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The Wall Street Journal December 04 2017

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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%
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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
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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
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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.
CORRECTIONS AMPLIFICATIONS
Readers can alert The Wall Street
Journal to any errors in news
articles by emailing
wsjcontact@wsj.com or by calling
888-410-2667.
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Monday, December 4, 2017 | A3
THE WALL STREET JOURNAL.
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
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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
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A4 | Monday, December 4, 2017
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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
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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.
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THE WALL STREET JOURNAL.
Monday, December 4, 2017 | A5
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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
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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
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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
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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
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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
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—Associated Press
HO
ISAAC LAWRENCE/AGENCE FRANCE-PRESSE/GETTY IMAGES
co Fo
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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
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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
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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
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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
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A collection of impeccable design & craftsmanship from Italy.
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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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
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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
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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.
It’s plain, however, that Pi-
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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
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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
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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.
Sacramento
St. Louis
Salt Lake City
San Francisco
Santa Fe
Seattle
Sioux Falls
Wash., D.C.
Tomorrow
Hi Lo W
39 24 pc
82 62 s
62 48 r
71 51 pc
54 26 r
47 43 r
49 37 s
59 35 s
46 27 pc
35 19 s
62 44 s
45 20 pc
46 35 s
26 18 c
62 46 r
International
City
Amsterdam
Athens
Baghdad
Bangkok
Beijing
Berlin
Brussels
Buenos Aires
Dubai
Dublin
Edinburgh
Today
Hi Lo W
47 42 c
65 49 pc
74 45 s
89 75 c
38 22 s
40 32 pc
44 36 c
75 61 pc
81 63 s
47 39 pc
47 42 pc
Tomorrow
Hi Lo W
47 41 c
58 42 sh
75 52 s
87 75 c
46 27 s
45 40 c
44 37 c
80 62 pc
77 62 s
48 44 c
48 44 c
City
Frankfurt
Geneva
Havana
Hong Kong
Istanbul
Jakarta
Jerusalem
Johannesburg
London
Madrid
Manila
Melbourne
Mexico City
Milan
Moscow
Mumbai
Paris
Rio de Janeiro
Riyadh
Rome
San Juan
Seoul
Shanghai
Singapore
Sydney
Taipei
Tokyo
Toronto
Vancouver
Warsaw
Zurich
Today
Hi Lo W
42 36 sh
39 28 c
83 62 pc
75 61 c
61 44 r
90 75 pc
70 47 s
83 60 c
49 39 pc
53 25 s
92 77 s
64 51 c
74 46 s
45 29 pc
33 22 sn
89 77 sh
46 33 c
85 74 sh
70 40 s
53 33 s
84 76 sh
34 19 s
56 36 pc
88 79 c
69 65 r
70 60 c
57 46 r
46 43 c
43 31 c
36 29 sf
36 31 sf
Tomorrow
Hi Lo W
42 33 c
42 30 pc
85 65 pc
72 63 pc
48 40 pc
91 76 pc
68 50 c
68 57 t
48 43 c
51 25 s
91 76 pc
69 54 pc
75 46 s
48 30 s
27 18 sn
84 75 r
44 33 c
82 73 t
71 43 s
55 36 s
84 76 sh
34 22 pc
47 35 s
87 77 t
73 63 t
66 58 c
57 41 pc
50 26 r
45 37 s
37 35 sh
38 27 pc
11
12
30
31
32
53
54
55
23
36
29
37
38
40
41
43
44
46
47
49
59
10
26
35
48
9
19
28
42
Cold
Ice
Today
Hi Lo W
58 25 c
79 61 pc
53 44 s
73 49 pc
55 44 pc
43 30 s
47 32 pc
59 37 s
70 35 sh
36 19 sf
59 46 s
48 22 s
45 34 pc
44 16 r
56 45 pc
34
8
16
22
50
56
l d
Orlando
7
15
25
Rain
Jacksonville
6
18
21
45
Warm
5
14
27
80s
100+
4
17
20
90s
hington
hi
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DC
Washington
Charles
Charleston
Indianapolis
d
p
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Richmond
80s
3
60s
Ph
hil d lphi
Philadelphia
l igh
h
Raleigh
Charlotte
C
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Columbia
2
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Boston
Hartford
rtford
New
Yorkk
ew Y
50s
1
13
51
52
57
58
60
61
64
62
65
67
68
ISN’T IT BROMANTIC? | By Zhouqin Burnikel
Across
1 Human’s relative
4 Creative class
7 Verbal
digressions
13 “Where the
Wild Things Are”
boy
14 Take a risk
16 “A likely story!”
17 Tunneling
worker
18 •Juilliard
offering
20 iPhone assistant
22 Alter an article
23 Dirt road tracks
24 •Better
Business Bureau
warning
26 Cardinal color
27
28
30
33
36
38
39
42
43
44
45
46
47
48
50
Dude
Yale, for one
Yale student
Setting for a
ring exchange
Sixth of an inch,
in typesetting
Direct-selling
cosmetics
company
•Class action?
Dissolute fellow
Some JFK
guesstimates
Boneheads
Free throw score
Frantic signal
Review harshly
Compete
•Pale lager
alternatives
56 Pro ___ (in
proportion)
57 Light and breezy
58 Zero, on a court
59 It happens
between buds,
and a feature of
the starred
answers
62 Food drive
donation
63 Sharp insight
64 Inverness
inhabitant
65 Facebook
revenue
source
66 Peanut butter
cup brand
67 Leave
open-mouthed
68 Jeans brand
Solve this puzzle online and discuss it at WSJ.com/Puzzles.
s
s...sunny; pc... partly cloudy; c...cloudy; sh...showers;
t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice
Today
Tomorrow
City
Hi Lo W Hi Lo W
Anchorage
43 29 r
35 22 sn
Atlanta
67 53 pc 69 41 c
Austin
82 56 pc 59 40 sh
Baltimore
55 40 pc 61 43 r
Boise
37 20 pc 37 22 s
Boston
46 37 s
52 50 r
Burlington
44 38 pc 51 41 r
Charlotte
64 45 pc 65 49 c
Chicago
63 35 sh 36 23 pc
Cleveland
57 50 pc 52 26 r
Dallas
82 47 c
58 40 pc
Denver
41 19 c
47 24 s
Detroit
54 47 c
47 27 c
Honolulu
82 69 s
80 67 c
Houston
81 67 sh 71 44 r
Indianapolis
63 42 c
45 24 pc
Kansas City
67 28 c
45 30 pc
Las Vegas
57 40 s
56 38 s
Little Rock
71 46 sh 54 33 pc
Los Angeles
69 52 s
69 46 s
Miami
83 72 pc 84 72 s
Milwaukee
59 34 sh 37 21 pc
Minneapolis
56 18 r
23 14 pc
Nashville
72 57 pc 59 32 r
New Orleans
77 65 pc 77 48 t
New York City
52 46 pc 60 52 r
Oklahoma City
70 35 pc 52 28 pc
A ban
b
Albany
Buffalo
Cl l d
Cleve
Cleveland
Pittsburgh
g
A
Augusta
40s
T
t
Toronto
k
Milwaukee
Des
es Moines
h
Omaha
20s
30s
L
Lou
C
d
Colorado
Kansas
Louisville
70s St.. Louis
hit City
Wichita
p
Springs
F
Santaa Fe
Nashville
h ill
Oklahoma
k homa City
C y
Memphis
phi
60s
Albb q q
Albuquerque
Ph
Phoenix
60s
Atl t
Atlanta
Little
L e Rockk
T
c
Tucson
70s
i gh
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Birmingham
Dallas
Jack
Jackson
Ft. 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
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P
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T
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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 wsj.ltrs@wsj.com. Please
include your city and state. All letters
are subject to editing, and unpublished
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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.”
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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.
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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
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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
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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
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consulting ˇrm, allows Watson
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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%
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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
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ci on
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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
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er rs
ci on
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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.
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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.
[1] 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. [2] 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
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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
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er rs
ci on
al a
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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
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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
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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
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PS BUSINESS PARKS, INC.
OF ALL OUTSTANDING DEPOSITARY SHARES
REPRESENTING INTERESTS IN ITS
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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
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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
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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
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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: heard@wsj.com
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
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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 reports@wsj.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.
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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
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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 askencore@wsj.com.
*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
reports@wsj.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 reports@wsj.com.
THE JOURNAL REPORT
For advertising information
please contact Katy
Lawrence at 212-416-4119
or katy.lawrence@wsj.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 william.power@wsj.com.
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THE WALL STREET JOURNAL.
Monday, December 4, 2017 | R3
2016 U.S. Fixed-Income
Fund Manager of the Year
co Fo
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1
ly
.
This is what you get
when you outperform.
Again. And again.
The Fidelity® Total Bond Fund has delivered income and diversification for years
through up and down markets. 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
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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 reports@wsj.com.
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 reports@wsj.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 reports@wsj.com.
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-
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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 reports@wsj.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
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m e
er rs
ci on
al a
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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.
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THE MORE WE MAKE SENSE.
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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
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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 reports@wsj.com.
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 reports@wsj.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 reports@wsj.com.
Ms. Winokur Munk is a writer in West Orange, N.J. She can
be reached at reports@wsj.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
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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
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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 reports@wsj.com.
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 daisy.maxey@wsj.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
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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
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er rs
ci on
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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.
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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 reports@wsj.com.
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
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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
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