prelim. Illinois Finance Authority 686.6 N.R. N.R. N.R. J P Morgan Securities LLC/— Dec. 8 prelim. Miami-Dade Co- Florida 958.7 N.R. N.R. N.R. Wells Fargo & Co/— Dec. 8 prelim. Nassau CoNew York 474.2 N.R. N.R. N.R. Citi/— Dec. 8 prelim. Pennsylvania Housing Fin Agency 175.2 N.R. N.R. N.R. RBC Cptl Mkt/— Sources: Ryan ALM; Tullett Prebon; WSJ Market Data Group Dec. 8 prelim. Sacramento MUD (SMUD) 173.3 N.R. N.R. N.R. Goldman & Co/— Corporate Borrowing Rates and Yields Dec. 8 prelim. San Jose City Redev Agcy 352.3 N.R. N.R. N.R. Stifel Nicolaus/— Dec. 8 prelim. San Jose City Redev Agcy 1,343.9 N.R. N.R. N.R. Stifel Nicolaus/— Dec. 8 prelim. TampaHillsborough Expressway Auth 203.0 N.R. N.R. N.R. Citi/— Dec. 8 prelim. Virginia Public Building Auth 154.7 N.R. N.R. N.R. Raymond James/— Dec. 8 prelim. Wisconsin Public Finance Auth 196.1 N.R. N.R. • • • • • • • • • Plus, get deeper money-flows data and email delivery of key stock-market data. All are available free at WSJMarkets.com Yield to maturity of current bills, notes and bonds 3.75% 10% Euro 5 2.25 0 1.50 –5 One year ago 0.75 –10 Friday t 0.00 1 3 6 month(s) Yen, euro vs. dollar; dollar vs. major U.S. trading partners 3.00 3.63% 800-530-2680 2.00 0.00 D J FMAM J J A S ON D 2017 Net chg WSJ Dollar Index Century Bank and Trust Company 3.25% Somerville, MA 800-823-6887 Epic Funding Fort Myers, FL Bookrunner(s) $245.7 26800 U.S. Dollar Index t 10-year Treasury note yield 3.00 17.6 Off the Shelf Benchmark Yields and Rates Treasury yield curve Forex Race 3.90% Bankrate.com avg†: 18.4 $69.0 Natural gas, $/MMBtu 3.061 Gold, $ per troy oz. 1278.80 WSJ .COM 16.58 Nov. 30 Nov. 15,310 17.3 20.0 4.9 3.6 18.2 U.K. pound, in dollars 15.7 $106.4 634.79 76989.79 16131.79 51713.38 4255.93 Yen, per dollar 25.3 $126.0 613.13 190.69 Euro, per dollar 15.04 Citi, BofA ML, Barclays, JPM, MS, WFS Jefferies, Credit Suisse DJ Commodity Gold, $ per troy oz. –5.8 ... 18.8 19.5 21.3 Natural gas, $/MMBtu 5.23 –12.8 $344.5 Close Yen, per dollar U.K. pound, in dollars ... 27550 Commodities and Currencies Last Week Euro, per dollar ... Blackstone Mortgage Trust Nov. 30 Real Estate/Property July 29,316 Medpace Holdings Nov. 30 Healthcare Sept. 1,317 24 27 28 29 30 1 November Crude oil, $ per barrel 10.00 Secondaries and follow-ons expected this week in the U.S. market None expected this week Issuer/Industry TR/CC CRB Index 27.5 Sources: WSJ Market Data Group; FactSet Research Systems 1 2 3 5 710 years maturity s Yen s WSJ Dollar index –15 30 2017 Bond total return index Spread +/- Treasurys, Yield (%) in basis pts, 52-wk Range Last Wk ago Last Low High Total Return 52-wk 3-yr 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 2.363 3.137 2.690 n.a. 2.940 n.a. 5.559 2.41 1.45 6.05 3.80 3.90 2.25 n.a. n.a. 2.66 1.87 n.a. n.a. 10.856 5.885 2.342 3.129 2.650 5.520 2.870 2.132 5.559 n.a. n.a. n.a. n.a. 317 Dec. 4 prelim. s 30-year ﬁxed-rate mortgage –34.5 –22.6 18.4 last week 3017.06 391.12 263.11 Source: SIX Financial Information;WSJ Market Data Group 4.00% –0.1 16.58 Other Stock Offerings Limelight Networks Leisure & Recreation Region/Country Index ... Bluegreen Vacations BXG Nov. 17/$14.00 Legacy Acquisition LGC.U Nov. 17/$10.00 Level Brands LEVB Nov. 17/$6.00 SailPoint Tech SAIL Nov. 17/$12.00 scPharmaceuticals SCPH Nov. 17/$14.00 s 385.36, or 1.43% 27050 Sources: SIX Financial Information; WSJ Market Data Group International Stock Indexes 71.2 –19.0 DJ US TSM 13.3 10.0 14.1 5.0 10.1 4.1 38.4 7.8 12.9 -0.4 14.0 13.5 1.0 2.9 -25.0 -13.4 38.9 23.0 -18.6 -7.2 % Chg From Friday3s Offer 1st-day close ($) price close Company SYMBOL IPO date/Offer price Leisure Acquisition 9.96 LACQU Dec. 1/$10.00 Regalwood Global Energy 10.00 RWGE.U Dec. 1/$10.00 RETO Eco-Solutions 8.56 RETO Nov. 29/$5.00 co Fo m rp m e er rs ci on al a us l, e on Other Indexes Russell 2000 1551.69 NYSE Composite 12673.70 Value Line 560.83 NYSE Arca Biotech 4273.51 NYSE Arca Pharma 545.50 KBW Bank 106.41 PHLX§ Gold/Silver 81.87 PHLX§ Oil Service 138.39 PHLX§ Semiconductor 1331.46 CBOE Volatility 14.58 Dec. 5 IPO Scorecard last week Standard & Poor's 500 Index MidCap 400 SmallCap 600 Offer Offer amt Through Lockup Symbol price($) ($ mil.) Friday (%) provision Issuer Sources: Dealogic; WSJ Market Data Group t 41.57, or -0.60% % chg YTD 3-yr. ann. % chg High Nasdaq Stock Market Nasdaq Composite Nasdaq 100 Lockup expiration Issue date Nasdaq Composite Latest Week Close Net chg Low 10.50/ Stifel, Piper Jaffray, 12.50 Sandler O'Neill & Prtnrs Lockup Expirations N D Financial Flashback The Wall Street Journal, December 4, 2010 30 20 10 0 D Luther Burbank Corp State commercial bank. 2075 N D Primary market Quanterix Life sciences company developing an ultrasensitive digital immunoassay platform. ly . J t D Bookrunner(s) 10/24 CURO Group Holdings Provides personal credit and cash loans. 2375 65-day moving average 20000 Issuer/business 12/6 Week's low 21000 Symbol/ Pricing primary Shares Range($) exchange (mil.) Low/High 35 n.a. 12 n.a. 303 46 n.a. 34 n.a. 393 Sources: J.P. Morgan; Ryan ALM; S&P Dow Jones Indices; Barclays Capital; Merrill Lynch N.R. Citi/— Source:Thomson Reuters/Ipreo For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. B8 | Monday, December 4, 2017 Stand Up with us co Fo m rp m e er rs ci on al a us l, e on ly . Support Stand Up To Cancer today to help cancer patients become cancer survivors. Give $25 or more to Stand Up To Cancer through the Miles To Stand Up program and you’ll receive 10 American Airlines AAdvantage® miles for every dollar donated. Donate and earn at no n- standuptocancer.org/americanairlines Pictured: Stand Up To Cancer Ambassador, Bradley Cooper along with American Airlines team members currently ﬁghting, surviving and co-surviving cancer. Stand Up To Cancer is a division of the Entertainment Industry Foundation, a 501(c)(3) organization. American Airlines and the Flight Symbol logo are marks of American Airlines, Inc. © 2017 American Airlines, Inc. All rights reserved. Offer valid on contributions made online at www.SU2C.org/americanairlines. Minimum $25 donation required. For charitable deduction purposes, each mile is valued at 3 cents per mile. The receipt of miles may reduce the tax deductibility of your donation. Mileage cap for a 12-month period is 600,000. Bonus miles do not count toward elite-status qualiﬁcation. Please allow up to eight weeks for the bonus miles to be posted to your account. Donations can only be accepted in U.S. dollars. Donations made in connection with AAdvantage® bonus miles program are not refundable. For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. Monday, December 4, 2017 | B9 * * MONEY & INVESTING Battle at CFPB Rages On Obama-era official to ask court to block Trump appointee from acting as agency head WASHINGTON—An Obamaera official will continue litigation seeking to remove White House budget chief Mick Mulvaney as acting director of the Consumer Financial Protection Bureau, legal papers filed Friday night said. Leandra English, who lost an initial court fight seeking to claim the title of acting CFPB director, said she would seek a temporary injunction against Mr. Mulvaney and ask the judge who ruled against her to do a more complete legal assessment of her claims that JOSHUA ROBERTS/REUTERS BY MARK H. ANDERSON Trump appointee Mick Mulvaney serves as CFPB’s acting director. she should be running the agency as its acting chief. “This case presents a single question: Who is the rightful acting director of the Consumer Financial Protection Bureau?” lawyers for Ms. English said in a court brief. “Until the full judicial process has run its course, the bureau’s employees, the companies it regulates, and millions of American consumers will continue to suffer under a cloud of legal uncertainty.” Rio Tinto Elevates Director to Chairman A federal judge on Tuesday sided with the White House in the battle over control of the agency, saying he wouldn’t stop the Trump administration from running the agency. Judge Timothy Kelly of the U.S. District Court for the District of Columbia rejected a temporary restraining order request by Ms. English. That cleared the way for Mr. Mulvaney to continue serving as acting director of the CFPB while President Donald Trump finds a permanent replacement. Questions over who should get to run the CFPB came up after its former director, Richard Cordray, an Obama appointee, stepped down early from a term that was to end in July 2018. —Yuka Hayashi contributed to this article. MELBOURNE, Australia— Rio Tinto PLC has turned to Simon Thompson, a boardroom veteran with mining-industry experience, to succeed Jan du Plessis as chairman. Mr. Thompson, a director at Rio Tinto since 2014, will take over when Mr. du Plessis steps down in March after about nine years as chairman, the mining company said Monday. A former executive at Anglo American PLC, Mr. Thompson has served as a director with miners including AngloGold Ashanti Ltd. and Newmont Mining Corp. U.K.-Australian Rio Tinto swung back to profit last year as prices for iron ore rebounded. However, it was hit with a U.S. lawsuit in October alleging the company and former executives misled investors about the value of assets in Mozambique, a further cloud for a company already grappling with investigations in the U.S., U.K. and Australia into a $10.5 million payment made to a consultant who helped secure rights to a large iron ore deposit in Guinea. The company said it would defend itself against the Securities and Exchange Commission’s suit, arguing claims of fraud were unwarranted. It said it was cooperating with authorities in the Guinea investigation and has handed over emails and information to investigators. Mr. du Plessis said in March he was stepping down to join British telecommunications firm BT Group PLC, where he became chairman last month. 52 wk Prem Ttl Fund (SYM) NAV Close /Disc Ret Templeton Dragon TDF 23.92 21.07 -11.9 36.4 Templeton Emerging EMF 19.10 16.95 -11.3 47.3 Virtus Total Return Fund ZF 12.74 NA 26.9 Voya Infr Indls & Matls IDE 16.73 15.97 -4.5 28.5 Wells Fargo Gl Div Opp EOD 6.22 NA 30.3 Prem12 Mo Fund (SYM) NAV Close /Disc Yld U.S. Mortgage Bond Funds BlackRock Income Trust BKT 6.61 6.14 -7.1 5.1 Nuveen Mtg Opp Term Fd JLS 26.54 25.83 -2.7 5.3 Investment Grade Bond Funds Blackrock Core Bond Tr BHK 14.83 13.96 -5.9 5.5 BlkRk Credit Alloc Incm BTZ 14.80 13.26 -10.4 6.3 John Hancock Income Secs JHS 15.56 14.80 -4.9 5.4 MFS Inc Tr MIN NA 4.16 NA 9.4 WstAstClymr InfLnkd Fd WIW NA 11.32 NA 3.7 WstAssetClymr InflLnk Sec WIA NA 11.63 NA 3.4 Loan Participation Funds Apollo Sr Fltg Rate Fd AFT 17.99 16.28 -9.5 7.5 BlkRk Debt Strat Fd DSU 12.72 11.63 -8.6 7.1 BlackRock FR Incm Strat FRA 14.94 13.86 -7.2 5.8 Blkrk FltRt InTr BGT 14.42 13.74 -4.7 5.5 BlackstoneGSO Strat Cred BGB 16.99 15.79 -7.1 8.5 Blackstone GSO Sr Float BSL 17.68 17.19 -2.8 6.7 Eagle Point Credit ECC NA 18.61 NA 8.6 Eaton Vance FR Incm Tr EFT 15.51 14.28 -7.9 5.8 EatonVnc SrFltRate EFR 15.18 14.21 -6.4 6.1 Eaton Vance Sr Incm Tr EVF 7.16 6.44 -10.1 5.7 First Trust Sr FR Fd II FCT 14.01 12.84 -8.4 6.2 FT Sr Floating Rate 2022 FIV 9.70 9.22 -4.9 NS Invesco Credit Opps Fund VTA NA 11.63 NA 7.3 Invesco Senior Income Tr VVR NA 4.38 NA 5.9 Nuveen Credit Strt Inc Fd JQC 9.07 8.20 -9.6 7.5 NuvFloatRteInco Fd JFR 11.51 10.92 -5.1 7.4 Nuv Float Rte Opp Fd JRO 11.42 10.91 -4.5 7.8 Nuveen Senior Income Fund NSL 6.82 6.41 -6.0 7.4 Pioneer Floating Rate Tr PHD 12.41 11.49 -7.4 6.3 Voya Prime Rate Trust PPR 5.66 5.08 -10.2 5.9 High Yield Bond Funds AllianceBernstein Glbl AWF 13.91 12.76 -8.3 6.8 Barings Glbl Short Dur HY BGH 20.90 19.47 -6.8 9.5 BlackRock Corp Hi Yd Fd HYT 12.23 11.07 -9.5 8.1 BlackRockDurInco Tr BLW 17.03 15.95 -6.3 7.8 Brookfield Real Assets RA 25.12 23.48 -6.5 NS Credit Suisse High Yld DHY 2.78 2.81 +1.1 9.6 DoubleLine Incm Solutions DSL NA 20.16 NA 8.9 Dreyfus Hi Yd Strat Fd DHF 3.54 3.35 -5.4 9.1 Fst Tr Hi Inc Lg/Shrt Fd FSD 17.95 16.32 -9.1 8.8 Guggenheim Strat Opps Fd GOF 19.75 21.58 +9.3 10.1 Ivy High Income Opps Fund IVH 15.87 14.73 -7.2 10.0 Neuberger Berman HYS NHS NA 11.73 NA 7.6 NexPoint Credit Strat Fd NHF NA 23.73 NA 10.1 Nuveen Credit Opps 2022 JCO 9.93 9.93 0.0 NS Nuveen Gl Hi Incm Fd JGH 18.54 16.57 -10.6 8.7 Nuveen High Incm Dec18 JHA 10.07 9.94 -1.3 5.1 Nuveen High Incm Dec19 JHD 10.24 10.12 -1.2 5.8 Nuveen Hi Incm Nov 2021 JHB 10.12 9.97 -1.5 6.0 Pioneer High Income Trust PHT 10.81 9.76 -9.7 8.2 Prud Gl Shrt Dur Hi Yd GHY 16.37 14.43 -11.9 7.9 Prudentl Sh Dur Hi Yd Fd ISD 16.55 14.79 -10.6 7.9 Wells Fargo Incm Opps Fd EAD NA 8.40 NA 8.8 Wstrn Asset Glbl Hi Inco EHI NA 9.92 NA 8.7 Wstrn Asset High Inco II HIX NA 6.93 NA 8.9 Wstrn Asset Opp Fd HIO NA 5.01 NA 7.2 West Asst HY Def Opp Fd HYI NA 15.16 NA 7.9 Other Domestic Taxable Bond Funds Apollo Tactical Incm Fd AIF 17.51 15.68 -10.5 8.9 Ares Dynamic Credit Alloc ARDC NA 16.47 NA 6.9 Barings Corp Investors MCI NA 15.60 NA 1.9 BlackRock Multi-Sector IT BIT 19.96 18.06 -9.5 9.8 BlackRock Taxable Mun Bd BBN 23.75 23.08 -2.8 6.8 Doubleline Oppor Credit DBL NA 22.46 NA 9.0 Duff & Phelps Utl & Cp Bd DUC 9.67 8.97 -7.2 6.6 EtnVncLtdFd EVV NA 13.51 NA 7.3 Franklin Ltd Duration IT FTF NA 11.74 NA 11.9 GuggenheimTaxableMuni GBAB 23.43 22.69 -3.2 6.7 Invesco High Incm 2023 IHIT 10.07 10.00 -0.7 5.5 John Hancock Investors JHI 18.72 17.64 -5.8 7.4 KKR Income Opps Fund KIO NA 15.79 NA 10.0 MFS Charter MCR NA 8.49 NA 8.9 MFS Multimkt MMT NA 6.11 NA 8.8 Nuveen Build Am Bd Fd NBB 22.55 21.69 -3.8 5.6 PIMCO Corporate & Incm PTY NA 16.50 NA 10.4 PIMCO Corporate & Incm PCN NA 16.76 NA 10.6 PIMCO HiInco PHK NA 7.46 NA 13.6 PIMCO Inco Str Fd PFL NA 11.62 NA 9.4 PIMCO Incm Strategy Fd II PFN NA 10.45 NA 9.2 Prem12 Mo Fund (SYM) NAV Close /Disc Yld Putnam Mas Inco PIM 5.02 4.75 -5.4 6.5 Putnam Premier Income Tr PPT 5.57 5.21 -6.5 6.0 Wells Fargo Multi-Sector ERC NA 12.99 NA 9.6 World Income Funds Abeerden Asia-Pacific FAX 5.42 4.90 -9.6 8.5 Etn Vnc Short Dur Fd EVG NA 13.68 NA 7.1 Legg Mason BW Glbl Incm BWG NA 12.85 NA 8.4 MS EmMktDomDebt EDD 8.88 7.75 -12.7 8.6 PIMCO Dynamic Credit PCI NA 22.55 NA 11.5 PIMCODynamicIncomeFund PDI NA 30.45 NA 13.4 PIMCO Income Opportunity PKO NA 26.14 NA 10.1 PIMCO Strat Income Fund RCS NA 8.71 NA 10.1 Templeton Emerging TEI 13.12 11.56 -11.9 4.5 Templeton Global GIM 7.43 6.59 -11.3 6.0 Wstrn Asset Emerg Mkts EMD NA 15.31 NA 7.7 Wstrn Asset Gl Def Opp Fd GDO NA 18.16 NA 7.5 National Muni Bond Funds AllianceBrnstn NtlMun AFB 14.84 13.65 -8.0 4.6 Blackrock Invest BKN 15.80 14.58 -7.7 5.3 BlackRockMun2030Target BTT 23.99 22.39 -6.7 4.1 BlackRock Municipal Trust BFK 14.35 14.06 -2.0 5.7 BlackRockMuni BLE 14.92 14.31 -4.1 6.1 BlackRockMuni Tr BYM 15.08 14.28 -5.3 5.3 BlkRk MuniAssets Fd MUA 14.08 15.05 +6.9 4.6 BlkRk Munienhanced MEN 11.81 12.03 +1.9 5.6 BlkRk MuniHldgs Inv MFL 14.57 14.85 +1.9 5.7 BlkRk MuniHldgs Qlty II MUE 13.95 13.83 -0.9 5.5 BlkRk MuniVest MVF 9.59 9.74 +1.6 5.7 BlkRk MuniVest II MVT 15.14 15.54 +2.6 5.7 BlkRk MuniYield MYD 14.75 14.35 -2.7 5.9 BlkRk MuniYld Quality MQY 15.69 15.65 -0.3 5.5 BlkRk MuniYld Qlty II MQT 13.79 12.96 -6.0 5.6 BlRkMunyldQltyIII MYI 14.32 14.10 -1.5 5.8 Deutsche Mun Income Tr KTF 12.58 11.79 -6.3 6.5 Dreyfus Mun Bd Infr Fd DMB 14.21 12.97 -8.7 4.9 Dreyfus Strat Muni Bond DSM 8.33 8.39 +0.7 5.9 Dreyfus Strategic Munis LEO 8.55 8.74 +2.2 5.9 Eaton Vance Mun Bd Fd EIM 13.61 12.55 -7.8 5.0 Eaton Vance Mun Income EVN 13.35 12.31 -7.8 5.4 EV National Municipal Opp EOT 21.91 23.21 +5.9 4.4 Invesco Adv Mun Incm II VKI 12.11 11.25 -7.1 5.8 Invesco Mun Incm Opps Tr OIA 7.59 7.99 +5.3 5.1 Invesco Mun Opportunity VMO 13.48 12.27 -9.0 6.1 Invesco Municipal Trust VKQ 13.46 12.30 -8.6 5.9 Invesco Qlty Mun Inco IQI 13.58 12.31 -9.4 5.4 Invesco Inv Grade Muni VGM 13.97 13.17 -5.7 5.8 Invesco Value Mun Incm Tr IIM 16.21 14.70 -9.3 5.0 MainStay DefinedTerm MMD 20.09 19.83 -1.3 5.5 MFS Munl Inco MFM NA 6.89 NA 5.6 Nuveen AMT-Free Quality NEA 15.08 13.59 -9.9 5.4 Nuveen AMT-Free Mun NVG 16.48 15.31 -7.1 5.7 Nuveen Mun Credit Incm Fd NZF 16.07 15.24 -5.2 5.8 Nuveen Enhncd Mun Val Fd NEV 15.03 14.29 -4.9 5.7 Nuveen Intermed Dur Mun NID 13.77 13.10 -4.9 4.9 NuveenMuniIncoOpp Fd NMZ 13.57 13.68 +0.8 5.9 Nuveen Muni Value Fund NUV 10.29 10.11 -1.7 3.8 Nuveen Qual Mun Incm Fd NAD 15.43 13.91 -9.9 5.5 Nuveen Sel Tax Free NXP 15.41 14.63 -5.1 3.7 Nuveen Sel TF NXQ 14.81 14.05 -5.1 3.5 PIMCO MuniFd PMF NA 12.95 NA 5.8 Pimco Muni Inc II PML NA 13.32 NA 5.8 PIMCO Muni Inc III PMX NA 11.74 NA 5.8 Pioneer Mun Hi Inc Adv Tr MAV 11.85 11.38 -4.0 5.3 Pioneer Mun Hi Incm Tr MHI 12.77 11.82 -7.4 5.0 Putnam Tr PMM 7.96 7.38 -7.3 5.4 PutnamMuniOpportunities PMO 13.30 12.39 -6.8 5.2 Wstrn Asset Mngd Muni MMU NA 14.24 NA 5.3 WesternAssetMunTrFund MTT NA 21.54 NA 5.0 Single State Muni Bond BlackRock CA Municipal Tr BFZ 15.11 14.12 -6.6 5.2 BlkRk MuniHldgs CA Qlty MUC 15.32 14.76 -3.7 5.0 Blkrck MunHl NJ Qlty MUJ 15.52 14.21 -8.4 5.7 BlRk MuHldg NY Qlty MHN 14.63 13.73 -6.2 5.0 BlkRk MuniYld CA Fd MYC 15.40 15.05 -2.3 5.1 BlkRk MuniYld CA Quality MCA 15.55 14.73 -5.3 5.2 BlkRk MuniYld MI Qlty MIY 15.30 13.95 -8.8 5.5 BlRk Muyld NY Qlty MYN 14.02 13.00 -7.3 5.0 Eaton Vance CA Mun Bd EVM 12.25 11.75 -4.1 4.9 Invesco CA Value Mun Incm VCV 13.36 12.60 -5.7 5.1 Invesco PA Value Mun Incm VPV 14.00 12.12 -13.4 5.2 Invesco Inv Grade NY Muni VTN 14.48 13.71 -5.3 5.0 Nuveen CA AMT-Free Qual NKX 15.77 15.33 -2.8 5.1 Nuveen CA Muni Value NCA 10.43 10.45 +0.2 3.9 Nuveen CA Quality Muni NAC 15.61 14.47 -7.3 5.5 Nuveen MD Qual Muni NMY 14.55 12.64 -13.1 5.0 Nuveen MI Qual Muni NUM 15.33 13.31 -13.1 4.8 Nuveen NJ Qual Muni NXJ 15.81 13.58 -14.1 5.2 Nuveen NY AMT-Free NRK 14.35 12.98 -9.5 4.9 Nuveen NY Qual Muni NAN 14.98 13.93 -7.0 5.1 Prem12 Mo Fund (SYM) NAV Close /Disc Yld Nuveen OH Qual Muni NUO 16.58 14.66 -11.6 5.0 Nuveen PA Qual Muni NQP 15.19 13.38 -11.9 5.3 Nuveen VA Qual Muni NPV 14.43 12.88 -10.7 4.3 PIMCO California Muni PCQ NA 17.11 NA 5.3 PIMCO California Mun II PCK NA 10.07 NA 5.6 52 wk Prem Ttl Fund (SYM) NAV Close /Disc Ret General Equity Funds Specialized Equity Funds Griffin Inst Access RE:A 27.00 NA NA 6.7 Griffin Inst Access RE:C 26.55 NA NA 5.9 Griffin Inst Access RE:I 27.16 NA NA 7.0 Griffin Inst Access RE:L 26.98 NA NA NS Griffin Inst Access RE:M 26.86 NA NA 6.2 Resource RE Div Inc:A 10.11 NA NA 6.8 Resource RE Div Inc:C 10.10 NA NA 6.0 Resource RE Div Inc:D 10.26 NA NA 6.2 Resource RE Div Inc:I 10.54 NA NA 6.8 Resource RE Div Inc:L 10.11 NA NA NS Resource RE Div Inc:T 10.08 NA NA 6.0 Resource RE Div Inc:U 10.12 NA NA 6.8 Resource RE Div Inc:W 10.27 NA NA 6.7 SharesPost 100;A 26.47 NA NA -1.6 SharesPost 100:I 26.47 NA NA NS Tot Inc+ RE:A 29.69 NA NA 7.0 Tot Inc+ RE:C 28.90 NA NA 6.2 Tot Inc+ RE:I 30.03 NA NA 7.3 Tot Inc+ RE:L 29.64 NA NA NS USQ Core Real Estate:I USQIX 25.28 NA NA NS USQ Core Real Estate:IS USQSX 25.28 NA NA NS Versus Cap MMgr RE Inc:F 27.64 NA NA 6.4 Versus Cap MMgr RE Inc:I 27.71 NA NA 6.7 Versus Capital Real Asst VCRRX 25.14 NA NA NS Wildermuth Endwmnt Str 12.82 NA NA 12.0 Wildermuth Endwmnt S:C 12.64 NA NA 11.1 Prem12 Mo Fund (SYM) NAV Close /Disc Yld Wildermuth Endwmnt S:I 12.87 NA NA NS Income Preferred Stock Funds MultiStrat Gro & Inc:A 15.21 NA NA 4.1 MultiStrat Gro & Inc:C 14.88 NA NA 3.4 MultiStrat Gro & Inc:I 15.40 NA NA 4.3 MultiStrat Gro & Inc:L 14.99 NA NA 3.6 The Relative Value:CIA VFLEX 25.55 NA NA NS Convertible Sec's. Funds Calmos Dyn Conv and Inc CCD 20.82 20.44 -1.8 18.9 World Equity Funds BMO LGM Front ME 10.65 NA NA 18.7 CalamosGlbTotRet CGO 13.44 14.50 +7.9 25.7 U.S. Mortgage Bond Funds Vertical Capital Income 12.66 NA NA 3.0 Loan Participation Funds 504 Fund 9.78 NA NA 3.7 FedProj&TrFinanceTender 10.08 NA NA NS Invesco Sr Loan A NA NA NA 4.2 Invesco Sr Loan B NA NA NA 4.2 Invesco Sr Loan C NA NA NA 3.4 Invesco Sr Loan IB NA NA NA 4.4 Invesco Sr Loan IC NA NA NA 4.3 Invesco Sr Loan Y NA NA NA 4.4 RiverNorth MP Lending RMPLX NA NA NA 9.1 Sierra Total Return:T SRNTX 24.86 NA NA NS Voya Senior Income:A 12.51 NA NA 5.3 Voya Senior Income:C 12.49 NA NA 4.8 Voya Senior Income:I 12.47 NA NA 5.5 Voya Senior Income:W 12.52 NA NA 5.5 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:F NA NA NA NS Griffin Inst Access Cd:I NA NA NA NS Griffin Inst Access Cd:L NA NA NA NS PIMCO Flexible Cr I;Inst NA NA NA NS PionrILSInterval 9.60 NA NA 10.5 WA Middle Mkt Dbt NA NA NA 11.3 WA Middle Mkt Inc WMF NA NA NA 11.2 Other Domestic Taxable Bond Funds Capstone Church Capital 11.45 NA NA 1.5 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 NA NA NA NS GL Beyond Income 3.69 NA NA NE Palmer Square Opp Income NA NA NA 5.0 Resource Credit Inc:A 11.22 NA NA 6.4 Resource Credit Inc:C 11.33 NA NA 5.6 Resource Credit Inc:I 11.25 NA NA 6.6 Resource Credit Inc:L 11.21 NA NA NS Resource Credit Inc:W 11.22 NA NA 6.3 BY ROBB M. STEWART Friday, December 1, 2017 52 wk Prem Ttl Fund (SYM) NAV Close /Disc Ret General Equity Funds Adams Divers Equity Fd ADX 17.27 14.85 -14.0 31.5 Boulder Growth & Income BIF 12.81 10.75 -16.1 28.3 Central Securities CET 32.41 26.75 -17.5 31.2 CohSteer Opprtnty Fd FOF 13.76 12.88 -6.4 18.4 Cornerstone Strategic CLM 13.56 15.03 +10.8 21.3 EtnVnc TaxAdvDiv EVT 23.54 22.60 -4.0 22.3 Gabelli Dividend & Incm GDV 24.69 22.59 -8.5 21.8 Gabelli Equity Trust GAB 6.67 6.28 -5.8 23.7 Genl American Investors GAM 40.12 33.59 -16.3 20.2 Guggenheim Enh Fd GPM 9.09 8.72 -4.1 23.7 HnckJohn TxAdv HTD 26.63 25.98 -2.4 27.6 Liberty All-Star Equity USA 6.76 6.09 -9.9 33.7 Royce Micro-Cap RMT 9.48 NA 27.4 Royce Value Trust RVT 16.02 NA 30.5 Source Capital SOR 44.58 39.87 -10.6 16.0 Tri-Continental TY 29.83 26.60 -10.8 28.2 Specialized Equity Funds Adams Natural Rscs Fd PEO 22.30 18.99 -14.8 0.8 AllnzGI NFJ Div Interest NFJ 14.87 13.47 -9.4 17.3 AlpnGlblPrProp AWP 7.31 6.50 -11.1 41.9 ASA Gold & Prec Metals ASA 12.74 11.10 -12.9 -0. BlkRk Enh Cap Inco CII 17.11 16.01 -6.4 28.3 BlkRk Engy Res Tr BGR 15.16 13.72 -9.5 1.1 BlackRock Enh Eq Div Tr BDJ 9.93 9.12 -8.2 21.9 BlackRock Enh Gl Div Tr BOE 14.44 13.39 -7.3 26.8 BlkRk Intl Grwth&Inco BGY 7.01 6.55 -6.6 30.7 BlkRk Health Sci BME 36.12 36.26 +0.4 13.7 BlackRck Rscs Comm Str Tr BCX 10.18 9.04 -11.2 17.4 BlackRock Science & Tech BST 27.94 26.37 -5.6 55.2 BlackRock Utilities Infr BUI 21.61 21.37 -1.1 19.9 CBREClarionGlblRlEstIncm IGR 8.86 7.83 -11.6 19.8 Central Fund of Canada CEF 13.35 13.13 -1.6 10.0 ClearBridge Amer Engy CBA 7.59 NA -4.6 52 wk Prem Ttl Fund (SYM) NAV Close /Disc Ret ClearBridge Engy MLP Fd CEM 13.08 NA -5.6 Clearbridge Engy MLP Opp EMO 10.69 NA -7.2 Clearbridge Engy MLP TR CTR 11.27 NA -0.4 Cohen & Steers Infr Fd UTF 26.18 23.59 -9.9 31.2 C&S MLP Incm & Engy Opp MIE 10.29 9.57 -7.0 0.7 Cohen & Steers Qual Inc RQI 13.73 12.53 -8.7 18.6 CohnStrsPfdInco RNP 22.98 20.87 -9.2 21.9 Cohen & Steers TR RFI 13.51 12.67 -6.2 14.5 CLSeligmn Prem Tech Gr Fd STK 21.93 22.85 +4.2 44.8 Duff & Phelps DNP 10.16 11.37 +11.9 22.6 Duff&PhelpsGblUtilIncFd DPG 17.93 15.82 -11.8 14.7 Eaton Vance Eqty Inco Fd EOI 14.92 14.21 -4.8 27.8 Eaton Vance Eqty Inco II EOS 15.57 15.02 -3.5 25.0 EtnVncRskMngd ETJ 10.03 9.21 -8.2 16.1 Etn Vnc Tax Mgd Buy-Write ETB 16.35 16.61 +1.6 10.3 Eaton Vance BuyWrite Opp ETV 14.95 15.11 +1.1 11.9 Eaton Vance Tax-Mng Div ETY 12.23 11.99 -2.0 29.4 EatonVanceTax-MngdOpp ETW 11.56 11.83 +2.3 27.8 EtnVncTxMngGlDvEqInc EXG 9.40 9.34 -0.6 28.8 Fiduciary/Clymr Opp Fd FMO 11.75 11.56 -1.6 -11.0 FT Energy Inc & Growth Fd FEN 22.96 22.78 -0.8 -1.7 FstTrEnhEqtIncFd FFA 16.70 15.72 -5.8 27.3 First Tr Engy Infr Fd FIF 18.80 17.88 -4.9 5.7 First Tr MLP & Engy Incm FEI 14.16 14.45 +2.0 -3.4 Gabelli Hlthcr & Well GRX 11.60 10.08 -13.1 10.8 Gabelli Utility Tr GUT 5.63 7.09 +25.9 26.7 GAMCOGlblGoldNatRscs&Inc GGN 5.38 5.28 -1.9 7.7 GoldmanSachsMLPIncOpp GMZ 8.45 NA -5.4 Goldman Sachs MLPEnergy GER 5.84 NA -11.3 John Hancock Finl Opps Fd BTO 37.69 37.56 -0.3 16.7 Macquarie Glbl Infrstrctr MGU 28.44 25.10 -11.7 39.6 NeubergerBermanMLPIncm NML 9.34 8.74 -6.4 1.1 Neubrgr Brm Rl Est Sec Fd NRO 5.77 5.43 -5.9 16.5 Nuveen Dow 30 Dynamic DIAX 18.99 18.23 -4.0 31.5 Nuveen Core Eq Alpha JCE 16.50 15.95 -3.3 29.1 Nuveen Diversified Div JDD 13.15 12.28 -6.6 21.4 Nuveen Engy MLP Fd JMF 11.03 10.83 -1.8 -9.5 NuvNASDAQ100DynOver QQQX 22.96 24.35 +6.1 40.9 Nuveen Real Est Incm Fd JRS 11.56 10.99 -4.9 17.6 NuvS&P500DynOverwrite SPXX 16.35 NA 24.3 NuveenS&P500Buy-Write BXMX 14.48 14.10 -2.6 18.8 Reaves Utility Fund UTG 34.02 31.29 -8.0 17.1 Tekla Hlthcr Investors HQH 23.82 22.43 -5.8 9.8 Tekla Healthcare Opps Fd THQ 19.33 17.57 -9.1 19.9 Tekla Life Sciences HQL 19.62 18.92 -3.6 18.2 Tekla World Hlthcr Fd THW 14.65 13.44 -8.3 11.3 Tortoise Energy TYG 26.25 NA -5.1 Insider-Trading Spotlight 52 wk Prem Ttl Fund (SYM) NAV Close /Disc Ret Tortoise MLP Fund NTG 16.16 NA -6.3 Voya Gl Equity Div IGD 8.25 7.82 -5.2 26.9 Income Preferred Stock Funds Calamos Strat Fd CSQ 12.92 12.21 -5.5 32.1 Cohen & Steers Dur Pfd LDP 27.32 26.37 -3.5 19.6 Cohen & Strs Sel Prf Inco PSF 27.98 28.12 +0.5 20.1 FT Interm Duration Pfd FPF 24.94 24.74 -0.8 23.5 Flaherty & Crumrine Dyn DFP 26.32 26.72 +1.5 25.8 Flaherty & Crumrine Pfd FFC 20.38 20.65 +1.3 16.2 John Hancock Pfd Income HPI 21.49 21.37 -0.6 16.2 John Hancock Pfd II HPF 21.25 21.31 +0.3 17.5 John Hancock Pfd Inc III HPS 18.96 18.55 -2.2 16.9 JHancock Pr Div PDT 16.13 17.27 +7.1 32.3 LMP Cap & Inco Fd SCD 13.76 NA 15.6 Nuveen Pfd & Incm Opps Fd JPC 10.77 10.46 -2.9 18.9 Nuveen Pfd & Incm Secs Fd JPS 10.37 10.29 -0.8 27.4 Nuveen Preferred & Incm JPI 25.96 25.02 -3.6 17.6 TCW Strategic Income Fund TSI 5.56 NA 12.3 Virtus Global Dividend ZTR 13.28 NA 38.6 Convertible Sec's. Funds AdvntClymrFd AVK 17.53 15.77 -10.0 21.9 AllianzGI Conv & Incm NCV 6.69 7.07 +5.7 22.2 AllianzGI Conv & Incm II NCZ 6.01 6.20 +3.2 23.2 AllianzGI Div Incm ACV 22.07 NA 34.5 AllianzGI Equity & Conv NIE 23.25 21.01 -9.6 23.8 Calamos Conv Hi Inco Fd CHY 11.83 11.87 +0.3 28.4 Calamos CHI 11.22 11.35 +1.2 28.7 World Equity Funds Alpine Tot Dyn Div AOD 10.10 9.14 -9.5 35.7 Cdn Genl Inv CGI 31.96 23.69 -25.9 31.4 China Fund CHN 23.29 21.47 -7.8 40.6 Clough Global Opp Fd GLO 10.90 NA 37.3 EtnVncTxAdvGblDiv ETG 18.32 17.29 -5.6 34.9 EatonVance TxAdv Opport ETO 24.68 24.95 +1.1 36.2 First Trust Dynamic Eur FDEU 19.44 18.59 -4.4 37.2 Gabelli Glbl Multimedia GGT 9.42 8.84 -6.2 30.7 GDL Fund GDL 11.62 9.99 -14.0 11.0 India Fund IFN 30.94 27.09 -12.4 30.9 Japan Sml Cap JOF 15.05 13.43 -10.8 42.4 Korea Fund KF 49.08 43.22 -11.9 34.2 Mexico Fund MXF 18.19 15.84 -12.9 15.5 Morgan-Stanley Asia-Pac APF 20.53 17.93 -12.7 31.4 MS China a Shr Fd CAF 28.05 23.34 -16.8 26.4 MS Emerging Fund MSF 19.74 17.32 -12.3 30.4 MS India Invest IIF 35.46 NA 43.8 New Germany Fund GF 21.58 19.77 -8.4 61.8 Swiss Helvetia Fund SWZ 13.89 12.70 -8.6 31.5 co Fo m rp m e er rs ci on al a us l, e on 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. 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 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 December 1, 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 Insider Nov. 28-29 Biogen BIIB Nov. 21 Nov. 24 Nov. 22 Prospect Capital PSEC Nov. 29 Medicines MDCO Nov. 27 MercadoLibre A. Denner Nov. 22-27 Entercom Communications Tallgrass Energy Partners No. of shrs in Price range ($) $ Value trans (000s) in transaction (000s) CEO CEO CEO Close ($) Ytd (%) 30 316.12-319.84 1,043 280 163 6.90 6.82 6.72 7,195 1,908 1,094 6.79 -18.7 5,105 28.50 -16.0 DI J. Barry J. Barry J. Barry 9,521 319.35 22.3 A. Denner DI 170 30.03 MELI A. Aguzin D 10 274.47 CLRO E. Bagley B 300 7.00 ETM J. Field R 168 11.73-11.88 1,986 11.80 -22.9 TEP D. Dehaemers D. Dehaemers CEOI CEOI 32 15 42.50 41.52 1,339 623 44.65 -5.9 1,046 39.22 -9.0 no Nov. 28-29 ClearOne Nov. 27 Nov. 28 Title n- Buyers 2,745 272.91 2,100 74.8 8.10 -28.9 AAT E. Rady CEOI 27 39.20-39.48 Nov. 24-28 Biglari Holdings BH S. Biglari DOI 3 333.88-334.84 Nov. 24 Nov. 21 Johnson Controls International JCI G. Oliver W. Jackson CEO O 27 20 36.80 36.00 1,005 720 37.42 -9.2 Nov. 30 Kennedy-Wilson Holdings KW S. Zax D 50 19.18 959 19.25 -6.1 Nov. 29 Noble Energy NBL G. Willingham OI 30 26.00 780 27.00 -29.1 Nov. 27 Pentair PNR E. Garden DI 10 69.22 690 70.19 25.2 Nov. 24 Hostess Brands TWNK W. Toler CEO 50 12.88 644 14.35 10.4 Nov. 27-29 American Assets Trust 1,020 337.78 -28.6 Sellers Nov. 21-22 Wal-Mart Stores Nov. 21-22 Nov. 21-22 Nov. 27-28 Nov. 27-28 Nov. 27-28 WMT Nov. 24 Performance Food Group PFGC W. Dawson Nov. 13 S. Walton J. Walton A. Walton S. Walton A. Walton J. Walton James River Group Holdings JRVR B. Martin Nov. 27-28 Amphenol APH D. Reardon Nov. 27-28 Facebook FB M. Zuckerberg DOI BI BI DOI BI BI 2,089 2,089 2,089 2,057 2,057 2,057 96.39-97.59 96.39-97.59 96.39-97.59 96.44-97.47 96.44-97.47 96.44-97.47 202,021 202,021 202,021 198,900 198,900 198,900 97.35 DI 5,000 28.03 140,160 29.55 DOI 99,060 40.58 -2.3 U.S. consumer price index 89.80 33.6 CEOI 232 182.50-184.20 42,499 175.10 52.2 All items Core S. Bershad D 500 52.55 STMP K. Mcbride CEO 142 180.01-180.59 AbbVie ABBV R. Gonzalez CEO 218 94.01 Loxo Oncology LOXO D. Bonita DI 267 Nov. 27-28 Gap GPS J. Fisher BI Nov. 27-29 Evercore EVR R. Schlosstein CEO Novanta NOVT Nov. 27-28 Stamps.com Nov. 21 Nov. 22 23.1 26,275 42.0 46.60 121.9 46.1 20,512 96.32 53.8 75.00 20,025 76.87 139.4 650 30.10-30.55 19,767 31.98 42.5 U.S. Canada Japan 228 85.44-87.14 19,658 87.00 26.6 Policy Rates Selling 21,393,619 11,133,180 0 1,764,515 16,171,585 149,311,031 15,687,903 –0.06 0.28 2.0 1.8 Week ago 52-Week High Low Prime rates Euro zone Switzerland Britain Australia Buying Finance Health care Industrial Media Technology Transportation Utilities 1,786,133 14,759,593 2,566,753 899 5,606,251 0 0 Selling 173,984,071 21,028,331 41,514,265 979,569 170,679,723 11,114,175 637,944 Sources: Thomson Financial; WSJ Market Data Group Secondary market 0.00 0.50 0.50 1.50 0.00 0.50 0.50 1.50 0.00 0.50 0.50 1.50 0.00 0.50 0.25 1.50 30-year mortgage yields 30 days 3.488 3.457 3.865 3.253 60 days 3.512 3.477 3.899 3.281 Other short-term rates 1.19 1.38 0.24 1.75 1.75 1.75 1.00 1.1700 1.3125 1.0000 1.1600 1.1700 1.2000 1.3125 1.1600 1.1700 1.1900 0.4200 0.5625 0.2500 0.4000 0.4200 Federal funds 1.1700 1.3125 1.0500 1.1600 1.1700 Week Latest ago Six month One year —52-WEEK— High Low 1.67425 1.65394 1.67425 1.29100 1.96044 1.93606 1.96044 1.64400 Euro Libor One month Three month Six month One year -0.399 -0.383 -0.312 -0.256 -0.402 -0.381 -0.316 -0.247 -0.376 -0.329 -0.220 -0.083 -0.405 -0.383 -0.322 -0.256 Euro interbank offered rate (Euribor) One month Three month Six month One year 52-Week high low -0.369 -0.326 -0.271 -0.188 Latest -0.372 -0.329 -0.272 -0.186 Value Traded -0.366 -0.313 -0.216 -0.076 -0.375 -0.332 -0.276 -0.192 52-Week High Low DTCC GCF Repo Index 3.00 3.00 3.00 2.25 Treasury MBS 1.39 n.a. 1.39 0.69 Libor 1.37938 1.33756 1.37938 0.64667 1.49463 1.46763 1.49463 0.94639 1.109 27.500 1.366 0.264 1.128 114.850 1.506 0.284 Open Implied Settle Change Interest Rate Commercial paper (AA financial) One month Three month Discount Week ago Call money 90 days U.S. government rates Effective rate High Low Bid Offer Fannie Mae Latest 1.14 U.S. Sector 1.170 1.130 1.300 0.340 1.285 1.285 1.285 0.490 1.435 1.415 1.435 0.590 4 weeks 13 weeks 26 weeks 4.25 4.25 4.25 3.50 3.20 3.20 3.20 2.70 1.475 1.475 1.475 1.475 Overnight repurchase Based on actual transaction dates in reports received this past week 109,063 59,022 0 32,000 0 699,797 980,130 Latest 25,586 167.55 Buying and selling by sector Basic Industries Business services Capital goods Consumer durables Consumer nondurables Consumer services Energy 246.663 253.638 —52-WEEK— High Low Treasury bill auction International rates 31,792 228.65 136.3 28,880 172.87 * Half the transactions were indirect **Two day transaction p - Pink Sheets Buying Chg From (%) Sept. '17 Oct. '16 45,637 168.32 Nov. 27 Week Latest ago Inflation Oct. index level 38.10 239.16-241.03 S. Easterbrook 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. 90.59-90.90 132 MCD December 1, 2017 503 172 A. Bechtolsheim McDonald's Money Rates 2,600 H ANET Nov. 21 40.8 Borrowing Benchmarks | WSJ.com/bonds D CEO Nov. 22-24 Arista Networks Sector ly . Closed-End Funds | WSJ.com/funds DTCC GCF Repo Index Futures Treasury Dec Treasury Jan Treasury Feb 98.660 0.005 2414 1.340 98.560 0.005 1284 1.440 98.560 0.005 549 1.440 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; Tullett Prebon Information, Ltd. For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. B10 | Monday, December 4, 2017 THE WALL STREET JOURNAL. MONEY & INVESTING A Tax Holiday Could Ripple Far 105 BY MIKE BIRD 100 15 95 90 10 85 5 80 0 75 2012 France Japan Canada Sweden Netherlands Australia Germany Source: FactSet (ICE index); Crane Data (bonds) how much. And if companies abruptly bring that cash home, it could mean a sudden shift in currency markets and a potential run on the instruments where the money is currently parked. Even a small portion of the total pile could amount to hundreds of billions of dollars’ worth of euros, yen, Swiss francs and other currencies being exchanged for greenbacks, leaving those currencies in line for a sudden fall. “Even though I do think most of the money is in dollars, even if 25% is not dollars we’re talking about flows that are going to be of the order of a minimum of $1.5 trillion, maybe as high as $2 trillion,” said Steven Englander, head of research and strategy at Hong Kong hedge fund Rafiki Capital. “And 25% of that is a decent chunk.” Goldman Sachs researchers believe that around 20% of the total is probably held in cur- rencies other than dollars, but others suggest a higher figure. The nondollar portion could be as high as 40%, according to researchers at Bank of America Merrill Lynch. The Senate Republican tax plan proposes a one-time $2.6T Russell 1000 companies held this much in earnings abroad in 2016 14.5% tax on earnings held overseas, which would then be regarded as repatriated. The House bill suggests a 14% tax. Currently, companies returning such a cash hoard to the U.S. would be hit with the 35% U.S. corporate-tax rate. “The terms under which they’re going to be able to repatriate are not as favorable as they wanted, but they’re the best they’re going to get. Any future change is going to be for the worse,” Mr. Englander added. That means companies are likely to act fast, which could distort markets in the short term. Several analysts have looked to 2004’s Homeland Investment Act for clues as to what might happen. The onetime tax break for repatriations came into force the following year, and after declining in 2002, 2003 and 2004, the dollar rose around 13% in 2005. But even if the majority of the cash is already in dollars, as many analysts expect, the potential market reactions may not stop there. A chunk of U.S. corporate cash trapped overseas is invested in offshore U.S. dollar money-market funds. A 2016 Deutsche Bank study based on 12 companies with some of the largest overseas cash balances suggested that around 25% of the total was held in cash or cash equivalents, a category including money-market funds. As companies return cash to the U.S.—even just to onshore money-market funds—a previously reliable source of greenback funding for global banks could shrink. During the final quarter of 2016, when new U.S. moneymarket rules, which also reduced dollar funding to global banks, took effect, the eurodollar cross-currency basis—a measure of the cost of borrowing dollars in exchange for euros—blew out to its widest levels on record. “The reshoring of cash could put increased pressure on dollar funding markets overseas, widening the crosscurrency basis,” said Gennadiy Goldberg, U.S. strategist at TD Securities. “Some of the recent move may be due to yearend pressures, but we don’t expect to see a reversal.” Other analysts believe repatriation may actually fall on U.S. assets, as money flows out of high-quality U.S. bonds. Though money is located outside the U.S. for tax purposes, it can be used to buy U.S. government and corporate debt. “To me it looks like the majority of the cash and cash equivalents are actually held in the U.S.” said Margaret Kerins, head of fixed-income strategy at BMO Capital Markets, who conducted an analysis of the financial statements of the 10 companies with the largest overseas cash piles. Ms. Kerins added that U.S. Treasurys and corporate debt had the potential to be most negatively affected by the change. co Fo m rp m e er rs ci on al a us l, e on A provision in the GOP tax plan giving U.S. companies a one-time cut for repatriation of earnings and cash held overseas could ripple through financial markets, including currencies, foreign savings vehicles and dollar funding for global banks. The details of a final tax plan remain unclear, as the Senate bill passed early Saturday morning still needs to be reconciled with the House bill passed in November. But the vast sums of cash held abroad by large U.S. corporations such as Apple Inc. and Microsoft Corp. are a tantalizing target for the Internal Revenue Service and companies themselves, as they could use that money for investing at home— or, simply to return to eager shareholders through buybacks or dividends. However, questions remain about precisely how the trillions of dollars in U.S. corporate profits are stashed overseas—and how a potential sudden mass repatriation of that cash could warp markets. The balance of U.S. corporate earnings held overseas by Russell 1000 companies reached $2.6 trillion in 2016, according to data consultancy Audit Analytics, a figure that has more than doubled since 2009. Much of that money is likely already held in dollars, though researchers aren’t sure 20% Number of breaches by sector in 2016 African Chain’s Woes Show Perils in Retail n- An elephant figure representing the Nakumatt supermarket at a mall in Nairobi, Kenya. Below, inside the supermarket in July. no NAIROBI, Kenya—The nearempty shelves and deserted aisles at a sprawling outlet of Kenya’s homegrown supermarket giant, Nakumatt Holdings Ltd., here are reminders of the risks—and opportunities—presented by East Africa’s biggest retail market. The family-run retailer was once emblematic of the “Africa Rising” narrative of a rapidly growing urban consumer class and local champions outmaneuvering larger foreign competitors. At its height in 2014, Nakumatt took over the Tanzanian stores of South Africa-based Shoprite Holdings Ltd., the continent’s largest retailer. Then in late October, Nakumatt filed for bankruptcy after a series of ill-fated decisions including the introduction of a private-label line, an overreliance on unsecured, short-term debt that dried up after the collapse of three Kenyan banks, and other events including floods and a terrorist attack. The chain’s demise illustrates the challenges faced by multinational retailers trying to build a presence here. Companies from French retail giant Carrefour SA to WalMart Stores Inc.’s Massmart Holdings Ltd., have grappled with how to gain and maintain a foothold in one of Africa’s most mature consumer markets while navigating the operating and financing pitfalls. Those challenges deepened in recent months: The International Monetary Fund cut its growth forecast to 5% from nearly 6% amid the prolonged political turmoil following the annulment of Kenya’s August presidential elections and October’s courtordered repeat vote. Still, with a largely English-speaking population of 48 million, Kenya remains an attractive target for retailers, according to analysts and retailers. They say Nakumatt’s downfall created an opening for multinationals looking to gain entrance—or increase their presence—in Kenya’s retail market, which market-research firm Euromonitor International values at around $12.35 billion. Carrefour is in the process of taking over two of Nakumatt’s outlets, its third and fourth Kenyan stores in under two years. The French chain’s THOMAS MUKOYA/REUTERS; SIMON MAINA/GETTY IMAGES BY ALEXANDRA WEXLER AND MATINA STEVIS-GRIDNEFF Currencies U.S.-dollar foreign-exchange rates in late New York trading local franchisee, Dubai-based holding company Majid Al Futtaim Holding LLC, said it continues to seek opportunities to open additional stores in Kenya. Massmart opened one outlet of its general merchandise and food retailer Game in 2015, and said it doesn’t currently have a second Kenyan store planned. One stumbling block has been a lack of visitors to the mall where Massmart’s store is situated. “With the proliferation of new malls and multiple international retailers entering Nairobi, consumers are now spoilt for choice,” said Richard Fuller, Game Africa director. “Our biggest challenge with only having one store in the city for now, was to create mass awareness of the Game brand and generate a vast pull factor to get Kenyans to travel from far to our store.” Malls have opened at a blistering pace across Nairobi over the past three years, but many of them have struggled to fill space. “The local retailers couldn’t handle the cost of opening multiple branches in those centers within a fairly short period of time,” said Nicholas Corbishley, head of Africa investments at Old Mutual Property, a South African real-estate developer, which is a 50% shareholder in Nairobi’s Two Rivers Mall. That shouldn’t pose such a challenge for deeper-pocketed multinational retailers, which have access to cheaper financing than a purely homegrown company and can pay more for the prime locations. Country/currency US$vs, YTDchg Fri in US$ per US$ (%) Europe Argentina peso .0581 17.2110 8.5 Brazil real .3070 3.2575 0.1 Canada dollar .7884 1.2684 –5.6 Chile peso .001543 648.00 –3.3 Ecuador US dollar 1 1 unch Mexico peso .0537 18.6270 –10.2 Uruguay peso .03448 29.0000 –1.2 Venezuela b. fuerte .099934 10.0067 0.1 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 Australian dollar .7612 1.3137 –5.4 China yuan .1512 6.6134 –4.8 Hong Kong dollar .1280 7.8120 0.7 India rupee .01550 64.508 –5.1 Indonesia rupiah .0000739 13533 0.1 Japan yen .008909 112.25 –4.1 Kazakhstan tenge .003037 329.25 –1.3 Macau pataca .1251 7.9941 1.0 Malaysia ringgit .2445 4.0900 –8.8 New Zealand dollar .6890 1.4514 0.5 Pakistan rupee .00949 105.375 1.0 Philippines peso .0199 50.290 1.4 Singapore dollar .7431 1.3458 –7.0 South Korea won .0009232 1083.21 –10.3 Sri Lanka rupee .0065083 153.65 3.5 Taiwan dollar .03333 30.007 –7.5 Thailand baht .03067 32.600 –9.0 Vietnam dong .00004403 22714 –0.3 US$vs, YTDchg Fri in US$ per US$ (%) Country/currency Americas Asia-Pacific 452 Services 226 Finance 116 Manufacturing 84 Retail trade 75 Transport & utilities 32 Wholesale trade 20 Construction 8 Mining 6 Public administration Source: Symantec THE WALL STREET JOURNAL. BANKS Continued from page B1 cause of a cyberattack. U.S. officials have long acknowledged they remain fearful of—and find it hard to prepare for—the potential confidence effect of an attack on financial data. Jerome Powell, President Donald Trump’s pick as the next head of the Federal Reserve, said recently of cyber risk: “There can never be any sense of comfort that we’ve got this nailed.” Banks and regulators have been trying to devise responses. One method is to conduct “war games,” such as Quantum Dawn in the U.S., or Operation Waking Shark in the U.K. In a 2015 exercise run by the U.S. Treasury known as the Hamilton Series, bankers learned that data disruptions at even small banks could shatter confidence in the broader system. The informal “buddy bank” system, in which two local branches agree to help each other’s customers in a crisis, wasn’t sufficient to stem systemic fears. For big banks, in particular, such experiences reinforced the reality that while some institutions can spend huge amounts on cybersecurity, they can still be vulnerable if there is an overall loss of confidence. And the proliferation of technology companies using small banks to facilitate billions of dollars in mobile payments or digital loans means any institution can become a key cog in the system. “This level of vulnerability to cyberattack didn’t exist in ly . If the GOP makes it Funding Gap easier for U.S. firms to The dollar has declined against other major currencies in 2017, but has held on to the majority of its large bring cash home, 2014-2015 rally, while dollar money market funds based outside the United States provide a source of greenback liquidity for companies around the world. financial markets Share of bonds held by offshore dollar money market funds ICE U.S. Dollar Index may feel the effect Targeting Banks .04652 21.496 –16.3 .1598 6.2561 –11.5 1.1896 .8407 –11.6 .003790 263.85 –10.3 .009685 103.25 –8.6 .1207 8.2857 –4.1 .2823 3.5426 –15.4 .01698 58.889 –3.9 .1197 8.3557 –8.3 1.0245 .9761 –4.2 .2555 3.9135 11.1 .0370 27.0070 –0.3 1.3478 .7419 –8.4 Middle East/Africa Bahrain dinar Egypt pound Israel shekel Kuwait dinar Oman sul rial Qatar rial Saudi Arabia riyal South Africa rand 2.6514 .3772 ... .0566 17.6730 –2.5 .2870 3.4841 –9.5 3.3154 .3016 –1.3 2.5970 .3851 0.03 .2702 3.701 1.7 .2666 3.7505 –0.01 .0728 13.7377 0.3 Close Net Chg % Chg YTD%Chg WSJ Dollar Index 86.49 –0.17–0.19 –6.93 Sources: Tullett Prebon, WSJ Market Data Group Bankers learned data disruptions at even small banks could shatter confidence. 2008,” said Paul Bracken, a professor at the Yale School of Management who has developed war-game scenarios with banks since the 1990s. “The question is how you handle...new ports to enter the system.” One answer was Sheltered Harbor, whose participants range from small, local institutions to giants such as Bank of America Corp., Citigroup Inc., and JPMorgan Chase & Co. Its 34-member board is composed of representatives of individual big banks, groups of smaller firms, trade associations, clearinghouses and broker-dealers. The project was hatched by Phil Venables, chief operational risk officer at Goldman Sachs, and James Rosenthal, Morgan Stanley’s former chief operating officer. Both are now co-chairs of Sheltered Harbor. The idea is to ensure that every U.S. bank has the kind of backups that some of the biggest banks have used since the 1990s: protected in vaults, whether digital or physical, and unalterable once recorded. To participate, banks pay fees ranging from $250 to $25,000 a year, depending on their size. Members must follow guidelines on formatting data, creating a backup vault and submitting to audits. The goal is to make it feasible for backed-up data to start being used within 48 hours. Of course, no defense is foolproof. Mr. Madnick, whose Cybersecurity at MIT Sloan center has studied industry groups that share security information, said such efforts have had mixed success in the past, sometimes because smaller firms find the costs of handling data to be shared prohibitive. There is also a risk that backups are compromised. “You have to ensure the backup copy is not a copy of already scrambled data,” he said. For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. Monday, December 4, 2017 | B11 * * MARKETS Political Shock Waves Rattle Markets The dollar fell Friday as investors weighed heightened political uncertainty in the U.S. against signs that lawmakers may be coming closer to passing sweeping tax overhaul. The Wall Street Journal Dollar Index, which measures the U.S. currency against a basket of 16 others, fell 0.2%, to 86.49. It fell as low as 86.24 during the session. U.S. stocks, bonds and metals prices also swung Friday. Investors sold the dollar after it was CURRENCIES reported that former national security adviser Michael Flynn was prepared to cooperate with the special counsel probe into potential links between the Trump campaign and the Kremlin during last year’s election. Mr. Flynn pleaded guilty Friday morning to lying to the Federal Bureau of Investigation about his communications with the Russian ambassador to the U.S. in December 2016. The currency later pared some of its losses after Senate Majority Leader Mitch McConnell (R., Ky.) said Republicans had the votes to pass a sweeping tax-overhaul bill. The White House has said its tax cuts will generate growth and spark inflation. The dollar on Friday fell 0.3% against the yen, a popular destination for nervous investors. Gold rose 0.4%. After a volatile week for markets that included a series of political developments, the House and Senate are set to try to reconcile competing versions of the tax plan and lawmakers are wrangling to avoid a government shutdown. Reports that Michael Flynn was cooperating with the Russia probe chipped away at the dollar's weekly gain Friday. The Dow Jones Industrial Average climbed last week, lifted by upbeat economic data and signs of progress on a tax bill, despite Friday's decline. 86.8 3.5% WSJ Dollar Index 86.7 86.6 2.5 86.5 2.0 86.4 1.5 86.3 1.0 86.2 0.5 86.1 0 Mon. Tues. Wed. 3M has touted investments in highgrowth technology sectors. 3M , which makes a variety of products such as Post-it notes and backup-camera monitors, contributed 171 points since the index first closed above 23000 in October, according to WSJ Market Data Group. Fri. Mon. Tues. Wed. Thurs. Fri. Semiconductors slid midweek, denting a rally for a group that has outperformed the S&P 500 in 2017. Shares of beaten-down retailers rose following a string of holiday-related sales held online and at brick-and-mortar stores. 106 1350 20% KBW Nasdaq Bank Index L Brands Macy’s Nordstrom PHLX Semiconductor Index 1330 15 104 1310 10 102 1290 5 1270 100 0 1250 98 1230 Mon. Tues. Wed. Thurs. Fri. –5 Mon. Tues. Wed. Thurs. Fri. Mon. Note: All data in 15-minute intervals Sources: FactSet (indexes, stocks); SIX Financial (WSJ Dollar Index) Tues. Wed. The jump from 23000 to 24000 has been one of the more widely shared Dow rallies this year. 3M and UnitedHealth Group both added more than 150 points, while two more stocks added at least 100 and an additional eight companies contributed at least 40 points. Shares of 3M have surged to records since a better-thanexpected earnings report in October. The company has touted investments in highergrowth technology sectors such as semiconductors and data centers. Some of the recent Dow milestones have been driven by big gains from just a handful of companies. The jump from 21000 to 22000 was supported by a 370-point contribution from Boeing, for instance. This time, the aviation giant added 115 points. 0.16% The average daily increase for the Dow industrials during their latest 1,000-point gain Some Big Days for Dow The Dow Jones Industrial Average’s latest milestone was facilitated by some of the largest daily gains in the index’s 120-year history. The Dow added an average of 0.16% a day in the six weeks between its first close above 23000 in October and its close above 24000 on Thursday. That Thurs. Fri. THE WALL STREET JOURNAL. co Fo m rp m e er rs ci on al a us l, e on When the Dow Jones Industrial Average closed above 24000 last week, industrial giant 3M Co. was in the driver’s seat. Thurs. Shares of banks, which some analysts say could be the largest beneﬁciaries of a corporate tax cut, posted their biggest weekly gain since the 2016 election. 3M Helps Dow Reach Its Latest Milestone BY CHELSEY DULANEY DJIA performance 3.0 ly . BY IRA IOSEBASHVILI is the fourth-biggest daily percentage gain between milestones in the history of the index. The Dow’s latest 1,000-point addition—the fifth such climb of the year—was achieved in just 30 days. The Dow and other U.S. stock indexes such as the S&P 500 and Nasdaq Composite Index have surged this year amid an acceleration in global growth, soaring consumer confidence and optimism about a potential U.S. tax overhaul working its way through MONEYBEAT Congress that investors say would juice corporate profits. While big gains from technology firms have been driving forces behind other indexes’ record runs, the Dow’s rally has been largely built on industrial titans such as aviation giant Boeing Co. and conglomerate 3M Co. Boeing has driven roughly 20% of the Dow’s overall point gains this year, while 3M has contributed 10%. The Dow gives the largest weights to the priciest stocks, instead of the companies with the largest market capitalization. That has given Boeing and 3M— which are the most and thirdmost expensive stocks, respectively—a bigger impact on the overall index. Dow milestones are becoming easier to reach as the index keeps climbing and the percentage gain required to rise 1,000 points keeps falling. The Dow gained 4.3% as it moved between 23000 and 24000, for example, less than half what it took to climb from 10000 to 11000 in 1999. But the size of the average daily gain is an indication that it was an impressive feat nonetheless. —Chelsey Dulaney ONLINE WSJ .COM For more MoneyBeat blog posts, go to blogs.wsj.com/ MoneyBeat THE TICKER | Market events coming this week no n- Monday Factory orders Sept., previous up 1.4% Oct., expected down 0.3% Brown-Forman 0.53/0.50 H&R Block (0.72)/(0.67) Keysight Tech. 0.65/0.64 Lululemon 0.52/0.47 Tuesday Thursday ISM non-mfg index Oct., previous 60.1 Nov., expected 59.4 Initial jobless claims Previous 238,000 Expected 238,000 Int’l trade deficit in billions Sept., previous $43.5 bil. Oct., expected $47.4 bil. EIA report: natural gas Earnings expected* Consumer credit Sept., prev. up $20.83 bil. Oct., exp. up $17.5 bil. Estimate/Year Ago($) AutoZone HD Supply Toll Brothers Veeva 9.78/9.36 0.75/0.83 1.19/0.67 0.21/0.22 Wednesday Mort. bankers indexes Purch., previous up 2% Refinan., prev. down 8% EIA status report Previous change in stocks in RICK BOWMER/ASSOCIATED PRESS (TOP); SERGIO FLORES/BLOOMBERG NEWS millions of barrels Crude oil Gasoline Distillates down 3.4 up 3.6 up 2.7 Productivity 3rd qtr. first est. up 3.0% 3rd qtr. rev. est. up 3.2% Unit labor costs 3rd qtr. first est. up 0.5% 3rd qtr. rev. est. up 0.3% Earnings expected* Previous change in stocks in billions of cubic feet down 33 Earnings expected* Estimate/Year Ago($) Cooper Cos. 2.65/2.28 Dollar General 0.94/0.89 Toro 0.28/0.27 Vail (1.92)/(1.70) Friday U.Mich. consumer index Nov., final 98.5 Dec., prelim. 99.4 Nonfarm payrolls Oct., previous 261,000 Nov., expected 190,000 Unemployment rate Oct., previous 4.1% Nov., expected 4.1% Wholesale inventories Sept., previous up 0.3% Oct., expected down 0.4% Estimate/Year Ago($) Broadcom Above, a Vail Resorts Inc. ski slope in Utah. Below, an AutoZone Inc. store in New Mexico. Both companies are slated to report results this week. 4.51/3.47 * FACTSET ESTIMATES EARNINGS-PER-SHARE ESTIMATES DON’T INCLUDE EXTRAORDINARY ITEMS (LOSSES IN PARENTHESES) ADJUSTED FOR STOCK SPLITNOTE: FORECASTS ARE FROM DOW JONES WEEKLY SURVEY OF ECONOMISTS For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. B12 | Monday, December 4, 2017 THE WALL STREET JOURNAL. * ***** MARKETS THE DAILY SHOT By Lev Borodovsky Consumer Conﬁdence Starts to Ripple A year after Donald Trump’s election as president, U.S. consumer-conﬁdence measures are hitting their highest level in years. This upbeat vibe, together with progress toward a U.S. tax overhaul and signs the global economy is ﬁnally breaking out of a yearslong slump, is boosting holiday sales and is even starting to reverse the death-of-retail trade in the stock market. WSJ subscribers can get The Daily Shot— a chart-by-chart brieﬁng on markets and economics— sent to their email each morning. Subscribe at wsj.com/newsletters Consumer sentiment indexes 150 Conference Board Consumer Conﬁdence University of Michigan Consumer Sentiment Index 100 50 Recession Recession 0 1998 ’99 2000 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 The savings rate is falling, a sign of conﬁdence in employment prospects. Beaten-down retailers are beneﬁting from a stronger-than-expected start to the holiday season. Retail sales, change from a year earlier* Personal saving as a percentage of disposable personal income† Retail stocks, performance since Nov. 24 6% 9% 20% 6 10 3 0 co Fo m rp m e er rs ci on al a us l, e on 4 2 0 Recession 0 2015 ’16 ly . The rise in sentiment has been reﬂected in retail sales. ’17 Recession –10 2000 ’05 ’10 ’15 ’17 Monday Tuesday Wednesday *Seasonally adjusted †Seasonally adjusted annual rate Sources: The Conference Board (consumer conﬁdence); University of Michigan (consumer sentiment); Census Bureau via Federal Reserve Bank of St. Louis (retail sales); Bureau of Economic Analysis via Federal Reserve Bank of St. Louis (personal saving); SIX Financial (stocks) HEARD ON THE STREET FINANCIAL ANALYSIS & COMMENTARY Email: firstname.lastname@example.org Economy Still Has Room to Grow Demand Picture Change in gross domestic product at annual rate, quarterly GDP 6% GDP excluding trade and inventory effects n- 4 2 0 no The evidence that the U.S. economy has been accelerating is thinner than the headlines shout. But with the rest of the world economy improving and a possible tax-cut jolt coming soon, the good news is there is room for a pickup in growth. In the years since the financial crisis, the U.S. economy has been in a deep rut. Growth averaged just 2.1% a year from the end of the recession to the first quarter of this year, making it the most tepid expansion on record. But lately GDP has perked up, growing at a 3.1% rate in the second quarter and 3.3% in the third. Put that together with steady hiring and an ebullient stock market, the economy looks very strong. But much of the strength in GDP over the past two quarters wasn’t actually the result of stronger domestic demand. Instead, the growth was driven by a narrowing of the trade deficit and an increase in inventories, both –2 2014 ’15 ’16 ’17 THE WALL STREET JOURNAL. Source: Commerce Department of which will likely prove temporary. Absent trade and inventory swings, demand grew at an average rate of 2.4% over the past two quarters, matching the average pace over the previous four quarters. Meanwhile, hiring, though strong, has been slowing since 2015. And the stock market’s rise has been driven not so much by U.S. economic growth as an increase in valuations and a pickup in profits from overseas. The S&P 500 trades at 18.4 expected earnings, compared with 16.8 times at the start of the year. And in the third quarter, earnings at companies in the S&P 500 with greater than half their sales abroad were up 13.4% from a year earlier, according to FactSet, compared with 2.3% for companies with less than half their sales abroad. Overseas economies have been looking better all year. The surprise is that hardly any countries are struggling. Deutsche Bank economist Torsten Slok points out that the International Monetary Fund forecasts only six of 192 countries will register an economic contraction next year. That would be the fewest on record. The global economic environment counts as good news for the U.S. It should continue to bolster companies’ overseas profits, and it could push up U.S. growth. Similarly, the tax cut, if it passes, would increase companies’ profits and would provide a boost of around 0.3 percentage point to GDP growth next year, according to a preliminary analysis by Bank of America Merrill Lynch. These effects mean U.S. growth should stay healthy but not accelerate too much from here. With all of the optimism, it is worth watching just where the growth comes from. —Justin Lahart OVERHEARD It isn’t very often that a joke turns into a new set of wheels and rarer still that that vehicle is a Polish joke. While filming the movie “Inferno” last year in Budapest, the actor Tom Hanks posed next to a Fiat 126p, a tiny vehicle that is the butt of jokes. Licensed from the Italian automobile manufacturer, built for decades in BielskoBiala, Poland, and widely sold in Hungary when it was behind the Iron Curtain, Mr. Hanks posed beside a number of the diminutive 23-horsepower vehicles, writing on social media: “So excited about my new car!” Be careful what you wish for. The flattered citizens of the town where it was once made bought Mr. Hanks one for his birthday, paid to refurbish it and shipped it to him. Mr. Hanks promptly took the souped-up version for a drive, followed by photographers, and really did look excited. RV Manufacturers Soar as Younger Drivers Go ‘Glamping’ For anyone who has gotten stuck on a mountain road behind a massive recreational vehicle, get used to it: There are a lot more on the highway. Recreational vehicles, ranging from bus-size motor homes to retro trailers, have been a boom-and-bust industry since they first became popular in the early 1970s. Now a wave of retiring baby boomers and a surprisingly young new fan base have sent U.S. unit sales above their housingboom peak. Shares of the two leading publicly traded manufacturers of RVs, Thor Industries and smaller Winnebago Industries, each King of the Road Annual wholesale RV shipments 500,000 Forecast 400,000 300,000 200,000 100,000 0 1977 ’85 ’95 2005 ’18 Sources: Recreation Vehicle Industry Association; Winnebago hit records last week. The fundamentals—fuel prices, interest rates, disposable income and demographics—all look solid. That has the Recreation Vehicle Industry Association Macy's Gap Target projecting a further jump this year and next. Despite that, delighted investors might want to unhitch themselves from these stocks. When things go badly for the economy, they go very badly for RV makers. Shares of onetime industry leader Winnebago plunged by 94% from peak to trough in the first 1970s energy crisis and by 78% in the second one. A lack of easy credit and consumer confidence can be just as devastating. Shares fell 92% between their housing-boom peak and housing-bust trough, while wholesale RV shipments fell by two-thirds. While an energy shock or sharp economic downturn doesn’t loom on the immediate horizon, the industry isn’t quite as robust as unit sales figures suggest. Younger “glampers” increasingly are opting for cheaper, towable vehicles, not huge, motorized ones. Leading RV retailer Camping World Holdings reported a 14.5% increase in same-store new-vehicle sales for its third quarter compared with a year earlier, even as the average price of new vehicles sold fell 1.6% because of the shift to cheaper offerings. Given the industry’s sharp cyclicality, RV makers really should trade more like auto manufacturers, yet the publicly traded industry leaders—No. 2 by revenue Forest River, is a subsidiary of Warren Buffett’s Berkshire Hathaway—have an average forward price/earnings ratio of 17.4 times, almost 2½ times the average of seven auto companies, according to FactSet. The leading dealership, Camping World Holdings, commands a 40% premium to a basket of auto dealers, but that seems less egregious given the fat margins it earns from services and used RV sales, compared with new vehicles. For the manufacturers, though, it is about time for a rest stop. —Spencer Jakab Thursday Friday THE WALL STREET JOURNAL. WSJ.com/Heard CVS-Aetna Deal Tests Positive CVS Health has taken bold action to win back investors. The potential benefits outweigh the risks. The pharmacy giant agreed to a $69 billion acquisition of health insurer Aetna. This will reshape the CVS business by making use of the chain’s walk-in clinics to deliver care to patients. CVS plans significant new investments to beef up its medical capabilities. CVS is taking a major risk by plunking down that much money. At more than 33 times trailing net income, Aetna isn’t exactly selling at a moment of weakness. And the deal will strain the CVS balance sheet. The potential is clear: Bringing pharmacy benefit management and insurance under the same roof is a proven winner, as the continued strong performance of UnitedHealth Group demonstrates. Bulking up ahead of any possible entry by Amazon.com into the prescription drug business is a smart idea. But using the CVS retail presence to lower health costs offers a unique twist. Aetna’s health-care costs could drop significantly if everything goes right. That would boost the insurer’s profitability. It is the right moment to shake up the CVS business model. Shares are down so far this year in a strong market for health-care stocks. The deal will likely beget more consolidation as competitors respond. That should bode well for insurance stocks like Cigna and Humana, as well as pharmacy stocks such as Walgreens Boots Alliance. After thinking through the potential of this tie up, it isn’t too hard to see why. —Charley Grant For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. JOURNAL REPORT | A MONTHLY ANALYSIS Follo The E w xper ts A Convn Online Monday, December 4, 2017 | R1 e DETA rsation I LS THE WALL STREET JOURNAL. © 2017 Dow Jones & Company. All Rights Reserved. INSIDE , R2 What to Consider Before You Dash Into Cash SAVING FOR RETIREMENT Ask Encore: Looking for Part-Time Work A reader wonders where to start when seeking a job during retirement R2 Now in 401(k)s: Alternative Investments Alternative-asset managers are starting to make some headway in the retirement-fund market R4 In this bull market, many investors wonder if it’s time to take money off the table—and where to put it SAVING FOR COLLEGE Hedging Your College Bets We look at how to save for college when you don’t know if the child will even go in 18 years R10 MONEY MANAGERS Bias Found in Mutual-Fund Managers’ Promotions A study finds that women face headwinds that keep top performers from rising as fast and high as they could R11 SECTOR STRATEGY U.S. Science/Technology Funds Are Up 37.3% in 2017 ly . In a year when U.S. large-cap stocks are strong, some overseas sectors do even better R12 NEWS CHALLENGE BY MICHAEL A. POLLOCK Real Estate Take our quiz to test your smarts on houses and property R14 co Fo m rp m e er rs ci on al a us l, e on ROBERT NEUBECKER AS STOCKS CONTINUE to march mostly higher, many investors are asking the same question: Isn’t this a good time to sell stocks and put more of my portfolio into cash? The broadly simple answer, many financial experts say, is that taking some money off the table could make sense for anyone who needs it soon. But, they add, it might be a really bad idea for those who have a long-term investment horizon and are mainly just worried about another market correction. But that’s the simple answer. Individual investors still need to figure out how much cash—meaning uninvested assets in a portfolio, as well as low-interest holdings like a bank savings account—does it make sense to have. In addition, where should an investor park that cash? And what’s the best way to build cash without sabotaging a long-term investment strategy? Any move to raise cash should be based on needs and be consistent with the goals of a long-term financial plan, not done in reaction to each twitch and turn in the markets, professionals say. “There have been many times during this bull market when people have said for any number of reasons that now was the time to take money off the table—and it turned out that it wasn’t,” says David Kelly, chief global strategist at J.P. Morgan Asset Management. Here are some questions to consider before building a lot of cash in a portfolio: 1. Valuations are high, so why not shift from stocks into cash now? Investors generally get better returns by buying stocks more aggressively after a major market downdraft and then by reducing equity risk when valuations have risen a lot, says David Giroux, who manages T. Rowe Price Capital Appreciation Fund (PRWCX). With U.S. stock valuations now above long-term averages, he says, it might make sense to trim Please turn to the next page SCOREBOARD November 2017 fund performance, total return by fund type. More on R2. U.S. stocks* Intl. stocks* Bonds (intmd.) 2.6% 0.8% –0.2% *Diversiﬁed funds only, excluding sector and regional/country funds Source: Lipper He knows when you’re awake and trading? Well, not quite. no THE ONLY SANTA Claus rally worth betting on doesn’t arrive until Christmas, just like the big man himself. If this year is like years past, however, that won’t stop countless assertions that any pre-Christmas rally is also a Santa Claus rally. Don’t fall for this apparent holiday cheer. There’s no reason to become more bullish just because Christmas is getting closer. If anything, Decembers leading up to Christmas have historically been a below-average period for stocks. Since the Dow Jones Industrial Average was created in 1896, the Dow has gained an average of just 0.24% between Dec. 1 and Dec. 24. That’s barely half the average 1stthrough-24th gains of all months in the calendar. Seven other months have better records than December. The period after Santa leaves is another story. Between Christmas and New Year’s Day in all years since the late 1800s, the Dow has turned in an average gain of 1%. That may n- BY MARK HULBERT SHANNON STAPLETON/REUTERS NO, VIRGINIA, THERE ISN’T A SANTA CLAUS RALLY not seem like much, but it’s eight times as large as the 120-year average of all five-day periods during the year. Of course, just because the last week of the year has a strong upward bias doesn’t mean a gain is guaranteed. Since the late 1800s, for example, the Dow between Christ- mas and New Year’s has risen in an average of three out of every four years. While that’s better than the 55% probability of a gain across all five-day periods of the last 120 years, it still means the stock market should be expected to fall between Christmas and New Year’s in one of every four years. Last year was one of these years, by the way. The Dow lost 0.9%. Why would the market exhibit above-average strength between Christmas and New Year’s? Researchers offer a number of reasons. One is that tax-loss selling begins to let up as the end of the year approaches. This is the practice of selling stocks held at a loss to offset capital gains on which a tax would otherwise be due. Though traders theoretically can harvest losses through the last day of the year, many take the last week of the year off and thus stop trading before Christmas. The market rebounds as this artificial selling pressure is removed. Another reason for above-average strength between Christmas and New Year’s is a controversial practice among some mutual-fund managers known as “leaning for the tape.” This occurs when managers try to inflate the prices of stocks they already own by purchasing more shares at year-end. Researchers have found that the practice can increase returns by as much as half a percentage point for large-cap funds and 2 percentage points for small-cap funds. The research that first documented that funds engage in leaning for the tape was published 15 years ago. In an interview, Adam Reed, a finance professor at the University of North Carolina at Chapel Hill and one of the authors of that research, was quick to say that a lot has changed since then. But, he added, fund managers’ incentive to lean for the tape remains as powerful as ever, and he would be surprised if the practice doesn’t persist at least to some extent. The bottom line: Don’t let the joys of the coming Christmas season lead you to see the stock market through rose-colored glasses. The time to bet on seasonal strength will be immediately afterward, just as everyone else is returning to the stores to return or exchange unwanted gifts. Mr. Hulbert is the founder of the Hulbert Financial Digest and a senior columnist for MarketWatch. He can be reached at email@example.com. WHAT DO PEOPLE really INVEST IN? Hint: It’s not actually stocks or bonds. What people really invest in is what they hope to get out of life. To help them get there, you can’t just approach investing from one point of view. We prefer to cross-pollinate and aggregate many points of view, to form our best point of view. So our clients might just get what they want out of life. Or they could get even more. invesco.com/MoreOutOfLife NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE Invesco Distributors, Inc. For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. R2 | Monday, December 4, 2017 JOURNAL REPORT | INVESTING IN FUNDS & ETFS ASK ENCORE | GLENN RUFFENACH Part-Time Work in Retirement: Where to Start Also: We answer questions on IRAs and on continuing-care retirement communities You certainly won’t be alone. In the coming decade, the 65- to 74-yearold and 75-and-older age groups will be the fastest-growing segments in the labor force, according to the Bureau of Labor Statistics. Currently, among all workers age 65 and older, 40% work part time. Yes, part-time work enables people to beef up their retirement savings. But other benefits are equally important: keeping your mind active; staying engaged with other people; easing the transition to (what could become) full-time retirement; and, ideally, finding satisfaction in a new career. In a survey published in March by the Employee Benefit Research Institute in Washington, 90% of retirees who work for pay said they do so because they “want to stay active and involved”; 82% said they simply enjoy working. As for good starting points, one of my favorite books about retirement is “Second-Act Careers,” by Nancy Collamer, a career coach in Old Greenwich, Conn. The book is divided into two parts. The first highlights different models for turning one’s interests and passions into income. Real-life examples (including food bloggers, pet photographers, nutrition coaches and tour guides) are plentiful and enlightening. The second part helps readers figure out what type of life and work they might want to pursue. Equally valuable: Ms. Collamer maintains a list on her website, mylifestylecareer.com, of more than 100 “Second-Act Career Resources.” The focus here is on “flexible, parttime and entrepreneurial options.” Want to learn how to breed dogs? Write a novel? Work in a national park? Teach English overseas? There’s a resource for that. More Older Workers Why They Work Between 2014 and 2024, the annual growth rate in the labor force, by age, is projected to be: Asked why they continue to work for pay in retirement, surveyed retirees said*: 8% Want to stay active and involved 90% 6 Enjoy working 82% Want money to buy extras 67% Job opportunity came along 47% Need money to make ends meet 42% 4 2 0 -1.4 -0.8 Decrease in value of savings/investments 23% Keep health insurance or other beneﬁts –2 16-24 25-34 35-44 45-54 55 -64 65-74 75+ THE WALL STREET JOURNAL. Source: Bureau of Labor Statistics Also, check out encore.org, a San Franciscobased nonprofit that promotes encore careers; and “The Encore Career Handbook,” by Marci Alboher, a guide to finding ways to “make a living and a difference in the second half of life.” Both are essential reading. i i trust typically pays income for life to the donor, and after the donor dies it gives the remaining assets to one or more charities. A charitable remainder unitrust, among other wrinkles, allows the donor to make additional contributions to the trust over time. As you probably know, transfers directly from an IRA to a charity (known as “qualified charitable distributions”) are permitted for people over age 70½. But to get the tax break associated with such transfers, several requirements must be met. One requirement, says Natalie Choate, a lawyer specializing in retirement benefits at Nutter McClennen & Fish in Boston, is that 100% of the gift must go immediately into the charity’s coffers, with the donor/IRA owner getting nothing back. But a gift to a charitable remainder trust (or unitrust) doesn’t meet that test, Ms. Choate notes, since the charity doesn’t get the money immediately and the donor is getting something in return. So the route usually recommended for charitable giving for this situation would be, first, continue to fund the unitrust with transfers of appreciated stocks, and, second, make additional charitable gifts (if desired) by transferring cash or investments directly from the IRA to a public charity, Ms. Choate says. In this way, you fulfill the minimum-distribution I’m sorry, but you can’t do this. Some background: With a charitable remainder trust, a person places an appreciated asset (stocks, property) inside a trust. The What to Consider Before Going Into Cash 2. Interest rates have risen, but over time, investors have done much better in the stock market. Comparing returns on $1,000 invested at year-end 2012. $2,000 1,800 1,600 1,400 1,200 1,000 800 S&P 500 Bonds* Money market / Savings† 2013 2014 2015 2016 2017 *iShares broad-bond ETF, symbol AGG † Money market is $1,005 and savings $1,004 Sources: FactSet (S&P 500, AGG); FDIC (national rate) THE WALL STREET JOURNAL. 3. Where is the best place to park cash? Use two separate parking places, says Paul Gaudio, a wealth-planning strategist at Bryn Mawr Trust’s Princeton, N.J., office. One of those is inside an investment portfolio, representing the cash an investor might use to buy more stocks or bonds or to cover fees and taxes. In portfolios he oversees, that cash usually represents a modest 5% or less of the total, though Mr. Gaudio has increased cash for some clients and plans to revisit the cash question with them toward the end of the first quarter of 2018. The second parking spot should be an account where an individual wants to keep funds in reserve for any planned or extraordinary expenses, Mr. Gaudio says. Bank accounts are one option, but an investor might put some money into a money-market fund or a short-term U.S. Treasury security, he says. no Is there a prudent way of taking some money off the table? Base the decision about how much cash to raise on expected needs for perhaps six months, says Kate Stalter, co-owner and senior adviser at Better Money Decisions, in Albuquerque, N.M. An investor also should consider selling some equity holdings if the actual allocations in a portfolio have moved out of line with the targets set by an investor’s financial plan, she adds. So, if the plan called for holding 60% in stocks, and the rally has pushed an investor’s equities allocation significantly above that, trim the equities back to 60% and deploy the cash elsewhere. An alternative strategy, says fund manager Mark Travis, might be doing the opposite of buying by dollar-cost averaging—which involves putting a set amount of money into stocks or a mutual fund each month, regardless of market conditions. In this case, an investor might raise cash gradually as markets advance by automatically selling a set amount of assets monthly. Mr. Travis, who oversees Intrepid Capital Fund (ICMBX), likes to change his fund’s allocations gradually, letting the cash position drift up or down depending on the trends in market valuations. Lost Opportunity n- Continued from the prior page stockholdings tactically. But tactical strategies carry more risk than investors may realize. A key problem is that doing them effectively requires being right about both when to take money out of stocks and when to go back into the market, notes Peter Andersen, chief investment officer at Fiduciary Trust Co., Boston. Although short-term interest rates are rising—with high-yield bank savings paying 1% to 2%—putting a lot into cash could pose an opportunity loss if the stock rally continues. “This is a tough enough business anyway, and [by trading tactically] you may be stacking the deck against yourself,” Mr. Andersen says. i i i In a recent column, you talked about the timing of moving into a continuing-care retirement community. But how do I evaluate such communities? In particular, how do I gauge their financial health? Good question. A CCRC might have wonderful amenities: fashionable housing, fine dining, a high-tech fitness center. But if it can’t keep its promises—if it can’t provide a secure and comfortable place to live, whatever the changes to your health—those amenities won’t count for much. Start with CARF International (carf.org), a nonprofit group that accredits health and human services, including CCRCs. On the home page, click on “Resources” and, then, “Retirement Living.” Here, you will find the aptly named “Consumer Guide to Understanding Financial Performance and Reporting in Continuing Care Retirement Communities.” It’s a valuable primer on the subject and contains a good list of questions to ask a community’s managers. (The same page on the CARF website also links to earlier articles in The Wall Street Journal about CCRCs and their finances.) Next, check out the National Continuing Care Residents’ Association (naccra.com) and its Residents’ Learning Center (naccrau.com). With the latter, highlight “CCRC Living” and click on “Consumer Guides.” Among the resources: a detailed (92-page) and invaluable list of questions and answers for prospective CCRC residents. You might need a financial planner or accountant to help make sense of some of the figures you get from a continuing-care community—assuming it’s willing to share those figures with you in the first place. If management is reluctant or unwilling to do so, then walk away. co Fo m rp m e er rs ci on al a us l, e on My wife and I (ages 81 and 85) each have a regular individual retirement account, primarily invested in stocks, and have made annual cash withdrawals every year since we became age-eligible. We also have a long-established charitable remainder unitrust at a state university, and have been making annual contributions to it by transferring appreciated stocks from our regular stock account for 20 years, receiving a computed deduction. This trust pays us 5% a year on the account value and is taxed as income. Our question: Can we transfer stocks and/ or cash from our IRAs directly to this trust without having it be considered taxable and at the same time meet the required-annualwithdrawal rule? Mr. Ruffenach is a former reporter and editor for The Wall Street Journal. His column examines financial issues for those thinking about, planning and living their retirement. Send questions and comments to firstname.lastname@example.org. *Includes multiple responses Source: Employee Beneﬁt Research Institute and Greenwald & Associates, '2017 Retirement Conﬁdence Survey' AGE i 13% requirement without increasing gross income. An additional note: A charitable remainder unitrust, Ms. Choate says, can be a good choice as the death beneficiary of an IRA, where the IRA owner wants to benefit both a human beneficiary (such as a spouse or child) with a life income and a charity (with the remainder interest). ly . I would like to work part time in retirement. But I want to try something that’s different from my primary career. Any good starting points? Any suggestions? 4. How can an investor decide when to redeploy cash into stocks? Instead of waiting for a market correction and then trying to figure out whether it’s a good time to reinvest, develop a plan for buying stocks in advance, says Spuds Powell, managing director of Los Angeles-based advisory firm Kayne Anderson Rudnick. Leaving the decision until stocks are plummeting is a bad idea, because many people become paralyzed by worry that the bottom will be a lot farther down, he says. Work out a strategy with an adviser that if a broad market average were to fall by a certain percentage, the adviser would reinvest a set portion of the cash in a portfolio in stocks. People who manage their own holdings in a brokerage account could accomplish the same thing by simply placing limit orders that would trigger purchases when prices dropped by a specified amount. 5. Still, the temptation to bail out will always be there. Could some investment strategies make it easier to have the discipline to hold less cash? Just as limit orders could be useful for planning when to buy, they also can offer protection against an abrupt market correction, notes Mr. Gaudio of Bryn Mawr Trust. Such an order in a brokerage account might trigger the sale of stocks or exchange-traded funds if prices fell by a certain percentage or to a specified price point, limiting the risk of further losses. But keep in mind that such sales could trigger capital gains and might prove self-defeating if stocks dip, but then rebound strongly shortly afterward, Mr. Gaudio adds. A solution used by Mr. Powell of Kayne Anderson Rudnick is to design a portfolio, or a portion of a portfolio, that distributes a steady flow of income each month from a combination of interest payments and dividends. “When people see that regular stream of income, it goes a long way toward eliminating the anxiety some have about the market,” Mr. Powell says. Mr. Pollock is a writer in Ridgewood, N.J. He can be reached at email@example.com. Follow The Experts >> This Journal Report doesn’t stop here. Join us online with The Experts—a group of industry, academic and cultural thinkers who weigh in on the latest investing and personal-finance issues raised in this and future reports. Read what they have to say at WSJ.com/Experts. Posts featured throughout the week include: “How You Can Lower Your Risk of Identity Theft,” by George Papadopoulos, a fee-only wealth manager in Novi, Mich. “The Problem With the ‘105 Minus Age’ Allocation Rule,” by Patrick Lach, an associate professor of finance at Bellarmine University and founder of Lach Financial in Louisville, Ky. And on page R13 of this report, you can read excerpts of some earlier online discussions. The Experts offer views on avoiding confirmation bias when investing, costly estate-planning mistakes with IRAs and 401(k)s, and more. The Journal Report welcomes your comments—by mail, fax or email. Letters should be addressed to Lawrence Rout, The Wall Street Journal, 4300 Route 1 North, South Brunswick, N.J. 08852. The fax number is 609-520-7256, and the email address is firstname.lastname@example.org. THE JOURNAL REPORT For advertising information please contact Katy Lawrence at 212-416-4119 or email@example.com MONTHLY MONITOR | WILLIAM POWER U.S.-Stock Funds Push 2017 Gains to 17% but Foreign Funds Beckon Stock-fund investors on average are riding double-digit gains as the 2017 finish line approaches. The question remains: How long will this stretched-thin bull market last? The average diversified U.S.-stock fund registered a total return of 2.6% in November and now boasts a 17.4% gain for the year to date, according to Thomson Reuters Lipper data. Internationalstock funds continue to rise as well, up 0.8% in November, to push their year-to-date gain to nearly 25%. Emerging-markets funds in particular have had a good year, up more than 30%. The U.S. stock market continues to be boosted by solid earnings gains by large companies. Even though many analysts fret about the high valuations for U.S. stocks—and many are advising that investors redirect more money to overseas markets—the skepticism hasn’t ended the market’s string of record highs yet. Tech stocks, particularly large ones, are dominating. “It has been quite a bit of a one-sided market performance. Tech and health care have been carrying the weight throughout the year,” says Omar Aguilar, chief investment officer for equities at Charles Schwab Investment Management in San Francisco. Leading the way among stock-fund sectors is science and technology, up 37% this year, including a 1.5% gain in November. (More on sector performance and the dominance of growth stocks on page R12.) Mr. Aguilar says that the other dynamic has been dollar deprecation, which has helped the economy and large-cap multinational stocks. ”We started the year by proposing that people needed to move more money internationally and reallocate from the U.S.,” he says. “We still believe that is the case. The U.S. is already at the end of the [economic] cycle.” That said, he says he remains optimistic that it will be a positive year for stocks in 2018, both in the U.S. and overseas. And, he says, “I’m more optimistic than six weeks ago” because of recent economic data. Bond funds up 3.1% for 2017 Bond funds fell modestly on the month. The Federal Reserve is likely to raise short-term interest rates again in December during its midmonth policy meeting. But so far, investors have taken the Fed’s measured rate-increase actions as a sign of confidence in the economy. Funds focused on intermediate-maturity, investment-grade debt (the most common type of fixed-income fund) were down 0.2% in November, to put their year-to-date gain at 3.1%. Mr. Power is a Wall Street Journal news editor in South Brunswick, N.J. Email him at firstname.lastname@example.org. REPRINTS AVAILABLE FULL PAPER: The entire Wall Street Journal issue that includes the Investing in Funds & ETFs report can be obtained for $10 a copy. Order by: Phone: 1-800-JOURNAL Fax: 1-413-598-2259 Mail*: Investing in Funds & ETFs Dow Jones & Co. Attn: Back Copy Department 84 Second Ave. Chicopee, Mass. 01020-4615 JOURNAL REPORT ONLY: Bulk orders of this Journal Report section only may take up to six weeks for delivery and can be obtained for $5 for one copy, $2 for each additional copy up to 50, and 25 cents for each copy thereafter. 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Which is one of the reasons Morningstar named our team 2016 U.S. Fixed-Income Fund Manager of the Year and included the Fidelity Total Bond Fund on their most recent Great 38 List.2 As part of one of the largest ﬁxed income teams in the industry, Fund Managers Ford O’Neil, Matt Conti, Jeff Moore, and Mike Foggin have successfully met their investors’ needs by being ﬂexible while carefully balancing risk with potential reward. Average Annual Total Returns Life of Fund 1-year 3-year 5-year 10-year Fidelity® Total Bond Fund 1.58% 3.45% 2.85% 5.03% 5.02% Bloomberg Barclays U.S. Aggregate Bond 0.0 7% 2.71% 2.06% 4.27% 4.33% Intermediate-Term Bond Category Average 0.83% 2.51% 2.12% 4.26% 4.06% as of 09/30/2017 Since 10/15/2002 Gross Expense Ratio 0.45% no n- Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value will ﬂuctuate, so investors may have a gain or loss when shares are sold. Current performance may be higher or lower than what is quoted, and investors should visit Fidelity.com/performance for most recent month-end performance. Learn about Total Bond Fund. Fidelity.com/morningstar | 800.FIDELITY or call your advisor. Before investing in any mutual fund or exchange-traded fund, you should consider its investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus, offering circular, or, if available, a summary prospectus containing this information. Read it carefully. Past performance is no guarantee of future results. It is not possible to invest directly in an index. All market indices are unmanaged. Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any. Life-of-fund ﬁgures are reported as of the commencement date to the period indicated. As of 09/30/17, Fidelity Total Bond Fund outperformed the Bloomberg Barclays U.S. Aggregate Bond Index and the Morningstar Intermediate-Term Bond category average over the 1-year, 3-year, 5-year, 10-year, and life-of-fund periods. In general, the bond market is volatile, and ﬁxed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inﬂation risk, liquidity risk, call risk, and credit and default risks for both issuers and counterparties. Lower-quality ﬁxed income securities involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Unlike individual bonds, most bond funds do not have a maturity date, so holding them until maturity to avoid losses caused by price volatility is not possible. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magniﬁed in emerging markets. The fund can invest in securities that may have a leveraging effect (such as derivatives and forward-settling securities) that may increase market exposure, magnify investment risks, and cause losses to be realized more quickly. Gross expense ratio is the total annual fund or class operating expense ratio from the most recent prospectus (before waivers or reimbursements) and generally is based on amounts incurred during the most recent ﬁscal year. Expense ratio is the total annual fund operating expense ratio from the fund’s most recent prospectus. Morningstar Awards © 2017 Morningstar, Inc. All rights reserved. Awarded to Ford O’Neil and Team, FTBFX, for Fixed-Income Fund Manager of the Year (2016), U.S. 1 Morningstar’s award recognizes Ford O’Neil, Matthew Conti, Jeffrey Moore, and Michael Foggin for Fidelity Total Bond Fund (FTBFX). Established in 1988, the Morningstar Fund Manager of the Year award recognizes portfolio managers who demonstrate excellent investment skill and the courage to differ from the consensus to beneﬁt investors. To qualify for the award, managers’ funds must have not only posted impressive returns for the year, but the managers also must have a record of delivering outstanding long-term risk-adjusted performance and of aligning their interests with shareholders’. Nominated funds must be Morningstar Medalists—a fund that has garnered a Morningstar Analyst Rating™ of Gold, Silver, or Bronze. The Fund Manager of the Year award winners are chosen based on research and in-depth qualitative evaluation by Morningstar’s Manager Research Group. Research Group consists of various wholly owned subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC. Analyst Ratings are subjective in nature and should not be used as the sole basis for investment decisions. Analyst Ratings are based on Morningstar’s Manager Research Group’s current expectations about future events and therefore involve unknown risks and uncertainties that may cause such expectations not to occur or to differ signiﬁcantly from what was expected. Analyst Ratings are not guarantees nor should they be viewed as an assessment of a fund’s or the fund’s underlying securities’ creditworthiness. The Morningstar Analyst Rating is a subjective, forward-looking evaluation that considers a combination of qualitative and quantitative factors to rate funds on ﬁve key pillars: process, performance, people, parent, and price. Gold is the highest of four Analyst Rating categories. For the full rating methodology, go to Corporate.Morningstar.com/us/documents/ MethodologyDocuments/AnalystRatingforFundsMethodology.pdf. 2 Out of a universe of more than 8,000 funds, only 38 funds passed all the screens (cheapest quintile of category, portfolio managers with at least $1 million invested, risk below “High” level, analyst rating of “Bronze” or higher, parent rating of “Positive,” and life-of-manager returns above benchmark). Morningstar FundInvestor June 2017 Issue. © 2017 Morningstar, Inc. All rights reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or redistributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Fidelity does not review the Morningstar data and, for mutual fund performance, you should check the fund’s current prospectus for the most up-to-date information concerning applicable loads, fees, and expenses. Fidelity Brokerage Services LLC, Member NYSE, SIPC. © 2017 FMR LLC. All rights reserved. 789739.6.0 For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. R4 | Monday, December 4, 2017 JOURNAL REPORT | INVESTING IN FUNDS & ETFS SAVING FOR RETIREMENT Now in 401(k)s: Alternative Investments Hedge funds, real estate and other assets are finally breaking into some retirement plans “People understand the problem of shrinking public markets,” he says. “If you’re only invested in index products, you’re missing out on the vast majority of small and midsize businesses and the tech unicorns, which are staying private.” Mr. Albert adds that while “401(k) investors used to have access to the broad economy of the U.S., that’s just not true anymore.” BY BAILEY MCCANN “The necessary education required for alternative investments is a challenging headwind for plan sponsors,” says Peter Ferrise, director of investments for PNC Retirement Solutions. PNC Retirement provides a range of services for the individual retirement market, including help with investments. Mr. Ferrise has seen interest in alternatives from retirement-plan sponsors, but adds that plan sponsors are often at a loss about how best to explain alternatives to plan participants. This disconnect tracks with what IZHAR COHEN the retirement team at BlackRock Inc. is seeing in its defined-contribution group. “There is a distinction between alternative assets and alternative strategies,” says Nick Nefouse, managing director and head of Defined Contribution Investment Strategy at BlackRock. “Alternative assets are here, they are in menus. Moving the conversation to specific alternative strategies and understanding what they do is harder.” Added flexibility? In this educational vacuum, target-date funds have emerged as a popular vehicle for cautious plan sponsors. Target-date funds are agebased funds that are designed to get more conservative as an individual gets closer to retirement age. “The structure allows for the kind of asset-bundling sponsors typically want to see to achieve diversifica- FUNDAMENTALS OF INVESTING tion,” says Stace Hilbrant, managing director of 401k Advisors LLC. Mr. Hilbrant says that with a target-date fund, plan sponsors can manage some of the common risks associated with alternatives, including liquidity constraints and volatility in returns, by creating a diverse investment pool that looks more like a pension portfolio. Real-estate investment trusts, or REITs, and interval funds, which are funds that periodically buy back fund shares instead of trading on public exchanges, have also gained traction with plan sponsors and wealth managers. These two types of investments pool together exposure to more-illiquid asset classes like private equity and real estate, while maintaining a cash position alongside those investments so investors can come and go from the funds without running into roadblocks. Private-equity investment firms, meanwhile, including Pantheon LP and Partners Group, have created products that provide exposure to private equity while tamping down fees by including certain performance thresholds before performance fees are charged. Kevin Albert, a partner at Pantheon, is involved with the company’s efforts in the defined-contribution business. He says performance-based pricing has been popular with fee-conscious plan sponsors. They see the need for new sources of diversification. gued that at current share prices, putting money into an S&P 500 index fund is more speculation than investment. GMO breaks down stock-market returns into four components—dividend yield, earnings growth, profit margin and P/E multiple. Over long periods, dividends and earnings drive returns, while margin and multiple changes can drive short-term returns. Since 1970, almost all of the S&P 500’s annualized real return of 6.3% has come from dividends and earnings growth. Only 0.60 percentage point—less than 10%—of that return has come from margin and multiple changes. Since 2007, however, margin and multiple expansion have contributed slightly more than half of the index’s 13.6% annualized real return. Messrs. Montier and Kadnar say their approach is similar to the Shiller P/E, but they try to account for the cyclicality of earnings in different ways. Of course, there’s no natural law that says today’s high margins must revert to their long-term norm in seven years, which is GMO’s working assumption. ‘We’ve noted a shift in how alternatives are viewed.’ Artivest CEO James Waldinger Technology, by enabling broader access to fund disclosures and educational material necessary to understand alternatives, is also removing some barriers to alternative investing. Platforms like Artivest, which provide wealth managers with access to interval funds and other private funds, have used new technology to build an infrastructure around alternatives similar to what wealth managers are used to seeing with mutual funds and exchangetraded funds. “Interest in alternatives from wealth managers has picked up significantly in the past 12 months,” says Artivest CEO James Waldinger. “We’ve noted a shift in how alternatives are viewed,” Mr. Waldinger says. “Previously these funds were seen largely as an option but an esoteric one. Now, wealth managers view alternatives as viable investment.” Kirk Chisholm, wealth manager and principal at Innovative Advisory Group, agrees with Mr. Waldinger. When Mr. Chisholm works with investors, he says he likes to focus the discussion on portfolio outcomes and education. He doesn’t want the conversation to get caught up in how certain asset classes are perceived, he says. “Risky investments,” Mr. Chisholm says, “are the ones where you, the investor, don’t understand what the risks are and what you could lose.” ly . Challenge for the plans More disclosure co Fo m rp m e er rs ci on al a us l, e on HEDGE FUNDS, private equity and real estate have had a tough time breaking into the individual retirement market. But, while plan sponsors are cautious, alternative-asset managers are starting to make some headway. In recent years, alternative investments such as hedge funds, privateequity and real-estate firms have all made a push to be included in 401(k)s and other defined-contribution retirement plans. The companies argue that the active-management and long-duration strategies they offer add necessary diversification to portfolios that have become largely defined by passive investments in recent years. That message has been received by wealth managers looking for new options for some of their private clients. But it has been a tougher sell with sponsors of 401(k) and definedcontribution plans. Employees with access to 401(k)s and defined-contribution plans typically get a menu of low-cost passive funds to choose from for their retirement savings. Adding alternatives to the mix gives investors new options. Still, the products typically come with higher fees, require more work on the plan’s part, and demand more from the investors in terms of the effort it takes to understand how the investments work. Ms. McCann is a writer in New York. She can be reached at firstname.lastname@example.org. No-America Portfolio: Two Big Investors Make the Bold Case Both say U.S. stocks have become too pricey to be worth it for a while Research Affiliates ‘Spicy food’ is worth it In a recent paper, Jim Masturzo and Jonathan Treussard of Research Affiliates created a graph depicting the expected returns and expected volatility of various asset classes, and of various portfolios consisting of different mixes of those asset classes. Next, the authors focused on one of the portfolios in the middle of the GMO FUND RESULTS WSJ .COM Lipper’s A-to-Z monthly mutual-fund and ETF listings and other tables are available free at WSJ.com/FundsETFs. JAMES YANG no SHOULD YOU OWN no U.S. stocks at all? Two big institutional investors argue precisely that. Excluding roughly half the world’s stock market from your portfolio is an extreme recommendation, and few advisers would agree with going this far. But it is worth examining the argument for zero U.S. stocks at a time when many advisers agree that at least some additional foreign exposure is warranted. Perched on opposite coasts of the U.S., Research Affiliates in Newport Beach, Calif., and Boston-based Grantham Mayo Van Otterloo, or GMO, have the same dim view of U.S. stock valuations. They say U.S. stocks are too expensive for their returns over the next seven to 10 years to beat inflation by much, if at all. That’s a grim forecast, as stocks have produced average annual returns of 6 to 7 percentage points above inflation over long periods. Here’s a closer look at their outlooks. graph that anticipates 10% volatility, because, they argue, it reflects the moderate risk many investors would choose if given a similar range of choices. It turns out that this 10%-volatility portfolio has just 28% of its assets in stocks. Moreover, that includes 19% in emerging-markets stocks and 9% in developed-country foreign stocks. In other words, “today’s diversified portfolio does not invest in U.S. equities at all,” say Messrs. Masturzo and Treussard, who use a metaphor of spicy food to characterize their preferred portfolio of non-U.S. stocks. “Like adding spice to a meal, adding asset classes beyond traditional core stocks and bonds to an investment portfolio can induce uncomfortable reactions, starting with the occasional heartburn,” but it’s worth it, the study says. Research Affiliates estimates that developed-country foreign stocks will deliver around a 5% real annualized return over the next decade, while emerging-markets stocks will deliver around 6% annualized. Largecap U.S. stocks, by contrast, are poised to deliver around a real 0.4%, while small-cap U.S. stocks are likely to deliver 0.6%, the firm says. The Research Affiliates stock-valuation model has three inputs—dividend yield, cash-flow growth and the cash-flow multiple. The last metric is the most speculative, and assumes a reversion to the long-term mean of the Shiller price/earnings ratio, a measure of share price relative to the past decade of average, inflationadjusted earnings. n- BY JOHN COUMARIANOS What They Expect Two big investment ﬁrms have low estimated returns for U.S. stocks. 8% 6 Research Afﬁliates expected 10-year return (real) GMO expected 7-year return (real) 4 2 0 Just say no to the S&P 500 –2 Members of GMO’s asset-allocation committee, James Montier and Matt Kadnar, recently came to similar conclusions as the analysts at Research Affiliates. In an August 2017 paper, they ar- –4 –6 U.S. Large-Cap U.S. Small-Cap Sources: Research Afﬁliates and GMO Foreign Developed Large Emerging Markets THE WALL STREET JOURNAL. Indeed, the firm’s chief strategist, Jeremy Grantham, has argued that margins may take decades to contract to their long-term mean. But GMO’s forecast is useful in showing why continued high returns are unlikely, for they would require still further margin and multiple expansion. An investor assuming the returns of the past seven years can persist must also think that a Shiller P/E multiple of 30 can go higher. In fact, the only other times it has been higher since 1880 was on its precrash runs to 34 in 1929 and to 44 in 2000. Not only do U.S. stocks likely offer poor future returns, but so do their counterparts in developed foreign countries, in GMO’s opinion. However, Messrs. Montier and Kadnar conclude that if one must own stocks, then one should own foreign stocks. International large-cap stocks are poised to lag behind inflation by 1.2 percentage points annually for the next seven years, GMO forecasts, but it figures they will outpace U.S. large-caps by about 3 percentage points annually. GMO expects emerging-markets stocks to do better still, outpacing inflation by 2 percentage points annually. Mr. Coumarianos, a former Morningstar analyst, is a writer in Laguna Niguel, Calif. He can be reached at email@example.com. For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. Monday, December 4, 2017 | R5 NY JOURNAL REPORT | INVESTING IN FUNDS & ETFS OPTIONS TRADING The VIX Riddle, Decoded The stock market’s volatility measure has taken on a life of its own, and it’s not always helpful THE VIX is the label people commonly use for the recently renamed Cboe Volatility Index. What else it is isn’t always clear to investors. The problem is that the VIX has become something of a Rorschach inkblot, with people projecting meaning into the index that perhaps isn’t there, such as signs of an impending market crash. People outside the options industry ascribe powers to the index that it never had, says Pravit Chintawongvanich, head of derivatives strategy at All Is Now Calm Month-end readings of the VIX index 60 investors to show up as more than an occasional blip in the VIX. This is a good example of what the VIX doesn’t do. While the index is a fear gauge in the sense that it measures the level of concern today about possible market volatility in the near term, it isn’t a measure of every risk that might affect share prices at some point. “We are just going through a period of extremely low volatility, and all the VIX does is measure how volatile the markets are going to be,” says Mr. Chintawongvanich. Indeed, though volatility flared on Friday, the VIX is now about as low as it has ever been. In the year through October, the index averaged 11.2. That compares with an average of 19.5 since 1990. dipped below 10 a few times, and the market didn’t crash. Later that decade, in 1999, amid the euphoria of the dotcom bubble, the VIX rarely dipped below 20, averaging around 24 for the year, an elevated level historically. But the following year the tech bubble popped and stocks took a dive. “It’s not extremely useful as a primary indicator” of the market’s direction, says Mr. Wantrobski. Name games: There’s room for some confusion among investors between today’s VIX and an earlier VIX that now goes by another name. The current VIX, launched in 1993, RANDALL ENOS BY SIMON CONSTABLE measures the expected volatility of the S&P 500. Before that, a volatility index for the S&P 100, launched in 1990, was known as the VIX. It now goes by the name VXO. And one more thing to keep in mind: The stocks in the S&P indexes change with the changing fates of companies and the emergence of new ones. For instance, Apple Inc. wasn’t always in the S&P 500 like it is now. That means that the expected volatility is based on a set of stocks that changes over time. Mr. Constable is a writer in Edinburgh, Scotland. He can be reached at firstname.lastname@example.org. 20 10 0 1990 2000 2010 Source: Cboe THE WALL STREET JOURNAL. Macro Risk Advisors in New York. It is, he says, nothing more than a measure of expected volatility in the stock market. It is not a broad measure of risk in the market or a reliable indicator of the market’s direction. Misunderstanding the VIX isn’t helpful to investors. But don’t despair. Here’s what you need to know. What exactly is the VIX? It is a measure of how volatile the broad stock market, the S&P 500, is expected to be over the next 30 or so days. A higher VIX means investors expect more volatility. A lower VIX means investors expect less volatility. The VIX figure comes from a complicated options-market calculation (the Black-Scholes formula) that helps answer the question of how much investors are willing to pay to buy insurance against a market drop, in the form of options. When the VIX is higher, it means people are willing to pay more. That’s why it is known as the “fear gauge.” Why isn’t the threat of a nuclear confrontation pushing up the VIX? The escalat- There will be more than nine billion people to feed by 2050. Over the next 35 years, it’s estimated that the world’s population will swell by two billion. To keep up, global food production needs to increase by 70%. CME Group is helping farmers, ranchers, processors and producers meet this need by giving them products designed to manage the inherent risks associated with grain and livestock markets. This is how global agribusiness can sustain a hungry world. This is how the world advances.Learn more at cmegroup.com/food. Does a low VIX portend a market top? The evidence says not necessarily. The argument that it does is based on the idea that when investors lose their skepticism and become complacent, it is often a sign that the major indexes are reaching a peak, and perhaps a pullback is in the offing. “VIX at 10 is a historically low level going back 30 years,” says Dan Wantrobski, director of research at Janney Capital Markets and the firm’s technical analyst. But he points out that in the mid-1990s the VIX n- ing war of words between the U.S. and North Korea simply hasn’t registered enough with low when the recent and current volatility of the market are low, suggesting a placid market may lull many investors into a sense of security about the near future. It’s the same as with any insurance— flood insurance is cheap when there are rarely floods. “The longer it’s been since the market has had a significant pullback, the more complacent people have been, and the VIX does indicate that,” says Russell Rhoads, director of product advancement, global derivatives, at Cboe Global Markets (parent of what used to be called the Chicago Board Options Exchange, or CBOE). In this sense the VIX is something of a trailing indicator, even though it measures expectations. Mr. Rhoads notes that the VIX remained elevated through 2009, in the wake of the global financial crisis, even though the market was going gangbusters through most of that year and didn’t see a major pullback after March. co Fo m rp m e er rs ci on al a us l, e on 30 ly . Does the VIX measure complacency? The VIX tends to be 50 40 no SPOTLIGHT | COLUMBIA ACORN FUND ONCE-MIGHTY ACORN FUND TRIES TO COME BACK Columbia Acorn Fund (LACAX) may be finding its footing after management changes and underperformance, but it could take time to persuade investors. They have pulled almost $963.9 million from the fund this year through October, according to Morningstar Inc. Years of outflows have left the midcap growth fund a virtual sapling of $4.8 billion as of Nov. 30, versus its December 2013 peak of $21.5 billion. Columbia Acorn underperformed its average peer and benchmark in 2013 and 2014. In 2015, the fund shed nearly 1.9% versus 1% for its average peer, though it outperformed its index, according to Morningstar. In March 2014, the fund’s longtime manager Chuck McQuaid stepped down, and Robert Mohn, then a co-manager, took over. Mr. Mohn retired in September 2015. Matt Litfin became a portfolio manager on the fund in January 2016. He has remade the fund since then, and its performance has improved. The management team now has a more-collaborative process and a more-systematic approach, Mr. Litfin says, adding that the team of 10 analysts is using new technol- ogy to get a better handle on the potential investment universe. “We’ve raised our game in terms of how we’re analyzing businesses,” says Mr. Litfin. While many growth investors focus on revenue growth or earnings per share, the Acorn team also heavily emphasizes return on invested capital and has put more focus on risk management, he says. In May, the fund’s manager, Columbia Wanger Asset Management LLC, changed the fund’s benchmark to the Russell 2500 Growth Index from the Russell 2500 Index to make it more reflective of the fund’s “true fishing pond,” says Mr. Litfin. The fund is up 25% in the year through Nov. 30, Morningstar says, while the new benchmark has gained 24.1% over the same period, according to FTSE Russell. The changes should result in a more-predictable performance pattern and help the fund avoid rough patches like 2014, says Gretchen Rupp, a Morningstar analyst. The fund is now “more what you would expect out of a fundamental growth-at-a-reasonableprice fund,” she says. —Daisy Maxey CME Group is a trademark of CME Group Inc. The Globe logo is a trademark of Chicago Mercantile Exchange Inc. All other trademarks are the property of their respective owners. Copyright © 2017 CME Group. All rights reserved. For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. R6 | Monday, December 4, 2017 JOURNAL REPORT | INVESTING IN FUNDS & ETFS Tracking Exchange-Traded Portfolios EXCHANGE-TRADED FUNDS Eurozone-Focused ETFs Finally Have Their Year Here are several funds to consider to ride the gains in German stocks and broader Europe German funds rally Second, there are ETFs that invest in stocks in particular eurozone countries, such as France or Germany. This could be attractive for a number of reasons, says Tushar Yadava, an investment strategist in BlackRock Inc.’s iShares unit, which has a range of eurozone-focused ETFs, from broad funds like EZU to country-specific vehicles. Individual countries are with about $1.92 billion in assets—is trailing, up about 16%. HEZU had net inflows this year of about $611 million as of Nov. 27, says Mr. Yadava, compared with the net inflows of $5.5 billion in EZU. Symbol Assets ($ billions) Volume (000s) Expense ratio iShares Core S&P 500 ETF Vanguard Tot Stk Mkt Idx ETF iShares MSCI EAFE ETF Vanguard 500 Index ETF Vanguard FTSE Developed Markets ETF Vanguard FTSE Emerging Markets ETF PowerShares QQQ Nasdaq 100 iShares Core US Aggregate Bond ETF iShares Russell 2000 ETF iShares Core S&P Mid-Cap ETF IVV VTI EFA VOO VEA VWO QQQ AGG IWM IJH 140.27 90.53 82.85 82.30 66.71 65.09 59.50 52.22 46.42 43.73 489,703.6 285,381.1 2,438,686.6 85,344.7 1,049,471.1 2,385,749.5 5,575,450.1 401,103.3 3,197,383.9 104,478.6 0.05 0.04 0.32 0.04 0.07 0.14 0.20 0.06 0.20 0.09 05/15/00 05/24/01 08/14/01 09/07/10 07/20/07 03/04/05 03/10/99 09/22/03 05/22/00 05/22/00 3.1 3.1 1.0 3.1 0.9 0.2 2.0 –0.1 2.9 3.7 20.5 20.0 23.0 20.5 24.4 26.9 32.0 3.1 15.1 15.9 22.8 22.3 27.2 22.8 27.4 26.7 33.5 3.2 18.3 18.5 iShares Core MSCI EAFE iShares Core MSCI Emerging Markets iShares Russell 1000 Growth ETF iShares Russell 1000 Value ETF iShares iBoxx $ Inv Grade Cor B ETF iShares MSCI Emerging Markets Index Fund Vanguard Total Bond Market ETF iShares Core S&P Small-Cap ETF Vanguard Value ETF Vanguard REIT ETF IEFA IEMG IWF IWD LQD EEM BND IJR VTV VNQ 704,427.1 41.19 40.89 1,656,760.9 198,341.4 40.02 225,111.7 39.67 610,952.7 39.45 37.82 11,383,141.2 304,419.4 36.82 282,847.9 36.28 223,026.6 35.54 483,127.7 35.25 0.09 0.14 0.20 0.20 0.15 0.69 0.05 0.09 0.06 0.12 10/18/12 10/18/12 05/22/00 05/22/00 07/22/02 04/07/03 04/03/07 05/22/00 01/26/04 09/23/04 1.2 0.4 3.0 3.1 –0.2 0.1 –0.1 3.5 3.5 2.6 24.3 31.9 29.0 11.9 5.9 31.7 3.2 13.8 15.4 5.2 28.4 32.2 30.6 14.6 6.6 32.0 3.3 17.6 18.5 10.1 SPDR Gold Shares Financial Select Sector SPDR Vanguard Growth ETF Vanguard Div Appreciation ETF iShares TIPS Bond ETF Vanguard Short-Term Bd Idx ETF Vanguard FTSE All-World ex-US ETF Vanguard Short-Term Crp Bd Idx ETF Vanguard Mid Cap ETF Vanguard Small Cap ETF GLD XLF VUG VIG TIP BSV VEU VCSH VO VB 791,384.6 34.54 31.79 13,496,302.2 78,751.4 31.17 79,739.3 26.99 110,555.6 23.98 174,213.2 23.51 299,181.6 22.45 207,390.9 21.71 28,756.0 21.56 40,905.5 20.96 0.40 0.14 0.06 0.08 0.20 0.07 0.11 0.07 0.06 0.06 11/18/04 12/16/98 01/26/04 04/21/06 12/04/03 04/03/07 03/02/07 11/19/09 01/26/04 01/26/04 0.8 3.5 2.5 4.5 0.1 –0.3 0.8 –0.3 3.2 3.1 10.0 19.7 26.9 20.6 2.0 1.2 24.8 2.3 17.8 15.8 8.2 24.3 28.2 21.9 1.9 1.2 27.4 2.5 18.6 18.0 Vanguard High Dividend Yield ETF SPDR Dow Jones Industrial Average iShares S&P 500 Growth Index Fund SPDR S&P MidCap 400 ETF iShares Russell 1000 ETF iShares iBoxx $ Hi Yld Corp Bd ETF Technology Select Sector SPDR iShares MSCI Japan Index Fund Vanguard FTSE Europe ETF Vanguard Intm-Term Corp Bd Idx ETF VYM DIA IVW MDY IWB HYG XLK EWJ VGK VCIT 20.96 20.34 20.15 19.96 19.71 19.69 18.86 18.52 18.27 18.23 115,850.6 651,102.1 45,235.9 119,817.2 143,558.2 1,792,066.8 2,102,617.2 753,902.1 1,317,628.4 160,021.7 0.08 0.17 0.18 0.25 0.15 0.49 0.14 0.49 0.10 0.07 11/10/06 01/14/98 05/22/00 04/28/95 05/15/00 04/04/07 12/16/98 03/12/96 03/04/05 11/19/09 3.1 4.2 2.8 3.6 3.0 –0.4 1.4 3.0 0.1 –0.4 14.9 25.6 26.5 15.7 20.2 5.9 33.7 22.8 25.2 5.0 18.2 29.9 28.3 18.2 22.4 7.8 36.7 23.9 31.1 5.3 iShares US Preferred Stock iShares Select Dividend ETF Health Care Select Sector SPDR Vanguard Info Tech Ind ETF iShares Russell Mid Cap Value Index Fund Energy Select Sector SPDR SPDR S&P Dividend ETF iShares Edge MSCI Min Vol USA ETF Vanguard Intermediate Term Bond ETF iShares MSCI Eurozone PFF DVY XLV VGT IWR XLE SDY USMV BIV EZU 18.04 17.74 17.42 16.81 16.80 16.61 16.58 15.88 15.16 15.12 268,207.4 84,590.8 1,043,331.3 46,766.2 13,132.2 2,216,457.0 33,577.4 85,682.8 73,244.4 888,569.8 0.47 0.39 0.14 0.10 0.20 0.14 0.35 0.15 0.07 0.49 03/26/07 11/03/03 12/16/98 01/26/04 07/17/01 12/16/98 11/08/05 10/18/11 04/03/07 07/25/00 0.6 4.0 2.9 1.2 3.4 1.8 4.1 3.1 –0.4 0.3 8.4 14.1 22.5 37.1 17.3 –5.8 14.6 18.7 3.5 28.2 8.8 16.6 23.4 38.9 18.6 –4.2 16.8 21.5 3.6 36.2 iShares S&P 500 Value Index Fund Guggenheim S&P 500 Equal Wght Industrial Select Sector SPDR Schwab International Equity ETF Consumer Discretionary Sel Sec SPDR iShares Core S&P Tot US Stk Mkt ETF Vanguard Small Cap Value ETF SPDR Bbg Barclays High Yield Bd ETF iShares JPMorgan USD Emg Mkts B ETF iShares 1-3 Yr Credit Bd ETF IVE RSP XLI SCHF XLY ITOT VBR JNK EMB CSJ 14.88 14.78 13.17 13.05 12.91 12.73 12.53 12.19 11.88 11.83 105,488.7 47,775.0 1,955,178.5 17,727.6 742,680.6 221,658.7 28,887.4 1,545,668.2 513,974.0 43,515.7 0.18 0.40 0.14 0.06 0.14 0.03 0.07 0.40 0.40 0.20 05/22/00 04/24/03 12/16/98 10/30/09 12/16/98 01/20/04 01/26/04 11/28/07 12/17/07 01/05/07 3.4 3.8 4.1 1.1 5.1 3.1 3.2 –0.3 0.01 –0.3 13.3 17.2 21.3 23.6 19.9 20.0 11.2 6.3 9.2 1.3 16.2 18.4 21.8 27.5 20.0 22.4 14.4 8.4 10.6 1.5 iShares MBS ETF Vanguard Large Cap ETF iShares 1-3 Yr Treasury Bd ETF Schwab US Broad Market ETF Schwab US Large-Cap ETF iShares Russell Mid Cap Value Index Fund iShares MSCI EAFE Small Cap ETF Vanguard Total Intl Stock Index ETF Vanguard Total World Stock ETF iShares Gold Trust MBB VV SHY SCHB SCHX IWS SCZ VXUS VT IAU 11.79 11.51 11.34 11.18 11.05 10.98 10.52 9.99 9.99 9.93 56,984.1 23,688.2 101,073.8 8,846.5 14,233.8 65,902.8 170,260.6 57,564.3 81,846.9 815,592.0 0.25 0.06 0.15 0.03 0.03 0.25 0.40 0.11 0.11 0.25 03/13/07 01/27/04 07/22/02 10/30/09 10/30/09 07/17/01 12/10/07 01/26/11 06/24/08 01/21/05 –0.2 3.1 –0.2 3.0 3.0 3.4 1.5 0.8 2.0 0.8 2.1 20.7 0.3 20.0 20.6 11.7 29.2 25.6 22.4 10.2 2.0 23.0 0.3 22.3 22.9 13.7 32.9 28.2 24.7 8.4 iShares Nasdaq Biotechnology Index Fund iShares Russell 2000 Value ETF Alps Alerian MLP ETF WisdomTree Japan Hedged Equity iShares Russell 2000 Growth ETF iShares National Muni Bond Vanguard Total Internatl Bd Idx ETF WisdomTree Europe Hedged Equity iShares Russell Mid Cap Growth Index Fund iShares Russell 3000 Index Fund IBB IWN AMLP DXJ IWO MUB BNDX HEDJ IWP IWV 9.84 9.49 9.36 9.31 9.26 9.00 8.91 8.64 8.43 8.36 100,852.4 118,016.1 1,037,769.7 373,847.7 86,858.6 115,795.8 53,553.3 42,450.4 27,998.1 27,372.8 0.47 0.24 0.85 0.48 0.24 0.25 0.12 0.58 0.25 0.20 02/05/01 07/24/00 08/25/10 06/16/06 07/24/00 09/07/07 05/31/13 12/31/09 07/17/01 05/22/00 0.6 2.9 –1.5 1.0 2.9 –0.6 0.3 –2.6 3.3 3.0 19.4 8.8 –11.8 18.9 22.1 3.6 2.4 14.5 24.3 19.8 15.6 13.2 –9.5 23.9 23.8 4.8 2.8 22.6 24.8 22.1 Consumer Staples Select Sector SPDR iShares MSCI ACWI ETF iShares Core MSCI Total Intl Stock PowerShares Senior Loan Vanguard Mid Cap Value Index ETF XLP ACWI IXUS BKLN VOE 8.35 8.26 8.19 8.17 8.15 1,383,402.4 771,923.3 50,589.7 43,913.7 16,389.7 0.14 0.32 0.12 0.64 0.07 12/16/98 5.6 03/26/08 2.0 10/18/12 0.9 03/01/11 unch. 08/17/06 3.5 10.5 22.3 25.1 2.2 15.0 13.9 25.0 28.3 3.3 16.2 co Fo m rp m e er rs ci on al a us l, e on The currency factor is key for investors in European stocks. Broader Europe And then there are funds that take a broader look at Europe, investing in eurozone equities along with stocks in the U.K., Switzerland and other countries that don’t use the euro. Mr. Sotiroff points to Vanguard FTSE Europe ETF (VGK) and iShares Core MSCI Europe ETF (IEUR) as standout examples. For most investors, he says, these funds are “the better way to go,” offering greater diversity across different countries and currency zones while still providing access to major, non-U.S. names. “You’re getting pretty broad access across the entire market spectrum,” he says. The currency factor is key for investors in European stocks, whatever option they choose. If a currency is strengthening against the dollar, that could provide U.S. investors with an additional tailwind: When they convert their returns back into dollars, their buying power could gain a boost, on top of whatever increase has been seen in the underlying equities. The reverse, of course, is also true. This helps explain much of the investor interest in the eurozone this year, according to Mr. Yadava. While EZU has generated returns of 28.3%, the currency-hedged version—HEZU, no AFTER A tumultuous few years, U.S. investors are piling into Europe. It has been a great year for exchange-traded funds that focus on eurozone stocks, a sector in which many ETFs have notched returns of more than 20%. As good a year as U.S. stocks have had, the MSCI Europe Index and the MSCI EMU Index (European Economic and Monetary Union) for the year-to-date through November were up 19% and 23.7%, respectively, compared with a gain of 18% for the MSCI USA Index. Many European companies have strong earnings and are undervalued versus American peers. Political concerns have calmed, particularly since Emmanuel Macron’s defeat of Marine Le Pen in the French election. In addition, the euro has strengthened against the dollar, boosting U.S. investors’ returns, while the European Central Bank’s ultra-accommodating monetary policy has supported broader economic stability by keeping bond yields low. U.S. investors can tap eurozone stocks through three broad categories of exchangetraded funds, according to Daniel Sotiroff, an analyst in Morningstar’s passive-strategies research team. First, a number of funds provide access to companies across multiple or all eurozone countries. Major names in this category include iShares MSCI Eurozone ETF (EZU), a $15 billion fund that was up 28.3% this year through November, and SPDR Euro Stoxx 50 ETF (FEZ), a $4.4 billion fund with a return of 26.5%. These funds could attract investors who want a multinational European exposure, but wish to limit it to the eurozone, says Mr. Sotiroff. For example, an investor might have a bearish view on the U.K. as the country’s exit from the European Union draws closer. often strong in particular sectors, he says. For example, investing in iShares MSCI Germany ETF (EWG) could be a good way of accessing “consumer discretionary” companies like Adidas or Daimler. Additionally, some investors might simply wish to play on a particular country’s success. Germany’s economic growth has outpaced that of the broader eurozone, says Garrett Paolella, managing director at Horizons ETFs Management US, which runs Horizons DAX Germany ETF (DAX), a $17.28 million fund that is up 28.23% for the year to date. The DAX fund tracks the DAX Index of Germany’s largest companies, whose members are major exporters, meaning investors derive a benefit from global growth as well. n- BY GERRARD COWAN Hedge or not? The decision whether to hedge depends on the preferences of the individual investor, says Arne Noack, head of exchange product development at Deutsche Asset Management in the Americas for Deutsche Bank, which runs both Xtrackers MSCI Eurozone Hedged Equity ETF (DBEZ) and the unhedged Xtrackers Eurozone Equity ETF (EURZ), as well as Xtrackers MSCI Europe Hedged Equity Fund (DBEU), which includes non-eurozone equities. There could be a tactical benefit, depending on the investor’s view of a currency’s performance. Investors should do some additional research to see whether hedging a particular currency makes tactical sense. Additionally, investors should consider that over very long periods, currency gains tend to balance out, Mr. Noack says. Still, for some investors, hedging might be attractive for its ability to damp the volatility of a portfolio. Americans shouldn’t put all their eggs in the European basket, says Matthew Bartolini, head of SPDR Americas Research at State Street Global Advisors, which runs FEZ and a number of other European funds, such as SPDR Stoxx Europe 50 ETF (FEU). He argues that for many investors, it could make sense to place a broader international fund at the core of their non-U.S. holdings, such as SPDR Portfolio World exUS (SPDW), and then overlay this with smaller investments in ETFs that look to specific regions. Mr. Sotiroff agrees, saying investors should aim for global diversification. Even then, “anything could happen tomorrow,” he says, noting the continuing concerns over the future of the common currency. “Lots of things could happen in the future with the euro, or the politics in some of its member countries,” he says. “That’s the uncertainty you deal with as a stock investor.” Mr. Cowan is a writer in Northern Ireland. He can be reached at email@example.com. Launch date Fund Performance (%) November YTD 1-year ly . JIM FRAZIER Performance figures are total returns for periods ended Nov. 30; for largest exchange-traded funds and other portfolios, ranked by asset size. *Expense charge is a maximum of 8 cents a share †Assets are estimated N.A.= Not applicable, fund is too new. Note: Total returns are based on the change in the net asset values, not changes in market prices. Net asset values can vary from market prices, which therefore can reflect a premium or discount to the net asset values. Source: Thomson Reuters Mutual-Fund Yardsticks: How Fund Categories Stack Up Data provided by Includes mutual funds and ETFs for periods ended November 30. All data are preliminary. Investment objective Perfomance (%) November YTD 1-yr 5-yr* Diversified stock & stock/bond funds Large-Cap Core Large-Cap Growth Large-Cap Value Midcap Core Midcap Growth Midcap Value Small-Cap Core Small-Cap Growth Small-Cap Value Multicap Core Multicap Growth Multicap Value Equity Income S&P 500 Funds Specialty Divers. Equity Balanced Stock/Bond Blend Avg. U.S. Stock Fund† Performance (%) November YTD 1-yr 5-yr* World stock funds 2.9 2.4 3.0 3.1 3.0 3.3 2.7 2.7 3.0 2.9 2.5 3.1 2.9 3.1 0.8 1.4 1.1 2.6 19.2 28.9 14.1 14.8 24.3 11.6 12.8 22.5 9.1 18.2 27.5 13.6 14.0 20.0 9.6 12.5 12.2 17.4 21.2 29.4 16.5 16.5 24.3 13.6 15.9 23.2 13.2 19.9 27.9 15.8 16.4 22.3 9.9 13.8 13.5 19.1 14.2 15.6 13.4 13.5 14.1 13.3 13.7 14.2 12.7 13.8 14.9 13.4 12.2 15.1 –3.2 8.1 7.1 12.9 1.3 1.9 2.4 2.4 2.0 2.4 2.5 32.7 8.8 25.2 18.2 –8.5 7.2 5.8 33.7 13.2 24.0 22.8 –8.0 11.2 9.9 17.6 9.4 17.8 11.3 –1.7 8.9 9.2 Sector stock funds Science & Technology Telecommunication Health/Biotechnology Utility Natural Resources Sector Real Estate Investment objective Global International (ex-U.S.) European Region Emerging Markets Latin American Pacific Region Gold Oriented Global Equity Income International Equity Income 1.9 0.8 unch. 0.5 –2.1 1.8 –1.1 1.8 0.6 22.2 24.8 22.9 30.3 24.3 36.5 2.5 15.7 19.9 24.1 11.0 27.1 7.8 28.2 8.1 30.5 4.6 25.2 –2.6 33.1 9.9 2.6 –12.0 18.3 8.8 22.5 5.4 –0.1 –0.1 –0.2 –0.02 –0.2 –0.1 –0.1 –0.2 –0.2 0.4 –0.1 1.6 5.1 3.1 1.7 3.1 2.5 4.9 6.2 2.0 7.2 3.9 1.7 1.0 5.7 2.9 3.4 1.9 1.7 –0.1 3.4 1.9 2.3 1.0 5.8 3.2 8.0 4.9 2.0 1.6 8.3 1.2 4.5 2.1 –0.2 –0.6 –0.3 0.1 0.7 3.2 4.4 6.6 0.7 4.1 5.3 7.3 Taxable-bond funds Short-Term Long-Term Intermediate Bond Intermediate U.S. Short-Term U.S. Long-Term U.S. General U.S. Taxable High-Yield Taxable Mortgage World Bond Avg. Taxable-Bond Fund** Municipal-bond funds Short-Term Muni Intermediate Muni General & Insured Muni High-Yield Muni 0.3 1.5 2.3 3.6 Stock & Bond Benchmark Indexes All total return unless noted Euro Vision Investment objective The largest Europe-focused ETFs and their year-to-date returns FUND SYMBOL Vanguard FTSE Europe VGK iShares MSCI Eurozone EZU SPDR Euro Stoxx 50 FEZ iShares Europe IEV Source: Thomson Reuters Lipper YTD RETURN $18.27 25.1% 15.12 8.64 4.44 3.23 5-yr* Large-cap stocks ASSETS (in billions) WisdomTree Europe Hedge Equity HEDJ Perfomance (%) November YTD 1-yr 28.3 DJIA S&P 500 4.2 3.1 25.7 20.5 30.0 16.1 22.9 15.7 3.7 16.0 18.5 15.5 Russell 2000 26.5 23.4 THE WALL STREET JOURNAL. DJ U.S. TSM Growth DJ U.S. TSM Value 3.0 3.0 25.8 14.6 –0.1 3.1 3.2 2.0 –0.5 4.4 5.6 2.6 0.9 0.9 20.0 24.8 24.0 27.8 5.4 7.7 27.0 16.8 17.9 14.4 Barclays Agg. Bond Municipal bonds 2.9 15.1 18.3 15.0 Broad stock market DJ U.S. Total Stock Market Russell 3000 5-yr* Taxable bonds Small-cap stocks 14.8 Performance (%) November YTD 1-yr Stock indexes Midcap stocks S&P MidCap 400 Investment objective Barclays Muni. Bond International stocks 3.0 3.0 20.0 19.9 22.3 15.6 22.3 15.6 MSCI EAFE†† (price return) Dow Jones World (ex. U.S.) *Annualized †Diversified funds only **Excludes money-market funds ††Europe, Australia, Far East For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. no n- co Fo m rp m e er rs ci on al a us l, e on ly . Monday, December 4, 2017 | R7 For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. R8 | Monday, December 4, 2017 JOURNAL REPORT | INVESTING IN FUNDS & ETFS Category Kings in 16 Realms Leaders and Laggards Data provided by Data provided by Top-performing funds in each category, ranked by year-to-date total returns (changes in net asset values with reinvested distributions) as of Nov. 30; assets are as of Oct. 31. All data are preliminary. Performance numbers are total returns (changes in net asset values with reinvested distributions) as of November 30; assets are as of October 31. All data is preliminary. Large-Cap Core Best-Performing Stock Funds Small-Cap Core BlackRock:IS USA MF;K 13.1 Amer Cent:Foc DG;Inv 27.3 GMO:Quality;VI 8,304.9 BNY Mellon:Foc Eq Op;M 520.1 iPath ETN LgEx S&P 2.3 BlackRock:LC Foc Gr;I 935.8 Vanguard PRIMECAP;Adm 59,704.4 Pear Tree:Quality;Ord 130.4 PowerShares S&P500 Momnt 1.7 Direxion:iBillionaire Id 14.3 Category Average: Total return (%) Nov YTD 1-yr 5-yr* N.A. 16.7 16.1 17.4 26.8 16.9 19.7 14.3 N.A. N.A. 37.3 36.6 32.2 31.9 29.8 28.6 28.0 28.0 27.1 26.8 1,024.6 2.9 19.3 21.2 14.2 Category Average: 496.5 2.7 12.8 15.9 13.7 880 873 804 Fund Count 1075 1080 1024 1018 718 794 639 DoubleLine:Sh Enh CAPE;I 4,569.5 Pioneer Disc Val;A 583.7 MassMutual Sel:Eq Op;I 692.5 Barclays ETN+ShillerCAPE 86.9 iShares:Edge MSCI USA VF 2,728.8 BlackRock:IS US VFI;K 11.1 AllianzGI:NFJ LCV;A 373.4 Queens Road Value 45.5 LM BW Dyn Lg Cap Val;IS 157.3 T Rowe Price Value 25,937.4 Category Average: Fund Count Total return (%) Nov YTD 1-yr 5-yr* 23.2 23.8 23.1 22.2 22.7 N.A. 22.8 21.1 19.2 21.1 N.A. 13.1 15.7 18.4 N.A. N.A. 13.8 13.9 N.A. 15.6 Assets ($ millions) 3.2 3.1 4.0 3.4 4.2 4.2 3.2 3.3 4.0 3.7 21.1 20.7 20.3 20.2 20.0 20.0 19.7 19.5 19.4 18.9 989.5 3.0 14.1 16.5 13.4 Category Average: 500 502 475 Fund Count 468 371 27.6 27.1 25.9 24.2 23.7 23.5 23.3 22.7 21.8 21.4 30.8 28.1 30.0 26.8 25.6 25.3 25.7 25.2 24.7 25.7 16.5 13.1 9.5 17.1 12.0 13.6 16.8 17.3 N.A. N.A. Total return (%) Nov YTD 1-yr 5-yr* 13.9 1.7 2.1 1.9 1.0 2.2 4.2 3.0 3.5 4.3 26.0 20.9 18.9 18.6 18.6 17.9 17.9 17.3 17.1 15.1 26.4 23.8 22.7 22.8 22.3 24.5 21.7 18.8 22.3 21.3 14.2 15.2 15.2 N.A. 15.6 N.A. 16.0 13.2 16.2 N.A. 442.2 3.0 9.1 13.2 12.8 281 281 269 267 210 44.5 43.8 41.8 38.3 38.0 37.9 37.9 37.5 36.5 36.4 1,427.6 2.4 29.0 29.5 15.6 Category Average: 695 692 648 Fund Count Fund Count 41.4 40.9 41.0 38.7 36.5 38.4 38.5 38.9 36.5 36.5 20.0 19.9 17.2 16.7 16.3 19.9 19.4 N.A. 18.9 18.9 Assets ($ millions) 2.0 2.0 1.5 2.8 2.0 2.3 2.4 2.8 2.2 2.2 639 523 195.8 1,492.5 74.6 1,648.6 52.2 249.1 27.3 316.5 830.4 1,398.7 JPMorgan:Dyn SCG;I JPMorgan:SmCp Gro;R6 Victory:RS Sm Cap Eqty;A Victory:Sm Cap Growth;Y Frontier:Tmpni SCG;Inst Baron Discovery;Rtl Conestoga SMid Cap;Inst Wasatch:Micro Cap;Inv Federated Kauf SC;A AB Sm Cp Gr;A Midcap Core Total return (%) Nov YTD 1-yr 5-yr* 3.3 3.3 3.1 3.1 4.1 2.9 2.6 3.8 2.3 3.7 38.8 38.8 36.8 36.4 35.9 35.8 35.2 34.3 33.7 33.0 38.1 38.1 36.5 36.2 34.9 35.5 34.8 33.0 33.1 32.4 17.2 17.6 18.2 18.0 15.8 N.A. N.A. 16.4 17.7 15.1 314.1 2.7 22.5 23.2 14.2 606 598 558 553 452 Multicap Core Assets ($ millions) 27.8 251.4 72.6 98.4 43.9 68.9 1,673.5 18.0 1.7 232.4 Category Average: Fund Count Total return (%) Nov YTD 1-yr 5-yr* Assets ($ millions) TCW:New America Prm Eq;I Schwab Cap:Lg-Cap Gro Victory:Multi-Cap;A J Hancock II:Fdm ACC;A AlphaMark Lg Cap Gr SPDR MFS Sys Gro Eqty Dana Large Cap Eqty;Inst Marshfield Concntrrd Opp Federated MDT LCG;A T Rowe Price Spec:Gro 18.4 256.9 448.9 84.6 23.5 46.4 174.3 14.4 83.3 3,801.1 14.9 16.5 13.5 Category Average: 442 Fund Count 2.8 6.0 3.9 1.2 5.1 4.0 4.0 3.9 4.6 3.0 35.2 28.7 28.0 27.9 26.3 24.3 23.9 23.5 23.2 22.2 872.3 3.1 462 460 37.3 28.6 29.1 29.1 29.8 26.9 26.4 28.5 25.0 25.4 18.6 15.5 14.3 19.4 N.A. 16.7 16.7 15.1 N.A. 16.0 435 305 Midcap Value Total return (%) Nov YTD 1-yr 5-yr* 1.4 2.4 4.4 1.2 4.6 1.6 3.4 5.3 3.5 2.0 37.8 27.3 26.8 26.6 26.5 26.3 26.1 25.5 24.7 24.7 39.4 28.5 30.0 28.8 26.8 27.1 29.6 26.9 26.6 26.2 N.A. 15.8 15.5 16.2 16.1 N.A. N.A. N.A. 14.8 13.4 1,449.6 2.9 18.2 20.0 13.9 816 817 782 771 566 Total return (%) Nov YTD 1-yr 5-yr* ValShs US Qnt Val 78.5 10.2 Royce Fd:Div Value;Inv 191.2 2.9 Hennessy:Crnst MdCp;Inst 972.3 2.8 Fidelity Low-Prcd Stk 38,757.9 2.9 Nuveen Mid Cp Value;I 110.4 3.4 TCW:Rel Value MC;I 103.2 3.5 Am Beacon:MC Val;Inv 669.6 3.2 Principal:MCV III;R-6 1,351.5 2.8 GW:GS MidCap Val;Inst 610.1 4.1 Nuance Mid Cap Val;Inst 455.0 3.2 Fund Count 22.6 22.1 18.1 19.1 20.7 19.4 18.1 17.3 17.8 18.7 N.A. 11.8 14.4 13.8 15.7 14.2 15.0 N.A. N.A. N.A. Assets ($ millions) 925.8 42.8 97.8 62.7 12.5 35.5 65.9 144.0 10.6 43.5 2.6 5.0 11.8 4.2 3.8 4.3 2.0 3.6 5.5 1.4 597.5 3.1 13.6 15.8 13.4 390 391 368 708.3 3.3 11.6 13.6 13.3 Category Average: 186 186 174 Fund Count 171 128 Midcap Growth Total return (%) Nov YTD 1-yr 5-yr* AllianzGI:NFJ MCV;A WisdomTree:US LgCp Val Deep Value O'Shaughnessy Mkt Ld V;I BlackRock:IS MF USA;K Lattice:Hfd MF US Equity Barrett Opportunity Federated MDT ACC;Inst Mt Lucas US Focus Eq;I RvrPrk:Foc Value;Instl n- Category Average: 21.3 19.6 18.8 18.4 18.2 18.2 16.2 15.8 15.6 15.6 25.8 21.9 21.7 21.3 21.2 20.8 20.5 20.3 20.2 20.2 29.0 24.8 24.5 21.2 23.7 23.0 24.1 22.2 22.6 21.4 15.6 14.2 N.A. N.A. N.A. N.A. 13.4 16.1 14.7 N.A. 367 279 Multicap Growth Assets ($ millions) Total return (%) Nov YTD 1-yr 5-yr* 36.5 35.5 34.9 34.7 33.2 33.1 32.8 32.2 32.1 32.0 34.9 35.6 34.5 31.4 35.1 31.8 33.8 30.4 30.8 29.4 14.4 18.5 N.A. 15.0 17.3 16.1 23.6 14.8 17.3 12.6 Assets ($ millions) Total return (%) Nov YTD 1-yr 5-yr* Zevenbergen Genea;Inst 7.9 –1.5 Berkshire:Focus N.A. 0.6 Morg Stan MultiCp Gr;A 419.0 2.0 Franklin Cust:Dyna;A 4,334.2 1.6 Wisconsin:Plumb Equity 24.8 3.5 Morg Stan I:MCG;A 611.6 3.6 SunAmerica:AIG Foc MCG;A 591.7 2.1 JAG Large Cap Growth;I 64.0 0.7 Fidelity OTC 17,086.5 1.5 Baron Opportunity;Rtl 252.8 1.1 no 80.4 5.3 971.6 1.8 16.9 –1.1 77.8 1.0 2,080.3 1.0 40.1 4.3 8,882.4 7.3 403.5 2.4 51.1 0.8 95.8 2.3 Category Average: Fund Count 544.6 3.0 24.3 24.3 14.1 Category Average: 403 402 388 Fund Count 383 320 Science and Technology Assets ($ millions) Category Average: Fund Count 50.1 47.3 45.6 40.2 39.1 38.8 38.4 38.2 37.8 37.6 51.0 50.8 42.8 39.6 41.9 33.6 38.2 38.6 40.2 35.8 N.A. 18.0 19.0 18.4 16.8 10.1 15.9 16.9 22.1 13.0 705.9 2.5 27.5 27.9 14.9 538 539 513 510 399 Total return (%) Nov YTD 1-yr 5-yr* Assets ($ millions) 1.2 37.0 37.4 19.6 Category Average: 177 179 172 Fund Count 140 Pacific Region Total return (%) Nov YTD 1-yr 5-yr* 2.6 0.2 21.6 –1.0 2,012.9 1.4 731.3 1.8 496.3 1.0 1,804.4 0.6 1,418.7 0.9 108.8 0.9 1,442.3 0.7 873.9 2.2 iPath ETN LgEn MSCI EM VnEck Vctrs:Poland Bail Giff Em Mkt;5 Principal:Origin EM;R-6 Amer Cent:NT EM;G VanEck:Emerg Mkts;Y WM Blair:Em Mkt G;Inst Martin Currie Em Mkts;IS Columbia:Emg Mkt;I3 Goldman:Emg Mkts;I 846.4 171 77.1 51.3 50.3 49.2 44.4 44.4 44.3 44.1 43.0 43.0 77.6 7.5 64.1 2.5 46.9 N.A. 44.8 N.A. 42.8 8.2 42.3 7.9 43.0 6.5 43.5 N.A. 42.9 6.6 40.2 8.2 617.9 0.5 30.1 30.3 4.6 888 876 827 463 808 European Region Assets ($ millions) Total return (%) Nov YTD 1-yr 5-yr* WisdomTree:China x-S-O Morg Stan I:Asia Opp;I Neuberger Gr Chn Eq;Is US Glbl:China Region Columbia:Grtr China;A Victory:Sophus China;A Matthews Asia:China;Inv PowerShares Gldn DrgnChi Oberweis:China Opps;Inv J Hancock Gr Ch Opp;A 55.1 2.4 17.4 –0.8 138.4 2.5 35.3 2.8 125.0 3.4 25.8 2.3 846.4 0.6 226.6 0.8 122.1 0.6 64.0 3.4 72.7 63.6 61.3 58.1 54.9 54.5 53.9 52.0 51.7 51.2 64.4 57.2 53.3 48.0 47.2 46.5 43.7 41.1 43.0 43.0 11.9 N.A. N.A. 9.7 12.6 13.4 9.9 19.8 16.0 11.7 Category Average: 9.8 387.4 1.6 34.9 31.8 Fund Count 263 256 244 N.A.: Not applicable; fund is too new * Annualized 244 167 NAIL HOML VMIN SOXL KORU CWEB XIV SVXY LABU TECL 35.8 4.1 13.4 525.4 12.0 85.9 1134.1 1,047.2 379.3 446.6 28.4 19.0 3.9 –1.6 0.3 –0.2 4.5 4.4 –2.4 3.6 264.0 161.5 160.6 155.2 153.1 149.5 148.6 145.8 138.5 123.6 266.9 162.6 186.8 174.5 159.7 112.0 170.5 166.8 97.3 137.0 N.A. N.A. N.A. 65.1 19.7 N.A. 45.1 44.1 N.A. 43.8 N.A. N.A. N.A. 89.3 N.A. N.A. 43.2 42.4 N.A. 55.4 Direxion:China Bull 3X ProShares:UltP QQQ Direxion:MSCI EM Bull 3X Direxion:MSCI Ind Bull3X VelShs VIX Short Vol Hdg ProFunds:UltraChina;Inv ProShares:UltP Dow30 ProShares:Ult Semicond ARK Innovation Direxion:FTSE EU Bull 3X YINN TQQQ EDC INDL XIVH UGPIX UDOW USD ARKK EURL 235.2 2,098.6 275.9 105.0 67.5 39.0 308.9 58.9 205.2 64.7 0.6 5.6 –2.0 –4.9 3.3 –2.4 12.6 1.1 4.8 –0.7 119.2 116.5 115.0 101.9 95.9 93.3 88.7 85.4 85.2 83.5 81.6 122.8 111.4 96.2 109.0 73.4 108.0 94.3 84.5 110.4 0.1 37.7 2.7 –2.7 N.A. 9.7 36.3 38.7 22.7 2.7 15.5 59.7 –1.2 2.5 N.A. 20.0 46.5 56.1 N.A. N.A. VelShs 3x Inv Nat Gas ProShares:Ult Tech ARK Web x.0 Direxion:MSCI DM Bull 3X Direxion:MSCI Jpn Bull3X iPath ETN LgEn MSCI EM Direxion:Hlthcre Bull 3X ProShares:Ult FTSE Ch 50 Guggenhm China Tech ETF WisdomTree:China x-S-O DGAZ ROM ARKW DZK JPNL EMLB CURE XPP CQQQ CXSE 98.4 267.2 122.9 31.8 14.4 2.6 143.6 56.2 325.3 55.1 –10.7 1.6 4.9 1.6 5.9 0.2 8.4 0.7 4.0 2.4 82.7 81.9 80.5 78.3 78.0 77.1 73.7 73.5 72.8 72.7 13.2 86.3 79.1 92.1 71.9 77.6 76.5 53.6 63.6 64.4 17.1 30.7 30.9 7.3 20.6 10.3 13.6 7.8 19.7 18.6 –20.6 38.2 N.A. 15.2 N.A. 7.5 48.5 9.1 25.2 11.9 Assets ($ millions) November YTD Direxion:Hbldrs&Sup Bl3X UBS E-TRACS MR2xL ISE Hb Rex VolMAXX SVW Ftrs Str Direxion:Semicnd Bull 3X Direxion:S Korea Bull 3X Direxion:CSI Ch Int Bl2X VelShs DlyInv VIX ST ETN ProShs II:ShVIX STF ETF Direxion:S&P Btech Bl 3X Direxion:Tech Bull 3X Assets ($ millions) Total return (%) Nov YTD 1-yr 5-yr* iShares:MSCI Ger Sm-Cap iShares:MSCI Austria Cap iShares:MSCI Poland Cp Frst Tr ADex:Germany SPDR EURO STOXX Sm Cap Columbia Acorn Eur;I Frst Tr ADex:Eurozone WisdomTree:Euro Dom Eco DFA Cont Small Co;I Frst Tr ADex:Europe 72.2 2.6 243.8 1.2 347.7 –1.3 242.5 4.0 28.3 1.4 96.7 1.2 36.8 1.2 12.3 1.0 649.7 0.2 691.2 0.02 52.3 48.0 47.7 41.9 36.3 35.7 34.6 34.0 32.4 32.1 59.2 52.3 58.8 50.1 44.4 39.1 42.4 43.2 39.2 37.4 18.0 9.7 2.3 11.7 N.A. 12.1 N.A. N.A. 16.3 11.5 Category Average: 547.0 –0.2 22.9 28.7 8.5 172 166 159 98 Fund Count Note: For funds with multiple share classes, only the largest is shown. 159 Total Return (%) Annualized 1-year 3-year 5-year Fund Ticker UBS AG Enh Eur Gl HY ETN UBS E-TRACS MP 2xL S&P D UBS E-TRACS MP 2xL DJ SD Mrkt Vctrs ETN Dbl Lg Eu ProShs II:Ult Euro Victory:INCORE Inv GC;I iShares:Intl Pref Stk iShares:Internatl HY Bd Franklin Inv:Cv Sec;Adv TETON WW:Convert Sec;I FIHD SDYL DVYL URR ULE VICIX IPFF HYXU FCSZX WESIX 992.3 14.8 34.7 0.0 15.8 109.6 92.6 90.2 2,683.8 15.0 4.4 8.2 7.9 4.5 4.0 0.8 1.1 1.9 0.1 1.5 35.1 29.4 28.3 26.1 23.0 20.0 19.4 19.0 18.1 17.8 43.0 34.3 33.9 23.7 20.9 21.7 23.1 20.5 18.8 19.3 N.A. 21.6 22.2 –6.3 –6.4 7.7 –2.6 2.9 8.2 5.0 N.A. 30.8 30.3 –6.1 –6.2 11.5 –2.4 3.8 11.3 10.1 Rydex:Wkn Dlr 2x Str;H Barings:Emer Mkts LCD;Y Premise Cap Frontier ADT Lord Abbett Convert;I Direxion:20+Y Trs Bl 3X SPDR Bbg Barclays Cnv Sc Barings:EM DB Tot Rtn;Y Columbia:Conv Secs;I Putnam Conv Sec;A Eaton Vance EM Loc Inc;I RYWBX BXLYX TCTL LCFYX TMF CWB BXEYX NCIAX PCONX EEIIX 3.5 9.2 16.2 872.8 90.3 4,169.7 11.4 814.8 717.8 542.8 3.1 2.2 1.7 0.5 1.8 –0.2 1.2 0.4 0.3 1.6 17.6 17.2 17.0 16.9 16.9 16.4 15.8 15.5 15.5 15.4 15.3 14.5 18.9 18.2 15.1 18.1 19.2 16.8 17.3 17.9 –5.6 N.A. N.A. 6.3 2.5 7.8 N.A. 6.9 5.4 2.4 –7.6 N.A. N.A. 10.6 1.8 11.1 N.A. 11.1 9.5 0.3 iShares:Convertible Bond AllianzGI:Conv;Inst Calamos:Glbl Conv;I Calamos:Convertible;I Hartfd:EM Local Dbt;Y 1290:Conv Secs;I Frst Tr VIII:CEF Inc Opp Ashmore:Ems Crp Dbt;Inst AlphaCentric Inc Opps;I Goldman:Loc EM Dbt;I ICVT ANNPX CXGCX CICVX HLDYX TNFIX FCEF EMCIX IOFIX GIMDX 354.4 534.0 106.6 604.9 155.0 23.4 34.2 358.6 1,386.9 270.7 –0.1 0.5 0.6 0.1 1.5 0.5 –0.6 –0.5 0.6 1.6 15.3 15.3 15.0 14.8 14.7 14.6 14.4 14.4 14.3 14.2 16.8 16.5 15.7 15.4 16.8 15.8 17.4 16.4 14.8 16.8 N.A. 5.9 N.A. 4.7 0.7 N.A. N.A. 8.2 N.A. –0.8 N.A. 10.4 N.A. 8.2 –0.4 N.A. N.A. 5.4 N.A. –2.4 Assets ($ millions) November YTD Total Return (%) Annualized 1-year 3-year 5-year Fund Ticker ProShs II:UltVIX STF ETF VelShs Dly 2x VIX ST ETN VelShs 3x Long Nat Gas Rex VolMAXX LVW Ftrs Str iPath Bloomberg NatGas A Direxion:S&P Btech Br 3X Direxion:Semicnd Bear 3X VelShs Dly 2x VIX MT ETN ProShs II:VIX ST Fut ETF iPath ETN SP500 VIX ST A UVXY TVIX UGAZ VMAX GAZ LABD SOXS TVIZ VIXY VXX 406.6 270.6 895.7 2.1 1.6 98.4 48.9 3.3 173.1 1,052.0 –10.7 –10.7 0.5 –7.1 –0.5 –0.6 –2.0 3.1 –5.1 -5.1 –92.2 –92.1 –81.4 –79.0 –78.0 –73.6 –70.5 –70.3 –68.5 -68.4 –93.7 –93.7 –76.2 –81.5 –71.5 –70.0 –73.9 –71.2 –71.5 -71.4 –89.0 –89.0 –82.4 N.A. –60.5 N.A. –61.3 –52.3 –58.3 -58.2 –87.1 –87.1 –70.0 N.A. –43.6 N.A. –64.7 –55.1 –55.7 -55.7 VelShs VIX ShTm ETN Direxion:China Bear 3X ProShs II:Ult Blm Nat Gs Direxion:Tech Bear 3X Direxion:MSCI EM Bear 3X ProShares:UltP Sht QQQ ProFunds:UlSh China;Inv Direxion:Jr Mnr Bear 3X Nvgtr Sentry Mgd Vol;I ProShares:UlS Semicond VIIX YANG BOIL TECS EDZ SQQQ UHPIX JDST NVXIX SSG 12.7 40.7 47.4 17.4 84.2 605.1 2.0 115.3 12.4 2.9 -5.1 -2.9 -1.2 -4.6 0.3 –6.1 1.2 2.0 –8.1 –2.5 -68.4 -62.5 -62.0 -60.1 –59.9 –58.1 –54.5 –53.7 –52.8 –52.0 -71.4 -55.6 -54.1 -63.0 –60.1 –59.7 –49.8 –56.6 –56.3 –55.2 -58.2 -42.5 -61.6 -45.4 –33.0 –42.1 –29.0 –83.8 –38.5 –40.4 -55.7 -47.3 -47.6 -48.2 –28.7 –49.2 –34.3 N.A. N.A. –46.2 ProShares:UPS Nasdaq Bio ProShares:UltP Sht Dow30 ProShares:UlS Tech Direxion:Nat Gas Bull 3X ProShares:UlS FTSE Ch 50 Direxion:MSCI DM Bear 3X Direxion:S&P OG EP Bl 3X ProFunds:UltSh EM;Inv ProShares:UlPS Fin Sel Rydex:Inv EM 2x Str;H ZBIO SDOW REW GASL FXP DPK GUSH UVPIX FINZ RYWYX 6.2 181.4 3.9 53.3 31.2 3.7 129.7 2.1 1.4 0.8 –2.4 –11.7 –2.2 1.9 –1.9 –1.9 10.6 2.4 –10.4 2.2 –49.9 –49.5 –48.5 –48.0 –47.4 –47.4 –46.6 –46.5 –46.3 –45.9 –45.7 –54.5 –50.2 –53.3 –41.2 –51.7 –48.5 –43.7 –52.6 –43.2 N.A. –37.2 –32.6 –80.6 –27.4 –26.5 N.A. –20.0 –43.3 –19.9 N.A. –40.7 –35.5 –70.5 –26.7 –30.1 N.A. –18.5 –48.1 –18.2 Ticker Assets ($ millions) November YTD Third Avenue:Foc Cr;Inst Direxion:20+Y Trs Br 3X Mrkt Vctrs ETN Dbl Sh Eu ProShares:UPSh 20+ Trs ProShs II:UlS Euro Rydex:Stg Dlr 2x Str;H Barclays Inv US TC ETN FX Strategy;I iPath ETN Trs Lng Bear A ProShares:UlS 20+ Yr Trs TFCIX TMV DRR TTT EUO RYSBX TAPR FXFIX DLBS TBT 146.5 371.4 ... 79.8 233.6 11.5 15.5 33.6 17.3 2,151.5 -8.9 -2.5 -4.2 -2.4 -4.0 -3.2 -0.3 -3.8 -1.1 -1.6 -22.4 -22.1 -21.4 -20.8 -20.8 -17.1 -16.5 -16.2 -15.0 -13.7 -15.1 -21.8 -20.3 -19.9 -19.7 -15.7 -15.1 -13.4 -13.7 -13.0 -16.7 -19.3 2.2 -18.0 1.5 1.5 -15.2 -4.6 -9.4 -11.1 -7.4 -18.1 2.6 -16.7 1.8 3.5 N.A. -0.6 -8.6 -10.3 ProShs II:UltSht AUD iPath ETN Trs Steepenr A ProShs II:Short Euro ProFunds:Rs USD;Inv Direxion:7-10Y Trs Br 3X PowerShares DB USD Bull iPath ETN Trs 10Y Bear A Oppenheimer Ro MD Mu;A WisdomTree:Blm USD Bull ProShs II:UlS Yen CROC STPP EUFX RDPIX TYO UUP DTYS ORMDX USDU YCS 11.9 4.4 8.20 16.6 28.7 643.9 50.1 26.6 142.1 144.2 2.2 -2.2 -2.0 -1.6 0.8 -1.5 4.8 -1.4 -1.4 -1.9 -11.8 -10.9 -10.8 -9.4 -8.5 -8.4 -7.8 -7.7 -7.7 -7.2 -8.0 -11.0 -10.1 -8.6 -8.6 -7.7 -6.4 -7.6 -6.8 -3.1 0.8 -4.5 1.0 0.4 -9.5 1.0 -6.7 -0.3 1.4 -5.4 5.3 -1.7 1.1 1.3 -8.8 2.0 -6.3 -1.4 N.A. 10.2 Rydex:Inv Gv LB Str;Inv Direxion:20+Y Trs Br 1X Oppenheimer Ro NJ M;A ProShares:Sht 20+ Treas Rochester Sh Dur HYM;A PowerShares DB G10 CH ProShares:Sht High Yield Rydex:Inv Hi Yld Str;C ProShares:CDS Sh NA HY C Direxion:M7-10Y B 2x;Inv RYJUX TYBS ONJAX TBF OPITX DBV SJB RYIYX WYDE DXKSX 118.4 5.1 293.9 616.5 1,302.4 37.9 114.3 2.9 4.9 6.4 -1.0 -0.7 -1.5 -0.8 -1.4 -1.4 0.4 0.4 0.1 0.6 -6.9 -6.9 -6.8 -6.8 -6.3 -6.2 -6.1 –6.0 -5.3 –5.0 -7.1 -6.7 -6.8 -6.4 -6.5 -8.1 -7.9 –7.6 -6.9 –5.0 -4.6 -5.2 -1.0 -5.2 -1.6 -3.3 -6.0 –7.6 -5.7 –5.7 -4.0 -5.0 -0.2 -4.9 -0.8 -1.9 -6.7 –9.5 N.A. –5.2 Worst-Performing Bond Funds Emerging Markets 85.9 –0.2 149.5 112.0 N.A. 205.2 4.8 85.2 84.5 N.A. 122.9 4.9 80.5 79.1 N.A. 326.7 0.7 62.1 53.4 N.A. 1,045.4 2.4 60.3 61.2 N.A. 109.1 3.1 55.1 56.8 20.1 43.4 1.4 54.6 52.2 N.A. 6,682.7 0.5 51.5 52.8 21.7 1,765.5 0.6 51.0 52.3 21.3 32.4 1.0 50.1 46.1 N.A. YTD Worst-Performing Stock Funds Multicap Value Assets ($ millions) November Ticker co Fo m rp m e er rs ci on al a us l, e on Transam:Cap Growth;I 832.9 Morg Stan I:Growth;A 4,114.7 Baron Fifth Ave Gro;Inst 192.6 JPMorgan:LgCp Gro;R6 12,741.0 Touchstone:LC Gro;Inst 220.2 T Rowe Price I LgCp Gro 15,483.2 Homestead:Growth 170.8 iShares:Edge MSCI USA MC 4,606.8 T Rowe Price BC Gro 44,436.3 T Rowe Price I LC Cor Gr 2,986.9 Total return (%) Nov YTD 1-yr 5-yr* Total Return (%) Annualized 1-year 3-year Assets ($ millions) Fund Best-Performing Bond Funds Small-Cap Growth Assets ($ millions) Direxion:CSI Ch Int Bl2X ARK Innovation ARK Web x.0 EMQQ EM Intrt & Ecom ETF Glbl X Rob & Art Intel Firsthand Tech Opptys ETFMG Video Game Tech Fidelity Sel Technlgy Fidelity Adv Tech;A Glbl X FinTech N.A. 1,618.7 49.9 5.5 22.4 23.6 2,625.5 83.9 69.6 23.5 Small Cap Value Fund Royce Fd:Oppty;Inv Paradigm:Micro-Cap Aristotle SmCp Eqty;I Ancora MicroCap;I DGHM MicroCap Val;Inst Invesco SC Value;Y Walthausen:Sel Val;Inst Perritt Ultra MicroCap Hotchkis:SC Dvs Val;I Large-Cap Growth PowerShares Russ MdCp PG BlackRock:MC Gro;A Renaissance IPO ETF Tocqueville:Opportunity Baron Partners Fund;Rtl DF Dent MidCap Gro PRIMECAP:Odyssey Ag Gr Harbor:Mid Cap Gro;Inst PowerShares DWA NASDAQ Virtus:KAR Mid-Cap Gr;A 4.1 2.5 2.2 3.4 3.1 0.6 2.5 3.4 1.7 3.1 Small-Cap Value Assets ($ millions) CB Select;IS RBB:Mtly Great Amer;Inv Guggenhm Insider Snt ETF Tarkio Frst Tr Srs:AQA Eqty;A Pac Fds:MdCp Eq;P Carillon:Sct Mid Cap;I Forward:Adapt US Eq;Inst Aberdeen:US MdCp Eq;Inst Guggenhm MC Core ETF 20.1 96.5 30.4 223.4 2,414.4 55.3 172.9 1,179.8 85.5 14.5 ICON:Opportunities Bernzott US Sm Cap Val Auer Growth Wasatch:Micro Cp Val;Inv Royce Fd:Premier;Inv Royce Fd:McCp Oppty;Inv AMG Mg Emerg Opps;N Harbor:Sm Cap Val;Inst AllianzGI:SmCp Blend;A Baird Sm/Md Cap Val;Inst Large-Cap Value Category Average: Total return (%) Nov YTD 1-yr 5-yr* 2.8 3.1 2.6 3.7 4.3 1.4 3.3 2.9 2.3 0.1 Fund Count N.A. 35.9 34.1 36.3 33.5 30.5 30.2 29.9 31.2 27.2 Assets ($ millions) ly . Assets ($ millions) Fund Total Return (%) Annualized 1-year 3-year Note: For funds with multiple share classes, only the largest is shown. N.A.: Not applicable; fund is too new or data not available 5-year 5-year For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. Monday, December 4, 2017 | R9 JOURNAL REPORT | INVESTING IN FUNDS & ETFS College-Savings Gender Divide: Readers Weigh In The passionate reaction to our article on parents putting more aside for sons than daughters i i When I told my girlfriend about the article, she said, “Oh, that seems obvious to me. Girls cost way more to raise than boys.” I think that this would especially have an impact on the difference in savings for parents with girls only vs. parents with boys only. I am only hypothesizing, but I think that this would decrease the overall savings for both boys and girls in families that have both. —Jerry Wallman i i i I know of no parents that think this way; they treasure their daughters as much as their sons. And there are many more women than men in college these days, so they do seem to be getting there. —James Leppert i i i Daughters don’t take courses that pay the bills. —Bill Wald i i i i i i i Forty years ago my parents sent both my brother and me to private high school and then Ivy League colleges. I never once doubted that they were committed to giving us both the most opportunity they could. —Mary Giannini i i i This article seems to have touched a raw nerve. If you have children, or nieces or nephews, keep it in mind. If it doesn’t apply to your family, be glad. If it does, you may have valid reasons. But girls don’t marry husbands who earn enough to allow them to be stay-at-home wives like 50 years ago. —Harold Lampi i i i More time should have been spent on the STEM issue [degrees in science, technology, engineering and math]. Colleges currently charge the same tuition regardless of field of study, and the return on STEM investment is significantly higher. While mine is but a single testimonial, it is enlighten- i i i i i Parents know their daughters can and will get jobs while in college to help out GÉRARD DUBOIS i Here’s the bias. Females account for 60% of undergraduates; females dominate postgraduate studies in the humanities as well as law school. Is this huge imbalance/ bias of the slightest concern to feminists? Of course not. —Ed Johnson with expenses, while their sons will hang out at the frat house recovering from last night’s party and planning tonight’s.... They don’t have time to work and they need the help! :) —Frode Jensen i i i i i Maybe parents want to make sure their sons aren’t living with them when their sons are 30. Maybe not as big a problem for daughters. So many variables.... —Vernon Parmley i ly . Interesting article that made many valid points and concerns. However, as the parent of both a female in college and a son almost there, I was disappointed that the article was incomplete. The writer did not explore the general cost difference in raising a girl versus a boy. Girls are more expensive in general: clothes, interests, etc. Plus, I am hearing that the brides’ parents are still expected to foot the bill for a wedding. It is possible that parents are factoring these expenses with education as a whole, not just an educational 50-50. That may not be fair educationally, but as a big picture it matters. As an aside, my children receive equal financial opportunities educationally. —Christine Byrne i I am a woman. This article is sadly true. I can’t tell you how many of the few females in my engineering classes could tell you the same story. Just because you don’t “see” it doesn’t mean it isn’t happening. Unfortunately it is. —D Smith i i i Could it be possible that parents believe their daughters may more easily qualify for grants and scholarships? I am one of six children, four of whom are women, and all of whom graduated college. Of my own five children, both of my daughters graduated with degrees with zero government help. They each succeeded because of one thing: They didn’t listen to those who told them they should constantly whine about being girls. —Gilbert Brown i i no If we add up parents’ expected financial contributions to their daughters’ weddings and college, does the number work out to be about the same as what they put away for their sons? I can’t imagine parents think like this—mine don’t— but it seems worth checking. —W. Zhang i succeed there. —John Paul Harmon co Fo m rp m e er rs ci on al a us l, e on i ing: My sisters and my wife all have master’s degrees and have each spent at least double on their education. Between the three of them, they have eight degrees. And yet, I, with my lowly bachelor’s of physics, earn more than all of them put together. I am not trying to be boastful, merely stating the truth: Women are less likely to choose STEM fields, and STEM fields pay [more]. Hence, as long as tuition remains unrelated to field of study, the return on investment of a STEM education will be higher, and differential saving for one’s children’s field of study is appropriate. —Jonathan Lawry n- READERS HAD STRONG reactions to last month’s Investing in Funds & ETFs article about the gender divide in college savings. The article, citing two financial-industry studies this year, pointed out evidence that parents are saving more for sons than daughters for higher education. One study, by mutual-fund company T. Rowe Price, found that 50% of parents of boy-only households had money saved for children’s college, compared with 39% of parents of girl-only households. (The firm’s similar study three years earlier found that 53% of boys reported that their parents were saving for college, compared with 42% of girls.) The second study this year, by student-loan marketplace LendEDU, found that females generally received less help paying for college than their male peers—6% of women said their parents paid for a majority of college, compared with 10% of men. One theory is that parents have more confidence in their daughters’ abilities to get financial aid. Another is that some parents still figure a daughter won’t have the long career that they expect a son will have. In any case, the readers spoke. Here are edited excerpts of some of the responses: i When more young women choose to major in fields that lead to good-paying jobs and solid careers—as opposed to “XXXXX Studies”— perhaps parents will more willing to pay for a pricey degree. —AA Byron i i i The study polled all-girl and all-boy families, yet the scolds who conducted the studies speak like parents are treating sons and daughters differently (unless I missed something here). In any event, women are going to take over the world eventually: More women are graduating from college than men. I’m not worried about my daughters. —Ted Howard i i i “HIGHEST IN EMPLOYEE ADVISOR SATISFACTION AMONG FINANCIAL INVESTMENT FIRMS.” FOR THE 9TH TIME. THE MORE YOU KNOW, THE MORE WE MAKE SENSE. Why is financial advisor satisfaction higher at Edward Jones than any other investment firm in the country? Perhaps it’s the vast resources at their disposal, from a dedicated Branch Office Administrator to strategic expertise to the most advanced technology and tools in the industry. It’s time to grow your practice here. It’s time you got to know Edward Jones. i Maybe parents are more willing to spend a lot of money on a STEM degree vs. other majors. —Joe Thompson i Craig Fehr, CFA Investment Strategist i Piffle. There are far more girls in college than boys, and there is an even bigger imbalance than that in STEM scholarships for girls. Why would I save for my daughter’s education when I know someone else is eager to pay for it? On the other hand, I want to coax my son into college, and I seem to be the only one interested in seeing him Visit edwardjones.com/knowmore Edward Jones received the highest numerical score in the Employee Advisor Segment in the J.D. Power 2017 Financial Advisor Satisfaction Study, based on 1,761 total responses from 10 companies in the segment measuring experiences and perceptions of financial advisors, surveyed January–April 2017. Your experiences may vary. Visit jdpower.com For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. R10 | Monday, December 4, 2017 JOURNAL REPORT | INVESTING IN FUNDS & ETFS SAVING FOR COLLEGE | CHANA R. SCHOENBERGER What If College Plans Change? BEST BET/WORST BET i i The key is to keep good records when filing your taxes, Mr. Shrier says. A parent or grandparent who wants to hedge their bets should consider saving in a regular taxable account in addition to the educational account, says Mr. Shrier “A good, tax-efficient investment in a taxable account is perfectly good for college savings to supplement a 529,” he says. If the student is likely to apply for financial aid, make this second account a regular brokerage or investment account, he says. “You would manage that account for a minimum of taxable gains by investing in a very tax-efficient manner and staying away from things that produce a lot of current income,” Mr. Shrier says. For instance, invest in global growth stocks through an ETF that you buy and hold, rather than a balanced fund that generates dividends. Another option for parents who don’t already have a Roth IRA is to open one, he says. These accounts don’t count toward financial aid, but the money can be taken out tax-free and penalty-free for educational purposes, as long as you’ve had the account for five years, he says. If you know you don’t qualify for financial aid because your income or assets are too high, consider setting up the taxable account as a custodial account in the child’s name, Mr. Shrier says. A custodial account—a UGMA or UTMA— will blow your chances at getting aid, because the college will consider 20% of the account a year as eligible to go toward educational costs. But in this sort of account, the first $2,100 of annual income, including interest and dividends, is either tax-free or taxed at the child’s rate, he says. “That gives you really good protection for taxes until it’s quite large,” Mr. Shrier says. When should you contribute to each of these accounts? Put as much as is allowed into the 529 as early as possible to maximize the power of compounding, Mr. Shrier says. Then put future savings into your taxable account. i How can I save for my children’s or grandchildren’s higher education if flexibility is my biggest concern? I am not sure, 18 years from now, whether my student will win a scholarship, attend a military service academy, or even go to college at all, so I’d like to preserve the option to use the money for education or other purposes, while paying as few taxes and penalties as possible. Here is the trouble with college savings: You never know how your child’s life is going to turn out. Tax-advantaged savings accounts such as 529s and Coverdells are designed for educational savings, not general savings. The benefits of these accounts are considerably diminished if the beneficiary doesn’t go to college, or is able to attend a school tuitionfree. “To preserve maximum flexibility, you’re going to want to consider saving in two different vehicles,” says Zach Shrier of Shrier Wealth Management in Los Angeles. The first account should be a 529, in which ‘529’ Assets Total investment in '529' college-savings plans stands at a high, through year-end 2016. $300 billion 250 200 150 i i i If my student receives a scholarship, can I wait to withdraw the equivalent amount of money from our 529 until she’s done with school, or do I have to do it in the year she receives the scholarship? 100 50 0 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 “The tax code doesn’t specify that the scholarship must have been awarded within a certain period,” Ms. Prangley says. While some accountants say you can take the distribution once the student has finished with school, you may want to avoid problems with the IRS by withdrawing the equivalent of the scholarship in the year your student receives it, she says. ’16 Source: College Savings Plans Network (CSPN) THE WALL STREET JOURNAL. i i i Can we transfer money from 529s that we hold for each of our grandchildren to 529s that their parents hold for them? Yes. If it’s the same state plan, the process will take only one step. If you and your children hold 529s under different states’ plans, it will take two steps. First change the owner on the account, then roll the funds into the parents’ account in the other plan, Mr. Shrier says. i i i When I withdraw money for qualified expenses from my 529, does the money have to be sent directly to the college? no n- after-tax contributions can grow tax-free as long as they are withdrawn for qualified highereducation expenses. Knowing there is money set aside in a 529 account—and that you’ll have to pay a 10% penalty on the gains, plus income taxes, if the funds are withdrawn for noneducational purposes—could give your student an incentive to go to college, he says. But even if a four-year college isn’t in the cards, some sort of advanced training likely will be. “The chance in this economy of a young person needing some postsecondary education is so overwhelming,” Mr. Shrier says. Whether it’s an associate degree, a bachelor’s degree, community college or trade school, “the 529 can be used for many of the ancillary expenses relating to your education,” he says. Here’s why financial experts like 529s: If your student doesn’t use the money, you can change the beneficiary on the account to another relative of the student. And the funds can be used not only for tuition, room and board, but also for other educational costs. “Expenses that are required for enrollment vary based on the institution, but frequently include books, school supplies, computers, printers, software and internet access fees,” says Karin Prangley, a senior vice president at Brown Brothers Harriman. If your child or grandchild is fortunate enough to win a scholarship, or place at a service academy, you’re entitled to withdraw the equivalent amount from a 529 without penalty (although you would still have to pay income taxes on any gains). HAVE A COLLEGE-FINANCE QUESTION IN GENERAL? We’ll be answering them in future Investing in Funds & ETFs reports. Write to firstname.lastname@example.org. No. You can take the equivalent money out of the 529 account and place it in another account of yours, or have your student receive it. “But having the funds sent directly to the college is probably the cleanest way to do it as you won’t have to worry about documenting that the funds were used for qualified educational expenses,” Ms. Prangley says. i i i If my three children are dependents of mine, do I count their 529s as their assets or my assets when I file the Fafsa for them? Do I include all three of the 529s, or just the 529 of the child whose form I’m submitting? These funds are all your assets on the Fafsa. As long as your children are dependents, you need to include all three accounts on each child’s form, Ms. Prangley says. IN TRANSLATION DONOR-ADVISED FUNDS Some individual investors may not be familiar with donor-advised funds, which have certain advantages and are fast becoming a force within philanthropy. “A donor-advised fund is a way for people to save money to give to a charity in the future but to get the tax deduction immediately,” says James Andreoni, professor of economics at University of California, San Diego. “It breaks the connection between when you donate and the timing of when the money goes to the charity.” Put another way, you make your donation now, get the immediate charitable tax deduction (if any), and then the money stays invested until you decide which charity should get it. Technically, when the cash is donated it becomes the property of the fund company, such as Fidelity Charitable Gift Fund. “You are giving Cyan Banister’s Lessons About Startup Investments After Cisco Systems Inc. bought IronPort in 2007, Cyan Banister, an early employee of the acquired company, found herself with money from the acquisition that she didn’t know what to do with. She considered putting it in the stock market or in land, but settled on startups. The first check she wrote was to SpaceX. Without quantifying the size of her investment or her returns, BY CHRIS she says “I’ve done quite well.” KORNELIS Over the past decade, she has written other personal checks to companies that have become familiar names—including Uber Technologies and DeepMind Technologies, which was purchased by Google in 2014. In 2016, she became a partner at the venture-capital firm Founders Fund, where she has invested in companies such as Brave Software and Contraline, which is developing a male contraceptive. Ms. Banister has been an employee and she has been a CEO—co-founding the pinupphotography platform Zivity—but she says investing is a better fit for the way her brain works: She’s a sprinter, she says, not a marathon runner. “I really like to work on different things at different times and think about different problems,” she says, adding that as an investor in various startups she can “shift from helping a hardware company, to the next day a consumer-apps company, and the next day a biotech company. I think it really just keeps me intellectually curious.” Here, she talks about the best and worst bets she has made. co Fo m rp m e er rs ci on al a us l, e on Average account size: $21,383 Total number of accounts: 12.9 million Cyan Banister says her Postmates investment was instructive—and profitable. ly . How best to save for college is a major preoccupation of families. But they also want to know what happens if a child’s plans change. We answer reader questions on that and other issues related to college savings, with the help of experts. ANTHONY THORNTON Flexible ways to save, for a child’s different path money to a foundation but retaining the rights on how to invest that money,” says Prof. Andreoni. “There are no legal restrictions and very few practical ones.” It is big business, too. Seven of the top 20 donor charities in 2017 are donor-advised funds, according to the Chronicle of Philanthropy. The ranking is based on annual donations to the fund, with Fidelity leading the way after taking in $4.1 billion in fiscal 2016 to end the year with $16 billion under management. “These funds have been a huge focus of growth over the last few years,” says Pam Norley, president of Fidelity Charitable. According to the National Philanthropic Trust, U.S. charitable giving totaled $389 billion in 2016. Combined, donor-advised funds took in around 10% of that charity haul, says Fidelity. —Simon Constable BEST BET: POSTMATES WORST BET: GAMECRUSH INVESTMENT: “Well over a million dol- INVESTMENT: $250,000 LOSSES: $250,000 lars” GAINS: Millions. Her stake in the company is currently valued at several times her investment. Ms. Banister made a personal investment in Postmates Inc. early, in 2012, when the company was still a bike-messenger service. Today, its value has been estimated at about $800 million, and it delivers everything from food to office supplies in under an hour. Postmates is just the kind of solution Ms. Banister likes to invest in: “Someone has the skill. Someone needs the skill. What sort of technology or platform can enable those two people to come together as efficiently as possible?” she says. “I just found it really compelling. It seemed like an underserved market.” Ms. Banister says Postmates is one of the biggest personal investments she has made, but not necessarily the investment that provided her with the greatest monetary return. In some ways, she says, that speaks to the difference between her life as an angel investor and her current role as a venture capitalist, where her job is to return as much value as possible to her partners and limited partners. “As an angel investor,” she says, “it’s the company that I was the closest to, had the most fun with, and had really great financial rewards, and did big things for the world.” THE TAKEAWAY: Postmates has done well in certain regions of the country, such as Los Angeles, but it isn’t dominant nationwide in a way that, say, Uber is. Ms. Banister says that demonstrates that a company need not be a nationwide force to succeed. “If you have an investment thesis that ‘I only invest in monopolies’ and you took that thesis down the path of national monopoly, then I may have never done that investment,” she says. “So I think that has definitely informed my thinking as well as people here at Founders Fund,” which is also an investor. Ms. Banister says her Postmates experience also taught her to put less emphasis on product and more on the design of product and its founders. Products and strategies are likely to change, she says, and they should. The long-term relationships, she says, tend to be with founders more than initial product ideas. “I’m much more open to the fact that I’m going to be in a relationship with this founder for 10 years,” she says. “Do I believe in them? If the answer is yes, then the product is kind of secondary.” In 2010, Ms. Banister became interested in a website called GameCrush that enabled men to play videogames online with female gamers and video chat with them as well—then tip them if they enjoyed the experience. Ms. Banister, who calls herself “a little more libertine than a lot of people,” pledged $250,000, which was her default investment at the time. “I was really excited about the prospect of gamers meeting each other,” she says, “as well as these female gamers being able to make a living doing what they love.” The warning signs, she says, were there from the beginning. At an early dinner—after she had committed but before the money was sent— she says it became clear that among the three founders, there wasn’t a clear leader. No single person was in charge. However, since she had already agreed to fork out the cash, she stuck to her word. (The founders didn’t reply to requests for comment for this article.) Later, the company’s biggest investors pressured the founders to make the site more mainstream. GameCrush eliminated some of the features, like certain tipping mechanisms, that Ms. Banister says had made the site successful. Women and men, she says, lost interest in the site. Ms. Banister lost her entire investment when the company went under. “That was a great disappointment to me,” she says, “because I really like sites that push boundaries and products and companies that try to move social norms.” THE TAKEAWAY: Ms. Banister says the experience has, in many ways, fundamentally changed the way she invests. To start, she tells companies up front that if material information arises, she’s free to withdraw her offer. She also started investing in smaller amounts depending on her level of conviction— $10,000 or $75,000 a throw, for example— and saving those $250,000 personal checks only for those opportunities she is “willing to bet the farm on.” Critically, she says she no longer invests in companies without a clear leader. “There have been companies I have not invested in after GameCrush because I can smell the hint of founders not being able to be agreeable, nobody was really in charge,” Ms. Banister says. “And sure enough, within six months, they implode.” She says the rules she set up for herself in the wake of the GameCrush experience compelled her to sit out some deals that “maybe arguably I should have been in, but I feel better about them, because you know what, this could have gone wrong. It’s better that I stick to this rigidity.” Mr. Kornelis is a writer in Seattle. He can be reached at email@example.com. For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. Monday, December 4, 2017 | R11 JOURNAL REPORT | INVESTING IN FUNDS & ETFS MONEY MANAGERS CEOS’ VIEWS ARE SHAPED BY THEIR DAUGHTERS Women Fund Managers Face Bias In Getting Promotions, Study Finds Investment-performance numbers aren’t everything when it comes to career outcomes, according to academic research Skill or luck? n- A good deal of academic research by others has shown that affinity with those in charge can affect one’s career path, but the three researchers wanted to see if this is also the case when performance is easily measured, Prof. Scherbina says. “We thought that mutualfund management would be a more fair promotion environment because performance matters a great deal and it is measurable,” she says. “But there is still some room for personal biases of the management to play a role because one can attribute performance to either skill or luck.” The study found that that little bit of wiggle room does allow managers to favor people like themselves—men with degrees from elite schools, for instance. The study found that women have held a smaller portion of fund-manager jobs than men over the years in the U.S.; that countries with “higher gender equality” had proportionately more female fund managers than the U.S.; that women are more likely to permanently leave fund management than men with similar performance; that women advance more slowly than men with the same track records; and that women who co-manage funds are more likely than their male partners to permanently leave the industry, though the partners share the same performance. “We were surprised to find that the tendency of female managers to permanently no HOW IS YOUR mutual-fund manager doing? That’s pretty easy to know, as most funds’ performance can be measured against a benchmark like the S&P 500. With objective data available, managers’ careers need not be governed by guesswork, misconceptions or favoritism. That is what many assume, anyway. But new academic research of actively managed U.S. funds shows that women face headwinds that keep top performers from rising as fast and high as they would in a system based solely on merit. “We find that female fund managers have worse career outcomes in the mutual-fund industry than male fund managers,” says one of the researchers, Anna Scherbina, associate professor at the University of California, Davis, Graduate School of Management. “Women do not advance as fast as male managers and are more likely to leave the industry prematurely for reasons that are not explained by their performance, funds flows or the types of funds that they manage.” The findings are described in a paper co-written by Brad Barber, finance professor at the UC Davis management school, and Bernd Schlusche, an economist with the Federal Reserve. The study used various data sources, including records from January 1992 through December 2016 covering 12,669 managers of actively managed funds with a total of 929,946 months on the job. It looked at fund performance and cash flows, and managers’ career leave the industry is not related to their age,” Prof. Scherbina says. “We were expecting to find that female managers disproportionately leave the industry in their 30s due to family conflicts. But this is not the case.” The Investment Company Institute, a trade group for the fund industry, says it couldn’t comment on the study’s findings because it doesn’t compile employment data for the industry. “ICI and its member funds support efforts to promote diversity in the financialservices industry,” says spokesman Mike McNamee. “Greater diversity and inclusion can promote stronger, more effective and more innovative businesses, as well as create opportunities for firms to serve a wider range of customers.” The study establishes the presence of bias in fund managers’ careers but doesn’t pinpoint the causes. “We need to understand what prevents female managers from succeeding in the money-management industry,” Prof. Scherbina says. “Our results show that the poor career prospects are not explained by underperformance.” Mr. Brown is a writer in Livingston, Mont. He can be reached at firstname.lastname@example.org. Ms. Winokur Munk is a writer in West Orange, N.J. She can be reached at email@example.com. ‘Investors should care’ It’s important for investors to know these things, because bias reduces the pool of job candidates, which can undermine an organization’s results—in this case possibly affecting fund returns. Prof. Scherbina says that investors should care about managers with good results getting more fund-management responsibilities and managers who underperform getting let go, “irrespective of their gender.” SPOTLIGHT | GENDER DIVERSITY INDEX ETF A ‘GENDER ETF’ IS WELL-TIMED Can an exchange-traded fund change America’s boardrooms? That’s part of the thinking behind SPDR SSGA Gender Diversity Index ETF (trading symbol SHE), a $368 million fund that has gained 18% so far this year. Research shows that gender-diverse companies perform better overall, says Lynn Blake, chief investment officer of global equity beta solutions at State Street Global Advisors, the money manager behind the fund. For example, a 2015 MSCI study found that companies with at least three female board members have a better return on equity. The SHE fund, launched in March 2016, aims to provide similar returns to the overall market, while also promoting gender diversity. It tracks an SSGA-created index that selects stocks from the 1,000 largest U.S. companies, depending on the gender diversity of their boards and senior leadership. The ETF weights its investments by choosing companies that have the greatest gender diversity within a respective sector. This allows the fund to minimize significant sector biases, says Ms. Blake. Otherwise, there would be significant skews toward certain industries because some, such as energy, have far less gender diversity than other sectors, such as consumer staples and health care, she says. The study raises questions about whether fund investors are poorly served by fund management practices, she says. “We would like to see whether female managers tend to see opportunities in a different set of stocks than male managers, and whether they tend to herd less with other managers when it comes to important predictions about the direction of the stock market, industries and individual stocks.” co Fo m rp m e er rs ci on al a us l, e on paths, gender, national origin, higher education and whether they worked with co-managers. BY JEFF BROWN Recent research suggests one possible way of reducing perceived inequalities in the workplace: Hire CEOs with daughters. A handful of studies that look at decision-making by chief executives, legislators, judges and venture capitalists suggest those who have daughters are more likely to make decisions that favor more equitable treatment of women. A newly published study in the December issue of the Journal of Financial Economics shows that CEOs who have daughters scored higher in a measure of corporate social responsibility, says co-author Henrik Cronqvist, chairman of the department of finance at the University of Miami School of Business Administration. Merely having a daughter opens executives’ eyes to gender-related issues that they might not otherwise be aware of, says Dr. Cronqvist, who co-wrote the study with Frank Yu, associate professor of finance at China Europe International Business School in Shanghai. The study found that when a CEO has a daughter, the company’s corporate-social-responsibility rating—a thirdparty measure of how companies stack up on community, diversity, employee relations and other metrics—is about 9.1% higher than that of a median firm. The study analyzed familial information of 416 CEOs from S&P 500 companies. “The research was designed to show causality and go beyond just saying there is a correlation,” Dr. Cronqvist says. As evidence, he points to data from the study that show when a new CEO who has a daughter comes on board, the company becomes more socially responsible. The opposite happens when a CEO without a daughter joins the company. “Clearly, not all companies have the same approach,” Dr. Cronqvist says, but it’s important for companies to recognize “that different CEOs are shaped by different experiences.” Having a daughter isn’t the only factor shaping how CEOs act, but “it’s an important factor,” he says. It all makes sense to other experts. “Fathers of daughters want their daughters to have equal opportunities in the world,” says Barbara J. Risman, a sociology professor at the University of Illinois at Chicago who studies gender issues. “They see the inequities that women face, and that makes them more open to thinking about inequity in general.” The theme of gender influencing parental decision-making is present in other research as well. A 2008 American Economic Review paper found that U.S. congressmen vote “more liberally,” especially on issues affecting women, when they have more daughters. Federal judges (primarily Republicans) with daughters consistently vote “in a more feminist fashion” on gender issues than judges with only sons, says a 2015 paper in the American Journal of Political Science. Also, a working paper by two Harvard University professors offers evidence that parenting more daughters drives leaders of venture-capital firms to hire more female partners. The daughters effect shows how important personal relationships can be in shaping people’s policy preferences, ideology and decisions, says Maya Sen, associate professor of public policy at Harvard and co-author of the study on judges. ly . JUN CEN BY CHERYL WINOKUR MUNK Similar ETFs were recently launched outside of the U.S. In September, Evolve North American Gender Diversity Index ETF (HERS) began trading in Canada, followed by Lyxor Global Gender Equality ETF (ELLE) in Europe in November. Both funds track indexes from Germany’s Solactive index provider. The goal is to encourage companies to change the makeup of their boards, as well as their senior-leadership profile, says Ms. Blake. SSGA issued guidance at the start of the year on its gender-diversity expectations for the 3,500 companies in which it invests on behalf of clients in the U.S., Australia and the U.K. It then screened these companies through the first half of the year and found that 476 didn’t meet its guidance. State Street has said it had positive discussions with 42 of the companies, including seven that changed the composition of their boards as a result. At the same time, the firm has said it voted against the re-election of directors at 400 companies this year because they didn’t take steps to add women to boards. The asset manager recently expanded the policy on gender diversity to include Japan and Canada. “A strong, effective board can truly only be effective if it has good diversity,” Ms. Blake says. —Gerrard Cowan S&P DJI can take it to the power of 500 S&P DJI set the standard when it invented the S&P 500® — a quintessential catalyst that fuels U.S. equity active and passive strategies alike. The world’s first choice for index funds, ETFs and sophisticated derivatives, the S&P 500 has inspired innovations from VIX® to the newest factor-based and ESG strategies across asset classes. Whatever your investment focus, S&P DJI raises every opportunity to the power of 500. indexology® where investing begins spdji.com/indexology © S&P Dow Jones Indices LLC, a division of S&P Global 2017. All rights reserved. S&P® and Indexology® are registered trademarks of Standard & Poor’s Financial Services LLC. Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. It is not possible to invest directly in an index. S&P Dow Jones Indices receives compensation for licensing its indices to third parties. S&P Dow Jones Indices LLC does not make investment recommendations and does not endorse, sponsor, promote or sell any investment product or fund. For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. R12 | Monday, December 4, 2017 JOURNAL REPORT | INVESTING IN FUNDS & ETFS SECTOR STRATEGY Large-Cap Growth Funds Dominate in 2017, Up 29% International in front Up until last week at least, many investors thought U.S. valuations were stretched thin, leading them to look overseas. International-stock funds have gained 24.8% on average so far this year, ac- 42.8% Total return for China-region funds so far this year cording to the Lipper data, with international small-stock and midcap growth-stock funds up 31.4% and international multicap growth-stock funds ahead 27.8%. Stock funds focused on the Asia-Pacific region have outpaced others in the non-U.S. category. China-region funds rallied 42.8% this year through November, while Pacific ex-Japan funds surged 36.8% and India-region funds Front-Runners A sampling of major stock-fund sectors' total return so far in 2017 37.3% Science and technology (U.S.) 28.9 Large-cap growth 14.1 Large-cap value 22.5 9.1 Small-cap value 24.8 S&P 500 index funds Average diversiﬁed U.S. fund 14.8 no International stocks Financial services n- Small-cap growth Source: Thomson Reuters Lipper Mutual funds and ETFs in the U.S. science-and-technology sector are leading the way in 2017, up 37.3%. shot up nearly 37.5%. Broad emerging-markets funds also have outperformed most other fund categories, with a 30.2% gain. “For international markets, it’s about companies starting to deliver on earnings growth,” says Mr. Smith. Some of the restructuring of banks and other companies in Europe has taken longer than in the U.S., he says. “We’re starting to see the fruits of reforms coming now, particularly in Europe,” he says. What’s more, he adds, “some of the stimulus that’s been put in place, particularly in areas like China, has been very successful.” 19.9 17.4 THE WALL STREET JOURNAL. Science and tech rally Among mutual funds that focus on particular stock sectors, science and technology funds have far outpaced others. Even there, however, it has paid to invest globally. Global science and technology funds have surged 44.9% this year, outpacing all other mutual-fund categories, while U.S. science and technology funds have risen 37.3%. In contrast, the energy sector, which was a top performer last year, has been a drag on funds this year, partly because a surge in U.S. oil production has weighed down oil prices this year. The worst performers among sector stock funds are those that invest in energy master limited partnerships, down 10.5%, and natural resources, down 8.5%. Technologies such as horizontal drilling and fracking have disrupted the energy industry, leading to increased production capacity and causing investors to worry that any oil price gains will be limited, says Mr. Smith. Indeed, some shareholders are questioning whether some big energy firms will be able to sustain their dividends at current rates given changing industry dynamics, he says. Funds flow overseas Mutual-fund investors, meanwhile, have redeployed assets to take advantage of the Give to Get: What Motivates Some Hedge Funds’ Charity BY SIMON CONSTABLE WHAT MOTIVATES hedgefund managers to make charitable donations? A new study suggests that in many cases, the gifts appear to be more about business strategy than benevolence. The researchers observed that hedge-fund managers often catch a severe case of philanthropy when their business hits the skids. That is, their giving tends to go up when the net flows and performance of the funds they manage go down, according to the study, which analyzed 6,642 donations of at least $7,500 made to charities by 667 hedge-fund managers from January 1994 through June 2016. “These guys seem to be giving money when their funds are doing badly, [which is] the opposite of you and me who give when we are doing well,” says Sugata Ray, professor of strong run by international shares. They pulled $147.1 billion from U.S.-stock mutual funds this year through September, while adding $58 billion to world-stock mutual funds over the same period, according to the Investment Company Institute. And as investors embrace low-cost passive management, much of the money flooding out of mutual funds is being reinvested in exchange-traded funds, with a significant portion of that also flowing to international ETFs. U.S.-stock ETFs took in $107 finance at the University of Alabama and co-author of the paper, along with Vikas Agarwal of Georgia State University and Yan Lu of the University of Central Florida. In effect, charities invest in hedge funds ‘which pay the best kickbacks.’ After making such gifts, hedge funds generally see a significant increase in net flows compared with their nondonating peers, the study said. That was especially true in the case of large, one-time donations (versus recurring donations) and when the gift went to a charity popular with other hedge-fund managers and investors. In short, “these strategic donations work,” the researchers wrote in the paper. Although the study didn’t go into why charitable donations seem to trigger higher inflows into donor funds, the researchers theorize it could be that big gifts provide more opportunities for fund managers to network and market their funds. “By making charitable donations and networking with investors, the fund managers may be able to gain their trust,” says Prof. Agarwal. Still, he says, “it isn’t possible to provide concrete evidence on such a mechanism.” It appears that for pennywise charity administrators, who have hedge funds beating on their doors, “allocating to the funds which pay the best kickbacks is a cost-reduction formula,” says Don Coxe, chairman of Coxe Advisors in Chicago. Mr. Constable is a writer in Edinburgh, Scotland. He can be reached at firstname.lastname@example.org. billion this year through September, compared with nearly $121.4 billion for world-stock ETFs, says the ICI. Ms. Maxey is a reporter for The Wall Street Journal in New York. She can be reached at email@example.com. ly . MUTUAL FUNDS focused on U.S. large-cap stocks are holding on to strong, steady gains in 2017, though their performance still trails that of some international-stock categories. The average diversified U.S.-stock mutual fund has gained 17.4% this year through November, according to Thomson Reuters Lipper data, buoyed by low interest rates, solid earnings and hopes for pro-growth economic actions from the Trump administration. While the funds are on track to beat last year’s average gain of 10.8%, U.S. stocks had investors jittery for a time on Friday, with the Dow Jones Industrial Average down 350 points at one point as the latest reports swirled about former national security adviser Michael Flynn, just a day after the Dow had its biggest oneday gain of the year. But the Dow closed down just 40.76 points by day’s end Friday. Growth has trounced value this year, as measured through November: U.S. large-gap growth funds, which invest in companies with strong earnings gains, have surged 28.9% this year. That compares with a 14.1% gain for value funds, or those that look for beatendown stocks, a chore in a bull market. The key has been an increase in price/earnings ratios and strong earnings growth, particularly across some of the faster-growing areas of the stock market, such as technology, says Malcolm Smith, head of international equity at J.P. Morgan Asset Management. Volatility in the U.S. stock market spiked Friday but had been persistently low this year, and stocks sectors had been moving independently of one another. Correlations— when sectors move in lockstep—have declined to levels not seen since the 1990s, says Ann Holcomb, a portfolio manager at T. Rowe Price Group. Low interest rates and policy changes out of Washington, including tax overhaul, should support further upside for U.S. shares, she says. Still, T. Rowe Price is cautious as valuations are extended against a backdrop of modest economic growth and uncertainty about Washington’s policy efforts, she says. With the market’s strong performance this year, few investors have been seeking a hedge. As such, the worstperforming diversified U.S.stock fund groups this year have been those that bet against the market or seek to provide a cushion against its risks. Dedicated short-bias funds, which take a net short position in the market, were the worst-performing, with a 22.7% loss on average. How the Largest Funds Fared Performance numbers are total returns (changes in net asset values with reinvested distributions) as of November 30; assets are as of October 31. All data are preliminary. The Largest Stock Mutual Funds co Fo m rp m e er rs ci on al a us l, e on BY DAISY MAXEY ISTOCKPHOTO/GETTY IMAGES Solid earnings bolster several U.S. sectors, though many overseas stocks do even better Total Return (%) Annualized 3-year 5-year Ticker Assets ($ billions) November 1-year VTSAX VFIAX VGTSX SPY VINIX AGTHX RERGX IVV FUSVX FCNTX 634.77 367.42 315.58 252.87 231.37 174.24 159.65 133.41 132.11 123.03 3.0 3.1 0.7 3.1 3.1 1.9 0.02 3.1 3.1 1.6 22.3 22.8 27.3 22.7 22.8 25.4 30.4 22.8 22.8 32.5 10.7 10.9 6.4 10.8 10.9 12.2 7.8 10.9 10.9 13.0 15.6 15.7 7.5 15.6 15.7 16.1 9.6 15.7 15.7 16.4 8.5 8.3 1.4 8.2 8.3 8.2 N.A. 8.3 8.3 9.0 American Funds Bal;A American Funds Inc;A American Funds CIB;A Vanguard Wellington;Adm Vanguard FTSE Dev Mk ETF American Funds Wash;A American Funds CWGI;A American Funds FInv;A American Funds ICA;A Vanguard Md-Cp Idx;Adm ABALX AMECX CAIBX VWENX VEA AWSHX CWGIX ANCFX AIVSX VIMAX 121.04 109.69 107.58 103.91 102.37 97.42 96.22 93.90 91.03 90.70 1.5 0.9 1.3 1.8 0.9 2.8 1.5 1.8 2.5 3.2 15.2 13.5 15.7 15.8 27.4 20.3 25.0 22.8 19.2 18.9 7.8 6.3 4.8 8.0 7.0 10.2 7.4 11.9 9.2 9.1 11.0 9.4 7.7 10.8 8.8 14.6 11.1 15.4 14.8 15.4 7.2 6.1 4.2 7.4 1.9 7.8 4.8 7.9 7.4 8.8 Vanguard FTSE Em Mkt ETF Franklin Cust:Inc;A iShares:MSCI EAFE ETF Vanguard Sm-Cp Idx;Adm American Funds NPer;A Vanguard Gro Idx;ETF Dodge & Cox Stock Dodge & Cox Intl Stock Vanguard REIT Idx;ETF Vanguard Value Idx;ETF VWO FKINX EFA VSMAX ANWPX VUG DODGX DODFX VNQ VTV 88.93 82.90 81.80 80.97 75.84 70.61 68.44 65.46 63.02 61.38 0.2 unch. 1.0 3.1 0.7 2.5 2.6 –0.5 2.6 3.5 26.7 10.9 27.2 18.0 29.5 28.2 17.0 24.5 10.1 18.5 4.5 4.3 5.9 10.2 10.5 11.3 10.2 3.6 6.0 10.3 4.0 6.9 8.1 15.1 13.0 15.9 16.4 9.3 10.1 15.5 0.9 5.4 1.5 9.6 6.8 9.5 7.2 2.9 7.1 7.3 Vanguard Ext Mk Id;Adm Vanguard PRIMECAP;Adm American Funds AMCP;A PowerShares QQQ Trust 1 First Eagle:Global;I Vanguard Wellesley;Adm T Rowe Price Gro Stk Vanguard Windsor II;Adm American Funds Mut;A Vanguard Health Care;Adm VEXAX VPMAX AMCPX QQQ SGIIX VWIAX PRGFX VWNAX AMRMX VGHAX 60.70 59.70 59.58 57.23 57.20 54.77 52.72 49.15 46.99 46.96 2.9 3.3 2.2 2.0 1.2 1.1 1.9 2.6 3.2 2.1 19.7 30.2 21.8 33.5 13.8 10.6 34.5 16.4 18.7 19.8 10.1 13.2 9.7 14.8 7.2 6.1 14.1 7.8 8.7 6.8 15.1 19.7 15.6 20.2 8.8 7.2 18.0 13.3 13.4 17.8 9.2 10.9 8.8 12.7 6.8 7.0 10.0 6.7 7.9 11.4 Fund Vanguard TSM Idx;Adm Vanguard 500 Index;Adm Vanguard Tot I Stk;Inv SPDR S&P 500 ETF Vanguard Instl Indx;Inst American Funds Gro;A American Funds EuPc;R6 iShares:Core S&P 500 Fidelity 500 Idx;Pr Fidelity Contrafund The Largest Bond Mutual Funds Total Return (%) Annualized 3-year 5-year 10-year Ticker Assets ($ Billions) November 1-year Vanguard Tot Bd;Adm Vanguard Tot Bd II;Inv PIMCO:Income;Inst Vanguard Tot Itl BI;Adm Met West:Total Return;I PIMCO:Tot Rtn;Inst Vanguard Sh-Tm Inv;Adm Vanguard Int-Tm TxEx;Adm DoubleLine:Tot Rtn;I Dodge & Cox Income VBTLX VTBIX PIMIX VTABX MWTIX PTTRX VFSUX VWIUX DBLTX DODIX 191.68 142.18 102.49 94.55 80.16 73.68 63.94 56.04 53.74 52.41 –0.2 –0.2 0.3 0.4 unch. –0.3 –0.2 –0.7 –0.1 –0.1 3.4 3.1 9.4 2.8 3.1 5.2 2.2 4.7 3.54 4.5 2.1 1.9 6.1 3.0 2.0 2.4 1.9 2.5 2.7 2.9 1.9 1.8 6.7 N.A. 2.5 2.1 1.8 2.3 3.0 3.0 3.9 N.A. 9.2 N.A. 5.6 5.2 3.0 4.0 N.A. 5.0 iShares:Core US Agg Bd Vanguard Sh-Tm Bd;ETF Lord Abbett Sh Dur;F iShares:iBoxx $IG Corp Templeton Gl Bond;Adv American Funds Bond;A Fidelity Str Adv Cre Inc Vanguard Int-Tm Bd;ETF T Rowe Price New Inc Fidelity US B Id;IP AGG BSV LDLFX LQD TGBAX ABNDX FPCIX BIV PRCIX FXNAX 51.32 51.22 42.60 39.02 38.81 36.54 35.64 34.38 34.30 34.15 –0.1 –0.3 0.1 –0.2 0.2 –0.4 –0.2 –0.4 –0.1 –0.1 3.2 1.2 2.7 6.6 7.7 3.2 4.7 3.6 3.7 3.2 2.1 1.1 2.1 3.5 1.6 1.9 2.8 2.5 2.1 2.1 1.9 1.0 2.2 3.3 2.4 1.9 2.5 2.1 1.9 1.9 3.9 2.4 4.2 5.7 6.2 2.9 4.9 5.0 4.2 N.A. Fidelity Total Bond Vanguard Int-Tm Inv;Adm Pru Tot Rtn Bond;Z Vanguard Infl-Prot;Adm JPMorgan:Core Bond;R6 Vanguard ST Corp Bd;ETF Fidelity Srs Inv Gd Bd Vanguard Ltd-Tm TxEx;Adm Vanguard HY Corp;Adm Vanguard GNMA;Adm FTBFX VFIDX PDBZX VAIPX JCBUX VCSH FSIGX VMLUX VWEAX VFIJX 31.46 29.29 28.41 27.37 26.70 26.66 26.19 25.03 24.96 24.89 –0.1 –0.4 -0.02 0.1 -0.02 –0.3 0.0 –0.8 –0.3 –0.2 4.3 4.1 6.4 1.9 3.6 2.5 4.2 2.1 8.3 1.8 2.9 3.1 3.4 1.3 2.4 2.0 2.6 1.0 5.4 1.8 2.7 2.8 3.4 –0.2 2.1 1.9 2.3 1.1 5.4 1.9 4.9 5.1 5.9 3.3 4.5 N.A. N.A. 2.2 7.0 3.9 iShares:TIPS Bd ETF Vanguard ST InPS Idx;Ins WA Core Plus Bond;I Vanguard Int Crp Bd;ETF iShares:iBoxx $HY Corp iShares:US Pref Stk BlackRock:HY Bd;I American Funds HI;A Vanguard Lg-Tm Inv;Adm Nuveen HY Muni;I TIP VTSPX WACPX VCIT HYG PFF BHYIX AHITX VWETX NHMRX 23.63 22.40 21.33 19.48 19.38 18.16 17.51 17.28 16.22 16.05 0.1 –0.2 unch. –0.41 –0.4 0.6 –0.1 –0.2 0.4 0.5 1.9 1.0 6.8 5.3 7.8 8.8 9.7 8.7 10.9 11.6 1.2 0.7 4.1 3.6 4.1 4.6 4.9 4.1 5.6 6.1 –0.3 0.1 3.8 3.3 4.6 5.4 6.3 4.5 5.1 5.8 3.3 N.A. 5.9 N.A. 6.1 5.7 7.7 5.9 7.6 4.7 Fund Note: For funds with multiple share classes, only the largest is shown. N.A.: Not applicable; fund is too new or data not available 10-year For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. Monday, December 4, 2017 | R13 JOURNAL REPORT | INVESTING IN FUNDS THE EXPERTS Insights on 401(k)s And Confirmation Bias High-rise. i no i i i Costly Estate-Planning Mistakes Take a Bite Out of IRAs and 401(k)s Few Americans pay the federal estate tax when they die, because, under current law for 2018, it applies only to net worth above $5.6 million (or $11.2 million for couples). Even fewer are expected to owe under the proposed GOP tax overhaul. But what a lot of households don’t recognize is they have future tax dollars at stake based on their current estate-planning choices and the big chunks of tax-deferred money in their IRAs and 401(k)s. It’s easy to make expensive tax mistakes in this area. Fortunately, these mistakes also are easy to avoid. First, don’t name your estate as benefi- i i Is the U.S. On Track For Energy Independence? The International Energy Agency recently said that the U.S. was set to become a net exporter of petroleum within a decade. Is energy independence a realistic goal for the U.S.? If so, what needs to happen and how quickly might we achieve it? The U.S. is relatively self-sufficient when it comes to most of our energy sources. The one glaring exception is petroleum. The U.S. has been dependent on foreign oil for decades. Our level of dependence is a function of how much oil we consume versus how much we produce. Energy independence would be achieved if the amount of petroleum we consume is equal to or less than what we produce. At the time of the 1973 OPEC oil embargo, the U.S. still produced about twothirds of the oil we used, but our energy security weakened significantly after that, to the point where only one-third of our consumption was met by domestic oil. The situation has changed dramatically over the past decade. The successful combination of hydraulic fracturing and horizontal drilling ushered in the shale oil and gas boom. Meanwhile, higher oil prices helped curb demand. The combined effect dropped net U.S. imports of crude oil and finished products from a high of 12.5 million barrels a day in 2005 to less than five million BPD in 2015. The U.S. actually became a net exporter of finished products (e.g., diesel, gasoline, etc.) in 2011, for the first time since 1949. Until the oil-price collapse that began in 2014, the U.S. was on a trajectory to achieve zero net imports by 2019. At present, we are still about four million BPD away from that goal, but U.S. oil production is once again rising. Energy independence could be achieved in as little as four years if oil production returns to the growth trajectory of 2008 to 2014. Some would argue this isn’t true energy independence, since we would still import oil in that situation. If that’s the standard, we will never truly be independent, because there will always be economic reasons to import oil even if we export oil and finished products at the same time. Some Canadian crudes may always have a logistical advantage over U.S. crudes for certain refineries in the northern U.S. But a long-term solution to U.S. energy dependence will also require significant demand-side reductions. A shift to electric vehicles, more fuel-efficient vehicles, and widespread adoption of ride-sharing could feasibly shave off several million BPD of demand over the next decade, giving us, by every measure, the energy security that has driven U.S. energy policy for decades. —Robert Rapier, engineering director, ZHRO Power, energy editor, Investing Daily n- We all have read about confirmation bias—the tendency to look for information that confirms a pre-existing belief—and how that bias leads us to make bad investment decisions. And yet we all can still succumb to this bias when it comes to investing. I have come up with four steps to make sure that I don’t succumb when it comes to my own investing. 1. Examine all evidence with equal rigor. If you have been sitting on cash during the stock market’s run this year or have been conservative with your investment choices, you may be feeling that you’ve missed out on big returns. And this could lead you to jump into some investments— simply because you believe that the market highs will continue (and they have, after all), not because they are the right choice for your portfolio. You need to try to avoid such tendencies by looking for real empirical data and evidence—and examining the evidence on both sides with equal rigor. For instance, consider whether the U.S. market is a better bet than international right now. Or, how the GOP tax plan will affect the markets. Make sure you ask yourself the tough questions. 2. Get someone to play Devil’s Advocate. It has happened to the best of us: You are at a dinner party or having a conversation in the kitchen at work when you hear someone say, “I just made 100% profit buying ABC stock, and this thing is just taking off.” When we hear of opportunities to make money, our interest is undoubtedly piqued. And if you hear a tip from a person you trust and like, chances are you will become convinced that it is, of course, a good idea. Do yourself a favor and find someone whom you trust just as much to play Devil’s Advocate and argue the opposite. Ask the person to build a counterargument using questions such as: What is the strongest reason to do something else? The second strongest reason? The third? What is the worst-case scenario? And can you live with it, if it happens? Then, consider this position with an open mind. For me, that person was a former boss. At times, I would grow frustrated with him because on the surface he would never agree with me when I presented an idea. Over the years, however, I realized it wasn’t really him challenging me as much as it was him challenging me to challenge my own thought process so I could be a better decision maker. His sage advice has made me a better investor today. 3. Be honest with yourself about your motives. Have you ever heard the saying, “If you can see John Brown through John Brown’s eyes, you can sell John Brown what John Brown buys”? I think it applies to the way I’ve looked at investments in the past—and the motives behind my decisions. We often don’t realize the power of our own motives—and we aren’t honest with ourselves about what they are. For instance, when I’ve made money in a stock in the past, I’ve felt that those gains justify holding on to the stock for the long term—even if the stock isn’t performing as well as it once did. So now, when I start doing research about that stock’s prospects, I need to make sure that I am really gathering information to help figure me out the right time to sell the stock. This will help me to determine whether any long-held desire to keep an investment is rooted in sound financial reasoning or is just based on pride or another emotion. 4. Don’t ask leading questions. One of the biggest mistakes you can make as an investor is to ask questions that set you up to get the answer you want—not the answer you need. For example, you say, “I heard that the iPhone X is going to help Apple boost the price of its stock, so now is a good time to buy, right?” You’ve essentially answered the question for yourself even though you don’t know what the sales of the phone will be, the profit margins the company is going to have or whether the product will succeed. And if you find that your financial adviser always agrees with your investment ideas, it may be time to find a different adviser. Healthy and heated debates with my adviser have allowed me to make better personal and business decisions over the years. —Ted Jenkin, co-CEO and founder of oXYGen Financial, and blogger ciary of any IRA or retirement plan account. If you do so, you’re almost assured to maximize the income taxes its recipients must still pay. When there’s no living named beneficiary (even if this is done in a will), the entire account balance is taxable over the deceased’s remaining life expectancy. For example, the IRS tables say an 85-year-old will live another 15 years. If that retiree dies at 85, her IRA accounts must be paid out and taxed at an even pace over those 15 years, even if the heirs are only in their 50s or younger. Almost certainly, forcing out the money this quickly wasn’t the idea behind the estate plan. If, instead, the inheritor had been directly named beneficiary of the IRA or 401(k), she could stretch out the required withdrawals over her remaining life expectancy. Because this is often two to three times longer, the percentage paid in taxes can be much lower than when forced out over fewer years, which can push heirs into higher income tax brackets—often 10 percentage points higher than necessary. Second, be precise with the language in a trust. A trust can be named to be primary or contingent beneficiary of an IRA or 401(k). Not surprisingly, the intent in such cases is for these assets to provide income over the beneficiary’s (longer) life expectancy. This is easily accomplished if the trust contains the proper language— often called “look-through provisions.” The problem comes when this language is omitted. When this happens, money is forced out—and taxed—much more quickly and often at higher rates, just as when an estate is named beneficiary. And this may befall an heir who truly needs every aftertax dollar he or she can get. The third mistake can happen if you name a charity to receive some assets. Many assets (e.g., real estate, bank accounts, stocks, bonds) can pass incometax-free to one’s heirs. If the will names charities, they receive a portion of these tax-free assets. Meanwhile, 100% of the fully taxable IRA and retirement-plan assets go to human beneficiaries. This should be reversed: Give charities their portion from IRA and retirement-plan assets. Because of their tax-exempt status, they pay no income tax. The remainder of such assets would go to human beneficiaries. Then leave 100% of the tax-free assets to the other heirs so they will receive as much, after income taxes, as possible. —Jonathan Guyton, principal, Cornerstone Wealth Advisors co Fo m rp m e er rs ci on al a us l, e on How I Avoid Confirmation Bias When I Am Investing ly . The Experts are thought leaders who blog on their areas of expertise. Edited excerpts follow. For more, go to WSJ.com/Reports. Think you know China? Think Again. UBS and WSJ. Custom Studios present ‘Fast & Forward: China Shifting Gears’ - an exploration of modern Chinese innovation including a fascinating look at the rise of green cities and sustainable building. Visit fastforwardchinaubs.com To learn more about WSJ Custom Studios visit wsjcustomstudios.com For personal, non-commercial use only. Do not edit, alter or reproduce. For commercial reproduction or distribution, contact Dow Jones Reprints & Licensing at (800) 843-0008 or www.djreprints.com. THE WALL STREET JOURNAL. R14 | Monday, December 4, 2017 JOURNAL REPORT | INVESTING IN FUNDS & ETFS NEWS CHALLENGE: FUNDS AND INVESTING Test Your Smarts on…Real Estate 7. During the real-estate bubble, which economist was known as “Dr. Doom”? A. Robert Shiller, author of “Irrational Exuberance” and co-developer of the Case-Shiller Home Price Index B. Nouriel Roubini, NYU professor, formerly an economist advising the White House Council of Economic Advisers C. Karl Case, the late professor/re searcher who co-developed the CaseShiller Home Price Index D. Ben Bernanke, former Fed chairman, now a Brookings Institution economist 1. How do investors participate in the real-estate sector? A. Mutual funds and ETFs B. Stocks C. As direct owners/landlords D. All of the above Investors can buy a piece of a shopping mall, through a REIT. See question No. 2. bis farms. You can buy shares (typically called units) in a REIT, or invest indirectly since REIT units are often found within mutual-fund portfolios or in target-date funds. 3. 2. What is a REIT? A. Real-estate investment trust B. Real-estate investment tax C. Real-estate insurance tariff D. Real-estate investor trade ANSWER: A. Real-estate investment trusts ANSWER: C. Before the creation of the FHA and Fannie Mae, it was hard for the average American to come up with a 50% down payment and then pay off the remaining 50% of a home’s value in only a decade; at that time, the homeownership rate was below 49% (versus the current rate of 63.9%, according to U.S. Census data). 6. How did real estate contribute to the most recent financial crisis and related recession? A. Lenders relaxed standards and underwrote loans that wouldn’t fly today B. Banks knowingly and unknowingly sold mortgage securities containing un sound assets, and ratings firms failed to accurately rate real-estate debt sold to the secondary market C. Investors speculated on housing and homeowners D. All of the above 8. ANSWER: B. Canada, according to research from JLL Research and Real Capital Analytics. During the first half of 2017, Canada accounted for 30% of all foreign investment in U.S. commercial real estate, followed closely by China (21%), Singapore (15%) and Germany (7%). 9. What U.S. city has the lowest rate of apartment vacancy? A. New York B. Seattle C. San Francisco D. Boston ANSWER: A. New York has a 1.9% vacancy rate, tightest in the U.S., followed by Boston (2.6%), San Francisco (2.8%), Los Angeles (2.9%), Seattle (3%) and Washington, D.C. (3.8%), says National Real Estate Investor. 4. Which commercial real-estate subsector is least prosperous now? A. Multifamily housing B. Industrial C. Office D. Retail ANSWER: D. Retail ranks last among six commercial categories both in its investment and development prospects, says a joint report on the 2018 commercial realestate market from PricewaterhouseCoopers (PwC) and the Urban Land Institute. Now, some history questions: What were typical residential mortgage terms before the creation of the 5. ANSWER: D. All of the above. You can read all about it in the Financial Crisis Inquiry Commission’s 2011 report. For a more fun look at what happened, watch the movie “The Big Short.” 10. Which commercial real-estate approach isn’t recommended in 2018? A. Take advantage of demand for new housing B. Bet on property price appreciation C. Invest in “experiential retail” D. Senior housing ANSWER: B. Investors are advised to look at cash flow from income as a source of benefit rather than property-value appreciation, according to the PwC-Urban Land Institute report on commercial real estate. Ms. Hodges is a writer in Seattle. She can be reached at firstname.lastname@example.org. no n- are investment vehicles that contain securitized portfolios of commercial properties such as office buildings, apartment buildings, retail sites, hotels, storage facilities, parking garages, data centers, even canna- ANSWER: It depends. Real estate’s fortunes usually rise in a bullish economy, since indicators such as high employment and a strong regional economy can push up demand and prices for housing, office space, storage, retail and other real estate. But some financial advisers and fund managers consider real estate “countercyclical” since it can zig when the rest of the economy zags. For example, even in a slow economy, consumers still need housing (they may opt to rent an apartment from a REIT, rather than buy a new home) and will continue to shop. And some market questions: What foreign country’s investors are buying the most U.S. commercial real estate? A. China B. Canada C. Germany D. Japan co Fo m rp m e er rs ci on al a us l, e on ANSWER: D. Many investors inadvertently own real estate. Broad-themed mutual funds typically allocate a portion of their holdings to real estate. They own it directly, too, sometimes in the form of an exchange-traded fund. You can buy stock in home builders or REITs. You also can buy investment properties for income, and in some cases you can carry these properties within an IRA. Some argue that owning a primary home makes the average investor “overweight” in real estate, so portfolio allocations to real estate need not comprise a large percentage of holdings. True or false: Real estate is a countercyclical sector. Federal Housing Administration (FHA) and the Federal National Mortage Association (Fannie Mae) in the 1930s? A. 3.5% down with a 30-year payoff B. 20% down with a 20-year or 30-year payoff period C. 50% down with a 10-year payoff D. 0% down, interest-only loans with a 30-year payoff period ANSWER: B. Nouriel Roubini, a global macroeconomist, boasts the title “Dr. Doom” for his prognostications about the 2008 real-estate and credit-market meltdowns. He is predicting more economic drama. ly . REAL ESTATE IS an important component of the U.S. and global economies. For many Americans, homeownership doubles as a first investment. Beyond a primary residence, investors also can buy into the commercial real-estate market: Office buildings, multifamily housing, hospitals, parking lots, storage facilities, retail properties, call centers, distribution hubs, hotels and restaurants form a sector with its own economic ups and downs. In 2016, the S&P 500 recognized real estate as its own sector, separating it from financial services where it had been buried for years—a move some view as a portent of more real-estate investment to come and that others view with indifference. Currently, real estate accounts for less than 5% of the S&P 500 by market cap. How much do you know about real estate—and real-estate investing? Let’s start with a few basics (but we assure you, they will get harder). ISTOCKPHOTO/GETTY IMAGES BY JANE HODGES Answer the call with the Earnings Tool. The TD Ameritrade Earnings Tool simplifies research on your earnings trades by aggregating thousands of estimates into a single data point. This earnings season, make your most insightful trades yet. Get up to $600 when you open and fund an account. Visit tdameritrade.com/earnings to learn more. does not represent or warrant the information to be accurate, complete, reliable, or current. See tdameritrade.com/600offer for offer details and restrictions. This is not an offer or solicitation in any jurisdiction where we are not authorized to do business. TD Ameritrade, Inc., member FINRA/SIPC. © 2017 TD Ameritrade.