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The Wall Street Journal November 27 2017

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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-
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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 wsjcontact@wsj.com or
by calling 888-410-2667.
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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.
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A4 | Monday, November 27, 2017
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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.
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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.
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NY
Monday, November 27, 2017 | A6A
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A6B | Monday, November 27, 2017
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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.
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A8 | Monday, November 27, 2017
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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.
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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.”
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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.
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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
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.
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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
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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.”
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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.
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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.
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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
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Edmonton
Calgary
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Calgary
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Winnipeg
Seattle
Portland
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10s
30s
50s
Helena
30s
Billings
0s
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30s
Bismarckk
20s
30s
40s
80s 60s
U.S. Forecasts
Hi
71
76
52
83
49
41
50
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69
60
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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
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49
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Lo W
41 r
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76 s
28 s
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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
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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
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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
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D A
MA C
A C T E
U G
G R A C
A L A
WA R
A
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S
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D
D
E
R
E
N
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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
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are subject to editing, and unpublished
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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.
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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.
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THEY WANT
BEFORE THEY
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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
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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.
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TECHNOLOGY: SPACE TAXI SERVICES STRUGGLE TO MEET NASA SAFETY RULES B4
BUSINESS & FINANCE
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Last Week: S&P 2602.42 À 0.91%
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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.”
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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
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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
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, $' 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.”
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THE WALL STREET JOURNAL.
Monday, November 27, 2017 | B5
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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
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$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
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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 | 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
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Funds: Contact JPMorgan Distribution Services, Inc. at 1-800-480-4111 or visit jpmorganfunds.com. Exchange Traded Funds: Call
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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
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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.
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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: heard@wsj.com
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.
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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.
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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.
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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
reports@wsj.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 clare.ansberry@wsj.com.
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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
reports@wsj.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 reports@wsj.com.
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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
reports@wsj.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
reports@wsj.com.
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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
reports@wsj.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
reports@wsj.com.
THE WALL STREET JOURNAL.
R6 | Monday, November 27, 2017
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Focus on Franchising
To advertise: 800-366-3975 or WSJ.com/classifieds
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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
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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 reports@wsj.com.
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To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
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 reports@wsj.com.
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