For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com MONDAY, NOVEMBER 6, 2017 ~ VOL. CCLXX NO. 108 * * * * * * Last week: DJIA 23539.19 À 105.00 0.4% NASDAQ 6764.44 À 0.9% STOXX 600 396.06 À 0.7% 10-YR. TREASURY À 23/32 , yield 2.343% OIL $55.64 À $1.74 Churchgoers Slain in Texas Business & Finance he New York Fed’s Dudley is set to announce he will retire next year, about six months earlier than scheduled, adding to a wave of turnover among top central-bank decision makers. A1 T ADP shareholders will decide on Tuesday whether to allow hedge-fund manager William Ackman into the company’s boardroom. B1 Several big advertisers are halting business with Outcome Health after allegations some employees of the startup misled clients. B1 Sprint and T-Mobile called off merger talks, derailing a potential deal that many on Wall Street had anticipated for years. B3 United Continental said it is considering replacing older wide-body planes with new Boeing 767 jets. B3 Oil prices reached their highest level in over two years last week as signs increased that global growth will continue to boost demand. B10 The SEC recently asked a Miami wealth manager about its ties to Guggenheim and a firm that purchased a home with Guggenheim’s CEO. B8 “Thor: Ragnarok” had a strong opening, welcome news for theater owners. B2 World-Wide A man blasted his way into a Baptist church in Sutherland Springs, Texas, with an assault-type rifle, leaving at least 26 dead and 20 others injured. The gunman fled in a vehicle and died following a pursuit. A1, A4 A roundup of princes, ministers and businessmen in Saudi Arabia sharply escalates the crown prince’s bid to consolidate power and accelerate change. A1 The arrest of Prince alWaleed hobbles the billionaire investor, who has backed some of the world’s best-known companies. A10 Prince Mansour, who was the former Saudi crown prince’s son, and a number of government officials were reported killed in a helicopter crash. A10 Commerce’s Ross failed to disclose business connections to Putin’s family and inner circle on a personal financial-disclosure form. A3 Trump, in Tokyo during the first leg of his Asia trip, increased pressure on Japan for a bilateral trade agreement. A6 A Belgian judge ordered the conditional release of ousted Catalan leader Puigdemont and four ex-officials sought by Spain. A6 Virginia’s gubernatorial election Tuesday could give Democrats a needed victory or deliver a demoralizing defeat. A3 A center-right coalition appeared to have edged out the antiestablishment 5 Star Movement in regional elections in Sicily. A6 CONTENTS Business News.. B2-3 Crossword.............. A14 Heard on Street.. B10 Journal Report.. R1-18 Life & Arts....... A11-13 Markets.............. B8-10 Markets Digest..... B7 Opinion.............. A15-17 Sports....................... A14 Technology............... B4 U.S. News......... A2-A4 Weather Watch.. A14 World News... A6,8,10 > s Copyright 2017 Dow Jones & Company. All Rights Reserved Saudi Arrests Rein In The Elite By Margherita Stancati in Beirut and Summer Said in Dubai A vigil was held for victims of Sunday’s mass shooting at a church in a small Texas town. The victims ranged from 5 to 72 years old. Shooting at a Baptist church in Sutherland Springs kills at least 26; suspect is dead SUTHERLAND SPRINGS, Texas—A young man clad in black and wearing a ballistic vest blasted his way into a Baptist church in this south Texas town on Sunday with an By Melissa Korn, Alejandro Lazo and Russell Gold The First Baptist Church in Sutherland Springs after the shooting. said, adding that it wasn’t known whether he died of a self-inflicted gunshot wound or was shot by someone else. Wilson County Commissioner Ernest “Skip” Hajek confirmed his identity as Devin Patrick assault-type rifle, leaving at least 26 people dead and 20 others injured. The gunman fled in a vehicle and died following a pursuit, law-enforcement officials Kelley. He said Kelley lived in the New Braunfels, Texas, area northeast of San Antonio. Among those killed were a woman in the third trimester of her pregnancy and the 14year-old daughter of Pastor Frank Pomeroy, according to family members of the victims. Twenty-three people were killed at the church, two outside and one died en route to the hospital, officials said. The pastor’s wife, Sherri Pomeroy, said she and her husband were out of the state on Sunday and she was working to get back home from Charlotte, N.C. “Neither of us have made it back into town yet to personally see the devastation,” she said in a text message. Kelley served in the U.S. Air Force but was court martialed in 2012 and ultimately received a “bad conduct disPlease see CHURCH page A4 Attack stuns a small, reverent community.............. A4 Saudi officials said the crackdown stemmed from a probe aimed at stamping out corruption. It touched some of the most widely known people in the country, including Prince al-Waleed bin Talal, an international tycoon who is one of the richest men in the world, according to people familiar with the matter. “This is a crucial turning point,” said Bruce Riedel, a senior scholar at the Brookings Institution and a former Central Intelligence Agency officer. “Saudi royal politics have gone from consensual to an unstable blood sport.” On Sunday, as the kingdom digested news of the arrests, another Saudi prince was killed in a helicopter crash near the kingdom’s border Please see SAUDI page A10 Game of Thrones Detained tycoon has backed high-profile firms............. A10 Regional cold war intensifies as ISIS fades...................... A10 Prince Mansour, officials killed in copter crash..... A10 New York Fed Chief Adds to Wave of Exits BY MICHAEL S. DERBY AND NICK TIMIRAOS monetary and regulatory decision makers and ushering in new uncertainty about its policy course. William Dudley’s announcement could come as soon as Monday, according to two people familiar with the matter. The search for his successor will start immediately with the The president of the Federal Reserve Bank of New York is set to announce he will retire next year, about six months earlier than scheduled, adding to an unusual wave of turnover among the central bank’s top aim of finding a successor in mid-2018. The decision has been longplanned and is unrelated to President Donald Trump’s announcement Thursday that he would nominate central-bank governor Jerome Powell to succeed Janet Yellen when her term as chairwoman expires in Amazon Cuts Third-Party Prices BY LAURA STEVENS discounting some items sold by third parties, covering the cost difference itself to ensure competitive pricing. The new “Discount provided by Amazon” tag allows Amazon to compete more fiercely with low-cost rivals including Wal-Mart Stores Inc. and Dollar General Corp. just as the all-important holiday season gets under way. On Amazon this week, a Boots No7 Instant Illusion Wrinkle Filler sold by kn9ght Amazon.com Inc. has quietly started lowering prices by as much as 9% in recent weeks on goods offered by independent merchants on its website, ratcheting up a price war with other retail giants—and potentially straining its relationship with some sellers. Until now, Amazon has generally controlled prices only on merchandise it sells directly to consumers. Now, it is i In business, few can resist a grand plan enumerated with the boundless promise of tomorrow. So 2020 has become the biggest number since Y2K. The U.S. Defense Security Cooperation Agency, the Bank of England, Malaysia and the German conglomerate Siemens AG are among the many with plans dubbed “Vision 2020.” The European Union has two proEye grams with the name. Nigeria’s budget ministry went two digits further, creating a strategy called “Vision 20:2020.” To have 20/20 vision is to In New York, a Marathon Surprise Shalane Flanagan, 36, celebrates after winning Sunday’s New York City Marathon. She is the first U.S. woman to win the professional race in 40 years. Geoffrey Kamworor of Kenya won the men’s event. A14 INSIDE Salesforce. #1 CRM. i Eye doctors see red as dozens of groups steal their slogan; grandiose strategic plans BY MAX COLCHESTER AND DANIEL MICHAELS see things clearly, an obvious plus for any leader plotting a revamp. The European Golf Course Owners Association’s “Vision2020” addresses the challenge of a “new phase of negative growth.” The original visionaries are seeing red. In 1999, a group of ophthalmologists got together to create a plan to tackle avoidable blindness. For obvious reasons, they called it Vision 2020. Now, an internet search turns up Vision 2020s for consulting firm A.T. chart Kearney, Wales’s hockey league and a campaign to achieve “zero food waste to landfill by 2020.” “You need to type in ‘Vision Please see VISION page A8 are also open, giving the president an opportunity to remake its policy-making team. A fourth seat on the board would open if Ms. Yellen decides to leave after ceding the helm as chairwoman. She could stay on as a governor in a term that extends to 2024. Please see FED page A2 was marked down 6% to $19.99, matching the same price offered online by retailer Ulta Beauty Inc. Amazon discounted a Risk Legacy board game sold by VirVentures by 6% to $43.92, 3 cents less than at Wal-Mart. “This item is sold by a third-party seller. The discount is provided by Amazon,” Amazon says on listings with the new tag. VirVentures Senior ManPlease see PRICES page A8 The Least Original Name for Your Business Project: ‘Vision 2020’ i February, according to a person familiar with the situation. Just last month, Fed Vice Chairman Stanley Fischer stepped down and Randal Quarles, Mr. Trump’s first nominee to the Fed’s Washington-based board of governors, took office. Three other seats on the seven-member board Salesforce ranked #1 for CRM based on IDC 2016 Market Share Revenue Worldwide. GENDER DIVIDE IN SAVING FOR COLLEGE 18.1% 9.4% JOURNAL REPORT, R1 7.2% 2012 2013 2014 2015 2016 Source: IDC Worldwide Semiannual Software Tracker, May 2017 ISTOCK The U.S. is investigating Credit Suisse, VTB and BNP Paribas for their roles in selling about $2 billion of debt for Mozambique. B1 YEN 114.06 A sweeping weekend roundup of more than five dozen princes, ministers and prominent businessmen in Saudi Arabia marks a dramatic escalation in the crown prince’s effort to consolidate power and accelerate far-reaching change in the kingdom. NICK WAGNER/AUSTIN AMERICAN-STATESMAN/ASSOCIATED PRESS Amazon is dropping prices on goods offered by independent merchants on its site, ratcheting up a price war with retail giants. A1 EURO $1.1610 VIRTUAL RESTAURANTS, FED BY APPS BUSINESS & FINANCE, B1 salesforce.com © 2017 salesforce.com, inc. All rights reserved. Salesforce.com is a registered trademark of salesforce.com, inc., as are other names and marks. DERIK HAMILTON/REUTERS What’s News HHHH $4.00 WSJ.com For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com A2 | Monday, November 6, 2017 * *** THE WALL STREET JOURNAL. U.S. NEWS ECONOMIC CALENDAR THE OUTLOOK | Jacob M. Schlesinger China-Trade Course Still Taking Shape Donald Trump will be joined in Beijing this week by executives from more than two dozen U.S. companies planning to announce trade deals they say would be worth billions of dollars. But that alone won’t make it an economic-policy success. Deals with a confined number of companies—involving soybeans, airplanes and natural gas among other products—are unlikely to dent the U.S. goods trade deficit with China that Mr. Trump has vowed to drain: a vat of red ink worth $347 billion last year, and on track to get even bigger in 2017. Instead, Mr. Trump’s first trip as president to the country he has branded “an economic enemy” could raise more questions than it answers about his plans for tackling an issue he placed prominently on his campaign economic agenda. Mr. Trump has tried to check other items off that list: moving to cut taxes, rewrite Obamacare, cut regulation and curb immigration. He is overhauling trade deals with other countries—Mexico, Canada, South Korea— with bilateral trade surpluses much smaller than China’s. As for China trade, there has been talk but little action or clarity on administration Growing Gap President Donald Trump has so far made renegotiating trade deals with Mexico, Canada and South Korea higher priorities than confronting China—even though China’s trade surplus is much bigger. $100 billion 0 Canada South Korea Mexico –100 –200 –300 China –400 1985 ’90 ’95 2000 Source: Commerce Department strategy. Mr. Trump’s early approach has, in fact, looked a lot like George W. Bush’s and Barack Obama’s. During President Xi Jinping’s April U.S. visit, the two leaders launched a dialogue similar to bilateral cabinet-level committees meeting regularly over the past decade. T he goal: to hash out trade tensions through conversation, and to make regular joint announcements of Chinese marketopening measures. The half-dozen China pledges unveiled with Trump aides in May were largely recycled versions of earlier ’05 ’10 ’15 THE WALL STREET JOURNAL. broken promises. The July dialogue broke down with no new agreements. No further rounds have been scheduled, and Mr. Xi is instead tightening the central government’s grip on the economy. Mr. Trump’s aides say don’t look for joint market-opening announcements this week. One senior White House official casts the dialogues as a Chinese “rope-a-dope” strategy the Trump administration will no longer fall for—forums for offering surface tweaks staving off pressure for more systemic changes. The pugilistic reference underscores the Trump administration’s vows for tougher enforcement. The president won’t make headlines on that front this week either. He touts his friendly relationship with Mr. Xi and isn’t expected to risk that chemistry. Aides are laying groundwork for sanctions that could be rolled out after his return. Agency studies are exploring tariffs and quotas on steel, aluminum, solar panels and washing machines—all partly aimed at China—with early-2018 deadlines. Mr. Trump’s trade representative is building the case that China is guilty of unfair trade practices because it pressures American companies to turn over intellectual property as the price for doing business in the world’s second-largest economy. What remains uncertain is when, if ever, Mr. Trump will move on any of these items. Internal divisions have stalled action. M r. Trump doesn’t want to jeopardize cooperation from Mr. Xi in tackling North Korea’s nuclear program. Back home, the White House doesn’t want a trade war jeopardizing tax cuts by aggravating free-trade Republican lawmakers. China hasn’t even been the main focus of Mr. Trump’s short-handed trade team. They’re deep into con- TUESDAY: Federal Reserve Chairwoman Janet Yellen speaks in Washington as she accepts an award for ethics in government, marking her first public appearance since President Donald Trump picked Jerome Powell to serve as the next chairman of the Fed. If he wins Senate confirmation, Mr. Powell would take the helm at the central bank in February, when Ms. Yellen’s fouryear term expires. Eurostat releases eurozone retail sales figures for September. In August, retail sales fell 0.5% from July, the second straight month of declines even as the eurozone’s economic recovery has gathered pace. THURSDAY: China’s statistics bureau releases producer and consumer-price index readings for October (release time is Wednesday evening in the U.S.). China’s factory-gate prices rose 6.9% on the year to a six-month high in September, as the economy continued to defy many economists’ expectations of a slowdown. Meanwhile, the consumer-price index’s growth eased to 1.6%, from an 1.8% increase in August. FRIDAY: The University of Michigan releases preliminary consumer sentiment data for November. Consumer sentiment has soared in recent months, reaching its highest level since 2004 in October. Recent consumer spending figures indicated that Americans’ rising sentiment is translating into more spending. Economists surveyed by The Wall Street Journal expect a consumer sentiment reading of 100.7 for November. tentious renegotiations of the North American Free Trade Agreement and the U.S.-Korea Free Trade Agreement. With only one confirmed trade agency political appointee, Robert Lighthizer, the administration can only do so much. The Nafta and Korea fights have raised tensions with economic allies who might otherwise join an effort to restrain Beijing. The 12-nation Trans-Pacific Partnership, a trade deal that Mr. Trump had spiked, was similarly aimed at encircling China with a regional bloc governed by American-style commercial rules. Mr. Trump shows no second thoughts about TPP. But his aides say his Asia trip will highlight a commitment for a U.S.-led regional economic alliance in a different form. That is vital for any attempt to pressure Beijing, says Scott Kennedy, director of the project on Chinese business and political economy at the Center for Strategic and International Studies, a think tank. “If the U.S. does not prioritize the challenges with China and more effectively work with its allies,” says Mr. Kennedy, “any unilateral action is likely to leave the U.S., not China, isolated.” Trump presses Japan on trade imbalance........................ A6 Dudley Was Key to Crisis Response It is unclear when Sen. Rand Paul (R., Ky.) will return to work. Senator Is Recovering After Ribs Are Broken Associated Press Sen. Rand Paul was recovering Sunday from five broken ribs after he was assaulted by a neighbor who tackled him from behind at the senator’s Kentucky home, officials said. Doug Stafford, a senior adviser to Mr. Paul, said it is unclear when the Republican will return to work since he is in considerable pain and has difficulty getting around, including flying. Mr. Stafford said this type of injury is marked by severe pain that can last for weeks to months. “This type of injury is caused by high velocity severe force,” Mr. Stafford said in an email to the Associated Press. The Bowling Green Daily News reported that an arrest warrant said Mr. Paul told police his neighbor came on his property and tackled him from behind Friday, forcing him to the ground. He had trouble breathing because of a rib injury, the warrant said. A Warren County official didn’t immediately respond to a request for a copy of the arrest warrant. Police arrested 59-year-old Rene Boucher on Saturday and charged him with misdemeanor fourth-degree assault with a minor injury. Mr. Boucher lives next door to Mr. Paul and his wife, according to Warren County property records. Mr. Boucher was released from jail Saturday on a $7,500 bond. He has a court date scheduled for Thursday. Mr. Boucher didn’t return a phone call from the Associated Press seeking comment. It was unclear if he had an attorney. A spokeswoman for Mr. Paul said he was “blindsided” by the attack. Police haven't said what motivated the attack. U.S. WATCH HOUSE OF REPRESENTATIVES Republicans Consider Changes to Tax Bill House Ways and Means Committee Chairman Kevin Brady (R., Texas) said the panel was weighing changes to a GOP tax plan ahead of a committee vote that starts Monday. Republicans on the tax-writing panel huddled Sunday to discuss reactions from constituents. Mr. Brady said tweaks would be made to a provision that is designed to prevent large, mostly foreign multinational companies from making payments to subsidiaries in order to shift profits to low-tax jurisdictions and expenses to high-tax areas. Pharmaceutical and auto companies have complained about a 20% excise tax House Republicans would impose on any such transactions that aren’t connected with a U.S. trade or business of the foreign corporation. Mr. Brady also said that the panel was reconsidering provisions that affect the life-insurance industry, and that he anticipated changes at some point on the treatment of partnerships, limited liability companies, S Corporations and other “passthrough” entities. —Siobhan Hughes PHILADELPHIA Shooting Leaves Teen Dead, Boy Hurt A man opened fire on a group of teenagers sitting on a stoop of a northern Philadelphia home, killing a 16-year-old and injuring a 12-year-old, police said. The suspect, described as in his early 20s, approached the group and opened fire early Sunday, then fled, they said. No arrests have been made. —Associated Press New York Fed President William Dudley will leave his post next year having played a central role helping the central bank respond to the financial crisis, while drawing fire for not doing more to prevent another one. He served as part of the Fed’s inner circle of firefighters who crafted unprecedented, experimental monetary policies to stabilize markets and boost the economy during a severe economic downturn and initially sluggish recovery. He designed and launched plans to reverse those policies. And now, as he prepares to announce he will retire next year, the economy is growing at a robust clip, unemployment is at a 17-year low and markets are buoyant. He will step down, however, having been dogged by criticism that the New York Fed, which supervises some of the country’s biggest financial institutions, was a lax regulator even after the crisis. He rejected the criticism but oversaw efforts seeking to improve its performance afterward. The New York Fed didn’t respond to requests for comment. Boston College economics professor Peter Ireland said Mr. Dudley “may not be remembered for one specific thing or event.” But “he’s been an important guy behind the scenes” for all the big issues facing the Fed over the past decade or so, Mr. Ireland said. Mr. Dudley has also drawn praise for working effectively with his colleagues, even when they didn’t agree on the right path. Former Philadelphia Fed president Charles Plosser was a frequent critic of the central bank’s easy-money policies, but he held Mr. Dudley in high regard. Mr. Dudley has been “a strong contributor to and believer in the Fed, and he took very seriously the goals and objectives the Fed had, and always wanted to do the right thing,” Mr. Plosser said. Mr. Dudley’s record on the regulatory front was more mixed. The New York Fed saw its role as one of the most powerful regulators diminished when then-governor Daniel Tarullo consolidated much of those activities under the Fed’s Washington-based board of governors. The New York Fed faced further trouble when, in 2013, a staff bank examiner said she had been instructed to go easy in her oversight of Goldman Sachs and was fired when she refused. While her claims were rejected by a court, she released secretly recorded conversations about the matter that became a public-relations problem for the New York Fed. “I completely stand behind the integrity and work of our supervision staff at the New York Fed,” Mr. Dudley said in 2014. FED Continued from Page One All governors are nominated by the U.S. president and are subject to Senate confirmation. The regional Fed bank presidents are chosen by the members of their boards of directors who don’t represent financial institutions regulated by the Fed, subject to approval by the governors. The New York Fed president is traditionally one of the central bank’s most powerful policy makers. This person serves as vice chairman of the ratesetting Federal Open Market Committee and leads the supervision of some of the nation’s biggest financial firms. Mr. Dudley, a former Goldman Sachs chief economist, started at the New York Fed in 2007, running the part of the institution that deals directly with financial markets to implement monetary policy. Many of his predecessors had markets experience. If that tradition continues, contenders for the job include Simon Potter, who now runs the bank’s markets desk, as well as D.E. Shaw’s Brian Sack, who held that job before Mr. Potter. Some observers close to the bank see a chance that its next president could be a current Fed official. Dallas Fed leader Robert Kaplan, a former Goldman Sachs top executive, has deep market experience, as does Minneapolis Fed President Neel Kashkari, who also worked at Goldman and led some of the government’s financial-crisis rescue efforts. Ms. Yellen, Mr. Fischer and Mr. Dudley worked closely together in recent years in deciding when and how to begin gradually reversing the Fed’s crisis-era stimulus policies as LUCAS JACKSON/REUTERS BRYAN WOOLSTON/ASSOCIATED PRESS BY MICHAEL S. DERBY New York Fed President William Dudley speaks at a 2015 event. the economy healed. The trio advocated keeping short-term interest rates historically low to encourage hiring and growth, but also has nudged them gently higher since late 2015 to prevent the economy from overheating. They also crafted and launched the Fed’s plan to shrink its large portfolio of bonds purchased since the crisis to provide extra stimulus. The Fed has penciled in one more interest rate increase this year, and more through 2020 if the economy performs as expected. The coming changes in the top three leadership positions, combined with the recent pickup in economic momentum, raise uncertainty about the coming pace of rate increases. The three officials also supported postcrisis measures to strengthen financial regulation and will be giving up their top CORRECTIONS AMPLIFICATIONS Readers can alert The Wall Street Journal to any errors in news articles by emailing email@example.com or by calling 888-410-2667. posts just as the Trump administration is pushing for deregulation. Mr. Dudley’s planned departure marks “further change in an institution that was already experiencing considerable change,” said Tim Duy, an economics professor at the University of Oregon. The coming announcement about Mr. Dudley, 64 years old, was earlier reported by CNBC. The New York Fed declined to comment. Mr. Dudley was long among the Fed “doves” who supported holding interest rates near zero for seven years after the crisis. But he also strongly supported nudging rates higher over the past two years to help keep the expansion on an even keel, even though inflation has run below the Fed’s 2% target in recent months. Mr. Dudley has said the Fed should continue gradually lifting borrowing costs to keep price pressures contained and prevent asset bubbles from forming. Mr. Dudley also was central in implementing multiple bond-buying campaigns. He has since been a leading advocate for the slow, passive runoff of those holdings, which began last month. The New York Fed has devised new methods of managing the Fed’s benchmark rate in an environment in which it maintains much larger liabilities. Mr. Dudley has been an outspoken advocate for maintaining a larger terminal balance sheet, an issue that hasn’t yet been formally settled by the central bank. THE WALL STREET JOURNAL (USPS 664-880) (Eastern Edition ISSN 0099-9660) (Central Edition ISSN 1092-0935) (Western Edition ISSN 0193-2241) Editorial and publication headquarters: 1211 Avenue of the Americas, New York, N.Y. 10036 Published daily except Sundays and general legal holidays. Periodicals postage paid at New York, N.Y., and other mailing offices. Postmaster: Send address changes to The Wall Street Journal, 200 Burnett Rd., Chicopee, MA 01020. All Advertising published in The Wall Street Journal is subject to the applicable rate card, copies of which are available from the Advertising Services Department, Dow Jones & Co. Inc., 1211 Avenue of the Americas, New York, N.Y. 10036. The Journal reserves the right not to accept an advertiser’s order. 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Monday, November 6, 2017 | A3 * * * * * U.S. NEWS Democrats Edgy as Virginia Race Nears Gubernatorial contest will be greatest gauge of parties’ strength since Trump’s election ALEXANDRIA, Va.—Virginia’s gubernatorial election Tuesday, a contest with broad national implications, could give Democrats a needed victory or deliver a demoralizing defeat that could exacerbate divisions within the party. The election pits Democratic Lt. Gov. Ralph Northam against former Republican National Committee chairman Ed Gillespie in the biggest test of strength between the parties since Donald Trump became president. Democrats are on edge because the race seems to be neck-and-neck, despite their considerable advantages in the Democratic-leaning state. “The party definitely needs a boost in morale,” said Doug Deaton, a retired firefighter who attended a Northam rally here. “I hope the race will be a stepping stone for Democrats to replace Donald Trump.” Mr. Northam is trying to channel that anti-Trump sentiment—at least when he is campaigning in liberal precincts like northern Virginia. “We are watching a clown show in Washington, D.C.,” he told supporters Thursday at a storefront campaign office. BRIAN CAHN/ZUMA PRESS BY JANET HOOK Democratic Lt. Gov. Ralph Northam, above, faces Republican Ed Gillespie on Tuesday in a tightening gubernatorial contest in Virginia. But some Democrats worry that Mr. Northam hasn’t pushed the anti-Trump message hard enough and fear his low-key style has been no match for hard-hitting negative ads from Mr. Gillespie. The closing weeks have been dominated by immigration issues that fire up the GOP base, while splitting Democrats. And just as Mr. Northam was trying to unify Democrats for the final push, the national party erupted in infighting that opened wounds of the 2016 presidential primary. Former interim party chairwoman Donna Brazile in a new book made fresh allegations that the party apparatus was rigged in favor of Hillary Clinton against primary rival Vermont Sen. Bernie Sanders. “The Democrats, they love to have this circular firing squad,” Virginia Gov. Terry McAuliffe, who is campaigning for Mr. Northam, said Friday on MSNBC. “Let’s focus on winning elections.” Polls have varied, but for weeks most showed a steady lead for Mr. Northam. A Real Clear Politics polling average shows it tightening, with the Democrat’s edge at 1.9 per- centage points as of Sunday. Running in a state Mrs. Clinton won by five points, Mr. Gillespie has been trying to keep the race from becoming a referendum on Mr. Trump. “My opponent has spent all his time talking about President Trump, but that’s not what voters are concerned about,” said Mr. Gillespie in a phone interview from the Shenandoah Valley. “Voters want to know what Ross Left Out Connection to Putin Family BY REBECCA BALLHAUS SHAWN THEW/EPA/SHUTTERSTOCK Commerce Secretary Wilbur Ross failed to disclose business connections to Russian President Vladimir Putin’s family and inner circle on a required personal financial-disclosure form earlier this year, according to documents released over the weekend. Mr. Ross said earlier this year that he would retain stakes owned by his private-equity firm in a gas-shipping company, Navigator Holdings Ltd. He didn’t disclose that the company does millions of dollars in business—$68 million since 2014—with a Moscow-based petrochemicals company, Sibur, with close ties to the Kremlin, according to analysis by the International Consortium of Investigative Journalists. Those ties were revealed this weekend in a trove of internal documents from Appleby, a Bermuda-based law firm that has handled more than 60 offshore holdings for Mr. Ross’s company. Those documents were leaked to a German newspaper and then shared with the journalism consortium, a global network of media outlets. Sibur’s owners include Kirill Shamalov, who is married to Mr. Putin’s younger daughter, and Gennady Timchenko, a cofounder of the Gunvor Group, a Cyprus-registered commodities trading firm. Mr. Timchenko was among the first Russian businessmen to be sanctioned by the U.S. following Russia’s intervention in Ukraine’s Cri- worked with Russia as part of what the U.S. says was Moscow’s interference in the 2016 election. Mr. Ross was an economic adviser and fundraiser for Donald Trump during the campaign. Mr. Trump has denied any collusion with Russia by him or his campaign, and Moscow has denied meddling in the election. Sen. Richard Blumenthal (D., Conn.), who serves on the Senate Commerce Committee, said in a tweet Sunday that he felt “misled” by Mr. Ross during the confirmation process. Mr. Ross, a private-equity billionaire, said earlier this year that he would sell at least 80 business assets and investment funds if confirmed by the Senate, but that he would hold on to investments in Navigator Holdings and 10 other entities that invest in shipping and real-estate financing, according to federal financial-disclosure and ethics filings. Mr. Ross hasn’t said why he has held on to those particular assets. Mr. Ross’s stake in Navigator Holdings is held through four Cayman Islands entities, according to ICIJ’s review of the documents. In his disclosure form in January, Mr. Ross valued his stake in those entities as between at least $2.05 million and $10.1 million, according to a Journal analysis of the filing. Mr. Ross didn’t disclose his stake in one of the four companies on the form and didn’t say why. Wilbur Ross at a January confirmation hearing after he was nominated to be commerce secretary. mea region. The Treasury Department’s Office of Foreign Assets Control called him a member of “the Russian leadership’s inner circle” and said Mr. Timchenko’s “activities in the energy sector have been directly linked to Putin.” Sibur’s largest shareholder, Leonid Mikhelson, runs an energy company, Novatek, Russia’s largest private naturalgas company, which also has been sanctioned by the Treasury Department for its ties to Mr. Putin. Mr. Timchenko owns 23% of the company. Both Gunvor and Mr. Timchenko have denied any financial connections to the Russian president. Novatek has sought to distance itself from Mr. Timchenko, saying the oligarch has limited influence on the company, and it has criticized the U.S. sanctions. The Commerce Department released a statement Sunday saying Mr. Ross hadn’t been involved in Navigator Holding’s decision to do business with Sibur and “has never met the Sibur shareholders referenced in this story and, until now, did not know of their relationship.” The statement added that Mr. Ross “recuses himself from matters focused on transoceanic shipping vessels, but has been supportive of the administration’s sanctions against Russian and other entities.” Mr. Ross “works closely with Commerce Department ethics officials to ensure the highest ethical standards,” the statement said. As commerce secretary, Mr. Ross oversees agencies with wide powers over trade and the U.S.’s economic relationship with foreign countries. His stake in a company with ties to Russian firms that are the subject of U.S. sanctions could come under particular scrutiny as the U.S. has escalated sanctions against Moscow in recent months. The disclosure also comes just after the first charges and plea agreement were announced last week by Robert Mueller, the special counsel investigating whether Trump associates Beyond Thanksgiving: Cranberry Converts China CARVER, Mass.—A loyal sidekick to turkey and stuffing on the Thanksgiving table, the humble cranberry has a new fan base—in China. Chinese consumers, who five years ago barely knew what a cranberry was, now snack on the dried berries and toss them into smoothies and baked goods believing they are healthful and unique. Their increased appetite for Craisins has helped vault China to the second-largest export market for U.S. processed cranberries in 2016, according to the U.S. Department of Agriculture, behind the Netherlands. That is good news to growers in places like Massachusetts, one of the nation’s top two cranberry-producing states, along with Wisconsin. Local bogs now find themselves hosting Chinese entrepreneurs looking for products to tout back home. On a recent fall day, Zhang Lei, chief executive of NetEase Kaola, an e-commerce company in China, toured a cranberry bog 50 miles from Boston. Wearing waders, she stood thigh-deep in water packed with the buoyant bright red berries her customers crave. After biting into a fresh berry, she grinned. “It’s very brand new to us,” she said. Cranberry experts point to a number of reasons for its sudden popularity, including the appeal of a red fruit in a country where that color connotes good fortune. In addition, new e-commerce sites in China have helped U.S. companies introduce American staples to Chinese shoppers. Mixed nuts are also doing well, said Ms. Zhang, of Kaola, which offers 5,000 brands from more than 80 countries. The U.S. cranberry industry has been looking to boost demand to help manage recent large supplies. U.S. cranberry production in 2017 is expected to be the second-largest in history, according to federal statistics. U.S. cranberry consumption is up only slightly, making customers in new mar- Booming Berries Growth in U.S. cranberry exports to the world Fresh cranberries Processed/dried cranberries Cranberry juice $400 million JENNIFER LEVITZ/THE WALL STREET JOURNAL BY JENNIFER LEVITZ 300 200 100 0 2011 ’12 ’13 ’14 ’15 ’16 Source: Department of Agriculture Zhang Lei, of NetEase Kaola, in a Carver, Mass., cranberry bog. THE WALL STREET JOURNAL. kets all the more important. The international push is working. U.S. cranberry exports to other countries totaled $314 million in 2016, up 49% from 2012, fueled in part by the European Union’s loosening of im- by far the largest category of cranberry exports, to China totaled $36 million in 2016, up from $4.6 million in 2012, according to the USDA. —Kersten Zhang in Beijing contributed to this article. port duties for dried cranberries, according to the USDA. Though EU countries still buy the most berries, the Asian market, led by China, is the fastest-growing. U.S. exports of processed cranberries, I’m going to do.” Still, the Gillespie campaign has hit Trumpian themes and the president has tweeted support. Mr. Gillespie is walking a tightrope to court both independents and Trump voters who backed his GOP rival, Corey Stewart, who had nearly beat him in the primary. “Ed Gillespie has run a focused campaign in an environment that many thought would not be friendly to Republicans,” said Jon Thompson, spokesman for the Republican Governors Association. “Republicans across the country will be looking to Gillespie’s campaign for successful lessons on how to navigate whatever is happening in Washington.” The state’s legislature is controlled by Republicans, but Virginia voted Democratic in the last three presidential elections. The state’s two senators are Democrats. Mr. McAuliffe, barred by law from seeking another term, is very popular. Both candidates are a mismatch with their parties’ ascendant antiestablishment wing. Mr. Gillespie is a former lobbyist and insider in a party increasingly dominated by outsiders. Mr. Northam, a physician-turned-politician, has a liberal record on most issues, but he is not a hero of progressive activists, many of whom supported his primary rival former Rep. Tom Perriello. Squabbles Persist Over Primary BY GABRIEL T. RUBIN Donna Brazile, the former Democratic National Committee interim leader, stood by her assertions in a new book that she considered replacing Hillary Clinton as the party’s nominee late in the 2016 presidential race, continuing an intraparty feud that some of her colleagues have deemed an unhelpful distraction. “I was under tremendous pressure after Secretary Clinton fainted to have a quote, unquote, plan B,” Ms. Brazile said in a television interview on Sunday, adding that she considered replacing Mrs. Clinton and ticket-mate Sen. Tim Kaine with Vice President Joe Biden and Sen. Cory Booker after her party’s nominee fell ill at a Sept. 11 commemoration in New York City. Democratic leaders and members of the Clinton campaign rejected Ms. Brazile’s claims, noting that she lacked the power to replace a presidential nominee under the party’s rules. On Saturday, 120 members of the Clinton campaign signed an open letter criticizing Ms. Brazile’s assertions, saying “it is particularly troubling and puzzling that she would buy into false Russianfueled propaganda, spread by both the Russians and our opponent, about our candidate’s health.” Ms. Brazile, responding to that criticism Sunday on ABC, said that anyone telling her to “shut up” could “go to hell. “I’m going to tell my story,” she added. The back-and-forth between high-profile Democrats comes at a crucial juncture for the party as it attempts to rebound from the 2016 election. The DNC’s new chairman, Tom Perez, declined to say on NBC that Ms. Brazile had been duped by Russian propaganda, as alleged by the Clinton campaign. “I don’t know what Donna fell for,” he said. “The charge that Hillary Clinton was somehow incapacitated is quite frankly ludicrous.” Mr. Perez, who took over as DNC chairman amid broad recriminations over how the party treated the primary race between Mrs. Clinton and Vermont Sen. Bernie Sanders, said that the DNC has work to do to regain voters’ trust. In her book, Ms. Brazile asserts that the fundraising agreement between the DNC and Mrs. Clinton’s campaign was unfair because it gave her too much influence on the party’s infrastructure. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com A4 | Monday, November 6, 2017 P W L C 10 11 12 H T G K B F A M 1 2 3 4 5 6 7 8 9 O I X X THE WALL STREET JOURNAL. ***** U.S. NEWS Airbnb Lands Victory in San Francisco MARCIO JOSE SANCHEZ/ASSOCIATED PRESS Top landlord to begin allowing its tenants to rent short-term to tourists, others BY LAURA KUSISTO San Francisco’s largest apartment landlord will begin allowing tenants to rent out their units on Airbnb Inc., a victory for the short-termrental website that could prompt an outcry from opponents who say the site is helping drive up housing costs. Veritas Investments, which owns more than 5,000 units in San Francisco, will allow tenants to rent their units to tourists and other temporary residents as long as they use the Airbnb platform. The company is piloting the program in five of its build- Veritas’s move to allow tenants to rent units via Airbnb is a win for the short-term rental website. ings, with about 100 units in total. “I’m just a fundamental believer that when you have a scarce resource, whether it’s housing or parking lots, there’s got to be a better way to share those scarce resources,” said Yat-Pang Au, chief executive of Veritas Investments, which is based in the city. Airbnb, which was founded in San Francisco in 2008, has been in the cross hairs of numerous fights over housing scarcity, pitting it against ten- ant advocates and landlords alike. It has received a similarly contentious reception in other pricey cities such as New York, Los Angeles and Miami. In the spring, the company settled a lawsuit with the city of San Francisco over a rule that imposed fines of $1,000 a day for hosts who don’t register their units with the city. Under terms of the settlement, hosts are to register through Airbnb’s website and it will pass the information to city officials. Airbnb has agreed to purge its site by the beginning of next year of listings of units that aren’t registered. Veritas is the guardian of some of the city’s most politically sensitive housing stock: older buildings with many rent-controlled units. Airbnb officials said this represents a new market, distinct from its traditional focus on newer buildings owned by large, institutional landlords. “The partnership really legitimizes home sharing for a community of apartment residents who weren’t really part of the home-sharing conversation prior to this,” said Jaja Jackson, director of global multifamily-housing partnerships at Airbnb. Affordable-housing advocates fear that if renters are allowed to sublet their units on Airbnb it will boost rents further in the city, where rates already have risen by 50% since the recession. Recent academic research into rents and home prices in the 100 largest metropolitan areas in the U.S. between 2012 and 2016 found that a 10% increase in Airbnb listings leads to a 0.39% increase in rents and a 0.64% increase in home prices. But Airbnb executives argue that allowing tenants to rent their units out on the site helps make housing more affordable in costly cities, by enabling them to generate extra income. “Your income should not define you as a San Francisco resident. We want this option to be available to people who want to live and stay in San Francisco,” Mr. Jackson said. Veritas has been speaking with Airbnb for several years but Mr. Au said he was initially hesitant. Mr. Au said he became more open to allowing Airbnb after the settlement with the city, which helped create legal limits designed to protect tenants. The company also has created a $1 million insurance policy that helps protect landlords from liability. CHURCH NICK WAGNER/AUSTIN AMERICAN-STATESMAN/ASSOCIATED PRESS Continued from Page One charge,” according to court records. He was sentenced to confinement for 12 months and a reduction in rank. Air Force spokeswoman Ann Stefanek confirmed that Kelley served in Logistics Readiness at Holloman Air Force Base in New Mexico from 2010 until his discharge in 2014. Kelley was court-martialed in 2012 for two counts of assault on his spouse and on their child. He was given a bad conduct discharge, confined for a year and reduced to the rank of E-1. In the Sunday massacre, Kelley started firing outside the church and kept firing as he entered, said Freeman Martin, regional director for the Texas Department of Public Safety. As he exited, Mr. Martin said, a local resident grabbed his own gun and “engaged him.” The resident pursued the suspect as he got back in his vehicle and drove away. The vehicle crashed, and the suspect was found dead inside. The unincorporated town of Sutherland Springs lies about 35 miles southeast of San Antonio. Its population estimate—pegged at several hundred by residents and local media—isn’t included in the U.S. Census. Agents from the Federal Bureau of Investigation as well as the Bureau of Alcohol, Firearms, Tobacco and Explosives flooded the scene Sunday afternoon. “We are dealing with the largest mass shooting in our state’s history,” Gov. Greg Abbott said at a press conference in nearby Stockdale Sunday afternoon. “The tragedy is worsened by the fact that it took place in a church, a place of worship.” A spokeswoman for Connally Memorial Medical Center in Floresville said the hospital had received eight patients with gunshot wounds, with the first patient arriving by ambulance around noon local time. The rural, 44-bed hospital transferred four patients to University Hospital in San Antonio because of the severity of their injuries, including one patient in critical condition who needed to be airlifted, the Connally Memorial spokeswoman said Sunday evening. Three patients with gunshot wounds were treated at the hospital and released, and one remained in the hospital in stable condition. The University Health System, which includes the University Hospital in San Antonio, received nine of the wounded, including four children, a spokesman for the system said Sunday evening. Another patient was expected to arrive by transfer from a rural hospital, he said. Information on the patients’ conditions wasn’t available, he said. The Brooke Army Medical Center received eight patients. “Our thoughts and prayers are with the victims and their families,” Army Brig. Gen. Jeffrey Johnson said in a press release. The First Baptist Church is a member of the Southern Baptists of Texas Convention. Its weekly attendance averaged about 50, and membership was closer to 90, according to a spokesman for the state group. The church posted record- Victims Included Pastor’s Daughter People comfort each other after the mass shooting in Sutherland Springs, Texas, on Sunday. The unincorporated town, about 35 miles southeast of San Antonio, has a population that is estimated at several hundred residents. Shooting Stuns A Small, Reverent Texas Town In Sutherland Springs, Texas, a tiny town that hugs Highway 87 southeast of San Antonio, a shooting in a Baptist church left residents in disbelief. “Everyone knows everyone here,” said Chris Taylor, who lives in Sutherland Springs and owns a racingfuel business there. “It has one main cross street. A flashing light; that’s it. There aren’t even any red lights.” Sunday evening, residents gathered at a community center and waited for news of family, friends and neighbors. Mr. Taylor said he knew several people who died. Estimates put the number of dead at at least 26. The town is unincorporated and is home to several hundred people, residents said. It is too small to operate a school, so children tend to their studies in nearby Floresville. Yet, despite its size, Sutherland is home to three churches, Mr. Taylor said. Beulah Wilson, an officer at the Sutherland Springs Historical Museum, has lived in the town since the 1950s. She said most residents work in San Antonio, about 45 minutes away. Ms. Wilson said that jobs had been plentiful in the 1950s, thanks to the dairy industry. But since then, she said, times have been hard. “There’s no economy here,” she said. —Mara Gay and Jim Oberman ings of its services online. Last week, Pastor Pomeroy urged the congregation to trust in God’s plan and not try to take too much control of their own lives. There was no talk of politics, and a small band played songs with lyrics like “God is good all the time.” L.G. Moore, who lives in Sutherland Springs and owns a recreational vehicle park about a quarter of a mile from the church, said sirens could be heard through the small town, as well as helicopters overhead. Mr. Moore said his family was safe but that he was still waiting to learn the names of those who had been killed and injured. He said the town is very small, leading him to believe he probably knows people who were hurt. “It’s noth- ARK. OKLA. Fort Worth Valero gas station Suspect seen before shooting Dallas LA. TEXAS Austin Houston 100 miles r Fa New Braunfels m R d oa 53 9 Sutherland Springs US -87 SUTHERLAND SPRINGS, Texas—Most of their names aren’t yet publicly known, but the numbers alone are both heartbreaking and revealing: Twenty-six killed and 20 wounded in a mass shooting inside a rural Texas church— the youngest victim 5 and the oldest 72. By Alejandro Lazo , Ian Lovett and Erin Ailworth Among the dead was Annabelle Pomeroy, the 14-year-old daughter of the congregation’s pastor, Frank Pomeroy, who had been out of state at the time of the shooting, according to his wife, Sherri. Most of an extended family were feared among the dead, including a pregnant mother. A young man clad in black and wearing a ballistic vest fired on the small congregation of the First Baptist Church in Sutherland Springs, located about 35 miles southeast of San Antonio. Victims were received at two Level 1 trauma centers in the San Antonio area and a small, rural hospital in Floresville. Seguin BEXAR COUNTY GUADALUPE COUNTY San Antonio First Baptist Church site of shooting Shooter dead in car near county line WILSON COUNTY The church serves as a focal point for the tiny community of Sutherland Springs. 4t Sutherland Springs Site of shooting hS t. Floresville Hospital received multiple victims Sources: Texas Dept. of Public Safety; Google Earth (image) Deadly Legacy A gunman opened ﬁre in a Texas church Sunday, killing multiple victims. A look at past mass shootings in the U.S.: 1966 FATALITIES 50 Austin, 25 Texas 10 16 killed 1970 1984 1991 San Ysidro, Killeen, Texas Calif. 23 21 1980 1990 1999 Columbine High school, Colo. 13 2007 Virginia Tech 32 2000 *At least 26 dead Note: Fatalities don’t include shooter. Source: News reports ing but chaos. Nobody knows nothing,” he said. Mr. Moore said he believed the unincorporated town had about 400 people, though other estimates place it higher. “The whole world as I know it has gone nuts,” he said of the church shooting and the recent terrorist attack in New York City. “You can’t take your wife or children to a church without being shot and killed, or ride a bike without being run over by a truck.” When Julius Kepper, an Army veteran who lives by the First Baptist Church of Sutherland Springs, first heard the commotion he thought a neighbor doing construction might be hammering on tin. As the bursts continued, he recognized gunfire. Mr. Kepper said he grabbed 2016 2017 Orlando, Las Vegas Fla. 58 49 2017 Sutherland Springs, Texas 26* 2010 THE WALL STREET JOURNAL. a gun of his own and headed through his neighbor’s yard toward the church. All told, he said, heard about 100 rounds fired. “Once I saw people laying out in front of the church, it wasn’t good,” Mr. Kepper said. He witnessed a neighbor engage the church shooter with his own firearm. The shooter dropped his weapon and got into a white SUV. The neighbor jumped into a pickup truck and drove after him, Mr. Kepper said. Both headed east toward the town of Seguin. Mr. Kelley was found not far away, dead from a gunshot wound. Nick Uhlig, a 34-year-old oil-field worker who lives in Sutherland Springs, attends the church. He wasn’t at the service Sunday but said his cousin, Crystal Holcombe, who was six-to-eight-months pregnant, was shot and killed. He said his cousin’s in-laws, Carla and Brian Holcombe, also were shot. Crystal Holcombe’s husband, John, survived. Mr. Uhlig described the message of the church as: “Come to God and love everybody.” He said there was a Thursday night Bible study with dinner, open to all. “It was, ‘Come on in, have something to eat and let’s talk about God,’” he said. President Donald Trump, currently overseas, tweeted Sunday, “May God be w/ the people of Sutherland Springs, Texas. The FBI & law enforcement are on the scene. I am monitoring the situation from Japan.” —Ian Lovett, Michael C. Bender and Ben Kesling contributed to this article. The University Health System, which includes the Level 1 trauma center at University Hospital in San Antonio, had received nine of the wounded, including four children, a spokesman for the system said early Sunday evening. Another patient was expected to arrive by transfer from a rural hospital, he said. Information on the patients’ conditions wasn’t available, he said. The Brooke Army Medical Center, also a Level 1 trauma center, received eight patients, according to a news release. “Our thoughts and prayers are with the victims and their families,” Army Brig. Gen. Jeffrey Johnson said in the release. Extended families—ranging from young children to grandparents—attended the church, which served as a focal point for the tiny community. Family and friends searched for news of the Holcombe family Sunday night. Among the dead was Crystal Holcombe, who was six to eight months pregnant, said a family member. Her husband, John Holcombe, was alive, the family member said, but family was still searching for news about four of the couple’s children, Greg Hill, Meghan Hill, Evelynn Hill and Emily Hill. The couple’s son, Phillip Hill, didn’t attend the services Sunday and was alive, the family member said. Karla and Bryan Holcombe, parents to Mr. Holcombe, who also attended services Sunday, were also feared dead by their family. —Jim Oberman, Nour Malas and Melanie Evans contributed to this article. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 6, 2017 | A5 I CAN KNOW THOUSANDS OF With IBM Services and Watson, customer service ag gents canít exactly read minds, but they can know which customers to he elp ˇrst and how to help th hem better. This helped on ne company to reduce call re esolution times by 99% an nd saved another company $1 11.2 million a year. Find ou ut more at ibm.com/you Th his is customer service to o the power of IBM. IBM and its logo, ibm.com and Watson are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. See current list at ibm.com/trademark. Other product and service names might be trademarks of IBM or other companies. ©International Business Machines Corp. 2017. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com A6 | Monday, November 6, 2017 * *** THE WALL STREET JOURNAL. WORLD NEWS Trump Presses Japan on Trade Imbalance President seeks bilateral agreement on first leg of Asia trip, meets with premier TOKYO—President Donald Trump increased pressure on Japan for a bilateral trade deal, saying the country has been “winning” for decades and suggesting that negotiations have drawn on for longer than he would like. Trade with Japan is neither fair nor open for the U.S., Mr. Trump said at the U.S. ambassador’s residence in Tokyo on Monday. But he added that he was “optimistic about the future of our economic partnership.” “Our trade with Japan is not free, and it’s not reciprocal, and I know it will be,” Mr. Trump said. “We’ve started the process and it’s gone on for a long time. And I know that we will be able to come up with trade deals and trade concepts that are going to be fair to both countries, and I think actually will be better for both countries.” The president didn’t say exactly how he would like to narrow the trade deficit with Japan, which totaled nearly $70 billion last year for goods and services, roughly the same as in 2015. “I have to say, for the last many decades, Japan has been winning,“ Mr. Trump said. ”You do know that.” While Mr. Trump and Japanese Prime Minister Shinzo Abe have both spoken of their close relationship—the two leaders have now golfed together in Japan and the U.S., and have talked more than a dozen times by phone—trade negotiations between the two countries could potentially damp that friendship, said Sheila Smith, senior fellow for ANDREW HARNIK/ASSOCIATED PRESS| BY MICHAEL C. BENDER President Donald Trump, left, and Japanese Prime Minister Shinzo Abe took part in an honor guard ceremony in Tokyo on Monday. Japan Studies at the Council on Foreign Relations. “There is some concern that the trade issue is going to blow up this good relationship that Prime Minister Abe has cultivated with the president, and a lot of anxiety inside Japan about really what is it the Trump administration wants to pursue,” she said. Japan was a strong advocate for the Trans-Pacific Partnership, a proposed trade deal linking the U.S. and Asian nations. Mr. Trump withdrew the U.S. from the TPP this year. On Monday, Mr. Trump said a new two-way deal with Japan may result in “more trade than anybody ever thought of under TPP, that I can tell you.” Mr. Trump then quickly noted that many people in the room disagreed with him on that point, adding that “ultimately I will be proven to be right.” The TPP would have opened Japanese agricultural markets to the U.S. and tightened intellectual property rules to benefit drug and technology companies, while attempting to establish an economic bloc to challenge China’s influence in the region. But bipartisan critics of the pact worried that the deal would have done little to protect vulnerable U.S. industries or promote job creation. Japanese business officials attending Mr. Trump’s meeting included Mitsubishi UFJ Financial Group Inc. Chief Executive Nobuyuki Hirano, Honda Motor Co. President Takahiro Hachigo and Soft- bank Group Corp. Chief Executive Masayoshi Son. U.S. company officials included Lockheed Martin Japan Chief Executive Chuck Jones, Eli Lilly Japan President Patrik Jönsson, and Boeing Japan President Brett Gerry. Mr. Trump was scheduled to hold a working lunch and a meeting with Mr. Abe later Monday. He was also set to meet with family members of people the Japanese government says were abducted by North Korea and hold a joint Germany Strains to Find Best Security Plan BERLIN—Germany’s antiterror posture is facing a shake-up as parties locked in talks about forming the country’s next government wrangle over how to balance a strong state and individual liberties. Last week’s arrest of a 19year-old Syrian man suspected of building a remote-controlled bomb in northern Germany was a stark reminder of how acute a threat Germany still faces even though it hasn’t had a largescale attack for almost a year. And last week’s atrocity in Manhattan, in which a suspected Islamist radical mowed down cyclists and pedestrians with a rented truck, underscored the near-impossible task authorities face in preventing crude yet devastating plots. Security experts see Germany as particularly exposed because of the departing government’s decision to open the country’s doors to nearly two million asylum seekers since 2015. Since then, security officials have attributed most terrorist attacks perpetrated in the country to recently arrived migrants. But how much Berlin can harden its security stance in response to the mounting challenges is in the balance as the three parties that have pledged to try to form a coalition government under Chancellor Angela Merkel seek to reconcile their views. The talks ULI DECK/DPA/ZUMA PRESS BY WILLIAM WILKES A police officer guarded the court in Karlsruhe where a Syrian terror suspect was arraigned last week. began in late October and are expected to stretch for weeks. After taking a liberal stance on immigration for years, Mrs. Merkel’s conservatives now want stricter checks on immigration as well as tougher terror laws and more resources for police and justice. The party called during the campaign for another 15,000 police officers to be hired. It also wants to centralize the work of the domestic intelligence agency, which is now largely under the authority of the federal states, to permit better coordination across government. Germany’s security and intelligence agencies already face some of the most severe constraints on their prerogatives among Western democracies, a legacy of the country’s Communist and Nazi dictatorships. Germany’s 16 states have their own surveillance laws, making it difficult for security services to investigate terrorist cells operating across state borders. Raphael Bossong, a security expert at the German Institute for International and Security Affairs in Berlin said Germany needs to harmonize its security laws to allow for tighter sur- veillance, adding it is “only halfway along the road” to a unified approach to counterterrorism despite the acute threat. The pro-business Free Democratic Party, once highly suspicious of state surveillance of citizens, has moderated its stance somewhat after recent terrorist attacks, calling for greater powers for federal security agencies and more police. But the party could still oppose the conservatives’ push for more broad-based surveillance techniques. The FDP would also like to make it easier for federal agencies to share information on suspects. “As liberals, we defend the freedom of the citizen,” Frank Elbe, FDP member and former German ambassador to Japan, Poland, India and Switzerland, said in an interview in September. But, he added, “an individual can only enjoy his freedom if he lives in security.” While the FDP and the conservatives see eye-to-eye on many security issues, the leftleaning Greens, the third party at the table, are pushing back. Their negotiators want greater scrutiny by Parliament of intelligence agencies and fiercely oppose systematic gathering of data on German citizens. The Greens also want any additional spending focused on police head counts and cyberdefense. And they staunchly oppose any increase in federal intelligence agency powers. “We’re a long way from finding agreement,” Konstantin von Notz, a lawmaker for the Greens, said last week. Security officials say last week’s arrest should concentrate minds. The BfV domestic intelligence agency said in October that the number of potential Islamist terrorists in the country had risen to 1,870 from 1,600 since January. Federal prosecutors estimate their case load on Islamist terrorism will hit 1,000 this year, up from 250 last year and swelled by the return of German citizens from Iraq and Syria as Islamic State’s empire crumbles. Berlusconi Coalition Seen Edging Outsiders in Sicily Vote MICHELE NACCARI/ANSA/ASSOCIATED PRESS BY GIOVANNI LEGORANO A woman voted at a polling station in Palermo, Sicily, on Sunday. ROME—A center-right coalition headlined by former Italian Prime Minister Silvio Berlusconi appeared to have edged out the antiestablishment 5 Star Movement in regional elections in Sicily, according to exit polls, but the solid showing by both groups suggest they could perform well in national elections next year. Sunday’s vote is widely seen as a litmus test for next year’s national elections in Italy. Those elections are due by May but are currently expected to be held in March. If the final count confirms exit polls, Sicilian voters will have elected Nello Musumeci, who is backed by Mr. Berlusconi’s center-right alliance, as president of the region. According to research institute EMG Acqua, between 37% and 40% of the people who cast ballots voted for Mr. Musumeci, who promised to cut red tape to help Sicilian companies and invest in job centers to help youths find jobs. The same polls showed that Giancarlo Cancelleri, the 5 Star candidate, garnered between 34% and 37%. The vote count is scheduled to start Monday morning. Sunday’s vote effectively kicks off an electoral campaign that is shaping up as a contest among the 5 Star Movement, Mr. Berlusconi’s center-right alliance and the governing center-left Democratic Party. Sunday’s vote is the last important electoral test before next year’s parliamentary elections. In Sunday’s election, the center-right coalition—which consists mainly of Mr. Berlusconi’s Forza Italia and the anti-immigration Northern League—ran on a united platform, demonstrating that they can scoop up votes when they join forces. Meanwhile, the 5 Star Movement shook off doubts about its capacity to govern that have emerged in the wake of its management of Rome since winning its mayoralty last year. press conference with Mr. Abe. The two leaders were to attend a state banquet in the evening. Ahead of the high-stakes talks, the two world leaders kept things lighthearted. “Our relationship is really extraordinary,” Mr. Trump said before dinner with Mr. Abe at Ginza Ukai-tei in Tokyo. “We like each other, and our countries like each other. And I don’t think we’ve ever been closer to Japan than we are right now.” The president is set to leave Tuesday morning for Seoul, the second of five counties he is scheduled to visit on his 10-day swing through Asia. Mr. Trump will visit China later in the week. He finishes the trip with multinational conferences in Vietnam and the Philippines. Mr. Trump said he expects to meet with Russian President Vladimir Putin in Southeast Asia. “It is expected we’ll meet with Putin, yeah,” Mr. Trump told reporters on Air Force One before landing in the Japanese capital. “We want Putin’s help on North Korea, and we’ll be meeting with a lot of different leaders.” During the flight to Tokyo from Honolulu, Mr. Trump said pressure on North Korea was his priority, and he also wanted to take steps to narrow U.S. trade deficits in Asia. U.S. officials will push Japan to lobby other countries to increase pressure on North Korea, a U.S. State Department official said.. “Japan is really in lockstep on this, so what we’ll do is ask those countries in turn to go and fan out and start pounding other countries in tandem with us so that is going to be a lot of what the conversations with individual leaders is going to be focused on,” the official said. Belgium Releases Catalan Officials BY VALENTINA POP BRUSSELS—A Belgian judge ordered the conditional release of ousted Catalan leader Carles Puigdemont and four former officials sought by Spain. Mr. Puigdemont and his allies on Sunday had turned themselves in to Belgian authorities after Spanish authorities on Friday requested their extraditions following their flight to Brussels last week. The ousted officials and Mr. Puigdemont are wanted in Spain on charges of rebellion, sedition and misappropriation of public funds as part of their two-year bid to see Catalonia secede from Spain. The Belgian judge, after holding hearings with Mr. Puigdemont, the other four officials and their lawyers, decided to release them under condition that they don’t leave Belgium, the Brussels prosecutor’s office said. Under the conditional release, the five former officials also have to reside at a fixed address, attend court hearings and comply with Belgian authorities’ requests, the office said. A Belgian court will make its first decision on the extradition within 15 days. It can be appealed twice, extending Mr. Puigdemont’s legal battle for as long as two months. The ruling of the highest appeal court, the Cassation Court, will be final. Belgium is one of the few European Union countries where political-asylum applications from other EU nations aren’t routinely dismissed. Belgium also has a history of diplomatic tension with Spain over several rejected extraditions of Basque separatists linked to the separatist organization ETA. Mr. Puigdemont’s lawyer, Paul Bekaert, successfully defended Basque clients in the mid-1990s and early 2000s. On Sunday, Belgian interior minister Jan Jambon criticized the Spanish government for its response to the Catalan crisis and for jailing the former officials who returned to Barcelona. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 6, 2017 | A7 Export Food, Not Jobs Congratulations to the Trump administration and Agriculture Secretary Sonny Perdue (pictured left, at last month’s second annual Global Food Forum) for increasing America’s food exports by 9 percent in the past 12 months after recent years of decline. This growth includes beef by 25% and dairy by 16%. We salute the Trump administration’s constancy of focus on exports, deregulation and other key drivers of success for farmers and food processors of America. Anthony Pratt Executive Chairman, Pratt Industries Pratt Industries is one of the largest corrugated box manufacturers in the United States. Our boxes save money and save the environment. www.prattindustries.com For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com A8 | Monday, November 6, 2017 THE WALL STREET JOURNAL. * ***** WORLD WATCH WORLD NEWS Looming Default May Aid Maduro BY KEJAL VYAS AND ANATOLY KURMANAEV AGENCE FRANCE-PRESSE/GETTY IMAGES CARACAS—A looming debt default for Venezuela, long seen as catastrophic for the country’s oil-dependent economy, may yet provide a vital political boost for embattled President Nicolás Maduro and help him consolidate power in the near term ahead of two crucial elections, bond investors and economists said. Mr. Maduro announced plans on Friday to convene bondholders in Caracas on Nov. 13 to negotiate a debt restructuring on the country’s foreign debt, estimated at between $100 billion and $150 billion. However, investors said that U.S. sanctions that restrict financial institutions from investing in new debt instruments issued by Venezuela’s authoritarian government make a deal unlikely, triggering a messy and prolonged default. By stopping payments on the debt, Mr. Maduro could double the funds he has earmarked for imports next year by holding back on some $1.7 billion in bond interest payments due in the remainder of 2017 and about $9 billion in 2018, according to Eurasia Group, offering relief—albeit brief—for a rapidly collapsing economy plagued by galloping inflation and chronic food shortages. “Maduro is adding up the numbers for the presidential elections next year and is trying to see how to raise imports,” said Alejandro Grisanti, an economist with the Caracasbased consultancy Ecoanalítica. A default would give the leftist leader a six- to nine-month window to try to ease shortages that have pushed Venezuela to the edge of a humanitarian disaster, Mr. Grisanti said. At the same time, U.S. sanctions that prohibit bondholders Residents survey their flooded home in the town of Hoi An on Sunday, a day after Typhoon Damrey made landfall in central Vietnam. VIETNAM Typhoon Leaves Dozens Dead A powerful typhoon battering Vietnam has killed at least 44 people and left more than a dozen missing as it caused extensive damage along the southcentral coast, officials said. The missing include nine crew members of cargo ships that were sunk off the coast of the central province of Binh Dinh, the Vietnam Disaster Management Authority said. Seventy-four other crew members had been rescued earlier. More than 600 houses have been destroyed and nearly 40,000 others damaged as Typhoon Damrey caused widespread blackouts across the region, the agency said. The typhoon, the second to hit Vietnam in a month, also damaged the region’s rice fields and other crops, while 228 fishing boats were sunk or damaged, the agency said. Heavy rains are expected to last until Tuesday including in the central resort city of Da Nang, just days before the start an economic summit attended by the leaders of the U.S., Russia and China, among others. —Associated Press IRAQ Prime Minister Visits Freed Border Crossing Iraqi Prime Minister Haider alAbadi raised the Iraqi flag at a border crossing with Syria on Sunday, days after Iraqi forces retook it from the Islamic State group, state television said. Mr. Abadi visited the newly liberated town of Qaim and the nearby Husaybah border crossing in western Iraq, Al-Iraqiya television said. Both sit along what used to be an important supply route used by IS when the group controlled large areas in Syria and Iraq. Iraqi forces backed by the U.S.-led coalition drove IS from Qaim and surrounding areas last week, in what coalition officials have said marked the end of the conventional war against the extremist group in Iraq. Separately, two suicide bombers struck near a Shiite mosque in the oil-rich northern city of Kirkuk, killing a civilian, the Interior Ministry said. No group immediately claimed responsibility, but it bore the hallmarks of an IS attack. Kirkuk is the country’s largest contested city, claimed by Arabs, Turkmen and Kurds. The bombing is the first since Iraqi federal security forces took over the city from Kurdish region-run troops last month. —Associated Press SOMALIA Some U.S. Staffers To Leave Country The U.S. has ordered all nonessential employees of its mission to Somalia to leave the capital, Mogadishu, because of “specific threat information” against them. The order Saturday came a day after the U.S. military carried out its first drone strikes against Islamic State group-allied fighters in Somalia, saying “several terrorists” had been killed in the northern Puntland region. The U.S. hasn’t had an embassy in Somalia since 1991 and calls security “extremely unstable.” The U.S. Mission has been based in neighboring Kenya, and it isn’t clear how many employees may be in Mogadishu. The U.S. mission didn’t immediately respond to requests to comment. —Associated Press from renegotiating debt with the Venezuelan government will allow Mr. Maduro to rally his Socialist Party supporters and deflect blame for the country’s problems by pinning them on his ideological rivals in Washington, said analysts at the risk consultancy Teneo Intelligence. “Politically, the timing of this is not a coincidence,” said John Polga, professor of Latin America studies at the U.S. Naval Academy in Maryland. “If they can use some of the extra money and nationalist rhetoric to boost approval to 30-35%, all of a sudden, he could win the presidential elections,” he said. That may only be a temporary respite before investors start targeting Venezuela’s oil shipments and external assets seeking compensation. But Mr. Maduro has few other options as he tries to keep alive the revolutionary movement he inherited from the late Hugo Venezuela’s president has announced an effort to negotiate a debt restructuring. Chávez. The International Monetary Fund expects the economy to shrink 12% and 6% in 2017 and 2018, respectively, while inflation tops 1,000%. U.S. sanctions, rampant corruption in Venezuela, the scale of the debt and different types of bondholders could all come together to make for a chaotic restructuring or default. “This will be the most corrupt, chaotic, and messiest default in the history of defaults,” said Moisés Naím, a distinguished fellow at the Carnegie Endowment for International Peace in Washington. FROM PAGE ONE Continued from Page One ager Amit Sharma said the company currently has two units of the board game for sale, adding that it appears most sellers still haven’t noticed the new discounts. The practice allows the seller to benefit as Amazon competes for more sales. “We are still receiving the same amount of money,” he adds. Kn9ght didn’t immediately respond to a request for comment. According to pages viewed by The Wall Street Journal, discounts appeared to be less than 10% and applied to items from sellers using Amazon’s in-house fulfillment option. The special offer frequently disappeared within days. It is unclear how Amazon selects which prices to lower. Sellers said they weren’t notified of the change. VISION Continued from Page One 2020’ and then the word ‘eyes’,” says Sally Crook, a program manager at the International Agency for the Prevention of Blindness, which created the project with the United Nations World Health Organization nearly two decades ago. Ms. Cook is dismayed by the moniker copycats. “How much do they know about 20/20 vision? Do they understand what it means?” It means that an eye-test subject can read the same line of text at 20 feet as a person who has what is considered normal eyesight. The etymology didn’t stop the U.S. Fish and Wildlife Service from endorsing “Indian Rhino Vision 2020” to protect the horned animal, which is famed for being practically blind. (A spokeswoman for the service denies it played a role in the project name, pointing the finger instead at the “conservation community in south Asia.”) Branding experts aren’t impressed with the naming fad. “It’s probably not going to be a vision, because you don’t change your vision every three years,” says Christian Purser, chief executive of the London office of branding consultants Interbrand. Indeed, several 2020 visions have already come and gone. The government of Trinidad and Tobago abandoned its Vision 2020 in 2010. The American Physical Therapy Association shelved its Vision 2020 following several “Beyond Vision 2020” forums back in 2013. “Vision 2020 was no longer challenging the association to be visionary,” says APTA President Sharon Dunn. For others, a 2020 vision doesn’t necessarily end in 2020. The Bank of England’s website explains that its Vision 2020 is just the latest leg of a “timeless mission,” maintaining British financial stability, that dates back to 1694. The 20/20 vision standard derives from the familiar eye chart of stacked letters that decrease in size as they descend, developed by Dutch ophthalmologist Herman Snellen in 1862. The idea of grandiose strategic plans with catchy names took hold in the latter half of the 20th century. It posed a challenge in 1987 for then-Vice President George H.W. Bush, whose presidential candidacy Jason Boyce, chief executive of home-recreation retailer Dazadi.com, says he has been selling on Amazon for nearly 15 years, and the majority of his more than $20 million in annual sales stem from that platform. He isn’t sure whether any of his products have been marked down yet, but said he has signed agreements with Wal-Mart and other marketplaces to maintain price parity on the same products he is also selling on Amazon. “At first glance, we thought it was great,” he said of the practice. But it would mean “violating our seller agreement with every other marketplace that we sell on.” An Amazon spokeswoman said the discount is a way to provide low prices for customers while sellers receive the list price. Sellers can also opt out. She declined to comment on how the company is selecting which items to discount. Amazon for years has been helping drive prices lower Sales Surge Amazon's third-party merchants comprise an increasing portion of overall sales on the site. $80 billion 60 40 Total gross merchandise volume 20 0 Share from Amazon retail sales* 2015 ’16 ’17 *Includes related shipping fees and digital media content, as well as a portion of Amazon Prime fees Sources: the company; FactSet THE WALL STREET JOURNAL. across the board, in part through algorithms that scrape competitors’ websites to match or cut prices on merchandise Amazon holds and STR/AGENCE FRANCE-PRESSE/GETTY IMAGES PRICES The unusual move, while good for consumers, could further strain Amazon’s complicated relationship with bigname brands, manufacturers and its own merchants. Sales by independent sellers are a significant area of growth in Amazon’s retail business. It also shows how much Amazon is willing to pay for market share, part of its strategy to reinvest profits to expand the company. Amazon last week posted a 34% increase in revenue in its most recent quarter to $43.74 billion, but profit was nearly flat at $256 million. The discounts could be a mixed bag for some sellers. A lower price on an item that matches or beats a competitor could help drive more sales at no extra cost to the seller. It might deplete inventory unexpectedly, though. And the lower prices could inadvertently violate a merchant’s agreement with a brand to keep its products at or above a set minimum advertised price. A rhino being moved under the program Indian Rhino Vision 2020. would have to figure out “the vision thing.” By then there already were early rumblings of a 2020 strategic boom. A Vision 2020 community project launched in Marion County, Fla., with the theme, “Eye to Eye with the Future.” Ophthalmologists gathering in Switzerland in the late 1990s didn’t spot the naming problem on the horizon. The sells directly. Over the past few years, third-party sales have become more dominant on Amazon. Third-party merchants are expected to account for roughly 70% of the estimated $340.71 billion of merchandise bought on Amazon this year, according to FactSet forecasts. Third-party goods are typically more profitable for the Seattle-based company, reducing inventory risk while increasing selection. But it is unclear how much the new price cuts, absorbed by Amazon, will eat into its already thin profit margins. The surge in those thirdparty sales, plus Amazon’s aggressive pricing policies, has significantly undermined brands’ pricing control. That has caused some brands, including luxury-goods maker LVMH Moët Hennessy Louis Vuitton SE and outdoor apparel company the North Face, to avoid selling directly to Amazon to help protect their pricing and branding strategies. Nike Inc. was a holdout until this summer, when it negotiated stricter controls on counterfeits and unauthorized sellers in exchange for selling some merchandise on the site. As a result, some other brands have decided to sell on Amazon’s platform as thirdparty sellers to retain more control over pricing. The new policy could help boost Amazon’s sales. Rosa Ruiz compares prices on her phone during her 40-minute daily commute into New York City, shopping for things such as toiletries and ironing boards on Amazon, Wal-Mart and Target Corp. sites. If she doesn’t need it fast, the sale goes to the lowest bidder— which frequently isn’t Amazon, she says. “I’m a bargain shopper,” says the 32-year-old customersuccess manager. “Sometimes there are certain things that I wouldn’t purchase from [Amazon], but if they do drop the prices, I’ll buy them.” eye doctors thought “Vision 2020: The Right To Sight” was a great slogan, recalls Gullapalli Nageswara Rao, an Indian eye specialist who helped found the project. The plan, after all, was to eliminate avoidable blindness by 2020. “It’s also a very positive message,” he says. Others soon agreed. At least 10 universities and school districts in the U.S., Canada and the U.K. embraced visions. Competing businesses began to out-vision each other. International Paper and Asia Pulp & Paper both presented 2020 visions. So did the professional-service consultants EY and Grant Thornton. Even august news organizations got in on the game. Recently The Wall Street Journal began a reorganization under the rubric of “WSJ2020,” having been scooped by the New York Times’s earlier “Project 2020” study group. The vision spread worldwide, though feet are a unit of measure in only a few countries. Even the bastion of the metric system, the EU, hopped on the imperial vision bandwagon. The European Statistical System launched its own Vision 2020, to ensure it “remains competitive in the future.” The EU has a separate Vision 2020 as part of its Horizon 2020 scientific-research program. The ophthalmologists looked on bemusedly. They trademarked their tagline in some countries, but that didn’t stop people from using abbreviated versions. “So many other projects have come but in other fields,” says Sri Lankan eye specialist Ramachandra Pararajasegaram, who also worked on Vision 2020. “There was some confusion.” But ultimately their project has proved successful, he says. Besides, time is now running out for 2020. Its use in strategic names is becoming stale, says Bruce Donald, the director of an Australian consultancy called 2020 Global— which doesn’t advise on any 2020 Visions. New five-year plans are being drawn up. “People are already looking at 2023,” he says. That is, alas, a less euphonious number. But forwardthinking consultants can start to ponder 2222. (3030 is a bit far off.) The ophthalmologists will also have to look for a rebrand. Work is under way to hammer out a successor to Vision 2020, says Ms. Crook. “We will need to refocus.” For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 6, 2017 | A9 Special Advertising Feature The Reinvention of Education Higher education may be at the tipping point, facing challenges such as skyrocketing tuition costs, attrition and limited job opportunities for graduates. For these reasons, Strayer University, one of the nation’s largest educational institutions that caters to working adults, is taking a novel approach to making college education affordable, virtual and more closely aligned with workforce needs. While Strayer University, an institution that is celebrating its 125th anniversary this year, has over 70 campuses in the U.S., more than half of its 48,000 students, who are mainly working adults in their 30s, are taking all of their courses online. Karl McDonnell, chief executive officer of Strayer Education, provides insight on where higher education is heading and how to better meet the needs of both students and employers. What’s “broken” in education today? Post-secondary education as it exists isn’t serving students very well. There are 42 million college graduates in the U.S. labor force; half of them are in jobs that don’t require a four-year degree. Probably the biggest indictment is that post-secondary education expenditures in the U.S. add up to about half a trillion a year — a similar amount to what companies spend on workforce development each year. Companies are investing in extensive training because they’re not satisfied with the caliber of skills that American students have acquired when they graduate. Students just aren’t workforce-ready. What is your perspective on what education should be? The average university sees its job as getting students to graduate. Really, the job is to engender economic mobility by improving workplace performance and teaching critical skills, such as thinking on your feet, having a good work ethic and engaging and collaborating with customers. People need these skills to earn higher wages and get better jobs in this country. So along with academic skills, we prepare students for the workforce. We hire advisors and faculty who help shape the student experience around the hard and soft skills required to move ahead in work and in life. How does technology change the playing field, and what are the results so far? Technology is an enormous enabler, but it isn’t always properly utilized. There’s been rapid advancement in areas such as analytics and adaptive learning, while in other areas there’s been almost no innovation. The platform is basically the same as it was 10 years ago. If you were to look at the online courses offered by most schools, including top-tier universities, what you see are videos of offline lectures that are shown online. That’s not engaging enough to hold the attention of students today. Low college completion rates are an ongoing problem. How can that be addressed? In our case, almost two-thirds or more of student attrition happens in the first year. If students get to the second year, their likelihood to graduate goes up four- or fivefold. What we’re trying to do is completely reengineer that first-year experience to be more engaging. We introduced Strayer Studios, an internal filmmaking arm, which turns lessons into a more dynamic experience by using documentary-style films. This stemmed from the pretty basic idea that online education doesn’t need to be boring. We thought, ‘Why is it that everybody is thoroughly engrossed while bingewatching shows on streaming services, but no one has ever applied that concept to education?’ So far, it’s had an amazing impact. The cost of education has risen dramatically in the last 20 years. What can institutions do to make education more affordable? In late 2013, we took a huge step. Enrollment was declining, and we were probably guilty of too many tuition increases. So we did two things. One was to introduce the Graduation Fund, which allows students to earn the opportunity to take up to 10 of their final degree classes tuition-free. Every time a student completes three courses, the student earns one course tuition-free toward the final 10 classes needed for the degree. It’s essentially a 25 percent tuition reduction and an incentive for completion. We also lowered overall tuition by 20 percent. Taken together, it was a 40 percent tuition reduction to receive a degree. To make this happen, we took about $50 million out of our expenses, closed 20 campuses, combined some positions and did a voluntary severance plan. You have to be willing to believe that you can do more with less. It was the right thing to do, and our student body has grown every year since then. Karl McDonnell, Strayer’s chief executive officer What challenges lie ahead for education? While we all benefit from technological advancement, technology can destroy jobs faster than it creates them, and the jobs created are completely different than the ones destroyed. So how is the U.S. educational system going to confront this? Who is going to give 2 million truck drivers the skills to become drone operators or software coders? You’re not going to be able to train and retrain a million people in brick-and-mortar centers no matter how hard you try. It will have to be online — and it will have to include partnerships with industry. WSJ. Custom Studios is a unit of The Wall Street Journal advertising department. The Wall Street Journal news organization was not involved in the creation of this content. LEARN MORE: www.strayer.edu For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com A10 | Monday, November 6, 2017 * *** THE WALL STREET JOURNAL. WORLD NEWS Detained Prince Has Backed U.S. Firms Prince al-Waleed gained prominence after buying shares of Citigroup predecessor tal raise by the bank during that time. In March, Prince al-Waleed hosted a dinner for Citigroup Chief Executive Michael Corbat in the Saudi capital, where they discussed “future plans of the company,” according to Kingdom’s website. One month later, the bank received approval from Saudi Arabia’s regulator to operate a capital-markets business in the kingdom after a long absence. The prince’s desert tent in Riyadh is a regular stop for U.S. company executives, investors and foreign dignitaries. Many of these events are documented on Kingdom’s website. Last month, Goldman Sachs Group Inc. Chief Executive Lloyd Blankfein and other senior bank executives met Prince al-Waleed in Riyadh, according to the website. Goldman advised Kingdom on its deal to acquire a stake in Banque Saudi Fransi from Credit Agricole SA. In 2015, executives from Snap Inc. including CEO Evan Spiegel met with the prince about “future potential business cooperation” while the disappearing-message app company was in the midst of a funding round. However, Kingdom never invested in Snap as a private company and didn’t Princely Holdings Billionaire tycoon Prince al-Waleed bin Talal has invested in a bevy of major American companies over the years, including through his investment ﬁrm Kingdom Holding: BY ANUPREETA DAS NEW YORK—The arrest this weekend of billionaire tycoon Prince al-Waleed bin Talal hobbles an investor who has straddled east and west, backing some of the world’s best-known companies while also encouraging U.S. business to invest in the Middle East. The Saudi Arabian prince was among dozens of people who were arrested as part of a crackdown on corruption in the kingdom, as King Salman and his son Crown Prince Mohammed bin Salman move to consolidate power. Prince al-Waleed hasn’t been charged, but could face allegations of money laundering and illegal arms sales, people familiar with the matter said. Representatives for Prince al-Waleed and his investment company, Kingdom Holding Co., didn’t respond to requests to comment. On Sunday, shares of Kingdom, which trade on the Saudi stock exchange, fell 7.6%. Photo: Hamad I Mohammed/Reuters THE WALL STREET JOURNAL. In a statement posted on the Saudi stock exchange’s website on Sunday, Kingdom Holding’s chief executive said the company has received the support of the government and would continue to operate “business as usual.” Prince al-Waleed has been a familiar figure in Western business and financial circles for more than a quarter of a century, having backed iconic U.S. companies such as General Motors Co., Apple Inc. and Citi- group Inc. More recently, he has invested heavily in young technology companies including Twitter Inc. and Lyft Inc. One of the prince’s most high-profile partnerships is with Microsoft Corp. cofounder Bill Gates. The investment firms of the two billionaires teamed up a decade ago to take luxury hotel operator Four Seasons Holdings Inc. private for $3.8 billion. Four Seasons spokeswoman Sarah Tuite said it was “business as usual” and that the “matter does not affect the day-to-day operations of Four Seasons Hotels and Resorts.” The prince shot to prominence in the U.S. in 1991 after buying shares of a predecessor to Citigroup. The deal eventually made him one of the bank’s largest individual shareholders. He remained a major backer of Citi as the firm’s shares plunged in value during the 2008 financial crisis and participated in an international capi- purchase shares in its public offering, according to a person familiar with the matter. The prince has also been a longtime investor in Rupert Murdoch’s media empire, first investing in News Corp in 1997 and eventually becoming the second-largest holder of voting shares outside of the Murdoch family. He remained a supporter of Mr. Murdoch’s, even as News Corp became embroiled in a phone hacking scandal in London and was subsequently split into two companies—News Corp and 21st Century Fox—in 2013. Two years later, he sold the bulk of his stake in News Corp, which owns The Wall Street Journal. He is also no longer a major shareholder in Fox. In 2010, News Corp paid $70 million for a stake in Rotana Group, a Middle Eastern entertainment company primarily owned by Prince al-Waleed’s firm. Since the split, Fox has continued to own a small stake in Rotana. That year, the prince bought a $500 million stake in GM during the carmaker’s initial public offering. —Keach Hagey, Margherita Stancati and Maureen Farrell contributed to this article. Regional Cold War Intensifies as ISIS Fades Prince, Officials Are Killed In Crash BY ASA FITCH Continued from Page One with war-torn Yemen. It wasn’t immediately clear what caused the crash. The targeting for arrest of high-profile figures represents an escalation of a campaign of detentions in recent months. It comes less than five months after King Salman installed his son, Prince Mohammed bin Salman, as crown prince and heir apparent, sending shock waves through the kingdom and stirring internal opposition. The crown prince has vowed to tackle corruption at the highest levels as part of the government’s plan to overhaul the kingdom’s economy and free Saudi Arabia from its dependence on oil revenues. At least some of those who were rounded up over the weekend are being held at Riyadh’s Ritz Carlton, a luxury hotel that resembles a royal palace. Just weeks earlier, the Ritz hosted a large business conference sponsored by the crown prince that drew some of the world’s top investors and entrepreneurs to the Saudi capital. The hotel evacuated all vision of Islamic government. For Iran, a key ambition is the establishment of a corridor through Iraq and into Syria, where its ally Mr. Assad rules. That corridor, currently obstructed by territories controlled by Islamic State, would open an overland route to Hezbollah in Lebanon and an outlet to the Mediterranean. “Just the way the European countries are connected to each other, we are establishing such connections too, by land and by air, tight connections,” said Esmail Kosari, an Islamic Revolutionary Guard Corps commander and former member of the Iranian parliament. Saudi Prince Mansour bin Muqrin and a number of government officials were killed Sunday in a helicopter crash some 70 miles from the kingdom’s southern border with war-torn Yemen, Saudi officials and state television said. The helicopter went down while the group was touring an area near the coast in Asir province, of which Prince Mansour is governor, according to a statement from the interior ministry’s security spokesman. The cause of the crash wasn’t immediately known. “While returning in the evening, contact with the helicopter was lost…authorities are currently searching for survivors where the wreckage was found,” the statement said. Eight people died, two Saudi officials said. Prince Mansour is the son of Prince Muqrin bin Abdulaziz, who resigned from his position as Saudi Arabia’s crown prince in April 2015 to make room for King Salman’s son Mohammed bin Salman. It wasn’t immediately clear whether there was any link between the crash and the Saudi Arabia-led war against Yemen’s Houthi rebels, which has raged across the border for more than two and a half years. Riyadh’s Sunni Muslim monarchy views the Houthis as a proxy of Shiite Iran, its main rival for power in the Middle East. on everyone who touched public money and didn’t protect it or embezzled it, or abused their power and influence,” King Salman said in his decree. “This will be applied on those big and small, and we will fear no one.” The government said any assets or property acquired through corruption will be transferred to the state. The government hasn’t named the people who were detained. Attorney General Sheikh Saud al-Mojeb said Sunday that the new anticorruption agency “has initiated a number of investigations as part of the state’s judicial duty to combat corruption.” Mr. Mojeb added that “suspects are being granted the same rights and treatment as any other Saudi citizen. A suspect’s position or status does not influence the firm and fair application of justice.” A lawyer familiar with the investigation said that Saudi authorities began their probe into alleged corruption two years ago and that the Saudi government has already frozen assets like bank accounts belonging to the accused. “They saw money getting in the wrong bank accounts,” said the lawyer. “They can im- mediately freeze bank accounts, and they have done that. They can now reach out to foreign jurisdictions and freeze their assets there.” The detentions send a clear message that corruption won’t be tolerated as the kingdom pushes through its economic overhaul, a plan known as Vision 2030, said Mohammed Alyahya, a Saudi political analyst and nonresident fellow at the Atlantic Council in Washington, D.C. “MBS has made it very clear that he will crack down on corruption, and that he is willing to do it from the top first,” Mr. Alyahya said. “The bottom line is that corruption costs the government. We have economic problems. …There is no way you can achieve Vision 2030 without tackling these issues.” The plan is centered on the initial public offering of a piece of the state energy firm, Saudi Arabian Oil Co., the largest oil producer in the world. The IPO could generate as much as $100 billion, making Saudi Arabia’s sovereign-wealth fund the largest in the world. —Shane Harris in Washington and Maureen Farrell in New York contributed to this article. A Yemeni man gestured at the site of an airstrike in San’a on Sunday. Saudi Arabia and Iran are vying for influence in the country. Iranian expansionism more aggressively. “Both sides will go back to the Middle East’s great game,” said Cliff Kupchan, the chairman of the political risk consultancy Eurasia Group. “The Sunni-Shia divide.” Saudi Arabia’s Crown Prince Mohammed bin Salman, who has led the kingdom into a confrontation with Iran by cutting diplomatic ties and trying to contain it on regional battlefields, meanwhile has been consolidating power. On Saturday, his father, King Salman, removed several princes from their posts, ostensibly as part of an anticorruption guests on Saturday. Repeated calls to the hotel went unanswered. Two Saudi officials said other five-star hotels in Riyadh are also being used to host suspects in the probe. Crown Prince Mohammed, 32 years old, has risen to a position of almost unrivaled authority since King Salman assumed the throne in early 2015. The octogenarian monarch is expected to abdicate either later this year or early next year, according to people close to the royal court. According to people familiar with the matter, another member of the royal family detained was Prince Miteb bin Abdullah, a politically influential son of the late King Abdullah who led the kingdom’s National Guard, one of the three main branches of Saudi Arabia’s security forces. Prince Miteb was among several senior princes who privately criticized the unceremonious removal of Prince Mohammed bin Nayef as crown prince in June, according to people close to the royal family. He was the most senior prince in a position of authority who didn’t belong to King Salman’s branch of the royal family. One senior Saudi official said drive. The move effectively strengthens the crown prince’s hand as he appears prepared to succeed the king, who is 81. Later Saturday, Saudi forces intercepted a ballistic missile fired by Yemen’s Houthi rebels just east of Riyadh’s main airport, according to the official Saudi Press Agency. Since 2015, Saudi Arabia has led a military coalition trying to defeat the Houthis, a Shiite group coalition members see as a proxy of Iran. A person close to the Saudi government said the missile fired Saturday was of Iranian origin, while Iran denied any link. In addition to Yemen, Iran and Saudi Arabia are facing off in Syria, where Iran supports President Bashar al-Assad and Saudi Arabia backs Sunni rebels trying to oust him. Saudi Arabia also sees an Iranian hand in Shiite unrest next door in Bahrain, and in Qatar. Iran rejects the notion that it interferes in Arab countries’ affairs. As the standoff intensifies, oil-rich Saudi Arabia and its Sunni Muslim allies have used financial muscle and growing military clout to woo proxies to their side. Iran, meanwhile, has used arms shipments, training and in some cases direct military involvement to spread its HAMAD I MOHAMMED/REUTERS SAUDI BY SUMMER SAID MOHAMMED HUWAIS/AGENCE FRANCE-PRESSE/GETTY IMAGES DUBAI—A cold war between Saudi Arabia and Iran, fought with proxies seeded across the Middle East, is sharply escalating as the two powers jockey to shape a regional order devoid of Islamic State. With the extremist group’s once-sprawling caliphate shrunk to a few towns around the border between Syria and Iraq, the region is turning its focus to the long-running IranSaudi struggle, as each strives to carve out a dominant role based on divergent political and religious visions. Iran is the main Shiite Muslim power in the Middle East. Its vision of governance includes a blend of a parliamentary system overseen by religious authority. Saudi Arabia, like other Sunni countries in the Persian Gulf, has a monarchical system. The latest salvo in the IranSaudi struggle came on Saturday, when Lebanese Prime Minister Saad Hariri abruptly resigned while in Saudi Arabia. As he stepped down, he criticized Iran and its Lebanese proxy, the Shiite militia and political group Hezbollah, for fomenting violence in the region and added that he feared for his life. Mr. Hariri is Sunni Muslim and a close political ally of Saudi Arabia. Iran’s foreign ministry spokesman rejected Mr. Hariri’s charges and denied interfering in Lebanese affairs. The clashes between both countries and the regional proxies aligned with each are set to intensify as the imminent defeat of Islamic State frees Tehran to pursue greater influence in Iraq and Syria while Riyadh seeks to counter Crown Prince Mohammed bin Salman in Riyadh last month the removal of Prince Miteb is a precondition to the king’s abdication in favor of Prince Mohammed, who is also known as MBS. King Salman on Saturday night issued a royal order firing Prince Miteb from his cabinet. “Prince Miteb was always the prince that needed to be sacked before MBS becomes a king. He was often viewed as a leading contender for the throne and is known to be very ambitious,” said the senior Saudi official. “Some arrests, particularly him, are more of a move to consolidate power rather than to fight corruption.” Prince Miteb could face allegations of bribery, according to people familiar with the matter. He couldn’t immediately be reached for comment. The detentions are overseen by a newly established anticorruption agency headed by the crown prince. The agency, formed on Saturday by a decree issued by King Salman, has farreaching authority in cases of suspected corruption involving public funds, including the power to issue arrest warrants, to impose travel restrictions and to freeze assets. “Laws will be applied firmly For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 6, 2017 | A10A NY * * GREATER NEW YORK Business Fights Governor’s Order On Pay Disclosure FROM TOP: LUCAS JACKSON/REUTERS; PETER FOLEY/EPA/SHUTTERSTOCK BY MIKE VILENSKY Marathon Is Celebrated—and Safe Security is tightened after attack last week, and two million people turn out to watch race BY MARA GAY AND SARA GERMANO An estimated two million people came to watch the New York City Marathon on Sunday, by far the largest event in the city since a terrorist attack in lower Manhattan last week killed eight people and injured nearly a dozen more. City Hall’s crowd estimate, which was the same as last year’s, indicated the ISIS-inspired assault on Tuesday failed to damp enthusiasm at the world’s largest marathon, where the spirited spectators cheered on some 50,000 runners. Shalane Flanagan on Sunday became the first American woman to win the New York City Marathon since Miki Gorman in 1977. “It’s been a tough week for New Yorkers, it’s been a tough week for our nation, and I just thought, what a terrific gift it would be to make Americans smile,” Ms. Flanagan said after the race. Ms. Flanagan, 36 years old, raced in the 2013 Boston Marathon, which was disrupted by a bombing. She said Tuesday’s A helicopter hovered over New York City Marathon runners on the Verrazano-Narrows Bridge on Sunday. Above, a security check. attacks in Manhattan evoked difficult memories. “It very much took a toll and is very personal to me, having been a part of a terrorist attack. It definitely brought back a lot of those emotions and those feelings from that day, 2013 in Boston,” she said. “What I do know, 100%, is that we are a very resilient nation and I don’t know that there are a tougher people than New Yorkers,” Ms. Flanagan said. “And marathoners are pretty tough, too.” In the men’s division, Geoffrey Kamworor of Kenya narrowly beat compatriot Wilson Kipsang in one of the tightest finishes in race history, 2:10:53 to 2:10:55. Lelisa Desisa of Ethiopia took third, and Abdi Abdirahman was the top American man in seventh. The city added extra security measures at the event in the wake of the ISIS-inspired assault on Tuesday, officials said. New York Police Department tactical teams could be seen with long guns and bomb-sniffing dogs. A maze of metal barricades directed spectators through security checkpoints. Garbage trucks from the city’s Department of Sanitation filled with salt lined the walkways at Columbus Circle near the finish line, a measure meant to protect pedestrians from those who may try to use a vehicle as a weapon. Spectators along the marathon route said they came without reservation. “I trust New York,” Kevin Creahan, a retired Navy fighter pilot from Memphis, Tenn., said while watching the runners in Central Park. “I trust New York to safely conduct an event of this magnitude. They’re professionals. They’ve been doing it so long.” Mr. Creahan’s wife, Memphis lawyer Valerie Corder, said she felt safe as well. “I have never once felt concerned,” she said. Nearby, the men’s basketball team at John Jay College stood along the route encouraging runners, as is their tradition. Their coach, Ryan Hyland, held a sign that read “Go Strangers.” Mr. Hyland said that while last week’s attack was briefly on his mind, he never considered staying home. “It’s the coolest day in New York every year,” he said. “We weren’t going to miss it.” Mayor Bill de Blasio said the large, spirited event filled with people from all over the world was “the worst nightmare” for terrorists. “They can’t change our democracy, they can’t change our society,” he said. Business groups are pushing back on Gov. Andrew Cuomo’s executive order requiring state contractors to regularly disclose worker-pay data broken down by race and gender. The Cuomo administration said the order, issued earlier this year with the objective of preventing discrimination, is moving forward, but it is having discussions with business groups concerned about the plan. Mr. Cuomo, a Democrat, has intended for the order to take effect in January 2018. Alphonso David, the governor’s counsel, said that is still the plan, but the date could be pushed back “to get a policy we feel comfortable with.” “We’re open to making sure it’s not onerous for businesses while we still get the information we need,” Mr. David said. “But what we’re doing here is making sure men and women get paid equally, and we can’t look the other way because a contractor is afraid,” he added. Over his two terms, Mr. Cuomo has allied with liberal advocates on social issues, but sought to remain friendly with business leaders. Critics of the governor’s order have been encouraged by California Gov. Jerry Brown’s decision last month to veto a similar measure, saying the California bill could “encourage more litigation than pay equity.” In interviews and letters to the Cuomo administration, business groups have said the information wouldn’t show why employees are paid their salaries, such as work experience or expertise, and could create a false impression of discrimination. The business groups also said having to report the data several times a year would be burdensome for businesses and could compromise confidential information. “We hope the recent action in California will prompt New York state officials to take a second look at [the executive order] and make significant adjustments, or better yet, scrap the program entirely,” said Zack Hutchins, spokesman for the Business Council of New York State, a businessadvocacy group. Mr. Cuomo first announced the plan in January 2017 as part of a package of measures seeking to combat gender inequities as he sought to tackle some issues of national concern. “State government has a responsibility to…ensure that this pattern of discriminatory wage practices is confronted and addressed,” he said at the time. In California, Mr. Brown vetoed a bill pushed by fellow Democrats that would have required large employers to provide gender-related wage information to the state. He wrote that it was “unclear the bill…[would] provide data that will meaningfully contribute to efforts to close the gender wage gap.” The administration is having discussions with business groups over their concerns. During his second term, President Barack Obama issued a rule that would have required large businesses to begin collecting and reporting data on how much they pay workers of different genders and races. President Donald Trump halted the plan in August, saying it could burden employers. Kathy Wylde, president of business-advocacy group the Partnership for New York City, said she supports the goal of Mr. Cuomo’s measure but added that the stalled federal order “was less cumbersome.” She said Mr. Cuomo’s administration has been responsive to her group’s concerns. Advocates for women, meanwhile, have lined up behind Mr. Cuomo’s measure. “You can’t fix what you can’t see,” said Dina Bakst, copresident of A Better Balance, a women’s-advocacy group. “This is a critical step forward to fix the wage gap,” she said. BY LESLIE BRODY Leaders of AltSchool said they are closing three of their seven private schools, including an elementary site in Manhattan’s East Village, so they can concentrate on developing their software platform for districts to purchase. The closures highlight the difficulty of navigating the fastchanging world of education technology. The decision to shut the East Village “micro-school,” which opened last year, at the end of this school year came in recent weeks: Earlier this fall, the company was hosting open houses to attract families to start its kindergarten through fifth grade next September “We have finite resources,” said Max Ventilla, the company’s founder and chief executive. “Closing a school is an in- credibly hard and painful decision for everyone involved.” The small schools serve as laboratories for AltSchool to refine a platform that organizes students’ work and tailors assignments to their individual needs, officials say. Altschool was launched in 2013 in San Francisco. Officials say they have raised about $175 million in venture capital, including from high-profile funders such as Facebook Inc. CEO Mark Zuckerberg and Laurene Powell Jobs, widow of Apple Inc. co-founder Steve Jobs. AltSchool is part of a “personalized learning” movement. Supporters say it helps children become self-directed and resilient, which will help them in a modern workplace. Critics say hype about the approach has run ahead of any extensive research showing it works. The company sent emails Thursday night to parents at the East Village elementary, notifying them it would shut down and inviting them to send their 20 children to the two other New York City venues, at Brooklyn Heights and Union Square, where tuition costs $37,500 this year. Mr. Ventilla said the company decided to close the sites that didn’t appear to be sustainable long-term. He said that since September, his company had found more private and public schools interested in buying its platform, and his team could supply their needs faster by cutting the number of lab schools it was operating. The company is closing one school in San Francisco and one in Palo Alto as well. Remaining next fall will be two in California and two in New York City. BESS ADLER FOR THE WALL STREET JOURNAL ‘Micro-School’ to Shut Down Students at AltSchool’s elementary school in the East Village. It will close at the end of the school year. Little Suspense in Mayor’s Race, but Other City Contests Bring the Heat BY MARA GAY New York City voters will cast their ballots for mayor on Tuesday, a race with little fanfare in which Democrat Bill de Blasio is expected to defeat Republican Nicole Malliotakis and several other challengers. Lower down on the ballot, other contests could be more competitive. The City Council’s 51 seats are up for a vote, as are all five borough-president seats, two district-attorney positions, and the roles of public advocate and comptroller. Many eyes are on the battle for an open City Council seat in the Bay Ridge area of Brooklyn. It is a fast-changing swath of the city where newer immigrants from the Middle East live alongside Italians and others, producing deep divisions over American politics from Mr. de Blasio to President Donald Trump. There hasn’t been any public polling in the race. Councilman Vincent Gentile, who holds the seat in the 43rd District, can’t seek re-election due to term limits. Justin Brannan, the Democrat in that race, is a longtime community activist who served for years as an aide to Mr. Gentile. He faces stiff competition from Republican John Quaglione, the press secretary and deputy chief of staff for State Sen. Marty Golden. Mr. Quaglione, 38 years old, 51 Seats on New York City Council, all of which are up for a vote has tried to make the race about Mr. Brannan’s ties to Mr. de Blasio, who is a polarizing figure in the district. Mr. Brannan, 39, worked for the Department of Education under the mayor, helping implement the city’s prekindergarten initiative. “He’s a de Blasio appointment,” Mr. Quaglione said of Mr. Brannan in a brief inter- view. He said quality of life has decreased under Mr. de Blasio. “We’re seeing people urinating in the streets here,” he said. Mr. Brannan has said that while quality of life is an issue, he didn’t believe Mr. Quaglione’s “apocalyptic” view of the area would resonate with voters. “The way that he talks about this district, I don’t know why he and his family would want to live here, much less represent the district,” Mr. Brannan said. “I’m not blind to the fact that some folks are suffering, but I think we’ve got a great community.” In another competitive City Council race, Councilwoman Elizabeth Crowley, a Democrat, is facing a tough challenge in central Queens from Robert Holden, a Democrat running on the Conservative, Republican, Reform and “Dump de Blasio” ballot lines. A central issue in Council District 30 is a homeless shelter that the de Blasio administration had hoped to put in the Maspeth area but scrapped amid local opposition. Mr. Holden has worked to tie Ms. Crowley to the shelter, which she also has opposed. Voters will also have a chance to weigh in on several statewide ballot initiatives. In Proposal 1, voters are being asked to decide whether to hold a constitutional convention to amend or rewrite the state constitution. Proposal 2 would allow a court to remove or reduce the pension of a public officer who has been convicted of certain felonies. Proposal 3 would make it easier for localities to use protected land in the state’s Adirondack and Catskill parks for limited kinds of development. Turnout is expected to be low, thanks in part to months of polling showing Mr. de Blasio leading Ms. Malliotakis, a state assemblywoman, by double digits. A NY1/Baruch College City Poll last week showed Mr. de Blasio with 49% of the support of likely voters, compared with Ms. Malliotakis’s 16%. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com A10B | Monday, November 6, 2017 NY THE WALL STREET JOURNAL. * * GREATER NEW YORK Office Landlords Sweeten Deals Nice Enough Just Isn’t Good Enough Owners of Midtown Manhattan trophy towers have ramped up the concessions they make to tenants to build out office space, often taking on the conPROPERTY struction work themselves and incorporating high-end touches in hopes of speeding up leasing and keeping rents up, according to market reports and real-estate executives. In the third quarter, the average tenant improvement allowance offered by landlords of top-tier Midtown buildings was $87.27 a square foot, almost triple the $30-a-squarefoot levels logged in 2008, just before the commercial real-estate market crashed, according to real estate services firm JLL. Midtown asking rents for trophy properties are $107 a square foot today, below the peak of $111 a square foot reached in 2008, according to JLL. One of the factors driving the tenant allowance increase is the demand for office space between 2,000 and 10,000 square feet that has already been built out and is ready for occupancy, said Cynthia Wasserberger, a JLL executive managing director. For tenants with plenty of options, that has translated TOBY ROBERTS BY KEIKO MORRIS Five years ago, Manhattan office landlords tended to build out smaller spaces just nice enough to attract tenants. Light-wood doors, inexpensive carpeting, dropped ceiling tiles and maybe a pantry with a microwave usually did the trick. Tenants today are expecting more. At 145 E. 57th St., owners ABS Partners Real Estate and Benenson Funding Corp. drew inspiration from luxury residential condominiums when designing the prebuilt office space on six floors, said John Brod, a partner at ABS. The $20 million improvement project includes large pantry spaces with oversize marble islands, Miele brand convection and microwave ovens, faucets for both sparkling and still water as well as ice makers. The owners spent an estimated $140 a square foot, he said. “There are a lot of prebuilts and they all look alike,” Mr. Brod said. “We specifically set out to build a better product.” At 601 Lexington Ave., Boston Properties Inc. created two prebuilt spaces on the top floors, creating large pantries with stone counter tops and installing high-end stainless steel appliances as well as marble floors in the reception area, according to the company. Landlords might be spending more now, but they figure their investment in high-end prebuilts will give them the flexibility to do shorter leases, serving multiple tenants leasing the same space over time, said Andy Levin, senior vice president at Boston Properties. —Keiko Morris Studley. Landlords have had to up their game, offering not just prebuilt, ready-to-occupy spaces but custom-built spaces at their expense. “Now the tenant is saying, ‘I don’t want to fit into your prebuilt space, I want you to build it to my specifications,’” Mr. Peck said. “So where a prebuilt space costs $100 a square foot, a new building installation can cost landlords $150 to $200 a square foot.” Landlords generally expect to benefit from leasing the space more quickly and at a higher rent, said Andy Levin, senior vice president at Boston Properties Inc., which has long offered prebuilt and customized office construction as part of its leasing strategy. Many tenants today opt to leave building and upfront costs to building owners. “Tenants prefer to focus on their business and leave the building of space and investment of capital in that space to landlords, if they are willing to do it,” Mr. Levin said. The office kitchen at 145 E. 57th St. in Manhattan includes a marble island and high-end appliances. into an expectation of upscale finishes such as marble floors or counters, and pantries with top-of-the-line appliances. “To attract tenants and remove the hurdle to relocating, which is the capital cost to build out space, landlords are continuing to build out space,” Ms. Wasserberger said. Landlord concessions at the top of the office market reflect the broader rise of concessions across all levels of office buildings. Building own- ers are offering longer freerent periods in addition to assuming the construction work and costs to create ready-tooccupy offices as well as customized build-outs, brokers and real-estate executives said. Rising construction costs also have pushed up the amounts landlords are spending so they can maintain or boost rents, they said. The amount Manhattan landlords spent on free rent and tenant allowances rose to $173 a square foot in the first GREATER NEW YORK WATCH Crushed on Home Turf CONNECTICUT AL BELLO/GETTY IMAGES High Court to Weigh Right to Put Up Signs TROUNCED: The Giants fell to 1-7 after being overpowered by the Rams in a 51-17 loss. Above, Sterling Shepard misses a pass. quarter of 2017, up almost 14% from $151.93 in 2015, according to real estate services firm Savills Studley. In the third quarter, the vacancy rate for Manhattan office space rose 0.1 percentage point from the previous year to 10.7%, according to Savills Studley. In addition, there is a large amount of so-called shadow space, or space that will be vacated in 18 months or more by relocating tenants, said Jeffrey Peck, executive managing director at Savills The Connecticut Supreme Court is set to hear arguments on whether a homeowner had the right to put up signs on her property criticizing a home contractor. Justices have scheduled a hearing for Tuesday in the case of Milford resident Eileen Arisian, who in the fall of 2010 put up signs saying she didn’t recommend the contractor and that the contractor was facing lawsuits. The city’s zoning enforcement officer said the signs violated local regulations and ordered Ms. Arisian to take them down. When she didn’t comply, the enforcement officer sued. A lower court ruled last year that while the city had authority to regulate advertising signs, Ms. Arisian’s weren’t advertising signs. The city is appealing that ruling. Ms. Arisian also says the signs are protected by free speech rights. —Associated Press NEW JERSEY Stabbing Suspect Charged With Murder A man accused in the stabbing death of a woman found slain behind a store at a vacant strip mall has been indicted on murder charges. Frank Walker III also faces two weapons counts in the indictment handed up by a Burlington County grand jury. The 41-year-old Wrightstown man remained jailed and it wasn’t known Sunday if he has re- tained an attorney. Mr. Walker is charged in the death of 29-year-old Diana Stillwell. She was found July 13 at the mall in Pemberton Township after a pedestrian reported hearing a woman scream. Prosecutors say the township resident suffered severe lacerations to her upper body and was pronounced dead at the scene. A motive for the attack hasn’t been disclosed. Mr. Walker was arrested about a month after the attack. —Associated Press WSJ TALK / E XPE RIE NCE / OFFER / GE TAWAY Atlantic Theater Company Production, photograph by Ahron R. Foster WSJ Masterpiece: ‘The Band’s Visit’ Join us as we welcome back our Masterpiece event series, with mezzanine and orchestra level seats to Broadway’s hit musical “The Band’s Visit.” After the play, WSJ Drama Critic Terry Teachout will take you behind the scenes for a private discussion with the show’s award-winning director, David Cromer, and cast members. WHERE: NEW YORK WHEN: DECEMBER 13, 2017 E XCLUSIVE TO WSJ MEMBER S BOOK NOW AT WS JPLUS .COM / THEBANDSVISIT © 2017 Dow Jones & Co., Inc. All rights reserved. 6DJ6059 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. LIFE&ARTS Monday, November 6, 2017 | A11 HOLIDAYS The Whenever Thanksgiving More Americans are celebrating Turkey Day earlier than the fourth week of November, citing cheaper travel and lower stress BY ANNE MARIE CHAKER gess, says. Ms. Jurgess did most of her grocery shopping the week before near her home in Tampa, Fla. Finding a frozen, 15-pound Butterball turkey at the grocery store was no problem. She made apple pie the night before and woke up early Saturday A recent survey found 16% of respondents indicating plans for an early Thanksgiving. morning to prepare the stuffing. The turkey went into the oven at 8:30 a.m. Then Ms. Jurgess sent her husband, Todd, to do a grocery run for fresh vegetables—asparagus, Brussels sprouts and green beans—and champagne for morning Mimosas. Their pleasant realization: The last-minute grocery errand was relatively peaceful. “It wasn’t like all the marshmallows were gone or all the cranberry jelly was gone,” Ms. Jurgess says. “If it had been Thanksgiving Day, they wouldn’t have had anything.” Ms. Jurgess FROM TOP: ILLUSTRATION BY MIKE GORMAN; LEIGH MENNINGER SOME FAMILIES LIKE their Thanksgiving meals over by sunset. Holly Salmons prefers earlier. Five days earlier. “There’s less competition for our time, and flights are cheaper,” explains Ms. Salmons, chief executive of the Longwood, Fla.-based Better Business Bureau of Central Florida and mother to 4-year-old Grayson. Thanks to the new date, Ms. Salmons says she was able to snag airfare to Knoxville, Tenn., for just $211 a person round trip, including a return from Chattanooga and extra charges for bags and seat selection. Thanksgiving, first celebrated in 1789 and falling on the fourth Thursday in November, is as wellknown for generating travel logjams as it is for roasted turkey. Enticed by cheaper travel, less competition for days off and greater availability of family members, more Americans are choosing the early-bird route and celebrating Thanksgiving some other time. Supermarket analysts say grocery stores have noticed more families planning early Thanksgivings, and are pitching Thanksgiving-related foods much earlier. Santa Monica, Calif.-based supermarket analyst Phil Lempert says as many as 75% of retailers are marketing Thanksgiving fare right after Halloween, compared with less than 5% three years ago. Some Thanksgiving foods may even be cheaper. “The price of a pumpkin pie two days before Thanksgiving will be higher than two weeks or a month before,” he says. In a recent survey of over 2,000 adults by Pittsburgh-based polling firm CivicScience, 16% of respondents indicated they are choosing to celebrate Thanksgiving early this year. Another 13% said they would be willing to move Thanksgiving to an earlier date in the future. Chief executive John Dick says more people are willing to sacrifice tradition to fit things more easily into their lives. The economic incentive to bust the Thanksgiving-on-Thursday tradition can be considerable. The busiest and most expensive departure day of the Thanksgiving period is the day before the holiday. Round-trip flights for itineraries starting on Nov. 22 average $344, according to Hopper, a mobile app that predicts and analyzes airfares. Traveling sometime the week of Nov. 12 lowers fares an average of 26%. Flights the week of Nov. 5 are 34% lower. Leigh Menninger, a 38-year-old stay-at-home mother in Gainesville, Fla., realized her family would be in the middle of a crosscountry move over Thanksgiving. So she and her two sisters decided the family would celebrate Thanksgiving on Saturday, Oct. 28, which Ms. Menninger marked on her calendar as “Fauxgiving.” Other than the date being a month early, the meal was traditional, her sister, Stephanie Jur- Stephanie and Todd Jurgess, at the back end of the table, celebrated Thanksgiving on Oct. 28 at their home in Tampa, Fla. says she would consider hosting an early Thanksgiving again in the future. Some families settle on a fall date when they happen to be in town at the same time. Stacee Silagi, a 37-year-old stay-at-home mom in Silver Spring, Md., is having her brother-in-law, Howie, and his girlfriend, Emily, over from San Diego for a week starting on the 14th. They will pick a day sometime that week to share a Thanksgiving meal. “They’ll probably want to go into D.C., and so we’ll work it around the touristy stuff,” she says. Ms. Silagi’s husband, Sandor, is a pilot who travels frequently but will be in town that week. She feels the actual date doesn’t matter. “It’s about being with your family and feeling grateful for your lives,” she says. On actual Thanksgiving, she is planning a low-key day with her husband and three children Eva, 4, Juniper, 2, and Hazel, 6 months. “We’ll just throw some things in the crockpot, go to the park, read books and do art projects,” she says. While the rest of the world is scrambling, she says, “it’s nice to have a holiday where we don’t really have an agenda.” BOOKS HOW ALEC BALDWIN TRANSLATES TRUMP NBC BY ELLEN GAMERMAN A fictional memoir written in the voice of Donald J. Trump features 204 exclamation points, nine uses of “trust me,” five instances of “look it up,” 133 cases of “really” (including five “really, really” and two “really, really, really”). That’s all in the book, okay? (“Okay?” appears rhetorically 14 times.) “You Can’t Spell America Without Me,” a satire by actor Alec Baldwin and journalist Kurt Andersen due out Tuesday, doubles as a dictionary for the commander-inchief’s singular brand of language. Its authors, both Trump critics, are students of his speech—Mr. Baldwin for his impersonations that roast the president on “Saturday Night Live” and Mr. Andersen for the Trump lexicon he compiled to help create the book. The parody, largely written by Mr. Andersen, required both au- thors to channel the president’s voice. Each had their own method of doing so. “It’s just like, stick out your mouth as hard as you can, eyebrow up, masticate—chew the person across from you. I’m chewing you,” Mr. Baldwin says, demonstrating his technique in a recent interview. Mr. Andersen’s approach was more academic. He pored over unedited transcripts of Mr. Trump’s news interviews. “That allowed the kind of full-on, naked view of how his mind works and how he uses language,” Mr. Andersen says, comparing his Trump language guide to “those short-form English-foreign language dictionaries that people take on vacation.” Searching a digital copy of the parody yields a linguistic scorecard where “fantastic” beats “amazing,” 72 mentions to 46, but “great” trounces both, at 136. “Tough” bests “strong,” 45 to 32. That’s not counting “toughness,” Please see BALDWIN page A12 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. A12 | Monday, November 6, 2017 LIFE & ARTS WHAT’S YOUR WORKOUT? Her First Fitness Rule: Keep Moving ‘CBS This Morning’ co-anchor Norah O’Donnell pushes herself for a full 75 minutes in a workout similar to HIIT near the end of the workout, like moving from a machine that mimics difficult snow skiing to waving battle ropes. The last moves, like lying on her back, hips lifted with a focus on the back of the body, are designed to fine-tune the target muscles. Ms. O’Donnell dislikes the slow pace of these “finishers,” and her tolerance for them depends on the day. She tries to work out at least two other times during the week, going on longer runs in Central Park or the Capital Crescent Trail in Washington. Or she’ll follow at least 3 miles on the treadmill with a collection of moves Ms. Stokes taught her. She recently used time on the treadmill to catch up on “Game of Thrones.” “Every time there was a battle scene I just ramped up,” she says. She often plays what she calls “cardio tennis” on the weekends, hitting with a ball machine. She and her husband golf together whenever they get the chance. “We carry the bag and walk,” she says. BY ERIN GEIGER SMITH As co-host of “CBS This Morning,” Norah O’Donnell wakes up well before dawn. She credits her fitness regimen for giving her the stamina to make it through workdays that regularly stretch well into the evening. The workouts also offer a little midday fun, even if the sessions are regularly 75 break-free minutes. The nonstop nature, she says, keeps her heart rate up and doesn’t allow her focus to shift. Plus, she says, “It also doesn’t allow me to think about quitting!” The core of Ms. O’Donnell’s regimen: twice-a-week sessions with Kira Stokes, creator of full-body workouts with circuits that work a particular muscle group several different ways. It differs from popular high-intensity interval training, or HIIT, routines, Ms. Stokes says, because there are no intervals. Each move and circuit is designed to flow directly into the next. Ms. Stokes either explains the next move while Ms. O’Donnell is finishing up the last one or is jumping rope between circuits. Ms. O’Donnell, 43, has worked with Ms. Stokes for more than four years, and says the all-around focus helps her do what she wants to do elsewhere, both in her job and her life. It also helps keep her prepared for the unexpected, like reporting from Houston following Hurricane Harvey. “I can go four days working 16-hour days and stand for six hours straight and not come home with a pulled back muscle,” she says. Sometimes the surprise assignments are more fun than serious. When her producers asked if she could hit balls with pro golfer Rory McIlroy, she felt confident saying yes. ‘CBS This Morning’ co-anchor Norah O’Donnell’s nonstop 75-minute workout is designed by her longtime trainer Kira Stokes. They incorporate a variety of body-weight exercises, using TRX straps, above. Nearly all of Ms. O’Donnell’s exercises include a focus on core strength, even those involving primarily lower body movement. The Diet Ms. O’Donnell has the same thing for breakfast every day before her show—a nonfat Fage yogurt with flax seeds and blueberries. On a five-minute break at 8 a.m., she has fruit, including green apple and banana. When her show ends an hour or so later, she might have a small fruit muffin the show keeps around. Lunch is usually lentil soup or a spinach salad. A recent dinner she made for her three preteen children included rice, broccoli, and chicken thighs. Of the thighs, she says, “a little fat in your life” is a good thing. She often has a glass of white wine, but will skip it if she’s overly tired or had a couple of glasses at a work event the night before. The Gear BALDWIN Continued from page A11 “tougher” and “toughest.” “Loser” comes in at 13. Mr. Andersen’s lexicon, which he didn’t include in the volume, is a roughly 12-page list of nouns, verbs, adjectives, positive adverbs, negative adverbs, phrases, constructions and recurring themes the co-author identified in the president’s speech. Mr. Andersen, who is also a novelist, says he was struck by the president’s references, especially earlier on, to his late uncle, a professor at the Massachusetts Institute of Technology. At a July 2015 campaign stop in Sun City, S.C., Mr. Trump said, “My uncle was a great professor and scientist and engineer, Dr. John Trump at MIT. Good genes, very good genes, OK? Very smart, the Wharton School of Finance, very good, very smart.” Nuances of the president’s language at times surprised Mr. Andersen. “He’s famously full-throttle hyperbolic, of course, but he occasionally struggles on the fly to hedge, to try to stay tethered to reality,” he wrote in an email. He cites wiggle language Mr. Trump has used publicly, such as “we probably maybe” and, when the president was describing when a replacement system would be enacted after repealing the Affordable Care Act, the phrase, “most likely be on the same day or the same week, but probably the same day, could be the same hour.” Another verbal tic: the word “the” popping up unexpectedly. “I hadn’t realized quite how often he uses the definite article when none is necessary or appropriate of a compound strength move, a jump-based or power-focused exercise, a core-focused exercise and mobility movement. Ms. O’Donnell might hold TRX straps while in a squat position and jump to tap her feet or, on all fours, thread one arm under the other and pull a 15-pound sandbag through while extending her opposite leg. She does another cardio burn Ms. O’Donnell is also a creature of habit when it comes to her workout clothes, favoring Lululemon crop pants and racerback tanks. She wears Brooks Levitate sneakers. Her home gym in Washington includes a Woodway treadmill, which she bought used online, and TRX straps. The Playlist “I’m very proud of my music choices,” she says, flipping through different lists she’s created for vacations, the Brooklyn half-marathon and annual running lists. Her 2017 lists includes “Your Song” by Rita Ora, “24K Magic” by Bruno Mars, and “Believe” by Mumford and Sons. in English,” Mr. Andersen wrote in the email. The president’s reference to “the cyber” is one that has gotten media attention, along with “the Latinos,” “the women” and “the gays.” Georgetown University linguist Jennifer Sclafani, author of the 2017 book “Talking Donald Trump,” studied the president’s speech for two years. She notes his preference for “direct, unmiti- Kurt Andersen noted Mr. Trump’s tendency to use ‘the’ ahead of words that don’t need it. gated and personal” wording: “He speaks about trade deals as ‘horrible.’ ” Attempts to reach a White House spokesperson were unsuccessful. The parody came together quickly. Mr. Baldwin called Mr. Andersen earlier this year with an idea for a Trump book. The two public-radio hosts—Mr. Andersen with “Studio 360” and Mr. Baldwin with “Here’s the Thing”—decided to write a comic memoir that would include photographs of Mr. Baldwin in character. The authors do not spare themselves. Writing as Mr. Trump, they bring up a humiliating public episode for Mr. Baldwin, calling him “the hater Alec ‘Phone Message’ Baldwin.” It’s a reference to Mr. Baldwin’s tirade on his daughter’s voice mail that exploded in the tabloids a decade ago. “That was my idea,” Mr. Baldwin says. “Of course Trump would say that about me.” MARY ELLEN MATTHEWS Ms. O’Donnell works out with Ms. Stokes early afternoons in New York. (She splits her time between there and Washington, D.C.) They begin with active stretches, like a yoga-style ballerina pose for balance. With bands around her ankles, she does quick in-and-out steps, keeping her core engaged, a move that stabilizes her back and helps her maintain good posture, a career necessity. She follows with a cardio circuit, doing at least two rounds of about five moves, including running backward, for 60 to 90 seconds each. The heart of the workout is four to six circuits, completed three times. Each circuit usually consists ADRIENNE GRUNWALD FOR THE WALL STREET JOURNAL The Workout Journalist Kurt Andersen, left, and actor Alec Baldwin, right, wrote the book as a fictional memoir. Baldwin Weighs In on Harvey Weinstein In a recent interview, actor Alec Baldwin couldn't avoid the topic engulfing Hollywood: the sexual-misconduct scandals involving movie mogul Harvey Weinstein and others. “There was a pool of gas on the ground,” he says, referring to the frustration and anger among sexual-harassment victims in the film industry. “It’s interesting to me how the match that was struck was struck on Harvey. If Harvey wasn’t so unlikable, would it have had the velocity that it has and the inten- sity? I think what enabled this was Harvey was somebody that many people, not myself, but many people were just itching to bring down.” A spokeswoman for Mr. Weinstein declined to comment. Mr. Weinstein has denied all allegations of non-consensual sex, and, when the scandal broke, issued an apology for past behavior that he said “caused a lot of pain” to colleagues. Mr. Baldwin, 59, says these stories have prompted him to examine his own past behavior. “I’ve been in rooms where the woman talked and we were like, ‘Yeah, yeah, that’s great, now let the man do the talking,’ ” he said. “The shots were always called by a man. I have been guilty of playing into that, where women’s opinions and women’s analysis and women’s participation and contributions are slightly less than men’s. I don’t think I do that much now, but in the past.” Mr. Baldwin added: “I don’t have any sexual-assault charges. I have none of that in my past, that I’m clear on. But it doesn’t change the fact that I need to improve.” —Ellen Gamerman For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 6, 2017 | A13 KARIM BEN KHELIFA (2) LIFE & ARTS Combatant Abu Khaled, Palestine, Popular Front for the Liberation of Palestine and Combatant Gilad, Israel, Israeli Defense Forces EXHIBITION REVIEW Facing Down Conflict Can an immersive virtual-reality project engender empathy and end violence? BY EDWARD ROTHSTEIN Cambridge, Mass. ABU KHALED’S eyes follow me as I approach. He is dressed to kill, his face hidden by a ski mask. He is “at ease”—in military fashion— and I am wary. He is a fighter for the Popular Front for the Liberation of Pales- tine. His headband bears an insignia with two rifles flanking a star—an allusion to the PFLP’s Marxist-Leninist roots? He has agreed to be interviewed, but I am not the one asking questions (and they are not questions I would ask). The questioner is the photographer Karim Ben Khelifa, who has choreographed this event. He is heard, but not seen. Khaled answers in Arabic and I hear simultaneous translation. But this is dialogue with a 3-D wraith. Though Abu Khaled seems to appear in the flesh, he is a digital illusion, created by scanning the actual fighter with multiple cameras when Mr. Khelifa interviewed him for this theater piece/interactive exhibition/ technological exploration/social experiment called “The Enemy,” which has already had some international exposure and is now at the MIT Museum. So vivid is Khaled’s interactive presence that when he begins to leave and I suddenly move, he momentarily seems to leap at me; I jump in alarm. But there are more ene- mies to be met. Near the opposite wall stands Gilad, a reservist in the Israel Defense Forces; he is Khaled’s enemy, as Khaled is his. He speaks without a ski mask. In the adjacent gallery two other men are enemies in Congo, where there have been five million deaths since 1994. And in a third gallery are two fearsomely tattooed, bare-chested members of rival gangs whose warfare has steeped El Salvador in blood, achieving what we hear are 37 murders a day. Who is your enemy? Mr. Khelifa’s voice asks each. Have you ever killed? What is violence? What is peace? What gives you joy? Many answers are similar. And when I have heard them all and I walk through an exit passage, I reach up and remove the enormous headset that sits over my eyes, along with a large PC backpack. The enemies disappear. So do the brightly lighted galleries through which I have seemingly walked. Now I see a large almost empty space in the museum. Other figures in virtual-reality gear blindly walk about or peer ahead into their headgear, presumably seeing what I saw. Mr. Khelifa, whose father was Tunisian and mother Belgian, is a photojournalist who spent considerable time in war zones. He gave up his vocation after having a child, but not, in his account, his dream of ending war. This project began as a photo exhibition, but after a residency at MIT beginning in 2013 it was reconceived with D. Fox Harrell, a professor of digital media and AI and director of MIT’s Imagination, Computation and Expression Laboratory. The virtual figures they created are uncanny, though not yet versatile enough to react to unscripted questions like Alexa and Cortana. But the technology created a discomfiting intimacy, leaving me uneasy. Was it the realism? I had stood near a man who described his parent’s gruesome murder in Congo, their heads split, their brains splattering on him as a child. Somehow, too, hearing the ruthless Salvadoran gangster in the “flesh,” I felt sympathy for his wrecked and wracked childhood. That was the point. Mr. Khelifa wants to turn the invisible enemy into a visible human being. This, he suggests, will lead to feelings of empathy. Once you really see the enemy, he can no longer be an enemy. And then, why fight? He plans to bring this piece directly into war-torn societies. Alas, empathy has its limits; for one, it doesn’t encourage analysis. How might one know, for example, that Khaled’s stated compromise with Israel and his insistence that the PFLP’s tactics do not constitute “violence” do not quite gibe with the group’s 2001 murder of an Israeli government minister or its 2014 hacking to death of Jewish worshippers? Would empathy be the best way for Israelis to welcome the PFLP and its more powerful allied groups? As for the suffering of Salvadoran gang members, would empathy lead them to mitigate their (tactfully undescribed) brutality? The questions Mr. Khelifa asks are also designed to minimize distinctions. Nearly every fighter gets joy from his children and wishes there were peace. Every conflict is called a “cycle of violence.” History doesn’t matter. Do we understand Congo any more from the empathy we feel for these two individuals? Once history and analysis are supplanted by empathy, everything becomes sentimental. I understand Mr. Khelifa’s desire. It haunts much journalism: Begin with a case history about individual suffering, thus harnessing empathy for a championed cause. But here, in this wellpackaged presentation of virtual reality, empathy actually inspires virtual unreality. The Enemy MIT Museum, through Dec. 31 Mr. Rothstein is the Journal’s Critic at Large. KEN HOWARD/METROPOLITAN OPERA John Tomlinson, Frédéric Antoun, Christian Van Horn, Audrey Luna, David Adam Moore, Alice Coote, Rod Gilfry and Christine Rice OPERA REVIEW CHAOS AT A DINNER PARTY BY HEIDI WALESON ‘THE Exterminating Angel” (2016), which recently had its American premiere at the Metropolitan Opera, is based on the surreal 1962 film by Luis Buñuel, which Thomas Adès’s kaleidoscopic music transforms into a scarily contemporary comedy, a kind of modern “Falstaff” in which the cosmic joke is on everyone. A group of aristocrats at a fancy post-opera dinner party find themselves mysteriously unable to leave at the end of the evening. Deprived of the structures and comforts that sustain their privileged existence, they quickly descend into a feral state. In the black-and-white film, the many characters and often deadpan acting had a distancing effect. In the opera—its libretto adapted from the screenplay by Tom Cairns, who also directed—there is plenty of color, not least from designer Hildegard Bechtler’s splendid midcentury haute-couture-inspired evening wear; six of the party guests have been eliminated; and the emotions are—sorry—operatic in a way that sweeps the audience along. The erosion of civilization is swift, and in the end we recognize that we are all ferrets in a box. Mr. Adès’s music communicates this breakdown with a sly mix of humor and bludgeoning force. In Act I, the formalities of aristocratic life are musically evoked with measured rhythms and familiar forms, like waltzes, but they barely hold their own against a vortex of harmonic and metric uncertainty that immediately starts pulling them off course. A striking clock and the electronic whoops of the ondes Martenot are the more overt tropes of horror; in the interlude between Acts I and II, assaultive horns and pounding drums get louder and louder as they repeat a motif. This repetition will infect the characters—the even rhythms that once signified civilization morph into obsessive tics and brute hysteria. Toward the end, a witchy incantation demanding human sacrifice is sung in tandem with a snippet of a requiem Mass. Mr. Adès’s conducting welded these elements into a creepily coherent whole. And yet, the opera is almost always funny, thanks to the streamlined text, vocal writing that makes the characters distinct, and a virtuoso cast. In a brief aria, the countertenor Iestyn Davies, as the petulant Francisco, declares, “There are no coffee spoons….I can’t stir my coffee with a teaspoon.” Three women sing of a hallucination they all had in the makeshift lavatory. The temperamental and exceptional nature of the opera singer, Leticia (the remarkable Audrey Luna), is expressed through an excruciatingly high tessitura and jagged vocal line. As the chaos mounts, young lovers, given sensual presence by tenor David Portillo and soprano Sophie Bevan, sing a series of increasingly erotic and hypnotic duets. Other singers find great poignancy in the absurdity. They include the gruff bass John Tomlinson as the doctor who tries to keep order as the men square off and look for scapegoats, and the luminous mezzo Alice Coote, as Leonora, his elderly patient, who appears to lose her mind in her own hallucinatory aria. Surreal touches of the film were heightened: Three sheep arrived, were butchered and devoured—and in the opera, Silvia (Sally Matthews) cradled one of their severed heads as she sang a lullaby to her absent son. Ms. Bechtler’s ingenious set, dominated by an enormous wooden doorframe, moved so subtly that you barely registered the changes until they were complete. Aided by the careful lighting of Jon Clark and potent projections by Tal Yarden, Mr. Cairns ably balanced the torments of individuals and the madness of the group. Ms. Waleson writes about opera for the Journal. Fit for the Tsar Fabergé Silver Flatware Fabergé artistry. Incredible rarity. Flawless design. This complete 197-piece parcel-gilt silver flatware service for 24 is arguably one of the finest sets of silver Fabergé ever created. Since many Fabergé silver creations were destroyed during the Russian Revolution, this is truly a remarkable opportunity to own an important treasure by one of the world’s most legendary craftsmen. Housed in its custom-fitted oak chest. Hallmarked Moscow, 1899-1908. 251/4”w x 177/8”d x 131/4”h. #30-6562 630 Royal Street, New Orleans, Louisiana • 888-867-9583 • email@example.com • rauantiques.com Since 1912, M.S. Rau Antiques has specialized in the world’s finest art, antiques and jewelry. Backed by our unprecedented 125% Guarantee, we stand behind each and every piece. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. A14 | Monday, November 6, 2017 SETH WENIG/ASSOCIATED PRESS FROM LEFT: JACK DEMPSEY/INVISION/ASSOCIATED PRESS; ROBERT DEUTSCH/REUTERS SPORTS Shalane Flanagan at the finish line. NYC MARATHON Winning Run for Flanagan in New York Left, Papa John’s founder John Schnatter. Right, New York Giants quarterback Eli Manning reacts during a 51-17 loss to the Los Angeles Rams on Sunday. BY SARA GERMANO NEW YORK—Shalane Flanagan approached Sunday’s New York City Marathon as if it would be her last race. She has an Olympic silver medal on the track and some 16 U.S. national titles, but the 36year-old, on the waning years of her career, was still searching for that major marathon title. “If I need to break a leg in the race in order to win,” she said this week, “I will do anything I can.” If it sounded desperate, perhaps it was because so many American women have been desperate—and unsuccessful—to win here for four decades. No U.S. woman had won the New York City Marathon since Miki Gorman in 1977. Until Sunday. Until Flanagan methodically dismantled the overwhelming favorite, three-time defending champion Mary Keitany of Kenya over the final Manhattan miles, breaking into a grin and then tears as she crossed the finish-line tape in 2 hours, 26 minutes and 53 seconds—no broken leg required. “I’ve dreamed of a moment like this since I was a little girl,” said Flanagan, draped in the American flag and wiping away tears. Keitany, 35, took silver in 2:27:54 while Mamitu Daska of Ethiopia claimed bronze in 2:28:08. Sunday’s win for Flanagan was the first major marathon win by an American woman since 2006, and the first overall American win since Meb Keflezighi’s men’s title in 2009. Keflezighi, finished his 26th and final career marathon here in 11th place. The men’s professional race was won by Geoffrey Kamworor of Kenya in one of the closest finishes ever. The 24-year-old won his first major marathon title in 2:10:53, just two seconds ahead of compatriot Wilson Kipsang and nearly a minute ahead of bronze medalist Lelisa Desisa of Ethiopia. FOOTBALL | By Jason Gay The NFL’s Pizza War A skirmish over food delivery is the latest bizarre twist in a surreal football season Baseball’s packed up its cleats and champagne goggles, and now we’re left with NFL football, snoring on the couch—a sketchy cousin with a murky future but no plans to leave until February. Even if you’re not watching, you know it’s been a bizarro season for the NFL: continued protests, presidential tweets, boycott threats, ratings rockiness, ownership skirmishes, concussion worries, season-ending injuries to superstar players, Roger Goodell’s spouse schooling media dingbats like me on Twitter, and now, naturally… A PIZZA WAR. Last week, the Papa John’s pizza outfit let the country know it blamed some of its sales sluggishness on the NFL and the league’s inability to find a resolution to its pregame protest controversy. What? It’s strange enough that the New York Giants are 1-7 and half of the league is ignoring Colin Kaepernick and scouring for quarterbacks on Craigslist. Now America isn’t ordering enough middling chain pizza? It’s an outrage! It got even more delicious when Papa John’s nemeses started mirthfully piling on. Both Pizza Hut and DiGiorno tweaked PaJo by announcing they haven’t suffered sales losses as a result of the NFL. Zing! That’s two slices with extra cheese! Truth: I really don’t need to see another NFL game this year if pizza companies treat us to a weekly Pizza Riot. Still, I tried to do my part for the piqued Papa on Sunday, ordering one of his “Works Pizzas” which included pepperoni, Canadian bacon, sausage, onions, green peppers, mushrooms and black olives. I asked them to add sea urchin, red squirrel, rhinoceros horn, shredded pages of The Fountainhead and a jumbo Sugar Daddy, but they were fresh out of those toppings. It took under 40 minutes to arrive, and it cost about $982 less than an iPhone X. But no pizza was going to make much of a difference this NFL weekend. Only two games the entire week matched up a pair of teams with records over .500. Two! It was mostly a day of uninspired or one-sided mush, like the Rams giving the Giants a 51-17 wedgie at a soggy MetLife Stadium. This is a problem. Last week, the Journal reported that TV execs think the main reason behind the NFL’s ratings torpor is overexposure. They acknowledge that some viewers are indeed turning away because of the player protests— but the broader belief is that gimmicks like Red Zone, breakfast football from London and Thursday Night Football have stretched the product thin. That’s probably fair. After all, it’s a better idea to take your cat to the movies instead of watching Thursday Night Football. And I’d rather come over to your house and rake the leaves than watch a London game. I don’t think saturation is entirely to blame, however. If the games were routinely great, or just competitive, you wouldn’t have much of a problem. But there’s too much of the mush: lethargic game planning, inept offenses, and a whoolllllle lot of punts. Meanwhile, it feels like there are only about six or seven people on the planet who can do a better than adequate job of quarterbacking a professional football club. Tom Brady literally seems to be a different species, and he’s 92 years old. That avocado ice cream must be a wonder. The other day, the Houston Texans lost Deshaun Watson—a rare quarterback sensation, easily the game’s most exciting rookie—to a knee injury in practice. It’s as if someone in the NFL league office is walking under ladders. I don’t want to be a killjoy. There are definitely some upbeat NFL stories. In Philadelphia—a city well known for its cheery sports optimism—the Eagles are 8-1 and cruising atop the NFC East. It’s truly strange, not hearing Eagles fans yelling angrily about the Eagles. The aforementioned Rams have a good story to tell, even if Los Angeles still needs to wake up to it. Minnesota Vikings are 6-2, with a shot of playing the Super Bowl at home. The Browns had a bye this weekend and didn’t lose. (I know you think I’m being extra snarky this week because Wisconsin is now 9-0 and the last undefeated team in the Big Ten and we’re still going to get passed over for a top four playoff slot because all the fancy college football blowhards think we only play high schools and donkey basketball teams. To which I say: it is annoying, but it’s still early November, and I look forward to stuffing my sweaty Bucky Badger socks under everyone’s nose in January.) And the pizza? Yes, my Papa John’s! I live in Brooklyn, which is probably the pizza snob capital of America—there are pizza parlors around here harder to crack than nightclubs, and I almost asked the delivery guy to deliver the PJ in an unmarked paper bag—but I’m in the shameless there’s-no-suchthing-as-bad-pizza crowd. I’ll get a slice at the airport, a hospital, or even that gas station with one slice under a heat lamp that may have been there since the Clash were together. That said, here’s my official, one-sentence review: The pizza—and the NFL—have some work to do. The WSJ Daily Crossword | Edited by Mike Shenk Weather Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day. <0 d t Edmonton V Vancouver 0s Calgary 20s Portland P tl d Eugene 30s 10s ip Winnipeg Seattle Helena 20s 30s 10s Billings g Ottawa Bismarckk 30s Montreal A g t Augusta Boise T t Toronto Pau Mpls./St.. 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As suggested by in various ways “Home Alone” reject the answer BOTH SIDES NOW, the contest answer 1 13 can be found in the letters that are identical on both the left and right sides of the grid. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 6, 2017 | A15 OPINION The Future Is Dodgeball The past may be a Shakespearean prologue, but the future is dodgeball. Ben Rosen, INSIDE chairman of VIEW Compaq ComBy Andy puter Corp. Kessler and an early investor in Lotus Development, was the semiconductor analyst at Morgan Stanley eight years before me. In the late ’80s an embarrassingly lame online service named Prodigy was state-of-the-art, but I had visions of a multimedia world with text, pictures and eventually videos delivered through vast networks. Crazy, right? I asked Morgan Stanley’s uber-strategist, Barton Biggs, for advice, and he suggested we have lunch with Ben Rosen. I was all of 30 and way out of my league, but we still trucked over to the Pan Am Building for a New York power lunch. I explained this multimedia thing. Mr. Rosen waved his hand and said in the nicest way, “I really don’t know anything about that.” I looked at Biggs, gulped, and asked Mr. Rosen for advice in general. He told me about building his venture-capital firm and running into investors on Sixth Avenue. Then he rambled on about getting in the middle of things at events, conferences and seminars. He said that at first nothing will make sense and all these balls will be flying across the room out of your reach. But eventually you’ll find yourself in the middle of the room and balls will start hitting you. Then you’ll know you’re inside. As we walked out the door, I remember thinking, “That’s it? Gee, thanks for nothing.” Biggs agreed it was a waste of time. Turns out it was the best advice I would ever receive. The thing about the future is that, as William Goldman wrote about screenwriting, “Nobody knows anything.” Everyone is an outsider, and it’s all up for grabs. Someone might have an opinion, but there are few facts. What you need are your own opinions about where the world is headed in any given industry: artificial intelligence, gene editing, autonomous trucks, marine salvage—whatever. You need to go to places where the future is discussed. Every industry has these events. Make the time to go. And not only to hear keynoters billow hot air, but for the panel discussions where people disagree. The conversation spills out into the hallways between talks. There will be all sorts. The smug ponytailed guy who talks about his Phish tribute band and insists he knows everything. The woman you see at every event but only in the hallways chatting and who never makes eye contact to let you into a conversation. Barge in anyway. Remember, there are no facts, only opinions. Walk up and talk to people. Ask what they do. They’re there because they want to learn something too. They will all ask you what you To understand what’s coming, let some of those balls whizzing by start to hit you. think. Come up with something fast, but don’t be too stubborn to change what you think as you learn more. During the personal-computer era I saw a guy, whom Bill Gates had just introduced, standing by himself after showcasing the first truly high-resolution videogame. I chatted him up and he has been a friend for life, showing me not only where technology is headed but the path it takes. It’s not classic networking but a network of ideas. The goal is finding a new way to think, to filter news over time as the future takes shape in fits and starts. It never happens in a straight line. Hydraulic fracturing has been around and argued about since 1947. Anyone had a chance to study this future of unlocking natural gas and make a fortune. Same for artificial intelligence in 1956, ecommerce in 1979 and quantum computing in 1982. The future doesn’t happen overnight. You just need to get inside it and let some of those balls whizzing by start to hit you. And you’ve got to do this in person. Most issues don’t show up online, let alone on Facebook or Twitter. It’s tough as a writer to admit that subtle nuances sometimes require face-to-face conversation. It doesn’t matter if you’re 25, 45 or 65. The industry you pick to work in has more of a say in your success than your job description. Same for giving money away. If you want to fund Alzheimer’s research, you better find yourself at wonky conferences going toeto-toe with doctors. Eventually, you’ll know more. I met Jeff Bezos at a tech conference about a decade ago and mentioned that I had just self-published a book and used his Amazon Advantage program to sell it. He proceeded to grill me like a steak, asking what was wrong with it and what features he should add. I’m convinced he keeps winning because he enjoys being hit with dodgeballs. He famously left New York a retailing outsider with an idea to sell books. Balls whizzed by until they hit. He now has the ultimate inside view. The Latin Left Hijacks Human Rights An effort by the Organization of American States’ Inter-American Commission Human AMERICAS on Rights to patch By Mary old political Anastasia hatreds got off O’Grady to a bad start in Montevideo, Uruguay, two weeks ago. The commission deserves most of the blame. What it calls a “memory, truth and justice” curriculum for 2018-19 is an attempt to recall, recognize and record human-rights violations and reconcile societies. But what transpired in Montevideo demonstrates how despised truthseekers can be among the Latin American left, which has hijacked the term “human rights” for its own political purposes. The event brought some 250 rights advocates together at the Four Points Sheraton hotel for a public consultation on the curriculum. That representatives of the Venezuelan Marxist dictatorship were present gives you some idea of the leftist tilt. But there were also six Argentines— lawyers and representatives— from two human-rights groups dedicated to equality under the law and due process. María Elena García is president of the Collective for the Defense of the Human Rights of Persons Deprived of Freedom and Access to Justice in Argentina. The organization works to secure due process and humanitarian treatment for Argentines who fought guerrilla terrorism and are imprisoned in violation of their civil liberties. She told me in an email that when her colleague Guillermo Fanego rose to speak about the importance of “complete” memory—that is, recognizing victims on both sides of a conflict—he was shouted down. The Argentine daily La Nación confirmed that account. In an editorial on Oct. 27 it described the assaults against the Argentines as “loud boos, insults, threats and shoving, which generated an unfortunate climate of violence and intolerance.” Ms. García told me that the moderator, commission executive secretary Paulo Abrão, was complicit in his silence during the uproar. Later, she told me, he announced that the curriculum will deal only with abuses committed by states. This, Ms. García noted, is “in clear contradiction to the postulates” of the commission. Another witness noted that the Venezuelan Marxists were not cut off when they accused civilians in their country of human-rights crimes. Moreover, Mr. Abrão did not intervene when a Chilean called for a show of hands to expel the Argentines from the meeting, which is what transpired. Commissioner Paulo Vannuchi gave shout-outs to leftist groups, according to participant María Werlau, executive director of the U.S.-based nongovernmental Cuba Archive. She told me in an email that Mr. Vannuchi also spoke about the honor he felt at attending a recent memorial event for Che Guevara in Bolivia. While there, he said, he complained to the government about its failure to form a “truth commission” to investigate the Guevara’s death and had offered technical assistance from the commission to do it. This was strange coming from a human-rights advocate, Ms. Werlau noted in her email, given that Guevara’s own writings endorsed “killing, hatred, violence, repression, racism and homophobia.” Cuba Archive has documented 98 extrajudicial executions directly ordered by Guevara after Fidel Castro took power in 1959. The Inter-American Commission meeting was about revenge, not reconciliation. On Friday consultant Renata Barreto Preturlan at the Human Rights Commission answered my request for comment. She described the Argentines as “representatives and relatives of military officials condemned for or accused of human rights violations during the Argentine dictatorship.” This is certainly not an accurate description of Ms. García’s group. Its emphasis on “complete” memory is a plea to clarify the country’s history leading up to and during the military dictatorship because thousands of victims of guerrilla terrorism from that period have been denied justice. It works to restore the rights of many Argentines—not only military— who were rounded up during the hard-left Kirchner governments (2003-15) and imprisoned without proof of a crime but merely because they opposed the terrorists years ago. Ms. Barreto claimed that the Argentines “spoke on the same terms as the other participants,” which is patently false because no other participants were shouted down and expelled. Ms. Barreto explained the expulsion on grounds that the Argentines had objected to being segregated into a specially designated breakout group. This generated “a reaction on the part of the participants themselves.” The implication being that the Argentines were not proper participants. In fact the prearranged breakout groups had innocuous nonpolitical titles like “memory politics,” “archives and access to information” and “justice and the struggle against impunity.” Banishing the Argentines was an act of blatant discrimination. Ms. Barreto closed her response by noting that the commission “is not responsible for the attitudes of third parties in its activities.” Yet surely it has a role in protecting minority viewpoints and defending the rights of all to speak and engage in the process. Judging from this first meeting, it looks as if its work has already been compromised by the left and will turn out to be more about revenge than reconciliation. Write to O’Grady@wsj.com. An EU Plan to Invade U.S. Markets By J. Christopher Giancarlo T here’s been much worry about the impact of Brexit on British and European banking and capital markets. It may seem that U.S. markets are protected from that uncertainty, but they aren’t. If the European Union mishandles Britain’s exit, the consequences for U.S. businesses and consumers could be serious. Brexit will put London’s financial markets outside the European regulatory umbrella. As a result, the European Commission has proposed authorizing regulation of financial entities outside the EU by the European Central Bank and the European Securities and Markets Authority, the EU’s markets watchdog. The proposal would reach far beyond London. It would subject key U.S. financial institutions to European law and regulation— even when they serve U.S. customers. One proposal would empower ESMA to demand onsite inspections of U.S. businesses such as the Chicago Mercantile Exchange without informing its primary regulator, the U.S. Commodity Futures Trading Commission. In response to Brexit, Brussels looks to expand its reach. Another proposal would enable the ECB to impose additional regulations on those same U.S. businesses—again without informing or consulting the CFTC. Such overlapping and uncoordinated regulation by the EU would be disruptive, expensive and detrimental to the U.S. trading markets and economy. Imagine a football game with two quarterbacks on the field vying for control of the ball. These proposals have the potential to affect the availability of food in American grocery stores, the cost of home heating, and mortgage interest rates. Farmers and ranchers could experience cost increases to manage the risks of their businesses from unpredictable weather to fluctuating prices in livestock feed. Without firm, exact and clear limits on their application to American businesses, these European proposals could dry up the capital necessary for growth and job creation. The CFTC, of which I am chairman, is focused on ensuring that American financial markets thrive and are well-regulated. That cannot be done if the EU secondguesses American markets and how businesses operate— taking partial control of the American economy, or worse, letting the Europeans call the plays. The solution to sluggish growth and stagnant wages is vibrant global markets for investment, not uncoordinated and overlapping regulation. If the U.S. accepts European regulation of American financial companies, it would set a dangerous precedent—potentially opening the door to all manner of other interference. The European Union favors a highly prescriptive and rulesbased approach to financial market supervision in contrast to the U.S. principles-based approach. Undoubtedly Brexit raises challenging issues for the EU’s regulation of its financial markets. Here in America we have seen how burdensome economic regulation has thwarted the revival of broad-based prosperity. The American people have rejected that approach and demanded that financial markets contribute to economic recovery. The last thing Americans want is to have overseas regulators impose European costs and regulatory burdens on the American economy. Mr. Giancarlo is chairman of the Commodity Futures Trading Commission. BOOKSHELF | By Joseph C. Sternberg It Was All Greek to Him Adults in the Room By Yanis Varoufakis (Farrar, Straus & Giroux, 550 pages, $28) I n his memoir’s subtitle, Greece’s flamboyant former finance minister Yanis Varoufakis—think Marxist academic with an artist wife, a motorcycle and never, ever, a tie— describes the 2015 Greek financial crisis as “My Battle With the European and American Deep Establishment.” He offers a gripping account of those chaotic days, when the eurozone appeared as if it might shatter. But there’s less “deep establishment” here than meets the eye. What emerges instead is a story of miscalculations, many of them the author’s own. Mr. Varoufakis became a global celebrity as a member of the far-left Syriza party, which came to power in a January 2015 snap election. By then Greece had already suffered through two financial crises and the resulting bailouts offered by the European Central Bank, the International Monetary Fund and the other governments of the eurozone (a combination known as the troika). Such was the aftermath of Athens’s decadeslong inability to balance its budget or even publish honest numbers about what the budget was. A large portion of its deficits had been financed by French and German banks, but their balance sheets would not have survived a Greek default, so in 2010 a bailout of €110 billion was arranged to prevent a crisis. But the banks were the big beneficiaries of the bailout; Greece barely benefited at all. By 2012 another €130 billion was needed to bail out the first bailout. The bailouts consigned Greece to years of misery. The first one required Athens to cut spending, raise taxes and pay down its debt. The second was only slightly more forgiving. Both also demanded economic reforms, such as privatizations and deregulation, but the reforms never materialized, so the economy barely grew. By 2015 Greece’s economy had contracted roughly 25% from its precrisis level. This set the stage for a young radical, who argued that Greece could free itself from what Mr. Varoufakis calls “Bailoutistan” by forcing creditors to accept a less exacting deal. In a stunning election victory, 40-year-old Alexis Tsipras became the country’s prime minister, his Syriza party coming within two seats of a government majority. In Mr. Tsipras and his finance minister, Mr. Varoufakis, frustrated and impoverished Greeks could hardly have picked worse champions. As political outsiders, Syriza should have led an effort to tamp down domestic corruption and focus on a fairer distribution of welfare benefits and government wages, reforming Greece’s long-running patronage politics. Instead, Mr. Varoufakis challenged the troika in a doomed renegotiation of the bailout terms, spooking investors, who had tentatively started buying Greek bonds again, and Greek savers, who then started pulling their money out of the banks. Soon ATMs were out of cash, the government’s coffers were empty and Athens was forced to sign a third bailout deal. Greece’s former finance minister recounts his fight in 2015 against the demands of Berlin, Brussels and the European establishment. Mr. Varoufakis insinuates that, while he represented the Greek democratic will, the troika was bent on bringing Greece to its economic knees. “Debt is creditor power,” he writes. “The Greek Spring challenged the right of creditors and their domestic agents to govern a debtor nation.” As if any creditors wanted to run Greece. This misinterpretation proved central to Mr. Varoufakis’s undoing. In reality, the creditors faced as many pressures as Mr. Varoufakis did. The bailouts represented the sort of delicate compromise at which the European Union excels. Northern European taxpayers showed their solidarity by reluctantly opening their wallets, while Athens kept faith by reluctantly reforming itself. In 2015 this compromise was in political danger. The Alternative for Germany, for instance, a vigorous new antieuro party, was putting increasing pressure on Berlin to cut weaker members loose. Thus one can imagine the exasperation among eurozone finance ministers when Mr. Varoufakis flounced into their first summit meeting declaring that, “whether they liked it or not, [they] were obliged to respect the fact that the Greek voters had given us a mandate to challenge” the terms of the bailout. What Mr. Varoufakis doesn’t acknowledge is that the bailouts had been signed by Greece’s duly elected representatives. The creditors weren’t about to let the Greeks simply change their minds. But the Greeks could have always changed their minds—they could have left the euro. Mr. Varoufakis says that although a socalled Grexit would have been disastrous for Greece and the eurozone, his party had to be prepared to leave the euro if negotiations failed. Contrary to Syriza’s reputation for recklessness at the time, Mr. Varoufakis did an impressive amount of planning for Grexit. He devised a clever mechanism for a parallel digital currency to temporarily replace the euro, pending the reintroduction of the drachma, on the theory that only a credible threat could draw creditors to the negotiating table. But for all his financial acumen, Mr. Varoufakis was—and, to judge by his memoir, remains—a political naif. Not even the threat of Grexit could have upset the creditors’ consensus. And as much as the Greeks hated the bailouts, they, too, concluded that they would be worse off leaving the euro. That’s worth remembering when it comes to Mr. Tsipras. Mr. Varoufakis saves his most bitter criticism for his former boss, who, he says, abandoned their plan to proceed with Grexit if necessary. Mr. Tsipras, he writes, was prone to “frivolity” and a selfish “intense desire to prove to a sceptical world that he was no shooting star.” That’s one read. Another is that the prime minister eventually bowed to the reality that Greeks wanted the euro. In the end, Mr. Varoufakis resigned, and Mr. Tsipras caved. A third bailout agreement was scraped together, offering €86 billion for the same economically illogical conditions. Today Syriza clings to power, a dysfunctional shadow of its former self, and Greeks, who have already lost nearly a decade to their crisis, face losing another decade or more. A better deal for Greece may exist, but Mr. Varoufakis was never the one to propose it. Even in his own book he appears as a hapless academic cursed by prodigious knowledge and limited wisdom. No wonder it all went so terribly wrong. Mr. Sternberg is a member of the Journal editorial board based in London. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. A16 | Monday, November 6, 2017 OPINION REVIEW & OUTLOOK Y Tax Rate Cleanup in Aisle Two ou know Republicans are intellectually no big deal because these taxpayers can afford confused when they send out press re- it. They’re also claiming this is kosher because leases defending a top marginal in- the 1986 Reagan reform also had a bubble rate come-tax rate of nearly 50%. of 33% in addition to a top rate The Senate needs to Yet that’s what they were up of 28%. But a bubble rate of to this weekend as they tried 33% is a lot lower than 50%, kill the House GOP’s to justify their bubble bracket which was the top rate before stealth tax surcharge. Reagan’s 1986 reform. tax rate of 45.6% after our criticism on Saturday. And as we wrote at the We called it a stealth tax time (“Gephardt Soap Bubrate because it’s buried in the fine print of the ble,” Sept. 25, 1989), Reagan’s bubble rate was Ways and Means proposal. It also isn’t part of also a mistake. It greased the skids for raising the tax simplification story Republicans are the top marginal rate to 31% from 28% as part selling by publicly claiming the House reform of George H.W. Bush’s tax increase in 1990. shrinks the individual code to four rates from Democrats argued then that the wealthiest seven. But caught out by our reporting, they are shouldn’t pay a lower marginal rate than the now denying that the fifth rate is stealthy while merely affluent, and the bipartisan deal was the defending it as good policy. 31% top rate for everyone. The 45.6% is a bubble rate because it applies If the Kevin Brady-Paul Ryan 45.6% bubble to tax-filing couples who make between $1.2 bracket becomes law, this will soon become the million and $1.6 million (above $1 million for new top rate for everybody—perhaps when single filers). The surcharge is intended to claw Nancy Pelosi is Speaker after 2018. back any benefit these filers get from the new The other Republican defense is that this 12% income bracket that applies to income of bubble surcharge raises some $50 billion over less than $90,000 for couples ($45,000 for sin- 10 years to pay for pro-growth tax cuts elsegle filers). where. But these rate increases never raise Republicans apparently think it’s unfair for what they claim because people change their people to pay the same rate on the same dollar behavior. The political truth is that the estiof income. So their surcharge applies the 39.6% mated surcharge revenue is really going to firate to those first dollars of income for those nance the huge increase in the family tax credit more affluent taxpayers, which adds about six- that costs $640 billion over 10 years. This fampercentage-points to the top rate and gets to ily credit will also be refundable over time, the 45.6% bubble rate. which means it will be paid as a welfare check Add that to the 3.8% ObamaCare surcharge to people who don’t pay taxes. that Republicans are keeping as part of tax reIn other words, Republicans are embracing form, and these taxpayers would now have a top higher tax rates a la Democrats to redistribute marginal rate of 49.4%. Add state and local the money to non-taxpayers a la Democrats. Retaxes, which would no longer be deductible mind us again why college-educated suburbanagainst federal taxes (a policy we support), and ites who are successful in business or the prothese mostly Republican voters would in many fessions and are unenthralled with Donald states pay a marginal rate (on the next dollar of Trump should vote Republican? income) close to 60% and an effective rate (total The best solution would be for Ways and share of income) higher than they do now. Keep Means to clean up this surcharge mess when it in mind this is Republican tax policy. marks up the bill this week. Failing that, we It’s no surprise, then, that Republicans are need a cleanup in aisle two, which is the Senate resorting to Democratic arguments that this is Finance Committee. A The Saudi Cauldron uthoritarian governments tend to be All the more so given that Iran will try to exmost vulnerable when they are trying ploit any instability. That’s the message sent by to change, so the weekend events in the resignation of Lebanon’s Prime Minister Saudi Arabia are worth watchSaad Hariri Saturday on a trip Weekend events show to Saudi Arabia. He said he ing for more than the usual royal family Kremlinology. feared an assassination plot the Middle East They reflect the drive for and he blamed Iran for causconflicts to come. Saudi reform and the contest ing “devastation and chaos.” between the Saudis and Iran Iran and its Hezbollah militia for regional influence. in Lebanon blamed the Saudis Saudi authorities made a wave of arrests Sat- and U.S., and the resignation ends the alliance urday, including members of the royal family between the Sunni Muslim Mr. Hariri and the and cabinet members. The targets include Prince Shiite Hezbollah. Israel welcomed the resignaal-Waleed bin Talal, a billionaire investor in Ap- tion, and one reading is that this will open the ple and Twitter and once a major investor in the way for Israel or Saudi Arabia to attack HezbolJournal’s parent company, News Corp. lah to reduce its growing influence in Syria and The arrests are being advertised as part of the Levant. an anti-corruption campaign endorsed by Meanwhile, the Saudis shot down a missile Crown Prince Mohammed bin Salman, who is aimed at Riyadh that was fired from Yemen by trying to consolidate power as the heir appar- Houthi rebels allied with Iran. The missile launch ent to his father, King Salman. The Crown shows the Houthis are far from defeated in their Prince has been making enemies among royals war with a Saudi-led coalition in Yemen. no longer in favor and the arrests are a sign that Behind all this is the effort by Iran, backed he is brooking little dissent as he tries to reform by Russia, to exploit the opening created by the the Kingdom’s economy and even some of its fall of Islamic State to dominate the region. Issocial mores. While the U.S. has a stake in the rael and Saudi Arabia can’t let that happen, and Kingdom’s successful evolution, the arrests are with the U.S. seemingly on the sidelines, expect a sign that the transition will be rocky. more conflict to come. R Tax Reform and ObamaCare epublicans are looking under every seat the Trump Administration withdrew. cushion to finance tax cuts and the poWe think CBO has long overestimated the litical bribes that Members of Congress power of the individual mandate in driving covare demanding for their votes. erage. And its faulty estimates How killing the One surprising potential “pay hurt the GOP during the for,” believe it or not, would ObamaCare repeal debate by individual mandate be repealing ObamaCare’s inoverestimating the number can finance rate cuts. who would lose coverage. But dividual mandate. The IRS administers the now those estimates can help mandate, which ObamaCare the GOP in the tax debate beeuphemistically dubbed an “individual respon- cause CBO says an end to the mandate will sibility payment.” But Chief Justice John Rob- mean fewer Americans would sign up for insurerts called it a tax to declare it constitutional, ance and subsidies. so a policy and fiscal nexus exists. The fear is that this would complicate the ObamaCare requires individuals without political task of passing tax reform by combinhealth coverage to pay the greater of 2.5% of ing it with the ill-fated ObamaCare repeal detheir household income (above the $10,350 fil- bate. But in this case the GOP would not be ing threshold for single adults in 2016) or $695. changing Medicaid or cutting spending. It The tax is regressive in that about 96% of pay- would be changing no rules or mandates other ers were households earning less than than the individual purchase requirement and $100,000. Most high earners are covered by em- tax, which are among the least popular parts ployer plans or Medicare. of the law. Republicans would merely be saying While the penalty raised $3 billion in reve- that they would no longer fine Americans for nue in 2015, Arkansas Senator Tom Cotton refusing to buy a product they don’t like or points out that abolishing the mandate would can’t afford. actually be a revenue gusher under the ConKilling the mandate now would also make gressional Budget Office’s scoring rules. Last it easier to revisit health reform next year. December CBO projected that repealing the With the mandate already gone, CBO would almandate would save $416 billion over 10 years most certainly find that there would be fewer because fewer people would sign up for Medic- uninsured under any new reform the GOP aid or receive subsidies on the exchanges. would propose. Fewer workers might also enroll in employerAs for financing tax reform, Republicans sponsored plans, which could result in more have to consider the alternatives. The House taxable compensation. bill doesn’t repeal the mandate and thus has CBO estimated in July that a combined re- to include “pay fors” that are either bad polpeal of the employer and individual mandates icy (see the stealth tax rate above) or that would yield $275 billion in savings. The agency face political resistance (ending the adoption didn’t break down its score or explain its analy- tax credit). sis. A future score might project greater savIn a Senate with only 52 Republicans, countings—Mr. Cotton estimates around $300 bil- ing votes is paramount, but ending the hated lion—since next year’s average premium tax individual ObamaCare mandate looks like a credit has ballooned by 45%. That’s because in- winner politically and as fiscal and health polsurers jacked up prices on benchmark silver icy. Why not combine health-reform progress plans to make up for cost-sharing subsidies that with a way to finance tax reform? LETTERS TO THE EDITOR Are We Coming at Opioids the Wrong Way? Regarding your editorial “The Opioid Puzzle” (Oct. 27): The innovation that is most needed to help end deaths from opioid drug use is decriminalization of drug use. The continuing “war on drugs” is a war on our entire society. We turn addicts into criminals who steal from us, spread hepatitis and HIV infections, fill up our jails and die at ever-increasing rates. Illegal drug abuse also fuels terrorism and violence around the world through drug cartels and opiate production in China and Afghanistan. In countries like the Netherlands, Switzerland and Portugal, drug use is treated as a social problem not a criminal problem, and drug abuse, criminality and drug-overdose deaths have all decreased. THOMAS EINSTEIN Santa Monica, Calif. job,” as if they are not already struggling under current mandates, which have been made ever-more stringent for patients and practitioners alike. CARRIE COX Lexington, Ky. If we are serious about pursuing innovative approaches to drug abuse, we first have to acknowledge the failure of our punitive, moralistic war on drugs and adopt, as some European countries have, the practical, open-minded, nondogmatic mind-set that is the prerequisite to any form of innovation. MICHAEL R. UTH The first issue is the readily available (and cheap) supply of illegal fentanyl and other narcotics on the street. The second issue is the lack of drug-treatment facilities. I am a practicing pain physician with sevThe only “puzzle” that I see is eral patients who need comprehenwhy—with mounting evidence sive drug rehab. The drug-rehab faaround its efficacy—cannabis is cilities are few and far between, never mentioned as part of the solu- frequently full and have significant tion to the opioid epidemic. Despite restrictions for admission, including proven cost savings in the hundreds financial coverage and lack of coexof millions of dollars for Medicare isting medical conditions. Part D in states that allow medicinal Many who are given naloxone are cannabis, a 25% reduction in overrepeat offenders and get no treatdoses in the same states and over ment after being rescued from an 97% of patients stating that they overdose. I believe that if someone were able to decrease their opioid receives naloxone once, he or she use, the word “cannabis” is missing should be required to receive inpafrom the lexicon of the president and tient narcotic rehab therapy—hard to most major news outlets. do if those facilities don’t exist or PERRY SOLOMON, M.D. won’t accept patients. San Francisco We need to prescribe narcotics less and stop Medicare’s increasing Lost in all this are the poor, powrestrictions on interventional pain erless and often older pain patients treatment (read nonnarcotic). But whose lives are made more funclet’s not forget the patients with tional and tolerable with the monichronic pain who may be hurt in this tored law-abiding use of opioid medi- war on narcotics. cation. In reality, many live in fear of JAMES TOBIN, M.D. Madbury, N.H. being cast off to “get clean and get a It Hasn’t Gone as Balfour Imagined It Would The Balfour Declaration didn’t stop Arabs from living in Israel with equal rights, and today Israel has a population of at least 20% Arab citizens with full religious and other rights (“100 Years After Balfour, Declarations of Division,” Review, Oct. 28). It isn’t the Jews’ fault that the Arab world couldn’t tolerate that small Jewish presence. At least as many Jews fled from Arab countries as the number of Arabs who fled when the state of Israel was created, but instead of helping and integrating the Palestinian Arabs, as Israel did with all the Jews who went to Israel, the Arab countries have kept the Palestinians as bitter pawns and limited their rights. If Palestinian Arab leaders really wanted to help their people, they would stop playing the victim card for so many years and so many millions of dollars later. Israel has been willing to cooperate with its neighbors for peaceful coexistence, but the Arab world has chosen to continue treating the Palestinian Arabs as homeless victims rather than move on and work toward a peaceful Palestinian state living alongside Israel. SARA MILLER Queens, N.Y. If anyone deserves an apology over the Balfour Declaration, it isn’t the Arabs but the Jews. If anyone should apologize over events since, it is Palestinian leaders to their followers, not Britain or Israel. The Arab world received more than fourfifths of the land promised to the Jews under the Balfour Declaration in the form of Jordan, the West Bank and Gaza. The Arab world rejected a two-state solution in 1948 and invaded Israel, promising to annihilate the Jews. It is much of the Arab world that continues to reject a permanent Israel behind any boundaries. Why do they deserve an apology for rejecting coexistence and perpetuating the refugee issue? Palestinian leaders have rejected every peace deal and continue to indoctrinate for endless conflict. Their obsession with dismantling Israel far exceeds their desire for statehood, and Mahmoud Abbas has made it CORRECTION clear that a Palestinian state in the West Bank will not end the conflict. If there are apologies due, it is from Palestinian leaders to their followers for rejecting every peace deal, inciting violence, for corruption and backward-looking policies that are the primary reasons for Palestinian victimhood. It is high time to hold them accountable and stop rewarding their intransigence with sympathy. DORON LUBINSKY Atlanta The Mueller Tax Indictment May Yield More Information Regarding your editorial “The Manafort Indictment” (Oct. 31): You should have started and ended with noting that Americans deserve to know what the Russians did and how, and that our leaders will take immediate steps to see it doesn’t happen again. You know what the goal of the investigation is. George Papadopoulos’s plea reveals that the Russians were offering him dirt on Hillary Clinton weeks before the Democratic National Committee email leaks. Did the Russians hack the DNC? Was that the dirt they were offering him? Was that the dirt they were offering Donald Trump Jr. when he set up the meeting with the Russian attorney, Paul Manafort and Jared Kushner? Mr. Manafort may know, and the pressure of this indictment will help him remember. We know from his tax-fraud indictment that he is dishonest, cunning and devious. Had he not joined President Trump’s campaign, he would have most likely gotten away with evading millions in taxes. We Americans deserve to know what he knows about what his clients in Russia were doing to interfere in our 2016 election. Without the tax-fraud indictment, he would never tell us. Now maybe he will. JERRY D. PALMER San Diego Pepper ... And Salt THE WALL STREET JOURNAL No employees or former employees of Crowley Maritime Corp. pleaded guilty, were convicted or went to prison in connection with the company’s 2012 plea deal with the U.S. government for price-fixing. An Oct. 31 letter to the editor, “The Jones Act Has Enabled Price Fixing in Recent Past,” mistakenly implied that some executives had gone to prison. Letters intended for publication should be addressed to: The Editor, 1211 Avenue of the Americas, New York, NY 10036, or emailed to firstname.lastname@example.org. Please include your city and state. All letters are subject to editing, and unpublished letters can be neither acknowledged nor returned. “Here are my notes on collateralized debt obligation. Make me sound like I know what I’m talking about.” For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 6, 2017 | A17 OPINION By Martin Feldstein T he debate over tax reform is focusing on all the wrong things: the personal rates and the deduction for state and local taxes. What will truly matter for the economy is corporate tax reform, which will lead to a major increase in capital spending by companies. That in turn will raise productivity and real wages. It could increase the U.S. capital stock by $5 trillion and cause a $500 billion rise in annual income. These gains start small but will grow year after year as capital flows to corporate investment in the U.S. from the rest of the world and from other parts of the U.S. economy. Although it is hard to judge how much the U.S. capital stock will grow, a reasonable estimate is that tax reform will raise the U.S. capital stock by $5 trillion within a decade, causing annual national income to rise by $500 billion—equal to $3,500 a household. That boost in future gross domestic product outweighs the adverse effect of the $1.5 trillion increase in the national debt. The government’s interest cost on the extra debt will be substantially less than $100 billion a year, and the potential rise in the annual trade deficit will be less than 0.5% of GDP. The $500 billion gain in total income is the right measure for evaluating the tax reform. It’s wrong to focus on the resulting change in the rate of economic growth, as some critics have done. Even though an annual gain of $500 billion by 2027 translates to a substantial $3,500 in income per household, the implied increase in the growth rate is surprisingly small. Since GDP is projected to be $30 trillion in 2027, a $500 billion increase represents a gain of 1.7%, or just 0.17% per year over the decade. The most important reform is to cut the corporate tax rate from 35%— the highest among major industrial nations—to 20%. This will increase corporate capital directly by reducing the tax burden. Cutting the corporate rate to 20% would raise retained earnings by about $2 trillion over 10 years. The lower tax rate will also induce foreign companies to shift some of their production to America. And capital within the U.S. will move from DAVID GOTHARD Corporate Tax Reform Is the Key to Growth low-productivity uses in agriculture and housing to corporate investments that can create good jobs and raise real wages. This will be reinforced by reforms that induce American corporations to bring back profits earned by their foreign subsidiaries. Under the proposed reform the U.S. will follow the practice of nearly all other countries in adopting a “territorial” tax system. This will make American companies bring back cash from foreign subsidiaries as it is earned. In addition, tax reform will help bring home some of the $2.6 trillion that U.S. companies already hold abroad because of today’s unfavorable taxation of repatriated profits. The GOP plan includes a one-time moderate mandatory “deemed repatriation” tax on those profits accumulated overseas, after which the funds can be repatriated with no further tax. What about tax reform’s effect on the budget deficit and the national debt? I have long been a deficit hawk. It is troubling that America’s ratio of debt to GDP has more than doubled in the past 10 years and is projected to increase from 77% today to 91% in a decade, even with no legislated changes in taxes or spending. An extra $1.5 trillion of debt will raise that ratio to 96%. But I believe the advantages of the corporate tax reform outweigh the adverse effects of the relatively small debt increase. The challenge for the Congress after the next election will be to start reversing the rise in the debt. The debtto-GDP ratio, which was 35% as recently as 2007, is heading to more than 100%. But cutting future annual deficits from the projected 5% of GDP to 3% would reverse that trend, causing the ratio to head back toward about 60%. That would be a useful next step toward a fiscally responsible condition for the U.S. economy. But the first step is to put tax reform into law. Mr. Feldstein, chairman of the Council of Economic Advisers under President Reagan, is a professor at Harvard and a member of the Journal’s board of contributors. Trump Brings a New Seriousness With Him to Asia By Kenneth R. Weinstein D onald Trump’s 12-day trip to Asia—on Monday he will be in Japan, followed by stops in South Korea, China, Vietnam and the Philippines—is the longest presidential visit to the region in a generation. That’s no accident: Although many in Washington see only Mr. Trump’s disruption, Asian leaders know his administration has brought a new seriousness and a nuanced agenda to Pacific policy. The immediate problem is North Korea’s nuclear adventurism. The broader challenge is China’s growing power and ambition. The overarching goal is managing Asia policy in a way that enhances the security and prosperity of the U.S. and its allies. The Trump administration begins with a hardheaded view of deterrence. Mr. Trump has rattled some Americans with his threat “to totally destroy North Korea” in “fire and fury” if it attacks the U.S. or an ally. But there is no ambiguity in the message this sends Kim Jong Un. To whatever extent North Korea can be deterred, Mr. Trump has done the job by laying down a clear marker of what war will cost Pyongyang: everything. Previous presidents’ policies toward North Korea were naive in the extreme. Neither the Agreed Framework in 1994 nor the “six party talks” last decade prevented Pyongyang from getting nuclear weapons. Mr. Trump rightly believes rushing into new negotiations would further enable North Korean deception and stalling, while the regime would continue to develop a nuclear-armed missile capable of hitting the U.S. Negotiating holds the most promise when it is done from a position of American strength. The White House rightly believes that the best chance of shifting Mr. Kim’s course is with pressure from the Chinese. Although Mr. Trump often invoked China as a nemesis during the presidential campaign, he has since dealt deftly, winning unexpected Chinese support for a Security Council resolution this past September imposing stiff sanctions on Pyongyang. Far from having a rancorous relationship, Mr. Trump has reached out regularly to President Xi Jinping. Increased cooperation from Beijing isn’t the product of any newly benevolent view of America. On the contrary, pressure from the U.S. has helped to cause the turnaround. The Chinese have heard Mr. Trump’s sharp criticisms of their trade and currency policies. But despite his At least when it comes to security policy, the president has his priorities straight. previous threats, the administration so far hasn’t labeled China a currency manipulator. “Why would I call China a currency manipulator when they are working with us on the North Korean problem?” Mr. Trump cagily tweeted in April. “We will see what happens!” When Mr. Trump stops in Beijing on Wednesday, expect blunt talk urging specific promises from China to further tighten the screws on North Korea. Beyond cooperation on North Ko- rea, the White House sees the longerterm challenge posed by China’s rise. Here the key is America’s alliances in the Pacific—another central element of the presidential tour. Mr. Trump’s closest friendship with any foreign leader is the one he has quietly cultivated with Japanese Prime Minister Shinzo Abe. The two speak almost weekly. Mr. Trump has made clear that a strong Japan improves regional stability, and Mr. Abe continues to increase military spending significantly. Mr. Trump’s personal relations with South Korea’s recently elected left-wing president, Moon Jae-in, have been far rockier. Mr. Moon’s preference for dealing with Pyongyang is dialogue. But he has overridden—however reluctantly—the wishes of his political base to say that the U.S. remains central to South Korea’s security. Mr. Moon understands that extends well beyond threats from its immediate neighbor. Vietnam wants assurances from Mr. Trump that the U.S. will not tolerate Chinese hegemony in the South China Sea. The increased tempo of American patrols through those waters has not gone unappreciated in Hanoi. In the Philippines, President Rodrigo Duterte appears to respect Mr. Trump, in contrast to his disparagement of President Obama. Both countries, though, pose problems: Vietnam remains under the unflinching control of its Communist Party, and Mr. Duterte has earned condemnation for his government’s extrajudicial killing of drug traffickers. Mr. Trump should speak up on these matters but probably won’t. Nevertheless, his administration is right in seeing Vietnam and the Philippines (a treaty ally) as essential to containing China. The wild card on this trip is trade. To the disappointment of Japan and Vietnam especially, Mr. Trump withdrew the U.S. from the Trans-Pacific Partnership, an 11-nation trade deal negotiated under President Obama. Then in April he called the 2012 Korea-U.S. Free Trade Agreement “a horrible deal.” But at least when it comes to security policy, the president has his priorities straight. Mr. Weinstein is president and CEO of the Hudson Institute. Is Roger Goodell Deliberately Pushing the NFL Leftward? By Jason Whitlock T he critics of National Football League commissioner Roger Goodell are only getting louder. Last week Papa John’s Pizza CEO John Schnatter assailed Mr. Goodell for bungling the national anthem protests. “The NFL has hurt us by not resolving the current debacle to the players’ and owners’ satisfaction,” said Mr. Schnatter, whose company is a high-profile sponsor. “Leadership starts at the top, and this is poor leadership. . . . This should’ve been nipped in the bud a year and a half ago.” Meanwhile, the owner of the Dallas Cowboys, Jerry Jones, is trying to block an extension of Mr. Goodell’s contract. The commissioner’s current deal expires at the end of the 2018 season. NFL insiders originally expected the deal to be extended this past summer. Mr. Jones, who owns more than 100 Papa John’s franchises in Texas, has reportedly been rallying support among fellow owners to oust Mr. Goodell. Asked Friday about Mr. Schnatter’s rebuke of the commissioner, Mr. Jones hailed the pizza tycoon as a “great American.” Speaking on a radio show Tuesday, he was even more explicit about Mr. Goodell: “I know a lot of people, a lot of fans, don’t think we make him as accountable as we should,” Mr. Jones said. “But that’s not the case. It’s just timing. When you have to account is when you’re either getting hired or you’re getting extended or you’re getting a raise or are you getting a bonus.” In other words, the time for action has arrived—and Mr. Goodell has a lot to account for. Concern over head injuries has eroded football’s public support. Mr. Goodell’s handling of player discipline, particularly the 2014 Ray Rice domesticviolence case and the 2015 New England Patriots “Deflategate” scandal, damaged the NFL’s image. Now unending national-anthem protests have frustrated the league’s conservative fans, made it a target for President Trump, and contributed to sliding TV ratings. It makes sense to blame ineffective leadership. But what if the problem is effective leadership? Football is headed exactly where Mr. Goodell has steered it—to the left. The NFL has long been a combatant in America’s larger culture war. But Mr. Goodell—whose father, Charles, was a liberal antiwar Republican senator in the late 1960s—was always an odd choice to run it. Remember that the NFL was cultivated into prominence by Pete Rozelle, a pro-war conservative. In the 1960s, Rozelle hired a World War II veteran-turned-filmmaker, Ed Sabol, to produce highlights, commercials PUBLISHED SINCE 1889 BY DOW JONES & COMPANY Rupert Murdoch Executive Chairman, News Corp Robert Thomson Chief Executive Officer, News Corp Gerard Baker Editor in Chief William Lewis Chief Executive Officer and Publisher Matthew J. Murray Deputy Editor in Chief DEPUTY MANAGING EDITORS: Michael W. Miller, Senior Deputy; Thorold Barker, Europe; Paul Beckett, Washington; Andrew Dowell, Asia; Christine Glancey, Operations; Jennifer J. Hicks, Digital; Neal Lipschutz, Standards; Alex Martin, News; Shazna Nessa, Visuals; Ann Podd, Initiatives; Matthew Rose, Enterprise; Stephen Wisnefski, Professional News Paul A. Gigot, Editor of the Editorial Page; Daniel Henninger, Deputy Editor, Editorial Page WALL STREET JOURNAL MANAGEMENT: Suzi Watford, Marketing and Circulation; Joseph B. Vincent, Operations; Larry L. Hoffman, Production EDITORIAL AND CORPORATE HEADQUARTERS: 1211 Avenue of the Americas, New York, N.Y., 10036 Telephone 1-800-DOWJONES DOW JONES MANAGEMENT: Mark Musgrave, Chief People Officer; Edward Roussel, Innovation & Communications; Anna Sedgley, Chief Operating Officer & CFO; Katie Vanneck-Smith, President OPERATING EXECUTIVES: Ramin Beheshti, Product & Technology; Jason P. Conti, General Counsel; Frank Filippo, Print Products & Services; Steve Grycuk, Customer Service; Kristin Heitmann, Transformation; Nancy McNeill, Advertising & Corporate Sales; Jonathan Wright, International DJ Media Group: Almar Latour, Publisher; Kenneth Breen, Commercial Professional Information Business: Christopher Lloyd, Head; Ingrid Verschuren, Deputy Head and documentaries that marketed the sport as patriotic and militaristic. Sabol’s NFL Films made football feel more American than baseball. His work was so critical to the league’s wild growth that in 2011 he was inducted into the Pro Football Hall of Fame. The same honor had been bestowed on Rozelle in 1985, while he was still commissioner. By contrast, a year ago Mr. Goodell hired a Democratic political strategist, Joe Lockhart, as the NFL’s executive vice president of communications. Mr. Lockhart, best known as President Clinton’s press secretary for two years, also worked for Jimmy Carter, Walter Mondale, Michael Dukakis and John Kerry. Last week the New York Times credited him with crafting the NFL’s message on the anthem controversy. Mr. Lockhart is an aggressive media manipulator. The Times reported that several NFL owners were bothered by a snide comment Mr. Lockhart made about Mr. Trump: “Lockhart told reporters that talking about police brutality is ‘what real locker room talk is.’ ” But Messrs. Goodell and Lockhart have made bigger gaffes. In mid-October, Mr. Goodell and Seattle Seahawks wide receiver Doug Baldwin wrote a letter to the Senate “to offer the National Football League’s full A year ago he hired a Democratic operative, Joe Lockhart, as his top communication exec. support for the Sentencing Reform and Corrections Act of 2017.” Mr. Goodell is paid $44 million a year to represent the views of the NFL’s owners, not players or himself. An ESPN story in late October about the anthem protests portrayed Mr. Goodell as supporting players’ desire to use the NFL as a platform to address whatever social issues they deem important. Buried deep in the article was an anecdote about the owner of the Houston Texans, Bob McNair, complaining to fellow owners, Mr. Goodell and a handful of NFL executives that “we can’t have the inmates running the prison.” Texans players took offense and staged an anthem protest before their Oct. 29 game against the Seahawks. Mr. McNair apologized but said he was misunderstood. “I was referring to the relationship between the league office and team owners,” he said in a written statement, “and how they have been making significant strategic decisions affecting our league without adequate input from ownership over the past few years.” Messrs. Goodell and Lockhart are damaging the league’s longstanding and highly profitable brand. Neither one seems likely to join Pete Rozelle and Ed Sabol in the hall of fame. The question is how long the owners will continue to allow the pair to reshape the NFL. Mr. Whitlock is a co-host of “Speak for Yourself” on Fox Sports 1. In Defense of Broccoli By George Ball Y our Honor, I’d like to make some preliminary remarks to provide context and perspective on the case before the court. As a third generation seedsman, I have agreed to pro bono representation of Broccoli, the most maligned vegetable of all time. I shall prove that my client is the vegetable that can save mankind. I shall demonstrate Broccoli to be the most succulent, tasty, and life-enhancing of all vegetables. Can you eat Pea’s stringy vine, Corn’s cob, Bean’s coarse stalk, or Melon’s spiny leaf? Only Broccoli allows you to eat the entire plant: asparagus-like stalks, savory green leaves and delicately sweet, nuttyflavored flower buds. My client represents the pinnacle of vegetable sophistication. Do not overlook Broccoli’s promotion and protection of human health. No plant possesses more antioxidants, beneficial enzyme-stimulating compounds, and metabolism-enhancing fiber, than my client. It abounds with vitamins: A cup of cooked Broccoli provides more vitamin C than an orange. That same cup supplies 10% of daily minerals. Add metabolismand enzyme-boosting folic acid and calcium pectate and the cancerfighting antioxidants beta carotene, carotene and sulphoraphane. Broccoli nips disease in the bud. My client contains healthful fiber, cellbuilding protein and eye-protecting lutein. Your Honor, my client is as close to perfection as a vegetable can be. Not to eat Broccoli should be a crime. Why, then, is savory, succulent, creamy-textured Broccoli on trial? For being too healthy? Too tasty? Too easy to grow in all 50 states? No: my client is accused of being “too bitter.” I offer two defenses: First, this apotheosis of subtle flavors and powerfully healthful properties needs to be grown to full ripeness. Second, it must be transported from farms or home gardens to the kitchen quickly, and then steamed, sautéed, grilled or stir-fried. Thereby I can prove beyond a reasonable doubt that my client possesses the most sublime vegetable flavor available to the human palate. Broccoli has been capriciously defamed and disparaged by influential figures in all walks of life, from nighttime talk-show hosts to Supreme Court justices. Nearly three decades ago, President George H.W. Bush declared that he did not like my client. His remark was an unfortunate result of the commercial production of Broccoli: picked unripe— thus deficient of flavors and healthful compounds—and shipped thousands of miles to languish for weeks on produce counters. Therefore, I ask the court to dismiss this case, and invite you, the court, the plaintiff, and the People, to lunch in my garden. Justice will be served—steamed and drizzled with melted butter and freshly squeezed lemon juice. Mr. Ball is chairman and CEO of W. Atlee Burpee Co. and a past president of the American Horticultural Society. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com A18 | Monday, November 6, 2017 Visit the installation from November 3-19, 2017 Cedar Lake 547 West 26th Street Chelsea, New York Book your visit at ArkVCA.com Walk-ins welcome THE WALL STREET JOURNAL. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com TECHNOLOGY: AT TWITTER, TRUMP IS BOTH STAR AND HEADACHE B4 BUSINESS & FINANCE © 2017 Dow Jones & Company. All Rights Reserved. Last Week: S&P 2587.84 À 0.26% S&P FIN g 0.11% THE WALL STREET JOURNAL. * * * * S&P IT À 1.84% DJ TRANS g 1.78% WSJ $ IDX À 0.20% Monday, November 6, 2017 | B1 LIBOR 3M 1.392 NIKKEI 22539.12 À 2.41% U.S. ProbesMozambiqueDebt Sale The U.S. Justice Department and Federal Bureau of Investigation are investigating By Matt Wirz and Rebecca Davis O’Brien in New York and Jenny Strasburg in London three international banks for their roles in selling about $2 billion of debt for Mozambique, opening a new phase in the global inquiry into the bond deals, people familiar with the matter said. Swiss lender Credit Suisse Group AG, Russian bank VTB Group and French bank BNP Paribas SA are focuses of the U.S. probes, the people said. The FBI is looking into whether the banks facilitated corruption by enabling Mozambican officials to take money raised in the debt sales, the people said. Financial regulators in the U.S., the U.K. and Switzerland began probes into potential securities-law violations by the banks last year, after The Wall Street Journal reported the existence of irregularities in the Mozambican transactions. The newer U.S. inquiries widen the scope of the probes to include potential corruption and raise the possibility of criminal prosecution. Credit Suisse has been trying to rehabilitate its international image for more than a year and recently restructured the investment banking unit that handled the Mozambican deals. Credit Suisse CEO Tidjane Thiam has been pushing to change the bank’s culture of risk taking for several years with some success—the bank settled a longstanding lawsuit from the financial crisis in 2016 and reported a sharp rise in third quarter profit this year as it focused more on wealth management. When informed of the investigations by the Journal, Alex Vines, head of U.K. international-policy think tank $2B Amount of debt sold for Mozambique Chatham House’s Africa division, said they were “an important step toward greater transparency on how these undisclosed loans were negotiated. It is important for Mozambique’s leadership to learn from past mistakes and will have international implications.” Spokeswomen for Credit Suisse, VTB and BNP declined to comment. Two Mozambican government spokesmen didn’t reply to requests for comment. The FBI began looking into the soured bonds around June 2016, when a small team of agents visited Maputo, the capital of Mozambique, according to people familiar with the situation. The securiPlease see BANKS page B2 See more at WSJMarkets.com Cut in Half Ackman's Pershing Square has shed assets, owing to slumping performance and client departures. $20 billion 15 10 5 0 2014 ’15 ’16 ’17 Source: Pershing Square THE WALL STREET JOURNAL. Showdown Looms For ADP, Ackman MIKE CHERNEY/THE WALL STREET JOURNAL BY DAVID BENOIT AND JULIET CHUNG Researchers test a drone at Northern Star Resources’ Jundee gold mine in Western Australia. Drones Become Mining’s Flight to Safety Fully autonomous devices use lasers to explore dangerous caves, reducing costs and human risks JUNDEE, Australia—Hundreds of feet underground here, scientists are experimenting with a technology that could transform how mining companies dig out rocks in dangerous, pitchblack caves: fully autonomous drones. The drones would fly without any pilot assistance into areas too risky for human miners. Using a rotating laser similar to those on au- tonomous cars, they would create three-dimensional maps more detailed than what is available now, helping miners excavate more gold and other commodities that might otherwise be missed. “It’s very sci-fi,” said Zachary McLeay, a production engineer for Australian gold producer Northern Star Resources Ltd., after seeing a drone fly into a dark cavern during a recent test. The trial, at Northern Big Advertisers Drop Once-Hot Startup BY SUZANNE VRANICA AND ROLFE WINKLER Several major advertisers are halting their business with Outcome Health following allegations that some employees of the prominent Chicago startup misled clients. Outcome Health streams “point of care” advertising to screens and tablets that it places in doctors’ offices. One of Outcome’s largest customers, Bristol-Myers Squibb Co., said it has opted not to renew an ad agreement for 2018. Bristol-Myers had been expected to pay Outcome roughly $20 million this year, according to people familiar with the deal. “We have decided not to continue our agreement with Outcome Health moving forward, and into 2018,” a BristolMyers spokeswoman said, declining to comment on the reason or on how much money the company has paid Outcome. At least one major ad company, Omnicom Group Inc., has suspended advertising with Outcome. A spokeswoman for Omnicom’s media group said it won’t resume spending with Outcome until the company “conducts a full campaign-level, third-party audit of previously enacted campaigns in 2016 and 2017.” Omnicom Media Group directed some $20 million in advertising to Outcome this year, according to a person familiar with the matter. Several other ad companies—Interpublic Group of Cos., Havas SA and Publicis Groupe SA—are putting deals with Outcome on hold or recommending that clients do so until Outcome provides verification of ad performance numbers, according to people familiar with the agencies’ plans. Interpublic’s Healix Global health-care media agency isn’t planning to renew ad deals with Outcome for 2018 unless Outcome assures it that there are no improprieties, a person familiar with the matter said. Healix clients spend several million dollars a year with Outcome, the person said. Havas and Publicis have recommended to some clients that they reconsider their 2018 spending until a third-party verification of Outcome’s services is conducted, people familiar with the matter said. In all, such moves could deny Outcome tens of millions Please see ADS page B4 Star’s Jundee gold mine in Western Australia, is part of a broader effort by the global mining industry to embrace automation, which is driving down costs and improving safety. It also might lead to fewer jobs. Companies from South Africa to Australia are already using technology such as driverless trucks, mechanized drilling and extra-long conveyor belts to improve productivity as they look to rebound from the recent INSIDE BOEING IS SET TO TAKE UP OLD AIRLINER AEROSPACE, B3 INSURERS WILL PUT OUT YOUR HOUSE FIRE FINANCE, B9 downturn in commodity prices. Automation can “save lives, and also save time and save money,” said Mehmet Kizil, associate professor and mining-engineering program leader at the University of Queensland in Australia. “The industry’s made a big jump in adopting this technology because the biggest cost in mining is labor.” Drones have become a popular cost-saving measure in sectors as diverse as retail and insurance, and mining companies regularly fly them to get aerial views of their facilities. But taking the machines underground represents a new frontier, and one fraught with risk. Pitch-dark cavities can conceal dangers, such as falling rocks, with the potential to destroy drones that cost tens of thousand of dollars apiece. Adding to the challenge, a drone flying underground can’t use satellitePlease see MINE page B4 KEYWORDS | By Christopher Mims Apps Feed Virtual Restaurants If you have ever ordered a burrito or a Hawaiian poke bowl through a food-delivery app, you may have been the patron of a virtual restaurant. No, you don’t need to put on a VR headset to experience one, and the food is quite real. What makes these new restaurants virtual is that you only find them online. Tucked inside industrial parks, commissary kitchens and refitted basements in cities like New York, Chicago and San Jose, Calif., these restaurants have no dining room, no wait staff, no takeout window and no signage. (They still have to pass inspections from health boards, though.) Many don’t take orders over the phone and are accessible only through online services like Grubhub, DoorDash or Postmates. Virtual restaurants, with their low overhead, are allowing restaurateurs to shift away from the capital-intensive model that kills 60% of new restaurants in their first five DOORDASH/REUTERS BY MIKE CHERNEY Automatic Data Processing Inc. has spent the past several years trying to modernize its business. On Tuesday, shareholders will decide whether those moves are enough or if they want to allow one of Wall Street’s most powerful and polarizing investors into the boardroom. Famed hedge-fund manager William Ackman is seeking a seat for himself and two others on ADP’s 10-person board, saying it has fallen behind hot technology companies that have made its human-resources industry user-friendly. Tuesday’s vote is the first time Mr. Ackman has had to woo investor votes since his bad bet on Valeant Pharmaceuticals International Inc. caused billions of dollars in losses at his hedge fund more than two years ago. A win—or even a close vote—for Mr. Ackman could be a reprieve and show that big investors believe he can help improve companies. A bad loss could raise questions about his future. Mr. Ackman and his Pershing Square Capital Management have underperformed for nearly three years, largely because of a $4 billion loss on Valeant. Its main fund has lost 24% since 2014, compared with a 33% climb in the S&P 500. The fund is roughly flat this year through October, while the S&P 500 is up 17%, including dividends. Mr. Ackman points instead to his long-term track record, saying Pershing Square has returned more than 500% since its Please see ADP page B2 The Star prepares pizza for delivery by DoorDash in San Jose, Calif. years toward something decidedly more techy. By adopting a “launch, experiment and iterate” approach, these virtual restaurants resemble scrappy internet startups (only, when they say “apps,” they often mean appetizers). By far the biggest company in the app-driven food-on-demand space is Grubhub. It is so invested in virtual restaurants that two years ago it lent one of its own customers, Green Summit Group, $1 million to expand. Green Summit, which launched in 2013, has kitchens throughout New York City, Todd Millman, its co-founder, says. There might be up to 10 different “restaurants” In a single kitchen. Though they appear on Grubhub as separate establishments, each with a distinct cuisine, all the food might be prepared in the same kitchen by the same staff. Consolidated kitchens increase efficiency. “Most of our employees don’t move very much,” Mr. Millman says, explaining that each Please see MIMS page B4 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com B2 | Monday, November 6, 2017 INDEX TO BUSINESSES These indexes cite notable references to most parent companies and businesspeople in today’s edition. Articles on regional page inserts aren’t cited in these indexes. A F Active Weighting Advisors..................R10 Activision Blizzard....B10 AI Powered Equity ETF ...................................R13 Airbnb..........................A4 Airbus..........................B3 Alphabet......................B9 Amazon.com .................... A1,B2,B3,R8 American Airlines Group .....................................B3 American International Group.........................B9 Apple......................B9,R8 A.T. Kearney................A1 Automatic Data Processing.................B1 Facebook......................R8 Federated Total Return Bond Fund...............R15 FedEx...........................B3 Fidelity Low-Priced Stock Fund................R8 Franklin Resources ..... B9 B Bank of America.........B9 BNP Paribas................B1 Boeing ......................... B3 Bridgewater Associates ...................................R13 Bristol-Myers Squibb . B1 C Casino GuichardPerrachon..................B3 Chubb...........................B9 CoreCivic....................R10 Creative Artists Agency .....................................B3 Credit Suisse Group ............................. B1,R13 D Delaware Diversified Income Fund...........R15 Delta Air Lines ........... B3 Democratic Policies Fund ........................ R10 Deutsche Telekom......B3 Diageo ......................... R9 DipJar..........................R1 Dollar General.............A1 DoorDash.....................B1 G General Motors.........B10 Global X Lithium & Battery Tech ETF ..... R6 GrubHub......................B1 Guggenheim Partners.B8 H Havas...........................B1 HCA Healthcare........R10 HealthSouth................R8 Honda Motor...............A6 I Imax.............................B2 Interbrand...................A8 Interpublic Group........B1 J John Hancock Bond Fund ........................ R15 L LendEDU......................R1 M Media Rights Capital..B3 Microsoft ............... B9,R8 Monster Beverage......R8 Morgan Stanley..........B9 Muddy Waters............B3 N Netflix....................B2,B3 Neuberger Berman...R16 Neuberger Berman US Eqty Idx PutWrite Strategy Fund;Inst.R16 Northern Star Resources..................B1 O E Omnicom Group..........B1 Outcome Health..........B1 Electronic Arts..........B10 Eli Lilly........................A6 Paulie Gee's................R2 P THE WALL STREET JOURNAL. * *** PayPal Holdings..........R1 Pernod Ricard..............R9 Pershing Square Capital Management.............B1 Point Bridge Capital.R10 Point Bridge GOP Stock Tracker ETF.............R10 Postmates...................B1 Publicis Groupe...........B1 R RavenPack International S.L............................R13 Remy Cointreau..........R9 Renaissance Technologies...........R13 Republican Policies Fund ...................................R10 Royal Dutch Shell.....B10 S Siemens ...................... A1 SoftBank Group..........B3 Spirited Funds/ETFMG Whiskey & Spirits ETF .....................................R9 Sprint .......................... B3 Square.........................R1 State Street................B9 T TD Ameritrade Holding .....................................B9 T-Mobile US................B3 T. Rowe Price..............R1 Twitter ........................ B4 U Ulta Beauty.................A1 United Continental Holdings....................B3 U.S. Tax Reform Fund ...................................R10 V Valeant Pharmaceuticals International.............B1 Vanguard Group..........R9 VTB Bank....................B1 BUSINESS & FINANCE Disney’s TV Plan in Focus BY BEN FRITZ Investors’ biggest question about the future of Walt Disney Co. continues to be whether and how it will turn around its THE WEEK struggling teleAHEAD vision business. Chief Executive Robert Iger’s answer, new streaming services aimed directly at consumers, will likely be a primary focus of the company’s earnings report Thursday. His decision to launch an entertainment-streaming service in 2019 will mark a revolution in the way the media company makes and spends money and in its relationship with consumers. Instead of licensing all the content it produces to other distributors, be they movie theaters, cable systems or online hubs like Netflix Inc., Disney will start selling the content it produces directly to consumers, with no intermediaries. The move is necessary, insiders say, because Disney’s TV business has turned from growth engine to albatross, in part because of the rise of streaming giants such as Netflix and Amazon.com Inc. Profit in Disney’s television unit, its largest, is down 11% so far this year. Television generated $6.1 billion of profit in the first nine months of Disney’s fiscal year, 48% of the company’s total. In 2014, it was 56%. In 2012, it was 66%. “The fact that the TV ecosystem is facing challenges has made us shift our focus pretty dramatically,” said Kevin Mayer, Disney’s chief strategy officer. “We see these streaming efforts as a way to capture new revenues and profits.” Despite Disney’s impressive growth in film, theme parks and consumer products, the company’s stock has fallen 17% in the past two years, largely over anxiety about the future of television. Mr. Iger laid out plans for the streaming service in August to try to allay Wall Street’s concerns. But his announcement raised new worries about whether the com- pany can execute effectively. Shares of Disney have fallen 8% since then. To power its streaming ambitions, Disney bought majority control of the technology company BamTech for $2.58 billion. $6.1B Disney’s profit from TV in first nine months of the fiscal year Disney is also preparing to launch an online ESPN offering next year that will stream over 10,000 sporting events, including early matches in Grand Slam tennis tournaments and professional baseball, hockey and soccer games. Because those aren’t shown on TV, however, the service is expected to be complementary to cable subscriptions. The entertainment offering, however, could prove an attractive alternative for fami- lies that don’t want to pay big cable bills. The centerpiece will be all of the movies Disney’s studio produces, including sequels to “Star Wars” and “Toy Story,” which will be available six to nine months after they make their debuts in theaters. “It’s a content investment that ultimately we believe will provide more revenue for the company than it did in the previous model,” Mr. Mayer said. Currently, Disney sells socalled pay-TV rights for its movies to Netflix for more than $300 million a year, according to people with knowledge of the arrangement. Including planned original movies and TV series, Disney will invest $1.8 billion on its streaming service between 2019 and 2021, research firm MoffettNathanson estimated. That is on top of what Disney paid for BamTech. Disney has yet to set a price for its service and is considering whether to give cable subscribers a discount, said people with knowledge of the matter. W Wal-Mart Stores........A1 Walt Disney................B2 Wavelength Interest Rate Neutral Fund..R13 INDEX TO PEOPLE B Gottfried, Daniel.........R5 Grantham, Jeremy ............................. R8,R10 Greene, Howard........R15 Grohowski, Leo.........B10 H McNally, Robert........B10 Moloney, Martin.........R9 N Neumann, Spencer ... B10 Nikolaev, Kiril ............. R9 O Benz, Christine...........R5 Blancato, Phil..............R8 Bolton, David..............R9 Braun, Nick................R14 Brisard, Jean-Charles.B3 Broad, Nick..................R1 Harper, Shaun.............R2 Haviland, Dave............R5 Herndon-Brown, Shereem....................R2 Hill, Joanne...............R16 O'Donnell, Norah......A12 Office, Jeremy S.......R11 Olmsted, Jennifer.......R2 I Powell, Brian...............R2 C Iger, Robert.................B2 R J Ramos, Rachel............R6 Rhind, Will................R16 Carella, Joe ................. R2 Celenza, Matthew .... R11 Chan, Kam Fong..........R6 Childs, Donna............R14 Citron, Danielle...........B4 Claure, Marcelo...........B3 Cliburn, Gretchen........R6 Cohen, Douglas...........R5 Cohen, Lara.................B4 D Donaldson, Charlie......R2 Dorsey, Jack................B4 E Early, Roger A...........R15 Ellenberger, Donald..R15 Ellis, Jenna..................B4 F Flynn, Kathryn............R6 Fox, Rick......................B4 G Garber, Mela.............R11 Goodman, Steven RoyR2 Jackson, Jaja .............. A4 Jacobs, Jay..................R6 Jalinski, Josh............R16 K Kollo, Michael...........R13 Kostin, David ............ B10 Kotlikoff, Laurence J..R2 Koutsoftas, Nick.......B10 Kramer, Doug............R16 Kwok, Renée.............R11 L Lambert, Hal.............R10 Landis, Mark.............R13 Legere, John................B3 Lowlicht, Marc............R5 M Mandelker, Lawrence D. ...................................R11 Marsh, Terry ............... R6 Masucci, Sam..............R9 Mayer, Kevin...............B2 Maz, Liliana ................ R1 ADP Continued from the prior page January 2004 start, compared with the S&P 500’s roughly 200%. The outcome of shareholder fights typically hinges on the specific idea on the table rather than an activist’s past performance. But Mr. Ackman’s counterpart, ADP Chief Executive Carlos Rodriguez, has sought to pressure him by hammering his performance. Mr. Rodriguez said he is already transforming ADP’s technology, and the company’s shares have outpaced returns of the S&P 500 since he became CEO in November 2011, performance that typically makes for a difficult activist target. The tension between Pershing Square and ADP is highlighted by an opinion of the biggest proxy adviser, Institutional Shareholders Services Inc. ISS said ADP’s board needs change and that Mr. Ackman is a strong candidate to improve performance—but it stopped short of recommending that shareholders vote for him because he might introduce too much risk to the company. Both sides criticized ISS’s opinion. ISS said it stands by the report. Several large shareholders, including one of ADP’s 10 biggest, said they would support the company in the vote, citing Mr. Rodriguez’s track record. Still, some of those investors believe there is room to improve and expressed hope Mr. Ackman’s presence would pressure management. One institutional investor supporting Mr. Ackman told The Wall Street Journal it believes more urgency is needed to combat technology-heavy rivals. Another proxy solicitor, Glass MARVEL STUDIOS/ASSOCIATED PRESS A Ackman, William ........ B1 Amador, Art..............R13 Andrews, Paul.............R9 Au, Yat-Pang...............A4 P S Sharp, Adam...............B4 Son, Masayoshi .......... B3 Spacey, Kevin..............B3 Spada, Gina M..........R14 Stammers, Bob.........R16 Stevens, Greg ........... R16 Sussman, Everett.....R14 T Thomas, Jason..........B10 Tillinghast, Joel..........R8 V Van Sciver, Jay...........R6 W Walker, Beth...............R6 Walter, Mark...............B8 Welka, Tiffany..........R11 Wittenberg, Steve....R14 Y Young, Roger...............R1 Lewis & Co., supported all three of his nominees. “This was a company that got no attention from its investors or the public,” Mr. Ackman said in an interview. “As a result of our research and the proxy campaign, the shareholders and the company have a much better understanding of the massive opportunity to be unlocked and that is inherently a good thing.” ADP, based in Roseland, N.J., has a stock-market value of about $51 billion, but it isn’t used to a spotlight. It helps a wide range of companies handle repetitive HR functions like payroll and timekeeping, and ADP says one in every six U.S. workers benefits from its services. Still, it historically operated behind the scenes, dealing with corporate executives, not individual employees. Mr. Ackman argues ADP has fumbled its industry-leading size and position. Today, HR functions are moving into the hands of individual employees, driven by software-focused firms like Workday Inc. and Ultimate Software Group Inc. The activist says ADP is insular, stifles innovation and relies too heavily on people while software-heavy firms run lower-cost models. Mr. Ackman also said the company could boost its operating margins significantly more than it plans to, though both sides have alleged that the other manipulates numbers. Mr. Rodriguez acknowledges margins and technology need to improve. But he said moving at too fast a pace risks destabilizing the business. ADP says Pershing Square’s suggestion to increase margins would introduce risk for bigger customers by pushing them too fast, and since such clients only change providers roughly every 20 years, the pace needs to be careful. The strong opening of ‘Thor: Ragnarok’ was welcome news for theater owners, who have weathered several box-office flops this year. ‘Thor’ Movie Flexes Its Muscles BY ERICH SCHWARTZEL “Thor: Ragnarok” thundered into theaters with a $121 million opening this weekend, breathing some life into a box-office market reeling from its worst October in a decade. “Ragnarok,” now the 17th consecutive movie from Walt Disney Co.’s Marvel Studios to open at No. 1, has grossed $427 million globally, led by a $55.6 million debut in China. “Ragnarok” is the third Thor movie since the original opened in 2011, and its opening this weekend is 41% higher than the 2013 debut of the series’ second installment, “Thor: The Dark World.” Chris Hemsworth reprises his role as the God of Thunder in the movie, which also features Marvel characters Doctor Strange and the Incredible Hulk. That interweaving of characters is a central component of Marvel’s strategy, which draws in moviegoers by BANKS Continued from the prior page ties-fraud unit of the FBI’s New York field office has been investigating whether the banks facilitated improper payments to senior Mozambican officials, a person familiar with the matter said. Attorneys from the Justice Department’s Washington, D.C., division specializing in money laundering and asset recovery met this summer with investors who had been sold the Mozambican bonds and requested they provide all documents and communications from the banks, according to the people familiar with the matter. Justice officials also have met with Credit Suisse and VTB bankers and lawyers based in London, where the deals were originated, to discuss the transactions and follow-up dealings with investors and Mozambique, the people familiar with the matter said. Credit Suisse became involved in the deals in 2012, appealing to fans of various characters and story lines. “Introducing characters like the Incredible Hulk creates this feeling that [the movie] is bigger,” said Dave Hollis, Disney’s distribution chief. It has also helped Marvel avoid the sequel fatigue that has led to disappointing openings in other franchise titles this year. The studio’s “Guardians of the Galaxy” sequel this summer also outperformed its original installment. The gross of “Ragnarok” benefited from playing on higher-priced IMAX Corp. screens, which have contributed $34 million to the movie’s global tally. The “Ragnarok” opening is welcome news for theater owners, who have weathered several flops this year and went into the weekend with an annual box office down 5% compared with last year. Last month was the lowestgrossing October since 2007, due to misfires like “Blade Run- when the lender began discussions with defense contractor Iskandar Safa, who negotiated a deal to supply Mozambique with military and surveillance equipment through his company Privinvest Group. Mr. Safa asked Credit Suisse to help Mozambique borrow money to pay for the contracts. From 2013 to 2014, the Swiss bank, VTB and BNP raised $2 billion in bonds and loans for companies owned by Mozambique’s Defense Ministry, which contracted to buy equipment and services from Privinvest. About $1.2 billion of the debt wasn’t publicly disclosed and, in an unusual twist, proceeds from the deals went straight from the banks to Privinvest rather than going first to the state-owned companies that borrowed the money, people involved in the transactions said. After the Journal reported on the deals in 2016, donors including the International Monetary Fund suspended hundreds of millions of dollars in direct aid to the country, citing concerns about how the money had been spent. Estimated Box-Office Figures, Through Sunday SALES, IN MILLIONS FILM 1. Thor: Ragnarok 2. A Bad Moms Christmas 3. Jigsaw 4. Boo 2! A Madea Halloween 5. Geostorm DISTRIBUTOR WEEKEND* CUMULATIVE % CHANGE Disney STX Entertainment Lions Gate Lions Gate $121 $17 $121 $21.6 --- $6.7 $4.7 $28.8 $43 -60 -54 Warner Bros. $3 $28.8 -49 *Friday, Saturday and Sunday Source: comScore ner 2049” and “Geostorm.” Several high-profile releases will follow “Ragnarok” and help recover some of the losses, including “Justice League” later this month and “Star Wars: The Last Jedi” in December. The weekend’s other new release, “A Bad Moms Christmas” from STX Entertainment, also was a sequel, but it didn’t match its predecessor’s performance. The comedy fell a bit short of expectations with a $21.6 million debut since opening Wednesday. That is a decent opening, given the movie’s modest $28 million budget, but indicates the movie won’t be the moneymaker that the original was. Last year’s “Bad Moms,” starring Mila Kunis and Kathryn Hahn as mothers who try to shake up their domestic life, was a breakout hit and ultimately collected $113 million. The aid freeze prompted a currency crisis and worsened food shortages in Mozambique, which ranks 181st out of 188 countries on the United Nations’ Human Development Index, a statistic including life expectancy and education. The IMF commissioned investigations firm Kroll to audit the deals, and Kroll found the prices of equipment to be provided by Privinvest exceeded what they should have cost by about $700 million, while an additional $500 million of the loan proceeds was delivered,” a Privinvest spokesman said. He also said the goods and services provided weren’t military in nature and declined to comment on the Justice Department and FBI inquiries. Revelations of the debts and the allegedly missing cash have sparked anger in Mozambique at the government and at the banks it hired. “Clearly there was nothing to do with borrowing money— at least the traditional way of borrowing money—for development,” said Adriano Nuvunga, program director for Mozambique’s Center for Public Integrity, a watchdog group, speaking at a conference at Johns Hopkins University in March. “This, for us, is clearly an international corruption scandal.” The Justice Department is also looking at whether the banks helped Mozambican officials borrow more debt than the nation’s economy could reasonably repay, said one of the people familiar with the matter. —Matina Stevis-Gridneff and Aruna Viswanatha contributed to this article. The FBI has been investigating whether the banks facilitated improper payments. unaccounted for. “It is our view that, had Kroll assessed the pricing of the projects properly, using the correct assumptions and methodology, they would have found no discrepancy between the contract prices and value For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 6, 2017 | B3 * * * * BUSINESS NEWS He Posed As Journal Reporter, Got Caught Boeing Is Set to Take Up Old Jet BY NICK KOSTOV BY DOUG CAMERON Late last month, Carson Block, the founder of short seller Muddy Waters LLC, accepted an invitation from a man identifying himself as a reporter for The Wall Street Journal. They were to meet at a chic Manhattan hotel and discuss Mr. Block’s short selling of the stock of a French supermarket chain, according to Mr. Block. The man who showed up wasn’t a Journal reporter. According to video footage of the encounter reviewed by The Wall Street Journal and two people who know him, it was JeanCharles Brisard, a well-known corporate security and intelligence consultant who lives in Switzerland and France. Mr. Brisard also has regularly worked for Groupe Casino, the French supermarket targeted by Muddy Waters’s short selling, the two people said. The hotel rendezvous offers a peek into the sometimes cloak-and-dagger world of a small but influential circle of short sellers and the companies they target. The encounter was described in a lawsuit filed on Oct. 31 in New York by Mr. Block, but Mr. Brisard’s involvement and his alleged links to Casino haven’t previously been reported. When first contacted by a reporter about the hotel meeting, Mr. Brisard said: “I am a stranger to these facts. I have absolutely no idea what you’re talking about,” adding that he had never worked for Casino. Ten minutes later, Mr. Brisard called back to say he had been “confused” during the initial call and that he had “no comment” on whether he appeared in the video or had ever worked for the retailer. On the phone, Mr. Brisard described himself as an “international investigator.” His résumé, which is posted on his business website, lists a “business intelligence” stint at media conglomerate Vivendi SA as well as work for the French government, but has no mention of work for Casino. When asked for comment for this article, a spokeswoman for Casino denied any involvement. She said the company has “never acted in an inappropriate manner” or “authorized anyone to act in an inappropriate manner.” Mr. Block’s Muddy Waters borrows shares and then sells them with the aim of repurchasing them later at a lower price. To that end, the California firm publishes critical research about the company whose shares it is trading and profits if the price declines. Mr. Block said he suspected the individual who met him at the hotel of impersonating the Journal reporter. Shortly after the meeting began, Mr. Block whipped out his cellphone and began to film the encounter. “I’d like to know who you really are,” Mr. Block said, according to the video of the encounter. Admitting he didn’t work for the Journal, the impostor said: “I wanted to meet you. There is no other way to meet you.” Shortly after, Mr. Block filed a lawsuit in New York trying to compel Google’s parent, Alphabet Inc., to turn over information related to the identity of the suspected impostor. The person had used Gmail in exchanges with Muddy Waters claiming to be William Horobin, a reporter in the Journal’s Paris bureau, according to the lawsuit. A Muddy Waters spokesman said Mr. Block filed the suit to establish that the impostor was sent by Casino. “Casino already suffered many calumnious accusations from this company in the past,” the Casino spokeswoman said. “We believe these alleged suspicions would just be another attempt to destabilize the group and we vehemently refute and deny any such allegations.” The Mr. Horobin who is a Journal reporter declined to comment. A spokeswoman for Dow Jones & Co., publisher of the Journal, said: “I can confirm that The Wall Street Journal reporter with this name has made no inquiries” with Muddy Waters. In the lawsuit, Muddy Waters said it contacted the Journal’s Mr. Horobin in February and established that he hadn’t been communicating with the firm. A spokesman for Muddy Waters said the firm no longer has a short position on Casino. United Continental Holdings Inc. said it is considering replacing older wide-body planes with new Boeing Co. 767 jets, in what would be a surprising revival of fortune for the 35-year-old aircraft. Boeing stopped making the passenger version of the twinaisle plane three years ago but recently increased production of models converted for use as military refueling tankers and freighters. Now the aerospace giant is looking at ways to restart production of a passenger 767 to meet emerging demand from airlines seeking to replace aging jets in the next several years, according to people familiar with Boeing’s plans. The focus is on reviving the 767-300ER, the most popular version of the jet family, which can seat about 200 passengers. This would also help satisfy demand before the company launches a twin-aisle jet in the middle of the next de- United considers 767s as plane maker looks to restart production of a passenger version Up and Away Number of 767 passenger jets in operation by airline* 79 Delta Air Lines 51 United 41 Latam Airlines 32 STEPHEN BRASHEAR/GETTY IMAGES Japan Airlines All Nippon 25 American 24 16 Condor British Airways 10 Air Canada 9 *For 767-300 and -400 passenger jets. Source: the companies A 767 fuselage under construction in 2012. Boeing wants to meet emerging demand from airlines. THE WALL STREET JOURNAL. cade, according to the people familiar with Boeing’s plans. Boeing recently established a program office for its proposed new midsize airplane—dubbed the 797 by some in the industry—but hasn’t definitively decided to build the plane. Boeing declined to comment on customer discussions. Chicago-based United operates 51 of the current 767 passenger jets on trans-Atlantic routes and to South America. declined to comment. Boeing has 101 outstanding orders for the military and cargo versions of the plane and recently raised annual output to 30 767s to meet orders from the Air Force and FedEx Corp. Amazon.com Inc. has contracted two cargo carriers to fly converted 767s for its Prime Air unit. —Susan Carey contributed to this article. The airline has been assessing options for replacing the planes, which are close to 20 years old on average. Analysts had expected United, which operated the first 767 in 1982, to select either new Boeing 787 jets or Airbus A330s to replace them. New 767s would be less expensive. “We have not recently asked for an offer for any particular wide-body aircraft type but have in the ordinary course of discussions asked for information about several wide-body aircraft, including the 767,” a United spokeswoman said. Boeing has delivered more than 700 passenger versions of the jet since the plane was introduced. Other big operators include Delta Air Lines Inc. and American Airlines Group Inc. Delta, which has 82 767s, said it wasn’t thinking of adding new 767s. American Sprint’s Desire for Control Sank T-Mobile Deal By Ryan Knutson, Drew FitzGerald and Dana Mattioli There was discussion over inserting a provision to buy the combined company back after two years, two people familiar with the matter said. They explored giving the Japanese billionaire the right to increase his stake over time. He was offered the role of cochairman. In the end, nothing worked. In a joint statement Saturday, the companies called off the merger for good. The abrupt turn of events derailed a deal that many on Wall Street have anticipated for years, and that Mr. Son has long desired. Before Mr. Son’s SoftBank Group Corp. acquired control of Sprint for $22 billion in 2013, he also held talks with Deutsche Telekom AG about striking a three-way deal with its U.S. subsidiary, T-Mobile. When that failed, he tried to merge the companies again in 2014, only to back down in the face of opposition from regulators. The latest round of deal talks began to unravel in late October. The transaction that was being contemplated was an all-stock merger that would have given Deutsche Telekom control over the combined company and made T-Mobile Chief Executive John Legere the new firm’s head, the people said. Beyond having a voice as a major shareholder, Mr. Son wouldn’t be able to dictate the combined company’s direction. In recent weeks, disagreements over Sprint’s valuation also came to a head, the people familiar with the matter said. Deal makers with Sprint were under the impression an exchange ratio for Sprint’s shares had been agreed to weeks earlier. But, as Sprint’s stock price began to slide, TMobile began discussing a lower valuation, they said. Then, at an Oct. 27 board meeting in Tokyo, executives at SoftBank started questioning the fundamental logic of the deal, the people said. Mr. Son believes wireless connectivity is central to major businesses of the future, including robots and millions of devices. Sprint, therefore, is a strategically critical asset, they argued, so why give up control at all? For Deutsche Telekom, control was also a requirement. TMobile is much larger than Sprint, and Deutsche Telekom would have to control the combined company to include the U.S. results in the German Final Decision Came After a Dinner Failed To Resolve Issues MARK KAUZLARICH/BLOOMBERG NEWS During months of merger talks with T-Mobile US Inc., Sprint Corp. Chairman Masayoshi Son sought a way to merge the two wireless rivals without really having to hand over the keys. SoftBank chief Masayoshi Son had long sought a T-Mobile deal. company’s reported results. Whether regulators would approve the deal was also a major concern for SoftBank, the people said. U.S. regulators had expressed opposition to the same combination under the Obama administration and had also blocked AT&T Inc.’s attempt to buy T-Mobile in 2011, arguing that reducing the market from four to three competitors would harm consumers. Even with a pro-business Trump administration, Sprint wasn’t sure the Justice Department would approve the merger. The SoftBank board didn’t want to leave Sprint in limbo, the people said, while antitrust regulators reviewed the process for a year—a time during which Sprint customers and employees might leave. “The probability of approval by the DOJ was low, so why sit in limbo and see Sprint go downward?” one of the people said. While significant progress had been made on many issues during months of talks, valuation and control always lingered in the background, said one person close to the deal. “The synergies that this deal offered were bigger than the deal. Bigger than the market cap of Sprint,” the person said. “The synergies were massive, and that’s what keeps everybody going.” Combined, Sprint and T-Mobile would still trail Verizon Communications Inc. and AT&T by monthly subscribers. But the combination could yield billions of dollars in savings by sharing management, stores, wireless spectrum and network equipment, analysts at New Street Research estimated. When Sprint Chairman Masayoshi Son recently called Tim Höttges, chief executive of Deutsche Telekom, to let him know he wanted to scrap the deal, Mr. Höttges asked for a few more days, people familiar with the matter said. T-Mobile’s board met in New York on Wednesday and its bankers scrambled to put together a better offer. After the board meeting, TMobile’s Mr. Legere spoke with Sprint’s chief executive, Marcelo Claure. Mr. Legere made it clear T-Mobile didn’t want the deal to die, two of the people said. The executives agreed to meet and talk things over. The meeting took place over dinner at Mr. Son’s expansive home in Tokyo, three of the people said. In attendance were Mr. Höttges, Mr. Legere, Mr. Claure and Mr. Son, along with their advisers. T-Mobile offered a more attractive exchange ratio, meaning it would have required fewer Sprint shares to obtain a larger ownership stake, the people said. Mr. Son couldn’t be swayed. Within hours, the executives were on planes, headed home. Legal Notice DAVID GIESBRECHT/ASSOCIATED PRESS If You Owned a U.S. Dollar LIBOR-Based Instrument Between August 2007 and May 2010 You May Be Eligible for a Payment from a $130 Million Settlement Kevin Spacey faces accusations of sexual assault and harassment. Netflix, Producer Break With Spacey BY JOE FLINT Netflix Inc. and “House of Cards” producer Media Rights Capital have cut ties with actor Kevin Spacey after sexual-assault and harassment accusations were made against him, as the companies investigate his alleged misconduct, reassure staff and determine whether production of the show can resume. Mr. Spacey last week was accused by actor Anthony Rapp in a BuzzFeed article of making an unwanted sexual advance in 1986. A subsequent CNN article said people connected to the show said Mr. Spacey created a “toxic” work environment on “House of Cards,” the political drama he stars in, through a pattern of sexual harassment. In a statement Friday, Netflix said it won’t “be involved with any further production of ‘House of Cards’ that includes Kevin Spacey.” Netflix said it would work with Media Rights Capital to “evaluate our path forward as it relates to the show.” Netflix halted production of the show last week and MRC suspended Mr. Spacey. Netflix is also canceling a movie it was making with Mr. Spacey that was in postproduction. Mr. Spacey has also been dropped by Creative Artists Agency and his publicist. Mr. Spacey couldn’t be reached for comment. Neither Mr. Spacey’s lawyer nor his manager responded to requests for comment. There is a Settlement with Citibank that impacts individuals and institutions that entered into overthe-counter financial derivative and non-derivative instruments directly with Citibank, Barclays, or a Non-Settling Defendant that received payments tied to U.S. Dollar LIBOR. Citibank, Barclays, and the Non-Settling Defendants (Credit Suisse, Bank of America, JPMorgan, HSBC, Lloyds, WestLB, UBS, RBS, Deutsche Bank, Rabobank, Norinchukin, Bank of Tokyo-Mitsubishi UFJ, HBOS, SocGen, and RBC) are U.S. Dollar LIBOR Panel Banks. The instruments include certain interest rate swaps, forward rate agreements, asset swaps, collateralized debt obligations, credit default swaps, inflation swaps, total return swaps, options, and floating rate notes. The litigation claims that the banks manipulated the U.S. Dollar LIBOR rate during the financial crisis, artificially lowering the rate for their own profit, which resulted in purchasers receiving less interest payments for their U.S. Dollar LIBORbased instruments from the banks as they should have. Plaintiffs assert antitrust, breach of contract, and unjust enrichment claims. Citibank denies all claims of wrongdoing. Am I included? You are included in the Settlement if you (individual or entity): Directly purchased certain U.S. Dollar LIBOR-based instruments from Citibank, Barclays, or any Non-Settling Defendant (or their subsidiaries or affiliates) in the United States; and owned the instruments at any time between August 2007 and May 2010. What does the Settlement provide? The Settlement will create a $130 million Settlement Fund that will be used to pay eligible Class Members who submit valid claims. Additionally, Citibank will cooperate with the Plaintiffs in their ongoing litigation against the Non-Settling Defendants. How can I get a payment? You must submit a Proof of Claim to get a payment. You can submit a Proof of Claim online or by mail. The deadline to submit a Proof of Claim is March 29, 2018. You are entitled to receive a payment if you have a qualifying transaction with Citibank, Barclays or a Non-Settling Defendant. At this time, it is unknown how much each Class Member who submits a valid claim will receive. What are my rights? Even if you do nothing, you will lose your right to sue Citibank for the alleged conduct and will be bound by the Court’s decisions concerning the Settlement. This Settlement will not result in a release of your claims against any Non-Settling Defendant, and the litigation against Non-Settling Defendants is ongoing. If you want to keep your right to sue Citibank, you must exclude yourself from the Settlement Class by January 2, 2018. If you stay in the Settlement Class, you may object to the Settlement by January 2, 2018. The Court will hold a hearing on January 23, 2018 to consider whether to approve the Settlement and approve Class Counsel’s request of attorneys’ fees of up to one-third of the Settlement Fund, plus reimbursement of costs and expenses. You or your own lawyer may appear and speak at the hearing at your own expense. 1-888-568-7640 www.USDollarLiborSettlement.com B4 | Monday, November 6, 2017 THE WALL STREET JOURNAL. TECHNOLOGY WSJ.com/Tech At Twitter, Trump Is Star and Headache Brief deactivation of president’s account sparks jokes and vow it won’t happen again BY NATALIE ANDREWS AND GEORGIA WELLS The deactivation of President Donald Trump’s Twitter account by a rogue employee was the most public sign yet that Twitter’s greatest star can also cause the company great headaches. Twitter blamed the incident—which took Mr. Trump’s @realdonaldtrump account offline for 11 minutes late Thursday—on actions taken by a customer-support employee on his or her last day of work. Twitter said it was taking measures “to prevent this from happening again.” Inside Twitter, the brief deactivation elicited celebration or amusement even in the upper ranks. A couple of hours after the deactivation of Mr. Trump’s account, Twitter Chief Executive Jack Dorsey liked a tweet with an image of his face superimposed on celebrity painter Bob Ross standing before a canvas depicting Mr. Trump’s deactivated account. “There are no mistakes, only happy little accidents!” the caption said. A spokesman for Twitter declined to comment. Like many tech companies, Twitter’s workforce is young and concentrated in the leftleaning Bay Area. Employees of Twitter donated $4,060 to Mr. Trump’s campaign from 2015 to 2016. During the same period, about 100 employees donated about $122,612 directly to “Hillary for America.” This disconnect between Twitter’s employees and the company’s most closely watched user has fueled tension within the company. One former employee said that deleting Mr. Trump’s account was a “running joke” among employees about things they wanted to do on their last day. Lara Cohen, Twitter’s former head of entertainment and talent partnerships, retweeted a post about the rogue employee that said, “Not all heroes wear capes.” Former Twitter executive Adam Sharp said Silicon Valley tech companies haven’t done a good job recruiting conservatives. “The underrepresentation there is as least as pronounced as the more talked about gender and race nearly 9 million new monthly users to the site. Early Friday, Mr. Trump addressed the controversy in a tweet. “My Twitter account was taken down for 11 minutes spheres,” said Mr. Sharp, now a technology consultant. “Social media platforms and shareable networks have continued to show an implicit liberal bias,” said Jenna Ellis, a fellow at the Centennial Institute, a conservative think tank at Colorado Christian University. A Twitter representative declined to comment. Further complicating Twitter’s relationship with the president is that Mr. Trump’s use of Twitter as a primary communication tool has helped the social network, tech analysts say, as it attempts to reignite user growth. Twitter’s user growth has largely stalled over the past two years; during the first quarter, Mr. Trump added 8.9 million followers among Twitter users. In the same period, Twitter drew President’s use of Twitter as a primary communication tool has helped the site. by a rogue employee. I guess the word must finally be getting out—and having an impact.” Critics of the president say that his use of the platform— such as by threatening to attack North Korea if the country acts “unwisely,” as Mr. ADS Continued from page B1 of dollars in potential revenue next year. During its recent fundraising, Outcome estimated 2016 revenue of about $130 million, according to a company presentation to investors that was reviewed by The Wall Street Journal. David Goldin, an Outcome Health spokesman, said in response to inquiries from the Journal, “Outcome Health is actively leading the point-ofcare industry in creating dependable delivery and measurement systems through transparent third-party validation, and we very much appreciate the overwhelming support from the vast majority of our customers who are making A drone at the Jundee mine, which is expected to produce over $300 million in gold this fiscal year. could also collect maps of older sections of mines, making it easier to restart mining in those areas if commodity prices rise. In general, mining companies assume they can get 95% of the ore from underground using current methods, said Brad Valiukas, technical-services manager at Northern Star. Jundee alone is expected to produce more decisions based on the substantial, verified data they are currently receiving.” Mr. Goldin added that Outcome has signed deals for millions of dollars in new advertising from pharmaceutical companies as well as medical device and lifestyle companies. Last month, the Journal reported allegations by advertisers and former employees that some Outcome employees had misled customers by charging them for ads on more screens than the startup had installed. Outcome offered free advertising worth tens of millions of dollars this year to make up for shortfalls, the Journal reported. An Outcome spokesman, Lanny Davis, told the Journal last month that Outcome had put three employees on paid leave and hired the law firm of former U.S. attorney Dan than $300 million in gold this fiscal year, so even a small improvement in efficiency is “a massive amount of money,” Mr. Valiukas said. In September, a team of researchers from Data61, part of the Australian government-funded Commonwealth Scientific and Industrial Research Organisation, demonstrated at Jundee that a drone could fly by itself in Webb “to review allegations about certain employees’ conduct” that were raised internally and by the Journal. Mr. Davis said Outcome “has always upheld the highest ethical standards” and has adopted new policies to comply with customer contracts. Legal Notices To advertise: 800-366-3975 or WSJ.com/classiﬁeds CLASS ACTIONS # ()*(+,+-*./-+%0 ' !"# $" !! ' ' %! ' # ' ' &% ! ' !# ' &&1 ) % % 2 &% 34&%5' &1 6 6-*7 8 % 9 6-*( 1 1 :"#! ! "" ! ! !!# #!",! "! " ! "!" #!",! " !! "; < = 0" 7* 6-*/ ! 9)-- $ = " ! "= %# 0 $! ! !!# #!",! 0; ! ! ! !!# #!",! "! " ! "!" #!",! " > # $# " ; ? ! !!# "!# *7-* !"! "!"$ 7 > " 9(.*6 " ! :":# !"$;) 3*' <!" ! :":# #!!$! # #! "! ! !:! !!$! ! ;#! 7- 6-*@ 34!:!5' ! =+,:! ,! 34!;!5' " A*9-------- ,# # = ::" = ! "! # " B#! "#= C!D 36' <!" 0;$! 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C#!# =! ! #!!$! $ ,!,! # ! ! <; "##) 8 & ? % 8 .HH #! "< ! *9- ; 96*-* 1 Basketball Champion Tries Hand At Esports BY SARAH E. NEEDLEMAN As a three-time National Basketball Association champion and actor, Rick Fox is used to fans asking him about his years with the Los Angeles Lakers or his stint on HBO’s “Oz.” What he is still getting used to: Fans who want to know about his pro videogame squad. In esports, fans watch videogame players compete with high-end gear, matching jerseys and other traditional sports hallmarks. Most watch on free live-streaming platforms like Twitch, though some buy tickets to live events. Echo Fox’s profile is getting another lift from an alignment with Major League Baseball. Last month, the New York Yankees signed a partnership agreement with Vision Esports, an investment vehicle run by the private-equity firm Mr. Fox co-founded. The Yankees partnership is part of a $25 million to $30 million funding round, expected to close in coming weeks, that will make Vision Esports the largest shareholder in Echo Fox, a person familiar with the matter said. Echo Fox and the Yankees declined to comment on the exact size of the Yankees’ participation. Mr. Fox’s third act, as a videogame team owner, comes as the esports industry is growing rapidly. Some 191 million people world-wide are expected to watch an esports contest at least once a month in 2017, more than double the 2012 number, according to research firm Newzoo BV. At a Sept. 13 meeting in New York sponsored by the Point of Care Communication Council, some big pharmaceutical advertisers raised questions about point-of-care ad companies’ claims about ad performance, people who attended the meeting said. Ad- vertisers at the meeting called for more transparency, these people said. Christine Franklin, executive director of the Point of Care Communication Council, said the purpose of the meeting was to present work from the group’s standards committee, including proposed auditing standards. In July, Outcome hired media-audit firm BPA Worldwide, which verified the size of Outcome’s network and its system for delivering ads. Richard Murphy, BPA’s senior vice president of auditing, said his firm has reviewed about a dozen Outcome ad campaigns to date and plans to audit more this quarter. “In reviewing those campaigns, we have [seen] some under-delivery and some over-delivery, which is typical of digital media campaigns,” he said in an email. MIMS U.S. retail sales at restaurants have surpassed sales at grocery stores. Outcome Health streams ads to screens in doctors’ offices. ADVERTISEMENT ) ,!=" ** 6-*@ an underground cavern where the pilot couldn’t see it. But that means the pilot also couldn’t intervene if something went wrong. “It’s a pretty big step for us and it shows that this is feasible,” said Stefan Hrabar, the Brisbane, Australia-based scientist who led the team. More work still needs to be done. Right now, researchers first must fly the JASON HENRY FOR THE WALL STREET JOURNAL Continued from page B1 navigation systems, such as GPS, like it could on the surface. Scientists and mining engineers say drones could be deployed to investigate large underground caverns after they are blasted open by explosives. The rock blasted out of these caverns is trucked to the surface, where it is crushed and gold is extracted. Currently, surveyors must use a laser-mapping device attached to a boom, and stick it as far into the cavern as possible. But a laser attached to a fixed point can’t capture everything, and it is too dangerous for human surveyors to go inside for a closer look. With a better map from a drone, miners could get a clearer picture of how much rock they have blasted out, modify their blasting technique if they aren’t getting enough, and better plan the next cavern to blast. Drones MIKE CHERNEY/THE WALL STREET JOURNAL MINE drone with assistance from a pilot to build a preliminary map. Using the initial data, they can then program the drone to fly autonomously to certain locations. But the ultimate goal is a fully autonomous drone that can simply be taken underground and turned on, and then fly away to map a tunnel or cavern. Such drones could be tested in the next few months. One of the riskier test flights Mr. Hrabar and his colleagues attempted at Jundee was an autonomous flight in a roughly 180-foottall cavern, the largest that had been blasted at the mine. “This is the moment of truth,” said Farid Kendoul, another scientist on the team, just before the flight. The drone, whizzing on its six rotors, disappeared into the cave. It returned a few minutes later, though a hardware glitch required the pilot to help land the machine. Mr. Kendoul clapped his hands in the poorly lighted tunnel. “It came back,” he said. Trump did this summer— sometimes violates Twitter’s rules. Twitter also considers the newsworthiness of a tweet when deciding whether to take action. “The public’s interest is to hear the president speak,” says Danielle Citron, a professor at the University of Maryland School of Law who studies online harassment. She has advised Twitter since 2009 and is a member of Twitter’s Trust and Safety Council. “The tweets can be costly, inciting racism and distrust and worse, but they still are the words of our president.” The president has said in the past that he believes Twitter is the best way for him to connect directly with his supporters. He has bragged about his follower count in media interviews. Continued from page B1 person is devoted to a specific set of tasks. At the end of the preparation process, runners assemble and bag the meals. In San Jose, Grubhub competitor DoorDash has built out its own kitchen space. There is one tenant so far, a pizzeria called the Star. (More are on the way, DoorDash says.) To save on rent, DoorDash built the facility in a disused portion of the Santa Clara County Fairgrounds. One month in, the Star’s savings have been notable, says Ben Seabury, chief operating officer of the 1100 Group, which owns the virtual restaurant. Typically, 30 cents of every dollar that comes into one of his restaurants goes to labor, says Mr. Seabury. But without waiters, bartenders and dishwashers, that cost is just 10 cents on the dollar— and even less when demand is high. Postmates, another popular on-demand delivery startup, is pursuing a similar strategy, a company spokeswoman says. In September, it opened a commissary kitchen in Los Angeles where, in exchange for paying a higher commission, Postmates’ virtual-restaurant Restaurants and bars Grocery stores $60 billion 50 40 30 20 10 0 2000 partners can operate without having to secure their own kitchen space. Virtual restaurants tap into a larger trend: Americans’ increasing aversion to cooking for themselves. For the first time ever in 2016, Americans spent more at eating and drinking establishments than on groceries, according to U.S. Census data. The food-delivery market is a small slice of that sector: It is only $30 billion in 2017, but Morgan Stanley estimates it could balloon to $220 billion within a few years. A nationwide oversupply of restaurants and the subsequent shakeout has kitchen space in some locations go- ’10 ing for below-market rates. Both kitchen space startup Foodworks and Green Summit Group specialize in snapping up kitchens on the cheap. The same trend is driving surviving establishments trying to figure out how to increase their business through delivery. A Chicago restaurant group, Lettuce Entertain You Enterprises, launched a virtual restaurant after three of its chefs realized they had unused kitchen space at one of their sushi restaurants. The group had leads on highquality tuna, and the result was the ASAP Poke virtual restaurant, which delivers poke bowls. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 6, 2017 | B5 NY CLOSED-END FUNDS Listed are the 300 largest closed-end funds as measured by assets. Closed-end funds sell a limited number of shares and invest the proceeds in securities. Unlike open-end funds, closed-ends generally do not buy their shares back from investors who wish to cash in their holdings. Instead, fund shares trade on a stock exchange. a-The NAV and market price are ex dividend. b-The NAV is fully diluted. c-NAV is as of Thursday’s close. dNAV is as of Wednesday’s close. e-NAV assumes rights offering is fully subscribed. f-Rights offering in process. g-Rights offering announced. h-Lipper data has been adjusted for rights offering. j-Rights offering has expired, but Lipper data not yet adjusted. l-NAV as of previous day. o-Tender offer in process. v-NAV is converted at the commercial Rand rate. w-Convertible Note-NAV (not market) conversion value. y-NAV and market price are in Canadian dollars. NA signifies that the information is not available or not applicable. NS signifies fund not in existence of entire period. 12 month yield is computed by dividing income dividends paid (during the previous twelve months for periods ending at month-end or during the previous fifty-two weeks for periods ending at any time other than month-end) by the latest month-end market price adjusted for capital gains distributions. Source: Lipper Friday, November 3, 2017 52 wk Prem Ttl Fund (SYM) NAV Close /Disc Ret General Equity Funds Adams Divers Equity Fd ADX 18.24 15.71 -13.9 35.0 Boulder Growth & Income BIF 12.44 10.63 -14.5 37.8 Central Securities CET 32.36 26.79 -17.2 35.5 CohSteer Opprtnty Fd FOF 13.78 13.14 -4.6 27.2 Cornerstone Strategic CLM 13.58 15.03 +10.7 26.0 EtnVnc TaxAdvDiv EVT 23.17 22.59 -2.5 31.3 52 wk Prem Ttl Fund (SYM) NAV Close /Disc Ret Gabelli Dividend & Incm GDV 24.03 22.60 -6.0 33.5 Gabelli Equity Trust GAB 6.41 6.02 -6.1 28.9 Genl American Investors GAM 42.42 36.29 -14.5 28.5 Guggenheim Enh Fd GPM 8.83 8.63 -2.3 30.9 HnckJohn TxAdv HTD 26.15 25.79 -1.4 22.5 Liberty All-Star Equity USA 6.80 6.18 -9.1 38.3 Royce Micro-Cap RMT 10.42 9.34 -10.4 40.2 Royce Value Trust RVT 17.52 16.03 -8.5 47.6 Source Capital SOR 45.23 40.87 -9.6 20.5 Tri-Continental TY 29.26 26.14 -10.7 32.1 Specialized Equity Funds Adams Natural Rscs Fd PEO 23.04 19.77 -14.2 11.0 AllnzGI NFJ Div Interest NFJ 14.72 13.41 -8.9 22.5 AlpnGlblPrProp AWP 7.21 6.46 -10.4 38.6 ASA Gold & Prec Metals ASA 12.79 11.30 -11.6 -20.3 BlkRk Enh Cap Inco CII 16.74 15.96 -4.7 35.2 BlkRk Engy Res Tr BGR 15.19 13.77 -9.3 10.2 BlackRock Enh Eq Div Tr BDJ 9.80 9.23 -5.8 32.8 BlackRock Enh Gl Div Tr BOE 14.32 13.57 -5.2 29.0 BlkRk Intl Grwth&Inco BGY 7.00 6.64 -5.1 30.7 BlkRk Health Sci BME 35.37 36.10 +2.1 27.2 BlackRck Rscs Comm Str Tr BCX 10.21 9.04 -11.5 24.7 BlackRock Science & Tech BST 27.82 26.57 -4.5 52.4 BlackRock Utility & Infr BUI 21.27 20.86 -1.9 27.1 CBREClarionGlblRlEstIncm IGR 8.76 7.79 -11.1 14.1 Central Fund of Canada CEF 13.13 NA -5.8 ClearBridge Amer Engy CBA 7.94 NA 7.5 ClearBridge Engy MLP Fd CEM 13.49 NA 0.7 A Week in the Life of the DJIA A look at how the Dow Jones Industrial Average component stocks did in the past week and how much each moved the index. The DJIA gained 105.00 points, or 0.45%, on the week. A $1 change in the price of any DJIA stock = 6.89-point change in the average. To date, a $1,000 investment on Dec. 31 in each current DJIA stock component would have returned $35,835, or a gain of 19.45%, on the $30,000 investment, including reinvested dividends. The Week’s Action Pct Stock price Point chg chg (%) change in average* Company Symbol Close 5.80 4.37 2.06 1.97 1.72 9.45 1.94 5.29 3.26 2.26 65.07 13.36 36.42 22.45 15.56 Apple Intel Boeing McDonald’s Travelers 1.71 1.68 1.50 1.28 1.11 1.51 2.00 1.65 1.45 2.69 10.40 13.77 11.36 9.98 18.52 Wal-Mart Stores WMT United Technologies UTX Visa V Chevron CVX Goldman Sachs GS 0.67 0.39 0.34 0.13 0.12 0.64 0.33 0.33 0.27 0.04 4.41 2.27 2.27 1.86 0.28 –0.14 –0.22 –0.35 –0.45 –0.53 –0.05 –0.10 –0.36 –0.25 –0.46 –0.34 –0.69 –2.48 –1.72 –3.17 Pfizer Coca-Cola J.P. Morgan Chase Nike Procter & Gamble –0.63 –0.86 –1.07 –1.20 –1.37 –0.53 –1.18 –2.52 –1.70 –2.10 –3.65 –8.12 –17.35 –11.71 –14.46 Exxon Mobil Caterpillar 3M Johnson & Johnson IBM XOM CAT MMM JNJ IBM –1.76 –1.90 –2.97 –3.13 –3.74 –2.95 –1.38 –1.45 –0.65 –2.18 –20.31 –9.50 –9.98 –4.48 –15.01 Home Depot DowDuPont Verizon General Electric Merck $1,000 Invested(year-end '16) $1,000 AAPL $172.50 INTC 46.34 BA 261.75 MCD 168.65 TRV 133.32 $1,508 1,306 1,719 1,413 1,108 89.68 121.07 111.36 114.99 244.40 1,324 1,124 1,435 1,007 1,030 American Express AXP 96.43 Microsoft MSFT 84.14 Walt Disney DIS 98.64 UnitedHealth Group UNH 212.87 Cisco Systems CSCO 34.47 1,323 1,377 954 1,346 1,181 PFE 35.55 KO 45.97 JPM 101.41 NKE 55.71 PG 86.58 1,127 1,137 1,202 1,107 1,062 83.18 136.63 232.22 140.08 151.58 948 1,517 1,324 1,240 939 HD 164.39 DWDP 71.16 VZ 47.42 GE 20.14 MRK 56.06 1,248 1,270 932 654 973 *Based on Composite price. DJIA is calculated on primary-market price. Source: WSJ Market Data Group; FactSet. 52 wk Prem Ttl Fund (SYM) NAV Close /Disc Ret Clearbridge Engy MLP Opp EMO 11.16 NA -0.0 Clearbridge Engy MLP TR CTR 11.75 NA 8.4 Cohen & Steers Infr Fd UTF 25.55 23.09 -9.6 30.9 C&S MLP Incm & Engy Opp MIE 10.48 9.70 -7.4 12.2 Cohen & Steers Qual Inc RQI 13.54 12.55 -7.3 17.9 CohnStrsPfdInco RNP 22.83 21.18 -7.2 25.6 Cohen & Steers TR RFI 13.40 12.64 -5.7 16.4 CLSeligmn Prem Tech Gr Fd STK 22.65 23.66 +4.5 55.3 Duff & Phelps DNP 9.98 11.29 +13.2 23.3 Duff&PhelpsGblUtilIncFd DPG 15.85 NA 16.5 Eaton Vance Eqty Inco Fd EOI 14.67 14.38 -2.0 33.5 Eaton Vance Eqty Inco II EOS 15.46 15.08 -2.5 26.9 EtnVncRskMngd ETJ 9.96 9.16 -8.0 15.6 Etn Vnc Tax Mgd Buy-Write ETB 16.27 16.58 +1.9 14.0 Eaton Vance BuyWrite Opp ETV 14.87 15.11 +1.6 17.5 Eaton Vance Tax-Mng Div ETY 12.06 11.73 -2.7 29.6 EatonVanceTax-MngdOpp ETW 11.52 11.87 +3.0 27.8 EtnVncTxMngGlDvEqInc EXG 9.40 9.32 -0.9 31.3 Fiduciary/Clymr Opp Fd FMO 12.19 12.12 -0.6 -5.8 FT Energy Inc & Growth Fd FEN 22.98 22.86 -0.5 6.7 FstTrEnhEqtIncFd FFA 16.40 15.62 -4.8 33.3 First Tr Engy Infr Fd FIF 18.72 18.39 -1.8 15.2 First Tr MLP & Engy Incm FEI 14.27 14.28 +0.1 6.6 Gabelli Hlthcr & Well GRX 11.09 9.65 -13.0 11.5 Gabelli Utility Tr GUT 5.50 7.08 +28.7 21.0 GAMCOGlblGoldNatRscs&Inc GGN 5.39 5.47 +1.5 4.1 GoldmanSachsMLPIncOpp GMZ 8.57 NA 6.3 Goldman Sachs MLPEnergy GER 6.10 NA 4.5 John Hancock Finl Opps Fd BTO 36.68 37.54 +2.3 40.0 Macquarie Glbl Infrstrctr MGU 28.09 24.93 -11.2 37.9 NeubergerBermanMLPIncm NML 9.65 8.69 -9.9 11.2 Neubrgr Brm Rl Est Sec Fd NRO 5.80 5.50 -5.2 17.3 Nuveen Dow 30 Dynamic DIAX 17.73 NA 37.0 Nuveen Core Eq Alpha JCE 15.82 NA 34.5 Nuveen Diversified Div JDD 12.76 NA 28.9 Nuveen Engy MLP Fd JMF 10.76 NA -0.8 NuvNASDAQ100DynOver QQQX 23.83 NA 43.0 Nuveen Real Est Incm Fd JRS 11.01 NA 20.4 NuvS&P500DynOverwrite SPXX 16.22 NA 31.8 NuveenS&P500Buy-Write BXMX 14.14 NA 25.0 Reaves Utility Fund UTG 33.08 31.00 -6.3 17.4 Tekla Hlthcr Investors HQH 24.31 23.50 -3.3 25.3 Tekla Healthcare Opps Fd THQ 19.11 17.45 -8.7 26.3 Tekla Life Sciences HQL 20.29 20.31 +0.1 35.7 Tekla World Hlthcr Fd THW 14.67 14.07 -4.1 19.7 Tortoise Energy TYG 26.02 NA -0.5 Tortoise MLP Fund NTG 16.91 NA 2.5 Voya Gl Equity Div IGD 8.15 8.00 -1.8 32.2 Income Preferred Stock Funds Calamos Strat Fd CSQ 12.80 12.38 -3.3 42.5 Cohen & Steers Dur Pfd LDP 27.55 26.72 -3.0 19.8 Cohen & Strs Sel Prf Inco PSF 28.13 28.20 +0.2 15.7 FT Interm Duration Pfd FPF 25.13 24.38 -3.0 18.8 Flaherty & Crumrine Dyn DFP 26.46 26.08 -1.4 17.4 Flaherty & Crumrine Pfd FFC 20.44 20.90 +2.3 13.9 John Hancock Pfd Income HPI 21.32 21.66 +1.6 15.3 John Hancock Pfd II HPF 21.09 21.42 +1.6 12.4 John Hancock Pfd Inc III HPS 18.82 18.26 -3.0 12.0 JHancock Pr Div PDT 15.84 16.93 +6.9 29.5 LMP Cap & Inco Fd SCD 14.08 NA 26.0 Nuveen Pfd & Incm Opps Fd JPC 10.50 NA 19.9 Nuveen Pfd & Incm Secs Fd JPS 10.33 NA 20.6 Nuveen Preferred & Incm JPI 25.46 NA 15.3 TCW Strategic Income Fund TSI 5.62 NA 12.2 Virtus Global Dividend ZTR 13.43 NA 36.4 Convertible Sec's. Funds AdvntClymrFd AVK 17.60 16.04 -8.9 30.0 AllianzGI Conv & Incm NCV 6.65 7.10 +6.8 30.0 AllianzGI Conv & Incm II NCZ 5.96 6.25 +4.9 30.3 AllianzGI Div Incm ACV 22.73 22.29 -1.9 43.3 AllianzGI Equity & Conv NIE 22.92 20.76 -9.4 28.1 Calamos Conv Hi Inco Fd CHY 11.96 11.99 +0.3 32.4 Calamos CHI 11.35 11.65 +2.6 35.3 World Equity Funds Alpine Tot Dyn Div AOD 9.94 9.07 -8.8 39.0 Cdn Genl Inv CGI 31.80 22.90 -28.0 33.8 China Fund CHN 23.45 21.33 -9.0 38.7 Clough Global Opp Fd GLO 12.17 11.54 -5.2 44.2 EtnVncTxAdvGblDiv ETG 18.26 17.24 -5.6 36.3 EatonVance TxAdv Opport ETO 24.66 24.76 +0.4 35.8 First Trust Dynamic Eur FDEU 19.40 18.85 -2.8 37.6 Gabelli Glbl Multimedia GGT 9.10 8.79 -3.4 34.9 GDL Fund GDL 11.65 10.08 -13.5 13.7 India Fund IFN 31.80 28.37 -10.8 28.6 Japan Sml Cap JOF 14.57 13.13 -9.9 33.8 Korea Fund KF 49.74 44.39 -10.8 37.5 Mexico Fund MXF 15.79 NA 1.1 Morgan-Stanley Asia-Pac APF 20.49 18.13 -11.5 29.6 52 wk Prem Ttl Fund (SYM) NAV Close /Disc Ret MS China a Shr Fd CAF 27.91 23.90 -14.4 32.5 MS Emerging Fund MSF 19.83 17.45 -12.0 27.4 MS India Invest IIF 40.82 36.20 -11.3 37.3 New Germany Fund GF 21.19 19.08 -10.0 51.5 Swiss Helvetia Fund SWZ 13.84 12.56 -9.2 22.7 Templeton Dragon TDF 21.65 NA 39.1 Templeton Emerging EMF 17.15 NA 44.8 Virtus Total Return Fund ZF 12.64 NA 25.3 Voya Infr Indls & Matls IDE 16.72 16.17 -3.3 43.5 Wells Fargo Gl Div Opp EOD 6.24 NA 29.7 Prem12 Mo Fund (SYM) NAV Close /Disc Yld U.S. Mortgage Bond Funds BlackRock Income Trust BKT 6.66 6.28 -5.7 5.1 Nuveen Mtg Opp Term Fd JLS 25.84 NA 5.2 Investment Grade Bond Funds Blackrock Core Bond Tr BHK 14.93 14.19 -5.0 5.5 BlkRk Credit Alloc Incm BTZ 14.91 13.43 -9.9 6.3 John Hancock Income Secs JHS 15.60 14.89 -4.6 5.4 MFS Inc Tr MIN 4.46 4.23 -5.2 9.2 WstAstClymr InfLnkd Fd WIW NA 11.28 NA 3.6 WstAssetClymr InflLnk Sec WIA NA 11.53 NA 3.3 Loan Participation Funds Apollo Sr Fltg Rate Fd AFT 18.07 16.51 -8.6 7.4 BlkRk Debt Strat Fd DSU 12.79 11.69 -8.6 6.9 BlackRock FR Incm Strat FRA 15.01 14.13 -5.9 5.6 Blkrk FltRt InTr BGT 14.49 14.12 -2.6 5.3 BlackstoneGSO Strat Cred BGB NA 15.78 NA 8.4 Blackstone GSO Sr Float BSL NA 17.10 NA 6.7 Eagle Point Credit ECC NA 19.08 NA 8.3 Eaton Vance FR Incm Tr EFT 15.55 14.36 -7.7 5.7 EatonVnc SrFltRate EFR 15.21 14.41 -5.3 6.0 Eaton Vance Sr Incm Tr EVF 7.18 6.50 -9.5 5.6 First Trust Sr FR Fd II FCT 14.08 12.99 -7.7 6.1 FT Sr Floating Rate 2022 FIV 9.74 9.50 -2.5 NS Invesco Credit Opps Fund VTA 13.07 11.61 -11.2 7.1 Invesco Senior Income Tr VVR 4.88 4.39 -10.0 6.0 Nuveen Credit Strt Inc Fd JQC NA 8.25 NA 7.4 NuvFloatRteInco Fd JFR NA 11.48 NA 6.9 Nuv Float Rte Opp Fd JRO NA 11.35 NA 7.3 Nuveen Senior Income Fund NSL NA 6.74 NA 6.9 Pioneer Floating Rate Tr PHD 12.48 11.77 -5.7 6.0 Voya Prime Rate Trust PPR 5.67 5.10 -10.1 6.0 High Yield Bond Funds AllianceBernstein Glbl AWF 13.91 12.84 -7.7 6.7 Barings Glbl Short Dur HY BGH 21.20 20.56 -3.0 8.9 BlackRock Corp Hi Yd Fd HYT 12.34 11.14 -9.7 7.9 BlackRockDurInco Tr BLW 17.14 16.16 -5.7 7.8 Brookfield Real Assets RA 25.28 24.09 -4.7 NS Credit Suisse High Yld DHY 2.80 2.84 +1.4 9.4 DoubleLine Incm Solutions DSL NA 20.81 NA 8.6 Dreyfus Hi Yd Strat Fd DHF 3.58 3.46 -3.4 8.8 Fst Tr Hi Inc Lg/Shrt Fd FSD 18.12 16.76 -7.5 8.3 Guggenheim Strat Opps Fd GOF 19.81 21.41 +8.1 10.2 Ivy High Income Opps Fund IVH 16.24 15.51 -4.5 9.4 Neuberger Berman HYS NHS 13.41 12.06 -10.1 7.4 NexPoint Credit Strat Fd NHF 25.34 23.88 -5.8 10.1 Nuveen Credit Opps 2022 JCO NA 10.01 NA NS Nuveen Gl Hi Incm Fd JGH NA 17.09 NA 8.2 Nuveen High Incm Dec18 JHA NA 9.99 NA 5.2 Nuveen High Incm Dec19 JHD NA 10.09 NA 5.8 Nuveen Hi Incm Nov 2021 JHB NA 10.12 NA 5.9 Pioneer High Income Trust PHT 10.87 10.00 -8.0 8.2 Prud Gl Shrt Dur Hi Yd GHY 16.50 14.68 -11.0 7.8 Prudentl Sh Dur Hi Yd Fd ISD 16.68 15.07 -9.7 7.7 Wells Fargo Incm Opps Fd EAD NA 8.51 NA 8.7 Wstrn Asset Glbl Hi Inco EHI NA 10.17 NA 8.7 Wstrn Asset High Inco II HIX NA 7.09 NA 8.7 Wstrn Asset Opp Fd HIO NA 5.07 NA 7.2 West Asst HY Def Opp Fd HYI NA 15.41 NA 7.8 Other Domestic Taxable Bond Funds Apollo Tactical Incm Fd AIF 17.51 16.09 -8.1 8.8 Ares Dynamic Credit Alloc ARDC NA 16.31 NA 6.9 Barings Corp Investors MCI NA 15.74 NA 3.7 BlackRock Multi-Sector IT BIT 20.08 18.43 -8.2 9.5 BlackRock Taxable Mun Bd BBN 23.77 23.40 -1.6 6.8 Doubleline Oppor Credit DBL 21.96 22.96 +4.6 8.7 Duff & Phelps Utl & Cp Bd DUC 9.75 9.15 -6.2 6.5 EtnVncLtdFd EVV 15.16 13.91 -8.2 7.1 Franklin Ltd Duration IT FTF NA 11.91 NA 11.4 GuggenheimTaxableMuni GBAB 23.44 22.44 -4.3 6.8 Invesco High Incm 2023 IHIT 10.11 10.10 -0.1 NS John Hancock Investors JHI 18.79 17.88 -4.8 7.2 KKR Income Opps Fund KIO NA 16.45 NA 9.4 MFS Charter MCR 9.34 8.55 -8.5 8.7 MFS Multimkt MMT 6.68 6.14 -8.1 8.7 Nuveen Build Am Bd Fd NBB NA 21.65 NA 5.7 Prem12 Mo Fund (SYM) NAV Close /Disc Yld PIMCO Corporate & Incm PTY NA 16.88 NA 10.3 PIMCO Corporate & Incm PCN NA 17.09 NA 10.4 PIMCO HiInco PHK NA 7.83 NA 13.1 PIMCO Inco Str Fd PFL NA 12.03 NA 8.9 PIMCO Incm Strategy Fd II PFN NA 10.71 NA 8.9 Putnam Mas Inco PIM 5.03 4.77 -5.2 6.5 Putnam Premier Income Tr PPT 5.58 5.38 -3.6 5.8 Wells Fargo Multi-Sector ERC NA 13.03 NA 9.4 World Income Funds Abeerden Asia-Pacific FAX 5.45 5.02 -7.9 8.3 Etn Vnc Short Dur Fd EVG 15.33 14.14 -7.8 6.9 Legg Mason BW Glbl Incm BWG NA 13.04 NA 8.3 MS EmMktDomDebt EDD 8.67 7.73 -10.8 8.4 PIMCO Dynamic Credit PCI NA 22.76 NA 11.4 PIMCODynamicIncomeFund PDI NA 30.20 NA 13.5 PIMCO Income Opportunity PKO NA 26.14 NA 9.9 PIMCO Strat Income Fund RCS NA 9.19 NA 9.7 Templeton Emerging TEI NA 11.55 NA 4.5 Templeton Global GIM NA 6.65 NA 6.1 Wstrn Asset Emerg Mkts EMD NA 15.50 NA 7.5 Wstrn Asset Gl Def Opp Fd GDO NA 18.30 NA 7.5 National Muni Bond Funds AllianceBrnstn NtlMun AFB 14.93 13.57 -9.1 4.6 Blackrock Invest BKN 15.89 14.58 -8.2 5.3 BlackRockMun2030Target BTT 24.12 22.39 -7.2 4.1 BlackRock Municipal Trust BFK 14.46 14.12 -2.4 5.7 BlackRockMuni BLE 15.05 14.33 -4.8 6.1 BlackRockMuni Tr BYM 15.20 14.30 -5.9 5.3 BlkRk MuniAssets Fd MUA 14.16 14.96 +5.6 4.6 BlkRk Munienhanced MEN 11.94 11.85 -0.8 5.7 BlkRk MuniHldgs Inv MFL 14.74 15.04 +2.0 5.7 BlkRk MuniHldgs Qlty II MUE 14.08 13.70 -2.7 5.6 BlkRk MuniVest MVF 9.65 9.71 +0.6 5.8 BlkRk MuniVest II MVT 15.27 15.33 +0.4 5.9 BlkRk MuniYield MYD 14.87 14.25 -4.2 6.0 BlkRk MuniYld Quality MQY 15.83 15.30 -3.3 5.6 BlkRk MuniYld Qlty II MQT 13.90 12.95 -6.8 5.6 BlRkMunyldQltyIII MYI 14.46 14.17 -2.0 5.8 Deutsche Mun Income Tr KTF 12.65 11.89 -6.0 6.6 Dreyfus Mun Bd Infr Fd DMB 14.22 12.96 -8.9 4.9 Dreyfus Strat Muni Bond DSM 8.39 8.42 +0.4 5.9 Dreyfus Strategic Munis LEO 8.61 8.66 +0.6 5.9 Eaton Vance Mun Bd Fd EIM 13.72 12.47 -9.1 5.0 Eaton Vance Mun Income EVN 13.42 12.48 -7.0 5.4 EV National Municipal Opp EOT 21.94 22.00 +0.3 4.7 Invesco Adv Mun Incm II VKI 12.18 11.26 -7.6 5.8 Invesco Mun Incm Opps Tr OIA 7.60 7.90 +3.9 5.2 Invesco Mun Opportunity VMO 13.55 12.50 -7.7 6.1 Invesco Municipal Trust VKQ 13.54 12.34 -8.9 5.9 Invesco Qlty Mun Inco IQI 13.67 12.45 -8.9 5.5 Invesco Inv Grade Muni VGM 14.04 13.08 -6.8 5.8 Invesco Value Mun Incm Tr IIM 16.31 14.73 -9.7 5.0 MainStay DefinedTerm MMD NA 19.28 NA 5.6 MFS Munl Inco MFM 7.38 6.90 -6.5 5.5 Nuveen AMT-Free Quality NEA NA 13.70 NA 5.4 Nuveen AMT-Free Mun NVG NA 15.23 NA 5.7 Nuveen Mun Credit Incm Fd NZF NA 15.04 NA 5.9 Nuveen Enhncd Mun Val Fd NEV NA 14.40 NA 5.7 Nuveen Intermed Dur Mun NID NA 13.02 NA 4.9 NuveenMuniIncoOpp Fd NMZ NA 13.61 NA 6.0 Nuveen Muni Value Fund NUV NA 10.17 NA 3.8 Nuveen Qual Mun Incm Fd NAD NA 13.96 NA 5.6 Nuveen Sel Tax Free NXP NA 14.67 NA 3.7 Nuveen Sel TF NXQ NA 14.06 NA 3.6 PIMCO MuniFd PMF NA 13.14 NA 5.9 Pimco Muni Inc II PML NA 13.17 NA 5.9 PIMCO Muni Inc III PMX NA 11.71 NA 5.9 Pioneer Mun Hi Inc Adv Tr MAV 11.92 11.26 -5.5 5.3 Pioneer Mun Hi Incm Tr MHI 12.81 11.66 -9.0 5.1 Putnam Tr PMM 7.97 7.45 -6.5 5.4 PutnamMuniOpportunities PMO 13.35 12.49 -6.4 5.2 Wstrn Asset Mngd Muni MMU NA 13.99 NA 5.4 WesternAssetMunTrFund MTT NA 21.85 NA 4.9 Single State Muni Bond BlackRock CA Municipal Tr BFZ 15.27 14.29 -6.4 5.1 BlkRk MuniHldgs CA Qlty MUC 15.48 14.71 -5.0 5.0 Blkrck MunHl NJ Qlty MUJ 15.64 14.33 -8.4 5.6 BlRk MuHldg NY Qlty MHN 14.85 13.74 -7.5 5.0 BlkRk MuniYld CA Fd MYC 15.55 15.22 -2.1 5.1 BlkRk MuniYld CA Quality MCA 15.70 14.92 -5.0 5.1 BlkRk MuniYld MI Qlty MIY 15.43 14.01 -9.2 5.5 BlRk Muyld NY Qlty MYN 14.23 12.98 -8.8 5.0 Eaton Vance CA Mun Bd EVM 12.39 11.79 -4.8 4.9 Invesco CA Value Mun Incm VCV 13.47 12.82 -4.8 5.0 Invesco PA Value Mun Incm VPV 14.04 12.05 -14.2 5.1 Invesco Inv Grade NY Muni VTN 14.62 13.61 -6.9 5.0 Nuveen CA AMT-Free Qual NKX NA 15.45 NA 5.0 Nuveen CA Muni Value NCA NA 10.47 NA 3.9 Prem12 Mo Fund (SYM) NAV Close /Disc Yld Nuveen CA Quality Muni NAC NA 14.53 NA 5.5 Nuveen MD Qual Muni NMY NA 12.69 NA 5.0 Nuveen MI Qual Muni NUM NA 13.41 NA 4.8 Nuveen NJ Qual Muni NXJ NA 13.74 NA 5.2 Nuveen NY AMT-Free NRK NA 12.98 NA 4.9 Nuveen NY Qual Muni NAN NA 13.85 NA 5.1 Nuveen OH Qual Muni NUO NA 14.82 NA 4.7 Nuveen PA Qual Muni NQP NA 13.43 NA 5.2 Nuveen VA Qual Muni NPV NA 13.07 NA 4.3 PIMCO California Muni PCQ NA 17.18 NA 5.3 PIMCO California Mun II PCK NA 10.08 NA 5.6 52 wk Prem Ttl Fund (SYM) NAV Close /Disc Ret General Equity Funds Specialized Equity Funds Griffin Inst Access RE:L NA NA NA NS Griffin Inst Access RE:M NA NA NA NS NexPointRlEstStrat;A 20.00 NA NA 9.1 NexPointRlEstStrat;C 19.95 NA NA 8.3 NexPointRlEstStrat;Z 19.95 NA NA 9.4 Resource RE Div Inc:A 10.04 NA NA 6.7 Resource RE Div Inc:C 10.03 NA NA 5.9 Resource RE Div Inc:D 10.19 NA NA 6.1 Resource RE Div Inc:I 10.47 NA NA 6.7 Resource RE Div Inc:L 10.04 NA NA NS Resource RE Div Inc:T 10.01 NA NA 5.8 Resource RE Div Inc:U 10.05 NA NA 6.7 Resource RE Div Inc:W 10.19 NA NA 6.5 SharesPost 100 26.19 NA NA -3.0 Tot Inc+ RE:L NA NA NA NS USQ Core Real Estate:I USQIX 25.13 NA NA NS USQ Core Real Estate:IS USQSX 25.13 NA NA NS Versus Cap MMgr RE Inc:F 27.46 NA NA 6.0 Versus Cap MMgr RE Inc:I 27.52 NA NA 6.3 Versus Capital Real Asst VCRRX 25.05 NA NA NS Wildermuth Endwmnt Str 12.84 NA NA 14.2 Wildermuth Endwmnt S:C 12.67 NA NA 13.4 Wildermuth Endwmnt S:I 12.89 NA NA NS Income Preferred Stock Funds MultiStrat Gro & Inc:A 15.28 NA NA 5.4 MultiStrat Gro & Inc:C 14.96 NA NA 4.6 MultiStrat Gro & Inc:I 15.47 NA NA 5.6 MultiStrat Gro & Inc:L 15.06 NA NA 4.8 The Relative Value:CIA VFLEX 25.37 NA NA NS Convertible Sec's. Funds Calmos Dyn Conv and Inc CCD 21.05 20.66 -1.9 20.9 World Equity Funds BMO LGM Front ME 10.24 NA NA 14.8 CalamosGlbTotRet CGO 13.48 14.15 +5.0 24.8 Prem12 Mo Fund (SYM) NAV Close /Disc Yld U.S. Mortgage Bond Funds Vertical Capital Income 12.57 NA NA 3.2 Loan Participation Funds 504 Fund 9.77 NA NA 3.7 FedProj&TrFinanceTender 10.06 NA NA NS Invesco Sr Loan A 6.67 NA NA 4.2 Invesco Sr Loan B 6.67 NA NA 4.2 Invesco Sr Loan C 6.68 NA NA 3.5 Invesco Sr Loan IB 6.67 NA NA 4.4 Invesco Sr Loan IC 6.67 NA NA 4.3 Invesco Sr Loan Y 6.67 NA NA 4.4 RiverNorth MP Lending RMPLX 25.05 NA NA 6.6 Sierra Total Return:T SRNTX 25.13 NA NA NS Voya Senior Income:A 12.54 NA NA 5.3 Voya Senior Income:C 12.52 NA NA 4.8 Voya Senior Income:I 12.50 NA NA 5.6 Voya Senior Income:W 12.55 NA NA 5.6 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 9.62 NA NA 10.5 WA Middle Mkt Dbt 752.69 NA NA 11.2 WA Middle Mkt Inc WMF777.56 NA NA 11.2 Other Domestic Taxable Bond Funds Capstone Church Capital 11.43 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 7.87 NA NA NS GL Beyond Income 3.68 NA NA NE Palmer Square Opp Income NA NA NA 5.0 Resource Credit Inc:A 11.15 NA NA 6.4 Resource Credit Inc:C 11.27 NA NA 5.7 Resource Credit Inc:I 11.18 NA NA 6.7 Resource Credit Inc:L 11.14 NA NA NS Resource Credit Inc:W 11.15 NA NA 6.3 Maximize the Impact of Your Employee Health Program THAN YOU EVER THOUGHT POSSIBLE Our members charter to major destinations worldwide and enjoy never-before-seen low pricing, guaranteed availability, zero upfront commitment, and year-round service reliability. 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Monday, November 6, 2017 | B7 MARKETS DIGEST Dow Jones Industrial Average New to the Market S&P 500 Index Last Year ago 23539.19 s 105.00, or 0.45% last week Trailing P/E ratio 21.28 P/E estimate * 19.35 High, low, open and close for each of Dividend yield 2.18 the past 52 weeks 19.56 16.91 2.66 All-time high 23539.19, 11/03/17 Current divisor 0.14523396877348 Last 2587.84 s 6.77, or 0.26% last week High, low, open and close for each of the past 52 weeks Year ago Trailing P/E ratio 24.33 23.02 P/E estimate * 19.39 17.78 Dividend yield 1.92 2.20 All-time high: 2587.84, 11/03/17 23000 22000 65-day moving average Week's high t UP Friday's close 200-day moving average Week's low IPOs in the U.S. Market 2575 2500 Expected pricing date Filed 11/6 10/31 Meridian Bank Full-service bank. 11/7 10/13 CBTX Bank. F M A M J J A S O D J F M A M J J A S IFRX Nq 6.7 14.00/ JPM, Leerink Prtnrs, 16.00 BMO Cptl Mkts 19000 2275 11/7 10/13 Four Seasons Education (Cayman) Provider of after school math education. FEDU N 5.1 9.00/ MS, Citi, 11.00 China Renaissance Prtnrs 11/7 10/4 Metropolitan Bank Holding Bank holding company. MCB N 3.1 31.00/ JPM, Stifel 34.00 11/8 10/13 Apellis Pharmaceuticals Pharmaceutical company developing treatments for acute & chronic indications. APLS Nq 10.7 13.00/ Citi, JPM, Evercore 15.00 11/8 10/13 Sogou Software company developing an internet search engine. SOGO N 45.0 11.00/ JPM, Credit Suisse, 13.00 GS, China Int'l 11/9 10/13 Bandwidth Cloud-based communications platform. BAND Nq 4.0 11/9 10/13 PPDAI Group Financial software company operating an online consumer finance marketplace. PPDF N 85.0 16.00/ Credit Suisse, Citi 19.00 11/9 10/16 Workspace Property Trust WSPT Real estate investment N trust. 39.0 12.00/ GS, JPM, BofA ML, 15.00 KeyBanc, Barclays, Citi, BMO Cptl Mkts, Capital One Fin, JMP Secs 200-day moving average 2200 2125 2050 N Composite D J F M A M J J A S O N Financial Flashback The Wall Street Journal, November 6, 1991 Several financial institutions, jolted by the furor around the confirmation of Associate Supreme Court Justice Clarence Thomas, have issued gender-sensitive decrees. O Weekly P/E data based on as-reported earnings from Birinyi Associates Inc. Major U.S. Stock-Market Indexes High Nasdaq Composite Latest Week Close Net chg Low % chg 52-Week Close (l) Low Dow Jones Industrial Average 23557.06 23327.87 23539.19 105.00 Transportation Avg 9902.69 9679.28 9755.00 -176.65 Utility Average 755.71 746.54 1.81 753.43 Total Stock Market 26825.82 26581.63 26789.00 45.04 686.22 Barron's 400 694.25 682.97 -5.35 0.45 l 23539.19 17888.28 8075.14 625.44 21514.15 523.22 -1.78 0.24 0.17 -0.77 High 10038.13 l 754.8 l 26789 l 691.56 31.6 20.8 15.3 24.5 31.2 19.1 7.9 14.2 15.1 14.1 10.7 3.6 7.8 8.5 8.6 l 6764.44 l 6295.58 34.0 35.1 25.7 29.4 13.4 14.7 l s 63.17, or 0.94% % chg YTD 3-yr. ann. % chg last week Nasdaq Stock Market Nasdaq Composite Nasdaq 100 6765.14 6677.15 6297.62 6194.58 0.94 1.32 63.17 82.11 6764.44 6295.58 5046.37 4660.46 Standard & Poor's 2588.42 2566.17 1845.02 1821.55 917.65 899.11 500 Index MidCap 400 SmallCap 600 6.77 -3.14 -15.55 2587.84 1835.98 900.88 0.26 l 2587.84 l 1839.12 2085.18 1478.83 707.17 -0.17 -1.70 l 918.72 15.6 10.6 7.5 24.1 24.2 27.4 27 30 31 1 2 3 October 8.6 8.9 9.9 1484.82 1494.91 12308.84 12373.06 538.52 540.13 4068.86 4207.22 532.25 537.12 100.81 102.13 80.01 80.72 128.34 134.88 1258.91 1299.97 9.14 8.99 -13.41 6.63 -3.33 91.07 -0.37 -0.10 -0.84 6.56 36.42 -0.66 -0.89 l 1163.44 10289.35 456.36 2.21 2887.17 463.78 73.36 73.03 5.12 117.79 2.88 802.88 9.14 0.05 -0.61 -0.07 -0.10 -1.03 -6.73 1512.09 l 12430.52 l 545.98 l l l l Philadelphia Stock Exchange 4304.77 l 560.52 l 102.31 96.72 192.66 l 1299.97 22.51 Close 621.85 73915.43 16020.16 48534.84 4162.76 DJ Americas Sao Paulo Bovespa S&P/TSX Comp S&P/BMV IPC Santiago IPSA EMEA 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 S&P/ASX 200 Shanghai Composite Hang Seng S&P BSE Sensex Nikkei Stock Avg FTSE Bursa Malaysia KLCI Straits Times Kospi Weighted 396.06 3237.05 400.01 3689.96 3410.25 4112.55 5517.97 13478.86 763.56 1427.62 23014.13 555.15 5368.64 1109.38 59638.21 10357.80 600.20 9322.05 7560.35 5959.90 3371.74 28603.61 33685.56 22539.12 1740.93 3382.31 2557.97 10800.77 0.55 0.66 1.09 0.21 –2.71 0.42 –1.37 –0.58 0.67 0.85 1.07 1.03 –0.15 0.50 0.43 1.98 3.29 –0.73 1.54 1.04 –0.74 –0.83 1.57 1.57 0.82 1.51 0.74 0.96 –1.32 0.58 1.59 2.41 –0.30 –0.12 2.46 0.86 52-Week Range Close Lockup expiration Issue date 6600 Nov. 7 Offer Offer amt Through Lockup Symbol price($) ($ mil.) Friday (%) provision Issuer May 11, ’17 Gardner Denver Holdings GDI 20.00 949.9 42.9 180 days May 11, ’17 Solaris Oilfield Infrastructure SOI 12.00 121.2 33.0 180 days May 11, ’17 Veritone VERI 15.00 37.5 130.1 180 days ASV 7.00 30.6 14.3 180 days 15.00 116.7 56.0 180 days Nov. 8 May 12, ’17 ASV Holdings s 45.04, or 0.17% Nov. 12 May 16, ’17 G1 Therapeutics 27 30 31 1 2 3 October Low 2390.11 311.55 206.73 503.67 57110.99 14509.25 44364.17 3137.71 328.80 2730.05 317.93 2954.53 2412.85 3426.21 4377.46 10259.13 573.92 1363.50 16217 440.51 4370.84 960.32 48935.90 8607.1 496.66 7593.20 6693.26 5156.6 3052.79 21574.76 25765.14 16251.54 1616.64 2787.27 1958.38 8931.03 • High • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 2981.65 385.82 260.28 17.6 18.3 21.5 621.85 76989.79 16029.33 51713.38 4255.93 15.1 22.7 4.8 6.3 29.2 396.77 3276.11 400.44 3697.40 3445.23 4116.50 5517.97 13478.86 858.08 1478.96 23046 555.15 5475.67 1195.61 59638.21 11135.4 600.20 9322.05 7560.35 9.6 7.5 14.2 12.1 30.2 14.0 13.5 17.4 18.6 –2.9 19.6 14.9 14.7 –3.7 17.7 10.8 12.3 13.4 5.8 5959.9 3416.81 28711.76 33685.56 22539.12 1792.35 3391.61 2557.97 10806.36 • • • YTD % chg 5.2 8.6 30.0 26.5 17.9 6.0 17.4 26.2 16.7 Source: SIX Financial Information;WSJ Market Data Group Consumer Rates and Returns to Investor Selected rates A consumer rate against its benchmark over the past year 5-year CDs GTHX Sources: Dealogic; WSJ Market Data Group Five-year CD yields 2.35% 888-720-8756 EverBank Jacksonville, FL 2.35% 855-228-6755 0.50 Home Savings Bank Salt Lake City, UT 2.35% 801-487-0811 0.00 Synchrony Bank Morristown, NJ 2.35% 800-903-8154 1.00 t Federal-funds target rate –0.50 N D J F MAM J J A S O N 2017 Goldman Sachs Bank USA 2.40% New York, NY 855-730-7283 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 1.38 1.39 Money market, annual yield 0.32 0.33 Five-year CD, annual yield 1.47 1.47 30-year mortgage, fixed† 3.99 3.92 15-year mortgage, fixed† 3.28 3.24 Jumbo mortgages, $424,100-plus† 4.29 4.36 Five-year adj mortgage (ARM)† 3.46 3.52 New-car loan, 48-month 3.02 3.01 HELOC, $30,000 5.19 5.19 3-yr chg 52-Week Range (%) Low 0 2 4 6 8 High (pct pts) 0.25 l l 3.50 0.88 l 0.26 l 1.19 l l 3.61 l 2.85 l 4.23 l 3.13 l 2.85 l 4.57 1.25 4.25 1.39 0.36 1.47 4.33 3.50 4.88 4.03 3.36 5.30 TR/CC CRB Index Crude oil, $ per barrel 156.5 15.84 26620 Nov. 7 AMERI Holdings Technology AMRH Nq 10.0 n.a. 26500 Off the Shelf YTD % chg 1.29 6.92 1.33 -1.63 55.64 1.74 3.23 0.02 0.67 -19.87 3.57 -1.70 -0.13 10.13 U.S. Dollar Index 94.92 0.001 0.001 -7.14 WSJ Dollar Index 87.96 0.8614 Yen, per dollar U.K. pound, in dollars 114.06 unch. unch. -9.39 5.91 52-Week Low Close(l) High % Chg 527.06 TR/CC CRB Index 166.50 l 3.93 l l U.S. Dollar Index 91.35 l WSJ Dollar Index 84.49 l 0.83 Yen, per dollar U.K. pound, in dollars 3.77 55.64 26.25 l 2.56 1127.80 Euro, per dollar 606.51 15.07 195.14 l Crude oil, $ per barrel 42.53 Gold, $ per troy oz. 0.34 -2.52 1.31 -0.0052 -0.40 DJ Commodity Natural gas, $/MMBtu 0.20 -5.36 0.39 7.84 1346.00 -2.82 103.25 -2.04 93.56 0.48 0.96 -4.04 l 103.11 l 1.20 l 118.18 10.62 1.36 4.44 Real-time U.S. stock quotes are available on WSJ.com. Track mostactive stocks, new highs/lows, mutual funds and ETFs. WSJ .COM Plus, get deeper money-flows data and email delivery of key stock-market data. All are available free at WSJMarkets.com 1.00 1.00 1.16 -0.09 -0.06 -0.15 0.01 -0.03 -0.31 -0.23 0.74 Bankrate.com rates based on survey of over 4,800 online banks. *Base rate posted by 70% of the nation's largest banks.† Excludes closing costs. Sources: SIX Financial Information; WSJ Market Data Group; Bankrate.com 3.75% Friday 1 3 6 month(s) One year ago 1 2 3 5 710 years maturity 2.25 0 1.50 –5 0.75 –10 0.00 –15 30 WSJ Dollar index s Euro s Yen Takedown date/ Deal value Registration Registration date ($ mil.) (mil.) Intellia Therapeutics Healthcare Nov. 1 June 5,317 $150.0 $250.0 Credit Suisse, Jefferies, Leerink Prtnrs Assembly Biosciences Healthcare Nov. 1 Dec. 30,315 $60.2 $150.0 Jefferies, W. Blair LLC Constellium Metal & Steel Oct. 31 Oct. 30,317 $316.3 ... Credit Suisse, DB, BofA ML, BNP Paribas, GS, JPM TransUnion Professional Services Oct. 30 Sept. 8,316 $394.5 ... MS, GS Corporate Office Properties TrustOct. 30 Real Estate/Property April 12,316 $285.2 ... WFS, BofA ML, JPM Oct. 30 June 23,317 $15.0 $200.0 Leader Underwriters Pluristem Therapeutics Healthcare Treasurys Monday, November 6 Tuesday, November 7 Auction of 13 week bill; Auction of 4 week bill; announced on November 2; settles on November 9announced on November 6; settles on November 9 Auction of 26 week bill; Auction of 52 week bill; announced on November 2; settles on November 9announced on November 2; settles on November 9 Tuesday, November 7 Wednesday, November 8 Auction of 3 year note; Auction of 10 year note; announced on November 1; settles on November 15announced on November 1; settles on November 15 Thursday, November 9 Auction of 30 year bond; announced on November 1; settles on November 15 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) Nov. 7 prelim. Massachusetts 200.0 N.R. N.R. N.R. Barclays/— Nov. 7 prelim. San Diego Assoc of Governments 204.5 N.R. N.R. N.R. J P Morgan Securities LLC/— Nov. 8 Jan. 1, 2031 Pennsylvania 974.0 N.R. N.R. N.R. Preliminary/ Dinsmore & Shohl/ Turner Law PC Nov. 8 Oct. 1, 2047 Washoe- SD 252.2 N.R. N.R. N.R. Preliminary/ Sherman & Howard Nov. 10 prelim. California 225.0 N.R. N.R. N.R. M. Stanley/— Nov. 10 prelim. California Educational Facs Auth 150.0 N.R. N.R. N.R. Wells Fargo & Co/— Nov. 10 prelim. Fontana Redevelopment Agency 206.0 N.R. N.R. N.R. Stifel Nicolaus/— Nov. 10 prelim. Harris Flood Control Dt 198.0 N.R. N.R. N.R. Citi/— Nov. 10 prelim. Harris CoTexas 246.0 N.R. N.R. N.R. Citi/— Nov. 10 prelim. Los Angeles Comm College Dt 300.0 N.R. N.R. N.R. Citi/— Nov. 10 prelim. Triborough Bridge & Tunnel Auth 500.0 N.R. N.R. N.R. Siebert Brandford Shank & Co/— Nov. 10 prelim. Univ of Texas Sys Bd of Regents 300.0 N.R. N.R. N.R. J P Morgan Securities LLC/— Sources: Ryan ALM; Tullett Prebon; WSJ Market Data Group Bond total return index Spread +/- Treasurys, Yield (%) in basis pts, 52-wk Range Last Wk ago Last Low High 10-yr Treasury, Ryan ALM DJ Corporate Aggregate, Barclays Capital High Yield 100, Merrill Lynch Fixed-Rate MBS, Barclays Muni Master, Merrill EMBI Global, J.P. Morgan 2.343 3.059 2.600 5.240 2.840 1.984 5.532 37 324 23 9 317 35 307 11 -4 303 47 490 34 18 407 Total Return 52-wk 3-yr -2.82 1.95 2.86 3.99 1.01 2.48 9.129 4.134 0.59 2.17 1.763 2.704 5.641 5.420 Sources: J.P. Morgan; Ryan ALM; S&P Dow Jones Indices; Barclays Capital; Merrill Lynch Bookrunner(s) Public and Private Borrowing 2017 Corporate Borrowing Rates and Yields Northland Secs Issuer/Industry 10% 5 GS “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: Yen, euro vs. dollar; dollar vs. major U.S. trading partners 3.00 2.426 3.067 2.640 5.172 2.910 1.977 5.496 Friday’s price ($) Bookrunner(s) PUMP N 7.73 2.49 Euro, per dollar Primary Amount exchange ($mil.) ProPetro Holding Oil & Gas 606.51 189.38 0.17 Symbol/ Expected Issuer/Business Nov. 6 Natural gas, $/MMBtu 2.984 Gold, $ per troy oz. 1266.50 Yield to maturity of current bills, notes and bonds t Barclays Wilmington, DE 1.50% t DJ Commodity Secondaries and follow-ons expected this week in the U.S. market 26740 Benchmark Yields and Rates Treasury yield curve Forex Race 1.47% Bankrate.com avg†: Last Week Close Net chg %Chg t U.S. consumer rates Interest rate 6655 CommoditiesandCurrencies Latest Week % chg 2976.28 385.82 260.04 The Global Dow DJ Global Index DJ Global ex U.S. Asia-Pacific Australia China Hong Kong India Japan Malaysia Singapore South Korea Taiwan 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. DJ US TSM s Region/Country Index Americas Brazil Canada Mexico Chile 6710 26860 Sources: SIX Financial Information; WSJ Market Data Group International Stock Indexes World Lockup Expirations Other Stock Offerings 10.2 8.5 11.9 4.6 6.7 3.1 36.8 7.8 11.5 0.4 11.3 12.2 2.4 6.5 -26.6 -17.7 43.4 26.3 -34.9 -14.7 28.5 20.3 18.4 45.7 15.0 39.2 -9.4 -10.0 61.9 -59.4 20.00/ MS, KeyBanc, 22.00 RW Baird & Co, Canaccord Genuity, JMP Secs 6765 last week Other Indexes Russell 2000 1512.40 NYSE Composite 12414.60 Value Line 545.11 NYSE Arca Biotech 4214.82 NYSE Arca Pharma 538.63 KBW Bank 102.56 PHLX§ Gold/Silver 82.80 PHLX§ Oil Service 136.65 PHLX§ Semiconductor 1300.02 CBOE Volatility 10.89 24.00/ Stephens, Stifel 26.00 10/13 Fireman Clinical-stage biopharmaceutical co. 30 20 10 0 N 2.4 Nq 11/7 N t Primary market NYSE weekly volume, in billions of shares CBTX Nq 2350 17000 t J 17.00/ Sandler O'Neill & Prtnrs 19.00 20000 16000 D Bookrunner(s) 2.2 2425 Bars measure the point change from Monday's open N Symbol/ Pricing primary Shares Range($) exchange (mil.) Low/High Issuer/business 21000 18000 Monday's open t Friday's close Public Offerings of Stock 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 65-day moving average DOWN Monday's open IPO Scorecard B8 Source:Thomson Reuters/Ipreo For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. B8 | Monday, November 6, 2017 MARKETS BONDS Global Government Bonds: Mapping Yields SEC Quizzes Miami Firm BY JUSTIN BAER AND MARGOT PATRICK U.S. securities regulators recently asked a Miami wealth manager about its ties to both Guggenheim Partners LLC and a company that purchased an oceanfront home with Guggenheim Chief Executive Mark Walter, according to people familiar with the matter. The questions came during an appearance late last month by the Securities and Exchange Commission to the Miami offices of Guggenheim Partners Latin America Inc., these people said. GPLA was formed by Pablo Stalman and Juan Ball, who built the business within Guggenheim Partners before buying parts of it starting in 2009. Mr. Walter sat on its board until 2013. GPLA is now owned by London-based LJ Partnership. During the SEC visit, according to these people, regulators queried GPLA about connections to Guggenheim and ABS Capital Co. LLC, the Miami investment firm that joined with Mr. Walter to buy an $85 million Malibu, Calif., mansion last May from film mogul David Geffen. ABS is owned by Messrs. Stalman and Ball and has offices in the same building as GPLA. The visit was unannounced, these people said. LJ in a statement said the SEC visit was a periodic review. “We cannot comment on questions posed by the SEC but they cover a broad range of topics as would be expected in a peri- Yields and spreads over or under U.S. Treasurys on benchmark two-year and 10-year government bonds in selected other countries; arrows indicate whether the yield rose(s) or fell (t) in the latest session odic review,” it said. It isn’t known whether the visit from U.S. regulators was related to a continuing SEC examination of Guggenheim Partners, which manages more than $295 billion for insurance companies, pension funds and other clients. A former Guggenheim employee has filed a complaint with the SEC over the handling of certain transactions by the company, according to documents reviewed by The Wall Street Journal. The SEC declined to comment about the visit. A Guggenheim Partners spokesman declined to comment and referred questions to GPLA. ABS said no one at its company has been contacted by the SEC or any other regulator. Insider-Trading Spotlight Trading by ‘insiders’ of a corporation, such as a company’s CEO, vice president or director, potentially conveys new information about the prospects of a company. Insiders are required to report large trades to the SEC within two business days. Here’s a look at the biggest individual trades by insiders, based on data received by Thomson Financial on November 3, and year-to-date stock performance of the company KEY: B: beneficial owner of more than 10% of a security class CB: chairman CEO: chief executive officer CFO: chief financial officer CO: chief operating officer D: director DO: director and beneficial owner GC: general counsel H: officer, director and beneficial owner I: indirect transaction filed through a trust, insider spouse, minor child or other O: officer OD: officer and director P: president UT: unknown VP: vice president Excludes pure options transactions Biggest weekly individual trades Based on reports filed with regulators this past week Date(s) Company Symbol Insider Title P. Svennilson DOI No. of shrs in Price range ($) $ Value trans (000s) in transaction (000s) Close ($) Ytd (%) Buyers Oct. 27 Immune Design 2,681 4.10 10,992 4.15 -24.5 LE E. Lampert BI 295 10.81-10.97 3,212 11.30 -25.4 XNCR J. Stafford J. Stafford BI BI 150 50 19.70-20.01 19.11-19.81 2,971 979 20.21 -23.2 OHI B. Korman D 100 28.24 2,824 28.39 IMDZ Oct. 31-Nov. 2Lands' End Oct. 25-27 Xencor Oct. 31-Nov. 2 -9.2 Oct. 31 Omega Healthcare Investors Oct. 27 Allegiant Travel ALGT J. Redmond P 11 138.28 Oct. 26 Walgreens Boots Alliance WBA J. Lederer D 20 67.00 Oct. 30 Charter Communications CHTR C. Winfrey CFO 3 323.61 Oct. 27 Sunesis Pharmaceuticals SNSS D. Misfeldt DI 400 2.00 Oct. 25 Lockheed Martin LMT D. Akerson D 3 311.97-313.93 780 309.99 24.0 Oct. 27 Mid-America Apartment Communities MAA W. Sanders D 7* 100.07-100.17 701 103.39 5.6 Nov. 1 Education Realty Trust EDR R. Churchey CEO 20 35.01 700 35.68 -15.7 Oct. 25 Oct. 25 TriplePoint Venture Growth TPVG S. Srivastava J. Labe P CEO 44 22 13.65 13.65 605 302 13.72 16.5 Oct. 31 Integra LifeSciences Holdings IART B. Hill 12.0 Oct. 31 Express Scripts Holding ESRX T. Wentworth CLDR Oct. 30-31 Facebook FB Oct. 17-27 REV Group Oct. 17-27 REVG Oct. 25-27 Cloudera Oct. 30-31 1,521 132.25 -20.5 1,340 66.87 -19.2 1,003 335.43 16.5 3.00 -17.1 800 D 11 46.66 502 48.05 CEO 8 61.13 489 60.54 -12.0 M. Cole M. Cole DI DI 30 20 14.80-15.39 15.11-15.39 452 305 15.71 -13.2 J. Koum DI 2,600 180.08-180.09 D. Cusumano K. Marvin D D 10859* 10859* PI Sellers 26.09 26.09 468,227 178.92 55.5 283,331 283,331 25.61 2.4 1,395 48.40 67,515 49.61 5.9 Oct. 30-31 Restaurant Brands International QSR D. Schwartz CEO 709 64.49-64.56 45,697 65.66 37.8 Oct. 26-30 Texas Instruments Oct. 26-27 Oct. 27 TXN R. Templeton B. Crutcher S. Anderson CEO CO O 450 264* 125 96.16-97.11 96.10-96.87 96.10 43,430 25,402 11,968 97.98 34.3 Oct. 31 Loews J. Tisch L Oct. 30-31 Twitter TWTR E. Williams D 2000* 20.72-21.53 42,121 19.90 22.1 Oct. 30 CWH M. Lemonis CEOI 700 40.50 28,350 42.70 31.0 Oct. 25-27 Exelon EXC M. Shattuck CB 567 40.05-40.27 22,751 40.94 15.4 Oct. 30 INTC S. Smith O 472 44.19-44.47 20,889 46.34 27.8 Oct. 30-Nov. 1Huntsman Oct. 30 HUN J. Huntsman J. Esplin H O 600* 429 31.58-32.32 31.54 19,031 13,515 31.72 66.2 Oct. 30-31 Amphenol APH R. Norwitt CEO 220 85.89-86.36 18,942 87.33 30.0 Oct. 31 ServiceNow NOW F. Slootman D 150 125.28-126.36 18,893 124.91 68.0 Oct. 31 Expedia EXPE V. Kaufman OD 120 122.02-124.84 14,788 123.05 8.6 Nov. 1 Dollar Tree DLTR M. Brock CBI 150 90.77-91.67 93.75 21.5 Camping World Holdings Intel 13,669 Country/ Coupon (%) Maturity, in years 1.500 2.250 l l 0.000 0.500 France 2 -0.591 t 10 0.617 t Germany 2 -0.754 t 10 0.365 t 0.050 2.050 Italy 2 -0.211 s 10 1.794 t 2.750 2.750 0.000 2.750 Buying Selling 60,691,080 12,604,367 0 36,596,616 33,718,737 54,013,813 4,818,707 Sector Buying Finance Health care Industrial Media Technology Transportation Utilities 5,741,805 2,489,487 780,059 0 464,492 1,521,081 0 Selling 118,470,483 92,703,898 73,789,458 17,730,845 264,983,511 21,009,894 44,396,353 Sources: Thomson Financial; WSJ Market Data Group Friday, November 03, 2017 These prices reflect buying and selling of a variety of actual or “physical” commodities in the marketplace— separate from the futures price on an exchange, which reflects what the commodity might be worth in future months. Friday Propane,tet,Mont Belvieu-g Butane,normal,Mont Belvieu-g NaturalGas,HenryHub-i NaturalGas,TranscoZone3-i NaturalGas,TranscoZone6NY-i NaturalGas,PanhandleEast-i NaturalGas,Opal-i NaturalGas,MarcellusNE PA-i NaturalGas,HaynesvilleN.LA-i Coal,C.Aplc.,12500Btu,1.2SO2-r,w Coal,PwdrRvrBsn,8800Btu,0.8SO2-r,w 0.9573 1.0401 2.740 2.730 1.490 2.490 2.620 0.750 2.680 57.850 11.750 Metals Gold, per troy oz Engelhard industrial Engelhard fabricated Handy & Harman base Handy & Harman fabricated LBMA Gold Price AM LBMA Gold Price PM Krugerrand,wholesale-e Maple Leaf-e American Eagle-e Mexican peso-e Austria crown-e Austria phil-e Silver, troy oz. 1280.82 1376.88 1267.20 1406.59 *1276.40 *1279.20 1319.34 1332.03 1332.03 1537.55 1246.48 1332.03 17.2000 Engelhard industrial Friday 20.6400 16.8300 21.0380 £13.0500 17.0850 12900 Engelhard fabricated Handy & Harman base Handy & Harman fabricated LBMA spot price (U.S.$ equivalent) Coins,wholesale $1,000 face-a Other metals LBMA Platinum Price PM *931.0 Platinum,Engelhard industrial 930.0 Platinum,Engelhard fabricated 1030.0 Palladium,Engelhard industrial 1005.0 Palladium,Engelhard fabricated 1105.0 Aluminum, LME, $ per metric ton *2152.0 Copper,Comex spot 3.1105 Iron Ore, 62% Fe CFR China-s 59.4 Shredded Scrap, US Midwest-s,w 286 Steel, HRC USA, FOB Midwest Mill-s 620 Fibers and Textiles 0.6100 0.6797 *79.00 68.500 n.a. Burlap,10-oz,40-inch NY yd-n,w Cotton,1 1/16 std lw-mdMphs-u Cotlook 'A' Index-t Hides,hvy native steers piece fob-u Wool,64s,staple,Terr del-u,w Grains and Feeds Barley,top-quality Mnpls-u Bran,wheat middlings, KC-u Corn,No. 2 yellow,Cent IL-bp,u Corn gluten feed,Midwest-u,w n.a. 74 3.1500 93.2 IPO Scorecard Performance of IPOs, most-recent listed first Company SYMBOL IPO date/Offer price % Chg From Friday3s Offer 1st-day close ($) price close Aquantia 9.51 AQ Nov. 3/$9.00 Spero Thera 11.56 SPRO Nov. 2/$14.00 Allena Pharmaceuticals 9.79 ALNA Nov. 2/$14.00 5.7 ... –17.4 0.5 –30.1 –1.9 l l l l l 2.750 1.450 Spain 2 -0.363 s 10 1.470 t U.K. 2 0.448 s 10 1.267 s l 1.750 4.250 l l l l Company SYMBOL IPO date/Offer price Altair Engineering ALTR Nov. 1/$13.00 Loma Negra LOMA Nov. 1/$19.00 Merchants Bancorp MBIN Oct. 30/$16.00 % Chg From Friday3s Offer 1st-day close ($) price close 19.37 49.0 5.8 21.50 13.2 0.7 17.77 11.1 3.9 Funko FNKO Nov. 2/$12.00 7.00 –41.7 –1.0 ForeScout Tech FSCT Oct. 27/$22.00 25.00 13.6 –2.0 Evoqua Water Tech AQUA Nov. 2/$18.00 20.32 12.9 –2.7 VM Holding NEXA Oct. 27/$16.00 18.10 13.1 4.0 Sources: WSJ Market Data Group; FactSet Research Systems Friday Corn gluten meal,Midwest-u,w Cottonseed meal-u,w Hominy feed,Cent IL-u,w Meat-bonemeal,50% pro Mnpls-u,w Oats,No.2 milling,Mnpls-u Rice, 5% Broken White, Thailand-l,w Rice, Long Grain Milled, No. 2 AR-u,w Sorghum,(Milo) No.2 Gulf-u SoybeanMeal,Cent IL,rail,ton48%-u Soybeans,No.1 yllw IL-bp,u Wheat,Spring14%-pro Mnpls-u Wheat,No.2 soft red,St.Louis-bp,u Wheat - Hard - KC (USDA) $ per bu-u Wheat,No.1soft white,Portld,OR-u 473.0 230 88 220 2.9300 370.00 24.00 7.6913 309.90 9.3500 7.5725 4.3350 3.6925 5.2750 Food Beef,carcass equiv. index choice 1-3,600-900 lbs.-u select 1-3,600-900 lbs.-u Broilers, National comp wghtd-u,w Butter,AA Chicago Cheddar cheese,bbl,Chicago Cheddar cheese,blk,Chicago Milk,Nonfat dry,Chicago lb. Cocoa,Ivory Coast-w Coffee,Brazilian,Comp Coffee,Colombian, NY Eggs,large white,Chicago-u Flour,hard winter KC Hams,17-20 lbs,Mid-US fob-u Hogs,Iowa-So. Minnesota-u Pork bellies,12-14 lb MidUS-u Pork loins,13-19 lb MidUS-u Steers,Tex.-Okla. Choice-u Steers,feeder,Okla. City-u,w 187.76 174.78 0.8635 2.2325 171.50 171.50 72.00 n.a. 1.2562 1.4537 0.8950 15.60 0.77 66.61 n.a. 0.9185 125.00 165.75 Fats and Oils Corn oil,crude wet/dry mill-u,w Grease,choice white,Chicago-h Lard,Chicago-u Soybean oil,crude;Centl IL-u Tallow,bleach;Chicago-h Tallow,edible,Chicago-u 34.5000 0.2300 0.3600 0.3305 0.2550 n.a. KEY TO CODES: A=ask; B=bid; BP=country elevator bids to producers; C=corrected; E=Manfra,Tordella & Brooks; G=ICE; H=Hurley Brokerage; I=Natural Gas Intelligence; L=livericeindex.com; M=midday; N=nominal; n.a.=not quoted or not available; R=SNL Energy; S=Platts-TSI; T=Cotlook Limited; U=USDA; W=weekly, Z=not quoted. *Data as of 11/2 Source: WSJ Market Data Group Month ago Year ago 1.616 2.349 1.475 2.321 0.810 1.814 1.827 2.664 1.967 2.852 1.641 2.310 -0.590 0.629 -0.491 0.753 -0.743 0.376 Spread Under/Over U.S. Treasurys, in basis points Latest Prev Year ago 15.9 23.8 21.1 31.5 83.1 49.6 -220.6 -172.0 -140.4 -134.6 -0.701 0.464 -0.594 -221.1 0.469 -172.5 -0.626 -237.5 0.157 -197.8 -235.9 -197.3 -143.6 -165.7 -0.212 1.804 -0.114 2.162 -0.009 1.637 -183.2 -54.9 -182.8 -54.5 -81.8 -17.8 -0.161 0.053 -0.113 0.076 -177.7 -229.6 -106.2 -187.3 -0.374 1.483 -0.287 1.710 -0.252 -178.1 -0.058 -229.0 -0.199 -198.4 1.239 -87.3 -199.0 -86.6 -100.9 -57.6 0.407 1.265 0.442 1.355 -121.0 -108.4 -61.9 -71.6 0.190 1.098 -117.3 -107.5 Source: Tullett Prebon Corporate Debt in that same company’s share price. Investment-grade spreads that tightened the most… Spread*, in basis points One-day change Stock Performance Close ($) % chg Issuer Symbol Coupon (%) Teva Commonwealth Bank of Australia Fifth Third Bancorp* Scripps Networks Interactive TEVA CBAAU FITB SNI 6.150 Feb. 1, ’36 2.050 Sept. 18, ’20 4.900 Sept. 30, ’49 2.800 June 15, ’20 368 34 87 77 –18 –13 –12 –10 n.a. n.a. 94 74 … ... 29.12 79.61 … ... –0.48 –1.68 Becton Dickinson And Co Capital One Financial Societe Generale S.A. Standard Chartered BDX COF SOCGEN STANLN 2.675 3.300 4.250 5.200 56 92 144 135 –8 –8 –8 –8 56 n.a. 146 n.a. 224.41 91.60 ... ... 0.17 –0.92 ... ... 65 n.a. n.a. 140 117.94 96.89 20.14 … –0.81 –2.44 1.00 … 53 n.a. n.a. 44 224.41 11.25 29.06 61.81 0.17 0.54 –1.42 12.71 Maturity Current Dec. 15, ’19 Oct. 30, ’24 April 14, ’25 Jan. 26, ’24 Last week …And spreads that widened the most VMware Delphi Automotive General Electric Teva Pharmaceutical Fin IV VMW DLPH GE TEVA 2.300 Aug. 21, ’20 3.150 Nov. 19, ’20 5.550 May 4, ’20 2.250 March 18, ’20 65 56 56 225 Becton Dickinson And Co Pitney Bowes Xerox Qualcomm* BDX PBI XRX QCOM 3.125 Nov. 8, ’21 3.625 Sept. 15, ’20 4.500 May 15, ’21 3.000 May 20, ’22 73 282 120 69 27 25 24 22 19 19 19 16 High-yield issues with the biggest price increases… Issuer Symbol Coupon (%) Jones Energy Holdings Global A&T Electronics American Axle And Manufacturing California Resources JONE GATSP AXL CRC 6.750 10.000 6.500 8.000 Sanchez Energy Sprint Capital Kindred Healthcare Bombardier SN S KND BBDBCN Bond Price as % of face value Current One-day change Maturity April 1, ’22 Feb. 1, ’19 April 1, ’27 Dec. 15, ’22 80.875 87.000 104.250 69.625 6.125 Jan. 15, ’23 8.750 March 15, ’32 8.750 Jan. 15, ’23 6.000 Oct. 15, ’22 86.500 122.500 97.750 99.125 Last week 3.13 2.75 2.13 2.06 1.75 1.38 1.00 0.78 Stock Performance Close ($) % chg 75.500 n.a. 102.500 65.250 1.36 ... 18.94 12.04 7.94 ... 5.11 4.51 83.500 125.250 98.900 99.065 4.63 … 5.90 ... 6.68 … –5.60 ... 74.311 78.500 84.750 92.250 … ... 7.41 16.37 … ... –19.28 –6.24 92.125 12.500 n.a. 85.500 ... ... 42.16 2.15 ... ... –2.02 2.38 …And with the biggest price decreases Revlon Consumer Products PetSmart Frontier Communications CenturyLink REV PETM FTR CTL 6.250 Aug. 1, ’24 7.125 March 15, ’23 11.000 Sept. 15, ’25 7.600 Sept. 15, ’39 Teamhealth Holdings Concordia International TreeHouse Foods Pioneer Energy Services TMH CXRCN THS PES 6.375 Feb. 1, ’25 9.500 Oct. 21, ’22 6.000 Feb. 15, ’24 6.125 March 15, ’22 66.500 –7.38 72.000 78.188 87.625 –2.63 –2.31 –2.13 –2.00 –1.75 –1.75 –1.50 85.250 9.250 104.000 83.250 *Estimated spread over 2-year, 3-year, 5-year, 10-year or 30-year hot-run Treasury; 100 basis points=one percentage pt.; change in spread shown is for Z-spread. Note: Data are for the most active issue of bonds with maturities of two years or more Sources: MarketAxess Corporate BondTicker; WSJ Market Data Group Borrowing Benchmarks | WSJ.com/bonds Money Rates November 3, 2017 Key annual interest rates paid to borrow or lend money in U.S. and international markets. Rates below are a guide to general levels but don’t always represent actual transactions. Week Latest ago Inflation Sept. index level Chg From (%) Aug. '17 Sept. '16 U.S. consumer price index 0.53 0.19 246.819 252.941 All items Core 2.2 1.7 International rates Week ago U.S. Canada Japan 0.00 0.50 0.50 1.50 0.00 0.50 0.25 1.50 1.11 1.21 One month Three month Six month One year 30-year mortgage yields 30 days 3.462 3.554 3.865 3.032 60 days 3.483 3.587 3.899 3.063 1.38 0.15 One month Three month Six month One year 52-Week high low 3.00 3.00 3.00 1.31 1.31 -0.401 -0.379 -0.322 -0.232 -0.376 -0.322 -0.212 -0.075 -0.405 -0.381 -0.322 -0.234 -0.372 -0.331 -0.275 -0.184 Value Traded -0.366 -0.311 -0.210 -0.069 -0.375 -0.332 -0.276 -0.191 52-Week High Low DTCC GCF Repo Index 1.196 29.600 1.366 0.244 1.201 115.280 1.506 0.257 Treasury MBS 2.25 Open Implied Settle Change Interest Rate Commercial paper (AA financial) 1.31 -0.372 -0.329 -0.276 -0.191 Latest Call money 0.62 DTCC GCF Repo Index Futures Libor One month Three month U.S. government rates Week ago -0.400 -0.378 -0.316 -0.234 Euro interbank offered rate (Euribor) Other short-term rates 90 days Overnight repurchase U.S. Euro Libor Secondary market Latest —52-WEEK— High Low 1.59017 1.57267 1.59017 1.24267 1.86289 1.84789 1.86317 1.55622 Six month One year Fannie Mae 52-Week High Low 0.00 0.50 0.25 1.50 0.00 0.50 0.50 1.50 Week Latest ago 1.020 1.005 1.300 0.240 1.130 1.105 1.180 0.350 1.260 1.245 1.260 0.500 4 weeks 13 weeks 26 weeks Policy Rates Euro zone Switzerland Britain Australia —52-WEEK— High Low Treasury bill auction 4.25 4.25 4.25 3.50 3.20 3.20 3.20 2.70 1.475 1.475 1.475 1.475 Treasury Nov Treasury Dec Treasury Jan 1.24322 1.24233 1.24333 0.53533 1.39194 1.38009 1.39194 0.88233 98.840 unch. 8062 1.160 98.700 -0.005 2038 1.300 98.605 -0.005 450 1.395 Discount 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 0.3500 0.5625 0.2500 0.3000 0.3200 1.75 Cash Prices | WSJ.com/commodities Energy l Prime rates Based on actual transaction dates in reports received this past week 125,825 0 0 0 224,515 1,604,915 391,578 l Japan 2 -0.161 10 0.053 Latest Buying and selling by sector Basic Industries Business services Capital goods Consumer durables Consumer nondurables Consumer services Energy l l 0.100 0.100 * Half the transactions were indirect **Two day transaction p - Pink Sheets Sector Yield (%) Latest(l) 0 20 40 60 80 100 120 Previous U.S. 2 1.621 s 10 2.343 t Australia 2 1.779 t 10 2.581 t Federal funds Effective rate High Low Bid Offer 1.1800 1.3125 1.0500 1.1600 1.1800 Notes on data: U.S. prime rate is the base rate on corporate loans posted by at least 70% of the 10 largest U.S. banks, and is effective June 15, 2017. Other prime rates aren’t directly comparable; lending practices vary widely by location; Discount rate is effective June 15, 2017. DTCC GCF Repo Index is Depository Trust & Clearing Corp.'s weighted average for overnight trades in applicable CUSIPs. Value traded is in billions of U.S. dollars. Federal-funds rates are Tullett Prebon rates as of 5:30 p.m. ET. Futures on the DTCC GCF Repo Index are traded on NYSE Liffe US. Sources: Federal Reserve; Bureau of Labor Statistics; DTCC; SIX Financial Information; General Electric Capital Corp.; Tullett Prebon Information, Ltd. Dividend Changes Dividend announcements from November 3. Company Symbol Amount Yld % New/Old Frq Payable / Record Increased Artesian Resources Cl A Cedar Fair Dep Rec Cogent Communications Community Healthcare Tr DCT Industrial Trust Entercom Commun Enviva Partners j2 Global Kennedy-Wilson Holdings Motorola Solutions NRG Yield Cl A NRG Yield Cl C PBF Logistics Sabra Healthcare REIT STAG Industrial Vectren Corp ARTNA FUN CCOI CHCT DCT ETM EVA JCOM KW MSI NYLD.A NYLD PBFX SBRA STAG VVC 2.3 5.4 4.5 5.7 2.4 3.4 8.4 2.1 3.9 2.2 6.1 6.0 9.4 10.8 5.0 2.7 .2352 /.2317 .89 /.855 .48 /.46 .395 /.3925 .36 /.31 .09 /.075 .615 /.57 .395 /.385 .19 /.17 .52 /.47 .288 /.28 .288 /.28 .48 /.47 .5201 /.35989 .1183 /.1175 .45 /.42 Q Q Q Q Q Q Q Q Q Q Q Q Q Q M Q Nov22 /Nov13 Dec15 /Dec04 Dec04 /Nov17 Dec01 /Nov17 Jan04 /Dec22 Dec15 /Nov28 Nov29 /Nov15 Dec05 /Nov17 Jan04 /Dec29 Jan12 /Dec15 Dec15 /Dec01 Dec15 /Dec01 Nov29 /Nov13 Nov30 /Nov15 Feb15 /Jan31 Dec01 /Nov15 CBL TNH 13.5 .20 /.265 Q 6.2 1.36 /1.60 Q Jan16 /Dec29 Nov29 /Nov15 Funds and investment companies Advnt Clymr Enh Grth AdvntClymr Convertible II AdvntClymrFd Dreyfus Mun Bd Infr Fd Ellsworth Growth & Income Fiduciary/Clymr Opp Fd Fidus Investment Fidus Investment Guggenheim Credit All Fd Guggenheim Strat Opps Fd Guggenheim Taxable Muni NexPoint Credit Strat Fd PCM Fund PIMCO California Mun II PIMCO California Mun III PIMCO California Muni PIMCO Corporate & Incm PIMCO Corporate & Incm PIMCO Dynamic Credit PIMCO Dynamic Income Fund Symbol PIMCO Global StocksPLUS PIMCO HiInco PIMCO Incm Strategy Fd II PIMCO Inco Str Fd PIMCO Income Opportunity Pimco Muni Inc II PIMCO Muni Inc III PIMCO MuniFd PIMCO NY Muni PIMCO NY Muni II PIMCO NY Muni III PIMCO Strat Income Fund WstAssetClymr InflLnk Sec WstAstClymr InfLnkd Fd Amount Yld % New/Old Frq PGP PHK PFN PFL PKO PML PMX PMF PNF PNI PYN RCS WIA WIW 10.8 12.4 9.0 9.0 8.7 5.9 5.7 5.4 5.3 5.0 5.1 9.4 3.6 3.8 .14668 .0807 .08 .09 .19 .065 .05575 .05967 .057 .05069 .04225 .072 .0345 .036 LARK 2.6 5.00% NTB BCE BT CNQ CVE ENB GIL MAXR MLCO MELI NNA OTEX RDS.A RDS.B 3.5 4.7 3.8 2.4 1.5 5.2 1.3 1.9 1.4 0.2 15.0 1.5 5.9 5.7 NATH SBSI 3.2 M M M M M M M M M M M M M M Payable / Record Dec01 /Nov13 Dec01 /Nov13 Dec01 /Nov13 Dec01 /Nov13 Dec01 /Nov13 Dec01 /Nov13 Dec01 /Nov13 Dec01 /Nov13 Dec01 /Nov13 Dec01 /Nov13 Dec01 /Nov13 Dec01 /Nov13 Nov30 /Nov15 Nov30 /Nov15 Stocks Landmark Bancorp Dec15 /Dec01 Foreign Reduced CBL & Assocs Properties Terra Nitrogen Company LCM AGC AVK DMB ECF FMO FDUS FDUS GGM GOF GBAB NHF PCM PCK PZC PCQ PTY PCN PCI PDI 9.8 9.2 8.6 4.9 4.7 14.2 9.5 9.5 9.7 10.2 6.7 10.1 8.0 5.6 5.2 5.4 9.2 7.9 8.7 8.8 .21 .047 .1154 .053 .11 .4308 .04 .39 .1813 .1821 .12573 .20 .08 .0473 .045 .077 .13 .1125 .16406 .2205 Q M M M Q Q Q M M M M M M M M M M M M Nov30 /Nov15 Nov30 /Nov15 Nov30 /Nov15 Dec01 /Nov17 Dec15 /Nov14 Nov30 /Nov15 Dec27 /Dec20 Dec27 /Dec20 Nov30 /Nov15 Nov30 /Nov15 Nov30 /Nov15 Nov30 /Nov22 Dec01 /Nov13 Dec01 /Nov13 Dec01 /Nov13 Dec01 /Nov13 Dec01 /Nov13 Dec01 /Nov13 Dec01 /Nov13 Dec01 /Nov13 Bank of Butterfield BCE Inc BT Group ADR Canadian Natural Res Cenovus Energy Enbridge Inc Gildan Activewear Maxar Technologies Melco Resorts & Ent ADR MercadoLibre Navios Marit Acq Open Text Royal Dutch Shell ADR A Royal Dutch Shell ADR B Q .32 .56057 Q .31678 SA .21485 Q .03896 Q .47528 Q .0935 Q .28829 Q Q .09 Q .15 Q .05 Q .132 Q .94 Q .94 Nov27 /Nov13 Jan15 /Dec15 Feb12 /Dec29 Jan01 /Dec12 Dec29 /Dec15 Dec01 /Nov15 Dec11 /Nov16 Dec29 /Dec15 Nov30 /Nov14 Jan16 /Dec31 Dec12 /Dec06 Dec20 /Dec01 Dec20 /Nov17 Nov20 /Nov17 Special Nathan's Famous Southside Bancshares 5.00 .02 Jan04 /Dec22 Nov30 /Nov16 Suspended RAIT Finl Tr RAS Q Dec15 / KEY: A: annual; M: monthly; Q: quarterly; r: revised; SA: semiannual; S2:1: stock split and ratio; SO: spin-off. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 6, 2017 | B9 MARKETS BY ASJYLYN LODER The rise of cheap exchangetraded funds has the investment industry fighting over scraps to get paid. Investors have poured a record $380 billion into ETFs this year, much of it into ultra-low-cost index funds. The trend leaves asset managers, brokers and advisers scrambling for a slice of a shrinking pie. The challenges are evident at State Street Corp., which in October slashed fees for 15 ETFs to remain competitive. TD Ameritrade faced a backlash last month from advisers and investors when the discount broker tried to introduce new fees on its trading platform, forcing it to delay some of the changes. The latest volley came late last month when Franklin Templeton launched 16 foreign-stock ETFs, most of them cheaper than rival products. ETFs are part of a yearslong transformation of wealth management. Investors demanding lower fees and more transparency are dumping pricey stock pickers in favor of low-cost index funds. Asset managers have slashed fund fees to as little as $30 a year for a $100,000 investment. Brokerage firms that once cashed in on sales and trading commissions have found more predictable income in getting paid di- rectly by their clients and agreeing to act in their best interests. ETFs have been a big beneficiary of the shift toward feebased investment advice. For much of their 25-year history, ETFs competed against mutual funds that paid sales incentives to brokers that relied on commissions to make money. ETFs, which trade on exchanges like any other stock, paid no such sweeteners. But the commission model is rapidly shrinking amid heightened regulatory scrutiny of sales commissions and an onslaught of regulations designed to elevate a client’s best interest over a broker’s own financial incentives. Investor flows into U.S. ETFs outstripped mutual-fund inflows for 18 of the past 19 months. ETFs now account for 18% of U.S. open-end fund assets, up from 7% a decade ago, according to Morningstar. Morgan Stanley’s unexpectedly bright earnings report proves that some firms have found an upside. The New York firm reported in October that it is on track for its best year in a decade, buoyed by rising revenue from its wealth-management division. Bank of America Corp. got a boost from increased fees paid on assets, with net income from its wealth- and investment-management business up 10% from last year. ETFs Gaining Ground Exchange-traded funds are growing at a record pace, and inﬂows have outpaced mutual funds for the past 17 months. $60 billion ETFs Open-End Mutual Fund Flows 40 20 0 –20 –40 –60 2015 ’16 Source: Morningstar ’17 THE WALL STREET JOURNAL. RANDALL BENTON//THE SACRAMENTO BEE/ASSOCIATED PRESS Rise of ETFs Leaves Investment Industry Fighting for Scraps Firefighting services are complimentary to policyholders in certain areas that are prone to wildfires. Fire threatens a Sonoma, Calif., home. Insurers Enlist Private Firefighters BY LESLIE SCISM During the worst of last month’s wildfires in Northern California, Dick Fredericks got a phone call that passed on “some magical words”: His house was safe. The message from a private firefighting service hired by his home insurer, Chubb Ltd., was accompanied by an email with some two dozen photos, including one of the service’s firefighters pumping water from Mr. Fredericks’s swimming pool to extinguish a brush fire on his Sonoma Valley property. Increasingly, insurance carriers are finding wildfires, such as those in California, are an opportunity to provide protection beyond what most people get through publicly funded fire fighting. Some insurers say they typically get new customers when homeowners see the special treatment received by neighbors during big fires. “The enrollment has taken off dramatically over the years as people have seen us save homes,” Paul Krump, a senior executive at Chubb, said of the insurer’s Wildfire Defense Services. “It’s absolutely growing leaps and bounds.” The services are complimentary to policyholders in certain ZIP Codes or states that are prone to wildfires. Some insurers require policyholders to enroll in the programs in advance, to give permission for workers to access the property and to obtain contact information. Chubb’s service, which began in 2008, is offered in 15 states. American International Group Inc. launched its Wildfire Protection Unit in 2005 in 14 California ZIP Codes. The unit has since expanded to 385 ZIP Codes in California, Colorado and Texas. Other insurers extending services include Privilege Underwriters Reciprocal Exchange and USAA. Tens of thousands of people benefit from the programs. For their overall insurance, policyholders can pay anywhere from thousands of dollars in annual premiums with these firms to more than $100,000, depending on the number and types of homes and other possessions they insure. Consumer advocates lament that the programs mean the rich can get better fire protection, because the services mostly have been available at insurers of the well-to-do. “Do we like the idea of a two-tier system for wealthy individuals and people with less means? No,” said Amy Bach, executive director of United Policyholders, a national insurance-focused consumer nonprofit based in California. “But do we want to see their approaches work? Yes,” she added. The private-sector activity calls to mind the early days of fire insurance in the U.S., in the 18th and 19th centuries before municipal fire services became common. Back then, metal-plaque “fire marks” were affixed to the front of insured buildings as a guide for insurers’ own fire brigades as to which fires to put out, said spokeswoman Loretta Worters of the Insurance Information Institute. Scott McLean, a spokesman for the California Department of Forestry and Fire Protection, known as Cal Fire, said the state has procedures in place to coordinate with the private-sector crews. They are allowed to visit properties only after obtaining permission of an incident commander. The insurers run “intelligence” or “command” centers from which they deploy these field forces. “Our goal is to be out in front of a fire…before the fire is burning up the hillside,” said Stephen Poux, head of risk-management services and loss prevention at AIG. The private crews seek to clear combustible items from a property: wood piles, outdoor furniture including cushions, weeds, straw floor mats and leaves in gutters. They may set up sprinklers with water available at the location, or with water they bring to the site, along with sprinkler lines and a generator to operate them. Currencies $194.77 The share price Apple needs to reach to become the first $1 trillion public company Apple Nears a Milestone The world’s most valuable public company is closing in on $1 trillion. Apple Inc. shares closed at a new high of $172.50 Friday, putting the iPhone maker within striking distance of reaching $900 billion in market value. The stock needs to hit $175.30 for the tech giant to become the first company to reach that milestone, while shares need to gain 13% and hit $194.77 for Apple to become the first public company worth $1 trillion, based on the updated share count the company released Friday. Shares rose 2.6% Friday with the new iPhone X hitting stores and investors digesting Apple’s latest earnings report. The firm delivered its best quarterly growth in two years, fueled by strong sales in all of its key MONEYBEAT products and a rebound in the critical China market. Generally positive reviews of the firm’s 10th-anniversary line of iPhones have also helped boost Apple shares recently. For the year, the stock is up roughly 50%, part of 2017’s torrid rally for technology stocks. That rally has helped other tech titans hit some major milestone of their own. Google’s parent company, Alphabet Inc., recently joined Apple as the only U.S. companies to reach $700 billion in market value since 2000, and maybe ever, according to The Wall Street Jour- nal’s Market Data Group. Meanwhile, Microsoft Corp. eclipsed its dot-com era market cap of $600 billion and is now flirting with the $650 billion mark. For Apple, this year rivals 2012 as one of the best for the stock in the company’s history. If it hits $900 billion before 2017 ends, it will mark the second time that Apple will have reached multiple $100 billion milestones in the same year. After taking nearly three decades to grow to $100 billion, Apple has gone from $100 billion to nearly $900 billion in just over 10 years. —Amrith Ramkumar ONLINE WSJ .COM For more MoneyBeat blog posts, go to blogs.wsj.com/ MoneyBeat U.S.-dollar foreign-exchange rates in late New York trading Country/currency US$vs, YTDchg Fri in US$ per US$ (%) Country/currency Vietnam dong Americas Argentina peso .0567 17.6350 Brazil real .3017 3.3144 Canada dollar .7835 1.2763 Chile peso .001576 634.50 Colombia peso .0003292 3037.50 Ecuador US dollar 1 1 Mexico peso .0521 19.2034 Peru new sol .3081 3.246 Uruguay peso .03421 29.2300 Venezuela b. fuerte .099392 10.0612 .00004403 22711 –0.3 Europe 11.1 1.8 –5.1 –5.3 1.2 unch –7.4 –3.2 –0.4 0.7 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 Asia-Pacific Australian dollar .7650 1.3072 China yuan .1506 6.6387 Hong Kong dollar .1282 7.8026 India rupee .01545 64.705 Indonesia rupiah .0000741 13499 Japan yen .008767 114.06 Kazakhstan tenge .002992 334.23 Macau pataca .1245 8.0345 Malaysia ringgit .2361 4.2360 New Zealand dollar .6906 1.4480 Pakistan rupee .00950 105.280 Philippines peso .0195 51.282 Singapore dollar .7327 1.3649 South Korea won .0008958 1116.29 Sri Lanka rupee .0065117 153.57 Taiwan dollar .03314 30.171 Thailand baht .03015 33.170 US$vs, YTDchg Fri in US$ per US$ (%) –5.9 –4.4 0.6 –4.8 –0.2 –2.5 0.2 1.5 –5.6 0.3 0.9 3.4 –5.7 –7.6 3.5 –7.0 –7.4 .04520 22.125 –13.9 .1560 6.4123 –9.3 1.1610 .8614 –9.4 .003735 267.73 –9.0 .009405 106.33 –5.9 .1223 8.1765 –5.4 .2735 3.6566 –12.7 .01694 59.024 –3.7 .1186 8.4335 –7.4 .9994 1.0006 –1.8 .2573 3.8864 10.3 .0371 26.9285 –0.6 1.3075 .7648 –5.6 Middle East/Africa 2.6512 .3772 0.01 .0567 17.6475 –2.7 .2850 3.5086 –8.8 3.3038 .3027 –1.0 2.5974 .3850 0.01 .2615 3.825 5.1 .2666 3.7503 –0.01 .0703 14.2236 3.9 Bahrain dinar Egypt pound Israel shekel Kuwait dinar Oman sul rial Qatar rial Saudi Arabia riyal South Africa rand Close Net Chg % Chg YTD%Chg WSJ Dollar Index 87.96 0.24 0.27 –5.36 Sources: Tullett Prebon, WSJ Market Data Group THE TICKER | Market events coming this week Monday Wednesday Nasdaq Earnings expected* Mort. bankers indexes Purch., previous down 1% Refinan., prev. down 5% Initial jobless claims Previous 229,000 Expected 233,000 Estimate/Year Ago($) Cardinal Health 1.00/1.24 CVS Health 1.48/1.64 Microchip Tech. 1.35/0.94 Priceline 34.26/31.18 Skyworks 1.75/1.47 Sysco 0.72/0.63 Tuesday Consumer credit Aug., prev. up 13.06 bil. Sept., expected n.a. Earnings expected* Estimate/Year Ago($) CHRISTOPHER LEE/BLOOMBERG NEWS CBOE Global Markets 0.88/0.58 Continental Resources 0.05/(0.22) DXC Tech. 1.51/0.61 Marriott 0.98/0.91 Royal Caribbean Cruises 3.40/3.20 Welltower 0.46/0.93 Analysts expect drugstore operator CVS Health to post quarterly earnings of $1.48 a share on Monday, down from last year. EIA status report EIA report: natural gas Previous change in stocks in millions of barrels Crude oil Gasoline Distillates down 2.4 down 4 down 0.3 Earnings expected* Estimate/Year Ago($) CenturyLink 0.45/0.56 Humana 3.26/3.18 Monster Beverage 0.40/0.34 Regeneron Pharma. 3.82/3.13 Rockwell Auto. 1.72/1.52 Twenty-First Century Fox 0.49/0.51 Thursday Previous change in stocks in billions of cubic feet up 65 Wholesale inventories Aug., previous up 0.9% Sept., expected up 0.3% Earnings expected* Estimate/Year Ago($) D.R. Horton 0.81/0.75 Johnson Controls 0.86/1.21 Liberty Broadband 0.03/0.02 Nvidia 0.95/0.83 Walt Disney 1.15/1.10 Friday Short-selling reports Ratio, days of trading volume of current position, at Oct. 13 NYSE 4.6 5.6 U.Mich. consumer index Oct., final 100.7 Nov., prelim. 100.7 * 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 or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com B10 | Monday, November 6, 2017 THE WALL STREET JOURNAL. * *** MARKETS Global Growth Boosts Oil to 2-Year High BY ALISON SIDER Oil prices reached their highest level in more than two years last week as signs increased that global growth will continue to boost demand for the extra oil and fuel that have weighed on the market. Economies around the world are expanding simultaneously for the first time in a decade. Industrial activity is picking up, increasing the need for diesel. More vessels laden with goods are crossing oceans, consuming bunker fuel. Falling unemployment means commuters are filling up tanks to head to work. All point to growing petroleum demand. “We’ve seen global growth clearly much stronger than we would have expected 12 months ago,” said Jason Thomas, director of research at Carlyle Group. “It’s not just faster growth, it’s faster growth in areas that happen to be oil consuming,” like trade and industrial activity, he said. Investors will be trying to gauge whether the rally will continue in the midst of a political transition in Saudi Arabia or if the higher prices will lure new production that could cap further increases. Oil prices gained more than 15% in September and October— their best two months in over a year. On Friday, both oil benchmarks jumped more than 2% to hit two-year highs. U.S. crude futures rose to $55.64 a barrel, their highest since July 2, 2015. Brent, the global reference price, broke above $60 last week as investors have latched on to signs that a coordinated effort by the Organization of the Petroleum Exporting Countries and other major exporters to curb output is working. Lift in Demand U.S. crude prices are trading at their highest level in more than two years on signs that global consumption of fuel will pick up. $60 a barrel 55 Nymex crude-oil WTI price 50 45 40 35 30 25 2015 ’16 All 45 countries tracked by the OECD are set to grow for the ﬁrst time in a decade. Number of countries with growth* U.S. motorists increased driving, using more gasoline. World oil demand is expected to rise this year. Vehicle miles traveled Global demand† 45 countries 290 billion vehicle miles 100 million barrels a day 40 35 This year’s biggest videogames aren’t getting as many players into stores. For companies like Electronic Arts and Activision Blizzard, that is a good thing. Both publishers benefited from a sharp rise in customers downloading full games rather than buying them on disks during the September quarter. Full-game downloads at EA generated $119 million in net bookings for the period, up 28% year over year. The company’s fiscal second quarter is anchored by its big sports releases that typically don’t drive as much download activity relative to other types of games. Activision said Thursday “Destiny 2,” a shooter released in September, generated more than half its sales through downloads versus 30% to 40% for its predecessor. As a result, net revenue in the company’s Activision segment more than doubled for the third quarter. Games sold as downloads offer better profit margins for publishers relative to those sold at retail. Activision CFO Spencer Neumann said the effect works out to about $10 in profit improvement per game sold. So the accelerating shift to downloads is encouraging ahead of the holiday sales period, when both companies have big new games coming. Activision’s “Call of Duty: WWII” went on sale Friday. EA’s “Star Wars Battlefront II” hits stores this month. If current trends hold, both games should click well with investors even if gamers never leave their chairs. —Dan Gallagher But a backlog of untapped wells could bring a surge of production if prices keep rising. Drilled but uncompleted wells in U.S. oil-producing regions 6,250 oil and natural gas wells 280 80 6,000 270 30 25 260 20 250 15 5,750 60 5,500 40 5,250 240 10 5 0 4,750 0 220 2007 ’10 ’15 ’17 5,000 20 230 2015 ’16 4,500 ’14 ’15 ’16 1Q ’17 ‘17 1Q 2016 ’17 *2017 is a forecast based off ﬁrst- and second-quarter data for most countries. †2014 and 2015 data annual, all else quarterly. Fourth quarter 2017 is a forecast. Sources: WSJ Market Data Group (WTI); OECD (growth); U.S. Department of Transportation (miles); IEA (demand); EIA (wells) THE WALL STREET JOURNAL. Barclays PLC analysts said Friday that robust global growth and unexpected supply disruptions have resulted in “the most constructive oil price environment” since 2014. The bank now expects Brent prices to average $60 a barrel in the fourth quarter and said they could make a push toward $70, though the analysts cautioned that such a move would be short-lived. Saudi authorities arrested royals and cabinet ministers Saturday in a crackdown on alleged corruption that comes as Saudi leadership seeks to consolidate power. Analysts said the move was unlikely to disrupt Saudi Arabia’s efforts to bring down global oil supplies, but uncertainty surrounding the political transition could boost oil prices further, especially against the backdrop of escalating geopolitical tensions. “The Kingdom’s oil policy— extend if not tighten restraint until glutted stocks drain—is unlikely to be disturbed, said Robert McNally, president of Rapidan Energy Group. “Though the transition’s uncertainty and links to regional turbulence—with tensions with Iran at the core— could stoke crude bullish sentiment.” Global growth also has helped send the U.S. stock market to records this year. Oil companies have reported higher earnings. On Thursday, Royal Dutch Shell PLC said profit nearly tripled in the third quarter from a year earlier, helped by recovering oil prices. It is a remarkable turnaround for crude prices, which plunged by more than 20% from February to June amid doubts that OPEC’s efforts would dent the glut that has stressed the market for more than three years. Investors who had been banking on a rally at the beginning of the year became frustrated, fearing that U.S. shale producers could pounce on any brief rise in prices and pump enough oil to replace much of what OPEC and its allies were curtailing. Since the end of March, crude inventories have fallen. The overhang of stored petroleum compared with the five-year average level in the OECD that OPEC is targeting has been cut in half since the beginning of the year, according to OPEC’s figures. In the U.S., more than 80 million barrels have been drained from storage tanks since March 31. Shrinking supplies and higher demand could align to keep prices at these levels, said Nick Koutsoftas, portfolio manager at Cohen & Steers. Mr. Koutsoftas said the global economy is strong enough to absorb Brent prices of $60 to $65 a barrel, and he anticipates that U.S. crude prices could climb to $57 or $58 a barrel by the end of the year. Many expected demand would be relatively tepid this year. The International Energy Agency predicted in January that oil demand would grow by 1.3 million barrels a day this year, a slowdown from 2016’s growth rate. The agency revised its forecast upward in September and is now predicting demand growth of 1.6 million barrels a day this year. “There were a lot more question marks around the global economy—the year got off to a very slow start economically,” said Leo Grohowski, chief investment officer at BNY Mellon Wealth Management. Now, “most major countries and regions around the world are in growth mode—oil over $50 is reflecting some of that.” U.S. gasoline demand is at records. Through August, drivers were on track to outpace last year’s record number of vehicle miles traveled, the most recent federal data show. There are risks on the horizon: OPEC’s production cut agreement is set to expire in March, and investors are eyeing the group’s Nov. 30 meeting to hear whether it will be extended. Some are anxious that prices could tumble if OPEC doesn’t firmly commit to continuing its cuts through the end of next year. Flattening U.S. oil output has helped bolster oil prices in recent weeks, but higher prices could bring on a wave of output from shale fields. U.S. drillers have drilled a massive backlog of wells that have yet to be tapped. Production from those wells could come online quickly. Investors and producing nations that have become convinced that shale is slowing could be due for a surprise, Citigroup analysts wrote. “We think they are wrong to project weaker U.S. supply growth ahead,” the analysts said. HEARD ON THE STREET Email: email@example.com Videogame Publishers Find Upside In Digital Downloads ’17 WSJ.com/Heard FINANCIAL ANALYSIS & COMMENTARY Companies Bet on More Expansion Slowing Flow Chinese banks’ claims on other ﬁnancial institutions ¥30 trillion 25 20 15 10 2015 ’16 ’17 Note: ¥1 trillion=$150.9 billion Source: Wind Info THE WALL STREET JOURNAL. QILAI SHEN/BLOOMBERG NEWS Pickups in industrial activity, employment, shipping increase demand for fuel The People’s Bank of China Why China’s Bonds Fell Catching sight of a chain reaction in China’s markets is rare. Carrying out a postmortem of a recent selloff in China’s $9 trillion bond market shows how it is becoming harder for Beijing to untangle its increasingly intertwined financial system. In the aftermath of China’s twice-a-decade party congress last week, yields on benchmark 10-year Chinese government bonds spiked to 3.9%, their highest in three years. Government bond futures fell. Reasons proffered for the rout ranged from expectations of higher U.S. interest rates to general fearmongering. An important anomaly to note about the bond rout is that as government bonds sold off, yields on less liquid, unsecured Chinese corporate bonds barely moved. That is atypical in an environment of rising rates. Usually, bond investors shed their less liquid holdings and keep assets that are more easily tradable, like government debt. So, this is how the selloff in China really worked: Let’s start with the travails of China’s small and midsize lenders that—like most banks—fund themselves by taking in customer deposits and by borrowing in wholesale markets. In China, the latter has increasingly meant issuing short-term bonds known as negotiable certificates of deposit, or NCDs. The trouble for Chinese banks of late is that both these funding sources have become expensive. Borrowing costs have risen as Beijing pursues its deleveraging campaign, while bank-deposit growth has been slowing. To balance out these rising costs, banks have been placing more of their money with nonbank financial institutions—the likes of trust companies, funds and securities companies—that offer high returns from investing in various markets, from bonds to stocks and commodities. Deposits placed by banks with these nonbanks— the bulwarks of China’s infamous shadow-banking system—had grown to more than $4 trillion as of September. But with less funds coming into banks now, less can go out. That has led to trouble for the nonbanks, which, after years of only everhigher inflows, have started facing redemptions. Banks’ claims on nonbanks have dropped 2% since peaking in June, according to Wind Info, equivalent to a $90 billion withdrawal of funds. In addition to these redemptions, the cost for nonbanks of juicing returns on their investments by leveraging up has risen because of higher interest rates. Faced with redemptions, nonbanks have needed to sell something, and quickly. Unloading highly liquid government bonds has proved the easiest option. Meanwhile, the nonbanks have held on to their higher-yielding corporate bonds, which at least have the benefit of helping them to maintain high returns. The upshot for investors looking for clues about Chinese markets: Watch out for trends in wholesale markets, particularly what is happening with those negotiable certificates of deposit. Issuance of NCDs fell by more than 300 billion yuan ($45.39 billion) in October, according to an estimate by Rhodium Group. And at least 5 trillion yuan worth of this short-term debt is expected to mature in the last quarter of the year, Rhodium estimates, indicating more funding pain for the banks ahead. As Chinese banks find it harder to raise cash, there could be more episodes of volatility in asset markets. Investors should be prepared. —Anjani Trivedi Investors are rewarding companies that are investing to boost growth, and with ample cash available, the trend of strong business investment should persist. One strong driver of the 3.0% third-quarter GDP growth rate was business investment, which rose an annualized 3.9%. This was actually a slowdown from 6.7% growth in the second quarter, possibly due to hurricane effects, but was still a strong driver of overall growth. This is somewhat at odds, however, with loan-growth figures from the Federal Reserve which have been sluggish all year. As of mid-October, commercial and industrial loans on the books of commercial lenders in the U.S. were up just 1% from a year earlier, compared with 7% growth in 2016. One possibility is that alternative lenders are filling the void, especially for riskier clients that ordinary banks eschew. Issuance of leveraged loans, which are originated by banks and then syndicated out to investors, are up 35% this year, according to Dealogic. But it is also likely that many companies are funding investments internally. Analysts at Goldman Sachs say cash balances at S&P 500 companies are at historic highs at 12% of assets. They forecast total cash spending by these companies on capital expenditures and research and development will rise 1.3% in 2017 and 8.2% in 2018. This reflects confidence in the economic outlook, but it is also partly out of necessity, says Goldman Sachs strategist David Kostin. With investment budgets having been squeezed for years to make way for share repur- chases and dividends, the average age of corporate assets has reached its highest level in more than 50 years. Importantly, the boost in investment spending also reflects a shift in incentives. Shares of companies that prioritized buybacks and dividends strongly outperformed from 2011 through 2015, Goldman finds. But since the start of last year, Goldman’s basket of companies that are most focused on capex and R&D within their sectors has outperformed the S&P 500 by 4.6 percentage points. The investment bank’s basket of companies that prioritize dividends and buybacks, by contrast, has underperformed slightly. Standouts in Goldman’s high-investment basket include General Motors, which is spending 60% of its market capitalization on capex and R&D, as well as some chip makers and airlines. With a steady supply of credit available from banks and alternative lenders and plenty of cash on corporate balance sheets, companies are well-placed to oblige investors looking for growth. —Aaron Back No Payouts Please Performance relative to the S&P 500 Goldman Sachs capex and R&D index Goldman Sachs buybacks and dividends Index 106 104 102 100 98 96 94 2016 Source: Goldman Sachs 2017 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com JOURNAL REPORT | A MONTHLY ANALYSIS © 2017 Dow Jones & Company. All Rights Reserved. Follo The E w xper ts A Convn Online Monday, November 6, 2017 | R1 e DETA rsation INSIDE I LS THE WALL STREET JOURNAL. , R2 COLLEGE-SAVINGS IMBALANCE: TAX STRATEGY Mutual Funds Might Pack A Capital-Gains Punch The stock rally and redemptions will affect investors’ 2017 tax bills; some early estimates R5 Parents Put Aside More for Sons Than Daughters SAVING FOR COLLEGE 529s and Financial Aid This month’s Q&A column looks at how 529 funds are treated in the calculations R6 FUNDAMENTALS OF INVESTING The ‘Presidential Cycle’ The second year of a term is thought to be bad for investors. But a study casts doubt. R6 Q&A Grantham Waits for the Bear U.S. stock valuations will revert, in time, says the bubble-spotting investor. Also: The manager of Fidelity Low-Priced Stock Fund will expand his universe. R10, R8 FIXED-INCOME INVESTING Has Your Bond Fund Gone Out on a Limb? Some of the workhorse funds for bond investors could be courting too much credit risk R15 GÉRARD DUBOIS Two studies find a gender divide. Is it bias? Or do parents have more confidence in their daughters’ abilities? BY CHERYL WINOKUR MUNK SOME GIRLS MAY STILL be getting shortchanged when it comes to college savings. Results from two financial-industry polls this year indicate that parents are saving more for boys than for girls for higher education. These findings suggest that a gender divide—identified several decades ago in academic research—persists today in some cases. “We certainly see in society more broadly there are gaps between incomes of men and women,” says Roger Young, a senior financial planner at mutualfund company T. Rowe Price, who was involved in analyzing and interpreting one of the recent reports. “That might be factoring into their thoughts on how much they are willing to spend on college,” he says. One study, conducted in January by T. Rowe Price, looked at 238 households with all boys and 155 homes with all girls and found that parents of the girl-only households reported less saving for college. Specifi- cally, 50% of boy-only households had money saved for their children’s college compared with only 39% of parents of girl-only households. Boy-only households also reported contributing to their children’s college savings more frequently, with 83% contributing at least monthly compared with 70% of girl-only households. (Mr. Young says the number of children in a household didn’t appear to affect the results.) These findings are consistent with a similar study that T. Rowe Price commissioned three years earlier, in which 53% of boys reported that their parents were saving for their college education compared with 42% of girls. Meanwhile, a study in April by LendEDU, a student-loan marketplace, paints a similarly unequal picture. The company polled more than 1,400 college graduates and concluded that females generally rePlease turn to the next page NEWS CHALLENGE Foreign Currencies Take our quiz to test your smarts on the dollar and rivals R18 SCOREBOARD October 2017 fund performance, total return by fund type. More on R8. U.S. stocks* Intl. stocks* Bonds (intmd.) 1.7% 1.6% 0.1% *Diversiﬁed funds only, excluding sector and regional/country funds Source: Lipper DONATE TO A STREET MUSICIAN? EVEN THAT HAS GONE DIGITAL ON A RECENT crisp afternoon in New York, saxophonist Chris Johansen wraps up a set in Madison Square Park. If this were a few years ago, he’d scoop up the cash tips in his collection bag and move on. But now, he also adds up the tips he has collected through an app on his smartphone. As Mr. Johansen plays, he displays a sign with his Venmo account, a service of PayPal Holdings Inc. And the rate at which the digital tips have come in, he says, has been a surprise. His largest single tip: a $25 whopper. “Almost every day,” he says, “I’ll look at my phone and see that people have donated money.” Mr. Johansen, 37, is one of many street performers turning to digital payment services for tips as fewer people walk around with cash. Nearly 10% of Americans carry no cash, according to a Bankrate.com study, while 40% leave the house with $20 or less. I’ll be here all week… Chadd Deitz, a stunt comedian in the Boston area known as “Wacky Chad,” uses a handheld, portable machine called DipJar, which went on the market in 2015. The device allows donors to tip using their credit cards, in encrypted transactions, based on a fixed amount set by the performer. “A lot of people are thankful that I have this machine so they don’t have to run to an ATM and feel guilty,” says Mr. Deitz, who typically charges $10 and has earned $1,860 through DipJar this year. Mr. Deitz also directs his audience to his mobile page, which takes payments through cashless services such as Square Inc.’s Square Cash. Mobile payments have made his job easier, he says, but a decline in cash tips has led to the disappearance of “a lot of quality acts.” Use of cash has declined in Scandinavian countries like Denmark, says Elron Allen, a street performer who lives in Hawaii but spends part of the summer “busking” (performing for donations) in Copenhagen. This shift, Mr. Allen laments, is “reducing the once-vibrant street performing scene that can add so much to a city.” A nonprofit that advocates for street performers has come up with a product to compete with commercial services like Venmo. Nick Broad and Liliana Maz, co-founders of the Busking Project, created an app and web service that buskers in the group’s network can use to accept digital payments practically anywhere. Digital thank-yous The two say they have noticed an uptick in recent donations, though they concede that digital payments are a challenge. Buskers, they say, must build trust with viewers to convince them to pull out their phones or credit cards. Getting past that barrier, though, can be an additional thrill for the performers. Mr. Johansen, the saxophonist, says he sometimes receives private messages from Venmo patrons who like his music. “It’s kind of exciting,” he says, “that people are connecting with us in that way.” Mr. Kassel is a writer in New York. He can be reached at firstname.lastname@example.org. SANDY WAVRICK FOR THE WALL STREET JOURNAL BY MATTHEW KASSEL Working hard for the (digital) money: Doron Tirosh (drums), Mark Nelms (bass) and Chris Johansen (sax) in Madison Square Park. WHAT DO PEOPLE really INVEST IN? Growth stocks? Global bonds? High-dividend strategies? Those are investments. But what people really invest in is what they hope to get out of life. And helping people get there takes focus — the kind that operates without distraction or competing interests. The undiluted focus we bring to managing money means people might just get what they want out of life. And maybe even more. invesco.com/MoreOutOfLife NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE Invesco Distributors, Inc. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. R2 | Monday, November 6, 2017 JOURNAL REPORT | INVESTING IN FUNDS & ETFS ASK ENCORE | GLENN RUFFENACH The Key to Finding Your ‘Passion’ in Retirement Also: We answer readers’ questions on Medicare enrollment and Social Security benefits A good approach is to take inventory of your interests. In other words, write down the activities and hobbies that already occupy some of your time and ask yourself: Which of these deserve more of my time? Perhaps you value reading and education. That could translate, in retirement, into volunteering in a reading program at an inner-city school or attending classes at a local college. Or perhaps you enjoy the outdoors, the open road. That could lead to buying a recreational vehicle or becoming a search-and-rescue volunteer. The first step is figuring out whether your interests will translate into daily activities. Whether the activities are doable and fulfilling is the second step. (You might love spending time with your grandchildren, but that doesn’t mean you can, or should, do it every day.) One of my favorite taking-inventory stories involves pizza. Several years ago, we profiled a New Jersey resident, Paul Giannone, who had spent almost 30 years “toiling” (his word) in information technology. “I picked my career because I made good money,” he told us, “but I had absolutely no passion for it.” What he did love was pizza—in particular, the thin-crust pies served up in the restaurants of his childhood in Brooklyn, N.Y. Gradually, in his late 40s and early 50s, Mr. Giannone began toying with the idea of opening his own pizzeria. He became an avid reader of, and contributor to, pizza blogs, restaurant-review sites and chef forums; he sampled dishes across the country during business trips; he built a pizza oven in his backyard. All of which culminated in Paulie Gee’s, the restaurant Mr. Giannone opened in 2010 in Brooklyn’s Greenpoint neighborhood. Today, he has franchises in Chicago, Baltimore, Miami and Columbus, Ohio. “My job is like having friends over, making pizza and hanging out,” he told us. “I can’t believe I get paid to do this.” 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 email@example.com. SONIA PULIDO I read frequently, in your column and elsewhere, that I’m supposed to find a “purpose” or “passion” in retirement. Can you be more specific? Are there steps people can take to find or develop new interests in later life? Note that Mr. Giannone started this journey before he retired from his first career. That’s important. If possible, field-test your retirement plans before you retire. If you think you want to spend time teaching, or RVing, or making pizza—wonderful. But try it while you’re still working to see if the idea makes sense. If not, you can start exploring other interests. i i Drug Data In 2017, Medicare will account for nearly one-third of all spending on prescription drugs in the U.S. compared with one-ﬁfth of total spending 10 years ago: Medicare Medicaid Consumer-out-of-pocket Other payers Private health insurance i I turn 65 next year and will enroll in Medicare. My question is whether I need to enroll in Medicare Part D. I don’t take any prescription drugs, and I would like to avoid paying premiums for coverage I don’t need. I know this hurts, but go ahead and enroll in Part D. You might not be taking any prescription drugs today, but that could change as you age. And if you delay enrolling in Part D, Medicare will penalize you in the form of larger monthly Part D premiums when you finally do enroll. You can find a good explanation of how this works on the Medicare website. Go to medicare.gov and search for: Part D late enrollment penalty. The best advice: Look for the Part D plan in your area with the lowest premium. And recognize that you’re doing a good thing: preparing now for the strong possibility of taking at 20% 45% $236 billion 31% 8% 43% $364 billion* 9% 22% 14% 5% 4% 2017 2007 *Projected. Figures might not total 100% due to rounding. Source: Kaiser Family Foundation THE WALL STREET JOURNAL. least some prescription drugs in the future. i i i I have a friend who is 73 years old and didn’t claim her earned retirement benefits. Is she eligible to collect the unclaimed benefits? She has been receiving widow’s benefits since age 60. This question, frankly, is worrying. First, I’ll deal with the particulars—and close with a warning. A widow or widower has some flexibility when it comes to collecting Social Security benefits. A person can begin by claiming a survivor’s benefit (at, say, age 60) and then switch to a (presumably larger) benefit based on his or her work record at some point in the future. Or vice versa: A widow or widower can begin by claiming a benefit based on his or her work record and then switch to a survivor’s benefit. So, if your friend thinks that she is eligible for a larger benefit based on her work record, she should make an appointment immediately with her local Social Security office. Now, let’s say your friend discovers that, yes, she is eligible for a larger benefit and has been for several years. The Social Security Administration will award her a maximum of six months of retroactive benefits. (To be specific, she would receive the difference between the survivor benefit and the increased benefit based on her own work record over those six months.) In short, a lot of money will have been lost. Unfortunately, this person isn’t alone. Ask almost any financial planner about Social Security slip-ups, and you get the same response: Many people fail to apply for a benefit simply because they don’t know or understand Social Security’s complicated rules. A classic example: the divorced spouse who doesn’t realize when or how she or he can collect benefits based on a former spouse’s earnings. And don’t blame the Social Security Administration. The agency knows a good deal about you (date of birth, earnings, taxes, etc.), but it “knows nothing about your family—absolutely nothing,” notes Laurence J. Kotlikoff, an economics professor at Boston University and co-author of “Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security.” The agency “doesn’t know to whom you are married, whom you’ve divorced, whom you will divorce, whether your spouse or ex-spouse(s) dies, whether you have young or disabled children, [or] whether you are taking care of dependent parents,” he says. Thus, the warning: Be proactive in telling the SSA about major changes in your life. In particular, “if your marital situation changes, or a former or current spouse dies and this can affect your current benefits, you must tell the agency,” Mr. Kotlikoff says. “Don’t expect your benefits to change” unless you do so. Parents Put Aside More for Sons Than Daughters Continued from the prior page ceived less help paying for college than their male peers. Only 6% of women said their parents paid for a majority of college, and 50% said their parents paid nothing at all. By contrast, 10% of men said their parents paid for most of college, and 43% of men said their parents paid nothing. Neither study delved into why parents may be saving more for boys than for girls, but Mr. Young of T. Rowe Price says the research adds “to the body of literature of gender issues in society.” He calls the results “disappointing” and says, “Parents should give a good hard look and make sure they are treating their children fairly and recognizing the potential of both their boys and their girls.” Jennifer Olmsted, a professor of economics at Drew University who teaches a course on gender and globalization, says parents need to recognize that their funding decisions could have long-term implications in terms of where their daughters attend college, the quality of their education and their eventual career path. Also, if girls end up having to work more to help pay for their education, they’ll have less time to spend on their studies. “There are some very subtle ways that [lack of funding] could make a difference,” she says. To be sure, gender bias has long been an issue with respect to income and career-advancement opportunities, so the idea that parents could be saving unequally for their girls and boys doesn’t surprise some academics. Joe Carella, assistant dean at the Eller College of Management at the University of Arizona, draws a parallel to his findings in the area of venture-capital funding. His research shows that for every dollar that men receive in VC funding, women receive 48 cents. His studies also point to a deep-rooted bias where men are judged based on their future potential, while women are judged on their accomplishments thus far. He postulates that the bias may be the same for parents saving for college—the idea being that parents save less for girls because they feel boys have more potential. “It is a completely misguided and biased Gender Gap College-saving habits and attitudes of parents with only boys are different than those with only girls. 100% Parents of only boys Parents of only girls 80 60 40 20 0 Have money saved for college Willing to take on $75,000 or more in student loans Source: T. Rowe Price's '2017 Parents, Kids & Money Survey' way to look at the way in which men and women perform, especially in environments when there is equal opportunity,” says Dr. Carella, who specializes in strategic thinking, neuroscience and gender differences. Faith in scholarships? A more benign possibility is that parents save less for girls because they expect them to receive more scholarship money than boys. Decades of research consistently show that girls outperform boys in academics, says Shaun Harper, a professor of education and business at the University of Southern California and executive director of the USC Race and Equity Center. “Many parents are probably not convinced their boys are going to receive enough meritbased scholarship money,” Dr. Harper says. In reality, the difference between what girls and boys receive in merit-based aid is minimal. Data from the National Center for Education Statistics shows the percentage of females who received merit aid for the 2011-12 school year, the latest period for which data is available, was only slightly higher than for men (11.3% vs 10.8%). And the average size of the grant for fe- 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: “Here’s a More Tax-Efficient Way to Give to Charities,” by William Reichenstein, Powers Professor at Baylor University and head of research at socialsecuritysolutions.com. “A Reality Check on Stock-Market ‘Anomalies’, ” by Wesley R. Gray, CEO and CIO of quantitative asset manager Alpha Architect. And on page R12 of this report, you can read excerpts of some earlier online discussions. The Experts offer views on how to get ready for a downturn, why critics of passive investing are wrong and why ARMs aren’t as risky as people think. Would consider a lower-cost college The children say their parents are saving for their college THE WALL STREET JOURNAL. males was slightly less—$6,100 compared with $6,500 for males, the data show. Some college planners say they have occasionally seen parents favor boys, particularly with respect to college selection and fields of study. Charlie Donaldson, founder of College Bound Coaching LLC, a financial-aid consultant, recalls one family that sent a son to a private high school, paid for him to receive private SAT tutoring and hired Mr. Donaldson to create a college-funding plan. The son ended up in a prestigious business school and landed a coveted internship—the kind of opportunity more “readily available” to children who attend upper-tier schools, Mr. Donaldson says. Their daughter went to a public high school, and they did all of the financial-aid planning and college funding on their own. The daughter got into a good school, but not one as well-respected as her brother’s. “In this family, it wasn’t saving for college that was a distinction but the amount of effort, time and resources that went into their son’s education as compared to their daughter,” Mr. Donaldson says. Steven Roy Goodman, an educational consultant and admissions strategist, has had similar experiences. He says he counseled two families in the past five years that treated their sons and daughters differently in terms of college planning, savings and selection. “There is really no way to say this subtly: The parents had different life expectations for their sons and daughters—and were unwilling to pay private college tuitions for their daughters,” he says. “They perceived that the young women were not going to have 40-year careers in the ways they expected their sons to have.” All of which can have an effect on the shape of a graduate’s financial life. A recent analysis of federal government data by the nonprofit American Association of University Women found that women are more likely to take on debt—and on average have larger student loans—than men. And following graduation, women repay their loans more slowly than do men, in part because of the gender pay gap, according to the analysis. That said, there is significant disagreement about just how wide the college-savings gender divide is, and whether it is improving over time. Some academics whose research focuses on these issues say the gender bias in college savings might have become as pronounced as it will get, and could improve from here. Some also contend that the scope of these recent studies is too small to make sweeping conclusions about gender bias in this area. Rather than gender, says Brian Powell, a sociology professor at Indiana University, the primary issue today in college funding is a family’s ability to set money aside amid increasing costs. “If your family doesn’t have the resources, your likelihood of going to college is going to plummet—whether you’re a boy or a girl,” he says. Dr. Powell, who has done research on parental investment in college, says he found evidence that parents in the 1980s exhibited gender bias when saving for college. However, his more-recent findings suggest that the gender bias has either disappeared or the pendulum has swung the other way. Today, women have a much greater likelihood of going to college, they are more likely to do well, and they are more likely to graduate, says Dr. Powell, who is a visiting professor at the Russell Sage Foundation. In addition to Dr. Powell’s research, data from the National Center for Education Statistics from 2009—the latest available—show a bias toward boys, but only by a small margin compared with the financial-industry studies. The data show that 94.7% of parents of ninthgrade boys who were expected to attend college had saved at least some money toward this goal, compared with 93.1% of parents of girls. The STEM issue One thing is clear: Many parents are pushing boys and girls toward different types of majors, which often means different types of colleges. Shereem Herndon-Brown, a former collegeadmissions director, says he has seen a tendency among parents to push boys toward business or STEM (science, technology, engineering and mathematics) fields—at highly rated and more-expensive colleges. The reason, he says, is that’s where the money is. “They save money to make sure they can pay for their boys to do that,” says Mr. Brown, founder of Strategic Admissions Advice LLC, which helps families navigate the college-admissions process. With girls, however, he has seen some parents push state schools or otherwise less-expensive colleges because they don’t think they are going to recoup the costs of their investment, he says. “I don’t think parents are going to admit to their 18-year-old daughter that they don’t want to pay as much for her education because they are thinking 10 years down the road to her wedding,” he says, “but it’s an unfortunate reality.” Ms. Winokur Munk is a writer in West Orange, N.J. She can be reached at firstname.lastname@example.org. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 6, 2017 | R3 This is what you get when you outperform. Again. And again. 2016 U.S. Fixed-Income Fund Manager of the Year 1 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 as of 09/30/2017 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% Since 10/15/2002 Gross Expense Ratio 0.45% 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 or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. R4 | Monday, November 6, 2017 JOURNAL REPORT | INVESTING IN FUNDS & ETFS Category Kings in 22 Realms Pacific Region Funds 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 October 31; assets are as of September 29. All performance numbers are preliminary. WisdomTree:China x-S-O Morg Stan I:Asia Opp;I Neuberger Gr Chn Eq;Is Frst Tr ADex:China US Glbl:China Region Matthews Asia:China;Inv Victory:Sophus China;A Oberweis:China Opps;Inv PowerShares Gldn DrgnChi Columbia:Grtr China;A Best and Worst Total return for the best- and worst-performing stock, bond and mixed mutual-fund categories; for period ended October 31; ranked by monthly returns. Best Performers Fund October 12-month 4.2% 4.0 3.5 3.4 3.1 2.5 2.4 2.3 Science & Technology Paciﬁc Region Managed Futures Large-Cap Growth Multicap Growth Midcap Growth Utility S&P 500 32.9% 26.9 1.6 27.3 27.4 26.3 15.1 23.1 October CXSE MSAQX NCEIX FCA USCOX MCHFX RSCHX OBCHX PGJ NGCAX 4.7 4.1 6.7 2.1 1.1 5.2 4.5 2.4 –1.1 4.3 68.8 65.0 57.3 55.4 53.7 53.0 51.0 50.8 50.8 49.8 59.1 52.9 48.6 49.5 45.2 46.9 41.5 38.9 35.6 38.4 44.9 15.9 133.6 11.6 29.3 775.9 24.7 120.0 227.0 126.9 10-yr* 11.5 N.A. N.A. 8.9 9.6 10.1 13.5 16.5 19.2 12.3 N.A. N.A. N.A. N.A. –2.8 2.36 N.A. 3.3 2.2 1.3 Morg Stan I:Intl Opp;I Bail Giff EAFE;5 Pru Jenn Intl Opps;Z AdvisorShs DorsWr ADR Vanguard Intl Gro;Adm Morg Stan I:Intl Adv;I Marsico Inv Fd:Intl Opp PNC:Internatl Growth;I Frst Tr II:Internatl IPO iPath ETN LgEn MSCI EAFE Category Average: Category Average: 399.2 4.0 32.7 26.9 9.9 2.10 Fund Count 228.0 256 245 245 166 87 iShares:MSCI Poland Cp iShares:MSCI Ger Sm-Cap iShares:MSCI Austria Cap Frst Tr ADex:Germany iShares:MSCI Denmark Cp SPDR EURO STOXX Sm Cap Columbia Acorn Eur;I Glbl X MSCI Portugal Frst Tr ADex:Eurozone WisdomTree:Euro Dom Eco 12-month –12.0% 12.6 5.3 26.4 1.3 10.5 5.8 4.7 Gold Oriented –3.8% Latin American –3.1 Emerging-Market Local-Currency Debt –2.4 Health/Biotechnology –2.1 Natural Resources –1.1 Telecommunication –0.8 Real Estate –0.3 World Bond –0.3 YTD Totalreturn(%) 1-yr 5-yr* European Region Funds Worst Performers Fund International Funds Assets Symbol ($ millions) October Assets Symbol ($ millions) October YTD 1-yr MIOIX 422.8 BGEVX 2,882.3 PWJZX 59.5 AADR 109.5 VWILX 31,891.3 MFAIX 234.8 MIOFX 63.8 PIGDX 7.1 FPXI 22.4 MFLA 2.6 47.5 45.8 45.8 43.2 40.7 39.7 39.4 37.8 37.3 36.7 41.3 40.4 38.7 39.0 35.4 35.3 31.2 30.2 30.9 39.5 1.6 2.6 3.2 3.5 2.3 0.8 1.4 2.8 1.6 2.2 Totalreturn(%) 5-yr* 10-yr* 17.1 N.A. 9.8 14.7 11.9 13.9 9.5 N.A. N.A. 13.5 N.A. N.A. N.A. N.A. 4.0 N.A. 0.7 N.A. N.A. N.A. 777.9 1.6 23.8 23.2 8.1 1.09 1,383.0 1,658 1,563 1,529 1,053 695 Assets Symbol ($ millions) October YTD 1-yr Totalreturn(%) 5-yr* 10-yr* BGLTX MGGIX BGAIX PRJZX DSMGX MGLBX OPGIX SCMGX MIGIX CCGIX 5.0 2.7 3.3 3.2 2.7 4.2 1.5 2.2 2.9 2.8 52.4 44.0 40.8 40.3 40.2 40.0 35.5 35.1 33.9 33.3 45.7 37.7 35.3 37.2 36.0 38.0 42.5 29.5 31.0 32.0 N.A. 22.5 14.6 16.3 16.3 15.1 19.1 13.8 13.8 N.A. N.A. N.A. N.A. N.A. N.A. 6.63 9.1 N.A. N.A. N.A. Fund Count Global Stock Assets Symbol ($ millions) October YTD Totalreturn(%) 1-yr 5-yr* EPOL EWGS EWO FGM EDEN SMEZ CAEZX PGAL FEUZ EDOM 2.4 1.4 2.1 1.9 1.2 –0.7 1.4 0.2 1.3 0.1 49.7 48.4 46.2 36.5 34.8 34.5 34.2 33.0 33.0 32.7 49.5 46.3 48.1 36.3 31.1 36.5 32.3 31.9 35.2 36.9 3.6 18.0 10.5 11.7 19.1 N.A. 11.9 N.A. N.A. N.A. N.A. N.A. –2.4 N.A. N.A. N.A. N.A. N.A. N.A. N.A. 356.1 51.3 240.5 216.9 67.5 18.8 84.2 60.4 16.9 6.1 10-yr* Bail Giff LTGGE;2 Morg Stan I:Gl Opp;I Baron Global Advtg;Inst Pru Jenn Global Opps;Z Touchstone:Glbl Gro;Inst Marsico Inv Fd:Global Oppenheimer Glbl Opp;A Sands Cap Gl Growth;Inst Morg Stan I:Gl Adv;I Baird Chtq Glbl Gro;Inst Category Average: 606.3 0.8 23.1 26.4 9.0 1.05 Fund Count 132.0 166 159 158 97 69 Assets Symbol ($ millions) October YTD 1-yr TFOIX 797.5 MSEGX 3,897.6 BFTIX 181.7 DSMLX 210.5 MFOCX 559.9 TRLGX 14,759.5 HNASX 160.0 JLGMX 12,005.9 CISGX 1,913.3 CFSIX 2508.0 5.5 5.4 5.1 3.2 3.7 4.9 4.9 5.2 3.3 3.3 41.6 40.9 39.7 35.3 34.8 34.8 34.6 34.6 34.1 33.9 35.0 34.5 36.6 34.2 32.1 38.3 38.1 35.6 28.5 28.2 20.6 20.5 17.6 16.6 15.0 20.0 19.5 16.8 14.6 14.5 N.A. 9.6 N.A. N.A. 6.3 10.62 10.1 N.A. 9.6 9.3 1,004.5 3.4 26.0 27.3 15.6 7.72 Category Average: 617.0 691 650 638 512 374 Fund Count 185.1 1,494.7 31.6 492.8 27.1 44.5 5,847.5 1,172.6 10.6 15.5 Category Average: 520.1 1.7 20.0 22.4 10.9 3.81 Fund Count 920.0 1,093 999 984 662 353 Assets Symbol ($ millions) October YTD 1-yr DSEEX 4458.5 CVFCX 583.7 OAKMX 18,776.5 CAPE 81.8 PNBAX 365.7 MFVZX 711.6 QRVLX 44.6 FIDVX 110.9 BIGRX 2,138.5 VLUE 2359.1 1.9 1.1 2.3 1.9 2.6 1.2 2.2 1.2 2.1 2.6 17.3 17.0 16.9 16.3 15.8 15.7 15.7 15.4 15.2 15.2 25.4 27.2 27.2 24.9 27.8 28.9 22.6 22.1 21.5 25.9 N.A. 12.4 15.9 17.7 13.1 15.3 13.3 13.3 13.8 N.A. N.A. 5.6 9.8 N.A. 4.4 N.A. 5.6 N.A. 6.2 N.A. 663.5 1.2 10.9 20.2 12.8 5.48 443.0 492 467 458 363 253 Assets Symbol ($ millions) October YTD 1-yr PQNAX RFVIX SAOPX BKMFX OFVIX HUDEX HOVLX QIACX EZY ROUS 1.5 1.1 1.1 2.9 1.3 2.5 2.8 2.5 2.3 2.7 22.5 18.6 18.1 16.8 16.4 16.3 16.3 16.2 16.1 15.8 34.0 24.6 28.0 26.4 26.6 25.5 25.3 25.0 25.9 25.2 15.4 N.A. 12.7 N.A. N.A. N.A. 15.7 15.3 13.0 N.A. 7.5 N.A. 3.5 N.A. N.A. N.A. 7.0 5.4 6.0 N.A. Source: Lipper Large-Cap Core Amer Cent:Foc DG;Inv GMO:Quality;VI BNY Mellon:Foc Eq Op;M BlackRock:LC Foc Gr;I Direxion:iBillionaire Id Davis Research;A Goldman:Hdg Indus VIP iPath ETN LgEx S&P Pear Tree:Quality;Ord PowerShares S&P500 Momnt Large-Cap Growth Assets Symbol ($ millions) October YTD 1-yr ACFOX GQLOX MFOMX MALHX IBLN DRFAX GVIP SFLA USBOX SPMO 3.7 4.5 4.3 5.0 3.9 4.7 2.8 3.2 4.4 6.0 32.4 28.8 27.2 26.8 26.7 24.8 24.6 24.5 24.5 24.2 32.2 30.6 35.5 33.7 29.4 30.6 N.A. 35.3 25.8 27.3 15.3 15.7 16.9 16.6 N.A. 15.4 N.A. 26.1 13.8 N.A. 5.0 9.3 N.A. 8.1 N.A. 6.14 N.A. N.A. 5.5 N.A. Transam:Cap Growth;I Morg Stan I:Growth;A Baron Fifth Ave Gro;Inst Touchstone:LC Gro;Inst Marsico Inv Fd:Focus T Rowe Price I LgCp Gro Homestead:Growth JPMorgan:LgCp Gro;R6 Touchstone Inst:Snd Gr Touchstone:Sel Gro;Y 24.1 8,088.0 496.7 1,167.0 13.8 44.1 51.1 2.2 125.7 1.6 Totalreturn(%) 5-yr* 10-yr* Category Average: 927.8 2.1 15.9 22.2 13.7 6.58 Category Average: Fund Count 714.0 862 799 787 633 485 Fund Count Assets Symbol ($ millions) October YTD Totalreturn(%) 1-yr 5-yr* TGUSX SWLSX SYG CGMFX PRSGX DLCIX MNNAX REDWX FDSSX TORLX 6.7 3.3 2.9 2.7 2.3 2.9 3.7 1.1 2.4 3.5 35.8 24.3 24.3 23.5 22.3 22.0 21.5 21.4 21.2 21.0 38.4 28.1 28.4 44.0 25.6 30.1 30.4 30.9 27.0 34.2 N.A. 15.6 N.A. 13.2 13.3 N.A. 14.6 N.A. 15.1 16.8 N.A. 7.5 N.A. 0.3 6.5 N.A. 8.3 N.A. 6.7 7.3 Zevenbergen Genea;Inst Berkshire:Focus Morg Stan MultiCp Gr;A Franklin Cust:Dyna;A JAG Large Cap Growth;I Baron Opportunity;Rtl Fidelity OTC SunAmerica:AIG Foc MCG;A Fidelity Adv Srs Eqty Gr Wisconsin:Plumb Equity 1,421.1 1.8 14.8 22.0 13.5 6.18 Category Average: 815.0 817 782 762 561 380 Fund Count YTD Totalreturn(%) 1-yr 5-yr* Multicap Core TCW:New America Prm Eq;I Schwab Cap:Lg-Cap Gro SPDR MFS Sys Gro Eqty CGM Tr:Focus Fund T Rowe Price Spec:Gro Dana Large Cap Eqty;Inst Victory:Multi-Cap;A Aspiration Redwood Fidelity Stk Sel AC Toreador Core;Rtl 16.4 250.5 45.1 992.9 3,734.6 167.2 436.4 36.9 7,945.1 155.4 Fund Count 10-yr* Midcap Core LCSSX TARKX NFO TMFGX AQAAX NEOMX 10-yr* 27.4 92.9 74.0 239.6 42.5 4.0 67.6 1,578.4 17.7 210.4 2.7 3.4 2.2 5.0 4.1 3.8 3.3 3.3 4.2 2.8 31.6 26.5 23.3 21.5 20.2 19.5 19.5 19.2 18.8 18.6 34.2 42.5 26.7 32.2 36.3 29.4 31.8 31.3 26.0 25.9 N.A. 19.7 13.4 14.4 N.A. N.A. 16.3 15.7 14.6 15.6 N.A. N.A. 8.3 N.A. N.A. N.A. N.A. 10.4 6.6 10.0 Renaissance IPO ETF Tocqueville:Opportunity BlackRock:MC Gro;A Baron Partners Fund;Rtl PowerShares DWA NASDAQ PowerShares Russ MdCp PG Virtus:KAR Mid-Cap Gr;A Harbor:Mid Cap Gro;Inst DF Dent MidCap Gro Alger:Mid Cap Growth;A Category Average: 915.1 1.5 11.4 20.5 13.2 6.78 Fund Count 449.0 451 433 425 291 204 Assets Symbol ($ millions) October YTD Totalreturn(%) 1-yr 5-yr* BSCVX AUERX ROSFX ICONX BRDZX MMCFX WAMVX RYPRX HASCX AZBAX 24.0 23.2 22.8 22.6 20.5 20.3 20.1 20.1 18.7 18.6 34.0 39.9 38.9 42.5 29.5 35.4 29.7 33.7 33.0 33.5 13.5 9.0 14.0 15.7 N.A. 16.1 16.4 11.6 17.1 N.A. N.A. N.A. N.A. N.A. N.A. 8.05 8.3 8.0 8.5 N.A. JPMorgan:Dyn SCG;I JPMorgan:SmCp Gro;R6 Victory:RS Sm Cap Eqty;A Victory:Sm Cap Growth;Y Baron Discovery;Rtl Conestoga SMid Cap;Inst Westcore:SmCp Gr II;Inst Federated Kauf SC;A Alger:SMid Cap Focus;A Frontier:Tmpni SCG;Inst UMBMX ASMCX CZA Small-Cap Core 2.9 3.1 2.8 3.3 1.7 1.0 1.2 3.0 4.0 1.4 10-yr* Multicap Value YTD Totalreturn(%) 1-yr 5-yr* ZVGIX 7.3 BFOCX 66.9 CPOAX 395.3 FKDNX 4,088.2 JLGIX 56.8 BIOPX 254.2 FOCPX 16,407.9 FOCAX 567.4 FMFMX 928.5 PLBEX 23.5 4.8 9.8 6.5 4.4 6.1 2.8 3.9 3.4 4.4 5.8 52.4 46.5 42.8 37.9 37.2 36.2 35.8 35.6 34.9 34.4 50.7 47.7 36.5 35.4 39.8 33.3 38.9 35.0 36.1 39.1 N.A. 19.1 19.7 18.4 17.0 12.7 22.5 15.7 N.A. 15.8 N.A. 11.0 9.6 9.8 N.A. 6.76 11.1 8.9 N.A. 6.2 366.0 3.1 24.3 27.4 14.8 7.24 Category Average: 484.6 1.0 10.1 19.9 12.8 5.61 464.0 548 525 521 406 289 Fund Count 343.0 401 375 372 286 229 Assets Symbol ($ millions) October YTD 1-yr RDVIX 195.3 HIMDX 967.2 FLPSX 38,546.9 FSEIX 109.5 TGVOX 102.2 NBRVX 98.8 AMPAX 659.6 PCMIX 1,354.8 NMVLX 435.6 ANSIX 17.4 1.6 3.0 1.7 1.7 1.2 –0.2 1.3 1.4 2.1 0.4 16.2 15.6 15.1 14.4 14.2 13.0 12.6 12.6 11.9 11.2 27.2 23.5 22.1 24.8 30.4 23.0 24.5 22.3 24.6 16.8 11.5 13.8 13.4 15.2 13.8 14.3 14.7 N.A. N.A. 14.3 8.0 N.A. 8.0 6.7 6.8 6.89 8.5 N.A. N.A. 7.1 10-yr* AllianzGI:NFJ MCV;A RvrPrk:Foc Value;Instl Barrett Opportunity BlackRock:IS MF USA;K O'Shaughnessy Mkt Ld V;I Huber Cap Dvsfd LCV;Inst Homestead:Value Federated MDT ACC;Inst WisdomTree:US LgCp Val Lattice:Hfd MF US Equity 880.5 43.2 65.2 12.2 60.1 4.8 1,050.7 144.2 41.8 34.5 Totalreturn(%) 5-yr* 10-yr* Midcap Value Assets Symbol ($ millions) October YTD Totalreturn(%) 1-yr 5-yr* IPO TOPPX BMGAX BPTRX DWAQ PXMG PHSKX HAMGX DFDMX AMGAX 10-yr* Totalreturn(%) 5-yr* 10-yr* 14.6 75.2 903.1 2,063.2 44.1 84.8 94.3 392.0 38.5 178.6 5.6 4.8 4.5 1.3 4.2 4.3 2.0 3.4 3.9 3.5 36.3 33.5 33.1 31.9 31.0 29.6 29.1 29.1 27.6 26.7 39.0 36.5 32.7 41.4 38.9 34.5 28.7 31.0 29.7 32.1 N.A. 15.1 18.6 17.5 17.1 13.7 12.5 14.5 15.4 13.8 N.A. 7.8 8.0 6.9 6.2 5.53 5.3 6.5 N.A. 3.6 Royce Fd:Div Value;Inv Hennessy:Crnst MdCp;Inst Fidelity Low-Prcd Stk Nuveen Mid Cp Value;I TCW:Rel Value MC;I Neuberger MC Int V;Inv Am Beacon:MC Val;Inv Principal:MCV III;R-6 Nuance Mid Cap Val;Inst Ancora Special Oppty;I Category Average: 378.7 2.5 20.7 26.3 13.8 6.81 Category Average: 383.3 0.8 8.3 18.5 13.0 6.84 Fund Count 346.0 401 388 381 313 228 Fund Count 172.0 193 181 178 135 100 Assets Symbol ($ millions) October YTD 1-yr Totalreturn(%) 5-yr* 10-yr* RYPNX ANCIX PVIVX ARSBX DGMIX WSVIX VSMIX PREOX CSMIX WSCVX 18.8 17.4 16.5 16.4 15.5 13.8 13.2 13.2 11.2 10.7 39.1 31.6 30.0 33.4 34.7 28.0 32.3 25.3 32.6 34.1 15.3 15.6 15.6 N.A. N.A. 13.2 15.6 15.2 14.6 13.4 8.1 N.A. N.A. N.A. N.A. N.A. 9.4 4.7 7.6 N.A. Small-Cap Growth 93.4 29.5 53.5 19.4 22.4 172.1 215.9 2,387.3 1,117.9 83.6 DoubleLine:Sh Enh CAPE;I Pioneer Disc Val;A Oakmark Fund;Inv Barclays ETN+ShillerCAPE AllianzGI:NFJ LCV;A MassMutual Sel:Fc Vl;I Queens Road Value Frost Value Eqty;Inst Amer Cent:Inc&Gro;Inv iShares:Edge MSCI USA VF Totalreturn(%) 5-yr* Assets Symbol ($ millions) October Midcap Growth Assets Symbol ($ millions) October Bernzott US Sm Cap Val Auer Growth Royce Fd:McCp Oppty;Inv ICON:Opportunities B Riley Dvsfd Eq;Instl AMG Mg Emerg Opps;N Wasatch:Micro Cp Val;Inv Royce Fd:Premier;Inv Harbor:Sm Cap Val;Inst AllianzGI:SmCp Blend;A 10-yr* Multicap Growth Category Average: CB Select;IS Tarkio Guggenhm Insider Snt ETF RBB:Mtly Great Amer;Inv Frst Tr Srs:AQA Eqty;A Neiman:Opportunities;A Pac Fds:MdCp Eq;P Scout Mid Cap Forward:Adapt US Eq;Inst Guggenhm MC Core ETF Large-Cap Value Totalreturn(%) 5-yr* 10-yr* Small-Cap Value Assets Symbol ($ millions) October YTD Totalreturn(%) 1-yr 5-yr* JDSCX JGSMX GPSCX RSYEX BDFFX CCSGX WTSLX FKASX ALMAX FTSGX 2.4 2.4 2.8 2.6 0.6 4.9 1.8 2.7 1.7 3.3 34.4 34.3 32.6 32.3 32.0 31.8 31.3 30.7 30.7 30.5 43.2 43.4 42.5 42.1 39.5 41.4 33.9 37.1 35.6 39.1 16.3 16.7 17.8 17.6 N.A. N.A. 10.1 16.6 13.5 14.7 7.6 N.A. 9.8 8.7 N.A. N.A. 3.4 8.0 5.8 N.A. Royce Fd:Oppty;Inv Ancora MicroCap;I Paradigm:Micro-Cap Aristotle SmCp Eqty;I DGHM MicroCap Val;Inst Walthausen:Sel Val;Inst Invesco SC Value;Y Perritt Ultra MicroCap Columbia:SmCp Val I;A Walthausen:SC Value 190.9 1,449.4 68.5 1,600.7 248.0 25.0 39.4 791.5 182.2 49.6 10-yr* 1607.5 21.9 49.4 4.0 26.5 83.3 2,606.7 69.8 612.1 653.3 0.9 –0.2 0.1 –0.6 –0.1 1.3 1.5 –0.3 0.6 1.7 Category Average: 329.0 1.2 9.8 24.6 13.3 7.14 Category Average: 215.0 1.9 19.3 29.2 13.7 7.22 Category Average: 404.7 0.7 6.0 23.4 12.4 6.77 Fund Count 954.0 1,087 1,033 1,020 715 511 Fund Count 523.0 597 558 550 448 337 Fund Count 250.0 283 271 267 209 135 YTD 1-yr Assets Symbol ($ millions) October YTD 1-yr Totalreturn(%) 5-yr* 10-yr* Assets Symbol ($ millions) October YTD 1-yr –2.0 3.6 6.3 2.0 7.9 3.0 7.0 6.4 6.8 9.4 150.0 76.7 72.1 60.9 56.6 52.5 50.8 50.5 50.2 50.0 N.A. 77.9 74.3 43.7 56.4 46.5 49.5 47.5 48.8 69.2 N.A. N.A. N.A. N.A. N.A. N.A. 22.1 19.5 21.6 33.0 N.A. N.A. N.A. N.A. N.A. N.A. 11.4 11.3 11.1 12.1 ETFis Virtus LS Bio Clin PowerShares DWA Health SPDR S&P Biotech Alger:Health Sci;A Eventide Hlthcare & LS;I Frst Tr:NYSEArcaBiotech ALPS Medical Break Principal Hlthcr Innv Id iShares:US Med Dev ETF Delaware Healthcare;A BBC PTH XBI AHSAX ETIHX FBT SBIO BTEC IHI DLHAX AAVPX GAADX BICHX MAPIX DFE IQDG EUDG DGS DLS DFJ 3.9 3.7 1.9 4.3 –0.1 1.3 0.8 1.0 1.4 3.3 33.0 31.5 31.2 29.1 28.9 28.1 28.1 28.0 26.3 25.4 29.8 26.5 25.1 22.0 33.6 27.1 29.6 23.9 28.4 24.9 N.A. 9.1 5.8 10.0 16.8 N.A. N.A. 4.9 13.0 15.1 N.A. 3.2 N.A. 8.4 4.4 N.A. N.A. 3.0 4.0 6.5 Science and Technology Funds Health/Biotechnology Funds Assets Symbol ($ millions) October Direxion:CSI Ch Int Bl2X ARK Innovation ARK Web x.0 EMQQ EM Intrt & Ecom ETF Glbl X Rob & Art Intel ETFMG Video Game Tech Fidelity Sel Technlgy Firsthand Tech Opptys Fidelity Adv Tech;A PowerShares Dyn Smcnd CWEB ARKK ARKW EMQQ BOTZ GAMR FSPTX TEFQX FADTX PSI 85.1 160.6 97.4 304.1 619.6 37.7 6,127.6 101.4 1,642.3 306.3 Totalreturn(%) 5-yr* 10-yr* Category Average: 560.7 5.2 35.5 37.4 19.8 9.33 Category Average: Fund Count 141.0 178 172 169 138 123 Fund Count Assets Symbol ($ millions) October YTD 1-yr FFTY KCE FSLBX IAI IYG FSVLX XLF PRISX JHMF RWW Financial Services Funds Innovator IBD 50 SPDR S&P Cap Mkts ETF Fidelity Sel Brkg & IM iShares:US BD & SE ETF iShares:US Fnl Svc ETF FIDELITY Sel Cns Fin Sel Sector:Finl S SPDR T Rowe Price Financial J Hancock ETF:Mltfctr FN Oppenheimer:Finls Sctr R Category Average: Fund Count N.A.: Not applicable; fund is too new International Equity Income Funds 30.5 182.6 4,139.4 157.9 423.8 1,153.3 131.1 7.7 1,369.1 414.6 –4.7 2.4 –3.3 1.4 –2.3 –2.4 –2.9 –2.2 3.3 –0.8 50.5 44.1 41.6 36.6 36.0 33.1 32.0 30.5 30.0 29.3 53.7 54.7 49.7 57.2 40.8 39.2 38.7 33.6 28.5 32.2 N.A. 16.4 25.2 17.8 N.A. 23.8 N.A. N.A. 21.9 20.8 N.A. 9.0 15.8 10.4 N.A. 16.73 N.A. N.A. 11.5 17.0 772.2 –2.1 22.2 26.4 17.9 11.89 79.0 100 100 100 74 63 Assets Symbol ($ millions) October YTD 1-yr Totalreturn(%) 5-yr* 10-yr* EMLB PLND BGEDX POEFX DPEGX EMRYX BIEMX ACLKX MCEMX TEMLX 6.5 2.0 4.0 3.4 3.7 3.5 2.7 2.6 4.0 3.5 76.9 52.8 48.3 46.5 45.1 43.6 43.0 42.9 42.7 42.6 58.0 53.4 40.4 36.7 35.7 33.1 30.6 34.5 35.4 34.6 Emerging Markets Funds Totalreturn(%) 5-yr* 10-yr* 78.9 107.4 466.8 165.7 1,492.7 98.0 27,347.3 750.9 49.8 35.3 5.7 1.7 1.1 1.5 3.1 3.2 2.9 1.9 2.5 3.1 37.8 20.9 20.4 18.7 17.5 17.1 15.7 15.6 15.4 15.3 50.9 39.3 38.6 42.3 39.1 30.2 36.9 33.8 34.0 35.6 N.A. 12.8 13.6 23.0 18.4 12.9 17.7 15.9 N.A. 17.8 N.A. –0.8 3.7 2.1 1.8 –1.23 1.8 5.6 N.A. N.A. 762.7 1.8 11.3 30.6 15.4 3.58 80.0 91 86 85 72 58 iPath ETN LgEn MSCI EM VnEck Vctrs:Poland Bail Giff Em Mkt;5 Principal:Origin EM;R-6 Delaware Pld:Mac EmMk II VanEck:Emerg Mkts;Y WM Blair:Em Mkt G;Inst Amer Cent:NT EM;G Martin Currie Em Mkts;IS TIAA-CREF:EM Eq;Inst 2.4 21.2 1,949.7 706.8 44.8 1,716.8 1,394.9 488.5 104.5 1391.0 AMG Mg VP Asia Div;I Guinn Atkin:Asia-Pc Dv B BlackRock:EM Div;Inst Matthews Asia:Div;Inv WisdomTree:Eur SC Div WisdomTree:Intl Qual DG WisdomTree:Eu Qual DivGr WisdomTree:EM SmCp Div WisdomTree:Intl SC Div WisdomTree:Jpn SC Div 10.0 6.6 13.7 6,370.7 1,112.4 14.9 38.3 1,287.8 1,679.3 605.9 Totalreturn(%) 5-yr* 10-yr* Category Average: 265.0 0.7 18.9 18.4 5.4 0.33 Fund Count 118.0 118 118 118 67 29 Assets Symbol ($ millions) October YTD 1-yr DHDG NULG COGEX WPLCX DGRW JEQIX MEIFX MDCEX HDPBX QLRIX 2.2 3.0 5.9 3.8 2.7 2.1 2.0 1.0 2.2 2.7 23.8 22.4 22.2 20.5 19.6 18.6 18.5 18.1 17.8 17.4 N.A. N.A. 28.0 33.4 26.4 24.4 24.0 22.1 26.6 N.A. N.A. N.A. N.A. N.A. N.A. 12.6 12.9 8.2 14.0 N.A. N.A. N.A. N.A. N.A. N.A. 6.97 6.9 N.A. N.A. N.A. Equity Income Funds 7.9 3.7 N.A. N.A. 8.2 8.5 6.6 8.3 N.A. 5.4 N.A. N.A. N.A. N.A. N.A. N.A. 0.3 0.3 N.A. N.A. WisdomTree:Dyn CH IQ DG NuShares ESG Lg-Cap Gro Cognios LC Growth;Inst WP Lg Cap Inc +;Inst WisdomTree:US Qual DG Johnson:Equity Income Meridian Equity Inc;Leg Matisse Disc CE Str;Inst Hodges Bl Chp Eq Inc;Rtl AQR:LC Rlxd Cons Eq;I 3.7 7.4 5.3 30.8 1,646.2 181.4 52.2 115.6 21.1 16.6 Totalreturn(%) 5-yr* 10-yr* Category Average: 604.0 2.2 29.4 23.4 4.7 0.37 Category Average: 797.2 1.1 10.7 17.9 11.6 6.08 Fund Count 737.0 883 834 808 462 191 Fund Count 582.0 583 551 537 361 234 * Annualized Note: For funds with multiple share classes, only the largest is shown. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 6, 2017 | R5 JOURNAL REPORT | INVESTING IN FUNDS & ETFS TAX STRATEGY Mutual Funds Might Pack a Capital-Gains Punch Stock rally, redemptions are part of ‘bad confluence of events’ affecting 2017 tax bills ACTIVELY MANAGED mutual funds can be remarkably inefficient from a tax standpoint. Because funds must pay out substantially all realized net capital gains, they may make big distributions late in the year, handing an unwelcome tax bill to shareholders. Unless a fund is owned in an individual retirement account or other tax-deferred account, the investor must pay tax on the gain—even if the investor hasn’t sold any shares of the fund during the year. It can pay to pick funds that are less likely to rack up big capital gains. Many fund firms already have released estimates of the 2017 distributions they expect to make in December. Some payouts will be sizable. The stock rally has boosted many funds’ portfolios while offering few opportunities to book offsetting tax losses, says Christine Benz, director of personal finance for Morningstar Inc. Meantime, as investors in actively managed funds increasingly shift to exchangetraded funds, that has forced fund managers to sell appreciated securities to raise cash for redemptions. From a tax standpoint, it’s “a bad confluence of events,” Ms. Benz says. There are ways to dodge the tax collector. An investor could contact a fund firm to learn when distributions will be made and then sell preemptively—or keep the fund while taking offsetting losses in other assets, such as bonds. Decisions shouldn’t be based purely on tax issues, professionals say. They also should take into account a person’s situation, investment goals and the potential benefits of a long-term buy-andhold strategy, among other things. Here are some issues to understand about capital gains and how to manage them: MICHAEL MORGENSTERN BY MICHAEL A. POLLOCK 1. Check dates and rates Before making a major new fund purchase, it might make sense to wait until after the fund makes a distribution to avoid having to pay tax on past gains. Investors can learn when distributions are scheduled and how large they will be by calling a fund firm or checking its website, notes Dave Haviland, managing partner at Beaumont Capital Management, in Needham, Mass. Don’t assume that a fund won’t pay out a major gain because it hasn’t in the past, Mr. Haviland adds. Events such as a changeover in managers can cause a fund that has been relatively tax-efficient to abruptly make a big payout. “A new manager may significantly rework the portfolio and may be selling stocks that have several years’ worth of unrealized gains,” Mr. Haviland says. This year, large-cap growth funds have piled up hefty capital gains while investors in many of those funds have been shifting to ETFs. That has forced many managers to sell positions and book gains to keep cash on hand to meet redemptions. Some growth funds already have estimated 2017 gains distributions as large as 10% of net asset value. Payout Scoreboard A sampling of capital-gains payout estimates from mutual-fund companies FUND FIRM FUND TICKER American Funds New Economy ANEFX AMG Funds AMG Frontier Small Cap Growth MSSVX nearly 22% Columbia Threadneedle Columbia Acorn LACAX about 17-21% Columbia Acorn USA LAUAX about 22-27% Franklin Small Cap Value FRVLX 7-13% Templeton China World TCWAX 7-12% JPMorgan Large Cap Growth OLGAX nearly 14% US Large Cap Core Plus JLCAX about 12% Growth Stock PRGFX about 11% Franklin Templeton J.P. Morgan T. Rowe Price ESTIMATED PCT. NAV* 8-10% *Most estimates are based on September or October data. Actual payouts could be signiﬁcantly different. THE WALL STREET JOURNAL. Source: Morningstar, fund-ﬁrm websites 2. Understand how distributions work Distributions are deducted from net asset value. So when they happen, a fund’s NAV drops to reflect the amount distributed. Regardless of whether the distribution is paid in cash or reinvested in more shares of the fund, though, the total value of the investor’s holding of shares plus any cash received from the distribution remains the same. Moreover, there can be a tax benefit for reinvesting a gain. Because an investor now has paid tax on the distribution, it isn’t taxed further, so using it to buy more shares at a now-higher price would increase the tax-cost basis for the holding. For someone who originally paid $100,000 for a fund and reinvested a $5,000 distribution (while paying any taxes owed from another source), the basis would rise to $105,000, notes Daniel Gottfried, partner and tax attorney in Hinckley Allen’s Hartford office. 3. Study a fund’s style before buying Understanding a fund’s strategy may help an investor choose funds that are less likely to rack up big gains. Among those are funds that focus on finding undervalued stocks and tend to hold them for long periods—so-called deep value strategies—says Marc Lowlicht, chief executive at Opes Private Wealth Management, in East Hampton, N.Y. Mr. Lowlicht also suggests checking resources such as Morningstar for a fund’s turnover ratio—a measure of how often it replaces holdings. A ratio above 50% might mean more capital gains, he says. For each fund it tracks, Morningstar also calculates a tax cost ratio, which measures how much a fund’s annualized return is reduced by the taxes investors pay on distributions. The higher the number, the less tax-efficient a fund is. 4. Don’t flee a fund just for tax reasons It’s easy to avoid a distribution by selling ahead of it. But depending on the investor, that might not make sense, professionals say. Unless people have some experience in trading and understand IRS rules about booking losses, it might be better for them to sit back and not trade near distribution dates, advisers say. Moreover, an investor who bought a fund at a significantly lower share price and sells now, after it has appreciated, could face a hefty tax bill on that transaction. “For most individual investors, the beauty of markets is to let compounding over a long period work for them,” says Douglas Cohen, a New York-based managing director for Athena Capital Advisors. In trading as a tax-avoidance strategy, “there’s a risk of being too cute.” Mr. Pollock is a writer in Ridgewood, N.J. He can be reached at email@example.com. PRUDENTIAL FUNDS: HIGHLY RATED BY MORNINGSTAR. POWERED BY PGIM INVESTMENTS. PRUDENTIAL TOTAL RETURN BOND FUND PRUDENTIAL SHORT-TERM CORPORATE BOND FUND, INC. PRUDENTIAL HIGH-YIELD FUND Intermediate-Term Bond Category Short-Term Bond Category High Yield Bond Category PDBZX PIFZX PHYZX 852 Overall Rating 463 Overall Rating 601 Overall Rating For the 3-, 5-, and 10-year periods, the Fund was rated 5 stars out of 852 funds, 5 stars out of 773 funds, and 5 stars out of 546 funds, respectively. For the 3-, 5-, and 10-year periods, the Fund was rated 4 stars out of 463 funds, 4 stars out of 382 funds, and 5 stars out of 259 funds, respectively. For the 3-, 5-, and 10-year periods, the Fund was rated 5 stars out of 601 funds, 4 stars out of 485 funds, and 5 stars out of 319 funds, respectively. PRUDENTIAL JENNISON GLOBAL OPPORTUNITIES FUND PRUDENTIAL JENNISON GROWTH FUND PRUDENTIAL QMA LONG-SHORT EQUITY FUND World Large Stock Category Large Growth Category Long-Short Equity Category PRJZX PJFZX PLHZX 703 Overall Rating 1,259 Overall Rating 198 Overall Rating For the 3-, 5-, and 10-year periods, the Fund was rated 4 stars out of 1,259 funds, 4 stars out of 1,125 funds, and 5 stars out of 800 funds, respectively. For the 3-year period, the Fund was rated 5 stars out of 198 funds. For the 3- and 5-year periods, the Fund was rated 5 stars out of 703 funds and 5 stars out of 583 funds, respectively. Performance by share class may vary. Morningstar Overall RatingTM for Class Z shares as of 9/30/2017. Morningstar measures risk-adjusted returns. The overall rating is a weighted average based on a fund’s 3-, 5-, and 10-year star rating. © 2017 Morningstar, Inc. All rights reserved. The information contained herein (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; 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. Visit pgim.com/pgim-investments/about to learn how we help investors participate in global market opportunities. Consider a fund’s investment objectives, risks, charges, and expenses carefully before investing. The prospectus and summary prospectus contain this and other information about the fund. Contact your financial professional for a prospectus or summary prospectus. Read them carefully before investing. Mutual fund investing involves risks. Some funds are riskier than others. The risks associated with investing in these funds include but are not limited to: high yield (“junk”) bonds, which are subject to greater market risks (PIFZX, PDBZX, PHYZX); foreign securities, which are subject to currency fluctuation and political uncertainty (PRJZX, PJFZX); and short sales, which may prevent from implementing its investment strategy to the extent the Fund is obligated to cover a short position at a higher price (PLHZX, PJFZX). Fixed income investments are subject to interest rate risk, and their value will decline as interest rates rise (PIFZX, PDBZX, PHYZX). The risks associated with each fund are explained more fully in each fund’s respective prospectus. There is no guarantee a fund’s objectives will be achieved. Some Morningstar Ratings may not be customarily based on adjusted historical returns. If so, an investment’s independent Morningstar Rating metric is compared against the retail mutual fund universe breakpoints to determine its hypothetical rating for certain time periods. The Morningstar Rating for funds, or “star rating,” is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. Star ratings shown are for Class Z shares, which are available to individual investors through certain retirement and wrap fee programs, and to institutions at an investment minimum of $5,000,000. Mutual funds are distributed by Prudential Investment Management Services LLC, a Prudential Financial registered investment advisor and Prudential Financial company. Jennison Associates and PGIM, Inc. (PGIM) are registered investment advisors and Prudential Financial companies. QMA is the primary business name of Quantitative Management Associates LLC, a wholly owned subsidiary of PGIM. PGIM Fixed Income and PGIM Real Estate are units of PGIM. © 2017 Prudential Financial, Inc. and its related entities. Jennison Associates, Jennison, PGIM Real Estate, PGIM and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. The investment return and principal value will fluctuate and shares when sold may be worth more or less than the original cost and it is possible to lose money. This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. Clients seeking information regarding their particular investment needs should contact a financial professional. 0306639-00004-00 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 6, 2017 | R7 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. R8 | Monday, November 6, 2017 JOURNAL REPORT | INVESTING IN FUNDS & ETFS MONTHLY MONITOR | WILLIAM POWER Q&A Year’s Gain for U.S.-Stock Funds Expands to 14.4% in a Market That Has Analysts Scratching Their Heads Veteran of ‘Low-Priced’ Stocks Will Expand His List FOR JOEL TILLINGHAST, investing is as much about avoiding mistakes as picking winners. In 28 years of running the $38 billion Fidelity LowPriced Stock Fund (FLPSX), he has done plenty of both. His proudest pick: Monster Beverage, known as Hansen Naturals when he came across it 16 years ago. He bought shares around $4 and after many splits they now trade above $57. One of his worst picks: HealthSouth, which fell 99% over the time he held it. The value-focused fund is up 15.1% through Oct. 31 including dividends, handily beating the Russell 2000’s 11.9%. But while it has beaten the benchmark over the life of the fund, average annual total returns have lagged behind for the latest one-year, three-year and five-year periods. Mr. Tillinghast attributes this to factors such as the strong showing by stocks of loss-making companies, which the fund avoids. Now the fund is expanding its universe; as of November 2017, it will change its definition of “low priced” and seek opportunities in what it perceives as undervalued smallcap and midcap stocks of high-quality companies. Here are edited excerpts from a recent interview. A changing definition WSJ: How do you define “low price”? What’s magical about $35 a share or less, the fund’s traditional definition? MR. TILLINGHAST: The fund’s definition of low-priced is changing in November, from a price at time of purchase of under $35, to either a price under $35 or a higher-thanindex earnings yield (that is, a low P/E). The original price test was meant to include small-cap stocks, but also larger companies that were temporarily depressed and turning around. The newer test is looking for low-priced relative to intrinsic value, which is how I have always run the fund. WSJ: You write that you like being paid for boredom, and that stable, low-volatility stocks historically have done better, while exciting stocks have done worse. Can you sum up your checklist for finding your investments and finding value? MR. TILLINGHAST: Markets change. With many investors desperately hunting for in- DAVID SALAFIA/GETTY IMAGES BY SILVIA ASCARELLI Joel Tillinghast: ‘The fund’s definition of low-priced is changing.’ come, I’m not sure that boring, low-volatility stocks are undervalued today, but they have often been undervalued in the past. My checklist is if you have the right attitude and knowledge; if the company has the right management/people; is in the right business; and has the right price, relative to value. Perfection is unattainable, so most of us are best off minimizing regrets with a negative checklist. Avoid a stock if you have the wrong attitude (irrational, shortterm gambling); and wrong knowledge—industries, economic statistics or countries that you don’t understand well enough to make a valid forecast. Also if the company has the wrong management (crooks and idiots); wrong businesses (ruined over time by obsolescence or commoditization); and wrong price, where future cash flows aren’t sufficient or visible. WSJ: And then when to sell? MR. TILLINGHAST: I’m not very good at selling, but it always has to be in the context of your other opportunities and how well you know them. In the rare cases where you can find a company that you understand better, with better stewardship, in a more resilient business, which is more undervalued—make the trade. the years? MR. TILLINGHAST: In the past, I bought a lot of statistically cheap terrible businesses with mediocre managements. Over time, I realized that value depends on future cash flows, and that depends on management and the quality of the business. WSJ: You say that a big part of investing success is avoiding mistakes. What’s one where you got it wrong and it still hurts? MR. TILLINGHAST: I made three mistakes with HealthSouth. I bought the stock, thinking it was undervalued on adjusted earnings, while GAAP [generally accepted accounting principles] earnings and free cash flows told another story. The company had a very charismatic leader, Jim Scrushy. Lots of bad news came out, including an accounting restatement and allegations of overbilling. I panicked and sold near the lows. The company survived and recovered, but I couldn’t bring myself to come back to the stock. WSJ: What adjectives would you use to describe the overall U.S. market now? MR. TILLINGHAST: Discounting low future returns. WSJ: Nearly 40% of your WSJ: What is the stock-picking lesson people find hardest to learn, whether they are investing pros or novices? MR. TILLINGHAST: People who have had success in other parts of their lives have difficulty accepting how much failure there is in the stock market. Just because the result was bad (or good) doesn’t mean you did it the wrong (or right) way. holdings are in international equities. Is that a lot for you? What are you finding abroad that you aren’t in the U.S.? MR. TILLINGHAST: International holdings are currently maxed out because valuations are lower overseas. Also, brokerage research coverage is less abroad, so Fidelity’s research team is more able to find undiscovered gems with growing earnings, strong management and, especially in Japan, better balance sheets. WSJ: How has your approach to stock picking, and investing generally, changed over Ms. Ascarelli is an editor at MarketWatch. Email her at firstname.lastname@example.org. The hard way Mutual-Fund Yardsticks: How Fund Categories Stack Up Data provided by Includes mutual funds and ETFs for periods ended October 31. All data are preliminary. Investment objective October Perfomance (%) 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† October Performance (%) YTD 1-yr 5-yr* World stock funds 2.1 3.4 1.2 1.5 2.5 0.8 1.2 1.9 0.7 1.8 3.1 1.0 1.1 2.3 1.9 1.2 1.2 1.7 15.9 26.0 10.9 11.4 20.7 8.3 9.8 19.3 6.0 14.8 24.3 10.1 10.7 16.5 8.6 10.9 11.0 14.4 22.2 27.3 20.2 20.5 26.3 18.5 24.6 29.2 23.4 22.0 27.4 19.9 17.9 23.1 9.0 13.3 13.0 22.2 13.7 15.6 12.8 13.2 13.8 13.0 13.3 13.7 12.4 13.5 14.8 12.8 11.6 14.6 –3.3 7.9 7.0 12.6 4.2 –0.8 –2.1 2.4 –1.1 –0.03 –0.3 30.8 6.7 22.2 15.2 –9.4 4.5 3.3 32.9 10.5 26.4 15.1 1.3 10.4 5.8 17.9 9.3 17.9 10.2 –1.7 8.0 8.6 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 1.7 1.6 0.8 2.2 –3.1 4.0 –3.8 0.5 0.7 20.0 23.8 23.1 29.4 24.6 32.7 3.5 13.2 18.9 22.4 10.9 23.2 8.1 26.4 9.0 23.4 4.7 12.6 –2.7 26.9 9.9 –12.0 –13.4 16.2 8.4 18.4 5.4 0.1 0.3 0.1 0.2 0.1 –0.1 0.1 0.4 –0.1 –0.3 0.1 1.7 5.2 3.3 1.7 3.3 2.5 5.0 6.4 2.2 6.8 3.9 1.4 1.1 2.9 2.9 1.2 1.9 0.2 –0.1 1.2 1.9 –1.1 1.1 4.1 3.3 7.9 5.1 0.6 1.7 4.7 1.1 3.2 2.2 -0.03 0.1 0.1 unch. 0.8 3.9 4.6 6.5 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 1.2 1.6 2.2 0.3 2.0 2.8 4.0 Stock & Bond Benchmark Indexes All total return unless noted Investment objective October Perfomance (%) YTD 1-yr 5-yr* Large-cap stocks DJIA S&P 500 20.6 16.9 32.1 15.1 23.6 15.2 2.3 11.9 23.5 15.1 5-yr* DJ U.S. TSM Growth DJ U.S. TSM Value 2.8 1.6 22.1 11.2 27.5 16.4 20.5 13.7 Barclays Agg. Bond 0.1 3.2 0.9 2.0 0.2 4.9 2.2 3.0 1.5 2.0 18.9 23.7 20.2 23.6 5.6 7.9 Municipal bonds 0.8 11.9 27.8 14.5 2.2 2.2 16.4 16.4 24.0 15.1 24.0 15.1 Broad stock market DJ U.S. Total Stock Market Russell 3000 Performance (%) YTD 1-yr Taxable bonds Small-cap stocks Russell 2000 October Stock indexes 4.4 2.3 Midcap stocks S&P MidCap 400 Investment objective Barclays Muni. Bond International stocks MSCI EAFE†† (price return) Dow Jones World (ex. U.S.) *Annualized †Diversified funds only **Excludes money-market funds ††Europe, Australia, Far East Nothing has slowed down this stock market’s record run so far in 2017, and stock funds are going along for the ride. Despite high market valuations and worries about when the good times will end, the average diversified U.S.-stock fund registered a total return of 1.7% in October and now boasts a 14.4% gain for the year to date, according to Thomson Reuters Lipper data. “We’ve had this really steady and progressive climb higher, and you’ve got to ask yourself why,” says Phil Blancato, president and chief executive officer of Ladenburg Thalmann Asset Management, in New York. “It’s a bit of a Goldilocks scenario, coupled with Groundhog Day,” Mr. Blancato concludes— meaning mild inflation, low interest rates and positive earnings (in other words, an economic scenario that isn’t too hot or too cold), coupled with what seems like constant, repetitive gains by large-capitalization growth stocks like Facebook, Microsoft, Amazon.com and Apple. Foreign flavor International-stock funds kept pace with their U.S. counterparts during October, advancing 1.6%. Such funds now show a 23.8% rise for the year to date, outpacing U.S. funds after an extended period of underperforming. European region funds are up 23.1% so far this year, Latin America 24.6%, the Pacific re- gion 32.7% and emerging markets 29.4%. Noted investor Jeremy Grantham anticipates that markets outside of the U.S., both emerging and developing, will outpace the U.S. and its high valuations (see a Q&A with him today on page R10). Bond funds rise Bond funds rose slightly in October, ahead of what is expected to be a Federal Reserve interest-rate increase in December. Investors view that eventuality as a sign of the Fed’s confidence in the economy. Last week, the Fed kept its target short-term interest rate steady but signaled it could raise it when its policy makers meet again on Dec. 12-13. Funds focused on intermediate-maturity, investment-grade debt (the most common type of fixed-income fund), were up 0.1% in October, to push their year-todate gain to 3.3%. Mr. Blancato says there are some underpinnings of the stock market that concern him. Things are fine for now, but he expects an earnings recession somewhere along the way. Absent a big tax-overhaul success, he says, “markets simply don’t go on like this forever.” Mr. Power is a Wall Street Journal news editor in South Brunswick, N.J. Email him at email@example.com. How the Largest Funds Fared Data provided by Performance numbers are total returns (changes in net asset values with reinvested distributions) as of October 31; assets are as of September 29. All data are preliminary. The Largest Stock Mutual Funds Total Return (%) Annualized 3-year 5-year Ticker Assets ($ billions) October 1-year VTSAX VFIAX VGTSX SPY VINIX AGTHX RERGX IVV FUSVX ABALX 620.51 350.32 306.58 241.41 230.76 168.69 154.44 126.49 125.82 118.60 2.2 2.3 1.9 2.3 2.3 3.7 3.1 2.3 2.3 1.6 24.0 23.6 23.7 23.5 23.6 26.6 27.0 23.6 23.6 15.3 10.5 10.7 6.0 10.7 10.8 12.1 8.5 10.7 10.7 8.0 15.1 15.1 7.7 15.1 15.2 16.2 10.2 15.1 15.1 10.8 7.7 7.5 0.9 7.4 7.5 7.4 N.A. 7.5 7.5 6.8 Fidelity Contrafund 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 FCNTX AMECX CAIBX VWENX VEA AWSHX CWGIX ANCFX AIVSX VWO 117.91 109.05 107.56 102.69 98.45 95.94 94.55 91.44 89.93 89.06 4.7 1.0 0.1 1.4 1.8 1.9 2.0 2.9 1.7 1.4 31.2 13.9 13.0 16.3 24.4 22.9 23.2 25.2 20.7 20.7 13.2 6.6 4.9 8.0 6.7 9.8 7.4 12.1 9.0 9.0 16.5 9.4 7.6 10.5 9.1 14.1 11.2 15.4 14.4 15.0 8.5 5.6 3.7 7.1 1.4 7.0 4.3 7.2 6.7 7.9 Vanguard FTSE Em Mkt ETF Franklin Cust:Inc;A iShares:MSCI EAFE ETF Vanguard Sm-Cp Idx;Adm American Funds NPer;A Dodge & Cox Stock Vanguard Gro Idx;ETF Dodge & Cox Intl Stock Vanguard REIT Idx;ETF Vanguard Value Idx;ETF ... FKINX EFA VSMAX ANWPX DODGX VUG DODFX VNQ VTV 85.61 83.40 80.60 79.84 73.21 68.51 68.45 65.74 63.65 60.21 2.5 unch. 1.5 1.6 3.5 0.6 2.9 –0.3 –1.0 1.8 21.0 12.4 23.4 24.3 27.8 25.0 26.6 24.3 5.4 21.2 4.1 4.3 6.0 9.4 11.3 10.1 11.4 4.4 5.8 9.9 4.2 6.8 8.4 14.6 13.3 15.9 15.8 9.7 9.4 14.6 0.1 5.2 1.0 8.5 6.2 6.6 8.8 2.6 5.8 6.4 Vanguard Ext Mk Id;Adm Vanguard PRIMECAP;Adm American Funds AMCP;A First Eagle:Global;I Vanguard Wellesley;Adm PowerShares QQQ Trust 1 T Rowe Price Gro Stk Vanguard Windsor II;Adm Vanguard Health Care;Adm American Funds Mut;A VEXAX VPMAX AMCPX SGIIX VWIAX QQQ PRGFX VWNAX VGHAX AMRMX 59.89 58.31 58.20 56.44 54.19 52.37 50.73 48.90 48.11 46.64 1.4 2.7 2.8 1.4 0.9 4.5 4.4 1.1 –1.7 0.8 25.5 31.0 23.4 12.6 8.6 31.4 32.8 19.7 19.2 19.0 9.5 13.2 9.6 7.4 6.2 15.7 14.2 7.8 7.3 8.5 14.8 19.4 15.5 8.7 7.0 20.0 18.2 12.6 17.4 12.8 8.2 10.1 8.1 6.5 6.9 11.7 9.3 5.9 11.3 7.1 MFS Value;I Fidelity Tot Mk;Pr T Rowe Price BC Gro Vanguard Ins T StMk;Ins+ iShares:Russ 2000 ETF Fidelity Gro Company iShares:Core S&P Md-Cp Oakmark Internatl;Inv BlackRock:Gl Alloc;I Fidelity Low-Prcd Stk MEIIX FSTVX TRBCX VITPX IWM FDGRX IJH OAKIX MALOX FLPSX 45.54 45.29 42.34 41.86 41.32 40.78 40.28 40.22 39.07 38.55 1.2 2.2 4.7 2.2 0.8 4.1 2.3 1.0 0.7 1.7 20.9 24.0 34.6 23.9 27.8 40.2 23.4 33.4 13.1 22.1 10.0 10.5 14.8 10.5 10.2 16.1 10.6 10.2 4.8 8.3 14.5 15.0 19.0 15.2 14.5 19.7 15.0 12.6 6.7 13.4 7.0 7.7 9.8 7.8 7.7 10.5 8.9 6.1 4.3 8.0 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 American Funds Bal;A The Largest Bond Mutual Funds Total Return (%) Annualized 3-year 5-year 10-year Ticker Assets ($ Billions) 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 189.80 138.46 99.02 91.39 80.00 74.11 63.24 55.55 53.44 51.81 0.1 0.02 0.5 0.7 unch. –0.2 0.2 0.1 0.02 0.1 0.8 0.6 9.0 1.2 1.0 2.8 1.5 1.9 2.0 2.9 2.3 2.2 6.1 3.2 2.2 2.9 2.1 2.7 2.9 3.1 2.0 1.9 6.9 N.A. 2.6 2.3 1.9 2.7 3.1 3.0 4.1 N.A. 9.3 N.A. 5.8 5.5 3.1 4.2 N.A. 5.1 Vanguard Sh-Tm Bd;ETF iShares:Core US Agg Bd Lord Abbett Sh Dur;F Templeton Gl Bond;Adv iShares:iBoxx $IG Corp American Funds Bond;A T Rowe Price New Inc Vanguard Int-Tm Bd;ETF Fidelity Str Adv Cre Inc Fidelity US B Id;IP BSV AGG LDLFX TGBAX LQD ABNDX PRCIX BIV FPCIX FXNAX 50.62 50.33 42.20 39.90 37.67 36.03 35.45 33.78 33.51 33.03 -0.03 0.1 0.1 –0.6 0.4 unch. 0.1 0.1 0.1 0.01 0.5 0.9 2.2 7.9 3.5 1.1 1.3 0.5 2.5 0.7 1.3 2.4 2.2 1.3 3.9 2.3 2.3 2.9 3.1 2.3 1.1 2.0 2.2 2.6 3.3 2.0 2.0 2.3 2.6 2.0 2.6 4.1 4.4 6.0 5.8 3.0 4.4 5.3 5.0 N.A. Fidelity Total Bond Vanguard Int-Tm Inv;Adm Vanguard Infl-Prot;Adm Pru Tot Rtn Bond;Z JPMorgan:Core Bond;R6 Vanguard ST Corp Bd;ETF Fidelity Srs Inv Gd Bd Vanguard GNMA;Adm Vanguard Ltd-Tm TxEx;Adm Vanguard HY Corp;Adm FTBFX VFIDX VAIPX PDBZX JCBUX VCSH FSIGX VFIJX VMLUX VWEAX 30.82 28.97 27.29 27.22 26.30 25.94 25.84 24.94 24.90 24.74 0.1 0.2 0.2 0.3 0.1 0.1 0.02 0.1 -0.04 0.1 2.1 1.8 –0.3 3.4 1.2 1.8 1.7 0.3 1.2 7.6 3.1 3.4 1.4 3.7 2.6 2.2 2.8 2.0 1.3 5.3 2.8 2.9 –0.1 3.4 2.2 2.0 2.3 2.0 1.3 5.6 5.0 5.4 3.7 6.0 4.7 N.A. N.A. 4.2 2.4 6.8 iShares:TIPS Bd ETF Vanguard ST InPS Idx;Ins WA Core Plus Bond;I iShares:iBoxx $HY Corp Vanguard Int Crp Bd;ETF TIP VTSPX WACPX HYG VCIT 23.36 21.85 20.81 19.43 19.01 0.2 0.2 –0.3 0.2 0.4 –0.2 0.6 4.3 7.8 2.5 1.3 0.6 4.3 3.9 4.0 –0.2 0.2 3.8 4.8 3.4 3.7 N.A. 5.9 5.8 N.A. Fund October 1-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 10-year For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 6, 2017 | R9 JOURNAL REPORT | INVESTING IN FUNDS & ETFS EXCHANGE-TRADED FUNDS Europe Debates How to Regulate ETFs BY GERRARD COWAN ‘WHISKEY ETF’ TURNED OUT TO BE WELL-TIMED ARE TODAY’S REGULATIONS appropriate for tomorrow’s exchangetraded funds? The Central Bank of Ireland has launched an effort to find out. More ETFs are authorized in Ireland than in any other part of the European Union and can be sold to investors in other member states, as long as they comply with EU and local legislation. Like its counterparts in other parts of the world, the Irish bank is analyzing whether regulations will have to change as the ETF market continues its rapid growth. In recent years, investors have poured money into European-domiciled ETFs, which had $637.9 billion in assets at the end of September, up from $262.7 billion at the end of 2012, according to Morningstar Inc. data. ETFs now account for 7.9% of the total European funds market, Morningstar says. In the U.S., regulators have been working to catch up and respond to market disruptions involving ETFs, relatively new investments governed by Depression-era laws. Similarly, ETFs in Europe are regulated under two different regimes, neither of which was designed for the ETF structure. They are Undertakings for Collective Investment in Transferable Securities, which regulates most retail funds, and the Markets in Financial Instruments Directive, which governs the trade of a host of financial instruments. The Central Bank of Ireland has been consulting with ETF providers and other stakeholders for the past year or so, says Martin Moloney, special adviser on policy and risk issues at the central bank. That effort led to the publication of a “discussion paper” in May that asked a range of questions on issues ranging from market liquidity to collateral. The bank published a number of responses to the report on its website in mid-September. The Ireland-based unit of U.S. fund giant Vanguard Group, in its response to the paper, said that although ETFs had become a soughtafter option for investors, “we do A liquors-focused ETF is toasting its first year in operation, with the fund’s managers hoping to tap a growing global market for spirits. Spirited Funds/ETFMG Whiskey & Spirits ETF (WSKY), launched on Oct. 12, 2016, invests in publicly traded companies involved in producing and selling whiskey, bourbon and other spirits. Its holdings include some of the biggest names in alcohol, including Diageo, Rémy Cointreau and Pernod Ricard, whose brands include Jameson and Beefeater. The $6.2 million fund has returned 28.4% through October. Sam Masucci, founder and chief executive officer of ETF Managers Group, which operates the ETF on behalf of Spirited Funds, the creator of the index, says the underlying companies in the fund have risen partly because of the strengthening global economy. “People have more discretionary money to spend in the distilled space,” he says. WSKY has benefited from bullish stock markets overall, says Kiril Nikolaev, an analyst at ETFdb.com. The fund’s exposure “is mainly in developed markets such as Europe and the U.S., which have enjoyed overall great returns year-to-date.” However, its performance also reflects growing demand for spirits, with most of its underlying holdings enjoying returns of more than 20% year-to-date. At Spirited Funds, CEO David Bolton says spirits are in a 30- to 40-year “supercycle.” Consumers “are spending more on the products, and the industry is investing hundreds of millions of dollars to increase storage and production.” —Gerrard Cowan JASON CLARKE SPOTLIGHT | WHISKEY & SPIRITS ETF NIALL CARSON/ZUMA PRESS Just as in the U.S., it’s a game of catching up to the fast-growing market The Central Bank of Ireland is hosting an international conference on ETFs. not believe there to be any evidence to date that the increased volumes have led to any strain in the ETF architecture. ETFs remain a small percentage of the overall funds market and stock-market activity.” Still, the responses did highlight a number of areas where participants think regulatory change may be considered. A big one involves a type of ETF that has also caused debate in the U.S.—so-called active ETFs, which are a hybrid of passive and active investing. While traditional ETFs passively track certain indexes, active ETFs have fund managers who make decisions about the allocation of the underlying portfolio. The responses suggest a potential push for change in this area, Mr. Moloney says. Specifically, how transparent should they be? Conventional ETFs must disclose their holdings often, allowing market participants a clear view of the assets in which they are invested. Some active-ETF managers may prefer lessstringent rules, however, because they want to keep their investment strategy under wraps. “That’s one area where I think you might see some increasing push from industry in the future,” Mr. Moloney says. Regulators in other parts of the world also are examining ETFs, and it appears they may increasingly work together on this issue. In July, for example, the body that sets global standards for regulators—the International Organization of Securities Commissions—published a consultation document on liquidity-risk management, with a section on ETFs. The Central Bank of Ireland, meanwhile, is holding an international conference on ETFs in Dublin at the end of November. Paul Andrews, the secretary-general of the International Organization of Security Commissions, will be a keynote speaker, as will a senior official from the U.S. Securities and Exchange Commission. Mr. Moloney says the Central Bank of Ireland hopes international regulators can develop a “common language of risk,” establishing exactly where the risks are in the ETF sector and the impact they could have on the broader market. While regulators in different jurisdictions have a shared language for discussing the risks associated with banking in areas like credit risk, “we’re not quite in the same place when it Global regulators need to develop ‘a common language of risk.’ IRELAND’S MARTIN MOLONEY comes to ETFs,” he says. Regulators could then develop high-level principles or perspectives on ETF regulation, Mr. Moloney says; this could potentially inform work at a global level through the International Organization of Securities Commissions, with regional and national regulators interpreting and implementing any principles that emerge in their own jurisdictions. Even if this doesn’t prove necessary, developing a common understanding of risk would be useful in and of itself, he says. “I anticipate that 2018 will be very much focused on that agenda.” Mr. Cowan is a writer in Northern Ireland. He can be reached at firstname.lastname@example.org. Latest exchange-traded funds performance table............................... R14 Sometimes the best route to consistency is ﬂexibility. Columbia Strategic Income Fund applies a nimble approach to bond investing that takes advantage of market-driven opportunities while striving to reduce risk. Find out more about the fund that pursues consistency, even in uncertain times. Average annual total returns as of 09/30/17 (%) Without sales charges 1-year 3-year 5-year 10-year Class Inst 5.56 4.58 4.09 5.89 Class A 5.04 4.25 3.81 5.60 0.02 2.59 2.80 5.09 With sales charge Class A (4.75% max. sales charge) Expense ratios: Class Inst: Gross 0.76% | Net 0.76% Class A: Gross 1.01% | Net 1.01% columbiathreadneedle.com Performance data shown represents past performance and is not a guarantee of future results. The investment return and principal value of an investment will ﬂuctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data shown. Please visit columbiathreadneedle.com/us for performance data current to the most recent month end. Class Inst shares are sold at net asset value and have limited eligibility. Columbia Management Investment Distributors, Inc. offers multiple share classes, not all necessarily available through all ﬁrms, and the share class ratings may vary. Contact us for details. On November 1, 2017, Class Z shares were renamed Institutional shares. Investors should consider the investment objectives, risks, charges and expenses of a mutual fund carefully before investing. For a free prospectus or a summary prospectus, which contains this and other important information about the funds, visit columbiathreadneedle.com/us. Read the prospectus carefully before investing. Investments involve risk, including the risk of loss of principal. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. Fixed-income securities present issuer default risk. Non-investment-grade (high-yield or junk) securities present greater price volatility and more risk to principal and income than higher rated securities. A rise in interest rates may result in a price decline of ﬁxed-income instruments held by the fund, negatively impacting its performance and NAV. Other risk may include foreign and emerging markets issuer and country speciﬁc risk, prepayment & extension risk, derivative and liquidity risks. ©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 distributed; 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. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating TM used to rank the fund against other funds in the same category. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly excess performance, without any adjustments for loads (frontend, deferred or redemption fees), placing more emphasis on downward variations and rewarding consistent performance. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) The Morningstar ratings for the overall-, three-, ﬁve- and ten-year periods for the A-share are 5 stars, 4 stars, 5 stars, and 5 stars and for the Inst-share are 5 stars, 4 stars, 5 stars, and 5 stars among 259, 259, 159 and 44 Nontraditional Bond funds, respectively, and are based on a Morningstar Risk-Adjusted Return measure. The Overall Morningstar Rating for a fund is derived from a weighted average of the performance ﬁgures associated with its three-, ﬁve- and ten-year (if applicable) Morningstar Rating metrics. Columbia Management Investment Distributors, Inc., member FINRA. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies. Not FDIC insured/No bank guarantee/May lose value. 1927110 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. R10 | Monday, November 6, 2017 JOURNAL REPORT | INVESTING IN FUNDS & ETFS Q&A Grantham Predicted 2 Bubbles. And Now? The investor thinks stock valuations are high. But so are profit margins, he says. WITH THE S&P 500 up more than 15% this year, it may be time for a reality check. To that end, we spoke with Jeremy Grantham, co-founder and chief investment strategist at Boston-based money manager Grantham, Mayo, Van Otterloo & Co. and a noted spotter of market bubbles. He thinks U.S. stocks and bonds will fail to generate inflation-beating returns over the next seven years, but he doesn’t see an imminent crash in share prices. Mr. Grantham and his firm recently have had their own reality check. Many investors cashed out of the company’s mutual funds and institutional investment accounts early this year, impatient with a bearish approach as U.S. stocks rallied. But Mr. Grantham has already cemented his legend by arguing that U.S. stocks were overvalued in 2000 and again in 2007, anticipating the market’s two most-recent crashes. He also noted before the 2008-09 financial crisis that the relationship between home prices and income had become unglued, and said at least one large financial institution would fail. By Mr. Grantham’s lights, U.S. stock prices are again high, with an overall Shiller price/earnings ratio (share price relative to the past decade of real average earnings) over 30, compared with its average of 16.8 since 1880. But profit margins also are unusually high, lending support to the high valuations, he says. And the Federal Reserve’s policy of keeping interest rates low supports share prices by making fixed-income investments less attractive as an alternative to stocks. So this time, instead of a crash, stock valuations may take decades to revert to anywhere near the longterm average, Mr. Grantham says. Edited excerpts of the interview: What’s different WSJ: You made some news over the past year, saying “this time is different” regarding high profit margins and stock prices. But you’ve said that not everyone understood you correctly. MR. GRANTHAM: Valuations will re- DANIEL ACKER/BLOOMBERG NEWS BY JOHN COUMARIANOS ‘The U.S. form of capitalism has lost its way,’ the British investor says. vert over a 20-year period. And even then it probably won’t be a complete reversal to the levels that we saw pre-’98. We’ll get two-thirds of the way back. Somewhere along the line journalists made it a permanent high plateau. That’s precisely what it isn’t. Reversion will occur, but it will take time. If you look at the 20-year horizon, which is the one that matters to pension funds, we’re forecasting 2.8% real [average annual returns] for U.S. stocks. The two great stress tests of the new era were the tech bubble and housing bubble. In neither case did prices go down below [the long-term trend line] and stay there. The Fed has learned to come to the rescue. Those things and stubbornly high profit margins were grinding away in the back of my brain. Finally, after a painful two or three years, I realized this time it’s different. WSJ: You’ve famously called profit margins the most mean-reverting data set in finance. What’s keeping them high now? MR. GRANTHAM: Some outsized margins are structural—the brand power of large corporations. I think what is [also] going on is new-fashioned bullying, not the old-fashioned monopoly. Bully politicians into getting fa- vorable legislation. Bully the Justice Department into going to sleep. Bully regulatory agencies. It’s the power of corporations—better regulations and favoritism for giant companies. WSJ: Speaking of the advantages of large companies, are the biggest, most profitable U.S. companies—the so-called high-quality businesses— still cheap? MR. GRANTHAM: Even those are not cheap anymore. They had the wind in their sails, and a few years ago we thought they were cheaper than the rest of the market. They are still less expensive than the overall market, but much less so than previously. We define high-quality businesses as those having consistent and stable high returns on invested capital, and low debt. Both emerging and developed markets [outside the U.S.] will probably deliver better returns. If you need a bigger return to survive, you should take a bigger bet on emerging markets. Purgatory, hell and capitalism WSJ: Your colleague and GMO port- folio manager, Ben Inker, has wondered whether we are in purgatory, with low-return investment choices until a reversion of valuations creates better ones, or hell, with low-re- turn investment choices without a reversion and the future high returns the resulting low prices would afford. Where are you? MR. GRANTHAM: I’m neither in hell nor purgatory. This is a structural problem. There is lower population growth. China is saving so much, putting downward pressure on the cost of capital. Fed policy is that you remorselessly keep the pressure on rates so that each leg down [in interest rates] is lower than the last. How quickly do we expect the Fed’s policy to change? Cycles come and cycles go, and probably sometime there will be inflation and [the Fed] will have to raise rates. Four and a half years ago, in the final paragraph of my quarterly letter, I’d been talking about the Fed bullying rates down. When you consider the bully, the career risk of the bullied [the need to buy stocks regardless of valuation because others are buying them], and the willingness of [individual investors] to believe the unbelievable, you’ve got to think that the Fed can win another round or two [keeping interest rates low and asset prices high]. WSJ: Is this high-profit-margin situation an unusual one for capitalism? MR. GRANTHAM: The U.S. form of capitalism has lost its way. The social contract was previously in good shape. Corporations looked after their employees. They were more paternalistic. Great pension funds were starting up. The CEOs were increasing income alongside their workers. CEOs earned more than 40 times workers. Today, that number is 350 times, and the system has gone to hell. Keynes, Schumpeter—and Marx, not to mention—thought, by their nature, corporations and capitalism would overreach simply because they could. Corporations would use their advantages to get more power and more money. Their share of the pie would increase, and cause society to push back. Sooner or later there will be a pushback. Mr. Coumarianos, a former Morningstar analyst, is a writer in Laguna Niguel, Calif. He can be reached at email@example.com. SPOTLIGHT EVENTSHARES THE ETFS FOR POLITICAL JUNKIES A handful of ETFs have sprung up in the past couple of months that let investors align their portfolios with their politics—or go against their politics if they think they’re more likely to profit that way. In October, New York asset manager Active Weighting Advisors launched a trio of exchange-traded funds under the EventShares brand. Republican Policies Fund (trading symbol GOP) and Democratic Policies Fund (DEMS) invest in stocks the fund managers believe are likely to do well under Republican and Democratic policies, respectively. For example, the GOP fund’s holdings include shares of CoreCivic Inc., a for-profit detention and corrections center operator. The DEMS fund’s stocks include HCA Healthcare Inc., the largest U.S. for-profit hospital company. A third fund, U.S. Tax Reform Fund (TAXR), invests in companies that the fund managers believe are poised to benefit from a tax overhaul. The EventShares funds, all of which have about $2 million in assets, come alongside another ETF already in the market with a different political twist. The $31 million Point Bridge GOP Stock Tracker (MAGA) was launched in September and invests in companies that are supportive of Republican policies and candidates. The 150 companies included in the ETF have been chosen based on the political contributions of employees and the existence of any company-backed political-action committees. Fort Worth, Texas-based Point Bridge Capital, which launched MAGA, is an investment firm managed by Republican activist Hal Lambert. —Bailey McCann W E D N E S D AY, D E C E M B E R 1 3 , N E W Y O R K C I T Y Join WSJ Pro journalists and cybersecurity experts for an exclusive event on cyber risks. Tailored to the needs of senior managers, the Cybersecurity Executive Forum will help you navigate the everevolving cybersecurity landscape, from protecting data and staying compliant with major laws to defending your business and how to respond should a crisis emerge. SPEAKERS INCLUDE Ajay Arora John P. Carlin Theresa Payton Stephen Schmidt CEO and Co-Founder, Vera Chair, Global Risk and Crisis Management Team, Morrison & Foerster CEO, Fortalice Solutions; CIO, The White House (2006–2008) VP, Security Engineering and Chief Information Security Officer, Amazon Web Services Wednesday, December 13, 2017 The Grand Hyatt 109 E 42nd St, New York, NY 10017 © 2017 Dow Jones & Co., Inc. All rights reserved. 6DJ5977 Request your invitation today: cyber.wsj.com For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 6, 2017 | R11 JOURNAL REPORT | INVESTING IN FUNDS & ETFS FAMILY FINANCE Why Couples Should See A Financial Adviser Before They Get Married BY CHERYL WINOKUR MUNK FOR COUPLES planning to get married, a meeting with a financial professional is an increasingly important step along the way, advisers say. It’s a “function of the fact that people are accumulating assets before marriage, getting married later in life, and seeing more and more people getting divorced,” says Lawrence D. Mandelker, a trusts and estates attorney with Seyfarth Shaw LLP in New York who has been referring more clients to financial advisers for these services. Financial professionals who offer premarital financial planning say they work with couples beyond the nitty-gritty details, such as who is going to pay the bills and whether the couple will pool their money or keep their accounts separate. They’re taking on a counseling role to help couples deal with the emotions that can complicate financial decisions—for instance, the stress that can strain a relationship when one partner tries to exercise too much monetary control. “We’re more psychologists in this position than we are financial planners,” says Matthew Celenza, managing partner at Boulevard Family Wealth, an investment advisory firm in Beverly Hills, Calif., who has helped couples with premarital financial planning. “It’s the root of so many problems in couples’ relationships,” says Jeremy S. Office, founder of Maclendon Wealth Management in Delray Beach, Fla., who regularly counsels clients on premarital financial issues. Some professionals bill an hourly rate for these services, while others don’t charge separately for the premarital financial planning they do for existing clients or children of clients. Some don’t charge prospective clients, while others base their fees on the complexity of the situation. Couples generally meet with their advisers anywhere from one to five times, though it depends largely on what the issues are. No secrets For the process to work, couples should be willing to openly discuss their spending habits, assets, liabilities and financial goals, says Laurie Boore-Clor, a 37-year-old doctor in Ann Arbor, Mich., who went through premarital financial counseling with her fiancé, now husband, about two years ago. “If you have secrets in a marriage, that doesn’t help your marriage,” she says. “If you’re willing to hide your money, what else are you hiding?” Only when people are open about how they feel can inevitable differences be addressed. About a year ago, Renée Kwok, a certified financial planner and president of TFC Financial Management Inc. in Boston, worked with a young couple who planned to buy a house but had very different views on how much to spend. The future bride was much more frugal than her fiancé, and it was an emotional sticking point, says Ms. Kwok. She talked the couple through different scenarios and ran financial projections. She asked the young man to consider how spending less would be more prudent and how it would help to ease his fiancée’s anxiety. The couple ultimately decided to take a more-conservative approach based on the future bride’s concerns, Ms. Kwok says. These meetings are “a forum for creating compromise because you see [people’s] emotional reactions.” standings happen when people assume things that aren’t reality,” Ms. Garber says. To be sure, not everyone needs a professional’s help with premarital financial planning. Several years ago, Saramaya Penacho, a publicist in San Diego, and her then-fiancé, management consultant Zach Penacho, instituted an annual financial-planning retreat where they go away for a weekend and discuss their past FALCON FILM STUDIOS People’s spending habits and other money issues are often overlooked in premarital planning Lauren and Derek Gauci in Michigan hadn’t worried about a financial plan—but are believers now. year’s finances and set a road map for the year ahead. At last year’s getaway, they discussed things like how much they could afford for a down payment on a home and brain- Tiffany Welka, vice president of VFG Associates, a registered investment adviser in Livonia, Mich., is part of the premarital counseling board at her church. Couples who want to get married at the church are required to meet with various social-services professionals, and they go to her for financial counseling. She doesn’t charge for these services. Ms. Welka says she helps engaged couples create a budget, determine common financial goals and set a financial plan. She also encourages them to communicate about financial issues. On average, roughly three of the five young couples she counsels each week on premarital financial planning issues haven’t talked about their finances previously, Ms. Welka says. They have no idea how much the other person spends or how much credit-card debt he or she is carrying—and they are surprised when the information comes out during discussions. Derek Gauci, age 28, says the premarital financial-planning process got him and his now-wife, Lauren, also 28, started on the right financial footing. Before going through the process, the couple, who live in Plymouth, Mich., hadn’t given saving for retirement or life insurance a second thought, he says. Also, Mr. Gauci had been putting all his money into his wedding-photography business and didn’t know how much of a profit he was making, how to calculate monthly costs or how to budget appropriately. He feels premarital financial planning is so important that he has encouraged several employees to do it. “I think you’d be a fool not to,” he says. “You just don’t want to have any big financial surprises.” In some cases, premarital financial planning with older couples ends up being much like a “business negotiation”— trying to determine who is paying for what and how much, says Mela Garber, a tax principal at New York-based accounting firm Anchin, Block & Anchin and chairwoman of the firm’s trust and estates services group. Ms. Garber has worked with several older couples where one person makes significantly more money than the other. During the dating phase, the wealthier person often covers the tab for dinners and vacations, but he or she may expect the partner to chip in more substantially after the marriage. If those expectations aren’t discussed up front, problems can arise. “Misunder- THE BEST OF BOTH WORLDS: AUTONOMY, WITH WORLD-CLASS SUPPORT. THE MORE YOU KNOW, THE MORE WE MAKE SENSE. Our 14,000 financial advisors run their own offices and make their own decisions. But they have vast resources at their disposal, from a dedicated Branch Office Administrator to the most advanced technological tools and resources in the industry. It’s a unique business model that’s helped us become one of the largest financial services firms in the country. Maybe it’s time to grow your practice here. Maybe it’s time you got to know Edward Jones. Time in a relationship when couples ﬁrst discuss money Ages 35-54 3% 3% 55+ 42% “HIGHEST IN EMPLOYEE ADVISOR SATISFACTION AMONG FINANCIAL INVESTMENT FIRMS” 47% Within the ﬁrst three months 15% 11% 4-6 months 22% 24% 19% 6-12 months 13% 14% 11% 1-3 years 3-5 years 5+ years 25% 2% 3% Ms. Winokur Munk is a writer in West Orange, N.J. She can be reached at firstname.lastname@example.org. Robin Diedrich, CFA, CFP,® CPA Senior Analyst - Consumer Equity Research Visit edwardjones.com/knowmore 35% future, Ms. Penacho says. Encouraging communication The Talk 18-34 stormed ways to trim expenses. It has been an effective way for the couple to gain a shared understanding of their individual and mutual financial goals and save for their 4% 8% Source: TD Love and Money Customer Insights July 2017 THE WALL STREET JOURNAL. Edward Jones received the highest numerical score in the Employee Advisor Segment in the J.D. Power 2017 Financial Advisor Satisfaction Study, based on 1,761 total responses from 10 companies in the segment measuring experiences and perceptions of financial advisors, surveyed January–April 2017. Your experiences may vary. Visit jdpower.com For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. R12 | Monday, November 6, 2017 JOURNAL REPORT | INVESTING IN FUNDS & ETFS THE EXPERTS Insights on Market Setbacks, ARMs and More How to get ready for a stock drop ing crisis, a subset of economists have Even as the stock market continbeen thinking how to design mortues to set new highs, investors feel gages to make homeowners better off. increasingly nervous about living A paper by Janice Eberly of Norththrough the next downturn. We western University and Arvind Krishshould spend more time planning for namurthy of Stanford University found volatility and potential losses than that allowing borrowers a guaranteed trying to predict when the next option to convert their fixed-rate mortdownturn will happen. gage into an ARM, even if underwater, Part of that planning includes runwould go a long way toward stabilizing ning a safety-net analysis. This allows the housing market. The authors’ cenyou to understand how long you can tral observation was that this type of withstand a downturn given your contract would prevent foreclosures by current situation and what changes lowering monthly payments in a downmight be appropriate at this stage in turn, while also discouraging strategic the bull market. default by reducing the total amount STEP 1: Determine your annual owed for the life of the loan. after-tax expenses. To know your —Benjamin Harris, visiting associate safety-net number, you need to know professor, Kellogg School of An ARMs view to ponder for real-estate agents like these in San Rafael, Calif. Management your total after-tax expenses. If you have multiple years of spending data, i i i then take the average of your annual expendidrawing on stocks at depressed values. The avtures from the past three years. List what you erage bear market lasts about two years, so Critics of passive investing are wrong think your annual expenses will be for each of that’s a useful starting point. Passively managed mutual funds have atthe next 10 years. You can adjust future ex—Peter Lazaroff, blogger and chief investment tracted considerable assets in recent years. penses for inflation of 2% or 3%. officer at Plancorp STEP 2: Make a list of all income you exBacklash by active managers has been sharp, i i i pect to earn outside of your portfolio. Total all with one famed hedge-fund manager, Paul nonportfolio income you expect to receive over Singer, arguing that passive investing is “deWhy ARMs aren’t as risky as you think the next decade—such as pension payments, destructive to the growth-creating and consensusBorrowers typically view adjustable-rate ferred compensation, Social Security, rental inbuilding prospects of free-market capitalism.” mortgages as risky products. ARMs generally come and so on. Passive indexing follows a fixed investment STEP 3: Estimate a yield on your portfolio. offer borrowers a fixed interest rate for a set rule—mainly, a fund invests an amount in each You can get a little creative here, but it’s imporperiod, often lower than the rate on a fixed-rate company present in an index proportional to its tant to remain conservative. Let’s pretend the mortgage, followed by adjustable payments that relative market capitalization—while active inmarket has fallen and is never coming back. vary with economywide rates. vesting follows a manager’s discretion. The Take your portfolio and assume it loses 30% or The popular perception seems to be that main argument made against market-capping is 40% of its value. This is the ultimate doomsday ARMs allow homeowners to trade off a few that it is dumb money, a herd mentality that scenario that is highly unlikely—and, thus, exyears of lower interest payments for the risk of magnifies the rise or fall of share prices. Rhetotremely conservative. seeing a mortgage interest payment rise. But to ric aside, passive indexing won’t consume all Now, let’s assume your depressed portfolio economists, it isn’t so simple. investments, despite its recent growth. Still, it value will yield 2% a year, which isn’t that far Interest rates tend to rise when the economy is an integral part of well-functioning markets. off from the yield on the S&P 500 index and 10is doing well and typically fall when the econIf anything, there is still too little of it. year U.S. Treasury bonds. Separate out equities, omy is doing poorly. Rather than seeing adjustFears of market-capping are largely based on fixed income and cash. This allows you to apply able interest as a risk, homeowners should see a misunderstanding of how a market equilibdifferent permanent losses and yields to the it as protection against a downturn in the econrium is reached. Active traders are the marginal three portions of your portfolio. omy. If economic growth stalls, the Federal Reinvestors who set prices. If passive investments STEP 4: Add up the income and compare to serve cuts rates and homeowners get a break. were inefficiently magnifying prices, then active your expenses. Total your expected portfolio inIf growth picks up, the Fed raises rates and managers would move completely to cash or come with your outside income, and subtract homeowners pay more—but chances are they bonds when stock prices are high and fully to that amount from your projected expenses in can afford a higher payment. From this perstocks when stock prices are low. Moreover, if year one. Ideally, you have enough income to spective, fixed-rate mortgages are actually the active managers could easily sell short, they meet your liquidity needs to support your liferiskier products because they don’t offer relief would take negative positions in stocks during style. If not, remove funds from your portfolio if homeowners are facing a sluggish economy. good times and leveraged positions during bad to cover the difference between your annual afIt’s true that homeowners with fixed-rate times. However, we don’t see either of these ter-tax expenses and total income. mortgages can manage risk through refinancstrategies implemented at significant scale. In years that you draw from portfolio assets ing—swapping out a loan for one with a lower Economic theory predicts that the march toto meet expenses, dial back portfolio income in rate. But it’s expensive. Even worse, refinancing ward market-cap weighting is likely not over. the second year. Continue this exercise year by can be unavailable in downturns due to either That’s probably a good thing for investors and, year for 10 years. Now we want to know how negative equity or other disqualifications. eventually, even high-quality active traders. It’s many years you can last without drawing on While policy makers nationwide have probacapitalism operating at its finest. your portfolio during a downturn and avoid bly not done enough to prevent the next hous—Kent Smetters, blogger and Wharton professor JUSTIN SULLIVAN/GETTY IMAGES The Experts are an online group industry, academic and cultural thinkers who blog on topics related to their expertise. Edited excerpts follow. For more, go to WSJ.com/experts. Leaders and Laggards Data provided by Performance numbers are total returns (changes in net asset values with reinvested distributions) as of October 31; assets are as of September 29. All data is preliminary. Best-Performing Stock Funds Assets ($ millions) October YTD Total Return (%) Annualized 1-year 3-year Worst-Performing Stock Funds Fund Ticker Direxion:Hbldrs&Sup Bl3X Direxion:Semicnd Bull 3X Direxion:S Korea Bull 3X Rex VolMAXX SVW Ftrs Str Direxion:CSI Ch Int Bl2X Direxion:S&P Btech Bl 3X VelShs DlyInv VIX ST ETN ProShs II:ShVIX STF ETF UBS E-TRACS MR2xL ISE Hb Direxion:MSCI EM Bull 3X NAIL SOXL KORU VMIN CWEB LABU XIV SVXY HOML EDC 14.0 386.2 9.6 16.9 85.1 325.0 1056.4 1,147.6 3.2 246.7 28.1 28.4 25.8 13.3 –2.0 –10.3 14.8 14.6 25.4 9.5 183.5 159.3 152.3 150.8 150.0 144.4 137.9 135.5 119.7 119.3 237.5 238.3 126.7 237.4 N.A. 165.3 204.2 199.9 156.4 85.1 N.A. 77.7 15.7 N.A. N.A. N.A. 47.4 46.4 N.A. 1.5 N.A. 92.0 N.A. N.A. N.A. N.A. 47.8 46.9 N.A. 0.1 Direxion:China Bull 3X Direxion:Tech Bull 3X Direxion:MSCI Ind Bull3X ProShares:UltP QQQ VelShs 3x Inv Nat Gas ProFunds:UltraChina;Inv VelShs VIX Short Vol Hdg Direxion:FTSE EU Bull 3X ProShares:Ult Semicond ProShares:Ult Tech YINN TECL INDL TQQQ DGAZ UGPIX XIVH EURL USD ROM 209.5 363.2 101.2 2,094.7 82.3 36.3 60.5 62.3 45.7 234.5 12.2 20.0 22.6 13.5 29.2 2.4 11.5 0.9 22.1 15.8 117.9 115.8 112.2 105.0 104.7 98.0 89.6 84.8 83.4 79.0 89.3 127.4 65.2 112.0 4.3 70.9 126.8 95.9 112.3 83.8 1.1 48.7 –2.1 41.2 12.1 9.5 N.A. 4.9 46.0 34.3 EMLB ARKK DZK UUPIX RYWVX ZIV KOLD XPP ARKW EET 2.4 160.6 30.3 44.5 19.9 174.2 5.9 51.9 97.4 39.5 6.5 3.6 4.7 3.7 3.8 9.0 18.0 8.3 6.3 6.4 76.9 76.7 75.6 75.1 74.7 74.7 73.0 72.4 72.1 71.0 58.0 77.9 78.3 45.6 45.6 83.4 13.9 58.2 74.3 53.9 9.4 21.1 6.7 3.4 2.8 23.2 30.8 8.6 29.3 5.2 iPath ETN LgEn MSCI EM ARK Innovation Direxion:MSCI DM Bull 3X ProFunds:UltraEM;Inv Rydex:Emg Mk 2x Str;H VelShs DlyInv VIX MT ETN ProShs II:UlS Blm Nat Gs ProShares:Ult FTSE Ch 50 ARK Web x.0 ProShares:Ult MSCI EM Best-Performing Bond Funds Assets ($ millions) October YTD Total Return (%) Annualized 1-year 3-year 5-year October YTD UVXY TVIX UGAZ GAZ VMAX LABD TVIZ SOXS VIXY VXX 520.7 302.7 680.4 2.5 2.4 110.7 2.0 42.4 191.4 1,028.1 –26.0 –26.0 –26.6 –38.8 –14.0 9.6 –16.4 –23.0 –13.6 –13.6 –91.2 –91.2 –81.5 –77.9 –77.4 –73.4 –71.2 –69.9 –66.8 –66.7 –95.4 –95.4 –74.8 –67.3 –84.8 –81.7 –74.8 –78.8 –75.4 –75.3 –89.4 –89.4 –82.3 –59.8 N.A. N.A. –53.6 –63.9 –58.9 –58.9 –88.2 –88.2 –71.5 –44.6 N.A. N.A. –57.4 –65.2 –57.4 –57.4 VelShs VIX ShTm ETN ProShs II:Ult Blm Nat Gs Direxion:China Bear 3X Direxion:MSCI EM Bear 3X Direxion:Tech Bear 3X ProShares:UltP Sht QQQ ProFunds:UlSh China;Inv Direxion:Jr Mnr Bear 3X Direxion:S&P OG EP Bl 3X ProShares:UlS Semicond VIIX BOIL YANG EDZ TECS SQQQ UHPIX JDST GUSH SSG 13.8 51.1 44.3 100.4 19.8 603.0 2.0 172.0 142.5 4.9 –13.6 –17.1 –13.4 –9.6 –17.5 –12.8 –3.4 13.9 0.5 –18.7 –66.7 –61.6 –61.3 –60.0 –58.2 –55.4 –55.0 –54.6 –51.8 –50.8 –75.3 –49.5 –57.7 –55.9 –61.8 –58.1 –49.4 –40.0 –27.0 –58.9 –58.9 –60.9 –43.4 –32.4 –47.1 –43.5 –29.0 –86.5 N.A. –43.3 –57.4 –49.0 –47.0 –29.7 –48.2 –49.1 –34.4 N.A. N.A. –46.0 Direxion:Nat Gas Bull 3X ProShares:UPS Nasdaq Bio Nvgtr Sentry Mgd Vol;I ProFunds:UltSh EM;Inv ProShares:UlS Tech Rydex:Inv EM 2x Str;H ProShares:UlS FTSE Ch 50 Direxion:MSCI DM Bear 3X ProShares:UlS MSCI Brz ProShs II:VIX MT Fut ETF GASL ZBIO NVXIX UVPIX REW RYWYX FXP DPK BZQ VIXM 58.2 5.2 12.5 2.2 3.0 0.7 34.2 3.9 29.6 43.2 –2.4 18.8 –6.6 –4.3 –14.2 –4.2 –8.9 –4.7 6.0 –8.4 –49.0 –48.6 –48.6 –47.7 –47.3 –47.1 –46.4 –46.4 –46.2 –45.2 –36.5 –58.3 –56.6 –39.0 –49.6 –38.3 –43.0 –48.3 –37.7 –48.5 –84.8 N.A. –38.0 –20.1 –34.3 –19.9 –28.1 –26.2 –32.7 –28.3 –71.7 N.A. N.A. –18.6 –35.6 –18.4 –27.0 –31.2 –23.0 –31.8 Ticker ProShs II:UltVIX STF ETF VelShs Dly 2x VIX ST ETN VelShs 3x Long Nat Gas iPath Bloomberg NatGas A Rex VolMAXX LVW Ftrs Str Direxion:S&P Btech Br 3X VelShs Dly 2x VIX MT ETN Direxion:Semicnd Bear 3X ProShs II:VIX ST Fut ETF iPath ETN SP500 VIX ST A 14.8 54.9 5.3 59.0 –16.5 20.2 N.A. N.A. 55.2 38.1 7.9 N.A. 16.6 2.9 2.4 30.8 7.8 9.3 N.A. 3.9 Worst-Performing Bond Funds Total Return (%) Annualized 1-year 3-year 5-year Ticker Assets ($ millions) October YTD Direxion:20+Y Trs Br 3X ProShares:UPSh 20+ Trs Mrkt Vctrs ETN Dbl Sh Eu ProShs II:UlS Euro Barclays Inv US TC ETN Third Avenue:Foc Cr;Inst Rydex:Stg Dlr 2x Str;H iPath ETN Trs Lng Bear A ProShs II:UltSht AUD FX Strategy;I TMV TTT DRR EUO TAPR TFCIX RYSBX DLBS CROC FXFIX 364.9 78.4 15.2 226.6 15.4 198.0 10.7 17.1 9.1 31.9 -0.1 0.04 3.3 3.1 0.9 -0.9 3.3 1.0 4.8 4.7 -20.1 -18.8 -17.9 -17.5 -16.3 -14.9 -14.4 -14.0 -13.7 -12.8 1.8 2.7 -10.4 -10.3 11.0 -3.6 -7.3 13.3 -4.9 2.8 -21.1 -19.8 4.2 3.4 -17.9 -14.3 3.7 -11.6 2.1 -2.0 -18.5 -17.1 3.2 2.5 N.A. -5.4 4.3 -9.3 4.5 -0.2 10.7 9.8 N.A. 9.6 11.2 N.A. N.A. 5.6 2.2 10.7 ProShares:UlS 20+ Yr Trs iPath ETN Trs 10Y Bear A Direxion:7-10Y Trs Br 3X ProShs II:Short Euro iPath ETN Trs Steepenr A ProFunds:Rs USD;Inv PowerShares DB USD Bull Rydex:Inv Hi Yld Str;C ProShares:Sht High Yield WisdomTree:Blm USD Bull TBT DTYS TYO EUFX STPP RDPIX UUP RYIYX SJB USDU 2,060.8 49.3 28.6 8.1 4.2 31.5 642.9 3.00 119.1 139.5 0.1 2.9 0.5 1.6 -1.2 1.7 1.7 -0.7 -0.1 1.8 -12.3 -12.0 -9.2 -8.9 -8.9 -7.9 -7.0 -6.4 -6.4 -6.4 3.0 25.1 2.6 -5.0 1.1 -4.3 -3.5 -8.2 -8.4 -1.8 -12.4 -10.4 -11.0 2.0 -4.6 1.4 2.1 -8.2 -5.8 2.7 -10.6 -8.2 -9.6 1.4 -1.8 1.6 2.3 -10.0 -7.0 N.A. 8.4 N.A. N.A. N.A. N.A. N.A. –8.3 N.A. 0.1 N.A. Oppenheimer Ro MD Mu;A Direxion:20+Y Trs Br 1X ProShares:Sht 20+ Treas Rydex:Inv Gv LB Str;Inv Direxion:M7-10Y B 2x;Inv Oppenheimer Ro NJ M;A ProShares:CDS Sh NA HY C ProShs II:UlS Yen Rochester Sh Dur HYM;A PowerShares DB G10 CH ORMDX TYBS TBF RYJUX DXKSX ONJAX WYDE YCS OPITX DBV 29.4 5.1 613.8 139.9 5.9 328.2 4.9 148.5 1,424.9 43.1 -3.3 0.1 0.1 0.2 0.4 -3.5 -0.9 2.3 -2.5 -1.1 -6.4 -6.2 -6.0 -6.0 -5.6 -5.4 -5.4 -5.4 -5.0 -4.9 -7.6 2.1 1.9 3.1 2.3 -7.8 -8.5 17.2 -6.2 -6.4 0.4 -6.0 -5.9 -5.3 -6.8 -0.3 -6.1 -1.3 -1.0 -2.7 -0.7 -5.1 -5.1 -4.1 -5.7 0.5 N.A. 12.0 -0.2 -1.4 Fund Ticker UBS AG Enh Eur Gl HY ETN Mrkt Vctrs ETN Dbl Lg Eu UBS E-TRACS MP 2xL S&P D Victory:INCORE Inv GC;I UBS E-TRACS MP 2xL DJ SD ProShs II:Ult Euro iShares:Intl Pref Stk Franklin Inv:Cv Sec;Adv iShares:Internatl HY Bd SPDR Bbg Barclays Cnv Sc FIHD URR SDYL VICIX DVYL ULE IPFF FCSZX HYXU CWB 934.2 2.5 14.5 105.7 34.2 13.7 90.0 2,628.2 90.6 4,278.0 0.5 –3.5 2.5 4.0 2.3 –3.2 –1.0 1.9 –0.5 1.7 29.4 20.7 19.7 19.0 18.9 18.3 18.1 18.1 16.8 16.6 36.5 9.3 35.6 23.1 33.3 8.0 21.0 18.7 14.2 18.4 N.A. –8.2 20.7 8.0 19.8 –8.1 –3.1 8.5 2.3 8.2 N.A. –6.7 29.3 11.4 28.2 –6.8 –2.4 11.4 3.8 11.3 Lord Abbett Convert;I TETON WW:Convert Sec;I iShares:Convertible Bond Putnam Conv Sec;A Columbia:Conv Secs;I Frst Tr VIII:CEF Inc Opp Premise Cap Frontier ADT Ashmore:Ems Crp Dbt;Inst Direxion:20+Y Trs Bl 3X AllianzGI:Conv;Inst LCFYX WESIX ICVT PCONX NCIAX FCEF TCTL EMCIX TMF ANNPX 859.1 14.7 347.9 705.6 804.2 32.1 14.5 323.3 111.7 530.0 2.2 1.9 2.1 2.0 1.2 0.1 1.6 1.5 –0.5 1.9 16.4 16.0 15.4 15.2 15.1 15.1 15.0 14.9 14.9 14.7 22.1 19.6 20.6 18.4 19.9 19.3 18.3 16.5 –13.6 18.9 6.3 5.2 N.A. 5.7 7.0 N.A. N.A. 7.7 4.8 6.0 Calamos:Convertible;I Barings:Emer Mkts LCD;Y Barings:EM DB Tot Rtn;Y Calamos:Glbl Conv;I Frst Tr IV:SSI St Cnv Se 1290:Conv Secs;I Rydex:Wkn Dlr 2x Str;H AlphaCentric Inc Opps;I Eaton Vance EM Loc Inc;I Am Beacon:Gl Ev FMI;Y CICVX BXLYX BXEYX CXGCX FCVT TNFIX RYWBX IOFIX EEIIX AGEYX 596.6 9.2 11.5 102.3 54.2 22.9 5.1 1,181.1 525.2 148.9 2.2 –3.5 –1.4 1.4 1.8 1.7 –3.3 0.7 –2.2 0.6 14.7 14.6 14.3 14.3 14.1 14.0 14.0 13.7 13.6 13.2 17.1 2.0 9.9 15.0 17.3 17.1 4.5 14.9 8.1 12.4 4.9 N.A. N.A. N.A. N.A. N.A. –7.5 N.A. 1.4 5.5 Note: For funds with multiple share classes, only the largest is shown. N.A.: Not applicable; fund is too new or data not available Total Return (%) Annualized 1-year 3-year Assets ($ millions) Fund 5-year Fund 5-year For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 6, 2017 | R13 JOURNAL REPORT | INVESTING IN FUNDS & ETFS PORTFOLIO STRATEGY Investors see more mutual funds and ETFs that make decisions based on cognitive computing BY BAILEY MCCANN WOULD YOU LET a thinking robot pick stocks for you? Fund companies are increasingly turning to artificial intelligence to help inform their investment-management decisions. Using AI to manage investments is nothing new for institutional investors— some of the world’s most highprofile hedge funds including Renaissance Technologies and Bridgewater Associates rely on computers’ analysis to make day-to-day trading deci- sions. But AI-powered investing is making its way to individual investors, as well. In October, two new highprofile products using artificial intelligence were launched—AI Powered Equity ETF (AIEQ) and the Credit Suisse RavenPack Artificial Intelligence Sentiment (AIS) Index. AIEQ is the first ETF powered by International Business Machines Corp.’s Watson cognitive computing platform and is managed by San Franciscobased EquBot, an investment company with plans to launch several AI-powered ETFs in the future. Credit Suisse AG joined with New York-based RavenPack on its AI-powered index product. The investment bank says artificial intelligence will be used to make sectorweighting decisions in the index, which tracks the performance of U.S. large-cap stocks. The AIS index is the first AI product for Credit Suisse. A machine’s insight Both AIEQ and AIS work on the same principle—they rely on machines to analyze reams of analyst notes, articles, earn- Monitoring Money-Market Funds Performance figures for these consumer-oriented funds are estimated annualized yields, which include earnings from the funds’ investments and the effects of compounding. Funds open only to institutions, special-purpose and tax-exempt funds are excluded from these tables. Largest Funds Highest 12-Month Yield Compound Assets *Performance (%) 7-day ($millions) 3-mos 12-mos yield (%) Fund Name Fidelity Govt Cash Resrvs 132,943.4 Vanguard Prime MMF/Inv 84,061.0 Vanguard Federal MMF 82,157.6 Fidelity Government MMF 80,210.5 Schwab Cash Reserves 36,422.1 Schwab Govt MF/Sweep 25,053.0 Vanguard Treasury MMF 15,696.4 Edward Jones/Inv Class 15,609.1 Schwab US Treasury MF 15,569.3 Northern US Govt MMF 14,916.1 0.72 1.12 0.97 0.66 0.70 0.41 0.95 0.38 0.43 0.72 0.45 0.92 0.69 0.39 0.51 0.17 0.66 0.18 0.21 0.45 0.74 1.14 0.99 0.68 0.72 0.47 0.99 0.40 0.46 0.75 Highest Seven-Day Yield Fidelity Inv MM/Instit 12,235.7 Federated Prime Cash/Wealth 3,621.5 JPMorgan Liq Assets/Cap 76.4 BlackRock MMP/Instit 755.1 Invesco Prem Port/Inst 691.7 Dreyfus Prime MMF/Cl A 135.7 First Amer Ret Prime/Z 263.6 Schwab Value Adv MF/Ultra 5,121.8 Vanguard Prime MMF/Inv 84,061.0 BMO Prime MMF/Premier 198.2 Source: Money Fund Report (iMoneyNet.com) Fidelity Inv MM/Instit 12,235.7 JPMorgan Liq Assets/Cap 76.4 BlackRock MMP/Instit 755.1 Federated Prime Cash/Wealth 3,621.5 Invesco Prem Port/Inst 691.7 Vanguard Prime MMF/Inv 84,061.0 Dreyfus Prime MMF/Cl A 135.7 Schwab Value Adv MF/Ultra 5,121.8 First Amer Ret Prime/Z 263.6 Fidelity MMF 2,744.0 1.27 1.20 1.18 1.20 1.18 1.12 1.13 1.11 1.15 0.98 1.08 1.01 1.00 0.96 0.93 0.92 0.91 0.91 0.90 0.80 1.28 1.21 1.20 1.22 1.20 1.14 1.17 1.14 1.17 0.98 Lowest 12-Month Yield Compound Assets *Performance (%) 7-day ($millions) 3-mos 12-mos yield (%) Fund Name Fund Name Compound Assets *Performance (%) 7-day ($millions) 3-mos 12-mos yield (%) 1.27 1.20 1.20 1.18 1.18 1.13 1.15 1.11 1.12 1.05 1.08 0.96 1.01 1.00 0.93 0.91 0.90 0.91 0.92 0.79 1.28 1.22 1.21 1.20 1.20 1.17 1.17 1.14 1.14 1.05 Fund Name AZL Government MMF The US Treasury Trust/S Federated Tr/UST Ob/Cash Transamerica Govt/A Federated Govt Oblig/Cash Federated Govt Res/Cl P RBC US Govt/Investor BlackRock Liq:T-Fd Select Ready Assets USA Govt MF BlackRock Liq:Treas Tr S Compound Assets *Performance (%) 7-day ($millions) 3-mos 12-mos yield (%) 519.7 57.7 612.5 191.4 164.3 9,670.6 2,090.8 75.8 41.2 38.3 Average Yields (all retail taxable funds) * - Estimates 0.00 0.00 0.02 0.01 0.02 0.05 0.06 0.07 0.06 0.06 0.00 0.00 0.01 0.01 0.01 0.02 0.02 0.02 0.02 0.02 0.53% 0.32% 0.00 0.00 0.05 0.01 0.04 0.07 0.11 0.10 0.00 0.10 ings-call transcripts, regulatory filings and social-media posts on individual companies to gather insights about how they might perform. From there, the software determines the weighting of their respective indexes and trades. Art Amador, co-founder and chief operating officer at EquBot, says EquBot’s algorithms with the power of Watson will look for undervalued stocks to invest in that have the potential to outperform over time. A human will confirm the software’s choices. AIEQ represents an evolution in the investment process and landscape. Mr. Amador says his company chose to use Watson because the platform works well with investments. “All AI is not created equal,” he says. “We wanted to be able to offer transparency into what stocks were being chosen and why they were being chosen. The EquBot approach to using AI for investing is designed to provide that understanding.” Watson is already being used in financial services and banking for regulatory compliance and financial data analysis. AIEQ is the first ETF powered by Watson. Mutual-fund managers are also bringing artificial intelligence into the investment process. In October, AXA Investment Management’s Rosenberg Equities announced it was taking steps to integrate AI into its investment products. Fund managers at Rosenberg Equities, which already uses algorithms to run its funds, also plan to use natural-language-processing technology to analyze things like analyst notes, articles and other unstructured data that could have an impact on how stocks perform. Rosenberg says that natural-language processing will inform its smart beta and “core plus” strategies, which are designed to beat the performance of benchmark in- BEN HIDER/GETTY IMAGES The Artificial-Intelligent Investor IBM’s Watson software is being used for an ETF. dexes, largely through stock weightings. According to Michael Kollo, head of research and chief quantitative strategist for Rosenberg Equities at AXA IM, artificial intelligence will also be folded into investment modeling to help fund algorithms predict risk and extreme price movements in specific stocks. “We already have a significant computing infrastructure in place, so it makes sense for us to take this step and continue to improve our process,” Dr. Kollo says. The bond bots AI is also creeping into fixed-income funds. New Yorkbased Wavelength Capital Management’s Wavelength Interest Rate Neutral Fund (WAVLX) has been using a proprietary artificial-intelligence system to analyze information and make trading decisions about the bond market since 2013. WAVLX is designed to capture positive return from the bond market without being sensitive to interest rates. “When we started, there wasn’t a lot of data available,” says Mark Landis, co-founder at Wavelength. “We were training our software using articles, historical patterns, social-media posts— a lot of unstructured data,” Mr. Landis says. “As regulation increased reporting requirements for all asset classes, we’ve been able to add that information into our analytics platform. The insights are getting better each year.” WAVLX is up 4.56% year-todate through Oct. 27. The Bloomberg Barclays U.S. Aggregate Bond Index, the benchmark index for the bond market, was up 2.90% for the same period. People power Is it all over for humans? Not quite. With all of these products, even though computers are taking on the role of a hyper-dialed-in portfolio manager, there are still humans standing by, ready to flip the switch if the software gets carried away. Dr. Kollo, the head of research at Rosenberg Equities, cautions that investors should use that same kind of vigilance when choosing AI-powered funds. “The technology itself is only a tool, like a shovel or a hammer,” Dr. Kollo says. “Success still depends on the skill of the manager running the strategy,” he says. “Investors still need to understand the team, what the process is and what the goals are before they invest.” Ms. McCann is a writer in New York. She can be reached at email@example.com. Which is why we offer investment strategies covering all asset classes. Conservative equity approach for your portfolio JPMORGAN EQUITY INCOME FUND HLIEX USE EVERY ASSET CLASS TO YOUR ADVANTAGE Total return with flexible exposure for your portfolio GBOSX JPMORGAN GLOBAL BOND OPPORTUNITIES FUND Globally diversified core holding for your portfolio GAOSX JPMORGAN GLOBAL ALLOCATION FUND Smoother international ETF exposure for your portfolio JPIN JPMORGAN DIVERSIFIED RETURN INTERNATIONAL EQUITY ETF LET’S SOLVE IT. Investors should carefully consider the investment objectives and risks as well as charges and expenses of a fund. The prospectus contains this and other information about the fund and should be read carefully before investing. To obtain a prospectus for Mutual Funds: Contact JPMorgan Distribution Services, Inc. at 1-800-480-4111 or visit jpmorganfunds.com. Exchange Traded Funds: Call 1-844-4JPM-ETF or visit jpmorgan.com/ETF. International investing has a greater degree of risk and increased volatility due to political and economic instability of some overseas markets. Changes in currency exchange rates and different accounting and taxation policies outside the U.S. can affect returns. Investing involves risk, including possible loss of principal. J.P. Morgan ETFs are distributed by JPMorgan Distribution Services, Inc., which is an affiliate of JPMorgan Chase & Co. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to the funds. J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. This communication is issued by Distribution Services Inc. and J.P. Morgan Institutional Investments, Inc., both members of FINRA/SIPC.; and J.P. Morgan Investment Management Inc.© JPMorgan Chase & Co., September 2017 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. R14 | Monday, November 6, 2017 JOURNAL REPORT | INVESTING IN FUNDS & ETFS FAMILY FINANCE Estate Plans Don’t Have To Be Just for People Picking a caregiver, possibly creating a trust, and other issues to consider for animals LAST YEAR, Nick Braun created a will for his human family. Soon after, he also made formal provisions for his dog, Gus. For Mr. Braun, the founder of PetInsuranceQuotes.com, a marketplace for pet health insurance, it was a multistep process to make sure his parents—Gus’s designated caregivers—have the financial support and practical guidance they need to assume care of the yellow Labrador retriever. “You can’t just say, ‘Hey, Dad, can you take the dog if something happens?’ ” says Mr. Braun, of Columbus, Ohio. While that’s exactly what most pet owners do (if they do anything at all), others say that creating a formal estate plan for pets can help ensure they receive a continuing and high level of care should you die before they do. It also could keep them out of a shelter, which is where many pets end up after their owners die. Before setting anything to paper, here are a few things to consider: 1. NAME A CAREGIVER Steve Wittenberg, director of legacy planning at SEI Private Wealth Management in Oaks, Pa., says that when clients think about choosing a caregiver for pets, they should consider whether that person is willing, capable and responsible enough to oversee the pet for the long term. Special accommodations may be needed if a pet has a long lifespan or atypical needs. It’s also a good idea to name a contingent caregiver, he says. “Things change, and you always have to have a backup plan to minimize the risk that your wishes aren’t going to be met,” he says. 2. SET ASIDE MONEY Pet owners should make a list of all of their pet-care costs, taking into account the pet’s expected lifespan. Donna Childs, of Warwick, R.I., added up the annual expenses for veterinary care for her two cocker spaniels, Coco and Henry, as well as their medications, monthly grooming, food, toys and a contingency for unanticipated expenses. She multiplied the annual total by what she believed to be the average life expectancy for the dogs, arriving at a budget of $25,000 for lifetime care. The next step is determining how those funds should be set aside. Options include a trust, a bank account controlled by an executor (or by the guardian) or life insurance. While the beneficiary of a lifeinsurance policy can’t be a pet, it can be a trust that includes provisions for a pet’s care or a trust specifically cre- ated for the benefit of the pet, says Gina M. Spada, a lawyer in Oak Brook, Ill., who advises clients on these matters. 3. OUTLINE A CARE PLAN By writing down clear, detailed instructions on how to care for the pet, owners make it easier for future caregivers to abide by their wishes. Mr. Braun and his wife made a list that includes the food Gus eats; how often a day he is fed; the name and contact information for the doggy day care he attends three days a week; where he’s boarded when the family goes away; and the information for his pet-insurance policy and his veterinarian. (The value of pet insurance is hotly debated, so owners should do their homework before buying it.) 4. FORMALIZE AGREEMENTS Once the basic decisions about a pet’s care have been made, owners should formalize things to help ensure that their wishes are carried out. Some people create a pet trust for their animals. These legal arrangements, now available in all 50 states, set out very specific directions for the care and funding of a pet after its owner dies. Setting up a pet trust typically requires as- BOB STAAKE BY CHERYL WINOKUR MUNK sistance from a lawyer. Others provide for pets in their wills. An owner who goes this route should make sure someone can step in immediately to care for the pet, since executing a will takes time. A third option is to draft a pet-protection agreement, a legally enforceable contract between at least two people or entities—often the pet owner and the chosen guardian. This is a simpler, more-affordable alternative to a pet trust, experts say, because it doesn’t require an attorney to draft. Formalizing and funding a plan are important to ensure your wishes are upheld, says Everett Sussman, a lawyer in Cheshire, Conn., who has assisted numerous clients with estate planning for their pets. “The idea is to protect the ones you love, whether they are family, furry or feathered.” Pet Ownership in the U.S. More than two-thirds of U.S. households own a pet. By species, as a percentage of all U.S. households: No pet Own a pet 32% 68% Dog | 48% Cat | 38% Freshwater ﬁsh | 10% Bird | 6% Small animal | 5% Reptile | 4% Horse | 2% Saltwater ﬁsh | 2% Source: American Pet Products Association's 2017 National Pet Owners Survey A Dog's (and Cat's) Life Life-expectancy guidelines, according to Dr. Erin Wilson, medical director of the ASPCA Adoption Center CATS 14-18 years | In general, cats can live this long, provided that they receive regular veterinary care and are kept indoors. DOGS 12-15 years | On average, dogs live this long, although this can Ms. Winokur Munk is a writer in West Orange, N.J. She can be reached at firstname.lastname@example.org. vary with size and breed. Generally, the larger the dog, the shorter the life expectancy. THE WALL STREET JOURNAL. Source: ASPCA ADVERTISEMENT CHALLENGE THE INDEX. Challenge convention with smarter solutions. ChallengeTheIndex.com/etfs ©2017 OppenheimerFunds Distributor, Inc. Tracking Exchange-Traded Portfolios Performance figures are total returns for periods ended Oct. 31; for largest exchange-traded funds and other portfolios, ranked by asset size. Symbol Assets ($ billions) SPDR S&P 500 ETF Fidelity Nasdaq Comp Tracker Stock 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 SPY ONEQ IVV VTI EFA VOO VEA VWO QQQ AGG 252.26 209.10 133.41 86.92 81.80 77.97 65.70 64.97 57.23 51.32 57,565.4 47.0 3,342.7 2,378.4 22,207.4 315.2 7,382.9 9,045.8 24,937.9 3,151.6 0.09 0.21 0.05 0.04 0.32 0.04 0.07 0.14 0.20 0.06 01/22/93 09/25/03 05/15/00 05/24/01 08/14/01 09/07/10 07/20/07 03/04/05 03/10/99 09/22/03 2.3 3.6 2.3 2.2 1.5 2.3 1.8 2.5 4.5 0.1 16.8 25.8 16.9 16.4 21.8 16.9 23.2 26.7 29.4 3.2 iShares Russell 2000 ETF Nationwide Maximum Dvs US Cre Eqty Vanguard Telecom Serv ETF iShares Core S&P Mid-Cap ETF iShares Core MSCI Emerging Markets iShares Core MSCI EAFE iShares iBoxx $ Inv Grade Cor B ETF iShares Russell 1000 Growth ETF iShares Russell 1000 Value ETF iShares MSCI Emerging Markets Index Fund IWM MXDU VOX IJH IEMG IEFA LQD IWF IWD EEM 43.62 43.04 43.04 41.71 40.39 39.61 39.02 38.80 37.84 37.78 22,055.6 0.2 589.3 1,094.1 6,788.4 5,812.8 5,912.8 1,724.2 2,505.1 47,557.0 0.20 N.A. 0.10 0.09 0.17 0.09 0.15 0.20 0.20 0.72 05/22/00 09/18/17 09/23/04 05/22/00 10/18/12 10/18/12 07/22/02 05/22/00 05/22/00 04/07/03 0.8 0.3 –2.9 2.3 3.5 1.6 0.4 3.9 0.7 3.4 BND GLD VTV IJR VNQ VUG XLF VIG TIP BSV 36.35 34.73 34.36 34.24 33.96 30.32 29.21 25.77 23.63 23.41 1,678.9 3,899.4 1,004.6 2,936.4 4,422.7 592.5 39,535.7 519.8 1,142.4 1,223.8 0.05 0.40 0.06 0.09 0.12 0.06 0.14 0.08 0.20 0.07 VCSH VEU VO VB VYM DIA IVW HYG MDY IWB 21.76 21.64 20.75 20.11 19.99 19.84 19.46 19.38 19.30 19.28 1,272.7 3,243.4 304.3 346.5 555.2 1,771.2 654.9 7,197.3 943.7 1,208.9 XLK PFF VGK VCIT EWJ XLV DVY XLE IWR VGT 19.23 18.16 17.88 17.82 17.35 17.31 17.11 16.67 16.23 16.17 SDY BIV EZU IVE RSP USMV JNK XLI SCHF VBR 15.97 15.00 14.54 14.28 14.22 14.15 13.11 12.63 12.47 12.05 Vanguard Total Bond Market ETF SPDR Gold Shares Vanguard Value ETF iShares Core S&P Small-Cap ETF Vanguard REIT ETF Vanguard Growth ETF Financial Select Sector SPDR Vanguard Div Appreciation ETF iShares TIPS Bond ETF Vanguard Short-Term Bd Idx ETF Vanguard Short-Term Crp Bd Idx ETF Vanguard FTSE All-World ex-US ETF Vanguard Mid Cap ETF Vanguard Small Cap ETF Vanguard High Dividend Yield ETF SPDR Dow Jones Industrial Average iShares S&P 500 Growth Index Fund iShares iBoxx $ Hi Yld Corp Bd ETF SPDR S&P MidCap 400 ETF iShares Russell 1000 ETF Technology Select Sector SPDR iShares US Preferred Stock Vanguard FTSE Europe ETF Vanguard Intm-Term Corp Bd Idx ETF iShares MSCI Japan Index Fund Health Care Select Sector SPDR iShares Select Dividend ETF Energy Select Sector SPDR iShares Russell Mid Cap Value Index Fund Vanguard Info Tech Ind ETF SPDR S&P Dividend ETF Vanguard Intermediate Term Bond ETF iShares MSCI Eurozone iShares S&P 500 Value Index Fund Guggenheim S&P 500 Equal Wght iShares Edge MSCI Min Vol USA ETF SPDR Bbg Barclays High Yield Bd ETF Industrial Select Sector SPDR Schwab International Equity ETF Vanguard Small Cap Value ETF Volume (000s) Expense ratio Launch date 554.6 300.5 1,250.2 362.8 3,177.3 626.1 224.6 58.3 69.7 196.4 0.03 0.20 0.40 0.25 0.14 0.15 0.06 0.03 0.03 0.25 01/20/04 01/05/07 12/17/07 03/13/07 12/16/98 07/22/02 01/27/04 10/30/09 10/30/09 07/17/01 2.2 0.1 0.3 –0.1 2.1 –0.1 2.3 2.2 2.3 0.8 16.4 1.6 9.2 2.2 14.1 0.5 17.1 16.5 17.0 8.1 24.0 1.2 5.7 0.4 19.5 0.1 23.8 23.9 23.8 16.9 9.79 9.72 9.71 9.61 9.58 9.57 9.38 9.17 9.05 9.03 717.0 2,310.6 836.1 474.2 926.8 6,784.7 469.9 381.0 319.7 306.5 0.40 0.85 0.11 0.11 0.47 0.25 0.24 0.58 0.25 0.24 12/10/07 08/25/10 06/24/08 01/26/11 02/05/01 01/21/05 07/24/00 12/31/09 09/07/07 07/24/00 1.7 –4.7 2.1 1.9 –5.8 –1.1 0.1 2.6 0.1 1.6 27.3 –10.5 20.0 24.6 18.7 9.3 5.7 17.6 4.2 18.7 27.2 –6.2 23.8 24.4 22.8 –0.4 24.7 24.9 1.6 31.1 DXJ BKLN BNDX TLT IWP IWV GDX ACWI IXUS VOE 8.95 8.76 8.51 8.20 8.13 8.11 7.97 7.95 7.80 7.78 2,750.0 353.8 566.9 4,412.5 691.6 213.5 28,363.0 1,247.4 263.2 168.9 0.48 0.64 0.12 0.15 0.25 0.20 0.51 0.32 0.12 0.07 06/16/06 03/01/11 05/31/13 07/22/02 07/17/01 05/22/00 05/16/06 03/26/08 10/18/12 08/17/06 5.3 0.4 0.8 –0.1 2.8 2.2 –2.2 2.1 1.9 0.8 17.8 2.2 2.0 6.2 20.3 16.3 7.5 19.9 24.0 11.1 30.8 3.5 1.2 –2.6 26.0 23.8 –8.2 23.6 24.1 19.0 Consumer Staples Select Sector SPDR PIMCO Enhanced Sht Maturity Act ETF iShares Intrm Credit Bond ETF iShares Edge MSCI Min Vol EAFE ETF Utilities Select Sector SPDR iShares 3-7 Yr Treasury Bd ETF iShares 7-10 Yr Treasury Bd ETF Powershares S&P 500 Low Vol Port iShares S&P Mid Cap 400 Growth Index Fund Vanguard HealthCare Index ETF XLP MINT CIU EFAV XLU IEI IEF SPLV IJK VHT 7.74 7.69 7.68 7.67 7.61 7.55 7.47 7.13 7.07 7.07 10,789.7 44.2 652.6 495.1 9,515.4 1,166.6 1,175.5 349.4 56.1 240.1 0.14 0.35 0.20 0.20 0.14 0.15 0.15 0.25 0.25 0.10 12/16/98 11/16/09 01/05/07 10/18/11 12/16/98 01/05/07 07/22/02 05/05/11 07/24/00 01/26/04 –1.7 0.2 0.2 1.0 3.9 –0.2 –0.2 1.9 3.4 –0.8 4.7 1.7 3.6 18.6 16.1 1.6 2.6 14.1 15.6 20.5 3.3 1.9 1.9 16.2 15.2 –0.6 –1.8 17.6 25.2 24.2 34.9 4.7 28.0 2.5 17.4 22.3 16.3 2.1 20.9 38.0 Xtrackers MSCI EAFE Hdg iShares MSCI Brazil Capped Vanguard Small Cap Growth ETF Vanguard Financials ETF iShares Short Treasury Bond ETF iShares Floating Rate Bond ETF iShares Core High Dividend Schwab US Dividend Equity ETF Schwab US Small-Cap ETF iShares MSCI EAFE Value ETF DBEF EWZ VBK VFH SHV FLOT HDV SCHD SCHA EFV 7.04 6.80 6.75 6.64 6.55 6.54 6.47 6.34 6.24 5.97 1,136.0 24,421.2 80.4 317.1 404.7 620.1 51.1 395.5 58.8 236.1 0.35 0.63 0.07 0.10 0.15 0.20 0.10 0.07 0.08 0.40 06/09/11 07/10/00 01/26/04 01/26/04 01/05/07 06/14/11 03/29/11 10/19/11 10/30/09 08/01/05 3.0 –3.8 2.4 2.6 0.1 0.2 –0.3 3.5 0.9 0.8 15.5 20.0 18.0 14.4 0.5 1.6 7.0 13.8 11.6 18.4 22.2 7.3 26.5 35.6 0.6 1.8 11.8 20.1 25.1 23.0 17.4 0.5 31.1 19.4 20.0 18.6 8.4 27.5 24.0 22.3 iShares S&P Mid Cap 400 Value Index Fund iShares US Treasury Bond iShares Silver Trust PowerShares Preferred Port iShares MSCI India ETF Vanguard Extended Market Index ETF iShares S&P Small Cap 600 Value Index Fund First Trust Dow Jones Internet Idx PowerShares FTSE RAFI US 1000 Portfolio Vanguard Global ex-US RE ETF IJJ GOVT SLV PGX INDA VXF IJS FDN PRF VNQI 5.69 5.44 5.37 5.33 5.31 5.29 5.13 5.11 5.08 5.07 50.1 2,409.4 10,654.4 1,049.7 2,587.2 116.7 50.2 268.4 131.6 326.9 0.25 0.15 0.50 0.50 0.71 0.08 0.25 0.54 0.39 0.15 07/24/00 02/14/12 04/28/06 01/28/08 02/02/12 12/27/01 07/24/00 06/19/06 12/19/05 11/01/10 1.0 –0.1 –0.3 –0.1 7.1 1.4 0.6 5.0 1.4 0.5 7.5 2.0 3.1 10.2 31.1 14.3 7.8 34.7 10.5 20.5 20.4 –0.8 –5.8 5.9 21.1 25.5 26.0 32.1 20.8 16.1 Fund Symbol Assets ($ billions) 23.5 30.8 23.6 23.9 23.4 23.6 24.4 21.0 31.4 0.9 iShares Core S&P Tot US Stk Mkt ETF iShares 1-3 Yr Credit Bd ETF iShares JPMorgan USD Emg Mkts B ETF iShares MBS ETF Consumer Discretionary Sel Sec SPDR iShares 1-3 Yr Treasury Bd ETF Vanguard Large Cap ETF Schwab US Broad Market ETF Schwab US Large-Cap ETF iShares Russell Mid Cap Value Index Fund ITOT CSJ EMB MBB XLY SHY VV SCHB SCHX IWS 12.00 11.98 11.91 11.67 11.58 11.38 10.95 10.78 10.55 10.54 11.9 N.A. –8.1 11.8 31.4 22.8 6.1 25.2 8.6 31.5 27.8 N.A. 1.8 23.4 25.6 24.3 3.5 29.5 17.6 25.6 iShares MSCI EAFE Small Cap ETF Alps Alerian MLP ETF Vanguard Total World Stock ETF Vanguard Total Intl Stock Index ETF iShares Nasdaq Biotechnology Index Fund iShares Gold Trust iShares Russell 2000 Value ETF WisdomTree Europe Hedged Equity iShares National Muni Bond iShares Russell 2000 Growth ETF SCZ AMLP VT VXUS IBB IAU IWN HEDJ MUB IWO 04/03/07 0.1 11/18/04 –1.0 01/26/04 1.8 05/22/00 0.9 09/23/04 –1.0 01/26/04 2.9 12/16/98 2.9 04/21/06 2.1 12/04/03 0.2 04/03/07 –0.03 3.3 9.2 11.5 9.9 2.5 23.8 15.7 15.4 1.9 1.5 0.8 –0.5 21.2 27.8 5.4 26.6 36.9 20.1 –0.2 0.5 WisdomTree Japan Hedged Equity PowerShares Senior Loan Vanguard Total Internatl Bd Idx ETF iShares 20+ Yr Treasury Bd ETF iShares Russell Mid Cap Growth Index Fund iShares Russell 3000 Index Fund VanEck Vectors Gold Miners ETF iShares MSCI ACWI ETF iShares Core MSCI Total Intl Stock Vanguard Mid Cap Value Index ETF 0.07 0.11 0.06 0.06 0.08 0.17 0.18 0.49 0.25 0.15 11/19/09 03/02/07 01/26/04 01/26/04 11/10/06 01/14/98 05/22/00 04/04/07 04/28/95 05/15/00 0.1 2.0 1.4 1.6 1.7 4.4 3.3 0.2 2.2 2.3 2.7 23.9 14.2 12.3 11.4 20.5 23.0 6.3 11.6 16.7 1.8 23.7 20.3 24.3 19.5 31.9 26.3 7.8 23.1 23.5 10,094.0 2,065.9 2,443.6 772.8 7,760.0 6,499.2 424.5 9,509.0 465.2 716.5 0.14 0.47 0.10 0.07 0.48 0.14 0.39 0.14 0.20 0.10 12/16/98 03/26/07 03/04/05 11/19/09 03/12/96 12/16/98 11/03/03 12/16/98 07/17/01 01/26/04 6.5 –0.5 0.4 0.4 4.6 –0.8 1.2 –0.8 1.7 7.4 31.8 7.8 25.0 5.4 19.2 19.1 9.7 –7.4 13.5 35.6 337.3 553.0 5,278.7 465.1 509.7 780.6 5,588.4 8,632.0 148.1 174.6 0.35 0.07 0.48 0.18 0.40 0.15 0.40 0.14 0.08 0.07 11/08/05 04/03/07 07/25/00 05/22/00 04/24/03 10/18/11 11/28/07 12/16/98 10/30/09 01/26/04 1.3 0.1 0.9 1.1 1.1 1.9 0.3 0.8 1.8 0.9 10.1 3.9 27.9 9.6 12.9 15.1 6.6 16.6 22.3 7.9 *Expense charge is a maximum of 8 cents a share †Assets are estimated N.A.= Not applicable, fund is too new. Source: Thomson Reuters Expense ratio Launch date Fund Performance (%) October YTD 1-year Volume (000s) Performance (%) October YTD 1-year 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. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 6, 2017 | R15 JOURNAL REPORT | INVESTING IN FUNDS & ETFS FIXED-INCOME INVESTING Beware Bond Funds That Have Gone Out on a Limb Some of the workhorse funds for bond investors could be 2% courting too much credit risk THE PAST NINE YEARS have been challenging for bond funds trying to deliver income to investors. The Federal Reserve collapsed rates during the financial crisis in an effort to stimulate the economy, and has only recently begun elevating them, although with some ambivalence. Consequently, the Bloomberg Barclays US Aggregate Index, or AGG, the main U.S.-bond index, is yielding less than 2.5%. Funds that track the index have delivered around 2% annually in total return to investors for the five-year period through Oct. 31. These are painful numbers for investors trying to maintain the purchasing power of their capital. And one of the risks investors face is that managers of intermediate-term bond funds—those whose benchmark is the AGG and which serve as the bond workhorses of most portfolios—may be tempted to add bonds of dodgier credit quality to their funds to deliver a bigger yield. This is especially true for actively managed funds whose expense ratios may be higher than 0.50%, meaning they consume 20% or more of the yield the index has to offer. We analyzed Morningstar’s intermediate-term bond category and found some funds that are going out on a limb. Stretching for yield Around 14% of the AGG’s bonds are rated in the BBB range (BBB+, BBB or BBB-), which is the lowest rating of bonds still considered “investment grade,” or deemed likely to make interest and principal payments. Anything that ranks below the BBB range is consid- ered junk or speculative, meaning one of three ratings firms—Moody’s, S&P or Fitch—deems interest and/or principal payments at risk. The AGG holds no junk bonds. (The Moody’s ratings system varies from the other two ratings firms. Its lowest investmentgrade rating is Baa3, and its first level of junk is Ba1. We will use the S&P and Fitch system, which is how most fund websites convey information.) It turns out that 44 of 301 intermediate-term funds in Morningstar’s database have 28% or more of their portfolios—double the 14% of the index—in BBB-rated bonds. Moreover, 75 of the 301 funds have at least 10% of their portfolios in bonds rated BB or below—i.e., in junk bonds. Finally, 174 of 301 funds have more than 20% of their assets in bonds rated BBB or below—a combination of the lowest investment-grade rating and junk. While many funds that loaded up on lower-grade corporate bonds have done well for the decade, the future may not be quite as rosy. For example, the $4.4 billion Delaware Diversified Income Fund (DPDFX) has 25% of its portfolio in junk bonds and more than half its portfolio in bonds rated BBB or lower. The fund has produced a 5.23% annualized return for the decade through Sept. 30, but it dropped 5% in 2008. That performance landed it in the middle of Morningstar’s intermediate-term bond category during a year when corporate bonds performed badly. John Hancock Bond Fund (JHNBX), which has nearly 20% of its portfolio in junk and more than half of its portfolio in bonds rated BBB or lower, fared less well during the financial crisis despite its JAMES STEINBERG BY JOHN COUMARIANOS The annual total return for funds that track the main U.S.-bond index for the five-year period through Oct. 31 How Junky? Some mutual funds assume more credit risk than their index. Exposure in percent to bonds with different credit risk. CREDIT QUALITY BBB OR BELOW BBB BB B BELOW B JUNK RATED* 29.65% 14.05% 10.57% 1.23% 25.85% John Hancock Bond (A) 31.56 12.09 5.68 1.74 19.51 51.07 Federated Total Return Bond (inst.) 26.33 6.24 11.94 0.02 18.20 44.53 Bloomberg Barclays US Aggregate 14.03 0.00 0.00 0.00 0.00 14.03 Delaware Diversiﬁed Income (A) *Junk ratings are those below BBB Source: Morningstar current five-star Morningstar rating and top 5% category showing for the past decade. The $11 billion fund lost nearly 12% in 2008, placing it in the bottom quartile of its peer group that year. Finally, the $8 billion Federated Total Return Fund (TLRAX) has 18% of its portfolio in junk bonds and 45% in bonds rated BBB or lower. It held up well in 2008, eking out a 0.12% gain and landing in the top half of the intermediate-bond category. The fund has had a middling showing over the longer term, with a 4.29% annualized return for the 10 years ended in Septem- ber, which places it in the bottom half of the category. Tight spreads Owning a slug of BBB-rated or junk bonds doesn’t doom a fund to disaster. Good bond selection can avoid the bankruptcies. But even corporate bonds that don’t fail exhibit volatility as yield spreads—the difference in yield between a corporate bond and a U.S. Treasury bond—widen and narrow. That happens when investors’ attitudes change from seeking risk to avoiding risk, or when investors change their minds about how much yield they require as compen- 55.50% THE WALL STREET JOURNAL. sation for assuming risk. “There’s no doubt valuations and spreads are tight,” says Donald Ellenberger, co-manager of the Federated fund. “We don’t think spreads will tighten here, but we don’t see a catalyst for them widening because of no recession and stronger demand in the economy. Spreads have been stable for long periods before, and this could be one of those periods.” Spreads are as narrow now as they have been in a decade, meaning corporate-bond and junk-bond investors are accepting the least amount of extra yield over Treasurys to own those bonds. For that reason, bond funds going out on a credit limb should look great now. But because bond yields and prices move in opposite directions, if investors decide they require more yield, existing corporate prices will drop, sending those corporate-heavy funds down. Howard Greene, lead portfolio manager of the Hancock fund, says that his fund varies the amount of credit risk it takes, and, that right now it is in about the middle of its historic range. Mr. Greene thinks investors are “better served” at this point in the cycle with some credit risk rather than the interest rate risk that U.S. Treasurys have. Roger A. Early, co-head of fixed income at the Delaware fund’s parent, says his fund is overweight in banking, utilities and health care. “In a sense you’re paying full price for credit these days, but credit metrics have improved markedly since 2015, and there remains an unabated global appetite for credit and extra yield.” Mr. Coumarianos, a former Morningstar analyst, is a writer in Laguna Niguel, Calif. He can be reached at email@example.com. FUND RESULTS WSJ .COM Lipper’s A-to-Z monthly fund listings are free at WSJ.com/ FundsETFs. MARKET CAP IS SO 3 MARTINI LUNCH. Market cap weighting has been around since the S&P 500 was created in 1957. But who says it’s the best way to weight the index? Market cap can overreact to sentiment and fear. Revenue doesn’t distort reality. In fact, it can be a truer indicator of a company’s long-term success. Discover Oppenheimer Revenue Weighted ETFs. That’s the right way to invest in this big, bold, beautiful world. RWL RWK RWJ RDIV CHALLENGE YESTERDAY. CHALLENGE OLD THINKING. CHALLENGE THE INDEX. ChallengeTheIndex.com/etfs The alternate weighting approach employed by the Funds (i.e., using revenues as a weighting measure), while designed to enhance potential returns, may not produce the desired results. Because the Funds are rebalanced quarterly, the Funds may experience portfolio turnover in excess of 100%. The greater the portfolio turnover, the greater the transaction costs to the Funds, which could have an adverse effect on a Fund’s performance. There is no guarantee that the issuers of stocks will declare dividends in the future, or that dividends will remain at their current levels or increase over time. Carefully consider fund investment objectives, risks, charges and expenses. Visit oppenheimerfunds.com or call your advisor for a prospectus with this and other fund information. Read it carefully before investing. ©2017 OppenheimerFunds Distributor, Inc. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com R16 | Monday, November 6, 2017 THE WALL STREET JOURNAL. NY JOURNAL REPORT | INVESTING IN FUNDS & ETFS NEED TO KNOW If You’re Trading Options On ETFs, Be Careful BY SIMON CONSTABLE MORE INDIVIDUAL investors are trading options on exchange-traded funds. The trend worries some financial experts, who say inexperienced traders may not fully understand the risks. Interest in ETF options comes amid growth in the number of ETFs and the amount of money invested in them. According to Options Clearing Corp., a clearinghouse that guarantees trades, ETF options accounted for 41% of the total volume of all options traded in 2016, up from 35% in 2014. “Certainly ETFs have grown in popularity along with trading options on them,” says Greg Stevens, vice president of brokerage product development for options at Fidelity Investments, adding that options trading is migrating toward ETFs and away from individual stocks. Josh Jalinski, chief executive officer of a financial-advisory firm in New Jersey and the host of a syndicated radio program on finance, says he meets with many potential clients who have a desire to invest in ETF options. “They go to two-day seminars and think they can trade options,” says Mr. Jalinski, adding that he has seen people “lose a lot of money buying options.” An option is a contract that gives an investor the right to buy or sell a security such as an ETF at a predetermined price (the strike price) for a set length of time. The seller DAN PAGE It can be an enticing prospect, but keep these guidelines in mind before taking the risk (or writer) of the option must cover any financial gains due the buyer when the option expires, or deliver the security at the predetermined price. The owner of a call option (which gives an investor the right to buy an asset) profits if the ETF rises above the strike price. The writer profits if the ETF stays below that price. (It works in reverse for put options, which give the owner the right to sell a security at a predetermined price.) Here are a few things investors should keep in mind before trading options on ETFs: 1. An additional two billion people will require housing by 2030. Over that same time period, the global middle class will increase to nearly five billion people. Add to that the fact that interest rates are set to rise and it’s no wonder businesses and individuals turn to CME Group to help manage their risks and navigate fluctuating borrowing costs. That, in turn, enables lenders and property developers to keep pace with population growth. This is how the housing industry can find solutions that make shelter more accessible around the world. This is how the world advances. Learn more at cmegroup.com/finance. NOT-SO-LOW RISK Even options-trading strategies considered to be low risk can hurt investors new to the world of options trading. Selling options on ETFs you already own (a covered option), is generally seen as less risky than selling options on ETFs you don’t own (a naked option). That’s because writers of covered options can deliver the ETF shares they own as payment, rather than having to settle the gains in cash. “People think the worst that can happen is that I have my shares taken away,” says Bob Stammers, director of investor engagement at the CFA Institute, an association of investment professionals, in New York. “But there is an opportunity cost” that needs to be considered, as well. In other words, holding on to the ETF may have been more profitable than the money earned selling options. “Talk to people who wrote call options on Netflix in 2009,” says Mr. Stammers. In that case, gains from Netflix far outweighed the value of options sold. 2. NAKED OPTIONS Other strategies can sink your finances even faster. “There are people out there writing naked options,” says Mr. Stammers. “Those are the most risky positions to be in.” The most an investor can earn from writing naked call options is the premium collected from selling them. The potential loss, however, is theoretically unlimited, depending on how high the ETF’s price goes. Say an investor sells a call option with a strike price at $15 and the price of the ETF rises to $45. That $30 difference is likely far greater than the premium the option writer received, translating into big losses for investors. To be sure, there are ways to hedge the risk of writing naked options, but some inexperienced investors may not fully understand them. 3. BUYING CALLS Sophisticated investors have a warning for individuals who buy call options: The odds are against you. “With stocks, you buy for the long term and it can be for years,” says Joanne Hill, chief adviser for research and strategy at CBOE Vest. “But with options, you have to be correct on your view in both time frame and price direction.” Options contracts last a relatively short time, typically a lot less than a year, sometimes just days in duration. “One of the complexities is that options expire,” says Ms. Hill, “and if the stock price doesn’t move [within that time frame], you lose money.” Doug Kramer, co-head of quantitative and multiasset class investments at assetmanagement firm Neuberger Berman, says buying a call option is similar to buying a lottery ticket. “The probability that you win is very small,” he says. “The traders who sell you options know these probabilities.” 4. AVOID NICHE ETFS Neuberger Berman runs a fund that is dedicated to an options-trading strategy on the S&P 500 and the Russell 2000 index of smaller stocks. That fund—U.S. Equity Index PutWrite Strategy Fund (NUPIX)—has produced returns over time that are similar to the S&P 500 but with “materially lower volatility,” says Mr. Kramer. But even with a staff of sophisticated market professionals, Neuberger Berman wouldn’t consider an options strategy based on niche ETFs, he says. The problem with investing in a small sector of the market is that there can be much greater price volatility. And that greater volatility is magnified in the options market because options prices are far more volatile than stocks. “The narrower the ETF— like a country or sector ETF— the more idiosyncratic the risks are relative to writing an S&P 500 option,” Mr. Kramer says. The CFA Institute’s Mr. Stammers says many individual investors who want to invest in options might be “better served by the diversification, strategic direction and risk management that professionally managed option-based funds can provide.” Mr. Constable is a writer in Edinburgh, Scotland. He can be reached at firstname.lastname@example.org. IN TRANSLATION ETF SPREADS 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. Investors don’t always pay attention to bid-ask spreads. And those who do may find that comparing spreads between exchangetraded funds can get tricky. In essence, the bid-ask spread is the difference between the highest price that a market maker is willing to pay for an asset and the lowest to sell it. The wider the spread, the more it costs investors for a round-trip trade. How do you measure bidask spreads? It is common to look at spreads in terms of cents per share, but experts say that isn’t always the best way. “It is fine to say something is 1 cent if you are comparing two stock prices that are the same,” says Will Rhind, chief executive officer of ETF company GraniteShares. If the prices aren’t the same, then cents per share is misleading. A good example of lack of comparability is when one ETF is $100 a share and the other is $5. If you are buying the same number of shares, then the funds’ cents-pershare spreads are comparable in absolute costs. But that isn’t the way people invest in funds. Typically, they buy funds in terms of value. For instance, they buy however many shares total $5,000, or $10,000. Using the example from above, if the spread for both the $100 ETF and the $5 one is 2 cents, then clearly they aren’t really the same in terms of the round-trip cost. The cost to the investor of trading the $5 ETF is 20 times that of the $100 ETF. That’s why websites such as Morningstar.com use percentages of the value of the share price to indicate the spread. “Mathematically the only way to be honest about the spread is to use percentages,” says Mr. Rhind. —Simon Constable For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. S&PDJI can Monday, November 6, 2017 | R17 take it to the power of 500 S&P DJI set the standard when it invented the S&P 500® — a quintessential catalyst that fuels U.S. equity active and passive strategies alike. The world’s first choice for index funds, ETFs and sophisticated derivatives, the S&P 500 has inspired innovations from VIX® to the newest factor-based and ESG strategies across asset classes. Whatever your investment focus, S&P DJI raises every opportunity to the power of 500. indexology® where investing begins spdji.com/indexology © S&P Dow Jones Indices LLC, a division of S&P Global 2017. All rights reserved. S&P® and Indexology® are registered trademarks of Standard & Poor’s Financial Services LLC. Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. It is not possible to invest directly in an index. S&P Dow Jones Indices receives compensation for licensing its indices to third parties. S&P Dow Jones Indices LLC does not make investment recommendations and does not endorse, sponsor, promote or sell any investment product or fund. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. R18 | Monday, November 6, 2017 JOURNAL REPORT | INVESTING IN FUNDS & ETFS NEWS CHALLENGE: FUNDS AND INVESTING Test Your Smarts on…Foreign Currencies began to fall, throwing commodity exporters’ economies for a loop and pushing Brazil, Canada and Russia, which was also hit by international sanctions over Russia’s annexation of Crimea, into recession. BY ANNEKEN TAPPE 1. How much has the U.S. dollar index fallen so far in 2017? A. It hasn’t. It has gone up. B. 1% C. 7% D. 4% ANSWER: C. The ICE U.S. Dollar Index, which is a way to measure the dollar’s performance against its main rivals, has dropped more than 7% so far this year. The index measures the dollar against the euro, British pound, Canadian dollar, Swiss franc, Japanese yen and Swedish krona. The euro is most important in the index because it carries more weight than the other individual currencies, reflecting that it is the dollar’s most important counterpart. 2. Fill in the blank: Since the summer, dollar traders have particularly been watching ____________ to determine the currency’s path. A. The Federal Reserve’s monetary policy B. Who will be the Fed’s next chairman C. Economic data D. Policy developments in Washington E. All of the above ANSWER: E. Foreign-exchange traders keep 6. True or false: President Trump said earlier this year that he preferred a weak dollar. ANSWER: True. President Trump said that a strong dollar could lead to “lots of bad things” happening, in an interview with Politico in August. His comment was part of his response to a question about Federal Reserve Chairwoman Janet Yellen’s low-interest-rate policy, which he said he favored. ISTOCKPHOTO/GETTY IMAGES FINANCIAL ANALYSTS have spent much of this year interpreting political events and their effects on economies and markets. But sometimes it’s all about the currencies. Currencies are one of the most sensitive barometers of a country’s general political situation. They are quick to reflect how traders feel about an election outcome or how a policy decision could affect an economy. For example, following the U.S. presidential election a year ago, the U.S. dollar rose, buoyed by hopes of policy changes and business-friendly incentives, while the Mexican peso dropped, reflecting how traders viewed the potential negative impact President Donald Trump would have on Mexican trade. Currencies are also at the top of the trading hierarchy of the world, dwarfing other asset classes such as stocks and bonds in terms of volume. In 2016, foreignexchange trades amounted to $5.1 trillion a day. How much do you know about currencies? Let’s find out: What’s the nickname for the U.S. dollar/British pound ‘pair’ trade? See Question No. 3. an eye on a lot of information daily, as currencies are sensitive to both economic and political news. The dollar started 2017 on a bullish note, as currency traders were excited for new policies being discussed in Washington, such as tax and infrastructure overhaul. But with their hopes initially set so high, many traders wound up disappointed as Washington found itself in a policy gridlock for much of this year. Since the summer, President Trump’s tax-overhaul plan has been reinvigorated, however, helping the dollar gain traction. Moreover, the Federal Reserve is expected to raise interest rates again in December; and economic data has shown some resilience following the hurricanes in August and September, which could give the dollar another push. 3. Individual currencies trade in pairs. What is the U.S. dollar/British pound pair commonly referred to? A. Cable C. Union Jack B. Trans-Atlantic D. Empire ANSWER: A. Outside of indexes, currencies always trade in pairs. If you sell one, you buy the other and vice versa. The name “cable” for the dollar-pound pair originated in the mid-19th century because the trades would be transmitted via trans-Atlantic cable. 4. Which currency has shown the most sensitivity to the renegotiations of the North American Free Trade Agreement that began this year? A. U.S. dollar C. Canadian dollar B. Mexican peso D. Brazilian real ANSWER: B. Analysts agree that out of the three Nafta partners—Mexico, Canada and the U.S.—Mexico has the most to lose, as much of its economy is reliant on its northern partners. Trade between Mexico and the U.S. totaled $525 billion in 2016, according to data from the Office of the U.S. Trade Representative. Since the renegotiations began on Aug. 16, the peso has dropped 8% against the dollar. 5. Which currency has performed the worst since 2014 when oil prices began to fall? A. Canadian dollar B. Australian dollar C. Russian ruble D. Brazilian real E. South African rand ANSWER: C. Russia has been the worst-performing “commodity currency” during that period. In second place is Brazil, followed by South Africa. Commodity currencies are so called because of their home countries’ reliance on commodity exports and thus global price dynamics. In 2014, oil prices 7. Looking at 2017, the euro has risen 10% against its U.S. rival. But it was after one event in particular that the eurozone currency took off. What was that event? A. President Trump’s inauguration B. French elections C. Rising tensions with North Korea D. German elections ANSWER: B. The euro rally that has persisted for much of this year picked up steam after Emmanuel Macron was elected president, defeating far-right candidate Marine Le Pen in the French election in early May. After markets were surprised by the outcomes of Brexit and the U.S. presidential election, the French vote was seen as somewhat of a barometer for the European political climate and allowed the euro-bullishness to take hold. 8. True or false: Bitcoin is generally considered a part of foreign-exchange trading. ANSWER: False. Cryptocurrencies aren’t considered part of regular foreign-exchange trading. Even though their name suggests they are just another form of tender, currencies such as the dollar, the Chinese yuan or the Indian rupee are backed by their respective central banks, giving them implicit value and support. Cryptocurrencies such as bitcoin or ether are more of a digital asset not linked to any central bank. This has been one of the central points of criticism of bitcoin and the like. Ms. Tappe is a markets reporter for MarketWatch in New York. Email her at email@example.com. A new way to plan for tomorrow, today. Managed portfolios from TD Ameritrade Investment Management. TD Ameritrade offers a variety of portfolios that can help you meet your goals now and as life changes. While there are plenty of things you can’t plan for, staying invested won’t be one of them. 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