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The Wall Street Journal November 06 2017

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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%
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10-YR. TREASURY À 23/32 , yield 2.343%
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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
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News
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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
wsjcontact@wsj.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.
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THE WALL STREET JOURNAL.
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.
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A4 | Monday, November 6, 2017
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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.
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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.
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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
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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.”
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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
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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.
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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%.
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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
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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
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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
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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.
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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.
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U.S. Forecasts
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Orlando
Philadelphia
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Sacramento
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Hi
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28 pc
65 pc
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63 pc
36 r
35 r
34 c
37 pc
42 c
33 c
47 pc
40 c
31 pc
22 c
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43 21 c
84 65 pc
56 45 c
81 60 pc
50 35 c
48 31 pc
48 38 c
63 41 s
49 36 c
46 25 pc
64 49 s
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34 s
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91 66 pc
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67 35 s
48 42 pc
47 35 s
74 63 c
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San Juan
Seoul
Shanghai
Singapore
Sydney
Taipei
Tokyo
Toronto
Vancouver
Warsaw
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Solve this puzzle online and discuss it at WSJ.com/Puzzles.
s
s...sunny; pc... partly cloudy; c...cloudy; sh...showers;
t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice
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35 21 s
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78 62 pc 77 62 c
Austin
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61 32 r
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85 61 pc 74 45 c
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52 39 c
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IN THE DUMPS | By Zhouqin Burnikel
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“Home Alone”
reject
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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.
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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 wsj.ltrs@wsj.com. Please
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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
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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.
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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.
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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
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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
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THE WALL STREET JOURNAL.
B6 | Monday, November 6, 2017
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THE WALL STREET JOURNAL.
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: heard@wsj.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 reports@wsj.com.
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.
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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 askencore@wsj.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 reports@wsj.com.
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THE WALL STREET JOURNAL.
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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.
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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 reports@wsj.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
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THE WALL STREET JOURNAL.
Monday, November 6, 2017 | R7
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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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
sascarelli@marketwatch.com.
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
william.power@wsj.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 reports@wsj.com.
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
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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 reports@wsj.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
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CEO and
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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-
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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
reports@wsj.com.
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.
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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 reports@wsj.com.
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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
reports@wsj.com.
vary with size and breed. Generally, the larger the dog, the shorter
the life expectancy.
THE WALL STREET JOURNAL.
Source: ASPCA
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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
reports@wsj.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.
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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.
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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 reports@wsj.com.
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.
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Monday, November 6, 2017 | R17
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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 atappe@marketwatch.com.
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