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 ADVERTISEMENT 50,000 EARNINGS ESTIMATES. 1 TOOL TO HELP MAKE SENSE OF THEM. Learn more about the TD Ameritrade Earnings Tool on page R8. Last week: DJIA 23557.99 À 199.75 0.9% NASDAQ 6889.16 À 1.6% STOXX 600 386.63 À 0.7% 10-YR. TREASURY À 3/32 , yield 2.342% OIL $58.95 À $2.24 Trump, Congress Face Crowded Agenda, Controversy on Return What’s News ERIC THAYER/REUTERS Business & Finance he number of people visiting U.S. stores on Thanksgiving and Black Friday fell 4% from last year, while online purchases increased 18%. A1 Powell is likely to sail through confirmation as Fed chairman with less partisan wrangling than previous nominees. A2 SoftBank is expected to proceed with an offer to buy billions of dollars worth of shares from Uber’s stakeholders. B1 Ford CEO Hackett wants to focus on electric and driverless cars, but the auto maker’s efforts are being hurt by safety-recall costs. B3 World-Wide Trump reiterated his stance that the election of Democrat Doug Jones to the Senate would mark a serious blow to the Republican agenda. A4 Lawmakers are working to accomplish a dizzying list of tasks before the year ends, including a tax overhaul and a new federal spending agreement. A4 Pakistan’s law minister resigned in a deal with Islamists to end a three-week demonstration that has shaken the government. A5 Rep. Conyers said he would leave his committee leadership post while an ethics panel investigates allegations of sexual harassment against him. A4 Venezuela’s Maduro named an active general to lead the state oil company, further empowering the country’s military. A9 The damage from the Northern California wildfires is revealing the state’s complex housing crisis. A3 A looming U.S. sanctions trial that could implicate prominent Turkish officials is inflaming tensions between Washington and Ankara. A7 Journal Report An entrepreneur with autism finds his own path. Small Business, R1-8 CONTENTS Business News...... B3 Crossword.............. A14 Heard on Street.. B11 Journal Report.. R1-8 Keywords................... B1 Life & Arts....... A11-13 FAST TRACK: President Donald Trump, departing Florida on Sunday, top, and Congress are dealing with issues ranging from the tax overhaul to charges of sexual harassment on Capitol Hill. House Minority Leader Nancy Pelosi, bottom center, declined to say whether Rep. John Conyers, left, should resign. Senate Majority Leader Mitch McConnell, right, could bring the tax proposal to a vote this week. A4 Black Friday Crowds Thin As more holiday sales shift online, retailers use new tactics, play to their strengths > stores on Thanksgiving and Black Friday while online purchases continued to surge. On Thanksgiving evening, Alex and Yanira Garcia, who say they traditionally buy nearly everything on Amazon, chose to stand in line at a busy WalMart store in Westbury, N.Y., to purchase pajamas, toys, a TV and other gifts that filled two shopping carts. “I heard that lots of stores are giving you deals so you come in the store,” said Mr. Garcia, a 39-year-old cook at an elementary school. BY SARAH NASSAUER AND LAURA STEVENS Wal-Mart Stores Inc. and Amazon.com Inc. battled to capture spending over the holiday weekend, as the shifts that have upended the retail industry this year were on display: fewer people visited traditional The number of people visiting U.S. stores on Thanksgiving and Black Friday fell 4% from last year, according to RetailNext Inc., which analyzes in-store videos to count shoppers. Meanwhile, online sales increased 18% over that period, said software company Adobe Systems Inc., a shift that is forcing traditional retailers to adopt new tactics. Best Buy Co. chose to hold back some deals from its website. On Saturday morning, the retailer started selling only in stores a retro Nintendo game Loan Growth Hits a Rut BY CHRISTINA REXRODE ness lending, an important source of revenues for banks in recent years, plumbed its lowest level since the first quarter of 2011. While loan balances are still rising, the slowing rate of growth has defied the expectations of bankers. Many have spent the year looking for growth-reviving catalysts that never came and remain puzzled by the slowdown. Even more surprising is that falling rates of loan growth are occurring as many signals point to a more buoyant U.S. economy. Unemployment continues to decline, gross domestic product growth came in at 3% in the third quarter and business in- Loan growth at banks is slowing, casting a cloud over what was supposed to have been a banner year for financial institutions following last November’s elections. The rate of 12-month loan growth at U.S. banks in the third quarter hit its lowest level since the end of 2013, according to data released last week by the Federal Deposit Insurance Corp. That marked the sixth consecutive quarter of decline for this measure of loan growth. Growth in each of the four major lending categories measured by the FDIC fell. Notably, the growth rate for busi- U.S. Mint Makes a Mint Selling Gold Coins at a 25% Markup i i i ‘Proof condition’ collectibles don’t shine as investments in retirement accounts BY MICHAEL ROTHFELD Markets............. B10-11 Opinion.............. A15-17 Sports....................... A14 Technology............... B4 U.S. News............. A2-4 Weather................... A14 World News....... A5-9 s Copyright 2017 Dow Jones & Company. All Rights Reserved ALEX WONG/GETTY IMAGES Loan growth at banks is slowing, defying expectations of a banner year for financial institutions after last November’s elections. A1 WILLIAM B. PLOWMAN/NBC/GETTY IMAGES Meredith has agreed to pay $18.50 a share in cash for Time, valuing the fabled New York publisher at $1.85 billion, in a bet on the future of the magazine industry. B1 Trump and his pick for acting director of the CFPB were sued by an appointee of the agency’s departing chief, who sought to block the president. A1 EURO $1.1932 YEN 111.57 Trump Is Sued In CFPB Battle BY YUKA HAYASHI MARK WILSON/GETTY IMAGES T HHHH $4.00 WSJ.com MONDAY, NOVEMBER 27, 2017 ~ VOL. CCLXX NO. 125 * * * * * * sheathed in plastic and never touched by human hands. Last The U.S. Mint makes a pretty year, sales totaled $112 million. penny selling gold and silver The government currently is coins. But there are two sides to selling the gold-coin proofs at a the deal, which 25% markup over some investors are per-ounce gold calling highway robprices, a premium bery. that can run as high After years of as $360 per coin. making pennies and The silver coins nickels that cost carry a more than more to produce 200% premium over than they are worth, market silver prices. Gold proof coin the Treasury DeThat might be partment is making well worth it for a mint off a line of pricey Amer- coin collectors and hoarders— ican Eagle coins in what is or for stashing in a post-apocaPlease see COINS page A10 known as proof condition— vestment is rising. Tepid rates of loan growth along with continued low longterm interest rates have taken some of the sizzle out of bank stocks. Financial shares were among the chief beneficiaries of last November’s election surprise, soaring on hopes of a tax-code overhaul, lighter regulation and stronger economic growth. With progress in these areas uneven during 2017, gains are more muted. The KBW Nasdaq Bank Index, a measure of 24 of the largest commercial banks, is up about 8% since the start of the year, about half the rise of the S&P 500. “There was such enthusiPlease see LOANS page A6 console, the Super NES Classic, which has been in short supply since it was released in September. Wal-Mart also calibrated the selection of discounted products it offers online versus in stores, U.S. CEO Greg Foran said in an interview. Online, the retailer offered more electronics and bulky toys that customers want shipped to homes, then stocked stores with additional lower-priced deals like $5 DVDs, pajamas and other items customers prePlease see STORES page A2 WASHINGTON—An Obamaera official at the Consumer Financial Protection Bureau sued the Trump administration Sunday night to block the installation of budget director Mick Mulvaney from taking control of the agency. Leandra English, a career staffer appointed to lead the CFPB by its former director Richard Cordray, filed the lawsuit in federal court the night before the bureau was set to reopen with dueling temporary leaders vying to take it over. In doing so, she touched off a legal fight that will trigger court interpretations on how different statutes regarding succession apply to the unusual struggle over control of a federal agency. President Donald Trump asserts he has the power to appoint an acting director, while the departing chief believed the law says otherwise. Last-minute maneuvering by Mr. Cordray means that come Monday morning, two different officials have a claim on the acting top job: Mr. Mulvaney, who also serves as head of the Office of Management and Budget, and Ms. English. The lawsuit, filed at the U.S. District Court for the District of Columbia, escalates the confrontation between the White House and the Obama-era leadership of the CFPB, an independent agency created after the financial crisis. Ms. English, a former chief of staff, was appointed by Mr. Please see CFPB page A4 OPEC Nears Deal to Extend Cuts OPEC and other major oil producers are expected to strike an agreement this week to extend supply cuts. Some producers and analysts caution a deal could cause prices to soar. B2 Total oil inventories in OECD countries compared with their ﬁve-year averages 400 million barrels ABOVE AVERAGE 300 200 100 0 –100 BELOW AVERAGE –200 2014 ’15 Source: International Energy Agency ’16 ’17 THE WALL STREET JOURNAL. A Self-Made Star Shows One Way to Crack the Gen Z Code Advertisers are flocking to Liza Koshy, a 21-year-old YouTube celebrity BY JOHN JURGENSEN A recent video by 21-year-old YouTube star Liza Koshy had her in mustache and wig to play a favorite character, the heavily accented Jet Packinski. She deadpanned silly answers to questions like “Favorite type of flower?” (“Gluten free”) and “How would you describe yourself?” (“Using adjectives”). It was a parody of Vogue magazine’s 73 Questions video series with celebrities. Ms. Koshy’s parody has notched 18 million views—even more than the 16 million views racked up by a real Vogue episode with pop music superstar Taylor Swift. This month, Vogue released a real 73 Questions with the comedian. The intersection of old and new media was a nod to one of the biggest challenges facing entertainment companies and marketers: The Gen Z audience, which watches video from a wide variety of online platforms and which often embraces self-made stars, is tough to capture. The generation—young people born after about 1996—favors irreverent, DIY stars seen as “authentic,” who produce bite-size content, sometimes daily, tailored to social-media and other outlets. They were raised on smartphones, and no single app or social media platform—Snapchat, Instagram, Musical.ly—monopolizes their time. When it comes to entertainment Please see STAR page A10 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. A2 | Monday, November 27, 2017 U.S. NEWS THE OUTLOOK | By Nick Timiraos Fed Plan for 2017 Nears Completion Federal Reserve officials are preparing to raise interest rates in December, allowing them to accomplish something that eluded them in each of the past two years: They will have delivered on their projections at the start of the year, which for 2017 showed three rate increases plus the start of the shrinking of their large bond portfolio. Whether officials can pull off a repeat performance by sticking to their road map of gradual rate increases again next year is clouded by conflicting signals on two items that matter most to the central bank: employment and inflation. Steady job gains have dropped the unemployment rate to lower-than-expected levels, at 4.1% in October, a 17year low. If the unemployment rate drops next year as much as it did this year—a 0.7 percentage point slide—it would plumb lows not seen since the late 1960s. Yet inflation has been puzzlingly soft. After nosing above the Fed’s 2% target for the first time in five years at the start of 2017, it slowed unexpectedly and hasn’t yet rebounded. Excluding volatile food and energy categories, the Fed’s preferred inflation gauge rose just 1.3% from a year earlier in September. At first, officials believed a few idiosyncratic price declines, such as wireless phone plans and prescription drugs, were to blame, though the weakness has proved more widespread and stubborn. Many economists, including Fed Chairwoman Janet Yellen, have long trusted in the framework advanced by the economist A.W. Phillips, who in 1958 hypothesized employers would bid up wages when workers grew scarce and hold wages steady when workers were abundant. T oday, wages and prices haven’t moved as the framework would suggest, raising questions over whether the labor market might have more slack or if something more permanent is holding inflation back. “We’re not seeing quite what we’re expecting to see,” said New York Fed President William Dudley this month. “That creates a bit of uncertainty about the best course going forward.” Most Fed officials expect once the jobless rate falls low enough, price pressures will re-emerge. No one is quite sure what that exact level is, but each decline in the unemployment rate brings the economy a little closer to it. Mr. Dudley said low inflation isn’t all bad because it means the economy might be able to sustain a lower jobless rate. The Fed has held its benchmark federal-funds rate in a range between 1% and 1.25% since lifting it in June. The economy is still adding more than enough jobs to keep up with the growth of the working-age population, and the unemployment rate is now below levels officials view quickly, leading to an unsustainable rise in prices that forces the Fed to raise rates at a fast clip, triggering a recession. “We don’t want a boombust policy,” Ms. Yellen said in New York last week. The second risk is inflation doesn’t respond as expected but the Fed keeps raising rates because unemployment falls lower. This could push inflation even lower still and hold back the economy. Persistently low inflation in the end would force the Fed to cease any rate increase campaign and could leave it with little room to maneuver should another recession hit. The third risk is the economy avoids an inflation run-up but rising asset values and low market volatility fuel financial imbalances. The last two expansions ended this way, with the tech-stock bubble of 2000 and the housing-market collapse of 2007. Mixed Signals Financial conditions have eased this year, despite moves by the Fed to remove support from the economy, and remain looser than the historical average given current growth and inﬂation. Chicago Fed Adjusted National Financial Conditions Index –0.2 –0.4 –0.6 –0.8 Fed rate hikes –1.0 –1.2 2013 ’14 ’15 Balance sheet normalization ’16 ’17 Inﬂation has slowed in 2017 and continues to underperform the Fed's projections of reaching the 2% target over the medium term. Personal Consumption Expenditures price index, annual 2.5% Fed target 2.0 Core inﬂation 1.5 1.0 Overall inﬂation 0.5 M 0.0 2012 ’13 ’14 Source: Chicago Fed (ﬁnancial conditions); Commerce Department (inﬂation) as sustainable, around 4.6%. Last December, Fed officials projected the unemployment rate would end this year within a range of 4.4% to 4.7%. In September, the projection had edged down to a range of 4.2% to 4.5%. Economists at Goldman Sachs expect the unemployment rate to keep falling, to 3.7% by the end of 2018 and 3.5% by the end of 2019. For the Fed, the ideal scenario would look something like this: job growth slows a ’15 ’16 s. Yellen’s nominated successor, Fed governor Jerome Powell, might try to use regulatory tools to fight an asset price boom. But such tools have had mixed results in other countries, and Republicans want Mr. Powell to lighten the regulatory load. He might instead be pressed toward fighting an asset price boom with higher interest rates. Mr. Powell’s confirmation hearing on Tuesday before a Senate panel could offer early insight into how he will approach the coming year of difficult trade-offs and even harder choices. ’17 THE WALL STREET JOURNAL. little in order to hold the unemployment rate steady, at around 4%, with inflation slowly returning to its 2% target. Tight labor markets would continue to boost wages while encouraging employers to pull workers out of the shadows of the labor market and to provide more nonwage benefits, such as worker training. Three risks loom. The first is the unemployment rate drops too low, too ECONOMIC CALENDAR TUESDAY: On Capitol Hill, the Senate Banking Committee holds a confirmation hearing for Jerome Powell, the man nominated by President Donald Trump to serve as the next chairman of the Federal Reserve. His nomination isn’t expected to encounter much resistance in the Senate, but the hearing could offer insight on how he would run the central bank. WEDNESDAY: The Joint Economic Committee of Congress hosts Fed Chairwoman Janet Yellen to discuss the economic outlook. The U.S. Commerce Department releases its second estimate for third-quarter economic growth. Economists surveyed by The Wall Street Journal expect gross domestic product grew at a 3.3% annual rate last quarter, following a 3.1% rate in the second. That represents the best six-month stretch of growth in three years. THURSDAY: The U.S. Commerce Department releases inflation data for October. September’s reading showed prices were up 1.6% from the previous year, short of the Fed’s 2% target. Figures from the European Union’s statistics agency are expected to show unemployment nudged down again in October. Data on consumer prices during November are expected to show inflation edged up to 1.5% from 1.4% in October, still below the target of just under 2%. FRIDAY: Inflation data from Japan are likely to reflect further baby steps toward strengthening price growth (release time is Thursday in the U.S.). October figures are expected to show the core consumer-price index rising by 0.8% from a year earlier, compared with September’s 0.7% gain, though that still leaves Japan far from its 2% inflation goal. BY JOSH ZUMBRUN Jerome Powell is likely to sail through confirmation as Federal Reserve Board chairman, even though the process has grown increasingly politicized since the days when Ben Bernanke was confirmed as Fed chief in 2006 by a voice vote with little opposition. Mr. Powell, now a Fed governor, heads into his confirmation hearing Tuesday before the Senate Banking Committee having garnered support from Republicans and Democrats. It isn’t the first time he has been a Fed candidate who offered the path of least resistance. The recent wrangling started in 2007, when President George W. Bush nominated two bankers, Larry Klane and Elizabeth Duke, to the Fed board of governors. The Senate Banking Committee, then led by Connecticut Demo- crat Chris Dodd, slow-walked the nominations ahead of the 2008 presidential election, which Democrats appeared increasingly likely to win as the economy deteriorated. The new president could fill any open Fed board slots. While the committee allowed Ms. Duke’s nomination to advance, it never voted on Mr. Klane’s. It also declined to approve another term for Fed governor Randall Kroszner, a Bush nominee. The Fed’s responses to the financial crisis, including its rescues of several big financial firms, attracted political fire from both parties. When Mr. Bernanke was appointed for a second term in 2010, he was opposed by 30 senators—18 Republicans, 11 Democrats and an independent—in the Democratic-controlled Senate. The vacancies left from Mr. Bush’s presidency, combined with other term expirations, meant that by 2010, President Barack Obama had three Fed openings to fill at once. He nominated San Francisco Fed President Janet Yellen for Fed vice chairwoman, plus Sarah Bloom Raskin—a Maryland state banking regulator—and Massachusetts Institute of Technology economics professor Peter Diamond for governors. Both women won Senate confirmation. As a regional Fed bank president and former Fed governor, Ms. Yellen had solid central-bank experience. Ms. Bloom Raskin’s background as a bank regulator was newly relevant after the financial crisis. Mr. Diamond ended up the odd person out. Sen. Richard Shelby (R., Ala.), then the ranking minority member of the banking committee, led the opposition, smarting over the ear- STORES THANK YOURSELF SALE DESIGNER COLLECTIONS ARE UP TO 40%FF B A R N E Y S.C O M CHICAGO NE W YORK BOSTON B E V E R LY H I L L S L AS VEGAS * SAN FRANCISCO PHILADELPHIA S E AT T L E F O R I N S I D E R FA S H I O N A C C E S S : T H E W I N D O W. B A R N E Y S . C O M *Up to 40 percent off regular prices on select clothing, shoes, and accessories for women, men, and children, as well as gifts for the home. Specific exclusions apply. See store associate for details. Continued from Page One fer buying immediately or are unprofitable to ship, Mr. Foran said. In stores, “is [Black Friday] the mayhem that it might have been eight or 10 years ago?” Mr. Foran said on Thanksgiving. “I think that world is gone.” ShopperTrak, another firm that measures foot traffic to traditional stores, found that visits declined a combined 1.6% on Thanksgiving and Black Friday from a year earlier. While most big chains still opened on Thanksgiving evening, some retailers adjusted their hours after discovering that the extra hours didn’t necessarily lift overall holiday sales. Target Corp. closed its stores from midnight Thanksgiving until reopening at 6 a.m. on Black Friday. Rosa Hilburn, 58, was among the first people inside a Target in Houston on Black Friday morning, but she was in and out in minutes with only a small bag of loot—several shirts and a Garth Brooks album for her husband. Ms. Hilburn said she was “really shocked” there weren’t more people at the store but attributed it to the changing times. “Most people do it online now like the millennials,” she said. “But I still like to see and touch things.” Al Rao, 44, and her sister-inlaw Sunanda Dugar, 43, were walking through a Los Angeles- ALEX BRANDON/ASSOCIATED PRESS Fewer Pitfalls Are Seen for Powell in Confirmation Jerome Powell lier rejections of Messrs. Klane and Kroszner. The Obama White House hit upon the idea, in the summer of area mall on Thanksgiving with just one shopping bag. The duo have made going to the mall on Thanksgiving night a tradition, even though both do nearly all of their shopping year-round on Amazon and Google Express. “Going to the mall is very rare for us now,” Ms. Rao said. In-store sales still account for about 90% of retail purchases, according to the U.S. Census Bureau, but the balance is shifting fast. Adobe said $7.9 billion worth of merchandise In-store sales still account for about 90% of retail purchases. was purchased online on Thursday and Friday, and expects Cyber Monday to be the largest online shopping day in history, with sales up nearly 17% to $6.6 billion. Wal-Mart has added tens of millions of products to its website over the past year, so heading into the holiday shopping period around 75% of the most frequently purchased toys were on walmart.com, the highest percentage of a traditional retailer, said Guru Hariharan, chief executive of Boomerang, an e-commerce performance firm that studies pricing and other metrics. Meanwhile, Amazon made it harder for other retailers to match its prices, more frequently blocking technology 2011, of nominating a Republican and a Democrat to the Fed board, hoping the package could win approval. The White House initially wanted to nominate Jeremy Stein, a Harvard economist and Democrat, to one seat and Richard Clarida, a Republican economist and adviser to Pacific Investment Management Co., or Pimco, to the second. Mr. Clarida pulled out. About the same time, Treasury Secretary Timothy Geithner learned that Mr. Powell, a Republican who had served in President George H.W. Bush’s Treasury Department, had been challenging members of his own party not to play games with the U.S. debt ceiling. Thus Mr. Powell was nominated to the Fed alongside Mr. Stein in late 2011. But in May 2012, with a presidential election nearing and Democrats that tracks its prices, Mr. Hariharan said. Amazon often kicks price-tracking technology off its site to prioritize customers when traffic surges. An Amazon spokeswoman said the company hadn’t made changes to its practices regarding pricetracking bots. Amazon also tried to create some holiday store frenzy. After purchasing grocer Whole Foods earlier this year, Amazon offered a discount on turkeys, plus an extra markdown for members of Prime. The online giant also used more than 100 of its 470 Whole Foods stores to sell its discounted gadgets. Amazon has an advantage as online sales rise. More than 50% of online product searches start with the site. It also commanded an average of about 42 cents of every dollar spent online through October, compared with nearly 2 cents at WalMart, according to Slice Intelligence, which tracks a panel of more than 5 million U.S. shoppers. Madison Lennon of Virginia Beach, Va., headed to her nearby Wal-Mart on Friday afternoon to load up on DVDs from the discount bins. But first the 24-year-old, who works at a movie theater, checked Amazon’s prices. Most were priced similarly or weren’t available, she said. So she decided to head to WalMart to “see if they have them for a cheaper deal,” she said. “And if not, I’ll come home and buy it on Amazon.” —Miguel Bustillo and Julie Jargon contributed to this article. holding a slight edge in the Senate, they appeared headed for defeat. It took an improbable event to break the impasse. J.P. Morgan Chase & Co. lost nearly $2 billion when a London trader’s bet went sour. The loss sparked an uproar about oversight of banks. Senate Majority Leader Harry Reid (D., Nev.) leveraged the moment to advance Messrs. Powell and Stein. In May 2012, Mr. Powell was approved, 74-21. Twenty-five Republicans voted for him, but 20 voted no, along with an independent. Mr. Stein was also confirmed, on a 70-24 vote. Less than two years later, Mr. Powell’s term expired. Mr. Obama nominated him for a second term, as part of a package with two other Fed board candidates. Mr. Powell was confirmed with 67 yeses by a Senate with a Democratic majority. CORRECTIONS AMPLIFICATIONS Hewlett Packard Enterprise Co. named Antonio Neri president in June. A Business & Finance article on Wednesday incorrectly said the move occurred in July. Readers can alert The Wall Street Journal to any errors in news articles by emailing firstname.lastname@example.org or by calling 888-410-2667. THE WALL STREET JOURNAL (USPS 664-880) (Eastern Edition ISSN 0099-9660) (Central Edition ISSN 1092-0935) (Western Edition ISSN 0193-2241) Editorial and publication headquarters: 1211 Avenue of the Americas, New York, N.Y. 10036 Published daily except Sundays and general legal holidays. Periodicals postage paid at New York, N.Y., and other mailing offices. Postmaster: Send address changes to The Wall Street Journal, 200 Burnett Rd., Chicopee, MA 01020. 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To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com Monday, November 27, 2017 | A3 THE WALL STREET JOURNAL. JUSTIN SULLIVAN/GETTY IMAGES ©T&CO. 2017 U.S. NEWS Chimneys remain standing in the Coffey Park neighborhood of Santa Rosa, Calif., on Nov. 13, a month after wildfires swept through. THE NEW HOME & ACCESSORIES COLLECTION Roadblocks to Rebuilding Wildfires have laid bare how difficult it is to erect houses in Northern California BY CHRIS KIRKHAM AND NOUR MALAS For Damian Clopton, the initial shock of losing his home in last month’s Northern California firestorm is beginning to wear off and a hard reality is setting in: Insurance won’t be enough to rebuild his burned-down house, and there are no clear answers on how to fill the gap. “I’m not going to get my house back,” Mr. Clopton said. “I’m going to get something considerably less.” The aftermath of the Northern California wildfires is laying bare the state’s multilayered housing crisis, as thousands of people who lost their homes navigate the complexities of rebuilding in one of the nation’s most expensive housing markets. Those who want to rebuild are left to untangle a web of insurance adjusters, contractors and local permitting agencies. The result is a prolonged rebuilding process that could leave thousands of families waiting months to return to their neighborhoods, a scenario prompting local officials to act fast to avoid a population drain. Mr. Clopton, 33 years old, lived in the Coffey Park neighborhood of Santa Rosa. As he fled the flames consuming his neighborhood, while clutching his four cats and a laptop, he left behind what was supposed to be a fireproof safe, new granite countertops and ornate Construction Crisis The number of homes destroyed in Northern California's wildﬁres in October is far greater than the annual pace of construction in parts of the area. 4,000 3,000 2,000 1,000 Homes destroyed in October 2017 Residential building permits in 2016 0 Santa Rosa Sonoma city County Napa County Sources: Trulia (permits); state and local government estimates (homes destroyed) Economies of Scale Key to Comeback Across California’s wine country, a basic challenge to rebuilding in the aftermath of the area’s wildfires is finding people to do the work. There are 15% fewer construction workers in Napa and Sonoma counties today than in the mid-2000s, according to Labor Department data, even as the population and housing demand have increased. Construction costs have soared in recent years as a result. Ad hoc groups are coming together across damaged neighborhoods to set groundrules for rebuilding. In Santa Rosa, the aim is to get groups of homeowners to agree to a limited number of home designs so a developer can start building several houses at once. “Economies of scale in rebuilding are very important,” said Hugh Futrell, a Santa Rosa builder who lost his home and is working with banks, contractors and builders to rebuild more quickly. “To build 10 houses in a neighborhood like Coffey Park, scattered across 10 different blocks, is not going to attract a contractor to do the job.” The way insurance is paid complicates the process, because each homeowner may be on a different timeline. —Chris Kirkham and Nour Malas retain our community and our workforce.” Rebuilding thousands of homes at once is a significant challenge in a part of the state where, before the fires, there was already a severe shortage of construction labor and a supply of new homes that fell far short of demand. Santa Rosa, which lost nearly 3,000 homes, built only half that number of singlefamily houses in the past decade, according to permitting data analyzed by real-estate tracker Trulia. Santa Rosa has worked to streamline the system, aiming to process building plans in less than two weeks, according to city officials. In the meantime, to help house people who lost their homes, Santa Rosa officials have changed or waived rules to allow for temporary hous- ing, including recreational vehicles. California Insurance Commissioner Dave Jones said it is still too early to determine how many homeowners will get sufficient payouts for the cost of rebuilding. The answer will depend on “what it costs to rebuild the home, but also what kind of coverage the homeowner purchased,” he said. Mr. Clopton hopes to apply for construction or small-business loans to make up the difference from his insurance payout. Jeff Okrepkie, who lost his home in Coffey Park and is helping to organize neighbors looking to rebuild, described the daunting task they feel they face: “You’re taking 5,000 homeowners and asking them to turn into developers, and experts in insurance, and experts in city permits in three weeks.” 800 843 3269 | TIFFANY.COM M Y L A G O S M Y W AY THE WALL STREET JOURNAL. landscaping with fruit trees. They all turned to ash and charred metal. Based on insurance claims so far, more than 4,700 homes were destroyed in Northern California and 10,000 more were partially damaged, leading to total insured losses of more than $3 billion statewide. Local officials in the counties most affected by the fires are working with federal emergency and disaster-relief agencies to set up temporary shelters and find new ways to speed up the rebuilding process, which, like elsewhere in California, involves layers of permits and approvals. “We have a sense of urgency,” said David Guhin, Santa Rosa’s director of planning and economic development. “We have to do everything we can to provide solutions to people so we can C AV I A R C O L L E C T I O N S AVA I L AB LE AT L A G O S . C O M BLOOM I NGDALE’S 59TH ST Race Highlights a Changing Atlanta ATLANTA—Joe Meadows has lived in his five-bedroom home in this city’s Kirkwood neighborhood since 1966, when he bought it for $10,000. In 50 years, the 83-year-old retired construction foreman has seen his neighborhood transform from predominantly white to largely African-American. Now it is on its way back to majority-white again. “I’m not going to be around much longer,” said Mr. Meadows, who is black, citing the forces of gentrification that have pushed up property values and driven out many of his black neighbors. “It’s all about money, money.” What’s happening in Kirkwood is taking place in many neighborhoods. For the first time since at least 1970, Atlanta is on the verge of not being a black-majority city, in part because it has become a magnet for newcomers drawn to a lower cost of living, decent job prospects and warm weather. Gentrification has become a key issue in the Dec. 5 runoff election for the next mayor. The two candidates are longstanding city council members who ran as nonpartisans. One is Keisha Lance Bottoms, an African-American woman who says she is a Democrat and is backed by Democratic Mayor Kasim Reed. Her rival is Mary Norwood, a white woman who MAURA FRIEDMAN FOR THE WALL STREET JOURNAL BY CAMERON MCWHIRTER Joe Meadows at home in Atlanta’s Kirkwood neighborhood. Gentrification is a key issue in the city’s mayoral runoff election. narrowly lost to Mr. Reed in 2009 and who calls herself an independent. Both have addressed concerns that economic forces are pushing out poorer residents, most of whom are black, and bringing in wealthier ones, many of whom are white. “If we have a city that is not a city for all, then we really are not fulfilling the promise that Atlanta has had for so many generations,” Ms. Bottoms, 47, said at a debate. Ms. Norwood, 65, said she has fought to protect homeowners but has been critical of the current administration, which is in the throes of a federal corruption investigation. “What gets in our way is power and money, and who has and who doesn’t have it and who wants it,” she said at a mayoral forum in October. The median home value in the city has risen 53% since 2010, faster than the national rate of 27%, according to the real-estate website Zillow. Average rents in the Atlanta metro area rose 33% since 2010, according to Jay Parsons, vice president of data analytics at RealPage Inc., a Richardson, Texas, company. Ms. Bottoms has called for $1 billion public-private fund to fight displacement, as well as zoning changes. Ms. Norwood has promised a citywide initiative to protect citizens from displacement, including reducing, freezing or delaying property taxes for longtime residents in changing areas. The two campaigns have traded allegations of race-baiting. Ms. Bottoms said robo- calls falsely claiming to be from her supporters were made to white sections of the city urging people to vote for her “to keep Atlanta black.” Ms. Norwood has said Ms. Bottoms has tried to portray her as a supporter of President Donald Trump to frighten Atlanta’s black voters. She said she voted for Hillary Clinton and Barack Obama in recent presidential elections. In Kirkwood, the changes are evident. Its commercial district now has trendy restaurants, a vegan bakery and new apartments. On residential streets, older smaller homes are being demolished and replaced with bigger ones. Freddy Luster, 47, who works in corporate real estate, said he and his family moved to Kirkwood as African-American professionals because they liked its diversity. Mr. Luster’s wife, Patricia, 43, said she feels Ms. Norwood, who lives in the wealthier, predominantly white area of Buckhead, “lives in a bubble.” In Buckhead, signs backing Ms. Norwood are more numerous. Marion Smith, 72, a retired white lawyer and Norwood backer, said residents in Buckhead and elsewhere have long believed their taxes were too high for the services they receive. Ms. Norwood would be “responsive to the entirety of the city,” he said. —Laura Kusisto contributed to this article. CLASSIMA Collection Starting at $990 FELDMAR WATCH CO. / Los Angeles, CA / 310.274.8016 RAZNY JEWELERS / Highland Park, IL / 847.432.5300 WEMPE / New York, NY / 212.397.9000 www.baume-et-mercier.com For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com A4 | Monday, November 27, 2017 P W L C 10 11 12 H T G K B F A M 1 2 3 4 5 6 7 8 9 O I X X ***** THE WALL STREET JOURNAL. U.S. NEWS Congress Prepares for Year-End Sprint Lawmakers rush deals on taxes and spending as sexual-harassment allegations reverberate WASHINGTON—Lawmakers returning to Washington face a tight calendar and a dizzying list of legislative tasks, from a major tax overhaul to a new federal spending agreement, with the added complication of sexual-harassment allegations that are reverberating in the halls of the Capitol. For weeks, the political spotlight has focused on Republicans’ efforts to pass the first major revision of the tax code in more than three decades. After failing in their push to dismantle the Affordable Care Act earlier this year, GOP lawmakers are counting on the tax rewrite to mark one major legislative accomplishment they can tout to voters in next year’s midterm elections. The Senate could vote on its version of the overhaul this week after the House recently approved its own bill. GOP leaders say they expect the two chambers to hash out a deal on one bill before year’s end. But the tax bill’s passage could be affected by the outcome of other, lower-profile negotiations, most notably over where spending levels should be set for the remainder of fiscal 2018, which ends Sept. 30. Once a budget deal has been reached, lawmakers will then need a few weeks to fill in more detailed spending legislation. Because the government’s current funding expires after Dec. 8, lawmakers and aides ex- J. SCOTT APPLEWHITE/ASSOCIATED PRESS BY KRISTINA PETERSON As the end of the year approaches, congressional Republicans are moving quickly to accomplish a range of complicated tasks. pect Congress will have to pass a short-term spending patch that would stretch for just two or three weeks until a longerterm spending bill is completed. President Donald Trump is expected to meet with leaders of both parties in both chambers Tuesday to discuss legislative priorities, aides said. Mr. Trump returned to Washington late Sunday after celebrating Thanksgiving in Florida. He tweeted: “Back in D.C., big week for Tax Cuts and many other things of great importance to our Country.” He added: “Senate Republicans will hopefully come through for all of us. The Tax Cut Bill is getting better and better. The end result will be great for ALL!” GOP leaders have advised lawmakers they may remain in Washington until close to Christmas, or beyond, to finish the tax bill and other legislation. At the same time, allegations of sexual misconduct by Sen. Al Franken (D., Minn.) and Rep. John Conyers (D., Mich.) as well as the release of a nude photograph of Rep. Joe Barton (R., Texas)—all of which happened in a matter of days—suggest that claims of sexual misconduct may continue to jolt Capitol Hill. The closely watched election for the Alabama Senate seat vacated by Attorney General Jeff Sessions also takes place Dec. 12, pitting GOP candidate Roy Moore, who faces accusations of sexual misconduct toward teenage girls, against Democrat Doug Jones. A GOP loss would narrow the Republicans’ Senate majority to 51-49. In either outcome, GOP leaders hope to pass the tax bill before the next Alabama senator is sworn in. Most immediately, one pressing challenge for GOP Senate leaders is that the Republicans who control swing votes on the tax bill have goals that could be almost impossible to reconcile in a spending bill needed to keep the government funded. With a slim 52-48 majority in the Senate, Republican leaders can afford to lose no more than two GOP votes on the tax bill, with Vice President Mike Pence prepared to cast a tiebreaking vote. GOP leaders are working to resolve concerns some Republicans, including Sen. Ron Johnson of Wisconsin, have ex- pressed over how the tax bill treats pass-through businesses, whose owners pay taxes on their individual returns. Also, at least three GOP senators have expressed concerns over the $1.5 trillion the tax bill is expected to add to the federal budget deficit over 10 years, to pay for the cost of lowering the corporate tax rate and many individuals’ income-tax rates. The negotiations over the spending limits could add to those concerns and potentially turn them off the tax bill, since congressional leaders have been discussing increasing government spending over the next two years by around $200 billion. “We’re $20 trillion in debt and it’s ‘party like there’s no tomorrow’ time in Washington,” said Sen. Bob Corker (R., Tenn.) on Twitter recently in response to articles about the negotiations. GOP Sens. Jeff Flake of Arizona, who is retiring next year, and James Lankford of Oklahoma also have expressed concerns about the tax bill’s impact on the federal deficit. Without a budget deal, spending levels would revert to lower levels established in 2011. Under current law, regular military spending is capped at $549 billion for fiscal year 2018, while nonmilitary spending is capped at $516 billion. That has upset Sen. John McCain (R., Ariz.), who has said Congress must increase military spending. Mr. McCain hasn’t directly connected his vote on the tax bill to the level of military spending, but several aides say they believe angering him over military funding could make it harder to get his support for a tax overhaul. —Ian Talley contributed to this article. BY SHARON NUNN President Donald Trump reiterated his stance that the election of Democrat Doug Jones to an Alabama Senate seat would mark a serious blow to the Republican agenda, while not explicitly saying he backed GOP nominee Roy Moore, who faces allegations of sexual misconduct with teenagers decades ago. “The last thing we need in Alabama and the U.S. Senate is a Schumer/Pelosi puppet,” Mr. Trump said on Sunday on Twitter, referencing Democratic leaders Sen. Chuck Schumer of New York and Rep. Nancy Pelosi of California. “Jones would be a disaster!” said Mr. Trump, citing border security, crime and taxes among other issues. Mr. Moore has denied any sexual misconduct and has vowed to stay in the race. He has blamed the media and Democrats for spreading what he called false allegations. Mr. Trump’s comments echoed statements he made last week, when he said Mr. Jones, a former U.S. attorney, was “terrible” on various political issues. As in the most recent comments, he didn’t directly say he supported Mr. Moore, and when asked about the accusations against the candidate, he pointed to Mr. Moore’s denials. Sebastian Kitchen, a Jones spokesman, said: “Doug Jones is continuing to focus on finding common ground and get- ting things done for real Alabamians. His record as a prosecutor speaks for itself.” He said Mr. Moore’s accusers “served as witnesses to all Alabamians of his disturbing conduct.” In his Sunday tweets, Mr. Trump also tried to temper the appearance of a personal investment in Mr. Moore, noting that he supported Sen. Luther Strange, Mr. Moore’s GOP primary opponent, in the race. Mr. Strange was named to the seat when Jeff Sessions became attorney general. He lost the primary to Mr. Moore. The Alabama race has created a headache for GOP leaders. Republicans hold a narrow 52-48 advantage in the Senate, and a loss of the seat would make passing certain partisan legislation even more difficult. Senate Majority Leader Mitch McConnell (R., Ky.) said this month that he believed Mr. Moore’s accusers and that Mr. Moore should step aside ahead of the Dec. 12 vote. Republican senators said on Sunday that the Moore candidacy wasn’t helping the GOP agenda. “It is pretty clear to me that the best thing that Roy Moore could do for the country is to move on,” Sen. Tim Scott (R., S.C.) said on ABC. “In my opinion, and in the opinion of many Republicans and conservatives in the Senate, it is time for us to turn the page, because it is not about partisan politics.” Continued from Page One Cordray as deputy director so she could assume the role of acting director of the agency under a provision in the DoddFrank financial law, which created the CFPB. Mr. Trump’s appointment of Mr. Mulvaney, a harsh critic of the CFPB, is based on the Federal Vacancies Reform Act, which sets rules for vacant government agency positions and gives the president authority to appoint an acting director. Calling herself the “rightful acting director” of the bureau, Ms. English is seeking a judgment and a temporary restraining order to prevent Mr. Mulvaney from becoming interim CFPB chief. “Ms. English has a clear legal entitlement to the position of acting director of the CFPB,” the lawsuit said. “The president’s purported or intended appointment of defendant Mulvaney as acting director of the CFPB is unlawful.” Ms. English wants the court to decide that the Federal Vacancies Reform Act doesn’t control the appointment of a temporary CFPB director and block any temporary Trump appointment. Deepak Gupta, a former CFPB lawyer who has sued the Trump administration previously, is the lead attorney representing Ms. English. In a written statement, White House spokeswoman Sarah Sanders said, “The administration is aware of the suit filed this evening by deputy director English. However the law is clear: Director Mulvaney is the acting director of the CFPB.” The White House PABLO MARTINEZ MONSIVAIS/ASSOCIATED PRESS CFPB Mick Mulvaney is the president’s pick to be CFPB acting director. also released a memo from CFPB General Counsel Mary McLeod in which she advised senior CFPB officials to “act consistently with the understanding that Director Mulvaney is the acting director of the CFPB.” The memo by Ms. McLeod, who was hired by Mr. Cordray, was dated Saturday. In a memo issued on Saturday, the Justice Department argued the Federal Vacancies Reform Act gives the president power for “temporarily authorizing an acting official to perform the functions and duties” of the CFPB’s director. The department acknowledged that Dodd-Frank permits a properly appointed deputy to serve as temporary director, but that it “doesn’t displace the president’s authority under the Vacancies Reform Act” to appoint an acting director. Alan Kaplinsky, a Ballard Spahr lawyer critical of the CFPB, said that “chaos will ensue at the CFPB.” The unfolding drama is the latest twist for the CFPB, which has been mired in partisan battles since the agency was created in the wake of the financial crisis. Democrat Elizabeth Warren, now a leading critic of Wall Street in the Senate, was the brain behind the agency’s birth. Many of the staff joined the agency as enthusiastic supporters of its mission. Until the lawsuit was filed, CFPB officials had remained silent since Mr. Cordray’s announcement Friday on his res- The 2010 DoddFrank Act created the agency in the wake of the financial crisis. ignation and Ms. English’s appointment. Agency spokesmen didn’t respond to repeated requests for comment. Neither Ms. English nor Mr. Cordray could be reached for comment. The president has promised to install a more businessfriendly leadership at the nation’s regulatory agencies. As acting director, Mr. Mulvaney would have full authority to implement changes at the bureau and is expected to do so aggressively. The former Republican House member from South Carolina once called the CFPB a “sad, sick joke,” and has called for an overhaul of the agency, including curtailing its budget. Other possible actions include delaying the enactment of a recently issued rule on payday lending, amending a 2013 mortgage rule that tightened underwriting standards, and reassessing pending lawsuits against companies such as student-loan servicer Navient Corp. Mr. Mulvaney said in a statement Friday that “Americans deserve a CFPB that seeks to protect them while ensuring free and fair markets for all consumers.” On Saturday, Mr. Trump called the Obama-era leadership of the agency a “total disaster,” adding that financial institutions “have been devastated and unable to properly serve the public.” The White House says Mr. Trump will eventually nominate his own choice for the next permanent director of the CFPB, who then needs to be confirmed by a simple majority in the Senate. Financial industry experts expressed alarm at the uncertainty created by the fight. “If there has been one consistent criticism of the CFPB, it’s a lack of predictability, and we are now left with the greatest uncertainty since the bureau was established,” said Ben Olson, a Buckley Sandler lawyer and a former CFPB official who advises financial companies. —Ian Talley contributed to this article. ALEX WONG/GETTY IMAGES Trump Warns of a Senate Setback Rep. John Conyers, shown in 2015, joined Congress in 1965. Conyers to Leave Committee Post BY KRISTINA PETERSON WASHINGTON—Rep. John Conyers said Sunday he would step aside from his post as the top Democrat on the House Judiciary Committee while an ethics panel investigates allegations of sexual harassment against him. “I have come to believe that my presence as Ranking Member on the [Judiciary] Committee would not serve these efforts while the Ethics Committee investigation is pending,” Mr. Conyers, of Michigan, said in a statement. “I cannot in good conscience allow these charges to undermine my colleagues in the Democratic Caucus.” Rep. Jerrold Nadler of New York will take over as the committee’s top Democrat. Mr. Conyers acknowledged last week that he settled a wrongful-dismissal claim in 2015 involving a former female employee, but he denied allegations of sexual harassment. He again denied the allegations on Sunday. Mr. Conyers said he settled the complaint to avoid litigation. He added he would cooperate with any further investigation in the House. “I deny these allegations, many of which were raised by documents reportedly paid for by a partisan alt-right blogger. I very much look forward to vindicating myself and my family before the House Committee on Ethics,” Mr. Conyers said in the statement Sunday. The allegations were first reported by BuzzFeed, which said it received the documents from Mike Cernovich, a socialmedia personality who is a self-described “American nationalist,” and independently confirmed their authenticity. Mr. Conyers, 88 years old, joined Congress in 1965, mak- ing him the longest-serving current House member. In an interview Sunday on NBC, House Minority Leader Nancy Pelosi (D., Calif.) called Mr. Conyers “an icon” and said he has done “a great deal to protect women.” Asked whether Mr. Conyers should resign from the House, Mrs. Pelosi said: “He will do the right thing in terms of what he knows about his situation. That he’s entitled to due process. But women are entitled to due process as well.” In a separate statement, she said there would be consequences for anyone found to have sexually harassed others. Last week, the House Ethics Committee said it had begun investigating and would gather more information about the Conyers allegations. The committee said it wouldn’t make further public statements pending its initial review. On congressional committees, the ranking member typically works closely with a panel’s chairman in crafting any bipartisan legislation, and during committee hearings can often make comments or ask questions before other lawmakers. Mr. Conyers was chairman of the panel while Democrats controlled the House from 2007 to 2011. Speaking Sunday on ABC, Rep. Jackie Speier (D., Calif.) said Mr. Conyers should resign from Congress if an investigation reveals the sexual-misconduct allegations to be true. “The Ethics Committee needs to move very swiftly.…Staff up if necessary to determine whether or not those allegations are accurate. And if they’re accurate, I do believe that Congressman Conyers should step down,” she said. —Sharon Nunn contributed to this article. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. * * * * * * Monday, November 27, 2017 | A5 WORLD NEWS Pakistani Official Quits to End Standoff Law minister resigns in an agreement with Islamist activists who had clashed with police ISLAMABAD, Pakistan—The country’s law minister resigned on Monday, in an agreement with religious activists to end three weeks of demonstrations that shook an already fragile government, the state broadcaster and the protesters said. Around 2,000 protesters had blocked a major road between Islamabad and the adjacent city of Rawalpindi. The activists’ main demand was the resignation of Law Minister Zahid Hamid, who they said is responsible for a proposed change in legislation they said amounted to an insult to the Prophet Muhammad. A government operation on Saturday by police and paramilitary forces had failed to dislodge the protesters and was suspended that night after at least seven demonstrators were killed and 260 injured. Under the agreement brokered by Pakistan’s powerful military, previously arrested protesters would be released, according to the text of the deal. AAMIR QURESHI/AGENCE FRANCE-PRESSE/GETTY IMAGES BY SAEED SHAH Protesters with Tehreek Labbaik Ya Rasool Allah attending the funeral Sunday of a demonstrator who was killed Saturday in Islamabad. Saturday’s crackdown in Islamabad had sparked protests by sympathizers elsewhere in the country, including Karachi and Lahore, its two biggest cities. The government has had a tense relationship with the military since the ouster of Prime Minister Nawaz Sharif this year. Mr. Sharif, whose party remains in office, has repeatedly said the military establishment is the force behind his removal, an allegation it denies. State-owned PTV news reported Mr. Hamid’s resigna- tion. The agreement with the protesters was confirmed by their spokesman, Ejaz Ashrafi. The protesters are from the mainstream Barelvi sect of Islam and organized around a group called Tehreek Labbaik Ya Rasool Allah, which formed a political party in recent weeks. The group aims to maintain Pakistan’s draconian blasphemy laws, which carry the death penalty for anyone insulting the Prophet Muhammad. The demonstrators said the proposed legislation would change the oath members of Parliament take to swear Muhammad was the final prophet. The government had called in the army on Saturday to help restore order as demonstrators clashed with police and paramilitary forces, but on Sunday, the military called for a peaceful solution. With the failed operation, the government was forced back into talks with the protesters. Interior Minister Ahsan Iqbal on Sunday said the government had acted in response to an order from the Islamabad High Court to clear the road. “We are trying everything to put this fire out,” he said late Sunday. A better-equipped paramilitary force, the Rangers, which operates under the Interior Ministry, was deployed on Sunday near the protest site, the government said. A State Department spokesperson on Sunday said the U.S. was monitoring the situation closely. Prime Minister Shahid Khaqan Abbasi met on Sunday for talks with army chief Gen. Qamar Bajwa. In a written response to the government’s requisition of the army, issued before that meeting, the military criticized the handling of the operation, saying the police on Saturday had “not been optimally utilized.” In Egypt’s Sinai, a Call to Cooperate With the Army Bedouin leaders in the Sinai Peninsula have issued a rare call for solidarity with the Egyptian army to fight against Islamic By Dahlia Kholaif in Cairo and Rory Jones in Tel Aviv extremism in response to a Friday attack that killed more than 300 Muslims at a local mosque. “We call on men and youths of Sinai tribes to join their brothers…to coordinate for a major operation with the army” to end terrorism, said a statement posted on Facebook by the Union of Sinai Tribes. It isn’t immediately clear how many tribes the group represents. The group’s Facebook page has nearly 220,000 followers, and tribesmen said they were aware of the group. The call for cooperation, issued on Friday, comes after years of tension between the army and Sinai tribesmen. It also underscores the desperation to end the Islamist insurgency in Sinai, where an affiliate of Islamic State known as Sinai Province has been fighting authorities and staging attacks in recent years. The Egyptian army’s spokesman didn’t respond to requests for comment. Sinai Province has recruited disaffected young Egyptian Bedouins, causing friction between tribes and the Egyptian army, according to political and military analysts. Tribal leaders have accused the Egyptian government of neglect and heavy-handed po- licing of the insurgency. Consecutive governments invested little in education and infrastructure for the territory. “The military has for years refused to collaborate with tribes for different reasons, including not to give them power,” said Mohannad Sabry, a researcher who has written about the Sinai Peninsula. In Friday’s attack, at least 25 armed men used guns and explosives against Muslim worshipers at the Al Rawda mosque in the town of Ber al Abd, killing 305 people, including 28 children, according to Egyptian officials. Nobody has claimed responsibility for the attack. But at least one militant waved an Islamic State flag, officials said. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com A6 | Monday, November 27, 2017 * * THE WALL STREET JOURNAL. WORLD NEWS France Vows Crackdown on Harassment Government launches antiviolence campaign amid rising complaints of sexual intimidation PARIS—The recent wave of sexual-harassment and misconduct allegations is crashing down on France and the myth of the French lover. Victims of sexual abuse have set social media ablaze with the French equivalent of the #MeToo hashtag known as #balancetonporc, or “expose your pig.” France’s national police force reported a 23% increase in complaints of sexual violence filed in October compared with the same month a year earlier. The gendarmerie, which is responsible for policing in rural areas, reported a 30% rise. The outpouring is fueling a reassessment of some male behavior. Unwanted kissing, groping and other acts previously often went unchallenged, French officials and victims say, because French society branded it a form of seduction in a romantic culture. “In France we relativize sexual violence, saying it’s French culture, love à la fran- LUDOVIC MARIN/AGENCE FRANCE-PRESSE/GETTY IMAGES BY WILLIAM HOROBIN AND STACY MEICHTRY French President Emmanuel Macron greets Marlène Schiappa, the secretary of state for equality. çaise, the French lover, sweet talk or gallantry,” Marlène Schiappa, France’s secretary of state for equality, said in an interview. “French women have had enough.” The French government says one woman is killed every three days by a partner or former partner. On Saturday, French President Emmanuel Macron said he would lead French society into a “cultural battle” by making gender equality the “national cause” of his fiveyear term in office with a focus on combating sexual violence next year. In 2018, government spending on equality will rise to €420 million ($501 million), Mr. Macron said. “Our entire society is sick with sexism,” he said. “We need to act before it’s too late.” Mr. Macron’s government is planning legislation that would introduce fines for verbal sexual harassment and automatically classify sex with minors as rape. His government is holding 300 workshops around the country to seek advice on how to strengthen the bill. People are also invited to weigh in on a government website. France isn’t the only European country grappling with public anger. In the U.K., the political establishment was re- cently rocked by a series of allegations and the resignation Nov. 1 of British Defense Secretary Michael Fallon after he was accused of inappropriate behavior. He acknowledged not living up to the high standards of the military. In Italy, allegations of sexual assault by a prominent film director have prompted a new debate over harassment of women in the workplace, which remains largely tolerated and rarely reported. Sweden, long seen as a champion of gender equality, has been stunned in recent days by a host of allegations of rape and sexual harassment in media and entertainment. France has historically shown reluctance to confront allegations of sexual misconduct, particularly at the highest levels of society. The country’s respect for individual privacy has often led the media to look the other way when it comes to the sexual behavior of powerful men. Many supporters of Dominique Strauss-Kahn, the former International Monetary Fund chief and onetime Socialist presidential contender, initially rallied behind him after U.S. authorities arrested him for allegedly assaulting a housekeeper in a New York hotel. Mr. Strauss-Kahn denied the charges, which were later dropped. That reticence melted after multiple women leveled accusations at Hollywood producer Harvey Weinstein, who has apologized for his past behavior with colleagues but denied allegations of nonconsensual sex. One of his accusers was the prominent French actress Léa Seydoux. She published an essay in the Guardian alleging harassment by Mr. Weinstein and movie directors she didn’t name, saying it was “very common to encounter men like these.” The conflagration quickly spread to the worlds of French academia, business and politics, where women have been speaking out. Most of the accounts surfacing on social media haven’t identified the alleged aggressors. French newspaper Libération in November published accounts from eight women describing alleged sexual assaults between 2010 and 2014 by the head of the youth movement of France’s Socialist Party, Thierry Marchal-Beck. The movement said in a statement it was “revolted” by the reported acts and will further its efforts to prevent and sanction sexist behavior. Mr. Marchal-Beck couldn’t be reached for comment. Overcapacity Greek islands are straining as they host far more people than facilities were designed to hold. Monthly arrivals in Greece 5,000 Through Nov. 23 2,649 Migrants and refugees currently on the islands compared with facilities’ capacity Lesbos 4,000 Chios 3,000 Samos 2,000 Kos 1,000 Leros 0 Other 2016 ’17 Capacity 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Sources: UNHCR (arrivals through October); Greek Migration Ministry (November arrivals, people, capacity) THE WALL STREET JOURNAL. EIRINI VOURLOUMIS FOR THE WALL STREET JOURNAL Stuck in Greece, Migrants Despair of Next Chapter Processing delays, violence and the approach of winterweather hardship dim island newcomers’ hopes for the future BY NEKTARIA STAMOULI SAMOS, Greece—Three months ago, Shehab Kabalan, a 20-year-old from Syria, traveled in a small boat from Turkey to Greece in the hope of receiving asylum in Europe and starting a new life. Instead he is trapped on the island of Samos, living in a flimsy tent among dozens of other migrants and refugees, prevented from traveling to the mainland and now bracing for a hard winter. Earlier this month, he slashed his wrists. A doctor patched him up and sent him back to the tent camp. “I felt desperate,” Mr. Kabalan said. “We are dying slowly here.” Greece’s migration crisis has faded somewhat from view since a March 2016 pact between the European Union and Turkey stanched the enormous flows of migrants crossing the Aegean Sea. But a surge in recent months has created abysmal conditions here, sparking ac- LOANS Continued from Page One asm coming out of the election,” said Gerard Cuddy, CEO of Beneficial Bancorp Inc., a community lender in Philadelphia. “I think reality is setting in.” The slowdown in lending growth raises questions about firms’ prospects for 2018, especially given that long-term interest rates haven’t moved much, even as short-term ones are climbing. The difference, or spread, between 10-year and two-year U.S. Treasury debt, a rough proxy for bank profitability, is around 0.6 percentage point, its lowest level in a decade. If loans balances aren’t growing briskly and the interest-rate spread is narrow, it is far tougher for banks to increase net-interest income. “The plane used to be flying at 30,000 feet, now it’s at cusations that EU and Greek authorities are leaving thousands of migrants exposed to disease, cold weather and violence as a deterrent to other would-be refugees. Earlier this fall, 200 people were crossing to the Greek islands of Samos, Chios, Lesbos, Leros and Kos daily, a fourfold increase over the spring. Arrivals have declined in recent weeks but remain high despite the worsening weather. “The EU-Turkey deal incorporates strong elements of deterrence,” said Gabriel Sakellaridis, head of Greek operations for Amnesty International. “No political considerations should trample upon human rights like that.” The Greek government and EU officials have said they are accelerating their efforts to offer more appropriate accommodation for the migrants. On Chios, Lesbos and Samos, the centers house sev- eral times the intended capacity and many have been living in them for nearly two years. Local authorities refuse to allow bigger facilities to be built, leaving thousands living in summer tents that are mushrooming around the official facilities. Aid groups have struggled to persuade local hotels and apartment owners to rent out empty rooms to house the migrants. Now, as winter approaches, Greece risks repeating last year’s disaster, when six people died in the camps, including four who inhaled toxic fumes when burning garbage to keep warm. Moreover, two-thirds of the new arrivals in September were women and children, increasing the vulnerable population, according to the United Nations High Commissioner for Refugees. Most of the newcomers are from Afghanistan, Iraq or 10,000,” said Christopher Marinac, director of research at investment-banking boutique FIG Partners. “There are many banks that are concerned about how much they can grow the loan book in 2018.” At the biggest U.S. banks, loan growth in the third quarter was spotty. At J.P. Morgan Chase & Co. and Bank of America Corp., total loans grew 3% from a year earlier. Citigroup Inc. posted growth of 2%, while total loans at Wells Fargo & Co. fell 1%. Loan growth was anemic among many smaller banks. At BB&T Corp., total loans in the third quarter were roughly flat compared with a year earlier. In an earnings call last month, CEO Kelly King said more clients were taking advantage of low rates in the bond markets and paying off their bank loans. Hurricanes in the southern U.S. also had an effect. He added the bank is purposely restructuring its loan portfolio to focus on more- profitable loans. Still, Mr. King nodded at deeper issues around the downshift, saying “the mega issue here is that, you know, we’ve been on a nine-year slow economy.” An area of particular con- Syrian Shehab Kabalan has been living on Samos, where he says he and others are ‘dying slowly.’ Strains Appear In EU-Turkey Pact Almost two years after the understanding was reached, only five Syrian asylum-seekers have been returned to Turkey. Greek judges recently proposed some adjustments to the asylum process to accelerate it. Meanwhile, migrants on the islands who are considered vulnerable or who have family ties elsewhere in Europe can ask to be transferred to the Greek mainland while their applications are considered. But there are long delays in that process as well. As a result, thousands are stuck in short-stay reception centers. A review of the EU-Turkey deal is unlikely, particularly given worsening relations between Europe and Ankara. Syria. Aid groups are urging authorities to move people to the mainland before winter sets in. Samar Elmonazed, a 20year-old Syrian woman who has been living in a tent for three months, said her 11month-old daughter often wakes in fright from the noise of wild animals or the fights that break out frequently. “Snakes, rats, scor- pions and fights: These are the things I deal with every day,” Mrs. Elmonazed said. The situation is better on the mainland, but challenges remain. Arrivals, including Syrian families, from across the Greek-Turkish land border have almost tripled in recent months. Many refugees who have secured permission to join family in Germany are none- theless stuck in Athens due to monthslong delays in approving the paperwork needed to leave the country. About 30,000 are stranded in camps throughout Greece, according to UNHCR estimates. Another 30,000 have smuggled themselves out of the country since the borders were sealed in March 2016, according to official estimates. cern for all banks is business lending. In the third quarter, the 12-month growth rate for business loans fell to 2.48% from 2.79% the prior quarter and 7.67% a year earlier. The drop-off is even more pronounced based on weekly Federal Reserve data. Commercial and industrial loans, or business lending, in early November were up less than 1% from a year prior, the data show. From mid-2014 through mid-2016, growth of such loans was regularly in the double digits. This is putting 2017 on track to be the worst year for business-loan growth since 2010, when the economy was still wrestling with the immediate aftermath of the financial crisis. It remains unclear why. Throughout the year, some banks have said more subdued business lending was due to a lack of clarity from Washington on the fate of initiatives on taxes and health care. Such worries should eventually fade, though, said Darren King, finance chief at M&T Bank Corp., where loans in the third quarter were down 2% versus a year earlier. “Business owners are eventually go- ing to get to the point where they say, ‘I can’t wait to find out what is going to happen in Washington,’ ” he said. Even so, “that doesn’t mean I think we’re going back to 2015 or 2016 levels” of loan growth, Mr. King added. Some bankers also have cited heightened competition. More business customers are tapping the bond market instead of bank loans to take advantage of low interest rates there, while insurance companies are offering to fund 30year commercial mortgages and hedge funds are lending to riskier companies. Others think the slowdown in business lending is a hangover from above-average growth in recent years. Many potential corporate clients are already loaded up on debt, said Kevin Barker, an analyst at Piper Jaffray & Co. That tamps down demand for loans. It also makes some banks wary of lending even more to these companies, he added. Under the European Union’s agreement with Turkey, migrants and refugees who apply for asylum once they arrive in Greece are to be returned to Turkey while their applications are processed. Squeeze Play Differences in yields of 10-year and two-year U.S. Treasurys Twelve-month growth rate for business lending, quarterly 3.0 percentage points 20% 2.5 15 10 2.0 5 1.5 0 1.0 –5 0.5 –10 0 –15 –0.5 –20 2007 ’10 ’15 Sources: FactSet (spread); Federal Deposit Insurance Corp. (growth rate) 2007 ’10 ’15 THE WALL STREET JOURNAL. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. NY Monday, November 27, 2017 | A6A Proud to be the World’s Best Bank. Helping you reach your dreams is our inspiration. The awards just happen. Visit us at us.hsbc.com WORLD’S BEST BANK 2017 Issued by HSBC Bank USA N.A. Member FDIC. HSBC was named The World’s Best Bank in the Euromoney Awards for Excellence 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 A6B | Monday, November 27, 2017 THE WALL STREET JOURNAL. NY We Deliver. Meals. Nutrition. Dignity. Hope. Love. #FoodIsMedicine godslovewedeliver godslovenyc godslovenyc God’s Love We Deliver is the New York City metropolitan area’s leading provider of nutritious, individually tailored meals to people who are too sick to shop or cook for themselves. All meals are provided free of charge, without regard to income, and we have never had a waiting list. To donate or volunteer your time, visit us at godslovewedeliver.org. If you are in the NYC metropolitan area and would like to become a client, please email firstname.lastname@example.org or call 212.294.8102. 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 27, 2017 | A7 * * * * WORLD NEWS Indonesia Volcano U.S. Curbs Flight Traffic Government volcanologist Gede Suantika said a red-yellow light visible in ash above the mountain was the reflection of lava in the crater and that Agung could spew ash for at least a month. But the volcanologist said he didn’t expect a major eruption. Authorities warned anyone still in the exclusion zone around the volcano, which extends about 4.6 miles from the crater in places, to leave. Mount Agung last staged a series of eruptions in 1963-64, which killed more than 1,700 people, according to Indonesia’s disaster agency. It started showing increased activity in September, triggering an exodus of more than 130,000 residents in the area. More than 25,000 people remain evacuated outside the exclusion zone. Last month, Indonesia’s government estimated Bali sustained some $150 million in economic losses due to the volcanic activity, mostly due to a fall in tourism. The ash was blowing southeast Sunday, away from the airport. Indonesia sits on the Pacific Ring of Fire, and has nearly 140 active volcanoes. In recent years, volcanic eruptions stranded tens of thousands passengers in this fast-expanding air travel market. JAKARTA, Indonesia—Eruptions at a volcano in Bali disrupted thousands of vacationers’ plans after flights to and from the popular resort island were canceled. Authorities on Monday increased the alert level at Mount Agung to the highest level of four, as the volcano continued erupting, spewing black ash more than 2 miles into the air. Bali’s Ngurah Rai International Airport, which handles as many as 420 flights a day, was closed on Monday. Arie Ansanuroohim, spokesman for Indonesia’s second-largest airport, said it would remain shut through Tuesday. Officials said 45 flights were canceled on Sunday by Cathay Pacific Airways, Jetstar, AirAsia and Garuda Indonesia, affecting more than 5,500 passengers. On Saturday, 14 flights were canceled, affecting some 2,350 passengers. Garuda said it was also canceling flights for the neighboring island of Lombok, which was in the path of ash drifting from the Mount Agung volcano. Mount Agung, which is located in the northeastern part of the island, spewed volcanic ash Tuesday and again Saturday afternoon and Sunday. M A L SU M ATRA A I Y N S D I A O N 300 miles 300 km E Jakarta S I A Mount Agung JAVA I n di a n O cea n BALI LOMBOK THE WALL STREET JOURNAL. Ankara assails case of Turkish suspects charged with helping Iran evade sanctions A trial opening in Manhattan this week that could implicate prominent Turkish officials is exacerbating already inflamed tensions between the U.S. and Turkey. SEBNEM COSKUN/ANADOLU AGENCY/GETTY IMAGES BY I MADE SENTANA Trial Ruffles Turkey By David GauthierVillars in Istanbul and Nicole Hong in New York The arrest of a Turkish gold trader in Miami last year on charges of conspiring with Turkish banking and government officials to help Iran evade U.S. sanctions upset the authorities in Ankara. At the time, President Recep Tayyip Erdogan suggested U.S. prosecutors may have had “ulterior motives” to implicate his government. Now, indications that the 34year-old businessman, Reza Zarrab, may be cooperating with U.S. prosecutors are infuriating Mr. Erdogan. “You are putting my citizen on trial and trying to make him confess,” Mr. Erdogan said in a recent speech. “Is this democracy? Is this justice?” The State Department has denied Turkey’s accusations. U.S. prosecutors have charged Mr. Zarrab, who has pleaded not guilty, and eight others in the case. Seven of the defendants are at large, leaving one defendant who is expected to appear for trial in Manhattan federal court on Monday: Mehmet Hakan Atilla, a former manager at Halkbank, a large stateowned Turkish bank. Mr. Atilla, who has also pleaded not guilty, has been in U.S. custody since his arrest in March. The trial is adding to a long list of disagreements straining U.S.-Turkey relations. Washington and Ankara, a key member of the North Atlantic Treaty Organization, have been at odds over how to combat the Islamic State terror group in Syria. The Turkish gold trader Reza Zarrab during his brief detention by Istanbul police in 2013. U.S. government has raised concerns over how Mr. Erdogan responded to a failed coup last year by cracking down on opposition groups, imprisoning thousands of people and repressing the media. On Turkey’s side, Mr. Erdogan has been irked that Washington hasn’t met his repeated demands to extradite a Turkish Muslim cleric living in Pennsylvania, whom he accuses of planning a July 2016 coup attempt. Fethullah Gulen, the cleric, has said he didn’t play a role in last year’s events. The trans-Atlantic crossfire has alarmed members of the business community, who fear that trial evidence implicating Turkish financiers and government officials could tarnish the country’s reputation in financial markets, spook foreign investors and inflate Ankara’s borrowing costs. The Turkish lira has lost 13% of its value against the U.S. dollar in the past two months, a drop analysts largely blame on the heightened bilateral tensions. The U.S. government hasn’t said whether Mr. Zarrab is cooperating. He is listed as released on the Bureau of Prisons website, but a spokesman for the Manhattan U.S. attorney’s office said he remains in federal custody. A lawyer for Mr. Zarrab, who has pleaded not guilty, declined to comment on his client’s status. There have been several recent signs that Mr. Zarrab, who had been scheduled to begin trial with Mr. Atilla, may be cooperating. For one, his lawyers haven’t participated in any court hearings or filed pretrial motions since September. Former law-enforcement officials also say Mr. Zarrab’s “released” status on the Bureau of Prisons website could mean he has been relocated to facilitate cooperation. If Mr. Zarrab is cooperating, he could bolster the U.S. case by helping to authenticate Turkish court documents that prosecutors have cited in pretrial proceedings. U.S. prosecutors have argued that Turkish government and banking officials were “integral to the sanctions evasion scheme.” One of the defendants is a former Turkish economy minister. At Mr. Atilla’s trial, prosecutors are expected to present jurors with 2013 wiretap recordings, including conversations in which Mr. Zarrab allegedly indicated he had dis- cussed his efforts with Mr. Erdogan. Mr. Zarrab’s troubles began in January 2013, when fog enveloping parts of Istanbul forced a plane arriving from Ghana to land at an airport on the European, rather than the Asian, side of the city. Inspecting the aircraft, customs officers found an undeclared load of gold. Turkish prosecutors traced the cargo to Mr. Zarrab, according to the 2013 court documents. U.S. prosecutors suspect the shipment was part of a barter arrangement under which Mr. Zarrab violated U.S. sanctions by allegedly purchasing natural gas from Iran, paying for it in gold. In late 2013, he was formally arrested on corruption charges, which he denied. Days later, Mr. Erdogan, who was then prime minister, said the investigation was a conspiracy against him and called Mr. Zarrab a philanthropist. Charges against him were dropped. In March 2016, the gold trader landed with his family in Miami. Asked about the purpose of his visit, he said: “Disney World.” —Dion Nissenbaum in Washington contributed to this article. Seoul’s Draft Is Challenged SEOUL—South Korea’s compulsory military service, long regarded as sacrosanct in a nation still technically at war with North Korea, faces a legal test over whether citizens can refuse to serve because of their beliefs. An army stint is a rite of passage for most young men here, where conscription has existed since 1949 and military influence extends well beyond the barracks. Schools and companies arrange three-day boot camps for workers and students to experience military life. That culture has left little room for conscientious objection. The country imprisons more young men for refusing the draft than the rest of the world combined, according to Amnesty International, which said in a February report that about 400 were behind bars last year. Women are exempt from service. The draft has made South Korea a garrison state, said Park Min-young, a culture critic. “Military culture seeps into companies, schools and personal relationships here,” he said. In recent months, though, a judicial rift over the subject has begun to play out in lower courts here, setting up a debate over what many see as a bedrock of Korean society. Courts first ruled in favor of objectors in 2004, but the number of acquittals has soared this year as judges an- YONHAP/NEWSCOM/ZUMA PRESS BY EUN-YOUNG JEONG Protesters rallied in May in Seoul seeking alternative service. ticipate a determination by the Constitutional Court on whether to recognize conscientious objection as a right. While no acquittal has yet been upheld by the Supreme Court, the shift has fueled hopes—and dread—that the government may be poised to scrap prison sentences for objectors. Caught in the middle are people like Kim Hyeon-woo and Kim Sun-woo, 23-year-old twins from the port city of Busan. Like most conscientious objectors in South Korea, the Kims are Jehovah’s Witnesses, who refused military service because it conflicted with their religious beliefs. Last December, Kim Sunwoo was found guilty and jailed for 1.5 years. Four days after Sun-woo’s imprisonment, South Korea's Objectors South Korea has sent thousands of young men to prison over the years for refusing military service, but the country's lower courts have been acquitting some conscientious objectors of late. Conscientious objection cases* Acquittals Convictions 40 1,000 2017: 39 as of Nov. 17 30 500 20 10 2004: First ruling in favor of objectors 250 0 0 2004 750 2016: Many cases left pending in anticipation of new ruling ’10 ’15 2004 ’10 ’15 *Doesn’t include those who objected for nonreligious reasons, which experts say amounts to four to ﬁve cases a year. THE WALL STREET JOURNAL. Source: Jehovah's Witnesses his brother Hyeon-woo was found not guilty by a different judge in the same court. “I thought I’d also go to prison like my brother,” Hyeon-woo, a physical therapist, said. “My brother later joked about how I’d left him behind when I visited him.” Three bills on alternative service are pending at the National Assembly that would give young men the option of working with the disabled or the elderly in social-welfare facilities, or conducting disaster-relief work, instead of serving in the military. “Introduction of alternative military service should be carefully scrutinized in consideration of public consensus on the issue,” said a spokesman at the presidential Blue House. The proportion of South Koreans in favor of alternative service rose to 46.1% last year from 10.2% in 2005, according to a survey conducted by the country’s National Human Rights Commission. Many oppose changing the draft, saying military duty must come first. “The constitution stipulates national defense as a duty. If refusing to serve in the military is conscientious, is the constitution then unconscientious?” a conservative lawmaker, Chung Jin-suk, told a recent parliamentary audit. Shin Taek-soo, 27, who completed his military stint in 2011, said alternative service would only work if the service period were longer than that for military service. “Otherwise, people will flock to do alternative service,” he said. Your full retirement picture. In one place. When you plan for retirement with Fidelity, you’ll have instant access to all your retirement savings details and goals, including: • How much you may need in retirement • How much you’re on track to have • How retirement ﬁts with all your other savings and investing goals • Steps you can take to help strengthen your plan It’s your retirement. Know where you stand. 800.FIDELITY | Fidelity.com IMPORTANT: The projections or other information generated by the Planning & Guidance Center’s Retirement Analysis regarding the likelihood of various investment outcomes are hypothetical in nature, do not reﬂect actual investment results, and are not guarantees of future results. Your results may vary with each use and over time. Investing involves risk, including the risk of loss. Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithﬁeld, RI 02917 © 2017 FMR LLC. All rights reserved. 812684.1.0 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. A8 | Monday, November 27, 2017 Kick Off the Season With an Ambitious Deal Cyber Monday exclusive: a brandbook notebook with every purchase Treat yourself or get a head start on your shopping list this season. Ending today—order something from The Journal Collection and enjoy a complimentary brandbook notebook of your choice. Slim and classic ruled with a reﬁned linen cover, it’s the perfect inspirational tool for your next ambitious idea. Use code freenotebook at checkout.* Shop now at THEJOURNALCOLLECTION.COM *Offer valid at thejournalcollection.com on any purchase while supplies last. To redeem online, add a brandbook notebook to your cart and use code freenotebook when placing your order. May not be redeemed for cash or cash equivalent and is not transferable. Offer ends Monday, November 27th at midnight. Valid in the U.S. only. © 2017 Dow Jones & Co., Inc. All rights reserved. 6DJ6177 The Journal Collection is operated independently of The Wall Street Journal news department. 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 27, 2017 | A9 * * * * * WORLD NEWS WORLD WATCH Venezuela Fuels an Oil Shift Maduro names general with no industry experience to lead ministry and state firm CARACAS, Venezuela—President Nicolás Maduro named an active general to lead the state oil industry, the nation’s last major economic sector that had been outside the military’s control. National Guard Maj. Gen. Manuel Quevedo will be the new energy minister and president of state-run Petróleos de Venezuela SA, known as PdVSA, which accounts for almost all the country’s foreigncurrency income. Gen. Quevedo, who has no oil-sector experience, takes the reins at PdVSA from Nelson Martinez, a U.S.-educated company veteran who was undermined by last week’s arrests of his associates at the firm’s U.S. arm, Citgo Petroleum Corp. Another U.S.-educated veteran oilman, Eulogio Del Pino, was fired as the oil minister. The appointment follows a four-month purge at PdVSA amid a deepening economic crisis and declining output. More than 50 company officials and contractors have been arrested and jailed in Venezuela since August on charges of alleged corruption, including most top Citgo executives. Mr. Maduro said Gen. RICARDO MORAES/REUTERS BY ANATOLY KURMANAEV State oil company PdVSA has been racked by a corruption probe that has led to jailing of executives. Quevedo would spearhead the continuing anticorruption campaign in an effort to turn around the company’s fortunes. “We’re going for a total restructuring of PdVSA,” Mr. Maduro said on Sunday. “It is time for a new oil revolution.” But some analysts said they saw the appointment as a decisive power grab by Venezuela’s military and security officers that would only worsen the country’s economic problems. “These are negative changes,” said Asdrubal Oliveros, director at Caracas-based consultancy Ecoanalitica. “You’re militarizing the industry and generating more uncertainty” for investors, he said. PdVSA’s output fell a record 6.2% in October from September, a 13th consecutive monthly decline, according to government figures reported ‘It is time for a new oil revolution,’ President Nicolás Maduro said on Sunday. to the Organization of the Petroleum Exporting Countries. The company is teetering on defaulting on about $30 billion of its bonds, with Mr. Maduro this month saying he wants to restructure the national debt. With three of four Venezuelans saying they want Mr. Maduro out of office, the president has increasingly relied on the military to bolster his power. Retired and active officers now make up almost half his cabinet and hold most of the top portfolios. “The military have reached the last frontier of power with the appointment of General Quevedo,” said Rocio San Miguel, a Caracas-based security analyst. Venezuela’s economy has contracted nearly 30% since 2016, according to the International Monetary Fund. NEPAL Turnout Exceeds 65% In First Provincial Polls Residents of mountain villages and foothill towns voted Sunday in Nepal’s first provincial polls, with the hope of bringing government closer to the Himalayan nation’s remote areas. Nepal’s chief election commissioner, Ayodhi Prasad Yadav, said turnout was more than 65% among the 3.2 million voters who were choosing lawmakers in seven newly formed federal states and for the national assembly. The lawmakers who were elected on Sunday, and those who will be elected on Dec. 7 in the remaining parts of the country, will be able to name their states, draft provincial laws and choose local leaders. —Associated Press CHINA Port Blast Kills Two, Injures at Least 30 An explosion in a port city south of Shanghai killed two people and injured at least 30 others as it knocked down buildings and left streets littered with damaged cars and debris, the government and news reports said. The early Sunday morning explosion struck a riverfront neighborhood in Ningbo, one of China’s busiest ports, China’s official Xinhua News Agency and other outlets reported. Xinhua said it happened at a factory. A police statement said the cause was under investigation. Two people were killed and two more seriously injured, the district office announced on its social-media account. It gave no details of the deaths. At least 30 other people were taken to hospitals, according to Huanqiu.com. —Associated Press ISRAEL Minister Steps Down Over Sabbath Work Health Minister Yaakov Litzman, who heads a powerful ultra-Orthodox political party in Prime Minister Benjamin Netanyahu’s government, resigned, saying he opposed continued maintenance work on the country’s railways on the Sabbath, when all labor is strictly prohibited by Jewish law. Ultra-Orthodox parties have provided Mr. Netanyahu with support to stabilize his coalition, while the government carves out large budgets for the minority community. They have in the past threatened to topple coalition governments by robbing them of their majority. Mr. Litzman’s resignation could pressure the other two ultra-Orthodox coalition partners to squeeze concessions from Mr. Netanyahu to prove to their constituents that they respect the Sabbath as much as the former health minister. The prime minister said later at a government meeting that he regretted Mr. Litzman’s decision, describing him as “an excellent health minister.” —Associated Press A Wall Street Journal Roundup Honduran President Juan Orlando Hernandez, a center-right U.S. ally, cited multiple exit polls on Sunday to declare himself victorious in a bid for a second term in the Central American nation, despite the opposition saying it was winning. A poll released by network Televicentro gave 49-year-old Mr. Hernandez 43.93% of the vote, with Salvador Nasralla, who leads a broad left-right coalition called the Opposition Alliance Against the Dictatorship, at 34.7%. “The count is more than clear and resounding that we won this election, that is what the polls say and that is what the results we are seeing from the count are saying,” Mr. Her- nandez told supporters at a Tegucigalpa hotel. The opposition alliance said early numbers gave it a strong lead but added it would only accept physically counted ballots. “We are winning,” Mr. Nasralla told supporters. Mr. Hernandez’s popularity is based largely on a drop in violence in the impoverished country, whose homicide rate was once among the world’s worst. But allegations of corruption and drug trafficking have cast a shadow over his government, and his re-election bid fueled charges that his conservative National Party has trampled the country’s institutions in a bid to entrench itself in power. Turnout appeared to be heavy, with relatively minor irregularities reported. REUTERS Honduran President Claims Election Win Rescue workers comb the site of an explosion in Ningbo, China. In schools to break barriers. A parent loses a job. A family loses a home. These are just some of the hardships Alina was coping with when she started at her new school. Jamall from Communities In Schools helped her settle in and map out a path to graduation. Along with his support, Alina’s “no excuses” attitude has earned her a scholarship to her dream college. There are millions of at-risk kids like Alina who need help breaking barriers to stay in school and succeed in life. See how we help all kids succeed. CommunitiesInSchools.org Outsmart Burglars The Moment You Plug It In SimpliSafe is a complete home security arsenal. With motion sensors, glass break sensors, entry sensors, and a high-deﬁnition security camera, you’ll have everything you need to keep your family safe—and 24/7 professional monitoring is only $14.99 a month. Cyber Monday Sale! Order now and Get $200 Oﬀ at SimpliSafe.com/Wall For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com A10 | Monday, November 27, 2017 THE WALL STREET JOURNAL. IN DEPTH STAR How Gen Z Watches Traditional TV* 27% Other 2% ERICKA BURCHETT/THE WALL STREET JOURNAL YouTube star Liza Koshy at MTV’s ‘TRL,’ which was relaunched last month. Media firms hope to reach her millions of online followers. A Strategy—and Unique Content—for Each Platform Online comedian Liza Koshy tailors content to different outlets, saying each app ‘is a different diary of me.’ the coins back at a loss. He since has given up on gold and instead bought land in Arkansas. The government’s proof sales amount to a heads-I-wintails-you-lose deal, according to George Cooper of USAGold, a Denver investment firm. He said he won’t sell the proof coins without reciting an extensive disclaimer. Marvin E. Johnson, 61, of Kanawha, Iowa, said American Bullion Inc. sold him 930 American Eagle silver proof coins for his retirement account. He paid the equivalent of nearly 2 1/2 times the market price of silver. Then he sued when he saw his investment drop like a rock. “He bought them at a premium where I don’t think he’d ever make a profit,” said Thomas Reavely, Mr. Johnson’s lawyer and coin collector. Mr. Johnson and American Bullion later settled the coin dispute confidentially. Orkan Ozkan, American Bullion’s chief executive, said it wasn’t the company’s fault. Mr. Johnson, he said, paid the going rate: “We buy it high, mark it up and sell it high.” Then he pointed a finger at the government. “Maybe you should ask that question of the Mint: Why are you charging so much for these coins?” he said. The U.S. Mint does operate a bit like a coin dealer. Salespeople answer phones. An online store, with a pop-up chat window, adorns the website. Customers can sign up to have annual proof sets charged to their credit cards. Mint profits on gold Eagle proofs hit nearly 18% last year. Net profits on the Silver Eagle proofs were even better, reaching about 41% last year. The Mint transfers its profits to the Treasury’s General Fund. “We are not in it to make money,” said Kristie McNally, the Mint’s chief financial officer. Mint officials said they pitch proof coinage as collector’s items, not investments. But Congress kept the door open to putting the coins into retirement account investments a few years after banning other collectible items in 1981. 25 0 Continued from Page One lypse bunker along with the guns and freeze-dried macaroni. But some unhappy investors have deposited them into retirement accounts, where the shiny gold and silver coins have performed like lead sinkers. Paul Rumage, a 64-year-old retired software engineer from Michigan, said he was looking for a haven from stocks for his individual retirement account in 2013. A private dealer persuaded him to buy 45 four-coin sets of American Eagle gold proofs, and 979 ounces of silver Eagle proofs, records show. The 1,135-coin treasure of gold and silver cost him $308,000, which included a 6% commission for the broker. Less than a month later, his IRA statement valued the coins at $212,000. “I knew something was wrong,” Mr. Rumage said. After filing a lawsuit against the dealer and broker, he sold DVD Video game console Subscription video on demand Jokes about her life and updates on projects INSTAGRAM 14.5 million followers Polished portraits with funny captions, ad placements She got her start as a Houston high schooler on Vine, the now-defunct app for looping six-second videos, where she found a following for sight gags that often involved her mugging with rubbery facial expressions. She switched to YouTube to create more elaborate—and monetizable—sketches. With her parents’ blessing, she dropped out of college at 19, moved to Los Angeles and signed with Creative Artists Agency, the Hollywood talent firm. She competes in an online ecosystem that has become more varied in recent years, with videogamers, musicians, makeup artists and assorted “vloggers,” a term for anyone who trains a camera on themselves, typically to document their lives, do stunts or orchestrate pranks. Star vloggers include Mr. Dobrik, who has 8.8 million subscribers and, in a recent video, persuaded a friend’s mother to shock him with a stun gun. More than a decade after YouTube helped create a new category of fame, digital creators now anchor the entertainment landscape for young audiences. CAA uses a data team to track emerging online stars and evaluates their potential for long-term earning through, for example, Hollywood roles, book deals and live events. CAA recently signed Tanner Braungardt, a 17-year-old from Kansas whose specialty is trampoline acrobatics. The firm has brokered a clothing deal for him, along with endorsements and a tour of indoor trampoline parks. Most of the creators are chasing Gen Z viewers, whose tastes were shaped by the crises of the 2000s. “They’re postrecession, post-ISIS, post-‘my older brother has too many school loans.’ They’re kind of world weary,” says Nick Shore, chief creative strategist at Astronauts Wanted, a youth-focused production company founded by former MTV Networks head Judy McGrath. Compared to their millennial elders—who came of age with reality television—Gen Z favors DIY “creators” like Ms. Koshy, who launch themselves on social media. In contrast to the obviously manufactured reality programs, Gen Z insists on authenticity, or the idea that people stay true to the personality they present online. Ms. Koshy often uses a selfmocking style to unpack the everyday feelings that make us embarrassed or insecure. In a recent video on YouTube titled “Facing My Anxiety,” she makes a fake phone call to avoid a casual encounter and appears alongside herself to voice a panicked inner monologue. “Time to go home and overthink this interaction,” she says. Gen Z—born after about 1996—favors irreverent, DIY stars seen as ‘authentic.’ She says being perceived as “ethnically ambiguous” helps her broaden her Gen Z audience, which is more ethnically and racially diverse than previous generations. Her father, a petroleum executive, moved to the U.S. from India as a teen, and her mother, a yoga instructor, is white. A self-described “little brown girl,” she stands out in YouTube’s predominantly white upper echelon of stars. In a video titled “Mixed Kid Problems,” she recalls bouncing among racial groups and constantly fielding queries about her ethnic background. “Now you may not relate if you’re just a white girl watching this, or a just a black guy watching this,” she says in the video. “But you two should meet up, make a mixed baby and have him subscribe to my KRIS TRIPPLAAR/SIPA/ASSOCIATED PRESS THE WALL STREET JOURNAL. Baby boomers 50 COINS 1.6 million followers her video. The 32,000 comments on the episode included, “i broke the replay button” and “i’ve watched this video about 15 times.” Ms. Koshy’s share of YouTube ad revenue ranges from about $10,000 to $15,000 a month for each of the new videos she posts weekly, she says. That doesn’t include the ad money accumulated by her older videos, or the typically five-figure sums she receives for creating sponsored clips. She adapts her style to multiple platforms. Her YouTube channel is the flagship for her weekly “Wednezzzdays With Lizzza” videos, which take her three or four days to write, shoot and edit. She uses a second YouTube channel for more improvisational material, often featuring fellow creators such as David Dobrik, Ms. Koshy’s boyfriend. Instagram is for polished portraits of herself—an image she often punctures with a scatological joke at her own expense in the caption. She uses Snapchat to confess when she is blowing her Wednesday video deadline, or to deliver the occasional serious message, like her recent rant about an Uber driver who suggested that Ms. Koshy find a rich man to pay her bills. Each app, she says, “is a different diary of me.” Twitter is the only feed that she supplies grudgingly. “I wish I could tweet the one-liners that I come up with for YouTube, but the bosses will call you out for recycling content,” she says, referring to her fans, who keep track of everything she does online. 75 Source: Nielsen Total Audience Report, 1Q 2017 17.5 million subscribers wear on Instagram. She also creates stand-alone ads, such as the rap video she made for Procter & Gamble Co.’s Always pads, and Snapchat clips promoting movie snack deals for AMC Theatres. In the Beats ads, she is seen working on one of her homemade videos, dressed up as her Jet character, and getting chased by fans. When the ad premiered on MTV, it cut directly to Ms. Koshy running onto the set of “TRL.” One reason her sketches work for advertisers is the replay factor. In the six-minute 73 Questions parody video, Ms. Koshy squeezed in dozens of puns and double meanings, in part to encourage easily distracted viewers to re-watch. The higher the view count, the more money she earns from the advertisements that play before Generation X Tablet TWITTER ADVERTISEMENTS For Beats and others; comical bits playing on her popular characters and obsessive fans 100% Smartphone YOUTUBE On two channels; weekly comedy videos that invite repeat viewing Gen Z prefers smartphones and tablets and accesses more entertainment on those devices. Technology ownership by generation: Millennials Other streaming services† 10% Note: Platform teens identiﬁed as their primary means of consumption *includes on demand and premium TV †includes Hulu, Amazon Prime and Twitch Source: 2017 Awesomeness survey of 1,500 teens Screens of Choice Generation Z YouTube 34% Netﬂix 27% BEATS BY DR. DRE Continued from Page One programming, they spend less than a third of their screen time on traditional television, and the rest on a mix of Netflix, YouTube and other streaming services, according to a survey by the media company Awesomeness. To reach them, creators compete with other professionals and also with the everyday people who fill up social-media feeds, giving them seconds to prove a piece of content is worth a longer look. Two years after introducing herself on YouTube with a squirrel impression, Ms. Koshy has cracked the code, accumulating 1.6 billion views and the advertising business that chases those numbers. The entrepreneur’s strategy presents a way forward for entertainment companies and marketers, who have flocked to Ms. Koshy’s expanding brand. The latest placement: a series of comical advertisements for Apple Inc.’s Beats earphones that play on her fast rise and obsessive fans. Online, her Beats ads have four times the rate of clicks for those starring other celebrities, including quarterback Tom Brady, Apple says. “To me, she’s like the next generation of Lucille Ball,” says Susanne Daniels, global head of original content for YouTube, which developed a TV series with Ms. Koshy for its subscription service, YouTube Red. “She’s not afraid to go for it, and you feel that lack of fear.” The Texas native is best known for antic, observational videos poking fun at consumer culture and trends that run on her two YouTube channels, which total 17.5 million subscribers. Her Twitter feed has 1.6 million followers, and 14.5 million track her Instagram. Her videos on Snapchat average about two million views each. Last month, she began appearing as a correspondent on a reboot of MTV’s music video countdown show “TRL,” and she stars in a teenhorror TV series that recently aired its second season on Hulu. Her comedy is heavy on selfdeprecation, slapstick and wordplay, more goofy than snarky. She has a soft spot for potty jokes, but overall her work is PG—an attraction for advertisers, who have been burned by offensive content on YouTube and social media. Among her YouTube peers, she says, “I’m the only kind of clean one.” She has worked paid product placements for Nike Inc. into her routines on YouTube, and posed in Calvin Klein under- Teens consume most of their entertainment on streaming services. Silver proof coins from the U.S. Mint facility in West Point, N.Y. Before the ban, said Ken Swab, former counsel for a House subcommittee on consumer affairs and coinage, investors could keep Persian rugs in their living rooms and IRA accounts. “It was perfect,” he said. “You could walk on your tax deduction every day.” Lawmakers allowed American Eagle proofs as an excep- tion to the rule, making them a favorite for coin dealers pitching a “Gold IRA” to retirees. Balint Mezei, a self-employed contractor, said he bought about $50,000 worth of U.S. proof coins around 2006 for his retirement account after being convinced by a coin dealer they would be safer from the government’s hands than regular bullion. THE WALL STREET JOURNAL. channel.” Her ethnic impersonations and gonzo style occasionally run afoul of her socially sensitive young audience. A backlash erupted in the comments section of her anxiety video as some viewers said she was mocking people with the disorder and using it as clickbait. “Gen Z finds things more offensive,” says Ms. Koshy. “They’re more informed about the world and more opinionated about it, which isn’t a bad thing. But it makes them a little more touchy.” During a recent interview, while shopping for Post-its, notebooks and other props for her next video at a Staples near her Los Angeles home, Ms. Koshy was waylaid repeatedly by fans: A cashier got so flustered that he overcharged her. A tween hid her braces with her hand as she asked Ms. Koshy for a selfie. “My bosses are a bunch of 11-year-olds,” she says. She is petite, about the size of the kids who recognize her in the store, and wears black tights, a mini backpack and a T-shirt that reads “Clickbait,” from a merchandise line sold by Mr. Dobrik. Ms. Koshy has proven to be safe territory for established entertainment companies and advertisers who have fled from edgier online content after getting burned in recent months. Prominent brands including Wal-Mart Stores Inc. and Starbucks Corp. pulled some advertising from YouTube in droves after reports of ads appearing alongside offensive videos, including clips uploaded by extremist groups. As “brand safety” became the buzzword for advertisers, YouTube made drastic changes to the automated advertising system that allows YouTubers to monetize their videos. Ads fell dramatically on videos flagged by YouTube for having potentially offensive language or imagery. The so-called adpocalypse stung the earnings of many YouTube creators, but Ms. Koshy didn’t lose the 15- and 30second ads that play before her videos. YouTube is banking on her comedy skills and marketability with an eight-episode sitcom called “Liza on Demand” for its YouTube Red subscription service, to premiere in 2018. In the scripted series, Ms. Koshy plays a fictional character living with roommates getting by in the gig economy, plunging into odd jobs and random tasks for pay. MTV is hoping that by adding Ms. Koshy and other social media stars to its “TRL” reboot it can make an influential TV program from the 2000s, and the network itself, relevant to a new generation of young people. Mr. Mezei said his account statement after the purchase valued the coins at $35,000. “I just wanted to diversify,” he said, calling the dealer’s 30% markup unfair. Gold prices rose, so he sold the coins last year for more than he paid, though he would have made more had he invested in regular gold bullion. Most buyers are better off not expecting any profits from U.S. proof coinage, experts say. Some collectors say they get joy simply by possessing the coins. The American Eagle proof, a double-struck coin colored with a special dye, has been described as the most beautiful coin ever made. Plus, “you get a certificate” and “a little leather box,” said Rick Boss of Ohio, a proof-coin collector and retired AT&T engineer. “You’re getting a piece of history.” Nonetheless, Jeffrey Christian, a precious-metals investment adviser, said he steers his clients away: “It’s sort of like buying a car and driving it off the parking lot. It will have an immediate depreciation.” 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. NY * * Monday, November 27, 2017 | A10A GREATER NEW YORK Panthers Beat Jets 35-27 R Train Derails in Latest Mishap BROOKS VON ARX/ZUMA PRESS BY MARA GAY TOUGH LOSS: Kaelin Clay avoided Lac Edwards as he ran back his punt for a touchdown at MetLife Stadium on Sunday. Even in a subway system beset with delays and other woes, the derailment of an R train on Sunday raised some eyebrows. The train was entering the 86th Street station in the Bay Ridge section of Brooklyn at about 5:30 a.m. when a chunk of wall collapsed onto the track, lodging itself under the train and causing it to derail. No one was hurt and workers restored service by late Sunday afternoon, according to a spokesman for the Metropolitan Transportation Authority. Officials said they didn’t expect the incident to affect Monday’s commute. But transit advocates and others said the episode was a grim reflection of the state of New York City’s overstressed subway system, which is struggling to keep up with record ridership after decades of underinvestment. Riders in New York City have endured increasing delays in recent years, as well as more crowded trains. After several high-profile incidents earlier this year, including one in which hundreds of people were No one was hurt in the incident. Monday’s commute isn’t expected to be affected. trapped underground in an F train for more than 40 minutes in June without air conditioning, improving the subway system emerged as possibly the city’s hottest political issue in the Nov. 7 election. “There is a general sense that the subway system is coming apart before our very eyes,” said John Raskin, executive director of the Riders Alliance, a transit-advocacy group. Gov. Andrew Cuomo, who controls the MTA, has said Mayor Bill de Blasio should pay half of an $836 million plan to stabilize the subway system. Mr. de Blasio has refused, noting that is about the same amount the governor has diverted from the MTA’s operating fund for other state uses. “New Yorkers deserve a safe and reliable transit system. The first step towards that starts with a fully funded subway action plan, which should be funded by returning the $456 million the state diverted from our subways and buses,” Austin Finan, a de Blasio spokesman, said in an email. “Instead of spending our dollars on upstate ski resorts, the state should return those dollars to city transit riders,” he said, referring to a nearly $5 million payment the MTA made last year to a state ski authority. Morris Peters, a Cuomo budget spokesman, said the MTA owed the state money, but that the payment was small compared with the amount of state funding allocated to the transit agency. He said the $456 million was used to pay debt service on MTA capital projects. Cuomo spokeswoman Dani Lever said the state is committed to improving the transit system and has allocated $8.4 billion in capital money and half of the $836 million in funding for the subway stabilization plan. “While we take action to meet the transit challenge, the city refuses to do the same at the expense of the New Yorkers,” she said in an email. BY KEIKO MORRIS Asking rents for New Jersey office space are nearing records as landlords undertake extensive renoPROPERTY vations and fill older properties with amenities from beach volleyball courts and yoga studios to outdoor lounges with fire pits. The steady climb in asking rents during the past two years reached $26.86 a square foot in the third quarter, just shy of the record $26.90 from the second quarter of 2001, according to real-estate services firm Transwestern. “Landlords are investing capital, adding amenities into office buildings, many built in the ’80s and ’90s, which has given them the ability to increase the office rents,” said Matthew Dolly, Transwestern’s On the Rise Average asking rent for New Jersey ofﬁce space, quarterly data $27.00 per square foot 26.50 26.00 25.50 25.00 24.50 24.00 2000 ’10 Source: Transwestern THE WALL STREET JOURNAL. Following Revamp, Tenants Stay Put Keystone Property Group in the past year completed major renovations at a Morristown, N.J., office building and a Piscataway, N.J., complex purchased in 2014 as part of a three-state portfolio, revamping fitness centers and cafeterias and adding conference centers. One result so far has been retention, eliminating vacant periods and costs to bring in a new tenant, said Tom Sklow, vice president of development and leasing. The tenant-retention rate is 99% at the complex at 30 Knightsbridge Rd. in Piscataway, he said. Meanwhile, a joint venture of Time Equities Inc. and Bergman Real Estate Group is completing a $4.5 million overhaul of a three-building Parsippany campus. Among the tenant perks are a massage room, bicycle-share program and an art studio with local artists providing classes. Occupancy has risen from 50% to 60% since the venture bought the 280,000-squarefoot office park last year, said Aaron P. Medeiros, Time Equities director of acquisitions and policy. —Keiko Morris New Jersey research director. In New Jersey, asking rents rose in eight of the past nine quarters. In 16 of 21 submarkets, third-quarter rents increased from the previous year, Transwestern said. Submarkets such as the Hudson waterfront, Newark and urban Essex County and the Short Hills and Millburn areas were among office districts with the biggest rent increases. The state’s vacancy rate, meanwhile, dropped to 14.8% in the third quarter from 15.5% in the same period last year, Transwestern said. Since the 2008 financial crisis, the recovery of New Jersey’s office market, particularly its suburban areas, has lagged behind New York City’s. Consolidations in a number of industries, including the pharmaceutical sector, left behind sprawling vacant campuses, which weighed on the state’s rents. The preference of a younger generation of workers for walkable, urban settings near mass transportation also put suburban office parks at a disadvantage. But real-estate investors buying and improving older properties in desirable locations have found that tenants have been willing to pay higher rents for extensively renovated, modern spaces with upgraded mechanical and power capacity to accommodate more dense office settings. “There is a combination of new money, new equity and investors who had not been in the market previously entering the market,” said Curtis Foster, executive managing director at Cushman & Wakefield. Conversions of obsolete office parks into apartment buildings or mixed-use projects have removed low-rent office properties from the market, another factor pushing the state’s average asking rents higher, said brokers and analysts. But landlords spending to upgrade buildings is a primary driver, and the bet already has paid off for some. Depending on the property, landlords said they have seen rent increases ranging between 7% and 15% after completing renovations. Mountain Development Corp. and Square Mile Capital Management LLC invested more than $20 million to redevelop and market 56 Livingston Ave. in Roseland, a 400,000square-foot property purchased from Merck & Co. in 2012. Since then, the joint venture has signed large leases with law firms Lowenstein Sandler LLP and Connell Foley LLP. Rents for conventional office buildings were in the low $20s, but after the overhaul of the Roseland property, the partners now expect to get above $30 a square foot, said Michael Seeve, president of Mountain Development. The company has launched a similar strategy at 5 Garret Mountain Plaza in Woodland Park, a 102,000square-foot building where plans call for transforming the rooftop into an outdoor lounge. BYRON SMITH FOR THE WALL STREET JOURNAL (2) N.J. Office Rents Near Fresh Highs As Perks Pay Off Comic Karen Bergreen performing at West Side Comedy Club, one of the new spots that have opened in the city in recent years. New Clubs, Venues Punch Up Comedy Scene BY CHARLES PASSY New York City is getting serious about joking around. The city is enjoying a comedy boom with the opening of several new clubs in the past few years. West Side Comedy Club, a 100-seat venue on Manhattan’s Upper West Side, is one of the latest additions to the scene, launching in early October. And other venues are adding comedy to the mix. Fishbowl, a bar and lounge at the Dream Midtown hotel, has launched a monthly comedy program, with the next one slated for Wednesday night. Established clubs say their business has been growing as well. Case in point: Carolines on Broadway, the 284-seat Times Square club that has a roster of such familiar comedians as Tracy Morgan, Kathy Griffin and Dave Chappelle. Owner Caroline Hirsch says attendance has increased roughly 50% during the past 25 years to about 150,000 a year. Comedy is “bigger than ever right now,” she said. Several factors are driving this trend, industry insiders said. Comedy has become more accessible, with stand-up acts showcasing their work through a range of mediums, including online videos, podcasts and satellite radio. Such platforms serve to boost interest at the club level by building familiarity with the comedians. Audiences have “more of an idea of who they’re coming to see,” said Jim Norton, a veteran stand-up and a host on satellite service SiriusXM. Mr. Norton appeared at the 2017 New York Comedy Festival earlier this month. The 14year-old festival, widely considered the city’s premier annual comedy showcase, has experienced growth as well. It now encompasses 100-plus shows, more than three times the number in its early years. Comedy clubs also have tweaked their business models from the traditional free-stand- How Owners Can Hit It Big Want to run a successful comedy club? It’s all about following a few key rules, according to Eugene Ashe, owner of West Side Comedy Club, a new stand-up venue on the New York City scene. u Keep the food and drink simple: At restaurants or bars, patrons arrive at various times. But at comedy clubs, they typically come all at once. That means club owners must keep the menu short, with lots of finger foods and sandwiches, so the staff can get multiple orders out at the same time. The same goes for drinks, with a caveat: Because service often occurs during shows, noise has to be kept to a minimum. In other words, ing venue. West Side Comedy Club is located in the basement of Playa Betty’s, a Mexican restaurant, and the two businesses have the same ownership. That means there is less pressure for the club to succeed by itself, said Eugene Ashe, the principal owner of both the stand-up venue and restaurant. It also means Playa Betty’s and West Side Comedy Club can cross-market themselves. The restaurant encourages customers to head downstairs by providing a sneak peek with a live feed of shows from the club. The club tries to get patrons to hang out at the restaurant after performances with the offer of a free mini-cocktail. West Side Comedy Club isn’t alone in thinking outside the box. At Q.E.D., a threeyear-old club in the Astoria neighborhood of Queens, the space is used during the day for classes in everything from embroidery to origami. “There are so many creative people in the neighborhood, “You don’t want to have any blender drinks,” Mr. Ashe said. u Create showcases on slower nights: It’s easy to pack a club on the weekends with name talent, but what about themselves—typically, at no cost to club owners, with performances for an audience filled with family and friends. At West Side Comedy Club, which hosts a Tuesday talent night, the comics are required to bring 10 patrons. u Capitalize on the weekends: Club owners often add a third show on Friday and Saturday nights to take advantage of larger audiences. the start of the week? Clubs often offer open-mic or “talent” nights. Such events give budding comics a chance to prove and we’re not going to have a stand-up show at 1 p.m. in the afternoon,” said Chris Gersbeck, who handles Q.E.D.’s marketing. Some newer clubs are dispensing with drink or food minimums for customers, long a key part of the economic equation for stand-up venues. 150,000 Yearly attendance at the comedy club Carolines on Broadway “We find that it alienates our patrons,” said David Kimowitz, one of the owners of the Stand comedy club in Manhattan’s Gramercy Park neighborhood and the Standing Room in Long Island City, Queens. Mr. Kimowitz said ditching minimums puts the onus on the clubs to deliver more ap- u Make sure the comics are happy: It isn’t enough just to offer a comedian a free drink as part of a gig. Mr. Ashe likes to serve them a meal, saying it creates goodwill and spreads the word about the club in the comedy community. “We have had comics come in and be like, ‘I heard about these chicken wings,’ ” he said. pealing fare, so there is no need to force customers to order. “You are going to want more,” he said. Minimum or no minimum, Mr. Kimowitz is enjoying success, particularly at the Stand, where he says the club has to turn away patrons on Fridays and Saturdays, its busiest times. “We do our best to get those customers back in on a late show or another night that week,” he said. What is happening today recalls a few decades ago, when stand-up comedy first went mainstream and clubs flourished. That led to an overexpansion, and the nationwide comedy boom went bust by the mid-1990s. Now, there is hope that the boom will stick. As the world becomes a more unsettling place, the comedy club becomes a haven of sorts, insiders say. “It’s one of the last places where people tell the truth,” said Mr. Ashe of West Side Comedy Club. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com A10B | Monday, November 27, 2017 NY * * THE WALL STREET JOURNAL. GREATER NEW YORK GREATER NEW YORK WATCH NEW YORK STATE A crowded mall in Hudson Valley was evacuated Sunday after a gun discharged into the floor, causing minor injuries to two bystanders, police said. The gun went off shortly after 3 p.m. at the Galleria at Crystal Run in Middletown, about 70 miles north of Midtown Manhattan. Video posted on social media showed armed police in tactical gear running down a corridor of the mall while shoppers ran in the other direction. Chief Robert Hertman of the Wallkill Police Department said officers were still seeking the man whose gun went off. Police didn’t know if the discharge was accidental, he said. The two people who were hurt were being treated for minor lacerations. Chief Hertman said it was unclear how they were injured. —Associated Press NEW JERSEY Predominantly Black Churches Vandalized Acts of vandalism committed at five predominantly black churches in northern New Jersey are being investigated as possible bias crimes, prosecutors said. Broken windows and damaged exterior signs were discovered Saturday at the Morristown Church of Christ in Morris Township and four churches in nearby Morristown—Church of God in Christ for All Saints, Bethel A.M.E. Church, Calvary Baptist Church and Union Baptist Church. The vandalism apparently occurred late Friday or early Saturday, authorities said. It wasn’t clear if any of the acts are linked or how many people may have been involved. Police have increased the number of patrols at the churches. No arrests have been made. —Associated Press CLOCKWISE FROM LEFT: CLAUDIO PAPAPIETRO FOR WSJ; MARK KAUZLARICH FOR WSJ (2) Gun Is Discharged Into Floor of Mall Chefs Cause Stir As Pasta Comes To Fast Casual BY JEANETTE SETTEMBRE It’s spaghetti and meatballs like grandma used to make, served in the culinary equivalent of a New York minute. Made-to-order pasta dishes such as fettuccine Alfredo and rigatoni Bolognese are being churned out at the speed of burrito-slinging at Chipotle. Italian food is having its fastcasual moment. After launching upscale redsauce restaurant Allora in Midtown last year with his father, Tim Gjonbalaj created a more casual noodle concept, ePasta, which is set to open Monday in Manhattan’s Financial District. Customers order at a marble counter in the open kitchen from a menu that features dried and fresh pastas including bowls of bowtie-shaped farfalle with broccoli rabe and Italian sausage, or penne in a spicy arrabiata sauce whipped up in minutes with a pasta cooker. The gnocchi pesto is $12; the same dish costs $23 at Allora. It is no surprise that chefs with fine-dining backgrounds are looking to cash in on a fast-casual future. Sales at quick-service restaurants were forecast to reach $234 billion in 2017, a 5.3% gain over 2016’s $222 billion, according to the National Restaurant Association. In 2015, Panera Bread raked in more than any other fast-casual restaurant with $4.8 billion sales in the U.S.; Chipotle ranked No. 2 with $4.4 billion, according to food-service industry research firm Technomic Inc. Shake Shack’s Danny Meyer recently dabbled in grab-and-go Italian with his pizzeria Martina in Manhattan’s East Village, which also serves meatball subs, salads and rice balls. A number of other quickservice Italian spots are twirling up pasta, pronto. Chef Mark Ladner, left and above left with his staff at Pasta Flyer in Greenwich Village. Above, spaghetto alla vodka with meatballs from ePasta, a new restaurant in the Financial District. Chef Mark Ladner, formerly of Michelin-starred Del Posto, set out to open the McDonald’s of noodles, only healthier, with Pasta Flyer in Greenwich Village. The space, a former Chipotle, has been transformed into a terrestrial-inspired dining room with a hanging UFO and a black-and-white mural of Rome. Mr. Ladner leads the assembly line stirring up sauces for pasta combos such as fusilli with pesto; whole-grain rigatoni in a meat ragout; creamy fettuccine Alfredo; and glutenfree penne. Each are is priced at $7 to $8. For $9.99, customers can get a full meal of spaghetti and miniature-size meatballs in marinara sauce with a side salad, and a soda or sparkling water. Sides such as the lasagna snack—a deep-fried bar of cheesy pasta—can be served in under five minutes. “We’re not necessarily interested in the foodie community. We’re trying to become a normal place to normal Americans who think food is just a meal,” Mr. Ladner said. On a recent evening, 63year-old diner Philip Ashley, who lives in the neighborhood, said: “The pasta and meatballs were right on the money.” He suggested, however, that patrons “may want slightly bigger portions.” Boiling pasta is easy, but serving it perfectly al dente quickly and consistently is the challenge. If the noodles sit out too long, they get soggy. At Pasta Flyer, dry pasta is cooked, frozen and flash-boiled. “I get pasta a lot and I find that it’s often overcooked or mushy, this was super al dente. It’s excellent,” Gina Zafran, 29, of the Upper West Side, said of the fusilli. Nona’s Italian food is served in a hip, pink dining room at the Sosta in the Nolita neighborhood of Manhattan. Instagram-obsessed diners hold smartphones up to the neon sign blaring “Mangiamo Baby!” above the counter, where zucchini noodles can be substituted for the carb-filled variety. An early adopter of the graband-go noodle trend was boxedpasta brand Barilla. Casa Barilla restaurant opened in Midtown in 2013, serving pasta, pizza and salads in a snap. The chain recently expanded to Southern California and to Dubai. Prices range from $7.95 to $12.95. “This is about better ingredients and better foods in the right portions that happen to be delicious,” said restaurant consultant Clark Wolf. Maximize the Impact of Your Employee Health Program Visit www.heart.org/workplacehealth to learn more and enroll today. The American Heart Association’s new Workplace Health Achievement Index is a national continuous quality improvement program called for by its CEO Roundtable. It assesses and recognizes the health of the workplace and the workforce. Because good health is good business. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. LIFE&ARTS Monday, November 27, 2017 | A11 TOYS The Mystery Inside 2017’s Hot Toys Anticipation and surprise for children are themes as companies ride the YouTube unboxing phenomenon BY ANNE MARIE CHAKER TOY MAKERS are bringing an element of surprise to the holiday season. Taking a cue from the YouTube phenomenon known as unboxing— viral videos in which people theatrically unpack hot new products— companies are churning out tiny charms, stickers and golf-ball-size critters, all tucked away inside layers of plastic. The mystery objects have become one of the hottest categories of toys this season. MGA Entertainment Inc.’s L.O.L. Surprise! Big Surprise is a glittery, half-sphere container that includes three tiers of toys, each bigger than the last. The 19 smaller packages feature “fizz balls,” plastic charms and L.O.L. Surprise! dolls and clothing. The Los Angeles-based company, which also makes Bratz dolls, says the $70 toy “takes unboxing to new extremes.” Big Surprise is already sold out in many stores, and is being offered on eBay and elsewhere for significantly more. For Charlotte, N.C., sisters Regan and Piper Haycock, a big part of what makes the toy so desirable is discovering what’s inside all that packaging. “There’s so many layers you can unwrap!” says Piper, age 7. She and Regan, 9, watch toy-unboxing videos on YouTube almost every day after school, says their mother, Stacy Haycock, a financial analyst for Perdue Farms. After seeing numerous videos of reviewers unboxing the Big Surprise, the girls could talk of little else. When a Target holiday store circular arrived in the mail, Piper circled a picture of the toy with black marker. So when Ms. Haycock noticed one Big Surprise left on a shelf at her local Target in early November, she grabbed it and used a coupon to bring the price down to about $50. “I don’t usually spend $50 on toys, but I figured I should get it because I may never see one again,” says Ms. Haycock. She is saving it for under the Christmas tree. Unboxing videos, also big with technology and fashion reviewers, have become a key way children learn about new toys, and their popularity has grown exponentially in recent years. A recent search for “toy unboxing” on YouTube, a unit of Alphabet Inc.’s Google, brought up more than 12 million results. A Google spokeswoman declined to provide more specific numbers on the genre, but pointed to a 2014 study the company did that showed a 57% growth in unboxing videos views between 2013 and 2014, and a 50% increase in uploads. With the weeks between Thanksgiving and Christmas making up one-third of the entire $27 billion toy business, according to Juli Lennett, senior toy analyst at market-research firm NPD Group, Children don’t know precisely what will be in the Hatchimals Surprise egg, top, or the Crate Creatures Surprise, right. Mystery is part of the toys’ appeal. Some Pikmi Pops items, above, can be attached to backpacks. it’s no surprise that toy makers are pushing their own versions of unboxing. Australia-based Moose Toys, maker of the popular Shopkins grocery-store figurines, launched its Pikmi Pops in September. The toy, a plastic lollipop-shaped container, hides “mystery items’” such as stickers, lanyards and charms. “It’s like a ‘Blind Bag’ on steroids,” says co-chief executive Paul Solomon, referring to the popular merchandising concept of hiding small figurines in foil bags. “We put a lot of focus on packaging and presentation.” The standard-size Pikmi Pops Surprise Pack retails for about $11 and is designed for girls ages 5 to 10, who are encouraged to collect all of the characters. The toys come with string to latch the characters, classified as common, rare or ultrarare, onto backpacks for displaying at school. Each of Spin Master Corp.’s Hatchimals Surprise, released in October, holds plush twin critters in a single egg that cracks open after being cuddled. When designing the toy, the company decided to provide consumers with a clue, says James Martin, head of robotics at the Toronto-based company. The color of each speckled egg suggests which family the creatures inside belong to, without revealing the identity of the set of twins that will hatch. Mr. Martin says consumers don’t necessarily want a complete surprise when they’re paying $69.99 for a toy. “You don’t want to worry a mom spending $70 and getting something she doesn’t want,” he says. The demand for unboxing toys has been a welcome surprise for companies, whose products must compete with the lure of smartphones and tablets for children’s attention. Total toy sales rose 5% in 2016, down slightly from a 7% increase a year earlier, according to NPD data. MGA Entertainment Chief Executive Isaac Larian says the company underestimated demand for the L.O.L. Surprise! Big Surprise by more than half. Since the toy’s launch on Sept. 29, 1.2 million Big Surprises have been shipped to stores. Mr. Larian says current company estimates indicate demand for more than 3 million total units. MGA Entertainment plans to expedite another 300,000 units to stores by Dec. 12, but Mr. Larian says factory capacity limits how many toys can be delivered by Christmas. The company is launching another unboxing product on Dec. 3, due in part to the success of Big Surprise. Aimed at boys ages 6 to 10, Crate Creatures Surprise features pet monsters such as Blizz the Yeti and Snorthog the Warthog. Tung Tu, a 44-year-old program manager who lives in Gaithersburg, Md., says his 7-year-old daughter, Violet, had been asking for a Big Surprise every day for a month. Mr. Tu noticed that most stores were sold out of the toy. He eventually found a Wal-Mart store 45 minutes away, in Washington, D.C., that had it in stock, and ordered the toy for next-day pickup. He ended up buying three. Violet received her Big Surprise in exchange for an excess of Halloween candy. Mr. Tu intends to give the other two to his nieces, ages 5 and 2½, for Christmas. MITCH O’CONNELL (ILLUSTRATIONS); PHOTOS CLOCKWISE FROM TOP: SPIN MASTER LTD.; MOOSE TOYS; MGA ENTERTAINMENT ANATOMY OF A SONG | By Marc Myers THE STORY BEHIND 10CC’S ‘I’M NOT IN LOVE’ GAB ARCHIVE/REDFERNS/GETTY IMAGES RELEASED IN MAY 1975, 10cc’s “I’m Not in Love” reached #2 on Billboard’s pop chart and helped inspire the British synth-pop movement of the early ‘80s. Recently, co-writer, electric pianist and lead vocalist Eric Stewart; cowriter, guitarist and bassist Graham Gouldman; drummer Kevin Godley; pianist Lol Creme and former receptionist Cathy Redfern talked about the song’s evolution. Mr. Stewart’s latest album is “Anthology” (Cherry Red), Mr. Gouldman’s is “Play Nicely and Share” (Wienerworld) and Mr. Godley’s is “Muscle Memory” (PledgeMusic). Edited from interviews. 10cc in 1975. From left, Graham Gouldman, Eric Stewart, Kevin Godley and Lol Creme. Eric Stewart: One morning in the fall of 1974, my wife, Gloria, and I were having breakfast at home in England. At some point, she said, “Why don’t you say you love me so much any more?” We had been married nine years by then. I said, “Look, if I say that every day, the words will lose their meaning, won’t they?” She said, “No, they won’t.” We left it at that. After breakfast, I went off to the living room, where I had a grand piano and my acoustic guitar. I began writing a song about saying “I love you” without actually saying it. As I worked on the lyrics, I tried to balance what Gloria wanted me to say and how saying it would trivialize how much I loved her. At first, I tried a contrast. I sang, “I’m not in love” followed by things like “It’s because I adore you.” But on paper, it seemed clichéd and trite. Instead, I wrote about the conflict between feeling a certain way and avoiding expressing it. When I arrived at Strawberry Studios in Stockport, about 20 minutes from my home, Lol Creme and Kevin Godley were busy on another song. So Graham Gouldman and I worked on “I’m Not in Love.” He came up with masterful chords. Graham Gouldman: We also needed a second eight-bar bridge. All at once, Eric and I came up with, “Oooh, you’ll wait a long time for me” along with the music and chords. Please see ANATOMY page A13 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 A12 | Monday, November 27, 2017 THE WALL STREET JOURNAL. NY LIFE & ARTS WHAT’S YOUR WORKOUT? | By Jen Murphy The Football Team Full of Ph.Ds The Brigham Young University women’s faculty flag football team spends a night each week battling younger opponents A Note on ACL Injuries says she sees A Lot as role models for students. “It’s good for the younger generation to see that your athletic life doesn’t have to end after college,” she says. The team finished the regular season 2-3. “It’s probably our best season ever,” Dr. Stephens says. If A Lot wins its tournament game on Nov. 30, the team will advance to the divisional championship on Dec. 2. Anywhere from 80,000 to 250,000 ACL injuries occur each year in the U.S., according to the American College of Sports Medicine. The ligament connects the femur to the tibia and helps stabilize the knee during cutting and pivoting activities. The injury is frequently associated with sports but can occur in daily life, like if you suddenly lunge to grab something, says Margot Putukian, director of athletic medicine at Princeton University. Data suggests that noncontact ACL injuries can be prevented by implementing strengthening exercises that target the core and the muscles surrounding the hip and lower extremities, Dr. Putukian says. “Exercises that work on improving the techniques of jumping and landing, so that the knee is flexed and the knee remains over the toe, can lessen impact forces,” she says. If someone sustains an ACL injury and requires surgery, a rehabilitation program should allow them to return to sports, Dr. Putukian says. “An emphasis on hamstring strength versus quadriceps strength is recommended,” she says, “and one-legged squats or functional training emphasizing balance and proprioception are useful.” BYU’s women’s faculty flag football team play women half their age. Meagan Ricks, below, runs with the ball. Denise Stephens, above, has helped lead the women’s faculty flag football team to its winningest season this year. The Workout Flag football has spring (April-May) and fall (SeptemberNovember) seasons. A Lot held formal practices once a week during its first season in 2011 to work on plays, but it became too tough to schedule. Games take place one night a week and consist of two 20-minute halves, with seven players on each side on the field. On the morning of a game, Dr. Stephens likes to run. “I think it loosens up my body,” she says. She runs for 60 to 70 minutes three days a week, often at 5 a.m. “I’m also an astronomer, so getting to see the constellations while I run is incentive to wake early,” she says. Afterward, Dr. Stephens spends 10 minutes stretching. She also competes in five races a year, Her indulgence is Baskin-Robbins peanut butter ’n chocolate ice cream. The Gear ranging from 5Ks to half-marathons. Dr. Stephens alternates running with strength training at the BYU gym, which faculty members can use at no cost. She does four to five exercises focusing on upper body one day and on lower another. Lower-body strength has been especially crucial since her knee injuries. “I’ve learned to love the leg-press machine,” Dr. Stephens says. She also uses the hamstringcurl machine and does lunges, calf raises and squats. She keeps a set of dumbbells at home for the days when she can’t make it to the gym. The Diet “I’ll be honest, I’m not the best with diet,” Dr. Stephens says. Prerun she makes a SlimFast shake with almond milk. Post-run, she has a protein shake or, if she isn’t teaching, she might have a fried egg with toast and avocado. A chicken breast, an apple, cheese sticks, celery or cucumber slices, and Greek yogurt go into her lunch bag. With seven children, she jokes that dinner is “whatever I can get my kids to eat.” Fajitas and spaghetti and meatballs are staples. Dr. Stephens wears soccer cleats, a knee brace, a team jersey and yoga pants for games. “Some ladies wear sticky football gloves, and I need to get a pair,” she says. Each team pays $40 for one season of flag football, which works out to about $5 per member. Because Dr. Stephens often runs in the dark, she also uses a reflective vest and headlamp. She pays between $100 and $130 for her Altra running sneakers. The Playlist “I have an ’80s playlist of songs like ‘Girls Just Want To Have Fun,’ by Cyndi Lauper, and ‘Vogue,’ by Madonna. I also like upbeat country.” NATURAL HISTORY Tuesday December 5, 2017 at 10 am LAPIDARY WORKS OF ART, GEMSTONES AND MINERALS Wednesday December 6, 2017 at 10am Los Angeles PREVIEW December 1-5 Left SPECTACULAR TRICERATOPS SKULL Hell Creek Formation, Marmarth, North Dakota $125,000 - 150,000 INQUIRIES +1 323 899 1443 email@example.com Below ALASKAN GOLD NUGGET $45,000-55,000 Gift Solutions for Busy Professionals This holiday season, give well-made gifts of quality they’ll use and enjoy all year long, from leather goods and writing instruments to the latest tech innovations. Shop Levenger.com for special offers and sales on our holiday gift collection Professional Accessories Bags & Totes Home & Ofﬁce Furniture & Lighting Travel Essentials Folios & Notebooks Writing Instruments International Auctioneers and Appraisers – bonhams.com/naturalhistory © 2017 Bonhams & Butterfields Auctioneers Corp. All rights reserved. Bond No. 57BSBGL0808 Levenger.com 800.544.0880 CHAD HURST FOR THE WALL STREET JOURNAL THE WOMEN on Brigham Young University’s faculty flag football team are no slouches on the field or in the classroom. The team includes lawyers, astrophysicists, political scientists and psychologists. “Most of the people on the team have at least three degrees,” says team captain Denise Stephens, an associate professor in the department of physics and astronomy. Since forming in 2011, A Lot has been the sole women’s intramurals faculty team, playing opponents an average of 20 years younger on fields at the Provo, Utah, campus. Head coach and associate political science professor Jessica Preece jokes that the team doesn’t score often, but the name is a reminder that, even if they don’t win, they still have great parking. Kif Augustine-Adams, a professor of law at BYU’s J. Reuben Clark Law School, has played defensive tackle since the team’s inception. At 53, she’s one of the oldest members. “I’m gray-haired and starting to wrinkle, but when I effectively block a 20-year-old on the defensive line or rush the opposing quarterback and almost pull her flags before she throws, I feel triumphant,” she says. The team recruited Dr. Stephens, 43, in 2014 after learning she played on a recreational soccer team. At first, she was pegged to play safety because of her speed. But when teammates saw that she could also catch a football, they moved her to wide receiver. On defense she plays cornerback. “My legs get a great workout trying to pick off 20-year-old receivers,” she says. “It feels like doing wind sprints.” This season, as team captain, Dr. Stephens has played every position except running back. “I’m like a mom, making sacrifices so everyone is happy and positions are covered,” she says. Dr. Stephens had surgery for a torn right anterior cruciate ligament seven years ago, and last fall she had her right meniscus removed following a soccer injury. She has reluctantly decided to give up soccer. Flag football requires diving and quick moves, but Dr. Stephens says it’s less aggressive than soccer and allows her to have a competitive outlet with less risk of injury. “The most common injury is breaking a finger while trying to nab a flag,” she says. Completing passes and gaining yards has brought the women together as friends and colleagues. “A lot of academic collaboration has happened because of A Lot,” says Dr. Stephens, who is working with two teammates to write a grant for the National Science Foundation to increase the retention of women majoring in the sciences. Dr. Stephens, who is married with seven children ages 3 to 21, 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 27, 2017 | A13 HARVARD MEDICAL SCHOOL/THE OFFICE OF THE CHIEF MEDICAL EXAMINER, BALTIMORE, MD (2) LIFE & ARTS EXHIBITION REVIEW Murder, She Built BY EDWARD ROTHSTEIN Washington WE NOW KNOW whodunit. And with the startling exhibition “Murder Is Her Hobby: Frances Glessner Lee and the Nutshell Studies of Unexplained Death” at the Renwick Gallery of the Smithsonian American Art Museum, we now know a lot more about how she dunit. The best forensic minds have scrutinized the evidence. A serial perp, with perhaps 20 murders to her name, Frances Glessner Lee (1878-1962) planned crimes down to the finest detail: the calendars she hung on the walls, the water stains she created, a carton labeled “Campbell’s soup” halfstowed. It is almost unheard of for a woman born in the Victorian Midwest to have been so practiced in killing: hanging, stabbing, shooting, burning. She was obsessive. If she left clues it was deliberate: an angled pattern in the blood splatter or crumbled love letters on an attic floor. Money was irrelevant; she didn’t need any, already possessing millions. Each killing cost her as much as $6,000—the price, in the 1940s, of a home. The most peculiar thing is that she executed her plans using a custom ruler that turned every foot into an inch. A 30-inch-high dining-room table became 2.5 inches tall. A revolver was an inch long. Lee was a miniaturist of murder. And these crimes? She staged them inside doll houses. The dead were bloodied dolls painted to reflect appropriate amounts of decay. But what was her motive? Lee was a brilliant eccentric, heiress to an International Harvester fortune, who was prevented from going to college or pursuing a profession by her father. She grew up in coddled solitude in a granite castle-like home in Chicago. It wasn’t until she inherited her fortune with the death of her father in 1936—when she was in her late 50s—that she could cultivate her passion, which wasn’t for committing murders, but solving them. As a child, she had followed Sherlock Holmes and later became a friend of George Burgess Magrath, who studied medicine at Harvard and became Medical Examiner of Suffolk County in Massachusetts. Lee endowed a profes- sorship for Magrath at Harvard of her approach. and established the first DepartThese Nutshells are in a mument of Legal Medicine there, seum because of Lee’s demand teaching a scientific approach to that they display “the utmost accrime. The replacement of elected curacy and fidelity in dimension coroners by physician medical exand proportion.” She would someaminers was times combine spurred by her known cases, but advocacy. otherwise detail In 1943, at 65, was scrupulously she began to accurate. Though create finely dethese scenes tailed scenes to cannot be teach criminal touched by visiinvestigation. tors, locks can She used them be turned with a during weeklong key, shades can seminars to be opened and train police. And closed. Lee knit when the Hartiny stockings vard department for one victim closed in 1967, and wrote lether scenes, ters for another which she called using the tip of Nutshells, were a human hair. In sent to the Ofone Nutshell, the fice of the Chief wood used for Medical Examthe barn authenFrances Glessner Lee’s Nutshells: iner in Baltitically came ‘Red Bedroom’ (c. 1944-48), left, and from a hundredmore. Together a detail of ‘Barn,’ also known as with one held year-old shed on ‘The Case of the Hanging Farmer’ elsewhere, the Lee’s property. (c. 1943-44), above surviving 19 are Doll houses temporarily were a great united here. Victorian preoccupation. Lee took Each is accompanied by a short that domain of feminine play and, description of its characters and in a bizarre twist that was surely situation. Each can be viewed with related to her own restricted home a magnifying glass. And in each, life, overturned it, creating grothe goal is to determine not whotesque, artful scenes of domestic dunit but whether death is an acci- violence. As the exhibition points dent, murder or suicide. “Soluout, the setting for 17 of the Nuttions” are not revealed because shells is the home; victims were the Nutshells are still used for largely women. They are shot in teaching. But isn’t it strange that bed, hanged in an attic, or dead in in the massacre of an entire fama bathtub. Lee put a miniature ily, the rifle is left in the kitchen, a painting of her home in one Nutshell is found in a child’s room, shell, and sometimes used her own and toy chairs on a dresser are wallpaper and furniture for modoverturned? Or that a woman on a els. In some ways, she was making parsonage floor seems a lot more exaggerated self-portraits. freshly dead than the maggot-covThe exhibition, we are conered meat she was supposedly carvinced, has it right: She had the rying? means, she had the opportunities The writer Erle Stanley Gardner and she also had motives for her became a fan, attended her semiunexplained crimes. nars, and said she was the only person who surpassed Perry MaMurder Is Her Hobby: Frances son in criminal insight; he would Glessner Lee and the Nutshell have known. She may have been Studies of Unexplained Death the inspiration for Angela LansRenwick Gallery at the Smithsonian bury’s character in the TV series American Art Museum, through Jan. “Murder, She Wrote.” She is the 28, 2018 subject of a forthcoming documentary by Susan Marks (part of which appears in the exhibition). Mr. Rothstein is the Journal’s And she inspired episodes of Critic-at-Large. “C.S.I.”—a series that evolved out ANATOMY Continued from page A11 Mr. Stewart: When Graham and I finished, Kevin and Lol joined us, and we recorded our first run-through using a light bossa nova beat. But during the playback, Kevin wasn’t happy with the bossa. Lol Creme: Kevin’s choir idea was great but it would be costly. Instead, I suggested we record the voice parts ourselves. I said we could do it by singing 13 notes in a chromatic scale and recording them onto 13 different tape loops. Then we’d record the loops individually onto our 16-track tape machine. Mr. Stewart: It was ingenious. But first we had to record the song’s basic rhythm track and my lead vocal as a guide. On one track, I played the electric piano and sang the lead vocal. Graham played rhythm guitar on the second track. On the third, Kevin used a mini-Moog set to sound like a bass drum. Once we recorded the rhythm track, we spent weeks recording our voices and transferring them onto our recorder. Then the four of us worked the mixing console’s 24 volume faders with two hands to create a choir behind the rhythm track and my lead vocal. Mr. Creme: The song still needed texture. I suggested Graham overdub an eight-bar bass solo on the first bridge. Next came my piano intro to the bridge. I also suggested we have a female voice whisper, “Get it together.” Mr. Stewart: At that very moment in our conversation, Cathy Redfern, the studio’s receptionist, stuck her head in. She whispered, “Eric, there’s someone on the phone for you,” and left. Lol said, “That’s it! Let’s get Cathy to speak the words.” Mr. Creme: I went down the hall after Cathy. When I told her what we wanted, she protested a bit, saying she had never recorded anything before. Cathy Redfern: I was 21 then. I adored the boys, and they treated me like their sister. When Lol told me their idea, I thought it might be a prank. They were always kidding around. But Lol picked me up and threw me over his shoulder. In the control room, the guys were serious. Mr. Creme: But the more I thought about that line, the more “Get it together” CATHY REDFERN Kevin Godley: For me, the bossa thing wasn’t daring. We needed something bigger and more atmospheric and evocative. What I heard in my head was a wash of voices, a choir that would hover above the music, like the one I had heard in the movie “2001: A Space Odyssey.” Cathy Redfern at Strawberry Studios in 1974. sounded harsh. So I changed it to “Be quiet, big boys don’t cry,” which felt softer and more comforting. Ms. Redfern: I went into the studio with Kevin, who was there to steady me and give me a cue. We both put on headphones so we could hear the song. Kevin touched my arm when it was time to say the words. Mr. Stewart: At first, Cathy’s delivery wasn’t musical enough. We said, “Go softer, go softer, Cathy. Whisper. Get closer to the mic.” Then she got it. Ms. Redfern: Hearing my voice after was surreal. I couldn’t believe it was me. I was thrilled. Mr. Creme: I went out and bought a child’s plastic toy music box. When you pulled the box’s string, it played the English nursery rhyme, “Boys and Girls Come Out to Play.” I swung the little box over my head between the two mics as it played the tune. We wound up with an eerie sound, shifting from one speaker to the other. Mr. Stewart: When we finished the album, I drove Gloria to the studio. The wives of the other guys joined us. We turned out the lights and listened to the whole thing, playing it over and over for what seemed like hours. Everybody loved it. On the drive home, Gloria asked what “I’m Not in Love” was about. I told her, “It’s my answer to your question about why I didn’t say ‘I love you’ more often.’” Gloria said the song was so beautiful. Then she said, “I’d still love if you’d say ‘I love you’ more often.” From then on, I’ve said ‘I love you’ to Gloria every night. Perfect Holiday Palette Color-Changing Alexandrite Color-changing stone. Extraordinary rarity. Natural wonder. This highly coveted gem exhibits one of nature’s most fascinating phenomena. The rare 1.94-carat alexandrite displays a lovely greenish hue in daylight, and transforms to a rich burgundy hue when exposed to incandescent light. Certified by the Gemological Institute of America as a natural alexandrite, it has undergone no treatment or enhancements to achieve its unique color change. Set in 18K yellow gold with Old European-cut diamonds. #30-6079 630 Royal Street, New Orleans, Louisiana • 888-867-9583 • firstname.lastname@example.org • rauantiques.com Since 1912, M.S. Rau Antiques has specialized in the world’s finest art, antiques and jewelry. Backed by our unprecedented 125% Guarantee, we stand behind each and every piece. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com A14 | Monday, November 27, 2017 THE WALL STREET JOURNAL. * * SPORTS COLLEGE FOOTBALL NFL | By Jason Gay AUBURN IS ON A ROLL Philly Is Feeling Good...and It’s Weird Yes: I need to spend the rest of this week having a full-blown panic attack about Saturday’s Wisconsin vs. Ohio State Big Ten championship—in my nightmares, Urban Meyer is sitting in my kitchen in a Buckeyes windbreaker, cackling, eating all of my Trader Joe’s animal crackers. But before my sweaty Badger anxiety kicks in, let’s address a handful of NFL topics. (The NFL is the pro-style football league that plays on Sundays, Mondays and, I believe, most Thursdays.) 1. The Philadelphia Eagles are very good. I know: I’m really going out on a long limb of courage here, after the Eagles improved to 10-1 following Sunday’s 31-3 demolition of Chicago. I can’t be the only person who’s been quietly waiting for an Eagles implosion, which has yet to happen—and may not, because this Philadelphia outfit is balanced and confident. It has an MVP fave in tall person and second-year quarterback Carson Wentz; It has one of the league’s highest-rated defenses; There’s a giddy optimism around the club that feels, well, un-Philly-like. Philly fans can be tough. A few years ago, former Journal colleague Mike Sielski left to become a (great!) sports columnist at the Philadelphia Inquirer, and to an avocado toast-eating New York media sissy like me, his job looks like a meat suit in a shark tank. But lo, here’s a shiny, happy Philadelphia sports sensation—the Eagles are off to their best start since the 2004 club that reached the Super Bowl, the rest of the NFC East is dusted in the rear view, and local complaints are hard to find. An Eagles team with a rowdy home field could be a real handful in the playoffs. Of course, I am sure I just jinxed them, and now I’m going to get all of Sielski’s angry mail. Auburn is in the SEC title game. THERE ARE potentially cataclysmic scenarios every season that would force the College Football Playoff committee into tricky decisions. Occasionally, one of them comes true. This year, pretty much all of them did. No. 1 Alabama (11-1) had its undefeated season ruined by rival Auburn in the Iron Bowl on Saturday, and there is a real possibility the Crimson Tide won’t make the playoff. Auburn (10-2) gets the chance to play Georgia (11-1) in the Southeastern Conference title game. The winner of that game will almost certainly make the four-team field. Either way, this year’s playoff could be headed toward unprecedented territory. A two-loss team has never made the playoff before. Now there might be as many as three. Two teams from the same conference have never made it together. Now the SEC might rewrite that rule. Alabama has never not been in the playoff. Now the Crimson Tide might be on the outside looking in. Auburn helps explain just how peculiar this season has been. It doesn’t matter that the Tigers have lost twice. They also might be the best team in the country. Another win over Georgia would all but clinch their playoff spot. Alabama doesn’t have another chance to strengthen its resume. Nick Saban’s team will be stuck rooting for two-loss Ohio State to beat undefeated Wisconsin in the Big Ten Conference championship and two-loss Texas Christian to upset one-loss Oklahoma in the Big 12 Conference title game. There is no provision in the sport’s governing documents that stipulates Alabama must be in the playoff. (We checked.) But any conversation about the four best teams in college football must include the Crimson Tide. There are two-loss teams being considered for the fourth playoff spot while Alabama has only one loss. FROM LEFT: BRYNN ANDERSON/ASSOCIATED PRESS; BILL STREICHER/REUTERS BY ANDREW BEATON AND BEN COHEN 2. The Minnesota Vikings could become the first NFL team to, you know. Vikings fans will haaaate that I’m even whispering about the possibility that Minnesota could host a Super Bowl on its actual home field. Thanks a lot, Jinxy McJinxFace! But it’s hard to not be enthused about these matte Purple Vikings, especially if you watched that Turkey Day handling of the Lions (burp!) Case Keenum: Who knew? (Besides Case Keenum.) I’m going to shut up now because Minnesota fans are going to get grouchy. But listen: don’t Airbnb your place yet for the first weekend of February! How would you feel if the Vikings were in a hometown Super Bowl and you had six weaselly Patriots fans sleeping in your guest bedroom, eating Pop-Tarts and asking for the Wi-Fi password? 3. The Atlanta Falcons look like Philadelphia Eagles receiver Nelson Agholor leaps over Chicago Bears cornerback Kyle Fuller for a touchdown. the Atlanta Falcons—the good kind, not the kind we laugh at. Hahaha, they’ve heard all your 28-3 jokes—they’re hilllllarrrious!—but lately they’ve been playing like they’re sick of them. After Sunday’s 34-20 win over Tampa Bay, the Falcons have won 4 of 5, seem comfortable in their fancy-pants new space station/nuclear reactor, and are starting to resemble their dynamic 2016 selves. Julio Jones had 253 yards receiving versus the Bucs, which is more yards than the Browns have had in the last 47 seasons combined. 4. Are the Browns going to go 0-16? Mmmm, very possible…though they do have a Grinch Special Christmas Eve game against the Bears. Bears vs. Browns: The perfect way to tell your family: I hate the holidays. 5. Grumpy Lobster Boat Captain Bill Belichick Is Scissoring Off His Sleeves Again. I don’t know about you, but I don’t like it when Bill wears some uncomfortable, ironed Nike pullover like it’s Date Night at Panera. I want Belichick to look Weather <0 d Edmonton Calgary ary Calgary g Eugene 10s p Winnipeg Seattle Portland Por d 10s 30s 50s Helena 30s Billings 0s 0s 30s Bismarckk 20s 30s 40s 80s 60s U.S. Forecasts Hi 71 76 52 83 49 41 50 60 69 60 62 66 50 68 58 Today Lo W 40 s 61 s 34 s 52 s 37 s 18 pc 43 pc 41 pc 47 s 31 r 48 pc 32 s 44 c 40 pc 39 s Tomorrow Hi Lo W 55 25 pc 78 63 pc 57 43 s 78 59 s 58 43 s 39 33 pc 49 39 r 60 45 pc 73 46 s 49 34 pc 61 50 pc 54 25 pc 48 41 r 50 27 pc 61 43 s 40s 24 International City Amsterdam Athens Baghdad Bangkok Beijing Berlin Brussels Buenos Aires Dubai Dublin Edinburgh Hi 49 64 66 89 42 41 47 74 81 45 44 Today Lo W 41 r 49 r 45 pc 76 s 28 s 39 r 36 r 46 s 69 s 34 r 31 r Tomorrow Hi Lo W 46 35 c 56 46 sh 68 46 s 91 78 pc 46 19 s 45 34 sh 44 34 sh 72 54 s 84 73 s 43 32 s 41 27 pc City Frankfurt Geneva Havana Hong Kong Istanbul Jakarta Jerusalem Johannesburg London Madrid Manila Melbourne Mexico City Milan Moscow Mumbai Paris Rio de Janeiro Riyadh Rome San Juan Seoul Shanghai Singapore Sydney Taipei Tokyo Toronto Vancouver Warsaw Zurich Hi 42 42 81 75 63 88 60 70 51 55 90 71 68 46 30 93 48 86 79 53 87 42 63 84 78 74 57 39 49 39 41 Today Lo W 39 pc 31 pc 64 sh 71 c 50 r 77 t 47 pc 52 pc 37 r 29 pc 79 s 55 c 42 s 30 pc 25 c 72 pc 43 c 73 t 60 pc 32 pc 75 s 27 s 54 s 75 t 69 t 70 c 49 pc 31 s 42 r 31 pc 34 pc Tomorrow Hi Lo W 42 31 r 44 36 r 84 66 pc 78 72 pc 56 47 r 87 76 t 62 46 s 72 55 pc 43 34 pc 56 38 c 90 78 pc 86 64 s 72 43 s 42 35 pc 29 22 sn 92 74 pc 47 34 r 79 70 t 76 54 s 55 47 pc 88 76 s 48 28 pc 66 53 pc 83 77 c 80 70 t 85 72 s 60 51 c 56 39 s 48 40 r 41 33 pc 43 31 c 5 6 7 8 9 10 15 21 20 80s 4 18 30s 30s 3 17 20s Ice City Omaha Orlando Philadelphia Phoenix Pittsburgh Portland, Maine Portland, Ore. Sacramento St. Louis Salt Lake City San Francisco Santa Fe Seattle Sioux Falls Wash., D.C. 6. The Cowboys’ star is fading. The wagon wheels appear off in Dallas, now 5-6 after a Thanksgiving home thrashing by the Los Angeles-ish Chargers. Finger pointing has commenced; Cowboys released running back Darren McFadden this weekend; and Jerry Jones disappointingly appears to have stood down in his legal battle to turn the NFL league office into a Jerry Jones Original Texas Steakhouse. This 14 22 31 7. MR. KHAKIPANTS NFL RUMORS. As soon as the Peripatetic Jim Harbaugh arrived in Ann Arbor, it was inevitable that rumors like this would happen—even if there’s not even a hint of smoke that Mr. Khakipants is interested in wearing his khakis on another sideline. There’s this, however: Fox’s Jay Glazer reported that a number of NFL clubs are enjoying the recent Wolverines skid, hoping it would inspire Harbaugh to consider a return to the pro ranks. Personally, I don’t like it when talented coaches leave unfinished business behind—like that old Miami Dolphins coach, Nicholas Saban, who fled the NFL to go back to the college game, and was never heard from, ever again. Whatever happened to Saban? I’ve been so focused on America’s last truly great college football team, the Wisconsin Badgers. And my Ohio State panic attack. 3 Put up a fight 27 32 28 33 38 40 39 41 43 44 48 49 42 50 54 55 57 58 59 61 62 63 64 65 66 46 47 5 Angsty rock genre 6 Piccolo’s cousin 41 Chivalrous offer 7 Bone-dry 42 Lavished affection (on) 9 Some are bitter 56 11 Chewy squid appetizer 12 “Well, here we go!” 13 ___ Antonio 27 Soccer star Hamm 6 Fortune’s partner 29 Grab a bite 30 •State fish of 10 Makes a move Rhode Island 14 First-stringers 34 In addition 15 It’s west of 35 Composer Satie Afghanistan 16 “That’s so funny!” 36 Places to relax in mud 17 •Stamp seller 38 Bank counter 19 Lena of “The fixture Reader” 39 “Bear with me” 20 Aunt Bee’s 40 Hammer or charge hatchet 21 Pomegranate’s 41 Princess color Jasmine’s love 22 Chichén Itzá 43 •It may involve natives learning lento 24 Sniffler’s need and largo 26 Greed or gluttony 45 Veggie burger protein 23 “Moreover...” 48 Anger 49 Paper towel layer 50 “Great comeback!” 25 Takes advantage of 26 Isn’t frugal 28 Pop the question 52 Explosive stuff 31 “Believe It or Not!” guy 54 Suit accessory 32 Mental flashes 56 Logan of “60 Minutes” 33 Noggin 57 Pop in a bottle 58 •Country album? 61 Proton’s place 62 Knight wear 63 Packers great Favre 64 Heredity factor 65 Son of Aphrodite 66 Pert Solve this puzzle online and discuss it at WSJ.com/Puzzles. 44 EMT expertise 45 Climbs, or what the starred answers all have 46 “Shoot!” 47 Like the smell of bread dough 51 Extreme 18 Worries Across 1 Say bad words 37 God with a trident 39 Lush 10 Shout to a sailor CLIMBS | By Zhouqin Burnikel 36 Bad thing to hit 40 “Ewww, enough already!” 51 60 34 Island east of Java 4 Fills completely 8 Big Apple line 45 53 Down 1 “Breakfast at Tiffany’s” author 2 Perfect place 35 37 52 13 23 34 36 12 19 26 30 11 16 25 29 s s...sunny; pc... partly cloudy; c...cloudy; sh...showers; t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice Today Tomorrow City Hi Lo W Hi Lo W Anchorage 23 16 c 26 23 c Atlanta 63 40 s 64 46 s Austin 77 51 s 78 52 s Baltimore 56 34 s 60 39 s Boise 49 31 c 50 32 pc Boston 46 27 pc 44 40 s Burlington 34 19 sf 45 41 pc Charlotte 63 33 s 64 35 s Chicago 57 47 pc 60 32 pc Cleveland 50 42 s 59 43 s Dallas 77 56 s 75 48 s Denver 76 29 pc 49 30 pc Detroit 44 38 s 60 37 s Honolulu 82 72 sh 82 73 r Houston 76 51 s 80 53 s Indianapolis 60 42 s 62 40 s Kansas City 68 54 s 57 34 pc Las Vegas 68 46 pc 64 49 s Little Rock 69 41 s 69 46 s Los Angeles 70 53 pc 76 54 pc Miami 80 72 pc 81 72 t Milwaukee 51 45 pc 54 33 c Minneapolis 58 38 pc 46 27 s Nashville 64 41 s 66 42 s New Orleans 68 50 s 75 60 s New York City 50 35 s 54 46 s 73 52 s 66 39 pc Oklahoma City 2 t Montreal A Augusta ttawa Ottawa 40s 80s 1 20s 50s T t Toronto A y Albany t Boston 30s 40s Boise ff l Buffalo 60s rtford Hartford oux FFalls ll Pierre Sioux Detroit k Milwaukee New Yorkk ew Y 70s Chicago Ch Chic g Reno Cleveland es Moines Des Salt City ltt Lake L C City Cheyenne Omaha Ph hil d lphi h Philadelphia 80s h Pittsb b g h Pittsburgh 40s 60s di p Spring p g d Indianapolis Springfield Sacramento Denver 90s hington hi gton D.C. DC 50s Washington San an Francisco Kansas 50s C h l Charleston Topeka 70s City 100+ h d Richmond C d Colorado L Las St.. Lou LLouis LLouisville Lou 60s Vegas h Wichita p g Springs igh h Raleigh Nashville h ill 70s Santaa FFe 80s Angeles Los A Ange l C h l tt Charlotte kl Oklahoma City Memphis hi Alb q q Albuquerque 60s C b Columbia 70s Ph Phoenix Warm Rain San Diego 60s Atlanta Atl t Little Rock 80s Tucson T c i h Birmingham Dallas D ll 70s 90s Ft. Worth El Paso 80s Cold T-storms J k Jackson Jacksonville Mobile bil A ti Austin 70s Stationary Snow 0s Houston t l d Orlando ew Orleans New -0s 10s Tampa an Antonio A t i San 70s Showers Flurries Anchorage A h g Honolulu l l Miami Mpls./St. Paul p s /St. Pa pls An Eagles team with a rowdy home-field advantage could be a handful in the playoffs. bums me out—football is better when the Cowboys are rocking, and I still want to see Jerry and Roger Goodell settle their dispute with a Gulfstream race. The WSJ Daily Crossword | Edited by Mike Shenk Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day. V Vancouver like he’s going to help me collect lobster pots and inspect shellfishing licenses on a snowy morning off Cuttyhunk. Related: The Patriots are now 9-2, with four of their last five games coming from the buffet that is the AFC East. 53 Not at all wild 54 Destiny’s Child, for one 55 Societal troubles 57 Give under pressure 59 Lifeboat mover 60 Muscles strengthened by belly-dancing Previous Puzzle’s Solution M I S O I R A N R VMA C G E L I O K E D R E A G B S H E Y E O T O P T P R A Y R U P A A N I M H E R S SWF OWL N U F A A T M G H T B P R E C A U S AW N B E I E U P T V C H I K E U L S D A L R E Y A C R U D E S E T T L E S E P T O A R T R A A G Y E E N E C MO J I U R E R A C R B T I A L R AM B Q Y A R S D A MA C A C T E U G G R A C A L A WA R A S S E S O D D E R E N D The contest answer is STUFFED CRUST. Each starred entry begins with a separate two-letter term: RV, GE, GB, SQ, TV, and RU. Alphabetically stuffed between the letters of each are R(STU)V, G(F)E, G(FEDC)B, S(R)Q, T(U)V and R(ST)U, which spell out the contest answer. 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 27, 2017 | A15 OPINION Who’s Afraid of Index Funds? By Barbara Novick C hallenges to the status quo—political, economic or social—always evoke strong emotions, from enthusiastic support to fierce criticism. The loudest critics often have the most to lose, even if they acknowledge some benefits of the new regime. This clash is now unfolding over ascendant investment vehicles: index and exchange-traded funds, or ETFs. The dramatic growth of such products has been revolutionary. More investors are choosing indexing over funds managed by traditional stock pickers, known in the industry as active managers. Since 2009, U.S. index funds have seen inflows of some $1.7 trillion, compared with outflows of nearly $1 trillion for actively managed mutual funds. Indexing has democratized investing. Today, all Americans can inexpensively and conveniently invest in markets, countries and strategies once open only to institutional investors. Yet a few detractors have compared such passive investing to Marxism and declared it an existential threat to the modern securities market. What exactly do they object to? As more individuals and institutions invest in index products rather than individual stocks, critics claim, the price of these securities becomes increasingly untethered from the value of individual companies. They argue that companies included in these indexes see their stock prices fly higher and higher regardless of their performance, while non-indexed stocks get ignored like wallflowers at a dance. If passive investing creates market distortions, active managers can win big. But the numbers tell a different story. Despite the popularity of indexing, active managers still dominate the buying and selling of stocks. Indexed assets—including mutual funds, ETFs and institutional portfolios—account for less than 20% of all global equities, according to our analysis. That’s about $12 trillion of a $68 trillion market. The rest is actively managed. Those actively managed assets trying to beat the market trade much more frequently than indexed assets do. At BlackRock, we estimate that for every $1 of U.S. stock trades driven by investors buying or selling index funds, there are $22 of trades driven by active stock pickers. Combine the effects of greater size and faster turnover, and it’s clear that the price of stocks is overwhelmingly determined by active traders. Critics of indexing sometimes point to the specter of a 100% indexed market. What would happen, they ask, if indexing replaced stock-picking entirely? Naturally, this would make it impossible to price individual securities properly. But this hypothetical ignores the natural equilibrium created by supply and demand. If indexing began to distort stock prices, that would create an enormous opportunity for active fund managers to reap big returns—attracting more dollars to those active funds and at least partly reversing the flow toward index management. This process is why active management remains—and will continue to remain—essential. Indexing is only one component of a diverse, robust and constantly innovating ecosystem. Think of ETFs and index funds as levers that sit alongside individual stocks and bonds, actively managed funds, futures and swaps, private equity and IPOs. Together, they combine to support the smooth functioning of U.S. capital markets and Americans’ ability to confidently buy and sell securities. What cannot be disputed is that indexing’s success has upended the status quo. The effect will grow as regulatory regimes around the world require the kind of consumerfriendly price transparency that benefits index products. To be sure, there are still questions to address. For example, investors need to better understand the difference between plain-vanilla ETFs and highly leveraged exchange traded notes, or ETNs, which have more volatile prices. But while debate is healthy, it needs to be based on facts rather than fear. There is a big difference between disruptions to the way traditional asset managers do business, which certainly are occurring, and disruptions to the basic functioning of capital markets, which are not. Far from undermining the markets, indexing has unleashed new competition, driven innovation and identified new ways to deliver profits. Even active managers are using more ETFs, while everyday investors are saving more. The rise of indexing has changed for the better the way all investors seek returns, manage risk and build portfolios. That’s a development everyone should welcome. Ms. Novick is a co-founder and vice chairman of BlackRock, a global leader in asset management. Puerto Rico Doesn’t Want Reform It has been 10 weeks since Hurricane Maria slammed into Puerto Rico. The devAMERICAS astation was fierce. Yet it By Mary cannot exAnastasia plain why alO’Grady most half the generating capacity of the Puerto Rico Electric Power Authority (Prepa) is still down. Credit for that goes to Congress, which in June 2016 passed the Puerto Rico Oversight Management and Economic Stability Act, a k a Promesa. It opened the door to debt defaults that violate the Puerto Rican constitution and U.S. law. As is always the case when the rule of law takes a back seat to politics, it has fueled chaos. Prepa blames its disastrous post-hurricane decisions on a shortage of cash. Yet in the immediate aftermath of the storm, a group of Prepa bondholders offered the company fresh debtor-inpossession financing that included a swap of $1 billion in existing debt for $850 million in new bonds and $1 billion in new cash. Puerto Rico rejected the offer. “The bondholders’ proposal is not viable and would severely hamper and limit Prepa’s capacity to successfully manage its recovery,” Puerto Rico’s Fiscal Agency and Financial Advisory Authority said at the time. It added that the offer had the “appearance” of “being made for the purpose of favorably impacting the trading price of existing debt.” Heaven forbid. More unthinkable was ruining the “flat broke” image the commonwealth has been cultivating so it can write down debt and skip the matching requirements necessary to receive Federal Emergency Management Agency funds. It’s also more convenient to tap taxpayers than to borrow money from private entities asking for accountability. This is particularly true for a state-owned monopoly like Prepa, which is as much a political instrument as it is an electricity company. When critics complained last year that Promesa would alleviate the pressure on island politicians to reform the welfare state, their concerns were pooh-poohed. Congress said Promesa’s “financial management and oversight board” would impose the discipline necessary for reform. Negotiated settlements with bondholders were to be given priority and existing restructuring agreements— like the one between Prepa and its creditors—were to be preserved. None of this happened. According to a spokesman for the Ad Hoc Group of Puerto Rico General Obligation Bondholders, the group reached a negotiated settlement with the commonwealth in the spring. But the Promesa board nixed it. The board also vetoed an existing agreement between creditors and Prepa, in violation of Promesa guarantees. Now the oversight board and Gov. Ricardo Rosselló are locked in a power struggle, and the board is losing. The Prepa fiasco is instructive. Earlier this month Mr. Rosselló’s handpicked Prepa director, Ricardo Ramos, resigned amid allegations that he grossly mismanaged the hurricane recovery. As the Journal’s Andrew Scurria reported earlier this month, a $300 million no-bid contract with Whitefish Energy Holdings to restore the island’s power lacked protections for Prepa and went against the recommendations of the utility’s lawyers. The Promesa law, not Hurricane Maria, is the real culprit behind the island’s troubles. Before a House subcommittee on Nov. 14 Mr. Ramos defended his decision to hire the company, arguing that it was driven by a cash crunch. But that’s a difficult narrative to sustain. After Mr. Rosselló canceled the Whitefish contract in late October, Mr. Ramos called on the American Public Power Association and Edison Electric Institute for help. Utility experts say that post-hurricane protocol is to go first to these industry groups, which organize “mutual assistance” from other utility companies. Mr. Rosselló has said “Prepa did not go that route . . . because they had timing issues and money issues.” Yet mutual assistance is all about emergency response and the company could have solved its money problems by accepting the financing offer from Prepa bondholders. Then again Mr. Ramos was a political hire and may have lacked the necessary utility experience to handle the crisis. And Mr. Rosselló almost certainly didn’t want to give creditors—whom the Promesa board has already sidelined— new leverage over an institution that, according to Puerto Rican tradition, is part of his fiefdom. Now Mr. Rosselló is asking for $94 billion in aid from Washington for reconstruction costs. But he’s refused to implement furloughs and pension cuts mandated by the Promesa board. In August the board sued him for that. The matter was dropped after Maria hit and so was the broader board-certified fiscal plan requiring Puerto Rico to tighten its belt. He then fought the board in court to stop it from appointing retired Air Force Col. Noel Zamot as “chief transformation officer” to run Prepa. Bondholders also objected to Mr. Zamot, citing a lack of utility experience. But Mr. Rosselló’s reasoning is that Prepa leadership must be his call. On Nov. 13 a federal judge ruled in his favor. Last week he announced the bankrupt commonwealth would pay Christmas bonuses to its employees. And so it goes. Mr. Rosselló liked the Promesa board when it tore up contracts. But now he wants it to go away. Write to O’Grady@wsj.com. What My Mother Told Me About Bad Men By Angela Rocco DeCarlo W omen have always had to deal with misbehaving men—sidewalk cat callers, subway gropers, workplace harassers, and the occasional complete rotter. Yet it’s also true that some women misuse their sexual charms to advance in life. The whole arrangement is unfair, often predatory and can be degrading. But it is the way of the world. “Never go to a man’s hotel room,” my mother once told me. I had a job profiling celebrities for Chicago newspapers. I brushed off the advice—I was a professional woman, after all—until I found myself in a hotel room with a barefoot guy wearing a white terrycloth bathrobe. I kept my back against the door while he patted the loveseat cushion, bidding me come hither. I asked my questions and fled. My mother was born in Italy in 1903. I doubt she’d ever been in a hotel room in her life. Yet somehow she knew what every woman should know—going to a man’s hotel room alone is rarely a smart choice. Going to a man’s hotel room alone is rarely a smart choice. Two years ago our local paper ran a photograph on the front page of a teenage girl in a plunging neckline holding a sign: “Instead of body shaming girls, teach boys that girls are not sexual objects.” The story, following the notion on the sign, was that girls should be able to appear in any state of undress and no one, especially boys, had any right to react. Sorry, young lady. The world doesn’t work that way. Someone should have told you. Don’t misunderstand. The Hollywood episodes are more about power than carnal attraction, though sex is the objective for sure. The power imbalance in the film business is enormous. It’s mostly men pulling the strings, deciding which supplicants get roles, script assignments and other high-demand jobs. Add to that this: Some men are cracked. They weren’t raised by actual wolves but something definitely went haywire somewhere. They see females as prey, not just pretties. This is reality and everyone involved should be aware. When my granddaughter, Michelle, started high school, I could see the boys were gaga over her. To put her on her guard I explained how things work. “Mishie,” I said. “You know how babies get excited if you jangle a bunch of keys in front of their faces? They laugh, wave their arms and legs, and act like they want to jump out of their little seats. Well, boys are the same way when they see a beautiful girl. Don’t take it personally.” As a teenage model I had an assignment for a jewelry photo shoot. The stylist gave me a length of satin cloth to wrap around my chest so I could bare my shoulders. After the photographer had taken his shots he wanted a different angle. He tried to reposition the satin cloth. “I can’t let you do that,” I said. “You aren’t going to make it as a model with such a silly attitude,” he huffed. He was right. I wasn’t going to make it, especially if compromising my values was the price. Don’t go to the hotel room alone. If you can’t take your mother, take videos. Ms. DeCarlo formerly covered culture, travel and entertainment for the Chicago Tribune and the Las Vegas ReviewJournal. BOOKSHELF | By Michael Barone An Isolationist Changes His Mind Arthur Vandenberg By Hendrik Meijer (Chicago, 432 pages, $35) A ny old timer’s lament about the dearth of foreignpolicy bipartisanship will surely invoke, sooner or later, the memory of Arthur Vandenberg—and justifiably so. During World War II and after, the formerly isolationist Republican senator provided critical support to the internationalist policies of Franklin Roosevelt and Harry Truman. Though he left behind diaries and scrapbooks, there has been no definitive biography of Vandenberg since his death in 1951. Now there is one, almost serendipitously. Some 25 years ago, the daughter of a deceased academic historian, who had published an account of Vandenberg’s life that stopped at 1945, telephoned the Historical Society of Michigan and asked if anyone wanted her father’s research files. She was referred to businessman Hendrik Meijer, who had recently delivered a lecture on his fellow Grand Rapids native. Mr. Meijer accepted the papers and, amid his work as chairman of the familyowned Meijer supermarket and retail chain, conducted dozens of interviews and consulted multiple archives. The result is “Arthur Vandenberg: The Man in the Middle of the American Century,” an engaging and thorough account of Vandenberg’s life. The man Mr. Meijer describes was a natural politician with a Horatio Alger beginning. He started working at age 9, when his father’s harness-making business foundered in the depression of 1893. He spent a year at the University of Michigan, lost one job for playing hooky to see vice-presidential candidate Theodore Roosevelt in 1900, and snagged another at the Grand Rapids Herald, soon turning in more copy than any other reporter. In 1906 the paper’s editor died, and the proprietor, soon-to-be Sen. William Alden Smith, named Vandenberg to replace him. He was five days short of turning 22. Vandenberg’s prose style—featuring “five-dollar words” and “overstuffed phrasing”—doesn’t match our modern tastes, Mr. Meijer concedes. But it made him influential in Michigan. He wrote two books praising his hero, Alexander Hamilton, and defended the homespun businessman at the center of “Babbitt,” Sinclair Lewis’s 1922 satirical novel. “Without him this would be a sodden land,” he editorialized. Vandenberg was gearing up to run for the Senate in 1928 and, when the incumbent died, was appointed to fill the vacancy; he won with 72% in November. With the auto boom, Michigan was the fastest-growing state east of the Rockies and north of Florida, and Vandenberg kept his eye on the new masses of auto workers in Detroit and Flint. After Michigan’s banks were forced to close in February 1933, he was the prime sponsor of federal deposit insurance and, with the help of Vice President John Nance Garner, overcame Franklin Roosevelt’s opposition to the measure. Vandenberg was the only Republican senator from a large industrial state re-elected in the Democratic year of 1934. Having opposed Lend-Lease and supported neutrality, a prominent Republican senator decided to back FDR and internationalism. Mr. Meijer does not sidestep Vandenberg’s peccadilloes. In the late 1930s he sometimes drank too much, and he had an affair with the wife of a British diplomat. He was an active member of the Nye Committee that blamed World War I on munitions makers, a vocal supporter of the 1937 Neutrality Act, and an opponent of increased defense spending. After a failed stab at the 1940 Republican presidential nomination, he was the “generalissimo” of the opposition to Roosevelt’s Lend-Lease aid to Britain. But as war continued to rage, this instinctive politician concluded that “prudence lies somewhere in between” isolationism and interventionism. He voted for Roosevelt’s huge increases in defense spending and backed him solidly after Pearl Harbor, although, as he wrote in his diary, “even in the Senate we can’t find out what’s going on.” He bristled at Roosevelt’s 1943 plan to deliver relief aid to liberated areas in Europe without congressional approval, then supported an authorizing joint resolution. He persuaded Republican officials, gathered at their summer 1943 Mackinac Island confab, to back “responsible participation . . . in [a] postwar cooperative organization among sovereign nations” and in 1944 started working out plans for one with Secretary of State Cordell Hull. In January 1945, in a much-noted Senate speech, Vandenberg said that, when it came to international security, no nation “can immunize itself by its own exclusive action.” The isolationist had become an internationalist. Roosevelt had seen how Woodrow Wilson’s failure to include Republicans had resulted in the Versailles Treaty’s falling short of Senate ratification. So he appointed Vandenberg, the man in the middle, to the group tasked with drafting the United Nations charter in San Francisco. Vandenberg shrewdly held in reserve but never exercised his prerogative of disagreeing with the administration and repeatedly used the threat of Senate disapproval to bring the Soviet delegation into line. The charter passed the Senate 89-2 in July 1945. He mistrusted the Communists, warning of an “iron curtain” five months before Churchill used the phrase. In February 1947, now chairman of the Foreign Relations Committee, he was summoned to a meeting with Truman. Britain was pulling out of Greece; Truman wanted to protect it and Turkey from Soviet takeover. “If you will say that to the Congress and the country,” Vandenberg asserted, “I will support you and I believe most of its members will do the same.” He did and they did, but it wasn’t always simple. Vandenberg maneuvered and added his own touches to the Truman Doctrine, the Marshall Plan and NATO. As Mr. Meijer writes: “The line between advice and consent and making policy grew blurred.” Truman’s 1948 victory brought back Democratic majorities and “an end to Vandenberg’s aura of indispensability.” His health deteriorated in October 1950, and he died six months later. But by then America’s bipartisan Cold War policy was solidly in place and would last for decades. As Mr. Meijer’s first-rate chronicle shows, Vandenberg was very much, in Dean Acheson’s phrase, “present at the creation.” Mr. Barone is senior political analyst at the Washington Examiner, resident fellow at the American Enterprise Institute and author of “Our Country: The Shaping of America From Roosevelt to Reagan.” 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 27, 2017 OPINION T REVIEW & OUTLOOK LETTERS TO THE EDITOR Tax Reform, Growth and the Deficit Not Much Light at End of Afghanistan Tunnel he Senate may vote as soon as this week three to five years and then settle at 2.5%. The on tax reform, and the outcome hangs Tax Foundation predicts the Senate plan will on a few GOP holdouts. Two worries of produce more than $1 trillion in revenue, in part the fence-sitters are how thanks to an investment cataA U.S. growth rate of much the reform will improve lyst from immediate capital exthe economy and whether it in the first year. 1.9% will never balance pensing will add to the federal deficit. The left ignores all this and the federal budget. Let’s examine these concerns flogs as unrefutable whatever against the budget math and emerges from the Joint Comeconomic evidence. mittee on Taxation. But Joint i i i Tax assumes the U.S. is a partially “closed” Start with the fact that the GOP budget out- economy with little access to global markets. line allows for a net tax cut of $1.5 trillion over Its models assume that higher deficits will a decade on a statically scored basis thanks to “crowd out” private borrowing and thus drive a deal brokered by Senators Pat Toomey and Bob up interest rates and offset the growth impact Corker. Democrats and their media chorus are of the tax cut. Yet a major goal of the tax reusing that number to claim that reform will bust form is make the U.S. more competitive as a the budget and add to the federal debt. This destination for foreign capital, and interest comes with ill grace from people who cheered rates in a global capital market will be deterBarack Obama’s doubling of the national debt in mined by far more than a modest increase in eight years, but it’s also overwrought. the U.S. budget deficit. The actual budget hole is smaller than $1.5 Another false charge from the left is that the trillion because the GOP budget is scored on a GOP bills are merely a tax cut without any re“current law” baseline. This assumes that tax form. But the bills eliminate trillions of dollars breaks that are “current policy” will expire and in loopholes, such as the state and local tax demore revenue will flow to Treasury. This is duction. The House bill caps the mortgage-interworth more than $400 billion over 10 years, est deduction at $500,000. which means the budget “hole” is closer to $1 Also on the chopping block are business trillion out of the $43 trillion the Congressional carve-outs—including cuts in the deductibility Budget Office projects in revenues over the next of interest—that are used to pay for lower busidecade. In other words, this is a modest net tax ness tax rates. We’d like to see every loophole cut even assuming no additional economic eliminated, but this really is the most far-reachgrowth. ing business-tax reform since 1986. CBO’s estimates are inherently speculative One fair objection is that the true deficit imbecause no one knows when the next recession pact is partially hidden because the Senate’s inmight hit or what some future Congress might dividual tax cuts expire after 2025, though evdo. But CBO has typically underestimated the eryone assumes Congress would extend them. growth and revenue feedback from tax cuts. A This fudge is driven by the Senate’s mistake in classic example is the 2003 cut in the tax rate on doubling to $2,000 the child tax credit, which capital gains. Dan Clifton of Strategas Research does nothing for growth and is thus a deadnotes that in January 2004, eight months after weight revenue loss to Treasury. the tax cut passed, CBO predicted $215 billion This is a sellout to Senators Marco Rubio and in capital-gains revenue through 2007. The ac- Mike Lee, as well as to the income distribution tual figure? $377 billion. CBO underestimated tables and the class-war left—not that it is muteconomic growth and how much investors would ing the critics. If the budget hawks want to recash in their gains. duce reform’s deficit impact, the child tax CBO’s roughly $43 trillion revenue estimate credit’s size and income phaseout of $500,000 also depends on a projection of average eco- should be their targets. i i i nomic growth of 1.9% a year. But the U.S. econThe question Senators need to ask themomy has never grown that slowly for so long. CBO says that every 0.1% increase in GDP adds selves in the end is whether this reform, all about $270 billion in revenue over 10 years. That things considered, is a net benefit for the counmeans a mere four years at 3% growth—the U.S. try. We think it is—not least because it is a vote historical norm—could fill a $1 trillion hole. An of confidence that better policies can restore average growth rate of even 2.4% over the de- America’s traditional economic vigor. Democrats and their media friends have given up on that cade would more than fill the hole. Nearby we reprint a letter from some of the score, concluding that we are doomed to “secucountry’s most distinguished economists mak- lar stagnation” and that our politics must deing the case that the House and Senate reforms volve into a brawl to divide up the spoils of whatwill significantly raise U.S. growth potential. The ever meager growth we can muster. That is not the country we have known and biggest boost comes from the reductions in the tax burden on capital, which should increase in- it is an America that would be much diminished and harsher. Republicans need to decide if they vestment and thus growth. One of the signers, Larry Lindsey, predicted still believe America can prosper again, or if it in our pages this fall that economic growth un- is doomed to the slow growth and stagnant der the GOP plan would accelerate to 3.2% for wages of the last 11 years. C Patents and Property at the Supremes an government bureaucrats vitiate priPanels also use a “preponderance of the evivate property rights without a jury trial dence” to invalidate patents rather than the more and fair compensation? That’s the ques- rigorous “clear and convincing” standard applied tion the Supreme Court will by federal courts in civil lawThe Justices will decide suits. Patent owners can be consider on Monday in what could become a landmark patto double or quadruple if Congress can let the subject ent case, Oil States Energy v. jeopardy since inter partes reexecutive revoke patents. view doesn’t limit the number Greene’s Energy. At issue is the inter partes of challenges. One panel decireview that Congress estabsion isn’t binding on another lished with the 2011 America Invents Act to panel. The Federal Circuit Court of Appeals, curb abusive patent litigation. Owners of low- which hears patent cases, has even ruled that inquality patents—e.g., abstract ideas or pro- ter partes review panels can invalidate patents cesses with broad applicability—extort busi- upheld by federal courts and juries. nesses with infringement lawsuits that are The Patent and Trademark Office director often cheaper to settle than fight. This can de- also wields enormous discretion. When unsatister innovation. Inter partes review allows any- fied with results of a review, Obama PTO direcone to challenge a patent at any time. The Pat- tor Michelle Lee granted rehearings and added ent Trial and Appeal Board, composed of judges. In other words, she stacked the adminisadministrative judges appointed by the Com- trative courts. merce Secretary, then decides whether to grant Oil States is before the High Court because a review and perhaps revoke a patent. the Federal Circuit broke with 200 years of judiOil States lost an inter partes review chal- cial precedent in 2015 by declaring that patents lenge after suing Greene Energy for infringe- are public rights—that is, executive privileges— ment. The company then claimed that inter and thus not entitled to Article III or Seventh partes review violates the Constitution’s Article Amendment protections. Large tech companies III and the Seventh Amendment because it al- have supported this radical legal departure to lows an administrative agency to revoke patents salvage inter partes review. without a jury trial. Article III sets the qualificaIn its landmark McCormick decision (1898), tions for the federal judiciary—that is, judges the Supreme Court asserted that “upon the issue are appointed by the President with the consent of [a] patent, the patent office . . . los[es] jurisof the Senate. They also have lifetime tenure. diction over it.” The Court has consistently reafThe Seventh Amendment guarantees a jury trial firmed that patents are private property rights, in suits involving common law such as private as recently as 2015 when Chief Justice John Robproperty, contracts and trademarks. erts wrote in Horne v. Dept. of Agriculture that Congress has increasingly ceded authority to a patent “confers upon the patentee an exclusive administrative bodies over disputes involving property in the patented invention which cannot public rights—those between the government be appropriated or used by the government itand individuals that don’t have a basis in common self, without just compensation.” law. But private rights are strictly the domain of Patents encourage innovation by protecting the federal judiciary. This distinction is crucial the fruits of entrepreneurs’ labor, and that prosince Article III judges are intentionally insulated tection is undermined if patents can be revoked from politics and the two political branches. at any time by an administrative agency. While Imagine if an Administration official could ad- abusive litigation can sap innovation, inter judicate a fraud case between Jeff Bezos and partes review offers the potential for legal and Ivanka Trump. A similar potential for executive government abuses. abuse and political interference exists with the The Supreme Court in May curbed forum Patent Trial and Appeal Board, which lacks the shopping in patent infringement cases, and due process and separation-of-powers protec- Congress can create other patent-troll detertions enshrined in Article III. Administrative rents such as requiring more rigorous training judges are essentially political appointees with for examiners who issue patents. Lawmakers civil service protections. A patent challenger could also establish district patent tribunals doesn’t even have to be a party to a case or con- similar to bankruptcy courts within the federal troversy to present a claim. Hedge-fund investors judiciary. Inter partes review was well-inhave been known to file petitions to invalidate tended, but any economic benefits aren’t worth patents prior to short-selling stocks. the constitutional damage. Hy Rothstein and John Arquilla make the point that’s been proven time and again about Afghanistan, that foreign occupiers face a quagmire in an almost ungovernable country (“Trump’s Afghan Policy Goes Wrong,” op-ed, Nov. 17). President Obama desperately wanted to pull all forces out of Iraq and Afghanistan, but he was trapped by his oft-repeated campaign statement that Afghanistan was the “smart war.” Forced into a corner, Mr. Obama had no choice but to agree with the Pentagon’s plan for a major surge, but he gave the generals fewer troops than they asked for and told the world (and the enemy) the exact time we would leave the country. This seemingly laughable strategy appeased Mr. Obama’s hard-left base at home, while appearing to keep his campaign promise on the “smart war.” The authors propose forgetting about trying to align with the government in Kabul. This has never been successful for anyone, as the former Soviet Union and presidents of both U.S. political parties have discovered. Their suggestion to forget Kabul and concentrate on creating relationships with local institutions makes sense. It’s the only approach to Afghanistan that has not been tried and failed. BOB BRONSON Aurora, Ill. The State Department is responsible for America’s policy implementation in Afghanistan, and it does a bad job. The reasons are manifest: lack of focus, lack of engagement, lack of consistency, lack of talent. When I was in Afghanistan helping to train its police, the biggest regional challenges were lack of central Afghan government control, local chaos created by the Taliban (supported by Pakistan), Afghan government corruption and the State Department’s inability to implement its policies. Integrating a network of highways, railroads, power grids and local governments, combined with consistent management of provinces by the central Afghan government, are crucial to long-term progress if the Defense Department, with our allies, can suppress insurgency. The State Department has to lead the support we provide, in partnership with the DOD. There is no local solution in Afghanistan. BOB ROSENKRANZ Richmond, Va. Senate’s Take on Tax: Best to Reduce Gaming The editorial “Reducing Corporate Tax Games” (Nov. 20) rightly recognizes the importance of dealing with base erosion in tax reform. The current tax code is full of loopholes that allow foreign-based companies operating in the U.S. to avoid paying taxes here on their U.S.-generated business. Meanwhile, U.S.-based companies are competing for the same business but paying full freight. This unequal tax treatment creates winners and losers and gives companies that invert to low or no tax jurisdictions (tax havens) a very real and significant competitive advantage in the marketplace. From the perspective of U.S.-based insurers, this is a real problem. Foreign-based insurers are currently allowed to strip profits generated in the U.S. to overseas affiliates and avoid paying any taxes on that income. That’s a glaring loophole that has cost U.S.-taxpayers nearly $9 billion over a decade. The Senate’s approach to closing this loophole is indeed the better one than that approved by the House, whose weak provisions undermined its own professed goal to stop inversions. The Senate approach should carry the day. Base erosion is a very real problem, particularly in the insurance industry. Comprehensive tax reform is the right place to deal with it. WILLIAM R. BERKLEY On behalf of the Coalition for American Insurance Miami Coins Are Right Half the Time, Beating Economists In your editorial “A Nafta Recession?” (Nov. 13), you cite a survey of economists in which “82% said the economy would grow more slowly for the next two years than it would otherwise, and 7% predicted a recession.” The Organization for Economic Cooperation and Development and Citigroup have published data on the inaccuracy of Concerning your editorial “The economists’ predictions. Tim HartMenendez Mistrial” (Nov. 18): What ford in the Financial Times reports in less brazen times would effectively Prakash Lougani, an economist with be viewed as felony bribery—a senathe IMF, wrote in 2001: “The record tor “helping” a longtime “friend” in of failure to predict recessions is return for political donations, opulent virtually unblemished” (throughout vacations, free trips and other life1990s). Mr. Hartford reports that style goodies—has now been defined Mr. Lougani and a colleague, Hites down as constituent service. Ahir, in 2014 continued to report You can hear the laughter echoing the dismal predictive results of throughout Tammany Hall: honest economists internationally. Since graft, now with the imprimatur of the only 7% of economists predict recourts. cession this may be the more likely The problem isn’t how constituent event. Once 82% predict a recesservice, corruption, bribery and quid sion, it has either already happened pro quo are defined. The problem is or it won’t. the inexorable economic largess of MICHAEL P. CARTER Savannah, Ga. government. The more regulatory and economic control government exerts over its citizens’ lives, the more the Salomon Melgens and Bob Menendezes of the world will engage in selfinterested crony politics. Regarding Karen Elliott House’s Perhaps a less influential government one-half or one-third its current “The Strategy Behind the Saudi Strife” (op-ed, Nov. 7): I have a relsize might do a far better job for the ative who has worked as a teacher people it professes to represent. WILLIAM A. MATTHEWS in Saudi Arabia for over 20 years. Boston In all of that time, he hasn’t been allowed to practice his faith. The same is true of others whose faith differs from that of the Sunni majority, including the Shiite minority, though in a less rigorous way. Saudi Arabia will have to become Dennis Shaul makes it abundantly a more tolerant society if it is ever clear that the Consumer Financial Protection Bureau is primarily an un- to join the community of progressive nations. Ms. House cites, among accountable, overstaffed, overpaid other changes, the newfound bureaucracy undertaking procedures (though limited) freedom for women duplicative of other financial regulaand the presence of restive young tors, politically biased and funded in men. Freedom of religion must aca way to avoid congressional overcompany any other change that the sight (“What Went Wrong With the present autocratic and theocratic CFPB,” op-ed, Nov. 20). rulers are planning to allow. So why is the Trump administraPETER O’REILLY tion going to appoint a new director Redondo Beach, Calif. to the CFPB, an agency the Republicans never wanted and that was created after the financial crisis when President Obama and the Democrats were in full control? If the party of low taxes and limited government wants to maintain THE WALL STREET JOURNAL that reputation, it seems that closing the CFPB would be a good place to start. The voters are still waiting for the swamp to be drained. A year after the Republicans took control of the White House and Congress, it looks like the swamp is alive and well. ELLEN SANDLES New York Bob Menendez Trial Defines Down Constituent Service Saudi Arabia Should Allow The Freedom of Religion Kill, Don’t Try to Reform, The Unaccountable CFPB Pepper ... And Salt Letters intended for publication should be addressed to: The Editor, 1211 Avenue of the Americas, New York, NY 10036, or emailed to email@example.com. Please include your city and state. All letters are subject to editing, and unpublished letters can be neither acknowledged nor returned. “Any other skills besides doing crossword puzzles in ink?” 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 27, 2017 | A17 OPINION Editor’s note: The following is a Nov. 25 letter to Treasury Secretary Steven Mnuchin: D ear Mr. Secretary: The present debate over tax reforms proposed by President Trump’s administration and embodied in bills that have passed the House of Representatives and the Senate Finance Committee has raised the basic question of whether the bills are “pro-growth”: Would the proposals raise current and future economic activity and generate federal tax revenue that would reduce the “static cost” of the reforms? This letter explains why we believe that the answer to these questions is “yes.” We believe the Republican bills could boost GDP 3% to 4% long term by reducing the cost of capital. Economists generally think of fundamental tax reform as a set of tax changes that reduces tax distortions on productive activities (for example, business investment and work) and broadens the tax base to reduce tax differences among similarly situated businesses and individuals. Fundamental tax reform should also advance the objectives of fairness and simplification. The quest for such fundamental tax reform has been pursued by policy makers and economists for decades. Examples include the Tax Reform Act of 1986, proposals for reducing the double taxation of corporate equity by the Treasury Department and the American Law Institute (enacted in part in 2003), the “Growth and Investment Plan” from President George W. Bush’s Advisory Panel on Federal Tax Reform, and arguments from President Obama’s administration to lower corporate tax rates. The proposals emerging from the House, Senate, and President Trump’s administration, fall squarely within this tradition. Reducing Corporate Tax Rates, as Proposed, Will Increase Economic Activity While the overall House and Senate tax plans contain numerous household and business provisions, we focus on the corporate tax changes, returning to other provisions before concluding. A key concept in this context is the “user cost of capital,” which essentially measures the expected cost to firms of making additional investments in equipment. A considerable body of economic research concludes that reductions in the user cost of capital raise output in the short and long run. Several of the proposals that have emerged in the current debate are key to lowering the user cost of capital. For example, expensing, which allows firms to deduct the full cost of investment at the time it is made, lowers the user cost of capital relative to depreciation over time. A lower corporate tax rate also lowers the user cost of capital, which not only induces U.S. firms to invest more, but also makes it more attractive for both U.S. and foreign multinational corporations to locate investment in the United States. There is some uncertainty about just how much additional investment is induced by reductions in the cost of capital, but based on an extensive body of scholarly research, many economists believe that a 10% reduction in the cost of capital would lead to a 10% increase in the amount of investment. Simultaneously reducing the corporate tax rate to 20% and moving to immediate expensing of equipment and intangible investment would reduce the user cost by an average of 15%, which would increase the demand for capital by 15%. A conventional approach to economic modeling suggests that such an increase in the capital stock would raise the level of GDP in the long run by just over 4%. If achieved over a decade, the associated increase in the annual rate of GDP growth would be about 0.4% per year. Because the House and Senate bills contemplate expensing only for five years, the increase in capital accumulation would be less, and the gain in the long-run level of GDP would be just over 3%, or 0.3% per year for a decade. Is this estimate of the growth effect realistic? According to one leading model using an alternative framework, the proposal would increase the U.S. capital stock by between 12% and 19%, which would raise the level of GDP in the long run by between 3% and 5%. Yet another model, this one used in the analysis of the “Growth and Investment Plan” in the 2005 President’s Advisory Panel on Federal Tax Reform, found that a business cash-flow tax with expensing and a corporate tax rate of 30% would yield ISTOCK/GETTY IMAGES How Tax Reform Will Lift the Economy a 20.4% increase in the capital stock in the long run and a 4.8% increase in GDP in the long run. More conservative estimates from the OECD suggest that corporate tax changes alone would raise long-run GDP by 2%. In short, there is a substantial body of research suggesting that fundamental tax reform of the type being proposed would have an important effect on long-run GDP. We view long-run effects of about 3% assuming five years of full expensing, and 4% assuming permanent full expensing, as reasonable estimates. Another advantage of the corporate rate reduction embodied in the House and Senate Finance bills is that it would lead both U.S. and foreign firms to invest more in the United States. In addition, U.S. multinational firms would face a reduced incentive to shift profits abroad, which would raise federal revenue, all else equal. In the foregoing analysis, we assumed a revenue-neutral corporate tax change. Deficit financing of part of a reduction in taxes increases federal debt and interest rates, all else equal. For the House and Senate Finance bills, this offset is likely to be modest, given that the United States operates in an international capital market, which means that the impact of changes in interest rates resulting from greater investment demand and government borrowing are likely to be relatively small. Lowering Individual Tax Rates Also Offers Generally Positive Economic Effects The House and Senate bills also contemplate a number of individual tax provisions that can affect economic activity and incomes. In recognition of the fact that non-corporate business income is substantial in the United States, both bills would reduce taxation of non-corporate business income and increase the amount of capital expensing allowed. While difficult to quantify, as the bills specify different effective tax rates, these provisions would increase investment and GDP above the level associated with the corporate tax changes discussed above. Also on the individual side, both the House and Senate bills reduce marginal tax rates on labor income for most taxpayers, increasing the reward for work. Increases in labor supply, in turn, increase taxable income and tax revenues. One should note, however, that some taxpayers would face increases in effective marginal tax rates because of basebroadening features of the bills, such as limits on the federal tax deductibility of state and local income taxes. On balance, though, we believe that the individual tax base broadening embodied in the proposals would enhance economic efficiency by confronting most households with lower marginal tax rates. In addition, fairness would be served by reducing differences in the tax treatment of individuals with similar incomes, and simplification by reducing the number of individuals who itemize for federal tax purposes. Confirming a Pro-Growth Objective Is Important for the Path Forward You have consistently stressed that the objective of tax reform should be to enhance prospects for increased economic growth and household incomes. We agree with this objective, which is consistent with the traditional norms of public finance going back to Adam Smith. We believe that the reforms embodied in the House and Senate Finance bills would achieve this objective. The increased growth, in turn, would lead to greater taxable income and federal tax revenues, which would reduce the static cost of lost federal tax revenue from the reform. We hope these analytical points of support for the growth effects of tax plans being discussed are useful to you and to the Congress as you complete the important economic task of fundamental tax reform. We would be happy to discuss our conclusions with you at your convenience. Robert J. Barro, Paul M. Warburg Professor of Economics, Harvard University Michael J. Boskin, Tully M. Friedman Professor of Economics, Stanford University; Chairman of the Council of Economic Advisers under President George H.W. Bush John Cogan, Leonard and Shirley Ely Senior Fellow, Hoover Institution, Stanford University; Deputy Director of the Office of Management and Budget under President Ronald Reagan Douglas Holtz-Eakin, President, American Action Forum, former director of the Congressional Budget Office Glenn Hubbard, Dean and Russell L. Carson Professor of Finance and Economics (Graduate School of Business) and Professor of Economics (Arts and Sciences), Columbia University; Chairman of the Council of Economic Advisers under President George W. Bush Lawrence B. Lindsey, President and Chief Executive Officer, The Lindsey Group; Director of the National Economic Council under President George W. Bush Harvey S. Rosen, John L. Weinberg Professor of Economics and Business Policy, Princeton University; Chairman of the Council of Economic Advisers under President George W. Bush George P. Shultz, Thomas W. and Susan B. Ford Distinguished Fellow, Hoover Institution, Stanford University; Secretary of State under President Ronald Reagan; Secretary of the Treasury under President Richard Nixon John. B. Taylor, Mary and Robert Raymond Professor of Economics, Stanford University; Undersecretary of the Treasury for International Affairs under President George W. Bush Immigrants Need Better Protection—From Their Lawyers By Benjamin Edwards W alls and travel bans get most of the attention, but there is another serious immigration problem that few talk about: incompetent and predatory immigration lawyers. Such attorneys do enormous harm to immigrants, courts and the federal fisc. This complex problem won’t go away overnight, but the Trump administration can limit the damage. As a group, the private immigration bar now contains the worst lawyers in all of law. A 2011 survey of federal judges by Richard Posner and Albert Yoon found that, of all practice areas appearing in federal courts, immigration lawyers provided the lowest-quality representation. In another 2011 survey, 31 immigration judges in New York classified nearly half of the attorneys appearing before them as either inadequate or grossly inadequate. A 2015 study found that immigrants would be better off without an attorney than entrusting their fate to the bottom 10% of immigration lawyers. Not all immigration lawyers are atrocious. Pro bono lawyers—who handle less than 10% of cases—win about 90% of the asylum claims they file. Law school clinics also deliver excellent results for their clients. The private immigration bar contains many fine lawyers, but there are far too many scoundrels. Clients struggle to find and afford lawyers who do honest and decent work. Bad lawyers generate real costs— and not only for their clients. A predatory attorney might take an immigrant’s money and file baseless asylum claims. These meritless claims clog judicial dockets and increase detention times for immigrants with legitimate cases. And the costs quickly add up: The federal government spends about $158 a day to detain someone, according to a 2014 Government Accountability Office report. The blame for America’s inadequate immigration bar does not lie with vulnerable immigrant communities. No rational immigrant would knowingly shell out $10,000 for an asylum claim destined for failure. Rather, immigrants make the common mistake of assuming that a valid law license means that a lawyer will do a decent job. The free market has failed to weed out the worst immigration lawyers for a variety of reasons. For one, immigrants often do not understand complex administrative court processes or the details of immigration law, forcing them to turn to corrupt counselors. Community reputation provides only an imperfect guide. Predatory immigration lawyers sometimes enjoy good reputations in the community because the U.S. deports their victims. When only winners remain, immigrants never hear about the lost cases. State bars also struggle to police this behavior. PUBLISHED SINCE 1889 BY DOW JONES & COMPANY Rupert Murdoch Executive Chairman, News Corp Robert Thomson Chief Executive Officer, News Corp Gerard Baker Editor in Chief William Lewis Chief Executive Officer and Publisher Matthew J. Murray Deputy Editor in Chief DEPUTY MANAGING EDITORS: Michael W. Miller, Senior Deputy; Thorold Barker, Europe; Paul Beckett, Washington; Andrew Dowell, Asia; Christine Glancey, Operations; Jennifer J. Hicks, Digital; Neal Lipschutz, Standards; Alex Martin, News; Shazna Nessa, Visuals; Ann Podd, Initiatives; Matthew Rose, Enterprise; Stephen Wisnefski, Professional News Paul A. Gigot, Editor of the Editorial Page; Daniel Henninger, Deputy Editor, Editorial Page WALL STREET JOURNAL MANAGEMENT: Suzi Watford, Marketing and Circulation; Joseph B. Vincent, Operations; Larry L. Hoffman, Production EDITORIAL AND CORPORATE HEADQUARTERS: 1211 Avenue of the Americas, New York, N.Y., 10036 Telephone 1-800-DOWJONES DOW JONES MANAGEMENT: Mark Musgrave, Chief People Officer; Edward Roussel, Innovation & Communications; Anna Sedgley, Chief Operating Officer & CFO; Katie Vanneck-Smith, President OPERATING EXECUTIVES: Ramin Beheshti, Product & Technology; Jason P. Conti, General Counsel; Frank Filippo, Print Products & Services; Steve Grycuk, Customer Service; Kristin Heitmann, Transformation; Nancy McNeill, Advertising & Corporate Sales; Jonathan Wright, International DJ Media Group: Almar Latour, Publisher; Kenneth Breen, Commercial Professional Information Business: Christopher Lloyd, Head; Ingrid Verschuren, Deputy Head It’s difficult to file a bar complaint after you’ve been deported. The best solution—a right to immigration counsel similar to the right to a criminal defense lawyer— This area of law is prone to abuse. It’s difficult to file a bar complaint after you’ve been deported. probably can’t garner enough support on Capitol Hill. Lawyers organized and funded like public defenders would be better positioned to police their own ranks. But this does not mean that Congress and the Trump administration should keep ignoring the problem. In a forthcoming article in the Washington and Lee Law Review, I argue that requiring disclosure of immigration lawyers’ track records could improve the market for representation. It almost certainly would drive some of the worst out of business. Who wouldn’t shop around after discovering a lawyer ranked in the bottom 10% by client outcomes? Although no lawyer should be expected to win them all, immigrants should get nervous if their lawyer always loses. When immigrants lack a way to differentiate between the shoddy and the skillful, the worst lawyers keep collecting cases and fees. This also means that the best immigration lawyers may struggle to make a living because their corner-cutting competitors depress the price of services. That’s part of why many talented practitioners choose to abandon immigration law. This has led to a shortage of representation. One 2015 study found that only 37% of people in removal proceedings have lawyers. The Justice Department already tracks lawyers practicing in immigration court by number. It should begin to collect, crunch and disclose their case outcomes. This would arm immigrants with the information they need to select competent counsel. It might also flag the fraudsters for state bar associations. Increased disclosure is not a silver bullet. A world with informed clients will face different problems than the current system, and not all immigrants will be aware of the new database. Some lawyers would try to game the system and duck hard cases to protect their records. It might make it more difficult for clients with more challenging claims to secure representation. But these potential pitfalls aren’t worse than the status quo so many immigrants already know. Mr. Edwards is a law professor at the University of Nevada, Las Vegas. If GPS Failed, We’d Be More Than Lost By A.P.D.G. Everett And Alex Berezow N orth Korea and Russia pose increasingly serious geopolitical threats to the U.S. and its allies. While these rogue nations possess nuclear weapons and formidable conventional forces, they have also used unconventional methods like hacking to attack government institutions and private companies. Add another target to the list of concerns: the Global Positioning System. Built primarily for the U.S. military, GPS is now used by civilians across the globe. Smartphones, personal navigation units, and air-traffic control all rely on it. They’re part of modern life, constantly performing trivial and critical functions all over the country. Fifteen of the “18 Critical Infrastructure and Key Resource sectors” in the U.S. are GPSreliant, according to the Department of Homeland Security. Temporary, local GPS failures have already proved chaotic. A truck driver in New Jersey used an illegal but easily acquired GPS jammer to prevent his boss from tracking him. As he drove past Newark Liberty International Airport, his jammer blocked air-traffic control signals. No one was injured, but someone setting out to do deliberate harm could pose a security risk in the future. As troublesome as a minor threat is, what if GPS as a whole were attacked? The detonation of a nuclear device high in the atmosphere—and the creation of an electromagnetic pulse, or EMP, that would follow— present the most likely threat to the satellites that underpin the system. In September 1962, a nuclear test conducted by the U.S. accidentally destroyed a British satellite and streetlights in Hawaii, demonstrating the potential devastation of an EMP. Anything that requires precise timing would be affected because GPS satellites serve as global timekeepers. The loss of clock synchronization across the world would cause the internet to stall and financial transactions to cease. Our ability to monitor and forecast the weather would be hobbled, too. Even if America’s adversaries are not capable of pulling off such a feat, Mother Nature certainly is. In 1859, a ferocious solar storm known as the Carrington Event shot charged particles from the sun toward Earth. If it were to happen again today, experts believe that satellites all over the world could be destroyed. NASA warns that they can’t be protected. The U.S. would be wise to stockpile communications satellites to replace the ones the sun obliterates. A better option is to build a landbased navigation system. The good news is that such a system, known as Loran, already exists and was used by the U.S. Coast Guard for years. But President Obama declared Loran obsolete in 2009, and Congress pulled funding for it. That was incredibly shortsighted. Loran is a great backup system because its signals would be difficult to jam and it would be less exposed to celestial events. Congress is considering a bill, the Department of Homeland Security Authorization Act, that would revive and enhance Loran into a highly reliable, ground-based backup system. This kind of system will not be completely impervious to EMPs or solar storms, but it would be less vulnerable than GPS satellites. In a world full of threats, it wouldn’t hurt to have a backup. Mr. Everett is a systems engineer. Mr. Berezow is senior fellow at the American Council on Science and Health. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com A18 | Monday, November 27, 2017 THE WALL STREET JOURNAL. I CAN OFFER CUSTOMERS WHAT THEY WANT BEFORE THEY WANT IT. With Watson, marketers can delight more customers more often. By using weather, shared location and personal data they can predict what customers want and where they’ll want it. Find out more at ibm.com/you This is marketing to the power of IBM. IBM and its logo, ibm.com and Watson are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. See current list at ibm.com/trademark. Other product and service names might be trademarks of IBM or other companies. ©International Business Machines Corp. 2017. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com TECHNOLOGY: SPACE TAXI SERVICES STRUGGLE TO MEET NASA SAFETY RULES B4 BUSINESS & FINANCE © 2017 Dow Jones & Company. All Rights Reserved. Last Week: S&P 2602.42 À 0.91% S&P FIN À 0.19% S&P IT À 1.76% Monday, November 27, 2017 | B1 THE WALL STREET JOURNAL. * * * * DJ TRANS À 1.45% WSJ $ IDX g 0.78% LIBOR 3M 1.468 NIKKEI 22550.85 À 0.69% See more at WSJMarkets.com Meredith in Deal to Buy Time Inc. SoftBank Readies Offer for Uber Stake BY JEFFREY A. TRACHTENBERG BY ELIOT BROWN AND GREG BENSINGER Better Homes & Gardens owner to pay $1.85 billion for fabled magazine publisher Meredith Corp., the owner of Better Homes & Gardens and Allrecipes, has struck a deal to buy magazine publisher Time Inc. for $1.85 billion in cash, a significant bet on the future of the magazine industry as media companies try to find their footing in an increasingly digital world. Meredith, based in Des Moines, Iowa, has agreed to pay $18.50 a share for Time, the fabled New York publisher of Fortune, People and Sports Illustrated, the companies said. The boards of both companies have approved the transaction. That is a 46% premium to Time’s closing price on Nov. 15, before reports of Meredith’s renewed interest in a deal with financial backing from the billionaire Koch brothers. More recently, the stock closed Friday at $16.90. Including the assumption of Time’s debt, the deal is valued at $2.8 billion. The deal caps the end of an era. Time, whose namesake Time magazine hit the newsstands in March 1923, emerged as one of the country’s great journalistic enterprises, shaping both the political and cultural landscapes. But in recent years, the magazine publisher lost ground as a shift among readers to digital platforms cut into traditional print reve- nue and a new generation of online rivals emerged. Stephen Lacy, Meredith’s chairman and chief executive, said the combined company will be able to reach almost 200 million consumers across all platforms, including digital. “The vision is the absolute premiere media company in the country with premium branded content on every platform,” Mr. Lacy said in an interview. “We’re very excited to bring these businesses together.” Mr. Lacy said the combined company will have more than 10 billion annual video views and nearly $700 million in digital advertising revenue. “This is also a digital play for Meredith, one that transforms the company into a top 10 digital media company in the U.S.” Mr. Lacy said he expects the acquisition to close in about 60 days. Tom Harty, Meredith’s chief operating officer, said that the combined properties won’t be entirely dependent on advertising thanks to their 60 milPlease see TIME page B6 Dollar Remains King Years After Crisis BY JON SINDREU AND MIKE BIRD Todd Mullins and his wife, Julie, started going to a shopping center 15 minutes from their Palm Beach Gardens, Fla., home about a year ago— after they joined a gym inside it. They work out at the Orangetheory Fitness there three to four times a week, and at least half the time they visit a nearby juice shop, restaurant or Trader Joe’s, he says. “There would be no other Dependence KEYWORDS | By Christopher Mims Global outstanding debt by currency $12 trillion 10 8 6 Domestic currency* Offshore dollars Other foreign currencies 4 2 0 1967 ’70 ’80 ’90 2000 ’10 *Includes U.S. debt issued in dollars Source: Bank for International Settlements THE WALL STREET JOURNAL. JOE BUGLEWICZ FOR THE WALL STREET JOURNAL It is one of the ironies of the global financial crisis: A decade later, a panic whose origins were in the U.S. has left the dollar more important to the rest of the world than ever before. Putative contenders for its throne—the euro, the Chinese yuan—have failed to gain global acceptance. It remains the dominant force in world trade. A slow, yearslong decline in the proportion of dollars among the holdings of the world’s central banks, which were trying to diversify, has stopped. And the commercial banks of Japan, Germany, France and the U.K. now have more dollar-denominated liabilities than those in their own currencies. The dollar dominance is testing the world again: Rules designed to make finance safer have already made dollars harder to come by. To add to the pain, the Federal Reserve is sucking dollars out of the world’s financial system as it tries to tighten its monetary policy. “‘Our currency, your problem’—it’s basically like that,” Please see DOLLAR page B2 Members work out at the Life Time Athletic gym in Franklin, Tenn. Health clubs are taking over mall space once held by department stores. Once Mall Pariahs, Gyms Step Up BY RACHEL BACHMAN reason to go to that mall,” says Mr. Mullins, a senior pastor at a local church. Mall owners long treated gyms like pool halls, unwanted tenants that attracted lowerrent visitors who were unlikely to shop. Now they’re giving health clubs some of their best real estate. The reason is twofold. Retailers have closed hundreds of stores across the country amid increasing competition from online shopping, leaving mall owners to grapple with declining foot traffic and rising vacancies. At the same time, fitness centers have boomed and diversified, and a proliferation of smaller, boutique gyms that draw higherend customers have created more attractive tenants that are easier to accommodate. The result is that health clubs that were once pariahs at malls are helping transform them into hubs of living, working and playing. “Twenty-five years ago, the best real estate was given to the department stores,” says Sandeep Mathrani, CEO of Chicago-based property owner GGP Inc. “And the department stores sort of prevented you from doing anything but having retail shopping. So today, their sort of slow retraction is giving us the opportunity to reinvent the wheel.” Mr. Mathrani says gyms are one element in making regional Please see MALL page B2 Laws of Innovation Everyone Should Heed Three decades ago, a historian wrote six laws to explain society’s unease with the power and pervasiveness of technology. Though based on historical examples taken from the Cold War, the laws read as a cheat sheet for explaining our era of Facebook, Google, the iPhone and FOMO, or fear of missing out. You’ve probably never heard of these principles or their author, Melvin Kranzberg, a professor of the history of technology at Georgia Institute of Technology who died in 1995. What’s a bigger shame is that most of the innovators today, who are building the services and tools that have upended society, don’t know them, either. Fortunately, the laws have been passed down by a small group of technologists who say they have profoundly affected their thinking. The text should serve as a foundation—something like a Hippocratic oath—for all people who build things. 1. “Technology is neither good nor bad; nor is it neutral.” Prof. Kranzberg’s first law, a seemingly mundane observation, is also his most important. He realized that the impact of a technology depends on its geographic and cultural context, meaning it is often good and bad at the same time. His example was DDT, a pesticide and probable carcinogen that nonetheless saved the lives of hundreds of thousands of people in InPlease see MIMS page B4 As soon as this week, SoftBank Group Corp. is expected to proceed with an offer to buy billions of dollars worth of shares from Uber Technologies Inc.’s stakeholders. First it must settle on an offer price, only days after Uber disclosed a security breach involving 57 million accounts that took place a year ago and prompted regulatory scrutiny from government agencies around the world. Uber’s decision to keep quiet about last year’s data breach until early last week raises the prospect that the incident could affect SoftBank’s offer price. SoftBank learned of the hack about a month ago, which may have changed its evaluation of Uber’s shares, according to people familiar with the matter. Some investors and observers say corporate breaches are becoming so routine that they shouldn’t weigh on a company’s valuation, though Uber’s string of controversies this year has given shareholders reason to question what’s next. A group of investors led by SoftBank plans to launch an effort in the coming days to buy at least 14% of the ridehailing firm from existing shareholders through the tender offer at a steep discount, as well as through a direct investment of at least $1 billion at Uber’s prior $68 billion valuation. The investor group includes Dragoneer Investment Group and General Atlantic. SoftBank has negotiated for weeks with Uber’s board to move forward with a deal, while some big investors have privately said they would balk if the valuation is too low. Former Chief Executive Travis Kalanick, who holds about 10% of Uber shares, has indicated he won’t Please see UBER page B2 INSIDE FORD’S RECALLS PROVE A DISTRACTION SPY AUTOS, B3 LIQUIDITY RESILIENCY PERFORMANCE 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 27, 2017 THE WALL STREET JOURNAL. * *** INDEX TO BUSINESSES BUSINESS & FINANCE 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 Alphabet......................B4 Amazon.com...............A1 Apple...........................B4 Asperger Experts........R1 B Boeing ......................... B4 C Cardlytics .................... B2 Chewbeads..................R4 Citgo Petroleum ......... A9 Comme des Garcons...R5 D Dow Jones...................B7 Dragoneer Investment Group.........................B1 General Motors...........B3 GGP..............................B1 Green Bridge Growers .....................................R1 H S Highland Capital Management.............B7 HNA Group..................B7 SafetyTat.....................R2 SmartGlamour ............ R5 Societe Generale.........B2 SoftBank Group..........B1 Space Exploration Technologies.............B4 Starbucks....................B2 Stuttering King Bakery .....................................R1 I Intel...........................B10 Intuit ........................... R3 J Javelin Venture Partners....................B4 K Kickstarter..................R3 E M Eight & Sand...............R5 Eloquii ......................... R5 EnerVest....................B10 EV Energy Partners..B10 Meredith......................B1 Micron Technology....B10 F Facebook......................B4 Ford Motor..................B3 G General Atlantic..........B1 P Panty Drop..................R5 Phillips Edison............B2 Postmates...................R3 T Takata..........................B3 TaskRabbit .................. R3 Time ............................ B1 Time Warner...............B6 Trader Joe's ................ B1 N U Netease.......................B4 Niantic.........................B4 Nvidia........................B10 Uber Technologies.B1,R3 UBS Group...................B2 O Oldphones.com............R7 Oldphoneworks.com ... R7 W Wal-Mart Stores........A1 Walt Disney................B6 Wefunder .................... R2 INDEX TO PEOPLE A H Adelstein, Dan............B2 Hackett, Jim ............... B3 Hanke, John................B4 Hinrichs, Joe...............B2 C Chase, Mariah.............R5 Chen, Feng .................. B7 Cook, Tim....................B4 Crislip, Matt..............B10 D Daugherty, Patrick......B7 Dondero, James..........B7 E Gartner, Steven .......... B2 Geiger, Angela ............ R1 Greenwald, Lisa..........R4 Griffin, Cary................R1 R Raede, Danny..............R1 J S Johnson, Brian............B3 Snider, Jeffrey............B2 K T Kalanick, Travis...........B1 Tan, Adam...................B7 Terry, Josh .................. B7 Tidmarsh, Chris .......... R1 Tommarello, Nicholas.R2 L Landon, Stéphane.......B2 M Edison, Jeff.................B2 G Pilarski, Jan ................ R1 Pozsar, Zoltan.............B2 U Mathrani, Sandeep.....B1 Mullins, Todd .............. B1 Musk, Elon..................B4 N-P Neri, Antonio..............A2 Upadhyaya, Paresh.....B2 W Wang Jian...................B7 Welsh, Michele...........R2 Woodbury, Don...........R7 OPEC Is Poised to Extend Oil Cuts BY GEORGI KANTCHEV AND SUMMER SAID After years of doing too little, OPEC could suddenly be doing too much. The Organization of the Petroleum Exporting Countries’ 14 members and other major producers like Russia are widely expected THE WEEK to strike an AHEAD agreement this week to continue withholding about 2% of global oil supply from the market. The national energy ministers of about two dozen countries are set to meet Thursday at the oil cartel’s headquarters in Vienna. But OPEC is beset by doubts that renewing its production agreement for another several months will help its members, say OPEC representatives and independent market watchers. Some members, along with outside analysts, say that OPEC could overstimulate the market and send prices too high next year. That, in turn, risks depressing demand for crude. “There’s actually a chance the market will overtighten and prices go close to $70 soon,” said Doug King, chief investment officer of the Merchant Commodity hedge fund, which has $165 million under management. “But they are also vulnerable if they don’t extend; that will spook the market.” Brent crude, the international benchmark, is already up more than one-fifth in the past three months, closing at $63.86 a barrel on Friday. U.S. crude oil futures settled 1.6% higher at $58.95, the highest closing Rising Price OPEC strategy and geopolitical threats to production in Iran, Iraq and Saudi Arabia are driving Brent crude-oil futures prices higher. Brent crude-oil futures $125 a barrel 100 75 50 25 0 2014 ’15 Source: WSJ Market Data Group level since June 2015. The upward trend is partly thanks to OPEC’s production limits but also to geopolitical threats to production in Iran, Iraq and Saudi Arabia, and Saudi public statements suggesting the kingdom is committed to supporting oil prices. For years, OPEC had fought against a perception that it was no longer relevant to an oil market shaped by U.S. shale drillers. The cartel did nothing when oil prices crashed in 2014. Then, when it finally decided to cut production last year, the desired effect— higher prices—took longer than expected. Today, investors and executives worry the cartel is overdoing it. “I’m used to OPEC not doing enough,” said Rainer Seele, chief executive of oil company OMV AG. “Now they are over- ’16 ’17 THE WALL STREET JOURNAL. delivering.” Overshooting their mark could hurt demand for crude around the globe and accelerate a push toward electric vehicles and other technologies expected to cut into oil consumption. Higher prices could also incentivize U.S. shale producers to ramp up drilling, raising the prospect of a flood of new oil that could depress the market. American producers seem already to be taking advantage. After falling for much of the past three months, the number of rigs drilling for oil rose by nine to a total of 747 this past week, according to oil-services company Baker Hughes. Saudi Arabia, OPEC’s most powerful member, has advocated extending the production cuts for an additional nine months, through the end of 2018. The kingdom needs higher prices as it plans an ini- UBER Continued from the prior page malls as well rounded as downtown areas were years ago, with a YMCA and small shops as well as department stores. GGP plans to integrate fitness centers into half of its 115 malls in the next decade, he says. Phillips Edison & Company has gyms in 44% of its more than 340 grocery-anchored shopping centers, according to CEO Jeff Edison. In the mid-1990s, the company had just a few centers with gyms because tenants viewed typical gym-goers as teenage weightlifters more likely to hang out on the curb than to shop, Mr. Edison says. Westfield Corp. has 33 U.S. malls, many with assets greater than $1 billion. More than half of them have some sort of health club, up from about 10% a decade ago. Many of the new tenants at shopping centers are gyms and specialty fitness studios that in some cases are barely bigger than a Starbucks store. But owners of regional malls also are welcoming sprawling, full-service health clubs as anchor tenants, sometimes replacing the stores that once excluded them. GGP is replacing a Macy’s at Oklahoma City’s Quail Springs Mall with a 180,000-squarefoot Life Time health club with indoor and outdoor pools and tennis courts. Years ago, health clubs Continued from the prior page sell in the tender offer, while Benchmark Capital has wavered on whether it would sell some of its 13% stake. Representatives for both Mr. Kalanick and Benchmark had no comment. The Japanese firm hasn’t yet set a price, said a person familiar with the matter, though talks between the SoftBank consortium and Uber investors in recent weeks centered on a valuation of around $50 billion. While a discount is customary in secondary sales, some investors have also marked down their valuations of the company amid its executive-suite turmoil in the past year. SoftBank wants to name the lowest number possible, while investors and board members are pushing for a higher valuation. Too steep of a discount risks repelling would-be sellers and imperiling the tender offer, which lasts 20 business days. SoftBank can try again at a higher price if its initial attempt fails. It is in Uber’s interest to get the deal done. In October, the board passed a series of corporate-structure changes that only kick in if the SoftBank consortium reaches its 14% stake threshold. The changes include revoking the supervoting rights of early investors, which granted them multiple votes per share, as well as expanding the size of the board by six to 17 directors. SoftBank would get two of the new seats. As DOLLAR Continued from the prior page said Credit Suisse analyst and money-market guru Zoltan Pozsar, of the move by the U.S. Since the financial crisis, markets have been flashing a red light, warning that dollars are scarce. Spreads on derivatives contracts called cross-currency basis swaps, which are used by investors and companies to source dollars, have jumped. Were greenbacks freely borrowed and lent, the spread would be zero, economists say. Whenever banks need to clean up their books around quarter- and year-ends—closing their dollar taps to borrowers— the gulf gets bigger. As the end of 2017 approaches, the threemonth spread has ballooned to a one-year high. Since October, the Fed has been allowing $10 billion of its $4.5 trillion balance sheet—acquired under bond-buying programs after the financial crisis—to roll off every month, while the U.S. Treasury is stashing increasing amounts of cash at the central bank, and analysts expect U.S. tax overhaul to JOE BUGLEWICZ FOR THE WALL STREET JOURNAL MALL A member lifts weights on the fitness floor at the Life Time Athletic gym in Franklin, Tenn. were “on a long list of prohibited uses that included massage parlors, billiards halls and pawnshops,” says Steven Gartner, managing director of retail at CBRE, the commercial real-estate services and investment firm. If gyms were allowed in malls at all, landlords often relegated them to back corners. The fitness industry brings its own risks. Streaming fitness services used remotely are on the rise, and the growth of health clubs is outpacing membership, according to the International Health, Racquet & Sportsclub Association. Many midprice gyms have struggled to compete with boutique stu- Greenback Scarcity Hits Non-U.S. Banks The scramble for dollars can hurt non-U.S. banks as the currency’s scarcity makes them more expensive to borrow. In December 2016, it drove French lender Société Générale SA to its worst trading day of the year—and the only one when the bank’s statistical estimates of probable losses were breached—its annual report showed. Swiss bank UBS Group AG breached its statistical model for group revenue at the same drive American companies to repatriate a chunk of their cash stashed abroad. All of this means that dollars are flowing out of the rest of the world’s pockets. Researchers at the Switzerland-based Bank for International Settlements have found that, whenever the dollar becomes scarcer, credit gets harder to come by around the world. Many economists have long predicted an end to the dollar dios and bargain chains. Yet overall, fitness has been booming. More than 57 million people belonged to a health club last year—19.3% of the U.S. population—and memberships have jumped 26% since 2009, according to IHRSA. Gyms fit into a broader push by mall owners to reinvent themselves as centers of entertainment at a time when so much of apparel sales have moved online. Landlords are adding restaurants, ice-skating rinks, pools and other recreational options to boost sagging foot traffic. There is also evidence that gyms might not be the retail repellent that mall owners long time. The lender said it was because of sharp movements in Swiss franc and euro interest rates and declined to comment further. Now Société Générale is working to put its own countermeasures in place, by diversifying sources of dollar funding across markets and types of investors. “This is something that we’re very careful and aware of,” said Stéphane Landon, head of group treasury at Société Générale. “It’s true that we have limited access to retail dollar funding. So we have developed more access to wholesale products overall,” he added. reign that was established after World War II, especially after President Richard Nixon unpegged the greenback from gold in 1971. The creation of the euro in 1999 and the breakneck growth of the Chinese economy led many analysts to say the dollar would need to share the limelight. But the euro became politically unpopular during the European debt crisis, and Chinese capital controls to peg the yuan thought. More than 40% of health-club members reported household incomes exceeding $100,000 in 2016, according to IHRSA, compared with 26% of the overall population. Consumer spending at fitness centers climbed 3.7% in the third quarter over last year, according to Atlanta-based spending-data analysis firm Cardlytics. Spending on apparel at brick-and-mortar stores rose 0.5%. “We’re like the nice-looking girl at the dance. Everybody wants to dance with us these days,” says Dan Adelstein, vice president of international development for Orangetheory Fitness. are anathema to global investors. Meanwhile, the share of official reserves held in dollars recently stopped its multiyear decline, and in the second quarter of 2017, foreign-country dollar-denominated debt rose to an all-time high of $8.6 trillion, according to the BIS. “The dollar’s downward trend of the last 40 years is over,” said Paresh Upadhyaya, fund manager at Amundi Pioneer, Europe’s largest asset manager. So will there be enough dollars for the world in the future? Since the 1950s, that responsibility has fallen to the eurodollar market, an offshore London-based market roughly $5 trillion in size, dwarfing any other offshore lending market. Yet, banks in the eurodollar market might not be capable of satiating the world’s hunger for dollars, investors say, because postcrisis regulations have raised the cost of short-term lending. “Above all the rest of the system, there’s the eurodollar system,” said Jeffrey Snider, head of global investment at Alhambra Investment Partners, “and if it doesn’t work, the rest of the currencies don’t work.” tial public offering of the state-owned Saudi Aramco, the world’s biggest oil-producing company. The IPO is the centerpiece of a plan to transform the kingdom’s economy, lessening its dependence on oil and developing the world’s largest sovereign-wealth fund to create new industries. But Saudi oil officials say they also don’t want to overdo it. Saudi Energy Minister Khalid al-Falih told Bloomberg TV this month that the kingdom doesn’t want “any spikes in prices that shock the market; we don’t want any price movements that are not healthy for demand.” “Our preference is that the market balances gradually,” Mr. Falih said. Not all OPEC members think the extension is a good idea. Most are reeling economically and politically from oil prices that are still around half of their 2014 levels. Higher prices would also lead to members cheating on their production targets to sell more crude, analysts say. Ecuador, for instance, has already all but said it won’t comply with OPEC directives. OPEC members like Libya and Nigeria, which aren’t bound to production limits because of civil strife, have also posed problems for the cartel, as their production rises. “I’m not sure all of us wanted to be in that deal for that long,” said an OPEC delegate from a Persian Gulf country where there are lingering doubts about the efficacy of the production cuts. Heard on the Street: Russia’s role is pivotal in oil talks... B11 part of those measures, Uber also set a deadline of 2019 for an initial public offering. Uber was obligated to disclose the hack before the tender offer was announced because a breach of its size could be material to investors, people familiar with the matter have said. The disclosure means all Uber investors and employees are now aware, which could strengthen SoftBank’s hand, observers said. “This is just going to be more leverage for SoftBank,” said Anand Sanwal, chief executive of tech-focused research firm CB Insights. If investors believe there is new potential for litigation and regulatory measures, he said, “that is going to have an impact on the valuation.” Mitchell Green, founding partner at Lead Edge Capital, an Uber investor, said breaches have become so commonplace that consumers are going to keep using the service and the core business won’t be affected. The breach should have been disclosed, Mr. Green said, but the executives who oversaw that decision are now gone, and he said there is wide support for the new chief executive. “That was Uber 1.0,” Mr. Green said. Now, “this company is being run by seasoned management,” he said. Uber said no financial information was obtained in the breach and it has found no evidence of fraudulent use of personal information. It said it was assured the stolen data were destroyed. To the Policyholders of THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA Notice of Annual Election of Directors The Annual Election of Directors of The Guardian Life Insurance Company of America will be held at its Home Office, located at 7 Hanover Square, New York, NY 10004 on December 13, 2017. The polls will open at 10:00 AM and remain open until 4:00 PM on that day. Policyholders whose policies or contracts are in force on the date of the election and have been in force at least one year prior to the election date are entitled to vote in person or by proxy. Proxies may be obtained from the Office of the Corporate Secretary, The Guardian Life Insurance Company of America, 7 Hanover Square, H-27-A, New York, NY 10004 or through Guardian’s website at www.guardianlife.com/ about-guardian/corporate-governance. Harris Oliner Senior Vice President and Corporate Secretary 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 27, 2017 | B3 THE WALL STREET JOURNAL. BUSINESS NEWS Recalls Mar Ford’s Drive for New Vigor Safety-related costs climb at same time CEO steers a move to electric, driverless cars Total Recall Ford’s stock price has remained stagnant amid concerns about the company’s future strategic endeavors, a period also punctuated by unexpected recall expenses. $14 a share Oct. 18 $267 million Faulty door latches on late-model pickup trucks BY MIKE SPECTOR AND MIKE COLIAS 13 June 28 $142 million Defective driveshafts on vans 12 LUKE SHARRETT/BLOOMBERG NEWS Ford Motor Co. Chief Executive Jim Hackett wants to push the 114-year-old auto maker toward the future as fast as he can. Right now, though, he is contending with mounting costs from safety recalls. Ford has disclosed over $1.3 billion in charges for recalling vehicles since September 2016, with the latest coming at the same time Mr. Hackett aims to divert a portion of profit from booming truck sales to the development of electric cars and driverless vehicles. The recall expenses have caught Wall Street’s attention as Mr. Hackett, who became CEO in May, is trying to revive investor enthusiasm for the company. He has committed to significantly cut spending on conventional car making. The sizable expenses are the latest to hit a mainline automotive manufacturer since 2014, when revelations of deadly flaws with General Motors Co. ignition switches and Takata Corp. air bags led 11 10 Sept. 8, 2016 $640 million Faulty door latches on various models March 29 $295 million Some engines posed a ﬁre risk; repairs to defective door latches on older cars 9 2016 ’17 A Ford assembly line in Louisville, Ky. The auto maker’s latest recall is related to faulty door latches. Sources: the company; WSJ Market Data Group (shares) to criminal charges against both companies and record industrywide recalls of at least 50 million vehicles annually in the U.S. for several years. Ford until recently had largely managed to avoid successive, significant recall expenses, and the charges and other consequences for the company haven’t reached levels suffered elsewhere. GM spent $6 billion spanning 2014 and 2015 on recalls and legal settlements stemming from the ignition switches and charge, which is being booked in the fourth quarter, covers faulty door latches on 1.3 million F-series pickup trucks sold during the past three model years. “Charges like these demonstrate that perhaps all was not well in the Ford factories over the last couple of years,” said Barclays PLC analyst Brian Johnson. Ford executives contend recent disclosures of recall expenses are part of an effort to be more transparent amid recent record recalls across the other safety problems. Takata, facing a multibillion-dollar recall tab, filed for bankruptcy protection. Still, Ford’s recall charges are a reminder of the challenges traditional car manufacturers face in the race to compete with Silicon Valley technology companies on driverless vehicles. The complexity of vehicles and the supply chain needed to build them can contribute to expensive manufacturing problems just as auto makers place bets on future technologies. Companies such as Waymo LLC, the driverless-car division of Google parent Alphabet Inc., don’t face similar manufacturing headaches, preferring to form partnerships with existing auto makers while remaining focused on their technological expertise. Ford’s latest recall charge, at $267 million, is larger than the company’s investment on an annual basis in Argo AI, a driverless-car startup it took control of this year. The THE WALL STREET JOURNAL. industry and don’t reflect consistent quality problems in the company’s vehicles. “Ford’s vehicle quality— based on trusted third-party surveys—is near an all-time high and we have achieved some of the industry’s lowest warranty costs,” said Joe Hinrichs, Ford’s global operations chief. Warranty expenses reflect auto makers’ costs for covering repairs in the initial years after a car is sold. Recall charges are one-time expenses taken to fix defective parts. FAA Tries to Ease Pilots’ Path From Military to Airlines BY ANDY PASZTOR As part of efforts to make it easier for U.S. military aviators to become commercial airline pilots, the Federal Aviation Administration has found a strategy around White House mandates to eliminate two existing regulations for each new rule that is proposed. Seeking to permit pilots of military helicopters and tiltrotor craft to claim civilian credit for hours spent behind the controls while in uniform, the agency on Friday formally proposed revising current regulations spelling out experience requirements for new commercial captains and copilots. The goal is to help alleviate shortages of entry-level pilots, an undersupply that particularly is dogging certain regional carriers. But it is also the first major safety rule to come out of the FAA this year without simultaneously identifying any regu- lations that are slated be scrubbed. The document published in the Federal Register—previously reviewed by officials at the Transportation Department and White House Office of Management and Budget— explicitly indicates the proposed rule falls outside the scope of President Donald Trump’s executive order demanding a 2-for-1 trade-off between existing and future regulations. The reason, according to the FAA, is that the initiative is “a deregulatory action” because the proposed changes “result in cost savings” rather than additional financial burdens. Anticipated savings include simplified record-keeping for the FAA, plus tens of thousands of dollars in potential savings for individual pilots who would avoid paying for extra flight hours now required before they are eligible to transfer into civilian cockpits. The FAA’s move has potentially broad implications for future rule-making by federal transportation officials affecting a variety of issues, ranging from drones to airtraffic control to autonomous vehicles. In some aviation areas, FAA chief Michael Huerta and Dan Elwell, the agency’s deputy administrator, similarly hope to persuade White House regulatory officials to sign off on new safety initiatives without automatically imposing a 2- for-1 regulatory swap, according to people familiar with their thinking. On Friday, the U.S. Department of Transportation said that Secretary Elaine Chao is pursuing a common-sense approach and a regulatory agenda—spanning ground and air technologies—built on a “carefully crafted balance that accelerates the safe integration of technology without imposing additional costs or stifling innovation.” IF THERE ARE THREE TRADING THINGS YOU WANT, THEY’RE THESE THREE THINGS. POWER. VALUE. SERVICE. Want more information about Power E*TRADE? • Advanced trading platform with a seamless experience between desktop and tablet • $4.95 equity trades, $0.50 options contracts, $1.50 futures contracts1 • Licensed specialists and former ﬂoor traders who speak to you on your level Futures and options transactions are intended for sophisticated investors and are complex, carry a high degree of risk, and are not suitable for all investors. 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Securities products and services are offered by E*TRADE Securities LLC, member FINRA/SIPC. Commodity futures and options on futures products and services offered by E*TRADE Futures LLC, Member NFA. E*TRADE Securities LLC and E*TRADE Futures LLC are separate but affiliated companies. © 2017 E*TRADE Financial Corporation. All rights reserved. THE WALL STREET JOURNAL. B4 | Monday, November 27, 2017 TECHNOLOGY WSJ.com/Tech Space Taxis Seek to Lower Risks Boeing and SpaceX are struggling to meet NASA’s requirements for aircraft safety Gaming’s Niantic Obtains Funding BY CAT ZAKRZEWSKI Can NASA send astronauts into space as safely as it promised? The space agency is scrutinizing that question as both Boeing Co. and Elon Musk’s SpaceX work on new spacecraft that NASA would begin using as early as next year to fly astronauts to the international space station. These commercial efforts face formidable obstacles in meeting safety requirements set by the National Aeronautics and Space Administration, posing policy and publicrelations dilemmas for the agency’s chiefs. Experts say NASA likely will require inspections in space to reduce the threat of catastrophic accidents, a last-ditch safeguard that it had hoped to avoid when approving the plan three years ago. Still, it is unclear whether such on-orbit checks by NASA would do enough to alleviate dangers from space debris and tiny meteor fragments, say experts inside and outside the agency. For months, these experts have warned that without new protections, neither Boeing’s nor SpaceX’s vehicles appear likely to comply with safety levels. Minutes of NASA’s Aerospace Safety Advisory Panel, composed of six independent safety watchdogs, are rife with concerns of danger. The stakes are high both for NASA and the companies. After fatal explosions of two space shuttles in 1986 and 2003, NASA said it was committed to making future spacecraft substantially safer. Falling short of the safety benchmark could further delay the goal of ending American reliance on Russian spacecraft to ferry U.S. astronauts to and from the international space The maker of the hit augmented-reality game “Pokémon Go” has raised about $200 million in new financing. Niantic Inc.’s Series B comes just weeks after the game maker said it plans to release a new title called “Harry Potter: Wizards Unite.” Niantic gained notoriety in the summer of 2016 as “Pokémon Go” became an overnight hit, pushing millions of players to get outside and chase digital monsters with their smartphones. Spark Capital led the round, with participation from Founders Fund, Meritech, Javelin Venture Partners, along with branding agency You & Mr. Jones and internet company NetEase Inc., according to Niantic. Niantic Chief Executive John Hanke said via email that the funding would enable new strategic opportunities for the company. “Pokémon Go” reached $1 billion in revenue globally just seven months after its release last July—faster than any other mobile game, including Activision Blizzard Inc.’s “Candy Crush Saga,” according to App Annie Inc. In “Pokémon Go,” Niantic combines location-tracking and augmented reality, technology that overlays digital images on real-world environments. Players can search for beloved monsters like Pikachu on a digital map on their phones. When they arrive at the locations on the map, they see digital images of the popular characters blended into real-world environments. San Francisco-based Niantic also makes “Ingress,” another mobile game that combined augmented reality and location years before “Pokémon Go.” The game never attained widespread popularity. DAVID C. BOWMAN/NASA BY ANDY PASZTOR A NASA test exercise. The agency is preparing to use next-generation spacecraft to send astronauts to the international space station. station, a 250-mile-high orbiting laboratory. NASA’s ultimate sign-off also is likely to prompt congressional scrutiny. Boeing recently said company engineering models show its CST-100 Starliner “is a safe, robust vehicle” that will meet all mandatory safety numbers. “NASA will review that analysis” next month, according to a Boeing spokeswoman, and “we will not speculate on their findings prior to the meeting.” Space Exploration Technologies Corp., the official name of Mr. Musk’s space-transportation company, recently said it and NASA are “working closely to ensure all safety requirements are met” for its new, manned Dragon spacecraft. It said the company was evaluating a number of options, including space inspections. Government and company experts “have jointly made significant progress in defining” orbital debris risks, SpaceX said. NASA’s requirements now call for a statistical limit of no more than one possible fatal accident per 270 flights. By contrast, scheduled airlines experience roughly one accident per one million departures globally. Although even the new standard seems perilous, it is a reflection of the mission’s technical difficulties. The standard is still more than four times safer than that of the space shuttle fleet that was retired in 2011 under budgetary strains and safety concerns. The commercial designers are seeking to alleviate other risks. They are concerned that extra shielding to better safeguard equipment and crews from collisions with debris could make a spacecraft too heavy. Today, only Russian rockets and spacecraft transport astronauts into orbit. But Moscow’s safety record for unmanned missions is worse than that of the U.S., and Washington is eager to take back that responsibility. submitted by each of the contractors. So far, the agency has committed roughly $4 billion overall on the two systems, with a total of 16 flights expected through the mid-2020s. A NASA spokeswoman said the agency plans to “work with the contractors [Boeing and SpaceX] through their final certification” and neither company “has requested a formal waiver from NASA” not to comply with the required safety metrics. Aerospace industry consultant Doug Cooke, a former senior NASA official, said he wasn’t surprised by difficulties complying with safety standards related to orbital debris. “It’s always been a difficult requirement to meet,” Mr. Cooke said. “NASA has to make a judgment on where the overall risk stands,” a decision that is “always done with a lot of data and a lot of hand-wringing,” he said. The biggest safety challenge for designers stems from thousands of tiny meteors or particles that can damage or penetrate space capsules. Traveling at approximately 17,000 miles an hour, even a paint chip can spark disaster. Boeing Co. partly addressed this by changing its design to install Kevlar backing. SpaceX is relying on other features. The international space station also faces risks from such orbital debris, but its design minimizes hazards and it can maneuver to avoid collisions. A comprehensive review of capsule safety, slated for early next month, is expected to provide NASA’s preliminary conclusions about assessments Legal Notices To advertise: 800-366-3975 or WSJ.com/classiﬁeds CLASS ACTIONS ! !" !# $%& ' ( &) *%+% *,-.* * + $.-' * + ,/ 0 $!1 23 2 &)3' , / 1 - +/ 4 ) &) $ 5 (' , / ! )) 4 !!/ 1 4 4 2- +/3 ) 4 ) / ( 4 - +/ 4 44 4/ 4 )(/ 4! / 6 6/ 1 / ) )4 4 ) 1 / 1 ( 4 ( ( ( 7)) / &) ( -8 9 -8 * -8 0 $ 2-8 &)3' 4 ) - +/ 1 // 5: ; 6 4 ) - +/ . - ! ) ) 4 ( 7)) )4 / 4 ) 1 4 ) - +/ ! <4 1 1/ ) 4 1 (4 ! ) / / 4 6 !1 ) / / ( 4 ) ( ) 1= ) 7))= / / ! : 4 ) )4 / , 04 4 1 5/ 4/ ( ) 7))= &)= ) , ( 1 , / / -8 &) ( 4 , & 74 - 0 ) !4 $:4/ 1 &) ) 4 )5' 4 - +/ . - 1 ) &) ) >4 4/ 41 4 ) 5 )(/ &) *%+% *,-.* *? + $.-' *? + ,/ 0? -8 9? -8 *? -8 0 ) 7 - $23' ( - 0 ! " , / ! - 0 ( *) 14 ! ! 14 1 1 (((47,49/ 1 / (/ )(/ - 0 09 04 > 0 8 8FA -H*, E @B 70 F -4 + - -4 7 7 , $' # -! 8 B%%& 8%B 9F&F E *99% 990 H46/ B -4 +64 *9 G , $"' G" %4/ - -7%0,FB BF-% E 8F&BF 70 ## 6 - -4 7 7 , $' " G / 1 / $ 2 - 43' / ! 7)) 4 ) / -8 &) *) 14 ) - 0 14 ( 41 ) - 0 4 14 :4 *) 14 ( - 0 14 6 1 ? 14 ( 1 7)) 1 - 0 04 *) 14 ( 4 1 14 4 4 ( I4 ) :4 ! ( 4 ) *) 14 !1 :4 14) ) - 0 14 ( 4 1 1 / 14 1 44 !41 1 14 1 ! / 14 ( : 4 14 ( / - 4 *) 14 1 - 0 14 ! / < - 0 04= I4 ) ( ) 1= ) / : 1 )(/ 4 ) C4 < 4 " ! - 0 04 ! , 04 4 / 41 # # ( ! I4 ) ( ) 1=) 4 ) / : , / 1 4 <4 4 (4 )4 *) 14 ! 14 ) - 0 14 4/ 1 ) ( 4 14 / // *) 14 ! I4 4 / 14 1 - 0 04 5 ! # $ $ & ! +C FB&%B F , . - & 04 ) % & ) / -4 &! Continued from page B1 dia as a cheap and effective malaria prevention. Today, we can see how one technology, Facebook groups, can serve as a lifeline for parents of children with rare diseases while also radicalizing political extremists. There is no absolute good or bad here, just how good or bad a technology is in a given context. This points to a problem tech companies are too often reluctant to face: Their enormous power means they have an obligation to try to anticipate the potential impact of anything they produce. 2. “Invention is the mother of necessity.” Yes, that’s backward from the way you remember it. It means “every technical innovation seems to require additional technical advances to make it fully effective,” Prof. Kranzberg wrote. In our modern world, the invention of the smartphone has led to the necessity for countless other technologies, from phone cases to 5G wireless. Apple’s cure for staring at your phone too much? A smartwatch to glance at 100 times a day. 3. “Technology comes in packages, big and small.” To understand any part of a technological package requires looking at its interaction with and dependency on the rest of it, Prof. Kranzberg wrote—including the human beings essential to how it functions. While innovation destroys jobs, it also creates countless new ones. Steel, oil and rail were the package of technologies that dominated the 19th and early 20th centuries, especially in America, just as the internet, mobile phones and wireless connectivity are transforming the 21st century. 4. “Although technology might be a prime element in many public issues, nontechnical factors take precedence in technology-policy decisions.” “People think technology as an abstraction has some CASE WESTERN RESERVE UNIVERSITY ARCHIVES MIMS ADVERTISEMENT @/1 7 A 7B%,* 9A%B,C +%9*D%. E 70A*F- 997 F 01 0 7F +: "G 7 % " "G , $' Debris in Space Poses the Biggest Danger to Capsules Melvin Kranzberg in the 1960s. He became a technology historian. sort of intrinsic power, and it doesn’t,” says historian Robert C. Post, who was Prof. Kranzberg’s friend and colleague. “It has to be motivated by political power or cultural power or something else.” Recently, representatives in Congress declared their intention to force Alphabet Inc.’s Google, Facebook Inc. and others to disclose who pays for political ads on their services, bringing them in line with television, radio and print. These disclosures were absent from internet ad regulation not for any technical reason, but because, in 2006, the Federal Election Commission took a light touch when regulating the new medium. More broadly, lawmakers are taking an interest in privacy, data transparency, national security and antitrust issues in tech—more because of a shift in our culture than in the technology itself. 5. “All history is relevant, but the history of technology is the most relevant.” The Cold War led to the buildup of nuclear weapons and the missiles to deliver them anywhere on Earth. That led to the development of a war-proof communication system: the internet. Many related innovations subsequently seeped into every aspect of our lives. But does that mean we owe the modern world to the existential contest between the U.S. and the former U.S.S.R.? Or was that conflict itself driven by previous technological developments that allowed Hitler to threaten both nations? 6. “Technology is a very human activity.” “Technology is capable of doing great things,” Apple Inc. Chief Executive Tim Cook said in his 2017 commencement speech at MIT. “But it doesn’t want to do great things—it doesn’t want anything.” The point, Mr. Cook continued, is that despite its power, how we use technology is up to us. The trick is, because technology generally reaches mass adoption via corporations, those businesses must think of the consequences of their actions as well as how they profit from them. Mr. Cook sets the tone at Apple, with his penchant for public pronouncements about how the company protects users’ data. Google has recently adopted antidiscrimination measures to make artificial intelligence less racist. Facebook now has teams dedicated to privacy, security and safety that review new services before they’re rolled out. As Prof. Kranzberg presciently noted at the dawn of the internet age, “Many of our technology-related problems arise because of the unforeseen consequences when apparently benign technologies are employed on a massive scale.” 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 27, 2017 | B5 The best gifts all in one place. Buy one of our best smartphones and get 50% off a featured accessory. Up to $960 device payment purchase req’d. Eligible devices: Google Pixel 2 & Pixel 2 XL, Samsung Galaxy S8, S8+ & Note8, and Moto Z 2 Force. Buy a Moto Z2 Force, get 50% off any moto mod™ Now $39.99 JBL SoundBoost 2 moto mod™ $31.50/mo Moto Z2 Force With Moto Z 2 Force purchase. Retail price: $79.99. For 24 months; 0% APR. Retail price: $756. 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Screen images simulated. © 2017 Samsung Electronics America, Inc. Samsung and Samsung Galaxy S are both trademarks of Samsung Electronics Co., Ltd. Other company product names mentioned may be trademarks of their respective owners. Ad valid 11/27/17–12/13/17. © 2017 Verizon Wireless. 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 B6 | Monday, November 27, 2017 NY THE WALL STREET JOURNAL. * *** MEDIA Disney’s ‘Coco’ Tops Holiday Weekend The animated film ‘Coco’ came out ahead of ‘Justice League’ at the box office amid positive reviews. In what’s becoming a holiday tradition, Walt Disney Co. won Thanksgiving weekend at the box office with a new family animated film. “Coco,” from the company’s Pixar Animation Studios, opened to a healthy $71.2 million in the U.S. and Canada between Wednesday and Sunday, according to studio estimates. That put it ahead of the superhero team-up “Justice League,” which grossed $59.6 million over the same period and family drama “Wonder,” which came in No. 3 with a surprisingly robust $32.3 million. Both films opened the prior weekend. “Coco,” about a boy on a journey in the land of the dead, opened below the 2013 Disney hit “Frozen” and last year’s “Moana,” which grossed Developing countries will consume 65% of global energy by 2040. The world energy landscape is changing dramatically. For example, two-thirds of energy-supply investment is now taking place in emerging economies. This creates opportunities as well as risks. CME Group gives producers and suppliers the tools they need to capture these opportunities while managing risks in volatile oil and natural gas markets. This is how the energy industry can deliver in the face of everchanging consumer demand. This is how the world advances. Learn more at cmegroup.com/fuel. 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. $93.6 million and $82.1 million, respectively, over the Thanksgiving weekend. But it was above 2010’s successful “Tangled,” which made its debut to $68.7 million on the holiday weekend and Pixar’s 2013 flop “The Good Dinosaur,” which started with $55.5 million. Perhaps most important for Disney and Pixar, “Coco” earned overwhelmingly positive reviews and audiences gave it an average grade of A+, according to market research firm CinemaScore. That means it is positioned well for a long box-office run driven by strong word-of-mouth. Disney now has 10 of the 11 highest openings ever over the Thanksgiving holiday, most of which were family animated films. The only competitor’s movie in the mix is the 2008 comedy “Four Christmases” from Time Warner Inc.’s Warner Bros. “Coco,” which draws extensively on Mexican cultural traditions, is already the highest grossing movie ever in that country in local currency, with $53.4 million through Sunday. Combined with a solid start in China and so-so-debut in Russia, “Coco” has grossed $82.2 million overseas. It has yet to open in many foreign countries, including all of Western Europe. In some major markets, such as Brazil, the U.K. and South Korea, it won’t de- but until January. That is due to differing schedules for school holidays, said Disney distribution chief Dave Hollis. Its domestic success comes as the once-reliable Pixar has had a mixed track record at the box office recently, with this summer’s disappointment “Cars 3” and “The Good Dinosaur” bracketing the 2016 hit “Finding Dory.” For the holiday weekend, “Justice League” declined 57% from its soft $93.8 million opening. That is less than the 69% and 67% drops for 2016’s “Batman v Superman” and “Suicide Squad,” respectively, but more than the 43% second weekend box-office drop for this summer’s “Wonder Woman.” It is an indication audience buzz on “Justice League” is decent compared with other DC superhero films from Warner Bros., though not stellar. The nearly $300 million production has grossed a total of $481.3 million globally. Ticket sales for “Wonder,” meanwhile, declined only 19%, a sign that word-of-mouth is very strong for the adaptation of a book about a physically scarred boy’s first days at school. The low-budget movie is becoming a hit for distributor Lions Gate Entertainment Corp. and its financing partners on the movie, Participant Media and Walden Media. Estimated Box-Office Figures, Through Sunday SALES, IN MILLIONS 1. 2. 3. 4. 5. FILM DISTRIBUTOR WEEKEND* CUMULATIVE % CHANGE Coco Justice League Wonder Thor: Ragnarok Daddy’s Home 2 Disney Warner Bros. Lions Gate Disney Paramount $49 $40.7 $22.3 $16.8 $13.3 $71.2 $171.5 $69.4 $277.5 $72.7 — -57 -19 -23 -8 *Friday, Saturday and Sunday Source: comScore TIME Continued from page B1 lion paid subscriptions, which will account for one-quarter of revenue. This is at least the third time Meredith has attempted to buy Time. Meredith made a run earlier this year but couldn’t secure enough financing, and Time in late April ended the sales process. Meredith was also in talks to buy a number of Time titles in 2013 that ended with Time Warner Inc. instead spinning off Time Inc. into a separate publicly traded company. This time around, Meredith approached Time with a fully financed offer, including $650 million from a private-equity unit of Koch Industries called Koch Equity Development. The backing of the Koch brothers, together with a group of bank lenders, immediately gave Meredith’s renewed effort greater weight. Koch Industries is one of the largest privately owned companies in the U.S., and the two billionaire brothers who control it, Charles Koch and David Koch, are known for supporting conservative causes. Mr. Harty described the Koch investment as “passive” and said the firm “won’t have any influence on Meredith’s operations, including editorial.” Koch Industries, he added, has expressed no interest in acquiring any individual Time Inc. titles. Mr. Lacy said he has never met with the Koch brothers. “They won’t have a seat on the board of which I chair,” he added. A representative for Koch Industries didn’t immediately respond to a request for comment. The magazine industry, like the broader media landscape, is undergoing profound changes as print advertising revenues continue to decline and publishers face off with tech giants for online ad dollars. Meredith is betting teaming up with Time will give it more scale online to compete with Alphabet Inc.’s Google and Facebook Inc., which are projected to account for more than 63% of U.S. digital advertising spending this year, according to eMarketer. The impact has been dramatic, especially on smaller publishers, contributing to consolidation in the magazine industry. Most recently, Hearst agreed to acquire familyowned magazine publisher Rodale Inc., and Jann Wenner is seeking to sell his majority stake in Rolling Stone. Time Inc. has been investing in online video and branded content, yet its print magazine circulation and advertising still account for about two-thirds of total revenue. In the first nine months of the year, magazine revenue dropped 17% to $1.3 billion. Time Inc. claims 30 million print subscribers. Time expects to generate about $1 billion this year in nonmagazine revenue. Meredith’s own magazine revenue has slipped slightly, but it has somewhat of a buffer thanks to its ownership of local television stations. For the fiscal year ended June 30, revenue at its magazine group fell 2% to $1.08 billion, while its TV station group saw revenue rise 15% to $630 million. Meredith describes itself as a business whose “cornerstone is knowledge of the home, family, food and lifestyle markets.” Such Time titles as Real Simple, InStyle and People, as well as Cooking Light, Southern Living, and Well Done, a social video brand, will all fit neatly alongside Meredith’s current portfolio. GARY HERSHORN/GETTY IMAGES DISNEY-PIXAR/ASSOCIATED PRESS BY BEN FRITZ 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 27, 2017 | B7 THE WALL STREET JOURNAL. BUSINESS & FINANCE BY JULIE STEINBERG Chinese conglomerate HNA Group Co. supplied false information and failed to disclose key ownership stakes of some of its executives while acquiring a company last year, a Swiss regulator found. The regulator, the Swiss Takeover Board, said Friday that HNA, which has been facing increasing scrutiny from regulators in the U.S. and China, last year gave incorrect information about two of its own stakeholders in its offer prospectus for its $1.5 billion deal to acquire Swiss air-travel logistics company Gategroup Holding AG. The board said HNA inaccurately represented the ownership stake held by Beijing resident Guan Jun as well as that of Bharat Bhise, chief executive of Hong Kong-based private-equity and investment advisory firm Bravia Capital. The regulator said their share holdings were actually 12.01% and 17.15%, respectively, not 12.35% and 17.4%, as HNA had claimed in the offer prospectus. HNA also failed to disclose that the two were holding stakes on behalf of the company’s co-founders, including Chen Feng, Wang Jian and Adam Tan, who should have been listed as the beneficial owners of the shares, the regulator said. “We cooperated fully with the Swiss Takeover Board’s inquiry, and we respect its authority in this matter,” a spokesman for HNA said. HNA will pay operating costs of 50,000 Swiss francs ($51,000) and could face monetary penalties for failing to provide complete information during the takeover. The size of such a potential penalty, if one is imposed, hasn’t been made clear. Highland Loses Ruling on Ouster Arbitration panel says firm falsely accused portfolio manager of improper relationship public recently in a lawsuit filed by Mr. Terry in Dallas County District Court to recover the award, as the money can’t be automatically collected with just an arbitration ruling. The two sides are expected to continue their battle in the district court. A Highland spokeswoman said in a statement: “In this ongoing compensation dispute, Highland’s remaining claims regarding Josh Terry’s misconduct, including over a year of malicious taping of coworkers and counter-parties, will dwarf the arbitration award.” The arbitration panel found that Mr. Terry was entitled to keep all the recordings he had made of his conversations with Highland employees. Highland specializes in trading distressed debt and secured loans of companies BY MATT WIRZ An arbitration panel found that fund-management company Highland Capital Management used pretexts and false allegations of a sexual relationship with a co-worker to fire a portfolio manager without paying millions of dollars it owed him. The finding is one of several legal reversals over the past several years for the Dallas-based firm, which has been fighting in court with former investors, former employees and trading partners since the financial crisis. Highland’s founder, James Dondero, fired the firm’s most productive portfolio manager, Josh Terry, in June 2016 after Mr. Terry opposed a plan by Mr. Dondero to transfer funds between Highland investment vehicles and to delay repaying money owed to Highland investors, the Dallas arbitration panel determined in October. Mr. Terry believed the plan was a breach of his fiduciary duty to Highland clients and an external lawyer hired by the firm sided with him against Mr. Dondero, according to the panel. “Dondero was simply angry and realized Terry was not a ‘yes man’ willing to let Dondero have his wrongheaded way,” the panel found in its ruling. “So Dondero fired Terry on the spot and later sought to characterize Terry’s termination of employment ‘for cause’.” The panel also found Mr. Terry “did not prove that the sole reason for his termination was his refusal to commit an illegal act.” The panel didn’t rule on whether Mr. Dondero’s plan would constitute a breach of fiduciary duty. Three months after it fired The finding is one of several legal reversals over the past several years for the firm. BRENT HUMPHREYS HNA Deal Under Fire From Swiss James Dondero in 2011. He fired Highland’s Josh Terry last year. him, Highland sued Mr. Terry, who had been trying to collect retirement investments from his former employer. Highland alleged Mr. Terry had acted against the interests of investors in a fund he managed and that he had sexual relationships with several subordinates. The court ordered the two parties to arbitration. Mr. Terry never caused damage or loss to the fund Highland alleged he mismanaged, according to the arbitration ruling. The arbitration panel, made up of three former Texas district court judges, also determined that Highland’s accusation that Mr. Terry had sex with a junior lawyer at the firm and involved her in alleged financial improprieties was “offensive.” The relationship never happened and “this allegation was based solely on someone’s fantasy related to costumes they wore to an office Halloween party,” the panel stated. Two other sexual relationships Highland alleged Mr. Terry had with co-workers were insignificant in one case and unproven in the other, according to the arbitrators. The panel said Mr. Dondero retrospectively constructed a pretext for the firing to justify not paying Mr. Terry $5.7 million he was owed by Highland. Arbitrators awarded Mr. Terry $7.9 million in damages and interest. “The arbitration award speaks for itself,” said Rogge Dunn, Mr. Terry’s attorney. The decision was made with junk credit ratings and managed about $39 billion at its peak in 2007. The firm took heavy losses in the financial crisis, leading to the liquidation of several of its hedge funds and to multiple lawsuits. Its assets under management have shrunk to $13.5 billion, according to a company website. Highland also lost an arbitration in 2016 against investors in one of its hedge funds who alleged they had been cheated out of millions of dollars. The firm subsequently reached an agreement with the investors. Separately, a New York State Supreme Court judge in April dismissed a lawsuit by the firm accusing an investor of libel, a ruling Highland is appealing. Highland also is still fight- ing in court against another former fund manager, Patrick Daugherty. The firm sued Mr. Daugherty in 2012, alleging he defamed Highland and publicized confidential information after leaving in 2011. Mr. Daugherty countersued, alleging he had been forced out of the firm for refusing to approve asset transfers ordered by Mr. Dondero. A jury found in favor of each of the sides on different issues in 2014 and both Highland and Mr. Daugherty have since been litigating to collect the amounts the jury awarded them. Highland has subpoenaed The Wall Street Journal related to the litigation between the firm and Mr. Daugherty. Dow Jones has challenged the subpoena and the matter is pending before the Dallas Court of Appeals. Mr. Daugherty was found in contempt of court in that case in August and was sentenced to 38 days in jail, a ruling he is now appealing. Mr. Terry was in good standing at Highland, managing more than $10 billion of the firm’s assets under management, until his abrupt firing, according to the ruling. The conflict started in 2016 when Mr. Dondero instructed Mr. Terry to lend $17 million from an investment fund Mr. Terry managed to another Highland fund to pay for the acquisition of a Brazilian latex manufacturer, according to the ruling. Mr. Dondero also planned to postpone a $56 million payment owed in May 2016 to investors in other Highland funds, the panel found. Mr. Terry opposed the plan to delay repaying money owed to clients. In early June 2016, an internal Highland committee approved the Brazilian acquisition but required the $56 million obligation be paid without further delay. That left Mr. Dondero with less money to fund his plan and he promptly fired Mr. Terry, the panel determined. Which is why we offer funds and ETFs across asset classes to help your clients weather every market trend for the long-term. EVERY MARKET TREND HAS AN EXPIRATION DATE 4 diverse solutions to help build a stronger portfolio: HLIEX GBOSX GAOSX JPIN jpmorgan.com/funds/4solutions LET’S SOLVE IT. Investors should carefully consider the investment objectives and risks as well as charges and expenses of a fund. The prospectus contains this and other information about the fund and should be read carefully before investing. To obtain a prospectus for Mutual Funds: Contact JPMorgan Distribution Services, Inc. at 1-800-480-4111 or visit jpmorganfunds.com. Exchange Traded Funds: Call 1-844-4JPM-ETF or visit jpmorgan.com/ETF. International investing has a greater degree of risk and increased volatility due to political and economic instability of some overseas markets. Changes in currency exchange rates and different accounting and taxation policies outside the U.S. can affect returns. Investing involves risk, including possible loss of principal. J.P. Morgan ETFs are distributed by JPMorgan Distribution Services, Inc., which is an affiliate of JPMorgan Chase & Co. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to the funds. J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. This communication is issued by Distribution Services Inc. and J.P. Morgan Institutional Investments, Inc., both members of FINRA/SIPC.; and J.P. Morgan Investment Management Inc .© JPMorgan Chase & Co., November 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. B8 | Monday, November 27, 2017 MARKETS DIGEST Dow Jones Industrial Average S&P 500 Index Last Year ago 23557.99 s 199.75, or 0.86% last week Trailing P/E ratio 20.74 P/E estimate * 19.35 High, low, open and close for each of Dividend yield 2.19 the past 52 weeks Last 2602.42 s 23.57, or 0.91% last week High, low, open and close for each of the past 52 weeks 20.89 17.86 2.48 All-time high 23590.83, 11/21/17 Year ago Trailing P/E ratio 24.49 24.35 P/E estimate * 19.50 18.45 Dividend yield 1.92 2.12 All-time high: 2602.42, 11/24/17 23000 2600 65-day moving average 22000 2500 21000 65-day moving average 2400 t Monday's open 18000 t Friday's close 200-day moving average Week's low J J A S O t NYSE weekly volume, in billions of shares Composite J F M A M J J A S O F M A M J J A S O N 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 23617.80 23360.58 23557.99 Transportation Avg 9656.31 9456.16 9620.20 Utility Average 762.32 754.76 759.07 Total Stock Market 27003.22 26712.18 26990.54 696.57 Barron's 400 699.28 687.76 199.75 137.11 0.99 272.32 9.18 0.86 1.45 0.13 1.02 1.33 19097.90 8783.74 626.66 22773.93 583.16 106.37 94.78 1.57 1.50 5251.11 4734.10 % chg High l 23590.83 l 10038.13 l 774.47 l 26990.54 l 697.81 23.0 6.4 18.6 17.1 17.1 19.2 6.4 15.1 16.0 15.8 9.8 1.6 8.7 7.9 8.4 6890.02 6779.49 6410.77 6301.88 6889.16 6409.29 l 6889.16 l 6409.29 27.6 31.6 28.0 31.8 13.2 14.4 6900 6850 6800 Standard & Poor's 2602.42 1859.19 927.25 23.57 18.45 18.34 0.91 1.00 2.02 1492.93 1519.16 12294.96 12421.94 542.63 549.04 4106.03 4217.84 531.24 538.23 98.88 98.92 79.69 81.11 129.57 131.64 1311.35 1341.69 9.67 8.56 26.34 119.05 6.28 67.83 3.71 -0.27 0.24 0.33 34.76 -1.76 1.76 0.97 1.16 1.63 0.69 2604.21 2578.24 1863.97 1839.40 930.89 909.07 500 Index MidCap 400 SmallCap 600 l 2602.42 l 1859.19 2191.08 1623.28 808.59 l 927.81 16.2 12.0 10.7 17.6 13.3 12.4 7.9 8.5 10.6 l 549.04 4304.77 l 560.52 l 102.31 96.72 192.66 l 1341.69 16.04 l l l l International Stock Indexes Close DJ Americas Sao Paulo Bovespa S&P/TSX Comp S&P/BMV IPC Santiago IPSA 1.44 1.38 1.78 2455.59 318.80 208.83 626.51 74157.37 16108.09 47941.88 3820.81 1.01 0.98 0.68 0.18 529.05 57110.99 14951.88 44555.26 3137.71 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 100 386.63 3170.49 389.89 3581.23 3328.48 3985.46 5390.46 13059.84 723.18 1432.71 22416.31 540.63 5283.35 1166.09 60323.95 10053.50 577.11 9325.60 7409.64 Asia-Pacific Australia China Hong Kong India Japan Malaysia Singapore South Korea Taiwan 5982.60 3353.82 29866.32 33679.24 22550.85 1717.23 3442.15 2544.33 10854.09 EMEA S&P/ASX 200 Shanghai Composite Hang Seng S&P BSE Sensex Nikkei Stock Avg FTSE Bursa Malaysia KLCI Straits Times Kospi Weighted 52-Week Range Close Low 2993.71 389.48 263.11 The Global Dow DJ Global Index DJ Global ex U.S. Americas Brazil Canada Mexico Chile Latest Week % chg –6.57 0.74 1.05 0.89 0.95 0.42 0.79 1.34 0.51 1.50 1.93 1.46 0.75 0.47 2.97 0.33 0.43 –0.04 1.55 0.39 0.42 –0.86 2.29 1.01 0.69 –0.26 1.77 0.41 1.42 339.36 2810.21 323.64 3015.13 2485.18 3427.61 4510.39 10513.35 604.06 1363.50 16217 449.60 4392.12 973.33 48935.90 8607.1 514.43 7779.11 6730.72 5400.4 3052.79 21574.76 25807.10 18274.99 1617.15 2859.33 1963.36 9078.64 Consumer Rates and Returns to Investor • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • High YTD % chg 2993.71 389.48 263.11 18.3 19.5 23.0 New car loan t Prime rate 4.00% 3.50 t New car loan 626.51 76989.79 16131.79 51713.38 4255.93 15.9 23.1 5.4 5.0 18.5 396.77 3276.11 400.44 3697.40 3445.23 4118.51 5517.97 13478.86 858.08 1478.96 23046 555.22 5475.67 1195.61 61211.52 11135.4 600.20 9325.60 7562.28 7.0 5.3 11.3 8.8 27.1 10.5 10.9 13.8 12.4 –2.6 16.5 11.9 12.9 1.2 19.1 7.5 8.0 13.5 3.7 6049.4 3447.84 30003.49 33731.19 22937.60 1792.35 3442.15 2557.97 10854.57 5.6 8.1 35.8 26.5 18.0 4.6 19.5 25.6 17.3 Interest rate 26725 1.89% 800-288-3425 2.37% 407-422-7129 2.50 De Witt Savings Bank Clinton, IL 2.45% 217-935-6342 Lake City Bank Warsaw, IN 2.49% 888-522-2265 Federal-funds rate target 1.00-1.25 1.00-1.25 Prime rate* 4.25 4.25 Libor, 3-month 1.44 1.47 Money market, annual yield 0.32 0.33 Five-year CD, annual yield 1.48 1.49 30-year mortgage, fixed† 3.90 3.89 15-year mortgage, fixed† 3.30 3.29 Jumbo mortgages, $424,100-plus† 4.28 4.26 Five-year adj mortgage (ARM)† 3.70 3.55 New-car loan, 48-month 2.99 3.00 3-yr chg 52-Week Range (%) Low 0 2 4 6 8 High (pct pts) 0.25 l l 3.50 0.93 l 0.26 l 1.19 l l 3.73 l 2.99 l 4.21 l 3.20 l 2.85 1.25 4.25 1.47 0.36 1.49 4.33 3.50 4.88 4.03 3.36 3.25 –21.1 –6.9 14.07 0.5 –0.2 14.25 1.8 9.6 12.82 6.8 5.4 10.00 ... ... 18.62 24.1 22.9 5.50 –8.3 –0.9 scPharmaceuticals SCPH Nov. 17/$14.00 Sterling Bancorp SBT Nov. 17/$12.00 Stitch Fix SFIX Nov. 17/$15.00 Arsanis ASNS Nov. 16/$10.00 16.57 65.7 18.1 YTD % chg Close Net chg 615.71 192.22 2.62 1.83 0.43 8.54 0.96 -0.15 2.24 3.95 58.95 %Chg -0.28 -9.17 -24.46 U.S. Dollar Index 92.76 -0.91 -0.97 -9.25 WSJ Dollar Index 86.41 -0.68 -0.78 -7.02 0.8381 -0.0099 -1.16 -11.83 Yen, per dollar U.K. pound, in dollars 111.57 0.88 8.00 52-Week Low Close(l) High % Chg 532.01 l 616.58 11.39 TR/CC CRB Index 166.50 l 195.14 Crude oil, $ per barrel 42.53 Natural gas, $/MMBtu Gold, $ per troy oz. 2.56 l l 1127.80 1346.00 9.21 91.35 l 103.25 -8.61 84.49 l 93.56 -5.90 Euro, per dollar 0.83 Yen, per dollar 1.00 1.00 1.23 -0.10 -0.07 -0.11 0.09 -0.02 0.20 -0.19 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 Friday U.K. pound, in dollars 118.18 -1.46 l l 1.20 1.36 6.85 Real-time U.S. stock quotes are available on WSJ.com. Track mostactive stocks, new highs/lows, mutual funds and ETFs. Plus, get deeper money-flows data and email delivery of key stock-market data. All are available free at WSJMarkets.com 1 3 6 month(s) One year ago 1 2 3 5 710 years maturity Yen, euro vs. dollar; dollar vs. major U.S. trading partners 10% 1.50 –5 0.75 –10 0.00 –15 30 ... GS Performance Food Group Food & Beverage Nov. 20 Nov. 16,316 $141.3 ... Barclays Public and Municipal Finance Deals of $ 150 million or more expected this week Final maturity Issuer Rating Bookrunner/ Fitch Moody’s S&P Bond Counsel(s) 750.0 N.R. N.R. N.R. Preliminary/ Chapman and Cutler LLP Nov. 29 June 1, 2030 Washington Suburban Sanitary Dt 190.1 N.R. N.R. N.R. Preliminary/ McKennon Shelton & Henn Nov. 30 prelim. Washington 499.1 N.R. N.R. N.R. Preliminary/ K&L Gates LLP Dec. 1 prelim. Central Utah Wtr Conservancy Dt 185.4 N.R. N.R. N.R. George K Baum & Company Inc/— Dec. 1 prelim. Clark- SD 315.3 N.R. N.R. N.R. J P Morgan Securities LLC/— Dec. 1 prelim. Delaware CityOhio 360.0 N.R. N.R. N.R. Citi/— Dec. 1 prelim. Denver City and CoColorado 252.5 N.R. N.R. N.R. Raymond James/— Dec. 1 prelim. Florida Development Fin 600.0 N.R. N.R. N.R. M. Stanley/— Dec. 1 prelim. Houston CoTexas 610.0 N.R. N.R. N.R. Goldman & Co/— Dec. 1 prelim. Iowa Finance Authority 346.0 N.R. N.R. N.R. BoA Merrill/— Dec. 1 prelim. Long Island Power Authority 350.0 N.R. N.R. N.R. Citi/— Dec. 1 prelim. Maryland Stadium Authority 426.0 N.R. N.R. N.R. BoA Merrill/— Dec. 1 June 15, 2047 NYS Environmental Facs 323.6 N.R. N.R. N.R. RBC Cptl Mkt/ SquirePattonBoggsLLP/DSeaton&Associates Dec. 1 prelim. Pennsylvania Hghr Ed Facs Auth 400.0 N.R. N.R. N.R. BoA Merrill/— Dec. 1 prelim. PennsylvaniaStateUniversity 200.0 N.R. N.R. N.R. BoA Merrill/— Dec. 1 prelim. San Francisco City/CoCalifornia 316.8 N.R. N.R. N.R. Hilltop Securities Inc/— Dec. 1 prelim. Texas A&M University System 158.8 N.R. N.R. N.R. Goldman & Co/— Dec. 1 prelim. Texas A&M University System 360.0 N.R. N.R. N.R. Barclays/— Dec. 1 prelim. Univ of Colorado Bd of Regents 437.7 N.R. N.R. N.R. Wells Fargo & Co/— Dec. 1 prelim. Univ of Texas Sys Bd of Regents 253.5 N.R. N.R. N.R. Barclays/— Dec. 1 prelim. Wisconsin 369.5 N.R. N.R. N.R. RBC Cptl Mkt/— Dec. 1 prelim. Wisconsin Hlth & Ed Fac Auth (WHEFA) 273.2 N.R. N.R. N.R. J P Morgan Securities LLC/— s s Yen s WSJ Dollar index Corporate Borrowing Rates and Yields Bond total return index Spread +/- Treasurys, Yield (%) in basis pts, 52-wk Range Last Wk ago Last Low High Total Return 52-wk 3-yr 10-yr Treasury, Ryan ALM DJ Corporate Aggregate, Barclays Capital High Yield 100, Merrill Lynch Fixed-Rate MBS, Barclays Muni Master, Merrill EMBI Global, J.P. Morgan 2.342 3.129 2.650 5.520 2.870 2.132 5.559 2.32 1.78 6.09 3.97 3.65 2.38 8.146 4.051 2.60 2.00 4.566 2.564 10.349 5.661 35 307 12 -4 303 Total ($mil.) Nov. 28 Dec. 1, 2042 Illinois Euro Sources: Ryan ALM; Tullett Prebon; WSJ Market Data Group 37 345 24 8 319 Tuesday, November 28 Auction of 5 year note; announced on November 22; settles on November 30 2017 2.352 3.162 2.660 5.587 2.890 2.045 5.587 Bookrunner(s) Public and Private Borrowing 0.96 -11.24 l 107.84 0 $227.5 58.95 27.99 3.93 -8.82 l WSJ Dollar Index 2.25 Nov. 20 May 8,317 3.49 U.S. Dollar Index 5 Black Knight Computers & Electronics -0.54 -0.48 -4.65 1.33 0.0116 DJ Commodity 3.00 Takedown date/ Deal value Registration Registration date ($ mil.) (mil.) -9.10 -0.70 11.89 Euro, per dollar 3.75% Issuer/Industry 9.74 Natural gas, $/MMBtu 2.813 Gold, $ per troy oz. 1286.70 WSJ .COM Secondaries and follow-ons expected this week in the U.S. market None expected this week 26600 17 20 21 22 23 24 November Crude oil, $ per barrel 2.24% 800-578-4270 TrustCo Bank Orlando, FL Yield/Rate (%) Last (l)Week ago 21.5 Other Stock Offerings Sale TR/CC CRB Index Yield to maturity of current bills, notes and bonds t D J FMAM J J A S O N 2017 3.00% Think Mutual Bank Rochester, MN 3.00 2.00 31.7 Auction of 13 and 26 week bills; Auction of 4 week bill; announced on November 22; settles on November 30announced on November 27; settles on November 30 Benchmark Yields and Rates Treasury yield curve Forex Race Bankrate.com avg†: UniBank for Savings Whitinsville, MA 15.80 Monday, November 27 26850 DJ Commodity t Selected rates A consumer rate against its benchmark over the past year SailPoint Tech SAIL Nov. 17/$12.00 s 272.32, or 1.02% Commodities and Currencies Last Week Source: SIX Financial Information;WSJ Market Data Group U.S. consumer rates 0.2 Treasurys 26975 Sources: SIX Financial Information; WSJ Market Data Group Region/Country Index 0.3 Auction of 2 year note; Auction of 7 year note; announced on November 22; settles on November 30announced on November 22; settles on November 30 11.9 8.6 12.3 4.0 8.5 2.9 37.2 7.4 11.8 -0.3 7.8 10.5 2.9 3.7 -28.4 -19.0 48.0 26.1 -31.1 -8.5 12.8 14.2 8.7 25.3 13.5 13.8 2.5 -21.5 50.6 -21.6 AMERI Hldgs AMRH Nov. 17/$4.12 Bluegreen Vacations BXG Nov. 17/$14.00 Legacy Acquisition LGC.U Nov. 17/$10.00 Level Brands LEVB Nov. 17/$6.00 % Chg From Friday3s Offer 1st-day close ($) price close Company SYMBOL IPO date/Offer price DJ US TSM last week l 1519.16 l 12430.52 1313.80 10808.63 496.60 3075.02 463.78 -0.27 85.30 0.29 73.03 0.25 117.79 2.66 836.79 -15.40 9.14 Philadelphia Stock Exchange World 6750 17 20 21 22 23 24 November Other Indexes Russell 2000 1524.18 NYSE Composite 12431.69 Value Line 550.25 NYSE Arca Biotech 4225.66 NYSE Arca Pharma 538.74 KBW Bank 100.01 PHLX§ Gold/Silver 82.15 PHLX§ Oil Service 132.74 PHLX§ Semiconductor 1342.05 CBOE Volatility 12.08 % Chg From Friday3s Offer 1st-day close ($) price close “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: last week Nasdaq Stock Market Nasdaq Composite Nasdaq 100 180 days Off the Shelf s 106.37, or 1.57% % chg YTD 3-yr. ann. 30.7 Sources: WSJ Market Data Group; FactSet Research Systems Citigroup shares fell although the bank announced a $7.5 billion investment by the Abu Dhabi Investment Authority in exchange for a 4.9% stake in the bank. N 35.4 Sources: Dealogic; WSJ Market Data Group Company SYMBOL IPO date/Offer price Financial Flashback The Wall Street Journal, Nov. 27, 2007 30 20 10 0 N D J 11.00 SSTI 2100 1900 N D N Primary market June 6, ’17 ShotSpotter Performance of IPOs, most-recent listed first 2000 17000 t M Dec. 3 Offer Offer amt Through Lockup Symbol price($) ($ mil.) Friday (%) provision Issuer Big Rock Ptnrs Acquisition 10.03 BRPAU Nov. 20/$10.00 16000 A Lockup expiration Issue date 2200 Bars measure the point change from Monday's open M Below, companies whose officers and other insiders will become eligible to sell shares in their newly public companies for the first time. Such sales can move the stock’s price. IPO Scorecard 200-day moving average 19000 UP Friday's close DOWN Monday's open F None expected this week 2300 20000 Week's high J IPOs in the U.S. Market Lockup Expirations Current divisor 0.14523396877348 N D New to the Market Public Offerings of Stock 47 436 34 18 393 Sources: J.P. Morgan; Ryan ALM; S&P Dow Jones Indices; Barclays Capital; Merrill Lynch 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. Monday, November 27, 2017 | B9 NY * * CLOSED-END FUNDS wsj.com/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 24, 2017 Prem NAV Close /Disc Fund (SYM) 52 wk Ttl Ret General Equity Funds Adams Divers Equity Fd ADX 17.03 14.77 -13.3 Boulder Growth & Income BIF 12.36 10.49 -15.1 Central Securities CET 32.40 26.88 -17.0 CohSteer Opprtnty Fd FOF 13.69 12.89 -5.8 Cornerstone Strategic CLM 13.42 14.89 +11.0 EtnVnc TaxAdvDiv EVT 22.97 22.53 -1.9 Gabelli Dividend & Incm GDV 24.02 22.50 -6.3 Gabelli Equity Trust GAB 6.51 6.13 -5.8 Genl American Investors GAM 39.68 33.52 -15.5 Guggenheim Enh Fd GPM 8.93 8.77 -1.8 HnckJohn TxAdv HTD 26.25 25.76 -1.9 Liberty All-Star Equity USA 6.67 6.07 -9.0 Royce Micro-Cap RMT 10.66 9.36 -12.2 Royce Value Trust RVT 17.82 16.00 -10.2 Source Capital SOR 44.31 40.33 -9.0 Tri-Continental TY 29.47 26.27 -10.9 Specialized Equity Funds Adams Natural Rscs Fd PEO 21.83 18.73 -14.2 AllnzGI NFJ Div Interest NFJ 14.70 13.52 -8.0 AlpnGlblPrProp AWP 7.32 6.41 -12.4 29.1 24.0 28.3 18.0 20.3 20.5 20.2 19.9 18.7 22.9 25.9 30.4 22.5 28.4 16.1 25.1 1.4 15.3 36.7 52 wk Prem Ttl Fund (SYM) NAV Close /Disc Ret ASA Gold & Prec Metals ASA 13.07 11.23 -14.1 4.7 BlkRk Enh Cap Inco CII 16.77 16.00 -4.6 26.3 BlkRk Engy Res Tr BGR 15.00 13.56 -9.6 2.7 BlackRock Enh Eq Div Tr BDJ 9.73 9.04 -7.1 20.1 BlackRock Enh Gl Div Tr BOE 14.36 13.50 -6.0 25.2 BlkRk Intl Grwth&Inco BGY 7.06 6.60 -6.5 30.3 BlkRk Health Sci BME 35.39 35.89 +1.4 13.9 BlackRck Rscs Comm Str Tr BCX 10.19 9.03 -11.4 17.8 BlackRock Science & Tech BST 28.87 27.29 -5.5 53.7 BlackRock Utility & Infr BUI 21.32 21.27 -0.2 22.2 CBREClarionGlblRlEstIncm IGR 8.90 7.80 -12.4 15.4 Central Fund of Canada CEF 13.64 13.38 -1.9 14.1 ClearBridge Amer Engy CBA 7.36 NA -7.7 ClearBridge Engy MLP Fd CEM 12.74 NA -9.7 Clearbridge Engy MLP Opp EMO 10.34 NA -12.0 Clearbridge Engy MLP TR CTR 11.02 NA -3.8 Cohen & Steers Infr Fd UTF 25.83 23.21 -10.1 28.7 C&S MLP Incm & Engy Opp MIE 10.00 9.20 -8.0 -3.0 Cohen & Steers Qual Inc RQI 13.80 12.68 -8.1 19.6 CohnStrsPfdInco RNP 23.07 20.99 -9.0 22.7 Cohen & Steers TR RFI 13.57 12.71 -6.3 14.3 CLSeligmn Prem Tech Gr Fd STK 23.13 23.89 +3.3 40.4 Duff & Phelps DNP 10.02 11.35 +13.2 19.9 Duff&PhelpsGblUtilIncFd DPG 17.68 15.65 -11.5 12.2 Eaton Vance Eqty Inco Fd EOI 14.73 14.29 -3.0 25.4 Eaton Vance Eqty Inco II EOS 15.62 15.09 -3.4 21.2 EtnVncRskMngd ETJ 9.97 9.20 -7.7 13.3 Etn Vnc Tax Mgd Buy-Write ETB 16.26 16.63 +2.3 3.1 Eaton Vance BuyWrite Opp ETV 14.90 15.18 +1.9 10.5 Eaton Vance Tax-Mng Div ETY 12.10 11.86 -2.0 24.5 EatonVanceTax-MngdOpp ETW 11.56 11.89 +2.9 23.8 EtnVncTxMngGlDvEqInc EXG 9.39 9.30 -1.0 25.1 Fiduciary/Clymr Opp Fd FMO 11.32 10.96 -3.2 -18.2 FT Energy Inc & Growth Fd FEN 22.34 22.19 -0.7 -5.7 FstTrEnhEqtIncFd FFA 16.53 15.70 -5.0 24.6 First Tr Engy Infr Fd FIF 18.50 18.00 -2.7 4.1 First Tr MLP & Engy Incm FEI 13.94 14.13 +1.4 -4.4 Gabelli Hlthcr & Well GRX 11.34 9.90 -12.7 6.9 Gabelli Utility Tr GUT 5.53 7.08 +28.1 26.4 GAMCOGlblGoldNatRscs&Inc GGN 5.41 5.38 -0.6 11.4 GoldmanSachsMLPIncOpp GMZ 8.28 NA -4.1 Goldman Sachs MLPEnergy GER 5.65 NA -11.7 52 wk Prem Ttl Fund (SYM) NAV Close /Disc Ret John Hancock Finl Opps Fd BTO 35.93 35.65 -0.8 10.8 Macquarie Glbl Infrstrctr MGU 28.06 24.86 -11.4 36.2 NeubergerBermanMLPIncm NML 9.13 8.37 -8.3 -3.2 Neubrgr Brm Rl Est Sec Fd NRO 5.80 5.44 -6.2 14.3 Nuveen Dow 30 Dynamic DIAX 18.59 17.99 -3.2 29.0 Nuveen Core Eq Alpha JCE 16.40 16.14 -1.6 29.5 Nuveen Diversified Div JDD 13.12 12.16 -7.3 19.8 Nuveen Engy MLP Fd JMF 10.69 10.39 -2.8 -14.7 NuvNASDAQ100DynOver QQQX 23.21 24.35 +4.9 36.6 Nuveen Real Est Incm Fd JRS 11.58 11.09 -4.2 17.8 NuvS&P500DynOverwrite SPXX 16.51 NA 24.5 NuveenS&P500Buy-Write BXMX 14.43 14.15 -1.9 16.7 Reaves Utility Fund UTG 33.16 30.81 -7.1 13.6 Tekla Hlthcr Investors HQH 24.07 22.72 -5.6 3.8 Tekla Healthcare Opps Fd THQ 18.94 17.32 -8.6 13.6 Tekla Life Sciences HQL 19.91 19.36 -2.8 13.6 Tekla World Hlthcr Fd THW 14.49 13.44 -7.2 10.0 Tortoise Energy TYG 23.39 25.71 +9.9 -9.5 Tortoise MLP Fund NTG 15.65 15.88 +1.5 -6.3 Voya Gl Equity Div IGD 8.26 7.88 -4.6 23.7 Income Preferred Stock Funds Calamos Strat Fd CSQ 12.77 12.19 -4.5 30.8 Cohen & Steers Dur Pfd LDP 27.31 26.18 -4.1 18.4 Cohen & Strs Sel Prf Inco PSF 27.96 27.96 0.0 19.8 FT Interm Duration Pfd FPF 24.82 NA 24.7 Flaherty & Crumrine Dyn DFP 26.47 26.74 +1.0 25.5 Flaherty & Crumrine Pfd FFC 20.49 20.86 +1.8 15.2 John Hancock Pfd Income HPI 21.38 21.39 0.0 15.3 John Hancock Pfd II HPF 21.13 21.20 +0.3 14.9 John Hancock Pfd Inc III HPS 18.87 18.31 -3.0 15.5 JHancock Pr Div PDT 15.92 16.91 +6.2 30.9 LMP Cap & Inco Fd SCD 13.82 NA 14.0 Nuveen Pfd & Incm Opps Fd JPC 10.76 10.46 -2.8 19.4 Nuveen Pfd & Incm Secs Fd JPS 10.37 10.29 -0.8 26.8 Nuveen Preferred & Incm JPI 25.94 25.25 -2.7 17.6 TCW Strategic Income Fund TSI 5.61 NA 13.3 Virtus Global Dividend ZTR 12.94 13.45 +3.9 39.4 Convertible Sec's. Funds AdvntClymrFd AVK 17.56 15.94 -9.2 19.9 AllianzGI Conv & Incm NCV 6.63 7.01 +5.7 23.2 AllianzGI Conv & Incm II NCZ 5.95 6.21 +4.4 24.9 AllianzGI Div Incm ACV 22.82 22.20 -2.7 32.2 Borrowing Benchmarks | WSJ.com/bonds Money Rates November 24, 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 Oct. index level Chg From (%) Sept. '17 Oct. '16 U.S. consumer price index 246.663 253.638 All items Core –0.06 0.28 2.0 1.8 Week ago 52-Week High Low 0.00 0.50 0.50 1.50 0.00 0.50 0.50 1.50 0.00 0.50 0.50 1.50 0.00 0.50 0.25 1.50 30-year mortgage yields 1.21 1.19 U.S. 1.38 0.24 1.75 1.75 1.00 1.1700 1.3125 1.0300 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 Federal funds Effective rate High Low Bid Offer 1.1700 1.3125 1.0000 1.1600 1.1700 One month Three month Six month One year Other short-term rates Week Latest ago 52-Week high low -0.372 -0.329 -0.272 -0.186 -0.403 -0.379 -0.313 -0.239 -0.373 -0.329 -0.274 -0.192 Value Traded Latest -0.376 -0.325 -0.219 -0.080 -0.405 -0.381 -0.322 -0.251 -0.366 -0.313 -0.216 -0.076 -0.375 -0.332 -0.276 -0.192 52-Week High Low DTCC GCF Repo Index Call money 3.00 3.00 3.00 n.a. 1.22 1.36 25.200 1.366 0.264 78.440 1.506 0.280 1.219 1.218 Treasury MBS 2.25 Open Implied Settle Change Interest Rate Commercial paper (AA financial) 0.67 DTCC GCF Repo Index Futures Libor Treasury Nov Treasury Dec Treasury Jan 1.33756 1.28719 1.33756 0.60561 1.46763 1.44067 1.46763 0.93067 One month Three month U.S. government rates Discount -0.402 -0.381 -0.316 -0.247 Euro interbank offered rate (Euribor) 3.457 3.471 3.865 3.253 3.477 3.490 3.899 3.281 90 days Overnight repurchase One month Three month Six month One year Secondary market Policy Rates Euro zone Switzerland Britain Australia Euro Libor Fannie Mae 4.25 4.25 4.25 3.50 3.20 3.20 3.20 2.70 1.475 1.475 1.475 1.475 U.S. Canada Japan —52-WEEK— High Low 1.65394 1.63211 1.65394 1.28878 1.93606 1.90622 1.93606 1.63900 Six month One year 1.130 1.045 1.300 0.340 1.285 1.240 1.285 0.480 1.415 1.360 1.415 0.590 4 weeks 13 weeks 26 weeks 30 days 60 days Prime rates Week Latest ago Treasury bill auction International rates Latest —52-WEEK— High Low 98.795 unch. 6910 1.205 98.655 -0.010 2252 1.345 98.550 unch. 459 1.450 Notes on data: U.S. prime rate is the base rate on corporate loans posted by at least 70% of the 10 largest U.S. banks, and is effective June 15, 2017. Other prime rates aren’t directly comparable; lending practices vary widely by location; Discount rate is effective June 15, 2017. DTCC GCF Repo Index is Depository Trust & Clearing Corp.'s weighted average for overnight trades in applicable CUSIPs. Value traded is in billions of U.S. dollars. Federal-funds rates are Tullett Prebon rates as of 5:30 p.m. ET. Futures on the DTCC GCF Repo Index are traded on NYSE Liffe US. Sources: Federal Reserve; Bureau of Labor Statistics; DTCC; SIX Financial Information; Tullett Prebon Information, Ltd. 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 24, 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 GE J. Tisch J. Flannery F. D Souza DI CEO D PNR No. of shrs in Price range ($) $ Value trans (000s) in transaction (000s) Close ($) Ytd (%) Buyers Nov. 21 Nov. 15 Nov. 20 General Electric Nov. 17-20 Pentair Nov. 20-22 SandRidge Energy 3,000 60 55 17.82-17.99 18.27 17.94 53,712 1,096 987 18.19 -42.4 E. Garden DI 385 68.33-68.94 26,307 69.16 SD C. Icahn BI 1,257 16.11-17.40 20,548 18.90 -19.7 23.3 CEO 996 6.98 6,948 6.80 -18.6 Nov. 20 Prospect Capital PSEC J. Barry Nov. 16 Valeant Pharmaceuticals International VRX J. Paulson DI 344 14.40 4,956 16.57 14.1 Nov. 21 Nov. 15 Drive Shack DS W. Edens W. Edens D D 483 257 6.00 4.50 2,896 1,157 5.94 58.0 OD 180 11.63-11.79 2,113 D 103 16.28-16.44 1,681 16.45 -40.9 CEOI 40 39.32-39.38 1,580 39.64 W. Galtney DI 6 225.29 ARMK S. Mehra D 20* 40.75 Nov. 20-22 Biglari Holdings BH S. Biglari DOI 2 331.95-334.97 Nov. 17 Nov. 21 Tallgrass Energy Partners TEP D. Dehaemers D. Dehaemers CEOI CEOI 15 15 43.63 42.97 654 645 43.04 -9.3 Nov. 16 JBG SMITH Properties JBGS C. Haldeman D 20 32.59 652 33.25 4.5 WMT S. Walton J. Walton A. Walton DOI BI BI 3,903 3,903 3,903 96.22-99.91 96.22-99.91 96.22-99.91 380,203 380,203 380,203 96.62 39.8 DOI 8,500 30.26 257,216 31.84 30.8 594 179.26-179.63 106,577 182.78 58.9 Nov. 20-21 Entercom Communications ETM J. Field Nov. 16-17 Green Plains GPRE W. Hoovestol Nov. 20-21 American Assets Trust AAT E. Rady Nov. 20 Everest Re Group Nov. 16 Aramark RE 12.00 -21.6 -8.0 1,352 217.67 0.6 41.32 15.7 800 690 339.44 -28.3 Sellers Nov. 17-20 Wal-Mart Stores Nov. 17-20 Nov. 17-20 Nov. 20 Genpact G D. Humphrey Nov. 16 Facebook FB J. Koum DI Nov. 21 Paylocity Holding PCTY S. Sarowitz DO 1296* 46.14 59,804 48.22 60.7 Nov. 20 Nov. 20 Nov. 20 Nov. 20 Nov. 20 Nov. 20 Nov. 20 Nov. 20 Nov. 20 Appian APPN M. Barrett P. Barris F. Baskett A. Florence P. Kerins D. Mott S. Sandell P. Sonsini R. Viswanathan BI BI BI BI BI BI BI BI BI 2,821 2,821 2,821 2,821 2,821 2,821 2,821 2,821 2,821 19.49 19.49 19.49 19.49 19.49 19.49 19.49 19.49 19.49 54,972 54,972 54,972 54,972 54,972 54,972 54,972 54,972 54,972 21.16 41.0 Nov. 17 Splunk SPLK G. Sullivan D 592 79.03-81.78 47,886 84.10 Nov. 16 Starbucks SBUX H. Schultz OD 784 57.05 44,730 56.80 2.3 BK E. Garden DI 800 52.52-52.60 42,088 52.23 10.2 Nov. 20-22 Bank of New York Mellon 64.4 * Half the transactions were indirect **Two day transaction p - Pink Sheets Buying and selling by sector Based on actual transaction dates in reports received this past week Sector Basic Industries Business services Capital goods Consumer durables Consumer nondurables Consumer services Energy Buying 299,615 141,262 0 0 2,575,988 1,529,516 1,791,373 Selling 24,036,267 49,274,977 0 25,142,621 25,973,537 44,973,859 24,692,518 Sector Buying Finance Health care Industrial Media Technology Transportation Utilities 13,136,892 5,142,527 2,108,894 2,402,987 1,037,601 12,048 93,400 Selling 125,429,128 160,678,570 95,526,960 1,622,503 103,037,374 11,536,584 23,911,777 Sources: Thomson Financial; WSJ Market Data Group 52 wk Prem Ttl Fund (SYM) NAV Close /Disc Ret AllianzGI Equity & Conv NIE 23.22 21.29 -8.3 22.0 Calamos Conv Hi Inco Fd CHY 11.94 11.93 -0.1 27.4 Calamos CHI 11.33 11.52 +1.7 28.6 World Equity Funds Alpine Tot Dyn Div AOD 10.01 9.09 -9.2 31.0 Cdn Genl Inv CGI 32.78 23.56 -28.1 32.6 China Fund CHN 24.42 22.19 -9.1 42.6 Clough Global Opp Fd GLO 12.41 11.26 -9.3 39.9 EtnVncTxAdvGblDiv ETG 18.22 17.14 -5.9 31.3 EatonVance TxAdv Opport ETO 24.58 24.59 0.0 33.5 First Trust Dynamic Eur FDEU 18.65 NA 37.0 Gabelli Glbl Multimedia GGT 9.42 8.79 -6.7 29.5 GDL Fund GDL 11.62 9.90 -14.8 8.9 India Fund IFN 31.27 27.44 -12.2 32.8 Japan Sml Cap JOF 14.93 13.24 -11.3 38.3 Korea Fund KF 51.02 44.64 -12.5 38.9 Mexico Fund MXF 16.05 NA 13.1 Morgan-Stanley Asia-Pac APF 21.01 18.30 -12.9 35.0 MS China a Shr Fd CAF 28.39 24.20 -14.8 33.3 MS Emerging Fund MSF 20.31 17.74 -12.7 34.2 MS India Invest IIF 40.15 35.97 -10.4 44.9 New Germany Fund GF 21.89 19.47 -11.1 58.8 Swiss Helvetia Fund SWZ 14.05 12.61 -10.2 27.2 Templeton Dragon TDF 24.89 22.01 -11.6 41.0 Templeton Emerging EMF 19.89 17.72 -10.9 52.1 Virtus Total Return Fund ZF 13.48 12.67 -6.0 26.5 Voya Infr Indls & Matls IDE 16.74 16.19 -3.3 25.4 Wells Fargo Gl Div Opp EOD 6.27 NA 31.3 Prem12 Mo Fund (SYM) NAV Close /Disc Yld U.S. Mortgage Bond Funds BlackRock Income Trust BKT 6.64 6.14 -7.5 5.1 Nuveen Mtg Opp Term Fd JLS 26.54 25.55 -3.7 5.2 Investment Grade Bond Funds Blackrock Core Bond Tr BHK 14.90 14.10 -5.4 5.5 BlkRk Credit Alloc Incm BTZ 14.83 13.29 -10.4 6.3 John Hancock Income Secs JHS 15.56 14.75 -5.2 5.4 MFS Inc Tr MIN 4.42 4.18 -5.4 9.2 WstAstClymr InfLnkd Fd WIW NA 11.34 NA 3.6 WstAssetClymr InflLnk Sec WIA NA 11.61 NA 3.3 Loan Participation Funds Apollo Sr Fltg Rate Fd AFT 17.98 16.38 -8.9 7.4 BlkRk Debt Strat Fd DSU 12.69 11.66 -8.1 6.9 BlackRock FR Incm Strat FRA 14.92 13.77 -7.7 5.6 Blkrk FltRt InTr BGT 14.41 13.81 -4.2 5.3 BlackstoneGSO Strat Cred BGB NA 15.79 NA 8.4 Blackstone GSO Sr Float BSL NA 17.26 NA 6.7 Eagle Point Credit ECC NA 19.15 NA 8.3 Eaton Vance FR Incm Tr EFT 15.46 14.18 -8.3 5.7 EatonVnc SrFltRate EFR 15.13 14.11 -6.7 6.0 Eaton Vance Sr Incm Tr EVF 7.14 6.48 -9.2 5.6 First Trust Sr FR Fd II FCT 14.05 12.84 -8.6 6.1 FT Sr Floating Rate 2022 FIV 9.72 9.29 -4.4 NS Invesco Credit Opps Fund VTA 12.99 11.50 -11.5 7.1 Invesco Senior Income Tr VVR NA 4.37 NA 6.0 Nuveen Credit Strt Inc Fd JQC 9.06 8.14 -10.2 7.4 NuvFloatRteInco Fd JFR 11.50 10.98 -4.5 6.9 Nuv Float Rte Opp Fd JRO 11.42 10.85 -5.0 7.3 Nuveen Senior Income Fund NSL 6.82 6.48 -5.0 6.9 Pioneer Floating Rate Tr PHD 12.41 11.53 -7.1 6.0 Voya Prime Rate Trust PPR 5.65 5.08 -10.1 6.0 High Yield Bond Funds AllianceBernstein Glbl AWF 13.90 12.59 -9.4 6.7 Barings Glbl Short Dur HY BGH 20.92 19.68 -5.9 8.9 BlackRock Corp Hi Yd Fd HYT 12.22 11.03 -9.7 7.9 BlackRockDurInco Tr BLW 17.01 15.83 -6.9 7.8 Brookfield Real Assets RA 25.06 23.70 -5.4 NS Credit Suisse High Yld DHY 2.77 2.83 +2.0 9.4 DoubleLine Incm Solutions DSL NA 20.25 NA 8.6 Dreyfus Hi Yd Strat Fd DHF 3.54 3.39 -4.2 8.8 Fst Tr Hi Inc Lg/Shrt Fd FSD 18.04 16.44 -8.9 8.3 Guggenheim Strat Opps Fd GOF 19.71 21.61 +9.6 10.2 Ivy High Income Opps Fund IVH 15.92 14.84 -6.8 9.4 Neuberger Berman HYS NHS 13.23 11.78 -11.0 7.4 NexPoint Credit Strat Fd NHF 25.60 23.84 -6.9 10.1 Nuveen Credit Opps 2022 JCO 9.92 9.82 -1.0 NS Nuveen Gl Hi Incm Fd JGH 18.48 16.56 -10.4 8.2 Nuveen High Incm Dec18 JHA 10.07 9.88 -1.9 5.2 Nuveen High Incm Dec19 JHD 10.23 10.02 -2.1 5.8 Nuveen Hi Incm Nov 2021 JHB 10.10 9.89 -2.1 5.9 Pioneer High Income Trust PHT 10.76 9.79 -9.0 8.2 Prud Gl Shrt Dur Hi Yd GHY 16.36 14.51 -11.3 7.8 Prudentl Sh Dur Hi Yd Fd ISD 16.54 14.78 -10.6 7.7 Wells Fargo Incm Opps Fd EAD NA 8.45 NA 8.7 Wstrn Asset Glbl Hi Inco EHI NA 10.02 NA 8.7 Wstrn Asset High Inco II HIX NA 6.98 NA 8.7 Wstrn Asset Opp Fd HIO NA 5.00 NA 7.2 West Asst HY Def Opp Fd HYI NA 15.17 NA 7.8 Other Domestic Taxable Bond Funds Apollo Tactical Incm Fd AIF 17.47 15.92 -8.9 8.8 Ares Dynamic Credit Alloc ARDC NA 16.46 NA 6.9 Barings Corp Investors MCI NA 15.58 NA 3.7 BlackRock Multi-Sector IT BIT 19.93 18.19 -8.7 9.5 BlackRock Taxable Mun Bd BBN 23.96 23.17 -3.3 6.8 Doubleline Oppor Credit DBL NA 22.31 NA 8.7 Duff & Phelps Utl & Cp Bd DUC 9.68 8.97 -7.3 6.5 EtnVncLtdFd EVV 15.04 13.59 -9.6 7.1 Franklin Ltd Duration IT FTF NA 11.78 NA 11.4 GuggenheimTaxableMuni GBAB 23.44 22.36 -4.6 6.8 Invesco High Incm 2023 IHIT 10.06 10.05 -0.1 NS John Hancock Investors JHI 18.69 17.65 -5.6 7.2 KKR Income Opps Fund KIO NA 16.32 NA 9.4 MFS Charter MCR 9.26 8.45 -8.7 8.7 MFS Multimkt MMT 6.62 6.10 -7.9 8.7 Nuveen Build Am Bd Fd NBB 22.53 21.74 -3.5 5.7 PIMCO Corporate & Incm PTY 14.97 16.54 +10.5 10.3 PIMCO Corporate & Incm PCN 15.21 16.83 +10.7 10.4 PIMCO HiInco PHK NA 7.51 NA 13.1 PIMCO Inco Str Fd PFL NA 11.68 NA 8.9 PIMCO Incm Strategy Fd II PFN NA 10.44 NA 8.9 Putnam Mas Inco PIM 5.00 4.76 -4.8 6.5 Putnam Premier Income Tr PPT 5.55 5.22 -5.9 5.8 Wells Fargo Multi-Sector ERC NA 13.06 NA 9.4 World Income Funds Abeerden Asia-Pacific FAX 5.42 4.92 -9.2 8.3 Etn Vnc Short Dur Fd EVG NA 13.80 NA 6.9 Legg Mason BW Glbl Incm BWG NA 12.93 NA 8.3 MS EmMktDomDebt EDD 8.87 7.73 -12.9 8.4 PIMCO Dynamic Credit PCI 23.66 22.49 -4.9 11.4 PIMCODynamicIncomeFund PDI 29.09 30.25 +4.0 13.5 PIMCO Income Opportunity PKO 25.69 26.09 +1.6 9.9 PIMCO Strat Income Fund RCS NA 8.84 NA 9.7 Templeton Emerging TEI 13.08 11.50 -12.1 4.5 Templeton Global GIM 7.40 6.50 -12.2 6.1 Wstrn Asset Emerg Mkts EMD NA 15.36 NA 7.5 Wstrn Asset Gl Def Opp Fd GDO NA 18.12 NA 7.5 National Muni Bond Funds AllianceBrnstn NtlMun AFB 14.84 13.70 -7.7 4.6 Blackrock Invest BKN 15.85 14.63 -7.7 5.3 BlackRockMun2030Target BTT 24.10 22.38 -7.1 4.1 BlackRock Municipal Trust BFK 14.41 14.11 -2.1 5.7 BlackRockMuni BLE 14.98 14.39 -3.9 6.1 BlackRockMuni Tr BYM 15.13 14.10 -6.8 5.3 BlkRk MuniAssets Fd MUA 14.13 15.11 +6.9 4.6 BlkRk Munienhanced MEN 11.85 12.18 +2.8 5.7 BlkRk MuniHldgs Inv MFL 14.62 15.08 +3.1 5.7 BlkRk MuniHldgs Qlty II MUE 13.99 13.92 -0.5 5.6 BlkRk MuniVest MVF 9.62 9.75 +1.3 5.8 BlkRk MuniVest II MVT 15.20 15.53 +2.2 5.9 BlkRk MuniYield MYD 14.81 14.42 -2.6 6.0 BlkRk MuniYld Quality MQY 15.75 15.59 -1.0 5.6 BlkRk MuniYld Qlty II MQT 13.83 13.07 -5.5 5.6 BlRkMunyldQltyIII MYI 14.36 14.07 -2.0 5.8 Deutsche Mun Income Tr KTF 12.55 11.81 -5.9 6.6 Dreyfus Mun Bd Infr Fd DMB 14.19 13.15 -7.3 4.9 Dreyfus Strat Muni Bond DSM 8.33 8.47 +1.7 5.9 Dreyfus Strategic Munis LEO 8.54 8.77 +2.7 5.9 Eaton Vance Mun Bd Fd EIM 13.59 12.62 -7.1 5.0 Eaton Vance Mun Income EVN 13.30 12.46 -6.3 5.4 EV National Municipal Opp EOT 21.88 22.40 +2.4 4.7 Invesco Adv Mun Incm II VKI 12.09 11.35 -6.1 5.8 Invesco Mun Incm Opps Tr OIA 7.57 7.92 +4.6 5.2 Invesco Mun Opportunity VMO 13.46 12.42 -7.7 6.1 Invesco Municipal Trust VKQ 13.44 12.44 -7.4 5.9 Invesco Qlty Mun Inco IQI 13.56 12.36 -8.8 5.5 Invesco Inv Grade Muni VGM 13.93 13.15 -5.6 5.8 Invesco Value Mun Incm Tr IIM 16.19 14.71 -9.1 5.0 MainStay DefinedTerm MMD 20.03 19.50 -2.6 5.6 MFS Munl Inco MFM 7.34 6.86 -6.5 5.5 Nuveen AMT-Free Quality NEA 15.05 13.65 -9.3 5.4 Nuveen AMT-Free Mun NVG 16.42 15.43 -6.0 5.7 Nuveen Mun Credit Incm Fd NZF 16.02 15.24 -4.9 5.9 Nuveen Enhncd Mun Val Fd NEV 14.99 14.32 -4.5 5.7 Nuveen Intermed Dur Mun NID 13.76 13.17 -4.3 4.9 NuveenMuniIncoOpp Fd NMZ 13.51 13.71 +1.5 6.0 Nuveen Muni Value Fund NUV 10.27 10.09 -1.8 3.8 Nuveen Qual Mun Incm Fd NAD 15.40 13.99 -9.2 5.6 Nuveen Sel Tax Free NXP 15.37 14.84 -3.4 3.7 Nuveen Sel TF NXQ 14.78 14.25 -3.6 3.6 PIMCO MuniFd PMF 12.79 13.05 +2.0 5.9 Pimco Muni Inc II PML 12.06 13.31 +10.4 5.9 PIMCO Muni Inc III PMX 11.00 11.75 +6.8 5.9 Pioneer Mun Hi Inc Adv Tr MAV 11.82 11.49 -2.8 5.3 Pioneer Mun Hi Incm Tr MHI 12.71 11.90 -6.4 5.1 Putnam Tr PMM 7.94 7.55 -4.9 5.4 PutnamMuniOpportunities PMO 13.26 12.64 -4.7 5.2 Wstrn Asset Mngd Muni MMU NA 14.18 NA 5.4 WesternAssetMunTrFund MTT NA 21.77 NA 4.9 Single State Muni Bond BlackRock CA Municipal Tr BFZ 15.17 14.32 -5.6 5.1 BlkRk MuniHldgs CA Qlty MUC 15.38 14.68 -4.6 5.0 Prem12 Mo Fund (SYM) NAV Close /Disc Yld Blkrck MunHl NJ Qlty MUJ 15.57 14.41 -7.5 5.6 BlRk MuHldg NY Qlty MHN 14.72 13.84 -6.0 5.0 BlkRk MuniYld CA Fd MYC 15.47 15.00 -3.0 5.1 BlkRk MuniYld CA Quality MCA 15.61 14.77 -5.4 5.1 BlkRk MuniYld MI Qlty MIY 15.35 14.06 -8.4 5.5 BlRk Muyld NY Qlty MYN 14.10 12.93 -8.3 5.0 Eaton Vance CA Mun Bd EVM 12.25 11.75 -4.1 4.9 Invesco CA Value Mun Incm VCV 13.34 12.62 -5.4 5.0 Invesco PA Value Mun Incm VPV 13.98 12.08 -13.6 5.1 Invesco Inv Grade NY Muni VTN 14.50 13.74 -5.2 5.0 Nuveen CA AMT-Free Qual NKX 15.73 15.35 -2.4 5.0 Nuveen CA Muni Value NCA 10.41 10.51 +1.0 3.9 Nuveen CA Quality Muni NAC 15.59 14.40 -7.6 5.5 Nuveen MD Qual Muni NMY 14.50 12.64 -12.8 5.0 Nuveen MI Qual Muni NUM 15.29 13.33 -12.8 4.8 Nuveen NJ Qual Muni NXJ 15.77 13.57 -14.0 5.2 Nuveen NY AMT-Free NRK 14.34 12.95 -9.7 4.9 Nuveen NY Qual Muni NAN 14.97 13.97 -6.7 5.1 Nuveen OH Qual Muni NUO 16.53 14.77 -10.6 4.7 Nuveen PA Qual Muni NQP 15.13 13.34 -11.8 5.2 Nuveen VA Qual Muni NPV 14.40 13.02 -9.6 4.3 PIMCO California Muni PCQ 14.07 17.18 +22.1 5.3 PIMCO California Mun II PCK 8.59 10.11 +17.7 5.6 52 wk Prem Ttl Fund (SYM) NAV Close /Disc Ret General Equity Funds Specialized Equity Funds Griffin Inst Access RE:A 27.01 NA NA 6.9 Griffin Inst Access RE:C 26.57 NA NA 6.1 Griffin Inst Access RE:I 27.17 NA NA 7.2 Griffin Inst Access RE:L 26.99 NA NA NS Griffin Inst Access RE:M 26.88 NA NA 6.4 NexPointRlEstStrat;A 20.73 NA NA 7.9 NexPointRlEstStrat;C 20.67 NA NA 7.1 NexPointRlEstStrat;Z 20.68 NA NA 8.1 Resource RE Div Inc:A 10.16 NA NA 6.6 Resource RE Div Inc:C 10.15 NA NA 5.8 Resource RE Div Inc:D 10.31 NA NA 6.0 Resource RE Div Inc:I 10.59 NA NA 6.6 Resource RE Div Inc:L 10.16 NA NA NS Resource RE Div Inc:T 10.13 NA NA 5.8 Resource RE Div Inc:U 10.17 NA NA 6.6 Resource RE Div Inc:W 10.32 NA NA 6.5 SharesPost 100;A 26.47 NA NA -1.7 SharesPost 100:I 26.47 NA NA NS Tot Inc+ RE:A 29.67 NA NA 7.0 Tot Inc+ RE:C 28.89 NA NA 6.2 Tot Inc+ RE:I 30.01 NA NA 7.3 Tot Inc+ RE:L 29.63 NA NA NS USQ Core Real Estate:I USQIX 25.26 NA NA NS USQ Core Real Estate:IS USQSX 25.26 NA NA NS Versus Cap MMgr RE Inc:F 27.64 NA NA 6.4 Versus Cap MMgr RE Inc:I 27.71 NA NA 6.7 Versus Capital Real Asst VCRRX 25.11 NA NA NS 52 wk Prem Ttl Fund (SYM) NAV Close /Disc Ret Wildermuth Endwmnt Str 12.83 NA NA 11.6 Wildermuth Endwmnt S:C 12.66 NA NA 10.7 Wildermuth Endwmnt S:I 12.89 NA NA NS Income Preferred Stock Funds MultiStrat Gro & Inc:A 15.29 NA NA 4.3 MultiStrat Gro & Inc:C 14.96 NA NA 3.5 MultiStrat Gro & Inc:I 15.48 NA NA 4.5 MultiStrat Gro & Inc:L 15.07 NA NA 3.8 The Relative Value:CIA VFLEX 25.45 NA NA NS Convertible Sec's. Funds Calmos Dyn Conv and Inc CCD 21.12 20.87 -1.2 18.4 World Equity Funds BMO LGM Front ME 10.42 NA NA 16.1 CalamosGlbTotRet CGO 13.61 14.19 +4.3 26.5 Prem12 Mo Fund (SYM) NAV Close /Disc Yld U.S. Mortgage Bond Funds Vertical Capital Income 12.69 NA NA 3.2 Loan Participation Funds 504 Fund 9.79 NA NA 3.7 FedProj&TrFinanceTender 10.07 NA NA NS Invesco Sr Loan A 6.65 NA NA 4.2 Invesco Sr Loan B 6.65 NA NA 4.2 Invesco Sr Loan C 6.66 NA NA 3.5 Invesco Sr Loan IB 6.65 NA NA 4.4 Invesco Sr Loan IC 6.65 NA NA 4.3 Invesco Sr Loan Y 6.65 NA NA 4.4 RiverNorth MP Lending RMPLX 25.16 NA NA 6.6 Sierra Total Return:T SRNTX 24.88 NA NA NS Voya Senior Income:A 12.50 NA NA 5.3 Voya Senior Income:C 12.48 NA NA 4.8 Voya Senior Income:I 12.46 NA NA 5.6 Voya Senior Income:W 12.51 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 10.52 NA NA NS PionrILSInterval 9.58 NA NA 10.5 WA Middle Mkt Dbt NA NA NA 11.2 WA Middle Mkt Inc WMF NA 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 7.88 NA NA NS GL Beyond Income 3.69 NA NA NE Palmer Square Opp Income NA NA NA 5.0 Resource Credit Inc:A 11.19 NA NA 6.4 Resource Credit Inc:C 11.30 NA NA 5.7 Resource Credit Inc:I 11.22 NA NA 6.7 Resource Credit Inc:L 11.18 NA NA NS Resource Credit Inc:W 11.19 NA NA 6.3 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 199.75 points, or 0.86%, 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 $35,984, or a gain of 19.95%, on the $30,000 investment, including reinvested dividends. The Week’s Action Pct Stock price Point chg chg (%) change in average* Company Symbol Close $1,000 Invested(year-end '16) $1,000 3.50 2.83 2.74 1.96 1.93 1.59 4.82 4.59 2.15 2.87 10.95 33.19 31.60 14.80 19.76 Verizon Apple Home Depot Visa IBM VZ AAPL HD V IBM $47.01 174.97 172.33 111.97 151.84 $924 1,535 1,308 1,445 950 1.64 1.57 1.47 1.43 1.38 0.59 1.80 1.18 2.39 3.62 4.06 12.39 8.12 16.46 24.93 Cisco Systems Chevron Exxon Mobil McDonald’s Boeing CSCO 36.49 CVX 116.51 XOM 81.42 MCD 169.11 BA 265.88 1,251 1,030 937 1,417 1,756 1.24 1.04 0.93 0.88 0.59 2.61 0.86 1.26 2.02 0.42 17.97 5.92 8.68 13.91 2.89 UnitedHealth Group UNH 212.51 Microsoft MSFT 83.26 Caterpillar CAT 137.39 3M MMM 231.38 DWDP 71.16 DowDuPont 1,343 1,370 1,526 1,326 1,277 0.37 0.34 0.33 0.27 0.22 0.17 0.12 0.38 0.12 0.13 1.17 0.83 2.62 0.83 0.90 Coca-Cola KO 45.88 Pfizer PFE 35.49 United Technologies UTX 116.91 Intel INTC 44.75 Nike NKE 59.32 1,135 1,135 1,092 1,268 1,179 0.18 0.02 0.01 –0.07 –0.11 0.18 0.02 0.01 –0.09 –0.02 1.24 0.14 0.07 –0.62 –0.14 J.P. Morgan Chase JPM 98.32 Procter & Gamble PG 88.45 Johnson & Johnson JNJ 138.01 Travelers TRV 129.83 General Electric GE 18.19 1,165 1,085 1,221 1,079 591 –0.22 –0.77 –0.87 –0.87 –1.54 –0.21 –0.80 –2.07 –0.85 –0.85 –1.45 –5.51 –14.25 –5.85 –5.85 American Express AXP 93.48 Walt Disney DIS 102.64 Goldman Sachs GS 235.95 Wal-Mart Stores WMT 96.62 Merck MRK 54.35 1,282 992 995 1,426 944 *Based on Composite price. DJIA is calculated on primary-market price. Source: WSJ Market Data Group; FactSet. Notice to Warrantholders of Tri-Continental Corporation of Distribution from Net Assets This notice is to inform Warrantholders of Tri‑Continental Corporation, as required by its Charter, that the Corporation, on November 24, 2017, declared a distribution of $0.4044 per share (comprised of $0.3094 from ordinary income and $0.095 from long‑term capital gain) payable on December 29, 2017 to the holders of Common Stock of record at the close of business on December 21, 2017. The distribution will be paid in additional shares of Common Stock, or, at the option of the Common Stockholder, 75% in shares and 25% in cash; 50% in shares and 50% in cash; or 100% in cash. The number of shares of Common Stock that each Warrant is entitled to purchase and the price at which the shares are purchasable may be adjusted, pursuant to the Corporation’s Charter, for additional shares of Common Stock issued in payment of the distribution. However, there is no adjustment to be made for cash paid out to Common Stockholders, and cash payments will tend to reduce the net asset value of the Common Stock subsequently purchasable on the exercise of Warrants. Each Warrant now entitles holders to purchase 24.19 shares of Tri‑ Continental Common Stock at a price of $0.93 per share. If holders wish to exercise their Warrants in order to receive the December distribution, they should do so on or before December 18, 2017, in order to ensure that they become a Common Stockholder of record by December 21, 2017. To exercise Warrants, complete and sign the Form of Election on the back of the certificates. Then send the certificates, together with the necessary payment, to: Regular Mail Tri‑Continental Corporation c/o Columbia Management Investment Services Corp. P.O. Box 8081 Boston, MA 02266‑8081 Express Mail Tri‑Continental Corporation c/o Columbia Management Investment Services Corp. 30 Dan Road, Suite 8081 Canton, MA 02021‑2809 Checks should be drawn to the order of Tri‑Continental Corporation. Any questions regarding Warrants or the distribution should be addressed to Tri‑Continental Corporation at the above‑listed addresses, or by calling 800.345.6611, Option 3. You can also visit the Corporation’s website at investor.columbiathreadneedleus.com for information relating to the Corporation. November 27, 2017 Ryan C. Larrenaga, Secretary Tri-Continental Corporation 225 Franklin Street Boston, Massachusetts 02110-2804 800.345.6611, Option 3 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. B10 | Monday, November 27, 2017 MONEY & INVESTING FBI Probes Ohio Shale Site’s Sale Copper Bolstered At issue are allegations landowner made in civil case against EnerVest By Dollar BY IRA IOSEBASHVILI The Federal Bureau of Investigation is looking into an eastern Ohio landowner’s claims that oil-and-gas investment firm EnerVest Ltd. sold valuable shale-drilling rights on his property that should have been his to sell, according to people familiar with the matter. The probe follows allegations made against EnerVest in a more than two-year-old civil case filed in Ohio’s Guernsey County, where drilling into the prolific Utica Shale has made the state one of the country’s top energy producers. The case involves EnerVest as well as Ascent Resources LLC, a company started by the late oilman Aubrey McClendon and two big investment firms, which has delayed plans to drill the property because of the dispute. Ascent has become one of the country’s top natural-gas producers by drilling one gusher after another in eastern Ohio; it is preparing for an initial public stock offering or sale that could value the company at more than $3.5 billion. It acquired rights to drill some of the landowner’s property from EnerVest in 2013 and started the civil case when it sued landowner Matt Crislip for access to the property in 2015. At issue is a tenet of the oil-and-gas business in which a drilling lease generally remains intact only as long as a well is producing from the property, a concept known as “held by production.” While his dispute with Ascent was litigated, Mr. Crislip made a counterclaim against EnerVest, alleging that the 37year-old natural-gas well on his property in rural eastern Ohio had been dead for many years but that EnerVest “took steps to deceive [him] into believing the well was still producing,” including feeding gas backward from a pipeline to the well, so the firm could retain control of the rights to drill the Utica Shale below. “They back-fed a dead well, RYAN DEZEMBER/THE WALL STREET JOURNAL BY RYAN DEZEMBER Ohio landowner Matt Crislip is involved in two-year-old litigation regarding a disputed property with Houston-based EnerVest. tricked me into thinking my well was producing, held my 342 acres, sold my deep rights for millions and I got nothing,” Mr. Crislip said. EnerVest has denied the allegations in court. An EnerVest spokesman said, “We deny Mr. Crislip’s baseless allegations, and a third-party expert review has validated our internal assessment. We will defend ourselves vigorously.” Ascent, which is controlled by Energy & Minerals Group and First Reserve Corp., declined to comment. FBI investigators have discussed Mr. Crislip’s allegations with local landowners and recently questioned others involved in the dispute, according to people familiar with the matter. So far, the federal probe has been limited to the Guernsey County case, according to a person familiar with the matter. Investigators have been interested since at least February, according to a letter the FBI sent to Mr. Crislip enrolling him in its Victims Assistance Program that was reviewed by The Wall Street Journal. “We have identified you as Ohio’s oil and natural gas production has surged since drillers began tapping the Utica Shale in the eastern part of the state. Ohio crude-oil production Ohio natural-gas production 80,000 barrels a day 5 billion cubic feet a day 4 60,000 3 40,000 2 20,000 1 Monthly 0 2008 ’11 ’14 ’17 Source: Energy Information Administration a possible victim of a crime This case is currently under investigation by the FBI,” the letter said, without being more specific. No charges have been filed. Conflicts between prospectors and landowners over contract language, royalty and lease payments, and land use have proliferated over the past decade as advances in drilling technology have unearthed previously unattainable troves Monthly 0 2008 ’11 ’14 ’17 THE WALL STREET JOURNAL. of oil and gas. In many places, including eastern Ohio, decades-old drilling leases that held rights to these nowwithin-reach reservoirs have soared in value. The case in Guernsey County’s Court of Common Pleas has been scheduled for a jury trial in March after Guernsey County Judge Daniel Padden earlier this year turned down EnerVest’s request to dismiss Mr. Crislip’s claims. “There are genuine issues of material fact remaining as to the issue of production of the Crislip No. 3 well,” he wrote in that June order. Houston-based EnerVest, which manages private investment funds and owns a controlling stake in publicly traded well owner EV Energy Partners LP, acquired the drilling lease for Mr. Crislip’s property in 2009 as part of a push into Ohio in which it spent more than $1 billion acquiring rights to more than a million acres ahead of the oil industry’s interest in the Utica Shale. Mr. Crislip’s parents signed the lease in 1980 with a local drilling outfit. The lease gives its holder rights to drill 342 acres so long as oil or gas is being produced from the property. For many years the lease’s various holders have relied on the output of the small gas well that was drilled there shortly after the lease was executed in 1980. EnerVest in 2013 sold 152 acres covered by the lease, but not the well itself, as part of a larger package of drilling rights to Ascent for nearly $285 million. Currencies 49 The number of trading sessions it took the S&P 500 to rise 100 points to close above 2600, the second-quickest 100-point milestone on record S&P Vaults to 2600 The eight-year U.S. stockmarket rally continues to rack up milestones. And fast. The S&P 500 finished last week at 2602, closing above another round number as it continues its virtually unhindered ascent in 2017. The benchmark eclipsed the hurdle Shale Boom Copper prices rose to their highest level in nearly a month Friday, buoyed by a weaker dollar. Copper for November delivery closed up 1% at $3.1660 a pound on COMMODITIES the Comex division of the New York Mercantile Exchange, its highest settlement since Oct. 26. The Wall Street Journal Dollar Index, which measures the U.S. currency against a basket of 16 others, fell 0.1% to 86.41, its lowest level since Oct. 13. A falling dollar tends to boost copper, which is denominated in the U.S. currency and becomes more affordable to foreign buyers when the dollar declines. A depreciating dollar and a pickup in global growth have pushed copper prices up nearly 27% this year. The metal is a key ingredient in everything from smartphones to refrigerators, making it sensitive to economic trends. Those gains may be in danger if signs of weakness persist in China’s metal-intensive infrastructure and property sectors, analysts at Julius Baer said in a note to clients. China accounts for some 45% of global copper demand. “We believe that the outlook for industrial metals demand in general and copper demand in particular is softening rather than strengthening,” the report said. Growth in Chinese factory output, fixed-asset investment and retail sales all slowed a tad in October, as Beijing imposed tighter pollution controls and continued restrictions on home purchases in the country’s big cities, data showed earlier this month. Stockpiles of copper held at London Metal Exchange warehouses have dropped 22% this month, a possible sign of heightened demand. Stocks held in Shanghai Futures Exchange warehouses, though, have been recently growing, Capital Economics said. in 49 trading sessions after it closed above 2500 for the first time back on Sept. 15. The 4% advance marks the second time the index reached a century milestone in fewer than 50 days. It was the second-fastest such climb on record. Back in 1998, during the run-up to the dot-com bubble, it took 35 trading sessions for the S&P 500 to vault from 1000 over 1100, a 10% advance. Under the hood, technology stocks were the biggest contributors to the rally’s MONEYBEAT latest push. The S&P 500’s tech stocks rose 11% during the 49-day run, roughly double the 5.4% advance for financialsector shares, the next best market segment. Chip maker Micron Technology Inc. surged 43% over that stretch and fellow semiconductor companies Intel Corp. and Nvidia Corp. tacked on 21% apiece. In that respect, the latest milestone serves as a microcosm for the U.S. stock market’s performance all year, which has been dominated by towering tech-stock gains in general and by chip stocks in particular. Both Micron and Nvidia have more than doubled in price to help the S&P 500’s tech sector rise 39%. By market value, the S&P 500 is now one-quarter technology stocks, compared with 14% for each of the next two sectors, financial and health-care stocks. That means continued strength in tech stocks could disproportionately help the S&P 500 in any new hasty advance toward 2700. —Chris Dieterich 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 Americas Europe Argentina peso .0576 17.3482 9.3 Brazil real .3092 3.2341 –0.6 Canada dollar .7866 1.2713 –5.4 Chile peso .001577 634.10 –5.3 Ecuador US dollar 1 1 unch Mexico peso .0539 18.5553 –10.5 Uruguay peso .03406 29.3600 0.03 Venezuela b. fuerte .097334 10.2740 2.8 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 .7615 1.3132 –5.4 China yuan .1516 6.5983 –5.0 Hong Kong dollar .1281 7.8083 0.7 India rupee .01549 64.550 –5.0 Indonesia rupiah .0000740 13505 –0.1 Japan yen .008963 111.57 –4.6 Kazakhstan tenge .003030 330.04 –1.1 Macau pataca .1243 8.0424 1.6 Malaysia ringgit .2431 4.1137 –8.3 New Zealand dollar .6881 1.4533 0.6 Pakistan rupee .00951 105.185 0.8 Philippines peso .0197 50.634 2.1 Singapore dollar .7433 1.3454 –7.0 South Korea won .0009211 1085.64 –10.1 Sri Lanka rupee .0065036 153.76 3.6 Taiwan dollar .03337 29.970 –7.7 Thailand baht .03062 32.660 –8.8 Vietnam dong .00004400 22725 –0.2 US$vs, YTDchg Fri in US$ per US$ (%) .04689 21.328 –17.0 .1603 6.2382 –11.8 1.1932 .8381 –11.8 .003822 261.63 –11.1 .009724 102.84 –9.0 .1230 8.1280 –6.0 .2835 3.5275 –15.7 .01713 58.394 –4.7 .1208 8.2760 –9.1 1.0206 .9798 –3.8 .2536 3.9437 11.9 .0373 26.8284 –0.9 1.3332 .7501 –7.4 Middle East/Africa Bahrain dinar Egypt pound Israel shekel Kuwait dinar Oman sul rial Qatar rial Saudi Arabia riyal South Africa rand 2.6466 .3779 0.2 .0565 17.6890 –2.4 .2850 3.5082 –8.8 3.3125 .3019 –1.2 2.5970 .3851 0.02 .2763 3.619 –0.6 .2666 3.7505 –0.01 .0720 13.8866 1.4 Close Net Chg % Chg YTD%Chg WSJ Dollar Index 86.41 –0.11–0.13 –7.02 Sources: Tullett Prebon, WSJ Market Data Group THE TICKER | Market events coming this week Wednesday Short-selling reports EIA status report Ratio, days of trading volume of current position, at Oct. 31. NYSE Nasdaq 4.9 4.3 New-home sales Sept., previous 667,000 Oct., expected 624,000 Earnings expected* Estimate/Year Ago($) Thor Industries 1.84/1.49 Tuesday Consumer confidence Oct., previous 125.9 Nov., expected 123.5 Earnings expected* Estimate/Year Ago($) Autodesk (0.13)/(0.18) Marvell Tech 0.33/0.20 Previous change in stocks in millions of barrels PVH Synopsis Tiffany Workday Crude oil Gasoline Distillates Thursday down 1.9 0.0 up 0.3 Gross domestic product Percentage change, annual rate 3d quarter.advance estimate up 3.0% 3d quarter second estimate up 3.3% GDP Deflator 3rd quarter advance estimate up 2.2% 3rd quarter second estimate up 2.2% Earnings expected* Estimate/Year Ago($) Guidewire Software (0.14)/0.02 2.91/2.60 0.57/0.77 0.76/0.76 0.15/0.03 Initial jobless claims Previous 239,000 Expected 242,000 EIA report: natural gas Previous change in stocks in billions of cubic feet down 46 Chicago PMI Oct., previous Nov., expected 66.2 63 Personal income Sept., previous up 0.4% Oct., expected up 0.3% Personal spending Sept., previous up 1.0% Oct., expected up 0.2% Earnings expected* Estimate/Year Ago($) Donaldson Kroger Ulta Beauty VMWare 0.42/0.38 0.40/0.41 1.66/1.40 1.28/1.14 Friday RICHARD B. LEVINE/LEVINE ROBERTS/NEWSCOM/ZUMA PRESS Monday Total vehicle sales domestically produced, at an annual rate Oct., previous 18.09 mil. Nov., expected 17.5 mil. Construction spending Sept., previous up 0.3% Oct., expected up 0.5% ISM mfg. index Oct., previous Nov., expected 58.7 58.2 * FACTSET ESTIMATES EARNINGS-PER-SHARE ESTIMATES DON’T INCLUDE EXTRAORDINARY ITEMS (LOSSES IN PARENTHESES) ADJUSTED FOR STOCK SPLIT NOTE: FORECASTS ARE FROM DOW JONES WEEKLY SURVEY OF ECONOMISTS An Ulta Beauty store in Manhattan. The company is expected to report higher profit on Thursday. 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 27, 2017 | B11 MARKETS The Dow’s Lightweight Title General Electric’s 2017 fall from grace has earned the Boston conglomerate a historic if unsought distinction as the lowest-weighted stock in the Dow Jones Industrial Average. While the Dow has surged 19% this year, GE shares have dropped 42%, erasing more than $100 billion in market value. Yet as signiﬁcant as GE’s challenges are—the ﬁrm this month halved its dividend and rolled back ﬁnancial guidance—its place in the basement underscores the quirks of the Dow as Wall handful of others, including the current Dow-weight leader, Boeing. It's not time to turn out the lights on the lone remaining original Dow component just yet. Street's most-famous price-weighted major average (others are value weighted). Yes, GE stock has slumped into the teens from the low $30s, but it remains more valuable than 10 other Dow stocks and is not far behind a Market value of the lowest-weighted component in the Dow* Intel Pﬁzer General Motors American International Group Citigroup Alcoa Bank of America Cisco Systems GE held the title brieﬂy in 2010. GE’s swoon this year has shaved more than $100 billion off its value General Electric Cisco and GE have traded the title in recent years. $300 billion Bank of America had an extended run as the Dow’s lowest-weighted component in the years following the ﬁnancial crisis after the bank’s share price cratered. 200 Alcoa removed from the Dow 100 General Motors removed from the Dow INTEL GM GM ALCOA ALCOA BANK OF AMERICA ALCOA CISCO CISCO GE GE CISCO GE GE 0 2007 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 Dow components’ current weighting ( ) and share of total market value ( ) Apple’s market value is greater than the combined value of the four components that are more heavily weighted. Microsoft is the second-largest stock in the Dow, but ranks No. 20 in weighting. 10% 5 0 General Electric Cisco Systems Pﬁzer Coca-Cola Intel Merck Verizon Communications DowDuPont Nike Microsoft Exxon Mobil American Express Procter & Gamble J.P. Morgan Chase Wal-Mart Stores Walt Disney Visa United Technologies Chevron Travelers *Weekly data Sources: WSJ Market Data Group (lowest-weighted); FactSet (market value, weighting) Before the formalities begin this week in Vienna, the only question oil ministers will have left is who pays for the Sacher torte. That is unusual for normally fractious meetings of the Organization of the Petroleum Exporting Countries. Even less usual is that, of the two crucial parties at the table, the pivotal one isn’t even a member—it is Russia. Saudi Arabia, the world’s top crude exporter and traditional OPEC kingpin, is facing political upheaval at home as 32 year-old Crown Prince Mohammed bin Salman purges political rivals. An export-revenue slump is the last thing he needs. For those concerned with the price of oil rather than geopolitics, Prince Mohammed and Russia’s Vladimir Putin being strange bedfellows isn’t what matters. The consensus seems to be that they are headed toward a deal that will see “OPEC-plus”—a collection of countries that control over half the trade in crude—extend cuts from the first quarter of 2018 through the end of that year. But the devil may be in the details. Russia, in particular, is a tricky partner because it doesn’t have a single large, state-owned oil company to corral. Furthermore, Mr. Putin is on firmer ground at home and in a strong negotiating position. Any agreement may contain wiggle room that hinges on aspects such as compliance or prices that could increase how much crude actually comes onto the market next year. With Brent crude up 22% in the past three months, investors may not want to push their luck betting on continued strength once a “successful” meeting of exporters concludes in Vienna. —Spencer Jakab IBM Johnson & Johnson Home Depot McDonald's UnitedHealth Group Apple FINANCIAL ANALYSIS & COMMENTARY China nonﬁnancial corporate debt as percent of GDP 180% 160 140 120 100 80 ’08 3M Boeing ’09 ’10 ’11 ’12 ’13 Source: Bank for International Settlements Why are stocks so expensive? In part it may come down to a behavioral quirk that could be putting the market at risk. The stock market is rich by just about any valuation measure, and by some excessively so. Given how ’14 ’15 ’16 ’17 low interest rates are, there THE WALL STREET JOURNAL. is some sense to that: When the average on the 10-year Treasury is just 2.35%, paying a higher price than usual for a stock seems to make sense. But how much more? A 2016 (4% of GDP), according series of experiments to researchers at the Asean conducted by economics +3 Macroeconomic Research graduate students Chen Lian, Office. Yueran Ma and Carmen Chinese financial markets Wang show that when rates have started to catch on. Steel prices are up 20% since are low, investors’ appetite for risk increases beyond June—but steel and coal what seems logical. firms such as Hangzhou Iron The researchers created & Steel and Yanzhou Coal two investing scenarios. In Mining have sold off sharply one, the risk-free rate of since the summer, and bond investors continue to demand return from investing for far shorter durations for coal one year is 5%, and the debt than in other industries. expected rate of return from Banks, which are being asked a risky asset (such as stocks) is 10%. In the other, the riskby Beijing to convert steel debt into equity, are dragging free rate is 1% and the expected return on the risky their feet. asset is 6%. In both Fewer steel mills scenarios, $100 invested in competing for business will still be a positive next year— the risky asset has an expected return of $5 over and continuing government the risk-free rate. An efforts to buy up empty investor should be agnostic apartments mean the about how much money gets property downturn will probably be less painful than allocated to risky assets in either case. in 2015. But when the economists But no one should delude asked workers on themselves into thinking Amazon.com’s online labor China’s debt problem has service Mechanical Turk how really turned the corner. To they would invest in these spring itself from the sturdy scenarios, the answer they debt trap built in the years got was different. People after the 2008 crash, China invested far more in the needs to keep credit growth risky asset when rates were in check and keep steel, coal low. In another experiment, and apartment prices they found the results reasonably high. intensified the lower rates History suggests doing went. both won’t be easy. They ran the first —Nathaniel Taplin Be Wary on China Debt It is well known that Chinese history is circular— dynasties rise and dynasties fall. So is commentary on the country’s economy. In 2008, China was supposedly on the brink of collapse. In 2009, its farsighted stimulus program saved the world economy. And in 2015, its nearsighted stimulus and ham-handed regulation were poised to tank the world economy. Now, according to market consensus, China’s problems have largely been fixed and it is poised to dominate the new century. If that sounds suspicious, it should. China has made progress on tackling its debt problem in 2017. Debt as a percentage of GDP has fallen for the first time in years, the nation’s Kafkaesque regulatory infrastructure has been strengthened, and forced factory closures have boosted margins in struggling industries. The problem is that market perceptions on China have grown disproportionately to real progress. The improvement in steel and coal finances—the two most vulnerable indebted sectors—has been real. Both industries were close to insolvent by late 2015, with WSJ.com/Heard Investors Add Risk In Low-Rate Times Scot Free? 2006 ’07 Goldman Sachs Group By Tom DeStefano and Peter Santilli/THE WALL STREET JOURNAL. HEARD ON THE STREET Email: firstname.lastname@example.org Russia Pivotal in Oil Talks Caterpillar aggregate operating earnings just 1.5 times and 1.8 times interest costs, respectively. Two years later, the ratio in both sectors is around five times. Unfortunately, only part of this improvement is due to capacity cuts. The other factor is the enormous, oldschool stimulus unleashed in late 2015, which pumped up the real-estate market and commodity demand. The repayment ability of coal and steel firms tends to follow the real-estate investment cycle closely, suggesting that has more to do with improving industrial margins than relatively modest capacity cuts. China’s financial vulnerability to a real-estate downturn—now starting to unfold again—remains worryingly high. Corporate debt ticked down by a measly 1% of GDP in the first quarter of 2017, according to the Bank for International Settlements, after rising by nearly 50 percentage points over the past five years. Close to 40% of the total is located in the real-estate, construction, mining and steel sectors, all intimately linked to the property market. Steel firms alone had 4.4 trillion yuan ($665.72 billion) of debt at the end of experiment again and told people they would get a payment based on the success of their hypothetical investment (with a computer program determining how the risky asset performed). The results were identical, as was a similar experiment with Harvard Business School students. Why do people behave this way? One reason is that people who had long earned 6% returns, were willing to take more risk to reach that number. The more investing experience the people had, the more likely they were to take on more risk in the lowrate environment. The researchers avoid such reallife dilemmas as the need to hit a target level of return from a portfolio. Over the past several years, during which central bankers have driven down rates, investors steadily took on more risk—just as the bankers wanted. This research suggests it may have been excessive. If rates go up and investors go back to less risky portfolios, assets such as stocks could be in for a big drop. —Justin Lahart Different Appetites Respondents’ average allocation toward a risky asset in various interest-rate regimes 78% minus 1%/4%* 70 0%/5% 65 1%/6% 3%/8% 58 5%/10% 57 15%/20% 51 10%/15% 50 *risk-free rate/expected return for risky asset Source: Lian, Ma and Wang THE WALL STREET JOURNAL. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. B12 | Monday, November 27, 2017 EVERYONE JUST SHOPS ONLINE NOW. SHOPPING FOR THE FALSE TRUTH TRUE THE TRUTH LEARN THE TRUTH ABOUT THE EVOLUTION OF RETAIL REAL ESTATE AT SHOPPINGFORTHETRUTH.COM ACCORDING TO ICSC RESEARCH, AND THE US CENSUS Physical stores generate 90.7% of all retail sales. 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 THE WALL STREET JOURNAL. © 2017 Dow Jones & Company. All Rights Reserved. F The Eollow Onlinxperts e wsj.c om/e at x An Entrepreneur With Autism Finds His Own Path Monday, November 27, 2017 | R1 perts DAVID KASNIC FOR THE WALL STREET JOURNAL (2) For Chris Tidmarsh, the key is building a support network to help execute his vision BY CLARE ANSBERRY C HRIS TIDMARSH CO-OWNS Green Bridge Growers, a commercial greenhouse in north central Indiana that provides herbs, lettuces and nasturtiums to local restaurants, and sunflowers and cosmos to florists. He has degrees in chemistry, environmental studies and French. He has a passion for agriculture. He also fits a very rare profile for an entrepreneur. He has autism. The 30-year-old created the company in 2013 with his mother—and co-owner—Jan Pilarski, after a promising job as an environmental researcher ended abruptly because he had difficulties communicating. That left him with the choice of either trying to find a more suitable job or, with the help of his family, creating a business that would capitalize on his skills. They chose the latter. “My mom does most of the administration,” says Mr. Tidmarsh, including accounting, marketing and sales. He perfects the spacing between rows of kale and spinach, and keeps close tabs on water chemistry and soil acidity. He spends hours researching natural and effective pesticides to deal with aphids. The solution: 4,500 ladybugs. Ms. Pilarski often explains how they created and run the business to groups of parents whose children have autism, to show that it is possible. “There is a deep, deep need for hope and jobs,” she says. A network of support In many ways, Mr. Tidmarsh’s path to entrepreneurship resembles that of others starting their own business. He has a wide breadth of knowledge and a vision of what he wants to accomplish. He is a mentor to those working alongside him. The results are promising. Green Bridge is projecting revenue of $80,000 and profit of $30,000 in fiscal year 2018. In fiscal 2020, when an expansion is complete, it expects to reach $220,000 in revenue and $72,000 in profit. In other ways, though, his journey is very different. Other entrepreneurs may know what they can’t handle and Speaks, an advocacy delegate those tasks and support organizato others. But they tion, which has a busiknow how to execute ness-accelerator protheir vision. That is gram. difficult for Mr. TidBy launching their marsh. He has a own companies, peodream but leans on ple on the spectrum his mother and a netcan create a work enwork of supporters to vironment that fits plot and fulfill it. their comfort level It is a story shared and doesn’t force by many other entrethem to navigate the preneurs with autism traditional, heavily sospectrum disorder, a cial office setting. condition affecting Very often, though, about one in 68 chiltheir key to success is dren and 1% to 2% of not to try for indepenthe overall population dence, but to build up in the U.S. Starting a a network of supportsuccessful business is ers who will help no small task for anythem with the busione, but those on the ness. autism spectrum face “It’s how interdechallenges that others pendent can you get,” don’t. Many have difsays Mr. Raede. “Try Top photo: Chris Tidmarsh working with ficulties with executo get as many people floating hydroponic raft beds. Bottom tive functioning—the you can rely on, not photo: Mr. Tidmarsh at a greenhouse conability to follow mulone. I want to have taining lettuce and herbs, and trays of seeds tiple steps to com10,000 people I know for the company’s larger greenhouses. plete a task. They and can rely on.” may also have a limHis online commuited ability to follow rules of social interac- nity is built on that concept, offering support tion—like maintaining eye contact or shaking groups and online courses to facilitate learning hands—or to read facial expressions to let on a mass scale. them know what someone might be feeling or One of the best ways those supporters can thinking. Sometimes they can type what is in help someone on the spectrum become self their head, but are unable to say it. employed is to identify and build on their They know how to work, explains Danny skills instead of trying to change behavior or Raede, chief executive of the Asperger Ex- have them do something they can’t, says Cary perts online community, who was diagnosed Griffin, co-founder of Griffin-Hammis Associwith Asperger Syndrome, an autism-spectrum ates, a Florence, Mont., consulting firm that disorder, at age 12. But “their brains won’t let specializes in developing self-employment opthem.” portunities for people with disabilities. If a So, jobs are few for people on the spectrum, person can’t manage bookkeeping or marketand adults with the condition have an esti- ing, for instance, others can. mated 80% to 90% unemployment rate. “One of Often, it’s a parent or sibling. When Matt the ways people choose to address this is by Cottle, 28, of Phoenix learned that he couldn’t creating a business that allows them to be self- be a Marine like his father and brother beemployed,” says Angela Geiger, CEO of Autism cause he was on the spectrum, he took culi- nary classes and began working with a pastry chef. Many people on the spectrum, in fact, are chefs, along with craftsmen, locksmiths and candle makers. Mr. Cottle found his vocation in baking and started Stuttering King Bakery, which supplies muffins and scones to local coffee shops, corporate events and farmers markets. He is licensed and works out of a large kitchen in the home he shares with his parents. His mother, Peg, handles orders and marketing. “For someone on the spectrum to be able to make it, they really have to have someone else who has a real high investment in their success, and usually that is going to be family,” says Ms. Cottle. Approaching the puzzle Mr. Tidmarsh, the oldest of four children, was diagnosed with autism as a preschooler, when a caregiver noted that he seemed in his own world and uninterested in family members coming and leaving the house. Since he was their first child, Ms. Pilarski says that she and her husband, Jay, likely missed the significance of behavior that might have concerned more-experienced parents. For most of his childhood and teen years, the couple focused on the most immediate next step—elementary school, middle school, high school and college—while also raising their other three children and working. Jay Tidmarsh teaches law at the University of Notre Dame, and Jan ran a social-justice program at St. Mary’s College. Chris Tidmarsh received his three degrees from Hope College, a small liberal-arts school in Holland, Mich. After graduating in 2010, he got a job as an environmental researcher. But it didn’t last. “I was doing a lot of office work and behind the computer. I’m not the best with that style. They generally communicate verbally, and I’m more of a visual learner,” says Mr. Tidmarsh, who struggles at times to find and say the right word. He’s better at following directions when they are written in emails and texts. It is harder when they are spoken. After three months, he was let go. “I felt Please turn to the next page INSIDE THE MONEY GAME FRANCHISING Dangerous Loopholes? The State of Franchising The business of selling vintage phones R7 MANAGING TECHNOLOGY RUNNING THE SHOW Software for Solos Why Immigrants Make Great Entrepreneurs And became a better entrepreneur R8 Rules to protect crowdfunding investors may not do enough R2 The industry looks to build on solid growth numbers R4 The hottest new apps to help freelancers R3 Being outsiders prepares them R4 A Damping Effect The Plus-Size Niche Gig jobs may stop some from launching startups R3 Startups take aim at a lucrative market that gets less attention R5 An Antique Calling How I Beat Math Phobia ONLINE AT WSJ.COM/ SMALLBUSINESS What It Takes To Run a Food Truck The overhead is huge. The hours are insane. So don’t expect the movie ‘Chef.’ For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. R2 | Monday, November 27, 2017 JOURNAL REPORT | SMALL BUSINESS THE MONEY GAME HOW I THOUGHT OF IT SAFETYTAT Investors, Beware of Crowdfunding BRIAN STAUFFER CHILDREN’S TATTOOS—WITH A MESSAGE Researchers say that rules designed to protect individuals from scams have too many loopholes BY LOUISE LEE LETTING SMALL investors buy shares in startups sounds like a great way for budding companies to raise cash. But it could be dangerous for the people putting up the money. In a paper published in the journal Business Horizons, Melissa S. Baucus, formerly of the University of Otago in New Zealand, and Cheryl R. Mitteness of Northeastern University say it’s easy for swindlers to circumvent safeguards in the Jumpstart Our Business Startups Act, the 2012 federal law allowing startups to raise up to $1 million annually from retail investors. “There’s too much opportunity” for shady projects, says Dr. Baucus, now at Texas State University. The study didn’t catalog instances of fraud. Instead, it explored rules covering so-called equity-based crowdfunding to find potential loopholes that criminals could exploit. The JOBS Act requires startups to disclose extensive financial documents and inde- pendent audit reports. The law also says a startup doesn’t receive actual funds until it attracts enough investors to reach its fundraising goal. And the law assumes that scrutiny by many investors weeds out fraudulent operations. But the researchers say that because many small investors simply aren’t sophisticated enough to evaluate a startup, they could be sucked into investing in a company that’s fraudulent. Making startups provide documentation and audit reports may not sufficiently shield investors, the researchers say. The required level of disclosure is lower than that for a company planning an initial public offering, the researchers say, and swindlers can fabricate documents that appear legitimate. Nor are audited financial statements necessarily reliable. Some firms create the appearance of proper auditing by funneling funds into legitimate companies that use reputable auditors. Some fraudulent firms produce fake audit reports or statements from audi- tors who aren’t legitimate. And requiring a startup to secure enough pledges to reach its fundraising target doesn’t protect investors, the researchers say. That requirement is intended to force a startup to satisfy many investors to hit a single lofty goal. But swindlers can get around the rule by creating multiple smaller ventures with more-attainable funding targets, listing them on various portals under different names, and collecting funds from each. While the law requires crowdfunding portals to vet startup officers, they vary greatly in the level of due diligence they actually perform, the researchers say. They argue that crowdfunding portals should as an industry agree on standard processes by which they research startups and educate investors about the risks of investing in them. The researchers say investors can turn to outside resources to find information about startups; portals can also get outside help with vetting startups and providing disclosures. Some outfits advise startups themselves about regulations and disclosures. Investor education and due diligence and disclosure are time consuming and increase the cost of crowdfunding but may be worthwhile in the long term, the researchers say. If many people lose money through crowdfunding, overall funding opportunities for entrepreneurs may decline, says Dr. Mitteness. “People are just going to assume that everything is a fraud,” she says. Nicholas Tommarello, CEO of Wefunder Inc., a public-benefit corporation that runs a crowdfunding portal, says to his knowledge “there has not been one case where fraud has taken place” since equity crowdfunding was permitted. Regulations, he says, are already extensive and rigorous, while fraud such as faking financial documents carries penalties far outweighing potential return. Meanwhile, he says, thinking that investors can’t make informed decisions is “paternalistic.” And, in fact, many investors come from the founder’s own social network. Ms. Lee is a writer in Palo Alto, Calif. Email email@example.com. Taking children to an amusement park can be a stressful experience. Michele Welsh found a way to ease her fears— and turned it into a booming business. On Labor Day weekend in 2008, Ms. Welsh and her husband, Robert, took their three children to Hersheypark in Pennsylvania. As they walked in the park, her excitement quickly turned into panic: The place was packed, and she could barely hold on to her children’s hands. Worried that they might get lost, and desperately searching for a quick solution in case they did, Ms. Welsh grabbed a ballpoint pen and wrote her cellphone number on their arms. Six parents stopped her that day, asking to borrow her pen and write their cell numbers on their children’s arms. On the long car ride home to Baltimore, she reflected on how that ballpoint pen made everyone feel better. That winter, the Welshes went on vacation with her brother and his family, and all the children wanted temporary tattoos. A few weeks later, everything clicked. With a background in marketing and graphic design, Ms. Welsh designed temporary tattoos for children with a space to display a phone number. Ms. Welsh self-financed her startup with an initial investment of $50,000, and filed a provisional patent and set up a website, which went live in January 2009. Initially, the website offered an interface that allowed customers to customize the message or phone number on their tattoos. Once the company started selling through retailers, it added a Quick Stick Write-on with which customers customize the product after it has been delivered. Ms. Welsh has branched out to use the tattoos to alert others about a child’s allergies or medical conditions such as diabetes and autism. Her products are sold in about 200 children’s boutiques in the U.S. and 24 internationally as well as AAA travel stores and a few amusement parks. SafetyTat recently reached a milestone: two million tattoos have been sold. One of the most satisfying aspects of the business has been the feedback from customers, Ms. Welsh says. SafetyTat runs a share-your-story contest every year. One winner was a parent who took her two daughters to the Pacific Science Center in Seattle. She had just noticed her younger daughter was missing and started looking for her when her phone started to buzz. Her 4-year-old daughter had immediately alerted the front desk that she was lost, and security used the number on the tattoo. Ms. Welsh says, “I know the tattoos are fun for kids and give parents peace of mind. But what I hadn’t thought about is how the children don’t panic when they lose sight of their parents.” –Barbara Haislip An Entrepreneur With Autism Finds His Own Path The plan emerges From there, mother and son began working together to figure out how to get the business off the ground. Ms. Pilarski left her job in 2012 and applied to a program through her alma mater, Notre Dame, designed to help startup social enterprises. Part of the class involved creating a plan that could be entered into a business-plan competition at Notre Dame’s Mendoza Business School. She and Mr. Tidmarsh laid out their strategy with the help of four graduate students. Among other crucial choices, they decided to set up the business as a 501(c)(3) nonprofit, and have a key component of its mission be training others with autism. when and how they could, as did Jay Tidmarsh. While caregiver to his wife during her 10-month treatment, he and volunteers started building two now-complete greenhouses on the new property. Once the growing facilities are fully operational, the family expects to harvest about 45,000 pounds of produce a year. Having both parents involved in the business, says Chris Tidmarsh, “brought us closer.” The way forward DAVID KASNIC FOR THE WALL STREET JOURNAL Continued from the prior page disappointed, and I guess I felt kind of sad that it didn’t work out, but I was looking forward to finding a job that I might enjoy more,” Mr. Tidmarsh says. Back at home, his parents saw him surrounded by peers with degrees and on the spectrum, and likewise unemployed. The reality of the obstacles facing their son and his limited options loomed large. It wasn’t so much the idea of his son earning money that concerned Jay Tidmarsh. “I wasn’t stressed that way,” he says. “It was hard for us to have this young man with a lot of ability unable to use it. That was really concerning. I really believe in the importance of work. It’s a part of who you are.” Over many meals, Chris Tidmarsh and his family talked about what he loved doing most. He interned at an organic farm, became a master gardener and took a class designed to help people become farmers. “I’ve been really interested in the environment and Earth for a long time,” Mr. Tidmarsh says. “I decided I wanted to do something related to that.” He and his mother, who grew up on a farm, began researching options. They visited a software business set up by the family of a young man on the spectrum, and talked at length about how they made it viable. They also visited several farms, including one that used an aquaponics process, where fish’s waste is used to fertilize plants that grow in water, while the plants clean the water to cycle it back to the fish tank. That process, heavily dependent on chemistry and environmentally friendly, captured Mr. Tidmarsh’s attention. “It requires a bit of knowledge of chemistry,” he says. “It is very sustainable. It uses 90% less water than growing in the soil.” When the group pre- Chris Tidmarsh and his mother, nonprofit, they raised money sented the plan to the com- Jan Pilarski, plant kale seeds at through donors and a crowdpetition judges, Mr. Tid- one of Green Bridge Growers’ funding campaign, which marsh spoke about greenhouses. they added to a $10,000 enunemployment problems trepreneur-of-the-year award faced by people on the autism spectrum and won by Mr. Tidmarsh. described his own experience. Finding land that met zoning regulations They won the social-impact prize, which and offered access to water and electricity, and provided $15,000 as well as legitimacy. “It re- room for growth, was more difficult than they ally took us to a different place and acknowl- envisioned. edged the viability of what we were doing,” “It took a tremendous amount of time,” says says Ms. Pilarski. Mr. Tidmarsh. The team met with area farm-to-table resAfter more than a year, in December 2014, taurant owners and a local Whole Foods Mar- they found a farm with 5 acres, a house and ket to determine market potential and realized barn, and bought it for $70,000. Ms. Pilarski that it was huge: Indiana trucks in 90% of its scouted for other funding sources to cover the food, they discovered. They researched profit cost, landing grants from a utility and the U.S. margins and decided to focus on those prod- Agriculture Department. ucts that have the highest ones, like basil, All was progressing until March 2016— which sells for $16 a pound retail and $10.50 when Ms. Pilarski was diagnosed with cancer. wholesale. It wasn’t only a personal blow, but also a treIn 2013, the partners built a prototype for mendous setback for the business. She was the their business, located on a site in South Bend, one calling contractors, pricing materials and Ind., that housed an agency serving people looking for the best suppliers. with disabilities. As they produced their first She did as much as she could for as long as crops—along with basil, they grew cilantro, she could, but “it was difficult to keep the mored Russian kale, lettuce, mint and parsley— mentum going,” she says. they learned the ins and outs of the growing Mr. Tidmarsh struggled with the disruption. process. He says little but nods in agreement as Ms. PiMr. Tidmarsh focused on monitoring the de- larski tells her story and concludes, “I’m back tails of the fish tanks and the level of nutrients and healthy.” the plants were getting. In the midst of those difficult times, their The next step in their plan was expansion. support network helped keep the business Guided by the board they had set up for the moving forward. Board members pitched in The business has provided a path forward for Mr. Tidmarsh and his family. He says that he has become more comfortable conducting tours of the greenhouse. He has also addressed large audiences, speaking in front of advocacy groups and gatherings at Notre Dame and St. Mary’s, including graduate speech-pathology classes. The goal is to help them understand the difficulties that those on the autism spectrum have communicating. Until recently, Mr. Tidmarsh lived with his parents. Now he has moved into a house with a friend who is also on the spectrum. His parents pay for his housing, but he hopes that will change. “My goal is to be self-sufficient,” he says, as well as help to employ others on the spectrum. Toward that end, he is mentoring workers at Green Bridge. Matt Coleman, Mr. Tidmarsh’s longtime friend and now his roommate, works alongside him, planting and harvesting, and monitoring water levels. Adam Rousculp, who is also on the spectrum, feeds the fish and cleans the tank. Photos and explanations hang throughout the pilot greenhouse to explain the process to visitors and help workers, who better absorb information visually. The changes in Mr. Tidmarsh are striking to Ms. Pilarski. “I’ve seen him grow in such a lovely way,” she says. On a recent afternoon, Mr. Tidmarsh checks nutrient levels in tanks that hold koi at the pilot greenhouse. Afterward, he creates holes 1/8th-inch deep and drops seeds into trays of soil. Later, at the site of Green Bridge’s two new greenhouses, he describes his plan to plant perennial rye in an open field on the property to restore microbes in the soil and prevent erosion. He’s optimistic about the future of Green Bridge. “It does provide hope not just for me, but others on the autism spectrum to find and keep jobs,” he says. “I think I can see myself doing this for the rest of my life.” Ms. Ansberry writes The Wall Street Journal’s Turning Points column. Email firstname.lastname@example.org. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 27, 2017 | R3 JOURNAL REPORT | SMALL BUSINESS MANAGING TECHNOLOGY As the gig economy explodes, so have tools targeted at helping freelancers BY AMY WESTERVELT FREELANCERS OF ALL stripes are becoming a huge part of the workforce. And software companies are scrambling to help them do their job. They’re taking tech products once designed for small companies and reworking them to serve the needs of solo operators. In many cases, this software targets corners of the freelance world—like health care and taxes—that work very differently than they do for other small businesses and that freelancers have long had to figure out on their own. “The more prevalent this way of working becomes, the more we’ll see apps or companies emerging to make it easier,” says Diane Mulcahy, author of “The Gig Economy” and a professor on the topic at Babson College. “If you’re in the gig economy, you’re not just doing your primary job, you’re also doing back-office work, invoicing, paying quarterly taxes, managing social media, doing marketing, business development, figuring out your own health-care and retirement benefits.” The potential market is huge. Depending on which report you read, people working in the gig economy— alternatively called freelancers, flex workers, consultants or independent workers—will comprise 30% to 50% of the U.S. labor force by 2020. Although often described as a monolith, gig workers are as diverse as the traditional workforce. Some take on lower-paid on-demand tasks for companies like Uber, TaskRabbit or Postmates. Others are highly paid, specialized consultants who use niche skills on complex projects for large clients with big budgets. Still others work in creative fields, doing everything from commodity jobs such as churning out content for a website to higher-paid contracts like designing a new brand. Here’s a look at some of the new software on offer and what it can do for freelancers. UNTANGLING TAXES: Tax rules for solo workers are quite different than those for a limitedliability company or other type of small business. Expenses are tracked differently, for instance, and different write-offs are permitted. Now established makers of tax software—as well as new entrants— are reworking existing products or devising new ones to handle those specialized regulations. One of the biggest names getting involved is Intuit. The financial-software giant beta-tested QuickBooks Self-Employed in 2014 and formally launched it in 2015. The program provides information and forms that gig workers need to manage their finances and comply with various tax requirements. It is also specifically designed primarily for smartphones to accommodate gig workers, especially drivers and delivery people, who are frequently on the go. In its August earnings, Intuit said there are now 390,000 subscribers, quadrupling over the past year. It expects that growth to continue. HANDLING THE BOOKS: As with taxes, freelancers face different challenges handling accounting and billing than startups do. Wave, an app and traditional software offering, has run marketing campaigns targeted at industries where freelancers tend to work, such as photography and web design. When people sign on to the service, which also covers smaller startups, they see information specific to their industry when they’re getting set up, and get suggestions about what various forms should include. For example, a photographer might see usage-rights offerings as a feature to add to their invoice. TREATING HEALTH CARE: With health-care coverage, small businesses have an advantage over solo workers: They can get group insur- ance, which carries a discount over policies for individuals and covers all employees. Freelancers don’t have access to those policies, and must go to insurance providers and see what they offer—typically policies with higher premiums and no discounts. Stride Health raised $13 million in 2015 to build a platform targeted specifically at gig workers who don’t get health insurance. The software sifts through available offerings to recommend the plan that gives freelancers the most bang for the buck, and then walks them through the process in much the same way that a human-resources staffer at an employer might do for an employee. For some solo entrepreneurs, the software delivers some of the benefits of working at a traditional business. The company has joined with some of the largest names in the gig economy, including Uber, Postmates and TaskRabbit, to aggregate their gig workers to get group discounts from insurance providers. ORGANIZING PROJECTS: Scheduling can become a big headache for solo workers, who frequently take on multiple jobs at the same time and don’t have the option to spread them among employees. Completo, a to-do app originally aimed at corporate executives, helps those juggling different projects maximize productivity and minimize stress. For instance, the company lets gig workers break a large project into smaller steps to help them organize many assignments at once, and offers the ability to set progressive reminders (such as reminding them five days before something is due, and then the day before). The company has also updated its marketing to specifically target freelancers, with language about juggling multiple “side hustles” and working with a variety of teams on different projects. The company says downloads are 10 times higher—from 100 downloads a week to more than 1,000 a week—since making these changes. Ms. Westervelt is a writer in Oakland, Calif. Email email@example.com. POSTMATES Apps for the Freelance Worker For some, on-demand jobs seem more attractive than creating a startup. ‘Gig’ Work May Keep Some People From Launching Firms BY LOUISE LEE WHEN COMPANIES like Uber move into an area, some people there are less likely to start businesses of their own. That’s the conclusion of a working paper for the Ross School of Business at the University of Michigan, written by Gordon Burtch of the University of Minnesota, Seth Carnahan of the University of Michigan, and Brad N. Greenwood of Temple University. The researchers examined the effect of two “gig” companies— Uber’s core service, UberX, and the delivery service Postmates—on startup activity, as measured by Kickstarter campaigns. The researchers found that a gig firm’s entry into a given area caused a decline in the number of unfunded and underfunded Kickstarter campaigns launched locally a year later. The falloff may reflect a decline in “necessity-based entrepreneurship” by unemployed or underemployed people, says Dr. Greenwood, now at the University of Minnesota. If they have no job opportunities, “they’re more likely to act on what’s potentially a lower-quality startup idea” that doesn’t get much support on Kickstarter. But with the arrival of gig firms, those individuals can find work more easily instead of feeling as if they have to pursue a weak project that languishes unfunded, he says. In the paper, presented at the 2016 Best Paper Proceedings of the Academy of Management, the researchers analyzed the volume and funding status of Kickstarter campaigns between 2013 and 2015 in 172 areas where Postmates and UberX launched. On average, Postmates’s entry into a market caused an 11% drop in Kickstarter campaigns, primarily unfunded and underfunded ones, a year later. UberX’s entry resulted in a 14% decline. The researchers add that according to census data from that time frame, more people in those areas reported their job as “paid driver or chauffeur” after the entry of UberX. There may also be an effect on crowdfunding platforms, the researchers say. Driving down the number of crowdfunding campaigns may declutter platforms and help funders quickly locate and evaluate the most attractive projects. But the researchers acknowledge that gig-economy firms could end up snuffing out a strong idea. “There might be ideas that would have been superstars that don’t get pursued” because someone joined the gig economy instead of launching a startup, says Dr. Burtch. San Francisco-based Uber declined to comment. Postmates, also based in San Francisco, says it “has a strong impact on local economies,” providing income to its couriers and giving local merchants more ways to distribute products. Ms. Lee is a writer in Palo Alto, Calif. Email firstname.lastname@example.org. You were looking to retire by the water. Better yet, above it. Captain of your own ﬂoating home. That would be retiring like a boss. That would also be tough without a plan. TOTAL USD BONDS IUSB WHEN INSPIRATION HITS, BUILD FOR WHAT’S NEXT. 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Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments. Buying and selling shares of ETFs will result in brokerage commissions. The iShares funds are distributed by BlackRock Investments, LLC. © 2017 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock. 285131 For personal non-commercial use only. Do not edit 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 27, 2017 JOURNAL REPORT | SMALL BUSINESS FRANCHISING HOW I THOUGHT OF IT The State of the Franchise Industry BY ELIZABETH GARONE Breaking It Down A look at projections for franchise sections for 2017, in thousands, and percent change over the previous year THE MOOD OF the franchise industry is upbeat right now. But recent performance hasn’t been quite as strong. Optimism among franchisers and franchisees is “through the roof,” says Robert Cresanti, president and CEO of the International Franchise Association, an industry trade group. Much of that mood appears to be coming from the Trump administration’s less regulatory, more business-friendly approach than that of the Obama administration. But the industry still has a way to go, Mr. Cresanti says. Growth isn’t as powerful as it could be. And there’s uncertainty in the sector over joint-employer rules. For decades, one business couldn’t be held liable for employment-related matters at another unless it had direct control over the employees in question—which allowed franchise operations to flourish. But in 2015, the National Labor Relations Board said any franchiser could be held as a joint employer with local franchisees, liable to legal action and protests by employees. The move sent shock waves through the industry and led to lobbying and a grass-roots movement of local business owners. The Trump administration may roll back some aspects of the rule, but the industry is pursuing permanent changes. Here are edited excerpts from the discussion with Mr. Cresanti. ESTABLISHMENTS EMPLOYMENT Locations Pct. Chg. Workers Pct. Chg. Sections 38 Automotive 1.3% 195 2.5% 106 1.3 640 2.1 Commercial/residential services 66 1.1 247 1.0 Lodging 28 1.0 619 1.1 Personal services 110 2.5 487 4.1 Quick-service restaurants Business services 191 1.8 3,615 3.7 Real estate 63 1.7 250 2.3 Retail food 53 0.8 465 2.0 Retail products/services 60 1.5 343 2.8 Table/full-service restaurants 31 745 TOTAL 1.6 1,019 3.5 1.6% 7,879 3.1% Source: IHS Markit for the International Franchise Association THE WALL STREET JOURNAL. Franchise Education and Research Foundation thumbs up. Franchising is up from last year. We’re having a growth pattern within the normal trajectory you would expect. But we have huge opportunities to break through our averages. According to our 2017 forecast conducted by IHS Markit, there are going to be approximately 745,000 franchise establishments in the U.S. by yearend, up 1.6% from the year before. That is decent growth. Franchise employment is on the rise. It’s forecast to outpace growth in businesses economywide. Things are good, but they could be a lot better. We’ve been through a cycle of eight years of regulatory, legislative and economic challenges, and this is us beginning to get our heads above the water. We have lots of headroom if we get a little stimulus. A little legislative and tax relief would be nice. The state of the field WALL STREET JOURNAL: Is franchising up or down? MR. CRESANTI: It’s one thumb up, and it should be two WSJ: Under the new administration, are you feeling more confident about what will happen with the issue of joint employment? MR. CRESANTI: The one thing that casts the largest shadow is the joint-employer issue. We passed a bill out of the House of Representatives rolling back the National Labor Relations Board ruling, and we’re hopeful the Senate will take that up and pass the bill. We’ve had conversations with the White House that the president is willing to sign that bill. WSJ: What areas in franchising are hot right now? MR. CRESANTI: The food sector is continuing to grow. Hotels are growing also, but they are being challenged significantly by things like Airbnb. Real-estate-related businesses and home-services businesses are probably a little bit slower than we would have hoped. I came from the technology industry prior to coming here, and we used to talk about disruptive innovation. I used to think that nothing could be more linear than the franchise business model. The shock to me has been how innovative and disruptive this business really is. Twenty years ago, you had three or four major hamburger brands. Why would anyone want to pay slightly more for a hamburger of different quality or marketing? Yet concepts are succeeding with gourmet burgers. They have different tastes and methods of preparation. I’m always amazed by the vibrancy in this business. Chowing up WSJ: Why is food hot now? MR. CRESANTI: It’s easily ac- cessible. People are creating interlinks with technology in ways they didn’t before, so you have app ordering, you have delivery of food in vehicles that bring it in temperatures unachievable before. You have people putting a lot of investment and thought into appealing to the consumer and particularly to millennials, who are becoming a greater economic force. One of my CEOs put it correctly. It doesn’t matter what franchise business you’re in. If you’re not a technology company along with being a hotel company, a lodging company, a doggy day-care company, a food company, you’re not going to be in business long. There’s a lot of innovation coming, and it’s pushing through to making convenience the last mile in a way that has changed dramatically over time. Ms. Garone is a writer in Alameda, Calif. Email email@example.com. RAQUEL BIANCA Optimism is high. Now the question is: Can business follow? IS IT A NECKLACE OR A TEETHING RING? YES. Lisa Greenwald loved her long, beaded necklaces. And many babies loved them, too. When she held babies, they would grab and chew on her costume jewelry. Seeing the effect she had on children, moms called her a “baby whisperer,” but Ms. Greenwald would say, “No. It’s the necklace.” In late 2008, when she was home with her first child, Benjamin, she saw that the boy was getting just as obsessed with her jewelry as the other babies had been. And she decided to find a way to make the improvised chew toy as safe as possible. Ms. Greenwald, who studied business in college and has spent nearly 20 years in the fashion industry, came up with an idea that she thought would resonate with other parents as well: nontoxic beads made of silicon. “I knew that if there was a way to make a safe necklace for teething that babies would love them and moms and caregivers would love to wear them,” she says. She found an agent in Hong Kong to make the beads and launched a company, Chewbeads, in 2009, self-funding the venture with her husband, Eric. Since then, she has sold 140,000 necklaces. The products—which now have expanded to include teething rings, stroller toys and rattles—are sold on the company’s website and at 1,500 to 2,500 boutiques, as well as Nordstrom and Buy Buy Baby outlets. They can also be found abroad in Canada, Mexico, Spain, China and France. Ms. Greenwald is chief merchandising officer at J. Crew, and works at her own business part time. Her husband left his job at a commodities-trading firm to concentrate on the business and now runs the day-to-day operations at Chewbeads. “Competition is keen,” says Ms. Greenwald, who lives in New York City. But “it keeps us innovating. We are diversifying the product with jewelry for kids, lots of stars and hearts and bright color combos.” –Barbara Haislip RUNNING THE SHOW GENERAL PHOTOGRAPHIC AGENCY/GETTY IMAGES Why Immigrants Make Such Good Entrepreneurs They’ve often overcome a lot of hardships. A business setback is nothing. grants for over a decade, trying to figure out what makes so many of them go into business for themselves in the West—at higher rates than natives do—and succeed, too. The Kauffman Foundation’s annual Index of Startup Activity shows that immigrants were almost twice as likely as native-born to start new businesses in the U.S. in 2016. Almost 30% of all new entrepreneurs were immigrants, Kauffman says. A report from the Partnership for a BY ADRIAN FURNHAM OUTSIDERS FACE a tough struggle fitting into a new culture. They must figure out how to deal with, and overcome, frustration, loneliness and a steep learning curve. And that’s why immigrants make such great entrepreneurs—they’re once again outsiders facing many of the same kinds of obstacles. Been there, done that. I’ve been studying immi- The Source of Startups The percentage of people in the U.S. who became entrepreneurs in a given month (rate) and the composition of entrepreneurs by birth Immigrant Native born Rate 0 0.2 0.4 0.6 Composition 0.8% 13.7% 1998 86.3% 1999 15.2 84.8 2000 15.9 84.1 2001 16.0 84.0 2002 17.9 82.1 2003 18.7 81.3 2004 20.6 79.4 2005 17.8 82.2 2006 20.1 79.9 2007 24.6 75.4 2008 26.2 73.9 2009 24.3 75.7 2010 29.5 70.5 2011 28.0 72.0 2012 27.1 72.9 2013 25.9 74.1 2014 28.5 71.5 2015 27.5 72.5 2016 29.5 70.5 Source: The Kauffman Index of Startup Activity THE WALL STREET JOURNAL. New American Economy found that in 2016, 40.2% of Fortune 500 firms had “at least one founder who either immigrated to the United States or was the child of immigrants.” I’m not surprised. What I’ve found is that immigrants not only have the qualities that help any entrepreneurs succeed—including aggressiveness and creative thinking— but they get a big boost because many of the skills they picked up coping with a new world are transferable to the entrepreneurial world. My research is based largely on many conversations with entrepreneurs. In addition, I teach at a university that attracts vast numbers of overseas students. And finally, I bring my own perspective to the research: I am a migrant who grew up in Africa. One caveat: These are broad stereotypes. Obviously, not all immigrants are entrepreneurial role models. And clearly, plenty of natives are. But there are reasons why so many immigrants forge an entrepreneurial path. It is worth identifying the likely factors—both to help understand the immigrant experience and what they can bring to their new economies, as well as to better identify what makes anybody thrive as an entrepreneur. Lands of opportunity The vast majority of migrants (as opposed to refugees) move to improve the economic and educational status of themselves and their families. When they arrive, they are aggressive about taking advantage of the stable economic system and respect for law and order, things they often can’t count on back home. Natives are more likely to take those for granted and not push to make the most of opportunities. I met three immigrant en- Immigrants being interviewed at New York’s Ellis Island, circa 1940. trepreneurs recently who had become friends through business. They all said the same thing: They were amazed by the quality of free education, by the benefits of the infrastructure and most of all the lack of awareness by the natives of how lucky they were. As one said, “As long as you are prepared to work hard and take some risks, it is easy to succeed in this country.” Rolling with punches All entrepreneurs experience failure and rejection, but outsiders are often better prepared to not be devastated by hard times, because they have already faced harder times than most people can imagine. They’ve left behind friends, family and support networks. Then they enter an unfamiliar nation full of complex bureaucracy, discrimination and other hurdles. Having already faced hardship, immigrants look at business setbacks as less traumatic, leaving them less likely to buckle and break in the face of adversity. I have met a few entrepreneurs, for instance, who were thrown out of Uganda by Idi Amin. They arrived in cold, indifferent Britain with what they could carry—and used the strength they gained from that disruption to persist in hard times. Coping with difficulties made me, says one of those immigrants, now in charge of a successful business. They had no capital, and no experience of British law and customs. One, who ran a number of bakeries in Africa, said he had to get a menial job in a local bakery to learn British tastes and preferences. The locals didn’t like bread and cakes as sweet as he expected, and freshness was all important. But he was fine with the setback. He adapted his recipes, started a small bakery and now owns a large chain. Watching social cues Because outsiders fear making a faux pas in a new world, they become adept at picking up cues that signal mistrust and misunderstanding. Similarly, they become good at reading people, and noticing the relationships between groups they do business with. That potentially makes them more shrewd and more perceptive in situations such as negotiations or sales pitches. One entrepreneur told me that he was astonished that everything in markets and shops was openly priced. He came from a culture where everything was negotiated—in his words, the difference between the mall and the bazaar, where people must learn to haggle, charm and persuade. People in his home country needed to observe customers closely to figure out how rich they were, whether they were serious, and whether they knew how to play the game. He believed that skill had served him well when negotiating deals in his adopted country. A different network In some sense, immigrants don’t have the array of local networks that natives do. But they often can substitute that broad network with a much deeper network: co-nationals. These earlier migrants are in many ways more supportive of their entrepreneurial successors than the networks that are available to native entrepreneurs. The earlier migrants offer financial support—including loans and discounts on products and services—as well as insights about local practices and people. Networking with this support group gives new immigrants a relatively safe environment to build interpersonal skills as well as learn crucial skills they need. It also offers them a way to simply survive difficult times, giving them breathing room to become entrepreneurs. Often a whole family shares a large, run down, cold and damp house with three other large families in the same position. They share everything and learn from one another. Seeing with fresh eyes Because immigrants learn about their new home culture, and its rules of language and etiquette, from the outside, they often have perspectives that natives don’t have. They see possibilities and opportunities that natives don’t see, and find new ways to be creative. They bring new flavors, musical sounds, cultural tastes to their new land. They also bring new ideas about selling, managing, customer service, technology and more. Confronting a problem with a fresh perspective is a huge advantage. Immigrants come by that naturally. Dr. Furnham is a professor of psychology at University College London. Email firstname.lastname@example.org. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. Monday, November 27, 2017 | R5 JOURNAL REPORT | SMALL BUSINESS Startups See Lucrative Niche in Plus-Size Clothing BY AMY WESTERVELT IT’S A $21 BILLION slice of the fashion market. It generates heated arguments about how clothes are designed and who they’re made for. And small companies think that they can get a major piece of it. We’re talking here about plus-size clothing for women, which represents 10% of retail sales, and has been a shining star in an otherwise sagging fashion retail market, outpacing total clothing sales for women for the past three years. Yet fashion observers and regular shoppers say that large brands haven’t been meeting the needs of plus-size customers, outside of a few specialty retailers. Enter small companies. A wave of entrepreneurs are betting that they can grab customers by offering garments that they say are better designed for plus-size figures and more fashionable than current offerings. Some companies are even selling bespoke outfits that are tailored to customers’ specific measurements. These new entrants don’t have the market heft of established specialty retailers like Lane Bryant. But observers say that they’re making inroads and have a lot of room to grow. “We’re seeing small, independent brands be much more successful in this market than larger brands and retailers,” says Marshal Cohen, a retailindustry analyst with NPD Group. “The small, new, innovative players are generally beating out the big behemoths that are sort of stuck in the old way of doing fashion retail.” A new take Eloquii’s designs feature unusual cuts, as well as styles that hug the body in places. says revenue is increasing every month. She says the average customer came back six or seven times in 2016, and the return rate is under 2%, “versus the 35% average return rate for online fashion retailers.” Mallorie Dunn, the designer behind another clothing retailer, SmartGlamour, which launched in 2015, customizes each garment it designs and sells depending on a woman’s measurements, emphasizing colorful prints and girlish, flirty cuts. “Every brand designs differently, and then every body is different, especially women’s bodies,” she says. “You have to be able to tailor a bit to each individual if you want a truly great fit. You can’t really expect something that’s made for the mass market to fit everyone well.” Two-thirds of Ms. Dunn’s customers every month are return visitors. With several thousand customers, she says she’s working on about 60 orders at any given time. Sales, body in places (rather than the traditional approach, which has tended toward very baggy, and lots of high-waisted empire cuts). Mariah Chase, CEO of Eloquii, says that the employees who stuck with the company after it was cut loose “really saw an opportunity for plussize fashion rather than just taking The Limited stuff and sizing it up.” Other companies are taking the same approach and designing plus-size clothes from the ground up. Noushie Mirabedi and Ronda Raymond, founders of Eight & Sand, an Oakland, Calif., women’s clothing line launched in 2015, focus on wardrobe staples such as a tailored henley in a variety of colors. Eight & Sand brought in models for numerous styles and sizes for its first run of clothing, to ensure that its designs work for a variety of shapes, including hourglass, pear, apple and boxy. They currently have 750 customers, and Ms. Mirabedi JAMES YANG Sizing is a contentious issue in fashion. A large number of women are size 14, 16 and above—35% to 60%, depending on which report you read—yet there aren’t a lot of options out there for them. While most mainstream retailers do carry sizes above 14, the choices are often limited. Usually, customers have to choose among garments that were created for an hourglass, size-4 body and then have been simply sized up. “I don’t see enough brands that are really breaking boundaries for plus-size fashion, that are actually designing for plus-size bodies, or for a diversity of shapes,” says Kat Eves, a Los Angeles-based stylist who works exclusively with plus-size men and women. “It’s always mirroring straight size trends. Who’s the Chanel of plus?” The industry logic, say analysts and some in the industry, has been that plus-size women don’t buy as many clothes on average as other women. Brian Beitler, chief marketing officer of Lane Bryant, a subsidiary of Ascena Retail Group, says it is true that the typical plus-size customer spends less on clothes than a thinner person. But, he says, that’s due largely to a lack of choice and the social stigma of being plus size. All of which means that large brands are “leaving a lot of room for smaller, innovative brands to come in and make their mark,” Mr. Cohen says. Probably the biggest new entrant is Eloquii, which started out as the plus-size label of The Limited. After the brand was cut in 2013, a few key employees sought out an investor to buy it from Limited, which has since gone out of business. The line relaunched as a stand-alone in 2014 and has been doubling its sales every year since, reaching around $80 million for fiscal 2017. Their approach: draping and unusual cuts or sleeves to create flattering silhouettes, as well as styles that hug the ELOQUII The market gets less attention at big retailers, and entrepreneurs are taking advantage of that Business-School Professors And Tech Students May Not Speak the Same Language BY ALINA DIZIK COLLEGES MAY need to rethink the way they teach tech students about entrepreneurship. In a recent study, researchers looked at business students and science, technology, engineering and math students about to enter entrepreneurship courses. Both groups started off with equal entrepreneurial knowledge, and STEM students even had a slight edge in terms of how many hours of entrepreneurship education they were able to take. Yet after taking those entrepreneurship courses, STEM students had only slightly higher intentions of launching startups than before. Businessschool students demonstrated a greater increase in intention after taking courses. No clear connection Why the lack of change? Entrepreneurship is often taught to STEM students by business-school professors who don’t know the best way to reach those students, says Rainer Harms, associate professor for entrepreneurship at the University of Twente in the Netherlands. Business-school professors tend to use teaching methods that work with business students on technology students, he says. “This may not be the correct approach.” A need for guidelines The biggest issue is a lack of formal structure, Dr. Harms says. Entrepreneurship professors often don’t explore problems and methods in the thorough, analytical way that STEM students are used to; instead, he says, the professors use more of a linear approach and don’t constantly ask the students to change their assumptions. “Science students are used to more structure, they are not familiar with the unstructured way of doing things,” says Dr. Harms, who conducted the study with three other researchers, using data from 4,548 student responses in a 2011 Global University Entrepreneurial Spirit Students’ Survey distributed in Austrian universities. One idea to improve things, Dr. Harms says, is to teach STEM students the leanstartup approach—a more-formalized method that focuses on creating a business while using few resources and experimenting along the way. Peer pressure Understanding how STEM students relate to their peers is another key, says Dr. Harms. Engineers are less motivated to pursue entrepreneurial activities when they are surrounded by entrepreneurs, he says, because they identify themselves as STEM specialists first and entrepreneurs second (if at all). Keeping them surrounded by other STEM students in entrepreneurship classes can help motivate them to strike out on their own, he says. Another easy fix is to consider introducing different role models into the tech-focused classroom. Instead of studying the traditional chief executives, Dr. Harms suggests, STEM entrepreneurship classes should focus on tech startups led by chief executives with a STEM background. “We should present to them the hero engineers turned entrepreneurs,” Dr. Harms says. Ms. Dizik is a writer in Chicago. Email her at email@example.com. she says, have doubled each year. Not all of the plus-size startups are designing clothes. In some cases, they’re acting as middlemen for other companies that make plus-size clothing. Panty Drop, an underwear subscription service, began carrying plus-size lingerie lines in fall 2016 to complement its standard sizes. Julie Arsenault, founder and chief executive officer of Panty Drop, says she extended the company’s plus-size offerings from 3x up to 6x after interacting with various body-positive communities on social media. “They told us loud and clear that if we really want to serve this market, we need to go higher than 3x,” Ms. Arsenault says. She says monthly revenue is in the thousands, and sales are growing 20% month over month. Down the road For all these startups’ success so far, there are obstacles on the way that may hurt their growth. Perhaps the most daunting: Big brands have recently started to devote more resources to the plus-size market. Michael Kors and Comme des Garcons have expanded their high-fashion lines into plus size, and H&M and Target have begun designing specific collections for plus-size women. In March, Wal-Mart announced plans to acquire ModCloth, a pioneer in size-inclusive fashion. “The big brands are definitely waking up to this,” Mr. Cohen says. “But they tend to change slowly.” Another issue that small fashion retailers must face: Plus-size clothing can cost more to make, because overseas factories are often not set up to make it. Clothing factories are typically making clothes for five to 10 brands at a time, and manufacturing larger sizes would require changes to their cutting tables and machines that are costly. That makes it harder for small businesses to compete with large-volume businesses. More niches Still, some observers say there are plenty of niches for the startups. Ms. Eves, the stylist, says, for instance, there’s a need for wider footwear, as well as “intimates, high-end designer wear, sportswear…. There’s this perception that plus-size women aren’t active, and that’s completely untrue.” Then there’s the whole other side of the plus-size business—clothing for men. Few startups have started to address that potentially rewarding market. “There are way fewer options than there are for plussize women,” Ms. Eves says. Ms. Westervelt is a writer in Oakland, Calif. Email firstname.lastname@example.org. THE WALL STREET JOURNAL. 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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 27, 2017 | R7 JOURNAL REPORT | SMALL BUSINESS They’re Clunky. They’re Outdated. And They Sell. been able to create a viable business from repurposing and redeploying obsolete technology that would otherwise end up in the trash,” says the 59-year-old Mr. Woodbury, who sold his 50-store cellphone chain in 2013. Many small companies have done very well by selling niche products that have long since been put out to pasture, whether it’s vinyl records, typewriters or anything else that captures people’s fancy. For some entrepreneurs, vintage sales are a sideline. Jonathan Finder started Oldphones.com 16 years ago when he was a young physician, and the second income helped him pay off student loans. Now his job as a pediatric lung specialist keeps him from putting in the time to acquire new customers. And a downturn in landline sales has hurt business. But he keeps at it, in no small part because he’s an unabashed fan of the craftsmanship and history of his merchandise. “How many electromechanical objects that are 50 to 70 years old do exactly what they did when they were first made?” Dr. Finder says. “The phones of the ’30s and ’40s outclass anything on the market today.” BY BONNIE MILLER RUBIN MATT JENNINGS WHEN DON WOODBURY opened a cellphone store in 2001, he included a few old phones as part of the décor, reflecting the historic district where the business was located. Soon customers were asking to purchase the vintage models. “They’d just come up to me and say, ‘I want one of those.’ It didn’t take me long to realize that there was a good internet market for this stuff,” Mr. Woodbury says. The 1905 Strowger can run $8,000. Some 16 years later, Oldphoneworks.com, based in Kingston, Ontario, has grown to become one of the biggest sellers of antique phones, whether it’s the “candlestick” style familiar from old films and TV shows or the clunky desk models that were fixtures at grandma’s house. Mr. Woodbury’s base is a small but loyal group of collectors with a taste for nostalgia, along with a handful of people looking to buy old models in bulk, such as movie producers trying to conjure up the past and hotel moguls looking to add a touch of uniqueness to rooms. “It’s kind of amazing that we’ve A new calling For other entrepreneurs, like Mr. Woodbury, retro devices are their sole focus. The market for these phones would seem pretty small to build a business on. Two groups— the Antique Telephone Collectors Association and Telephone Collectors International—have only 1,125 members total. Yet buyers have been eager enough not only to keep Mr. Woodbury’s operation afloat but allow it to thrive, even enough to support a four-person staff. Revenue, he says, can hit 50,000 Canadian dollars (roughly US$39,000) in a good month, and though he doesn’t track long-term growth, he says that sales have shown a consistent year-toyear increase since the beginning. When original equipment is unavailable, the company uses reproduction parts—such as cloth-covered MATT JENNINGS In a world that raves about iPhones, Don Woodbury has found customers with a passion for vintage machines Western Electric 302 models date back to the 1930s. cords—manufactured in its own workshop. Additionally, Oldphoneworks.com has the capability to repair and refurbish models that aren’t in its inventory, a service that accounts for about 10% of the company’s revenue. Mr. Woodbury’s customers are both “repeat buyers; people who are going through their collection and want to upgrade, so they’ll come to us to order the one part they need,” he says, and “a lot of one-offs, where someone Googles us because they need parts.” Typically, Mr. Woodbury gets his inventory from individuals or estates looking to liquidate their collections. His average telephone sale is $250, a healthy return on his average investment of $50, not counting the cost of labor for refurbishing. Prices usually range from $100 to as much as $8,000 for a rare model, such as the 1905 Strowger Candlestick, the first commercially available dial telephone. (A Kansas City undertaker, Almon Strowger, believed that the only local operator was steering business calls to his competitor, who also happened to be her husband. So he invented dial service, bypassing operator intervention.) “A phone like that may sit there for five years, but eventually someone will buy it,” Mr. Woodbury says. “If people really want something, they’re willing to pay for it. You just have to be patient.” To build consumer trust, he offers a one-year, repair-or-replace warranty—which gives him an edge over garage sales and flea markets, where the mantra is “Let the buyer beware.” He also says he can offer items in bulk, which is difficult for other dealers. A trunk line The company doesn’t do much marketing. Mostly it involves making sure customers can find 20th-century technology using 21st-century methods. General manager Matt Jennings, 31, makes updating social media a top priority, trying to land the company at the top of Google rankings in their category. When he answered a help-wanted ad two years ago, he didn’t know a spit-cup receiver from an F1 handset. “I thought I’d be repairing cellphones. I certainly didn’t think this would be much of a market,” he says. “After my first day, I realized I was wrong.” Beth Howe, like many buyers, found her way to Oldphoneworks by googling. She isn’t a collector, but lusted after a Western Electric 500— the phone of her childhood—for her Topanga, Calif., home. “I have fond memories of avocado-green kitchen appliances,” Ms. Howe says. “Maybe it’s just reaching adulthood that has made me nostalgic for the late ’60s, early ’70s design sensibility.” An online search brought her to The New WSJ iPhone App Follow the markets in a whole new way. From individual companies and industry sectors to asset values and percentage change, experience the live U.S. stock market in augmented reality. Available now in the AR/VR section of the WSJ iPhone app. DOWNLOAD NOW © 2017 Dow Jones & Co., Inc. All rights reserved. 6DJ6157 the site, and she fell hard for a dark red Western Electric 302 instead. Last produced in 1954, the phone’s sleek lines and distinctive chime made the model a staple of Hollywood’s Golden Age. “I thought, what fun to have a phone, not from my own childhood era, but from that classic period,” says Ms. Howe, a visual-effects production supervisor, who worked on the recently released film “Blade Runner 2049.” “I was especially enamored of the matching textile cord…and the clickety, clickety, clack of the dialing mechanism and the ringer, which is as good as a time machine to transport me back,” she says. A starring role Other regular clients are the TV and movie industries, which account for 15% of the firm’s revenue. “It’s just been building on its own,” Mr. Woodbury says. Recently, he says, “we got calls from two different production companies on the same day asking us to rush phones that they need on the set.” Jess Royal, set decorator for the Netflix series “Stranger Things,” calls the company her “go-to source.” “It’s super hard to find a whole bunch of phones in working condition, such as ones that all light up for a police station scene,” she says. “They’ve been great for us.” When a certain style Mr. Woodbury has supplied appears on the screen, his staff will see an immediate blip in sales. “We won’t sell any red pay phones for ages, then, all of a sudden, we’ll sell four in a day,” he says. A big order came in recently from Ventana Big Sur, a luxury resort on California’s Central Coast, which asked for 59 Western Electric phones dating back to the 1930s. The property—which opened in October and is the first in North America for Asia-based Alila Hotels & Resorts— needed its rooms to have a distinctive touch, says Kristina Jetton, general manager. “In this day and age,” she says, “when everyone has a cellphone, this is something unexpected, retro, quirky and fun.” Ms. Rubin is a writer in Chicago. Email email@example.com. For personal non-commercial use only. Do not edit or alter. Reproductions not permitted. To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com THE WALL STREET JOURNAL. R8 | Monday, November 27, 2017 JOURNAL REPORT | SMALL BUSINESS How One Entrepreneur Conquered Her Math Fear BY ALEXANDRA SAMUEL IT WAS FUNCTIONS and relations that finally killed me. I was 15 years old, in a class taught by an old guy named Mr. Fox—and by “old,” I mean around 46, the age I am now. Mr. Fox was the last in a string of math teachers who presided over my gradual descent into math phobia. By the time I landed in his class, math was no longer something to be learned, but merely to be endured. I slogged through each lesson, dutifully following the template for solving each problem, without ever understanding what a “function” or One great motivator: Find a question that you’re desperate to answer with numbers. “relation” actually was. When I switched to a new school in the middle of that year, I convinced my mother to let me drop math. More than 30 years later, I find myself in a career that involves regular and persistent engagement with the world of numbers: writing datadriven articles and reports is now the lion’s share of my work. That has required me to finally conquer my math phobia by using a few different strategies that can work for others, too. While it wasn’t easy, I recognized that in this era of abundant data, math phobia is a recipe for missing out on the professional insights and opportunities that make the difference between a business that scrapes by, and a business that is wildly successful. Smart businesses of all sizes now use data to drive decision-making on everything from product development to marketing. The proliferation of low-cost (and even free) data sets, as well as tools and expertise to analyze that data, means that small and medium-size businesses are increasingly data-driven. You can count on your competitors using data to outsmart you, unless you’re as datadriven as they are. Even if you’re fortunate to have an analytics expert or team, that doesn’t mean that you can sit out serious data work. If you’re part of a marketing team, you need to get comfortable using customer data, and web and social-media analytics, to assess the relative value of different channels and campaigns. If you’re part of a sales or customer-support team, you should know how to make sense of data that predicts the customer journey, surfaces key sales patterns or identifies the major factors in customer satisfaction. And if you’re part of the leadership team in your company, you need to be comfortable working with all of these types of data—plus financial information—so that you can make data-driven decisions about the best strategies and tactics. All of that is hard to do, however, if the mere sight of a row of figures gives you flashbacks to junior high. That’s where I started from, and it took plenty of hard work—and some luck—to turn my math phobia around. If numbers still give you the shivers, here’s how you can work your way toward a more confident relationship with the quantitative world. Learn quantitative thinking with a passion project. You’re not going to become a fluent and confident data analyst until you have a basic level of comfort with quantitative work. So look for an area that interests you. I took an economics course as a way of satisfying my college’s quantitative requirements, and discovered that when I was working with numbers in a meaningful context— and not just in abstract math problems—I actually loved it. By the time I got to grad school, I had also fallen in love with computing; while I’d struggled with the rigid order of operations in algebra, I embraced it enthusiastically when it took the form of programming or scripting. TIM BOWER As a small-business person, it’s crucial to be comfortable with numbers. Here’s how to do it. The key is to start with a subject you’re genuinely passionate or curious about, so that you develop some quantitative understanding in a context that feels stimulating rather than defeating. Working with web data became part of my daily working life, and I was too fascinated by what that data revealed to let my math anxiety get in the way. Recruit a mentor—humbly. BuildFind a question you’re desperate to answer with numbers. There’s no better motivation for conquering your math phobia than a question that you are really motivated about answering. Maybe you want to know which of your service lines generates the most recurring revenue, or what kinds of social-media posts get shared the most within different market segments. All of those questions are answerable with data, and they can drive your recovery from math phobia. What ultimately broke through my wall of math resistance was the desire to build traffic to my blog— which got me curious about which pages and blog posts got the most views, or kept people on our site the longest. When I started advising organizations on how to build online communities, I had to do the same thing for their websites, learning to mine web analytics for insight. ing your quantitative skills on the job means taking on projects that push you past your comfort zone. Since you don’t want to make a recommendation, much less a decision, based on mistaken calculations or methodology, you’re going to need someone looking over your shoulder and double-checking your work. Think of this person as a “math mentor,” and make sure that it’s someone you can approach humbly (i.e. honestly) so that you aren’t tempted to overstate your level of confidence. The best place to find that mentor is in a very quantitative business or department—even if the prospect of exposing your needs inside the company is terrifying. I was lucky to find two of mine while working at a business-intelligence software company: Since the company’s product was designed to help businesses work with survey data, there were a bunch of people on the team who had significant quantitative research skills. I took on projects that required me to have regular calls with the company’s chief research officer, so that I’d have the chance to ask an endless series of methodological questions. I also befriended a colleague who (she confessed) enjoyed a good data nerd-out. Get indignant about your math education. We can’t talk about the impact of math phobia in business without acknowledging that girl students are subject to this more than boys—which has an effect later in life. A survey conducted for Change the Equation, a coalition that supports STEM (science, technology, engineering and mathematics) literacy, found that women are significantly more likely than men to say that they’re not good at math. For women who’ve yet to get comfortable with quantitative work, there’s nothing like pure indignation to fuel a turnaround. Ms. Samuel is a technology researcher and the author of “Work Smarter with Social Media.” Email firstname.lastname@example.org. Answer the call with the Earnings Tool. The TD Ameritrade Earnings Tool simplifies research on your earnings trades by aggregating thousands of estimates into a single data point. This earnings season, make your most insightful trades yet. Get up to $600 when you open and fund an account. Visit tdameritrade.com/earnings to learn more. does not represent or warrant the information to be accurate, complete, reliable, or current. See tdameritrade.com/600offer for offer details and restrictions. This is not an offer or solicitation in any jurisdiction where we are not authorized to do business. TD Ameritrade, Inc., member FINRA/SIPC. © 2017 TD Ameritrade.