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Last week: DJIA 21830.31 À 250.24 1.2%
WSJ.com
MONDAY, JULY 31, 2017 ~ VOL. CCLXX NO. 25
* * * * * *
NASDAQ 6374.68 g 0.2%
STOXX 600 378.34 g 0.5%
10-YR. TREASURY g 17/32 , yield 2.291%
OIL $49.71 À $3.94
Business & Finance
C
harter Communications
said it isn’t interested in
buying Sprint, rebuffing a gigantic merger offer and ending weeks of deal talks. A1
Aluminum use in vehicles
is expected to grow but at a
slower pace than forecast
before as auto makers shift
to a mix of materials. B3
Saint Laurent is launching online sales in China as
the French fashion brand
seeks to expand in that
fast-growing market. B3
Tesla showed off details
of its new, all-electric Model
3 sedan. The base model
will start at $35,000 and
have a 220-mile range. B5
Apple removed software
from its app store in China
that allowed users to circumvent internet filters. B4
Uber is rolling out its
own credit card. A2
World-Wide
Trump’s turbulent week,
which included a staff shakeup and collapse of the Republican health bill, has widened rifts in the GOP. A1
White House officials expect further staff changes
following Priebus’s ouster. A4
Trump administration officials urged China and other
nations to band together to
confront North Korea over
its missile ambitions. A6
China unveiled a new,
more mobile ICBM at a parade of advanced weaponry
and combat troops. A6
Seoul said it would upgrade its Patriot missile system in response to North
Korea’s latest ICBM test. A6
Putin said the U.S. would
have to cut 755 diplomats
and staff in Russia in retaliation for impending U.S.
sanctions on Moscow. A6
The U.S. and Iran reported their second confrontation of the week in the waters off the Persian Gulf. A9
The White House is exploring a pullback from Afghanistan amid concern over
sending more troops. A9
The EU launched legal
action against Poland over
the government’s overhaul
of its court system. A8
The U.S. is considering
stepping up sanctions
against Venezuela by targeting its oil industry. A7
Deadly protests flared
across Venezuela as Maduro urged supporters to
vote for a new assembly. A7
Western states are focusing on the risk of floods in areas scorched by wildfires. A3
CONTENTS
Business News....... B3
Crossword.............. A12
Heard on Street B10
Keywords................... B1
Life & Arts...... A11-13
Markets............... B9-10
Opinion.............. A15-17
Outlook........................ A2
Sports....................... A14
Technology............... B4
U.S. News............. A2-4
Weather................... A12
World News....... A6-9
>
s Copyright 2017 Dow Jones &
Company. All Rights Reserved
COUNTERMEASURE: Russian President Vladimir Putin, at a naval parade on Sunday, ordered the U.S. diplomatic presence in the country
be cut by more than half, or 755 personnel, in retaliation for U.S. sanctions on Moscow. Some would be forced to leave the country. A6
Trump Deepens GOP Divide
President’s turbulent
week fuels frustration
in his party; core
supporters remain loyal
Mr. Trump has long been a
polarizing force among members of his party, but for the
first several months of his
tenure, the GOP was largely
united by a shared desire to
make the most of his election
and the party’s total control
of the government for the
first time in a decade.
After a week that included
the president attacking his attorney general, the collapse of
a GOP health bill, a surprise
effort to bar transgender people in the military and a
White House staff shakeup,
divisions that were largely set
aside at the start of 2017 have
emerged anew.
BY SIOBHAN HUGHES
AND THOMAS M. BURTON
WASHINGTON—President
Donald Trump’s tumultuous
past week has widened rifts in
his party, between those who
vocally support the president’s combative style and
others who bridle at it, according to interviews with
GOP officials and supporters
across the country.
New Pressures
Kate Davidson: GOP’s next
task is raising debt limit... A2
Priebus’s ouster has
staffers on alert................. A4
Trump warns China on
North Korea.......................... A6
“Particularly among some
of my former colleagues in the
House, there is a frustration
and lament about opportunities squandered in what
should be a prime time for a
GOP legislative agenda,” said
former Republican Rep. David
Jolly of Florida. In 2015, Mr.
Jolly urged Mr. Trump to drop
out of the presidential race
and, as a result, lost the support of some GOP voters during his unsuccessful re-election bid.
Mr. Jolly added that Mr.
Trump
remains
popular
among many of his voters.
“They are going to stick
with Trump—they like him
the more combative he is and
the more his back is against
the wall,” he said.
During the Obama years,
the party was split between
establishment Republicans
and hard-line conservatives
who rose to prominence out
of the tea-party movement.
Please see TRUMP page A4
OPEC’S EXISTENTIAL PROBLEM
Charter Communications
Inc. said it isn’t interested in
buying Sprint Corp., rebuffing
a gigantic merger offer and
potentially ending several
weeks of deal talks between
the media and communications companies.
While the announcement
could effectively kill the possibility of a deal between Sprint
and Charter any time soon, a
person familiar with the matter said Sprint Chairman
Masayoshi Son may still decide to make a formal offer to
acquire Charter anyway.
Sprint proposed a merger
with Charter that would create a massive new entity controlled by SoftBank Group
Corp., Sprint’s parent, The
Wall Street Journal reported
Friday.
On Sunday, Charter rejected
the merger idea and indicated
it would stick with an existing
wireless reseller agreement
with Verizon Communications
Inc.—known as an MVNO
pact—rather than switch to
one with Sprint.
“We understand why a deal
is attractive for SoftBank, but
Charter has no interest in acquiring Sprint,” Charter
spokesman Alex Dudley said
in an emailed statement. “We
have a very good MVNO relationship with Verizon and intend to launch wireless services to cable customers next
year.”
Charter has influential investors, including Liberty
Broadband Corp., which is controlled by cable mogul John
Malone. Mr. Malone has been
interested in a wireless deal.
Please see DEAL page A2
Dow faces a revolt as DuPont
deal nears..................................... B1
INSIDE
Big budget obligations drive members to keep pumping despite deal to cut oil output
OPEC, the once powerful oil cartel, is struggling to hold the line in a make-or-break fight
to limit oil production, prop up crippling low
prices and prove its relevance.
Why? Its members are addicted to oil.
By Benoit Faucon in London,
Lynn Cook in Houston
and Summer Said in Cairo
Eight months after the Organization of the
Petroleum Exporting Countries announced a
plan for its 14 members and 10 allied countries
to withhold almost 2% of the world’s oil every
day to boost prices, seven of the 11 OPEC members that pledged to cut appear to be producing more oil than promised.
Crude prices have actually fallen, by 7.6% to
$52.52 a barrel, since the beginning of the
year—half what the cartel called a fair price
just three years ago and a level that some say
is here for the long term.
Previously, low production costs meant
OPEC members profited even when oil prices
fell. These days, members have ramped up
government spending to keep populations
happy and cover military expenses, and don’t
have a cushion to let oil revenues slip. Their
strained budgets can be covered only through
increasingly high prices per barrel, and if
prices are low they need to produce more.
The inability to control output poses a potentially existential threat to OPEC’s influence.
The longer prices remain low, said Helima
Croft, the global head of commodity strategy
at RBC Capital Markets and a longtime
watcher of the cartel, “the harder it is to make
the case to the most cash-strapped producers
that they are ‘better together.’ ”
Tensions were laid bare last week in St. Petersburg, where OPEC and its non-OPEC allies
discussed why output was going in the wrong
direction.
Russia aimed to boost camaraderie with a
visit to the Hermitage museum and a picturesque evening cruise on the Neva River, where
ministers donned matching hoodies bearing
the logo of the city’s soccer team, FC Zenit.
But during the weekend, Saudi Arabia’s energy minister, Khalid al-Falih, and other oil officials holed up in a hotel conference room at
the Four Seasons calling other OPEC minisPlease see OPEC page A10
U.S. takes aim at oil industry in Venezuela.... A7
Investors await detail on shale plans................. B2
Purple Craze: Long Island
Lavender Draws Mystery Crowds
i
i
i
A farm and nearby town are swamped by
selfie-takers; ‘Instagram picture, man!’
BY CORINNE RAMEY
quiet place that nobody came to, it was
great,” said Anne
EAST MARION,
Murray, president of
N.Y.—During some
the East Marion
July weekends the
Community Associapast few years, traftion. “Now it’s kind
fic on the two-lane
of a nightmare.”
country road passLong
Island’s
ing through the
North Fork isn’t imhamlet of East Marmune to seasonal
ion, population 926,
overcrowding. Weekhas been backed up
enders flock here to
for miles.
visit wineries in the
Lavender
To w n s p e o p l e,
summer, pick pumpunaccustomed to
such things, initially found tour kins in the fall, and saw down
buses parked in front of their Christmas trees in the winter.
homes and wayward picnickers East Marion, which lacks such
Please see BLOOM page A10
on their lawns. “When it was a
Funding the Budget
Price per barrel needed by OPEC
members to cover national
spending*
Friday’s close: $52.52 a barrel
$139
Nigeria
117.5
Venezuela
Saudi Arabia
83.8
Angola
82
71.3
U.A.E.
67
Gabon
66
Algeria
Iraq
BUSINESS & FINANCE, B1
79.7
Ecuador
Libya
WHY A $1,400
IPHONE ISN’T
CRAZY
64.7
54.3
Qatar
52.9
Iran
51.3
Kuwait
49.1
*Figures for Equatorial Guinea not available
Source: Fitch, Highmark Capital, International
Monetary Fund
THE WALL STREET JOURNAL.
VENEZUELA
HEADS FOR
CIVIL WAR
OPINION, A15
Earnings Growth Heats Up
After Years of Cost-Cutting
BY THEO FRANCIS
AND THOMAS GRYTA
America’s largest companies are on pace to post two
consecutive quarters of double-digit profit growth for the
first time since 2011, a product
of years of cost-cutting, a
weaker dollar and stronger
consumer spending.
Earnings at S&P 500 companies are expected to rise 11% in
the second quarter, according to
data from Thomson Reuters,
following a 15% increase in the
first quarter. Almost 60% of the
firms in the index have reported
second-quarter results so far.
Corporate America’s strong
earnings performance comes
as several policy initiatives
that were expected to help
boost companies’ bottom
line—corporate-tax cuts and
increased government spending on infrastructure—have
been sidetracked amid political infighting in Washington,
D.C., which culminated with
the recent failure of the
health-law bill.
Even as activity inside the
Beltway bogged down, markets
have been on an almost nonstop
rally since the election. The S&P
500 is up 16% since early November and 10% this year.
“You could argue that the
stock-market investor overestimated Trump but underestimated earnings,” said Christopher Probyn, chief economist
for State Street Global Advisors.
The second-quarter profit
gains are spread across industries from Wall Street banks to
Detroit’s car factories to Silicon Valley’s software labs.
Earnings are expected to decline only in the utilities sector, according to data from
Thomson Reuters.
Several factors are at work,
analysts and economists say. A
weaker dollar has made it easier to sell U.S.-made goods
overseas and has kept borrowing costs low. U.S. wages have
improved enough to help bolPlease see PROFIT page A8
Europe’s lenders are
stabilizing...................................... B1
Private equity take fire as
some retailers struggle........ B1
KIICHIRO SATO/ASSOCIATED PRESS (ABOVE); RONALDO SCHEMIDT/AGENCE FRANCE-PRESSE/GETTY IMAGES
Private-equity firms accelerated the financial collapse of some retail chains,
creditor lawyers contend. B1
METZEL MIKHAIL/TASS/ZUMA PRESS
Dow’s CEO faces an attack by four activist investors over his plan to break
up DowDuPont after the
chemical firms’ merger. B1
Samsung surpassed Intel
as the No. 1 semiconductor
maker by sales on strong demand for memory chips. B3
YEN 110.69
BY RYAN KNUTSON
S&P 500 companies
are on track to post two
straight quarters of double-digit profit growth for
the first time since 2011. A1
European banks are stabilizing as restructuring
starts to pay off, but they
still lag behind U.S. peers in
profits and dividends. B1
EURO $1.1751
Charter
Snubs
Sprint
On Deal
Stare Down: Russia’s Putin Orders U.S. Diplomats to Leave
What’s
News
HHHH $4.00
A2 | Monday, July 31, 2017
THE WALL STREET JOURNAL.
* *****
U.S. NEWS
THE OUTLOOK | By Kate Davidson
GOP’s Next Task: Raising Debt Limit
Debt Ceiling Crises Can Be Costly
Rise in government borrowing costs during debt ceiling spats.
Percentage-point change in average yield of Treasury securities of
all maturities attributable ...
... to a possible Aug. 2, 2011,
... or to a possible Oct. 17, 2013,
debt-ceiling breach ...
debt-ceiling breach.
0.08 percentage point
0.08 percentage point
0.06
0.06
0.04
0.04
0.02
0.02
0
0
–0.02
July 18, 2011
–0.02
Aug. 2
Oct. 1, 2013
Oct. 17
Note: Only trading days are shown. Series start at July 14, 2011 and Sept. 25, 2013.
Source: Cashin, Ferris, Klee and Stevens (2017)
leave town with no clear strategy for managing the complex
politics around raising the
limit when they return.
“We just don’t know what
the process is going to look
like this time,” said Goldman
Sachs political economist Alec
Phillips.
This will be the first time
Republicans will control both
chambers of Congress and the
White House while navigating
a debt-ceiling increase since
2006, when a House rule existed that bypassed the need
for a debt-limit vote. The rule
was repealed in 2011.
Now, they face resistance in
their own party.
U.S. WATCH
TENNESSEE
MONTANA
Nashville Mayor’s
Son Found Dead
Gianforte to Atone
As a Volunteer
The 22-year-old son of Nashville Mayor Megan Barry was
found dead on Saturday night in
Colorado, of an apparent drug
overdose, Ms. Barry’s office said
in a statement.
“Early this morning, we received news that no parents
should ever have to hear,” Ms.
Barry and her husband Bruce,
said. “Our son Max suffered from
an overdose and passed away. We
cannot begin to describe the pain
and heartbreak that comes with
losing our only child.”
Max Barry had graduated in
June from the University of
Puget Sound, the statement
said.
Jenny Fulton, a spokeswoman
for the Jefferson County Sheriff’s Office, said sheriff’s deputies responded to a call around 9
p.m. on Saturday night in South
Jefferson County, which is part
of the Denver metropolitan area.
Ms. Fulton confirmed the deceased was Mr. Barry. She said
the death wasn’t suspicious, but
she didn’t release the cause of
Mr. Barry’s death.
—Dan Frosch
Greg Gianforte will work off
his sentence for assaulting a reporter by volunteering for an organization that builds custom
wheelchairs for children.
The Republican was ordered
to perform 40 hours of community service as part of his sentence for attacking Guardian reporter Ben Jacobs the day
before the congressman was
elected in a May 25 special
election.
Gallatin County Court Services Director Steve Ette said
Mr. Gianforte will work with
ROC Wheels, a Bozeman, Mont.,
nonprofit organization.
The Bozeman Daily Chronicle reported that Mr. Gianforte
is working with ROC Wheels
on when and how his hours
will be completed. He has until
Nov. 28.
Mr. Gianforte must complete
20 hours of anger-management
counseling after he pleaded
guilty to misdemeanor assault in
June. He told the court he would
be seeing a therapist in Bozeman.
—Associated Press
THE WALL STREET JOURNAL.
In the past, conservative
Republicans sought to pair increases in the borrowing limit
with steep spending cuts.
Some argued against raising the limit at all.
This time the GOP will have
to own the consequences if the
government defaults on debt
or fails to make other payments.
M
r. Mnuchin has made
clear the administration wants to see the
debt limit increased, with no
strings attached. But GOP
leaders will almost certainly
need Democratic support to
pass any increase, some-
thing Democrats might be reluctant to provide without
something in return. They
have been unified in opposition on other issues.
The path to raising the debt
limit will be the first major
political test for Mr. Mnuchin,
a Washington novice who has
been intensely focused on the
Trump administration’s forthcoming tax overhaul proposal.
It is going to be a tight
squeeze. Treasury’s cash balance is expected to drop to
near $25 billion in September—a precariously low
level, especially in the event of
some unforeseen shock, such
as a severe natural disaster,
global crisis or unexpected
drop in revenue.
Strategic challenges hang
over Mr. Mnuchin’s options.
When President Barack Obama
was in power, some Republicans sought to allow cash to
run down and prioritize some
payments, such as interest on
debt, over others, such as discretionary spending. That idea
could return.
Transcripts from a 2011
meeting of the Federal Reserve showed the central bank,
as the Treasury’s financial
agent, was prepared to continue making payments to
bondholders, while potentially
delaying other payments, if
Congress failed to raise the
borrowing limit.
Mr. Mnuchin told lawmakers on Capitol Hill last week
he had “no intent” to prioritize payments, which would
put him in the uncomfortable
A
dding to the political
muddle, some lawmakers want to relax
spending caps set into law six
years ago as part of a compromise reached between Mr.
Obama and congressional Republicans to end an earlier
debt-limit standoff.
The costs from delaying action on the debt ceiling are
already mounting, Mr.
Mnuchin warned lawmakers.
Two recent debt-limit fights
on Capitol Hill, in 2011 and
2013, raised yields on Treasury
securities ahead of the expected date of default, ultimately boosting Treasury’s
borrowing costs by about
$260 million in 2011 and $230
million in 2013, according to
research released by the Federal Reserve this year.
“Right now effectively, as
opposed to borrowing in the
market at lower rates, we’re
borrowing and making our
trust funds whole at
slightly higher rates,” Mr.
Mnuchin said. “There is a real
cost to doing that.”
Arc of Triumph: Young Athletes Strut Their Stuff Between the Lines
SKIP IT: Members of the Ninja team of Englewood Cliffs, N.J., competed in the Double Dutch Summer Classic at Lincoln Center in
Manhattan on Sunday. The event took place in Lincoln Center for the first time in years, organizers said.
DEAL
Uber, Lyft Open Door
To New Credit Cards
BY ANNAMARIA ANDRIOTIS
AND GREG BENSINGER
MARIO ANZUONI/REUTERS
Continued from Page One
Sprint entered into exclusive talks with Charter and
Comcast Corp. in late May
about an array of deal possibilities including one that
would allow Comcast and
Charter to offer wireless service under their own brands
using Sprint’s network, people
familiar with the matter have
said.
Also on the table was a potential investment in the
wireless carrier from the cable companies, people familiar with the matter have said.
The exclusivity ended last
week, but Sprint and Mr. Son,
who is also SoftBank’s chairman, continued to pursue a
full combination with Charter,
the people said. Together, the
companies have a market
value exceeding $130 billion,
though
Charter,
worth
roughly $100 billion, is much
bigger than Sprint.
Comcast has made clear it
wasn’t interested in participating in any merger with
Sprint. The telecommunications company is free now to
resume merger talks with rival T-Mobile US Inc., which it
had held earlier this year.
Sprint shifted to the talks
with the cable companies
when discussions with T-Mobile, which have been on and
off for years, hit an impasse,
position of choosing whether
to pay foreign bondholders ahead of retirees or government workers.
The showdown will coincide
with the end of the fiscal year
on Sept. 30, and the prospect
of a government shutdown if
Congress fails to authorize
new spending for 2018. That
could make the debt limit increase more difficult to address, if lawmakers get bogged
down in a fight over spending.
TUESDAY: The eurozone has
been one of the positive surprises
for the global economy this year,
having outpaced the U.S. in the
three months through March. Eurostat’s preliminary estimate of
gross domestic product in the
second quarter is expected to
show growth continued at that
pace or possibly a little faster.
The U.S. Commerce Department releases the June personalincome report, including figures on
consumer spending, as well as
the Fed’s preferred inflation gauge,
the price index for personal-consumption expenditures. The 12month figure is expected to remain weak.
THURSDAY: The Bank of England announces its latest policy
decision, with no change expected.
With inflation easing in June, and
growth still modest in the second
quarter, a majority of the Monetary Policy Committee’s members
are likely to oppose a rate rise.
FRIDAY: The U.S. Labor Department releases the July employment report, after the June
report showed employers added a
seasonally adjusted 222,000 jobs
in June, and the unemployment
rate rose slightly to 4.4% as more
people joined the labor force.
Economists surveyed by The Wall
Street Journal forecast the economy added 180,000 jobs in July,
while the unemployment rate
ticked down to 4.3%.
The U.S. Commerce Department releases the June international trade report. The trade deficit narrowed in May on a rise in
exports, and Friday’s gross domestic product report showed trade
boosted the economy in the second quarter, suggesting any headwinds from a strong U.S. dollar
might be subsiding.
ALEXANDER COHN/THE WALL STREET JOURNAL
Republicans
are leaving
town for an
August recess
after a
failed attempt
to repeal the Affordable Care
Act. When they return in September, they’ll have just 12
working days to deal with another big problem.
In a letter to lawmakers
Friday, U.S. Treasury Secretary
Steven Mnuchin said the federal borrowing limit, or debt
ceiling, needed to be raised
by Sept. 29 or the government
risked running out of money
to pay its bills.
The Treasury Department
has been employing cash-conservation measures since
March, when borrowing hit
the formal ceiling of nearly
$20 trillion. Those measures
are expected to run out in
early to mid-October. When
they do, the government won’t
have money to pay interest on
debt, write Social Security
checks or make millions
of other routine payments, unless it can tap credit markets
for borrowing to raise additional cash. Missing payments
could send financial markets
in a tailspin.
Lawmakers have managed
to resolve bitter feuds over the
debt limit before. But markets
are starting to reflect angst
about Washington’s ability to
navigate a new showdown
given the challenges Republicans have had reaching common ground on issues like
health care. Lawmakers
ECONOMIC
CALENDAR
Charter indicated it would stick with an existing wireless reseller agreement with Verizon.
people familiar with the situation said.
T-Mobile has also made
public statements lately indicating it is in no hurry to
strike a merger, as the carrier
has been adding new customers at a fast clip while also
improving financial performance.
Sprint recently reversed
years of subscriber losses but
still hasn’t turned profitable.
It reports quarterly results on
Tuesday.
The rebuff adds to the already high drama surrounding the cable, telecom and
media industries, which are
jockeying for position as consumers spend more time
watching video and surfing
the web on smartphones.
AT&T Inc. is awaiting approval for a proposed $85 bil-
lion acquisition of the content
company Time Warner Inc.
Comcast Chief Executive
Brian Roberts said on an
earnings call last week that
he was happy with his current
business units, including cable, content and theme parks,
all of which show healthy
growth.
The wireless industry,
meantime, is under great
pressure, as there are more
active cellphones in America
than people. Carriers have resorted to price cuts and bigger data allowances to win a
smaller pool of available subscribers.
The competitive pressure
in the wireless business that
gives carriers motivation to
consolidate has been a boon
for consumers, who have recently seen prices fall. The
consumer-price index for
wireless service saw its largest fall ever earlier this year,
according to the Labor Department.
The wireless industry is
also poised for another major
technology cycle to fifth generation, or 5G, technology,
which will require significant
investment. T-Mobile and
Sprint, the nation’s third- and
fourth-largest carriers by
subscribers,
respectively,
have indicated that greater
scale will help them invest in
such technology, which their
larger rivals are already
working on.
Sprint isn’t the only carrier
to have an eye for Charter.
Verizon also discussed a deal
with the cable company earlier this year, but the talks
didn’t amount to anything.
Ride-sharing rivals Uber
Technologies Inc. and Lyft
Inc. may soon take their fight
to your wallet.
Uber is rolling out a credit
card for its U.S. customers,
choosing Barclaycard, a unit of
Barclays PLC, as the issuer,
the companies said Friday. The
card will be available in the
fall, according to a Barclaycard
spokeswoman.
Visa Inc. is expected to be
the network for the card, according to a person familiar
with the deal.
San Francisco-based Uber
would be the first major ride-sharing company to
launch a credit card. It could
help the firm lock in more customer relationships, a crucial
goal as it faces an invigorated
Lyft, which recently raised
fresh funds and has been expanding into new U.S. markets.
Lyft is also working on rolling out a credit card, according to people familiar with the
situation.
The bank’s CEO, Jes Staley,
announced the partnership on
Barclays’s earnings call Friday.
An Uber spokeswoman said
the company will be launching
a co-branded card with Barclays but declined to share
more details.
Consumers will be able to
use the card outside of Uber.
THE WALL STREET JOURNAL
(USPS 664-880) (Eastern Edition ISSN 0099-9660)
(Central Edition ISSN 1092-0935) (Western Edition ISSN 0193-2241)
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Monday, July 31, 2017 | A3
U.S. NEWS
Colleges Tie Up With K-12 Public Schools
Partnerships aim
to improve areas near
campus, boost
student pipeline
Lessons From a
Frustrated Union
Colleges have long encouraged students and faculty to
get involved in local public education. Now they are taking
over entire schools.
The University of Central
Florida, Johns Hopkins University and others are lending
their names to new charters or
partnering with districts to
overhaul troubled institutions, often investing millions
or tens of millions of dollars in
cash or faculty time.
They say the K-12 work is
about testing education theories, such as the value of socioeconomically diverse classrooms and being good
neighbors, but acknowledge the
engagement is far from altruistic. It is also about improving
blighted blocks that abut their
campuses and strengthening
the pipeline of students who
could eventually enroll at their
institutions.
The strategy has risks and
sometimes doesn’t pan out, as
shown by a University of
Southern California experiment
that was called off in 2012 after
five years and stumbles at a
Baltimore school in which
Johns Hopkins has invested
millions of dollars.
Aiming to avoid the potential headaches of working
within the confines of a school
district, Purdue University invested $1.1 million for startup
costs at the Purdue Polytechnic
High School, a science, technology, engineering and math focused Indianapolis charter
school opening this fall. It has
also pledged $1.7 million over
the next five years to cover faculty advising on the hands-on
curriculum and an emergency
backstop if enrollments don’t
CASSANDRA GIRALDO FOR THE WALL STREET JOURNAL
BY MELISSA KORN
At City Polytechnic High School of Engineering, Architecture, and Technology in New York, students prepared for state exams.
pick up quickly.
The school, about 70 miles
away from Purdue’s main campus and in Indiana’s largest
city, was created in part “to increase significantly the unacceptably low number of Indianapolis Public School students
who are qualified to succeed at
Purdue,” said university President Mitch Daniels.
A
new
prekindergarten through 8th grade public
school in Orlando’s poor Parramore district will open in August, with backing from the
University of Central Florida,
the Orange County Public
Schools and several community
groups. It is across the street
from where UCF recently broke
ground on its downtown Orlando campus.
The $41.3 million Parramore
school is funded and operated
by the district, but UCF is providing curriculum guidance and
teacher training, staffing social
work and speech pathology interns and helping with overall
strategy and operations. The
school said it couldn’t put a
firm dollar amount on the investment as more students and
faculty likely will continue to
get involved.
UCF has gotten more than
$4 million from the state legislature over the past four years
to fund its Center for Community Schools, which now works
with 18 Florida districts interested in pursuing the model
that teams universities with local health-care providers,
school districts and social service nonprofits.
Johns Hopkins President
Ronald Daniels acknowledges
“growing pains and stumbles”
in the rollout of the $54 million
Elmer A. Henderson: A Johns
Hopkins Partnership School in
East Baltimore, near the university’s medical campus.
Johns Hopkins contributed
$12 million toward school construction between 2011 and
2014. The university continues
to provide $750,000 in annual
operating funds for the K-8
school via unrestricted donations, foundation support and
the School of Education budget.
But Mr. Daniels said the
school isn’t yet “where it
should be.”
It isn’t as economically diverse as leaders first envisioned, as construction was delayed on new middle-income
housing included in a broader
East Baltimore development
project. And test scores, while
on the rise, match those at
schools with similar demographics and trail the city average.
The school, which is known
as Henderson-Hopkins and operates as a contract school with
the district, underwent a reboot last year with a new executive director, principal and
curriculum that focuses more
on nonfiction texts and critical
reading.
“Starting a new school turns
out to be difficult,” said Mr.
Daniels, though he added that
Hopkins has no choice but to
be in the game.
“Our fate is inextricably
linked to the fate of Baltimore,”
Mr. Daniels said. “As goes Baltimore, so goes Hopkins.”
Universities’ efforts to
help local schools don’t always
work out.
The University of Southern
California’s Rossier School of
Education—in partnership with
the Urban League, the Los
Angeles Unified School District and an area foundation—
began working with Crenshaw
High School in 2007, aiming
to turn around a school where
enrollment had plunged and
accreditation was in peril.
USC intended to provide
professional development to
teachers and administrators,
conduct research on urban education and have a say in
who was hired as principal.
The partnership dissolved
after five years, citing frustration with the district’s oversight, disrespectful student
behavior and different sets of
goals among stakeholders, including balancing immediate
test-score gains against community support of the school’s
culture.
“Although the teachers
and the parents voted on having this partnership, as you
know with anything, you can
say, ‘Yes we need change’ but
don’t all have the same thing
in mind,” said Rossier Dean
Karen Symms Gallagher. She
has called the experience
“humbling and instructive.”
USC has since created Ednovate, a network of five
charter schools around Los
Angeles, including two opening this fall. The university
doesn’t operate the charters
outright or provide funding,
though it does help with
fundraising advice and extended a $1 million line of
credit—which is being repaid—
as enrollments grew.
—Melissa Korn
BY KRIS MAHER
A new bridge connecting
Minnesota and Wisconsin is
set to open Wednesday in a
rare win for cooperation in the
often-contentious realm of
cross-border infrastructure.
For years, environmentalists and others, most notably
former Vice President Walter
Mondale, strongly opposed
building a new bridge over the
St. Croix River. The Mississippi River tributary is protected by the Wild and Scenic
Rivers Act, a 1968 federal law
aimed at preserving 12,734
miles of 208 rivers in the U.S.
But after a decadeslong effort by state officials to build
consensus—preliminary planning for a new four-lane
bridge in the region began in
the late 1960s—many are now
welcoming the opening of the
St. Croix Crossing.
The new bridge, which will
replace a nearby two-lane
bridge built in 1931, is expected
to give an economic boost to
local communities by rerouting
traffic and cutting out the delays and congestion that have
plagued the old crossing.
“There has been so much
pent-up anxiety and emotion.
Now, there is a sense of relief
that it is finally opening,” said
Bill Rubin, executive director of
the St. Croix Economic Development Corporation, in St. Croix
County, Wis.
The nearly milelong span,
which will connect Oak Park
Heights, Minn., just east of the
Twin Cities, and St. Joseph in
rural Wisconsin, is projected to
cost $646 million. Minnesota
will spend about $367 million,
which includes 60% federal
funding; Wisconsin is projected
to spend about $279 million,
with 5% coming from federal
funds. States can choose different funding sources for projects, including bonds and state
highway monies.
At a time of increased attention on improving the nation’s
bridges, roads and other infrastructure, the St. Croix Crossing
is an example of how to avoid
the pitfalls that often beset
such projects involving multiple
states with competing interests.
“Bridge projects in particular
have some of the toughest
times moving from blueprint to
final construction,” said Adie
Tomer, a fellow at the Brookings Institution who focuses on
infrastructure policy.
Funding challenges across
states and differing voter priorities often undermine projects,
he said. “All it takes is a few
state legislators on either side
to derail it based on just one
component.”
But it isn’t just bridges. Minnesota is fighting with North
Dakota over the location of key
parts of a major project to divert floodwaters from the Red
River of the North, around
Fargo. Disagreements between
Kentucky and Ohio have long
delayed repairs and upgrades
to the 53-year-old Brent Spence
Bridge, one of about 84,000
U.S. bridges that the Federal
Highway Administration considers functionally obsolete.
Four years ago, Washington
state lawmakers withdrew
funding from a proposal that
was being developed in conjunction with Oregon to build
a new bridge connecting Vancouver and Portland, to replace the Columbia River Interstate Bridge, which first
opened in 1917. In May, Washington Gov. Jay Inslee signed a
MINNESOTA DEPARTMENT OF TRANSPORTATION
States Bridge Differences
With New Milelong Span
The St. Croix Crossing connecting Minnesota and Wisconsin is scheduled to open on Wednesday.
bill allocating $350,000 to restart the planning process.
The St. Croix Crossing has
had its share of disputes. The
Minnesota Chapter of the Sierra Club twice sued to block
the project in federal court.
The environmental group argued that making an exception
to the Wild and Scenic Rivers
Act would set a precedent that
could put other rivers at risk.
Ultimately congressional
lawmakers from Minnesota
and Wisconsin sponsored a bill
to exempt the project. President Barack Obama signed it in
2012, paving the way for construction to begin a year later.
“This is going to happen. We
don’t like it, but that’s a fact,”
Mathews Hollinshead, the Sierra Club chapter’s conservation chair, said of the bridge’s
opening this week.
Despite the opposition, officials in Minnesota and Wisconsin earned the support of 28
citizen and other groups and
leveraged their past cooperation on other bridges joining
the two states. In this case,
Minnesota took the lead on the
bridge project, which was the
largest in the state’s history and
required highway work as well.
“We work together all the
time because we have a lot of
border bridges,” said Diana
Maas, a spokeswoman for the
Wisconsin Department of
Transportation.
Controlling Fires, Western States Now Fear Floods
As wildfires have quieted in
some parts of the U.S., Western states have turned their
focus toward another problem
this summer: floods.
While heavy rainfall in recent weeks was a welcome respite for the typically parched
Southwest, it has also caused
deadly and in some cases historic flooding in Arizona and
Utah, while portions of New
Mexico have been under a
flash flood watch.
Meanwhile, as pockets of
rain are expected to continue,
state emergency officials say
they are keeping a close eye
on areas that were scorched
by fires in summers past, now
barren of vegetation and particularly prone to flooding.
The wildfires increase the
dangers of flash floods by denuding land of vegetation that
can retard water flow.
LAURA SEITZ/ASSOCIATED PRESS
BY DAN FROSCH
April Rodriguez pulls son Francisco along a flooded Utah street.
In large portions of southern Colorado, the National
Weather Service put out a
flash flood watch for Sunday
afternoon and evening, due to
the threat of heavy rainfall.
The weather service said
burn scars in the area from
prior wildfires were especially
vulnerable to potential floods.
A flash flood tore through a
portion of Salt Lake City on
Wednesday morning, flooding
several schools, a public library and leaving parts of the
city’s transit system underwater. The flood was the equivalent of a 200-year event, ac-
cording to Laura Briefer,
director of the Salt Lake City
public-utilities department,
noting that 2.5 inches of rain
drenched the area in about 40
minutes.
“It was unique in its intensity and its suddenness,” said
Ms. Briefer, adding that city
officials were still assessing
damage from the floods.
Arizona has been hit particularly hard by flooding this
month.
On July 15, 10 people died
after a flash flood swept
through a popular swimming
hole in the Tonto National
Forest, about 90 miles north
of Phoenix.
Bill Boyd, spokesman for
the Arizona Department of
Forestry and Fire Management, said two wildfires that
had charred the area this year
contributed to the flood, as
burned terrain allowed floodwaters to roll downhill unob-
structed.
Eight days after the deadly
flood, 17 hikers had to be rescued from a canyon on the
edge of Tucson, after another
flash flood roared through the
area.
While monsoons are typical
this time of year, some parts
of the West have seen more
rainfall than normal, adding to
the flooding concerns.
In Denver, for example,
rainfall was above normal, and
in some cases well above normal, for all but one day over
the past week, according to
the Colorado Division of
Homeland Security and Emergency Management.
Chris Spears, professor of
meteorology at Metropolitan
State University of Denver and
meteorologist for the local
CBS affiliate, said that Douglas
County, south of the city saw 2
to 4 inches of rain in just a
few hours on Wednesday
night.
“That isn’t a big deal for a
place like Florida with sandy
soils, but here in the West,
that amount of rain in such a
short period of time causes
extreme runoff,” he said. “And
the result can be a flash
flood.”
Currently, some 40% of the
West is experiencing drought
conditions, down markedly
from last year at this time,
when 72% of the West suffered
from a drought, federal
weather data show.
While weather experts say
a wet winter, coupled with the
recent rains, helped ease the
drought, they have left other
areas such as parts of Montana, Nevada, Idaho and California tinder dry.
That means the region’s familiar foe, wildfires, are still
lurking.
—Covey Son
contributed to this article.
A4 | Monday, July 31, 2017
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THE WALL STREET JOURNAL.
U.S. NEWS
Priebus’s Ouster Has Staffers on Alert
Further White House
changes are expected
after Trump replaced
his chief of staff
WASHINGTON—Two hours
after President Donald Trump
tweeted Friday he was replacing Chief of Staff Reince Priebus with his homeland security
secretary, Mr. Priebus’s colleagues filed into the White
House’s Roosevelt Room to
watch their former boss tape
an exit interview on CNN. The
question on many of their
minds, according to administration officials: Who would be
next?
Mr. Priebus’s departure
came a week after Sean
Spicer—who was among the
group watching the CNN interview—resigned as press secretary over the president’s hiring
of a new communications director, though he plans to stay
on until August. The latest
move left West Wing officials
awaiting over the weekend
other changes to come in a
White House coming off of one
of the most turbulent weeks
for any administration in recent memory.
Several officials, some of
whom had left the building on
Friday when Mr. Trump made
his announcement, said they
expected further shuffling in
coming weeks as new Chief of
Staff John Kelly sets up shop.
Anthony Scaramucci, the
JONATHAN ERNST/REUTERS
BY REBECCA BALLHAUS
Reince Priebus, at right, and fellow White House staffers arrived with President Trump at Long Island MacArthur Airport on Friday.
newly installed communications director, had already
spent the past several days
threatening to fire officials
caught leaking information to
the news media.
The departure of Mr. Priebus, a former chairman of the
Republican National Committee, also prompted concerns
from some Republicans about
the administration’s relation-
ship with the party, which has
shouldered some communications work for the White
House in recent months.
Mr. Scaramucci sought to
ease those concerns Sunday,
tweeting that he had spoken to
RNC Chairwoman Ronna Romney McDaniel and looked forward to “building [an] even
stronger relationship.”
Mr. Priebus was the third
former RNC aide to leave in a
single week, and other former
RNC staffers in the West Wing
have feared they would soon
be purged over doubts—which
many say are ungrounded—
about their loyalty to the president, according to several
White House officials.
The officials over the weekend said they hoped Mr. Kelly,
a retired Marine Corps gen-
eral, would command the president’s respect and attention in
a way that Mr. Priebus appeared unable to do. “If he
says you should stop, he might
actually think twice about
sending that tweet,” one official said of Mr. Trump, whose
top advisers have proved unable to curb his penchant for
bombastic social-media posts.
Many White House aides
said Mr. Priebus’s departure
was sealed after the demise of
the Republican health-care bill
in the Senate early Friday and
when Mr. Priebus declined to
respond to a profanity-riddled
rant by Mr. Scaramucci in an
interview with the New Yorker
on Wednesday in which he disparaged the chief of staff as a
“paranoid schizophrenic, a
paranoiac.”
Mr. Priebus’s relationships
with the GOP’s top donors—
many of whom had initially resisted Mr. Trump’s campaign—
were instrumental in Mr.
Trump’s fundraising efforts
last year and led in part to his
appointment. In the 2016 election, the RNC ran Mr. Trump’s
large-dollar fundraising operation, helping it raise more than
$100 million in a joint fundraising vehicle with the campaign.
“It was nice having one of
our own in that position,” said
Jeff Kaufmann, chairman of
the Iowa Republican Party.
“Reince understood the minutiae of campaigns. That level
of understanding was helpful.”
Several top Republican donors said they didn’t expect
Mr. Priebus’s departure to affect the administration’s relationship with the party committee. The White House has
also grown in some ways dependent on the RNC’s communications staff, which has
taken on much of the administration’s rapid response and
surrogate efforts.
—Peter Nicholas
contributed to this article.
Voting Technology Is Put to the Test Senator Criticizes
TRUMP
Continued from Page One
Now, more Republicans are
beginning to split from the
president, seeing him as easily riled and hampering the
party’s ability to govern.
Last week started with Mr.
Trump’s criticisms of Attorney General Jeff Sessions as
“weak” and “beleaguered” and
ended with his decision to
push out his chief of staff,
Reince Priebus. Along the
way, Republicans reacted to
new White House communications director Anthony Scaramucci’s profane denunciation
of his fellow West Wing aides
in a published interview and
Mr. Trump’s military transgender ban, a policy change
that Republicans neither requested nor anticipated.
Sunday on CNN, Sen. Susan
Collins of Maine, a Republican
who has said she didn’t vote
for Mr. Trump, took a shot at
the president’s propensity to
communicate by Twitter, saying that “whether it’s health
care or the transgender issue
for our military, I just don’t
think a tweet is the right way
to go.”
Speaking on CBS, Sen. Jeff
Flake (R., Ariz.) said that Republican leaders were complicit if they didn’t call out
Mr. Trump for his behavior.
“We can’t respond to everything,” he said. “But there are
Hackers at the Defcon convention probed weaknesses in systems.
county voter-registration network.
Hackers were invited to “do
the things that if you did on
Election Day, they would arrest
you,” said Matt Blaze, a computer science professor at the
University of Pennsylvania and
election security specialist who
helped organize the event.
Fears have mounted over the
security of the U.S. voting system following the 2016 presidential election.
Last month, Jeanette Manfra, the acting deputy undersecretary for cybersecurity and
communications at the Department of Homeland Security,
times when you have to stand
up and say ‘I’m sorry. This is
wrong.’ ”
On the other side are Republicans who echo Mr.
Trump’s behavior and tone.
Rep. Blake Farenthold (R.,
Texas) last week suggested
that he would have settled
differences with Ms. Collins
and Sen. Lisa Murkowski (R.,
Alaska), who both made decisive votes against a GOP
health plan, by challenging
them to duels if they had been
male. Mr. Farenthold later
apologized. Rep. Buddy Carter
(R., Ga.), asked about Trump’s
decision to attack Ms.
Murkowski on Twitter over
her “no” vote, used a confusing but coarse phrase that
suggested resorting to physical assault. His spokeswoman
said he wasn’t commenting on
Ms. Murkowski but was using
a southern idiom roughly
translating to “get your act
together.”
“They’re just attacking him
for everything, even some of
the Republicans,” said Republican New Hampshire State
Rep. Al Baldasaro, about Mr.
Trump. “I’m really disgusted
over the GOP.” He had praise
for the new White House communications director, Mr.
Scaramucci, saying “we’ve finally got someone who’s outspoken.”
Rep. Chris Collins (R., N.Y.),
the first member of Congress
to endorse Mr. Trump, said
that instead of turbulence, Mr.
told the Senate Intelligence
Committee that election-related
systems were targeted last year
as part of a Russian campaign
of hacking and disinformation.
Russia has denied the alleged interference.
U.S. officials have said that
no evidence has been uncovered that systems involved in
vote casting or counting were
hacked. But researchers say
that tampering with touchscreen machines wouldn’t be
detectable. The WinVote machine was decertified and not
used in last year’s election, Mr.
Schürmann said.
After the disputed 2000
presidential election, when a
hand recount of Florida’s paper
ballots produced weeks of uncertainty, a new law awarded
more than $3 billion to state
and local governments to help
them replace aging mechanical
voting machines.
By and large, those governments bought touch-screen
electronic voting machines that
started to come into service in
advance of the 2004 presidential election. But what was once
state-of-the-art technology is
now antiquated.
The WinVote system hacked
at Defcon was likely vulnerable
to a wireless attack for years,
Mr. Schürmann said. WinVote’s
manufacturer, Advanced Voting
Solutions Inc., is no longer in
business.
The display on the WinVote
machine at Defcon indicated
that it was used during Fairfax
County, Va.’s, Aug. 19, 2014,
special election.
Attempts to reach Fairfax
County after business hours
Friday were unsuccessful. The
county’s Office of Elections
overhauled its voting system in
2014, according to a post on
the county’s website.
The Defcon organizers purchased about 30 decommissioned voting machines, including the WinVote, on eBay Inc.
President on Health
BY THOMAS M. BURTON
most explicit threats to cut off
the payments in a tweet over
the weekend, when he also
floated the idea of cutting off
lawmakers’ own health benefits. “If a new Healthcare Bill
is not approved quickly, BAILOUTS for Insurance Companies
and BAILOUTS for members of
Congress will end very soon!”
Mr. Trump said on Twitter.
The next set of payments is
scheduled in three weeks. This
issue is especially critical now
because deadlines for insurers
to decide whether to participate in health-insurance marketplaces are also looming.
These payments are under
legal challenge by Republicans
in the House, who say the
money never was authorized
by Congress. A federal judge is
allowing the funds to continue
during the litigation.
During appearances on Sunday talk shows, Tom Price, the
secretary of health and human
services, said “no decision’s
been made” on whether the
administration would enforce
the ACA’s “individual mandate.” Mr. Price said he
couldn’t comment on the status of payments to insurers
because he is a party to the
House litigation.
Sen. Susan Collins, one of
three Republican senators who
blocked the GOP’s health-care
bill last week, on Sunday said
President Donald Trump’s
threatened cuts in payments
to insurers would be “detrimental” to America’s poor.
The secretary of health and
human services, meanwhile,
was noncommittal about the
payments and also declined to
say whether the Trump administration would enforce the
portion of the Affordable Care
Act that generally requires individuals to carry insurance.
At issue are millions of dollars under the Affordable Care
Act that the federal government pays in order to lower
deductibles and out-of-pocket
costs for the poorest enrollees.
“It really would be detrimental to some of the most
vulnerable citizens if those
payments were cut off,” Ms.
Collins, of Maine, said in a
CNN interview. “They’re paid
to the insurance companies,
but the people that they benefit are people who make between 100% and 250% of the
poverty rate.
Mr. Trump made one of his
SUSAN WALSH/ASSOCIATED PRESS
LAS VEGAS—A touch-screen
voting machine used in a 2014
election in Virginia was hacked
in about 100 minutes by exploiting a Windows XP flaw
that was more than a decade
old as part of a demonstration
on security vulnerabilities in
election technology.
The hacker was Carsten
Schürmann, an associate professor with IT University of Copenhagen. He was one of the
computer hackers invited to the
Defcon convention in Las Vegas
to test the security and integrity of common pieces of voting
technology, many of which
were purchased more than a
decade ago and are rapidly becoming obsolete.
Within hours of the doors
opening Friday at the Voting
Machine Hacking Village, hackers penetrated the WinVote
voting machine and gained access to an electronic poll book.
Microsoft Corp., which made
the Windows XP operating
system, declined to comment.
They also penetrated the
hardware and firmware of a
kind of touch-screen voting
machine used in hundreds of
jurisdictions across the country, and attacked a simulated
STEVE MARCUS/REUTERS
BY ROBERT MCMILLAN
AND BYRON TAU
President Donald Trump on Friday named John Kelly, right, as his new chief of staff.
Trump last week “had one of
the best weeks he has ever
had.” Pointing to his calls to
crack down on the street gang
known as MS-13, Mr. Collins
said that “he is addressing
one of the scourges of America.”
In Congress, some Republicans are pushing back at Mr.
Trump. Last week, the House
and Senate passed legislation
that would make it hard for
Mr. Trump to relax economic
sanctions on Moscow or to restore Russia’s control over
diplomatic compounds, in re-
sponse to U.S. intelligence
findings that Russia interfered
in the elections, which Russia
denies.
In the meantime, Republican senators moved to block
every path Mr. Trump might
try to use to fire and replace
Mr. Sessions, out of concern
that doing so would disrupt
the independence of the investigation into any election
interference.
Senate Judiciary Committee Chairman Chuck Grassley
(R., Iowa) said his committee
didn’t have time to fit in hear-
ings on a new attorney general. Sen. Lindsey Graham (R.,
S.C.) said he was writing legislation to protect the independence of a special counsel
hired to investigate links between Russians and the
Trump campaign, a probe that
Mr. Trump has called a witch
hunt.
Senate Majority Leader
Mitch McConnell (R., Ky.) and
House Speaker Paul Ryan (R.,
Wis.) are driving ahead with
their agenda. Mr. Trump has
been insisting that Republicans dive back into the
health-care fight, but Mr.
McConnell hasn’t budged
since declaring early Friday
morning that it was “time to
move on” from the GOP health
bill. In a Fox News interview
on Sunday, Mr. Ryan talked
only about advancing a tax
overhaul.
Signs are emerging that the
intraparty
battle
could
threaten the party’s standing
in the 2018 elections and the
president’s beyond that. Mr.
Jolly, the former Florida congressman, said he is part of a
group discussing how to put
together a primary challenge
to Mr. Trump in 2020. “There
are people looking for a mainstream Republican place to
land, and it’s not in Trump’s
Republican Party,” he said.
Michael Steele, a former
Republican National Committee chairman, said “the president is in his element when in
front of a crowd of 40,000 instead of behind his desk dealing with the minutiae of governing. That’s not governing,
that’s theater, a reality TV
presidency.”
Gary Kirke, an Iowa businessman and prominent
Trump donor, said his support
is unshaken. He said he wonders whether various White
House staff who have been
pushed out “were loyal to him
after he appointed them.”
“So far, I think he’s done a
good job,” Mr. Kirke said.
—Janet Hook
contributed to this article.
Monday, July 31, 2017 | A5
© 2017 salesforce.com, inc. All rights reserved. Salesforce.com is a registered trademark of salesforce.com, inc., as are other names and marks.
THE WALL STREET JOURNAL.
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A6 | Monday, July 31, 2017
* ****
THE WALL STREET JOURNAL.
WORLD NEWS
U.S. Presses China on Pyongyang Threat
Pence, in Estonia, says
Beijing, others need to
join in isolating regime
over nuclear ambitions
Trump administration officials urged China and other
nations to band together to
confront North Korea over its
nuclear and ballistic-missile
ambitions, with Vice President
Mike Pence declaring “all options are on the table” to rein
in Pyongyang.
“The continued provocations
by the rogue regime in North
Korea are unacceptable and the
United States of America is going to continue to marshal the
support of nations across the
region and across the world to
further isolate North Korea economically and diplomatically,”
Mr. Pence told reporters traveling with him in Estonia on Sunday, two days after North Korea’s second intercontinental
ballistic-missile test. “We believe China should do more.”
Speaking at a trade briefing
on Monday, China’s vice minister of commerce, Qian Keming,
said the U.S. and China should
separate issues over trade
from those over North Korea’s
missile test, adding that Beijing is willing to work with the
U.S. to boost bilateral trade.
Mr. Qian didn’t directly address North Korea’s latest missile test, but said China re-
AGENCE FRANCE-PRESSE/GETTY IMAGES
By Peter Nicholas
in Tallinn, Estonia,
and Felicia Schwartz
in Washington
A Terminal High-Altitude Area Defense interceptor was tested in Alaska, on Sunday, as South Korea’s defense minister said the country would upgrade its missile defenses.
mains committed to ridding
the Korean Peninsula of nuclear weapons.
At the United Nations, U.S.
Ambassador Nikki Haley rejected calls for an emergency
session of the Security Council, saying “the time for talk is
over” and that a further Security Council resolution that
doesn’t “significantly increase
the international pressure” on
North Korea would be “worse
than nothing.”
Secretary of State Rex Tillerson also singled out Russia
on Friday, saying it could do
more to blunt Pyongyang,
while Ms. Haley in a tweet on
Sunday said Japan and South
Korea could step up as well.
Their remarks came as
President Donald Trump signaled his chagrin at what he
described as China’s inaction
on North Korea’s nuclear and
ballistic-missile ambitions.
After North Korea’s first
ICBM launch, in early July, Defense Secretary Jim Mattis said
the U.S. wasn’t closer to war,
and said the Trump administration would give diplomacy
more time to resolve the crisis.
On Friday, the White House
said Mr. Trump would sign a
package of sanctions passed
last week by Congress designed in part to limit the cash
available to North Korea to
further its nuclear and missile
programs. Yet on Sunday, it
wasn’t clear the administration’s strategic calculus had
fundamentally changed with
the second missile launch.
“I don’t see the test leading
to any change of the administration’s approach,” said Robert Einhorn, a former senior
State Department official who
worked on North Korea in the
Obama and Clinton administrations. “I think they will try
to use the test to reinforce
what they’re doing—maximizing pressure on North Korea.
“I think the Trump people
know you have to get China on
board, and part of that is to
confront the Chinese with real
costs if they don’t get on
board.”
For now, Trump administration officials have been making
preparations to act unilaterally,
including by drawing up measures targeting Chinese companies and banks that are funneling funds into North Korea’s
nuclear and weapons programs.
The U.S. also been demon-
strating military force in the
region, including by conducting a missile test, sending two
American bombers to fly over
the Korean Peninsula and testing a sophisticated missile-defense system known as Thaad.
The State Department’s acting top Asia diplomat told
lawmakers last week before
North Korea’s second test that
the U.S. would soon impose
sanctions on additional Chinese entities for violating U.N.
sanctions on North Korea.
China’s ambassador to the
U.S., Cui Tiankai, warned
against unilateral sanctions.
South Korea Revises Defense Policy Putin Aims to Cut
SEOUL—South Korean President Moon Jae-in was elected
in part on promises to extend
an olive branch to North Korea
and put the brakes on the installation of a controversial
U.S. missile-defense system.
But less than three months
into office, Mr. Moon has been
forced to rethink that approach after North Korea testlaunched its first two intercontinental ballistic missiles.
On Sunday, South Korea’s
defense minister said the
country would upgrade its Pa-
triot missile system in response to North Korea’s second ICBM test-launch late
Friday.
That decision came a day after Mr. Moon said he would
weigh further deployment of a
separate longer-range missiledefense system, called Terminal High-Altitude Area Defense,
or Thaad, in South Korea.
Mr. Moon had suspended
Thaad’s deployment this year
as one of his first acts in office
on concerns that it had been
pushed through by his unpopular predecessor without
proper public consultation.
While Thaad is meant to defend the Korean Peninsula
from shorter-range missiles—
not an ICBM that would be capable of reaching the continental U.S.—Mr. Moon’s pursuit of
beefed-up military capacities
reflects broader regional concerns about Washington’s commitment to defending its regional allies as the U.S.
homeland comes under threat.
China, which strongly opposes the Thaad deployment,
warned on Saturday that the
deployment of further Thaad
components “gravely damages
strategic balance in the region
and harms the national security interests of countries in
the area, including China’s.”
On Sunday, the U.S. Defense
Department said it had conducted a successful Thaad
missile-interception test over
the Pacific Ocean.
North Korea’s latest test
launch could add momentum
to Japan’s push for greater
missile-defense capabilities of
its own, including a possible
Thaad battery or the Aegis
Ashore missile-defense system, which would enhance its
ability to defend itself against
a North Korean attack.
China Unveils New, More-Mobile ICBM
BEIJING—China unveiled a
new, more-mobile intercontinental ballistic missile at a parade of advanced weaponry
and combat troops in President
Xi Jinping’s latest display of
military and political muscle.
State television showed at
least 16 DF-31AG missiles in
Sunday’s parade at the Zhurihe
combat-training base in northern China, marking the 90th
anniversary of the founding of
the force that is now known as
the People’s Liberation Army.
The DF-31AG is mounted on
an all-terrain vehicle so it is
harder to track and can be fired
from multiple locations, and it
could have a longer range than
the older DF-31A, which was
also displayed and is carried by
a vehicle designed mainly for
roads, military experts say.
Mr. Xi inspected the troops
from an open-top military vehicle before the parade, which
featured tanks, helicopters,
stealth jet fighters and some
12,000 personnel.
“The world is not peaceful,”
Mr. Xi said in a speech afterward that invoked his signature political idea of a “China
Dream” to build the country
into a global economic and
military power. “Today we are
closer than any other period in
history to the goal of the great
rejuvenation of the Chinese
nation and we need more than
any period in history to build
a strong people’s military.”
Mr. Xi also ordered troops
to obey the Communist Party
leadership, saying: “Wherever
the party points, march there.”
It is the first time a parade
has been held to mark the anniversary since 1949, state media reported, and is the latest
in a series of moves that analysts say are designed to boost
Mr. Xi’s political standing in
the run-up to a shuffle of the
party leadership this year.
XINHUA/ASSOCIATED PRESS
BY JEREMY PAGE
President Xi, standing, inspected PLA troops at the Zhurihe combat-training base on Sunday.
The parade was held amid
escalating military tensions in
the region, with North Korea accelerating its nuclear-weapons
program since January through
a series of tests, including the
launch of an intercontinental
ballistic missile on Friday.
U.S. President Donald
The new missile was
displayed at a parade
marking the army’s
90th anniversary.
Trump has warned repeatedly
that he is weighing military
action to halt North Korea’s
nuclear program, and in recent
weeks has become increasingly critical of China, accusing it of failing to rein in
Pyongyang. The U.S. Air Force
flew two B-1B bombers over
the Korean Peninsula on Sat-
urday in response to North
Korea’s latest missile test.
China’s parade would have
been planned months in advance, analysts said, and wasn’t
a direct response to Pyongyang
or Washington, but it demonstrated Mr. Xi’s efforts to build
a military that can respond to
external challenges—including
on the Korean Peninsula.
Last year, the Chinese
leader launched sweeping military overhauls that are designed to overhaul Sovietmodeled command structures
and better prepare the armed
forces for combat if needed.
The People’s Liberation
Army is training for scenarios
that include a conflict over the
disputed South China Sea and
a blockade of China’s oil supplies through the Indian Ocean,
and operations to protect its
citizens and investments in Africa and the Middle East.
Mr. Xi has also sought to
assert his authority over the
PLA through an anticorrup-
tion campaign that ensnared
several current and retired
generals, and by assuming the
new title of “commander-inchief” last year.
In June, he inspected PLA
troops stationed in Hong Kong
in another move to boost his
political stature ahead of this
fall’s 19th Party Congress,
where he is expected to try to
promote allies to the top leadership.
China hasn’t provided details about the DF-31AG, but a
model was displayed for the
first time this month in an exhibition at Beijing’s Military
Museum. Analysts say the missile’s design and name suggest
it is an improved version of
the DF-31A.
China has an estimated 75
to 100 intercontinental ballistic missiles, including the
solid-fueled DF-31A, which has
a range of more than 7,000
miles and can reach most locations in the continental U.S.,
according to the Pentagon.
American Presence
BY THOMAS GROVE
MOSCOW—Russian President Vladimir Putin said Sunday that the U.S. would have
to cut 755 diplomats and staff
in the country by September
in retaliation for impending
U.S. sanctions on Moscow.
In an interview with Russian state television, Mr. Putin
said the U.S. presence in Russia would be reduced by more
than half, following the passage of new sanctions legislation by Congress that has further frayed ties between
Moscow and Washington. The
White House has indicated
that President Donald Trump
plans to sign the legislation.
“We had hoped that the situation
would
somehow
change,” Mr. Putin said. “But
judging by everything, if it
changes, it won’t happen fast.”
Mr. Putin held out the possibility of additional measures
but said that at this point he
was against taking further punitive steps. “I hope it doesn’t
come to that,” he said.
Mr. Putin told state television
that slightly more than 1,000
U.S. diplomatic and technical
staff work in Russia at present.
Last week, the Russian foreign ministry said the number
of U.S. diplomatic and technical staff in Russia as of Sept. 1
would be reduced to 455, the
same number of Russian diplomats now operating in the U.S.
It’s unclear how the reductions will affect American citizens working in the U.S. embassy and in three U.S.
consulates in Russia; many of
the people who work in those
facilities are local hires.
A State Department official
said Sunday, “This is a regrettable and uncalled for act. We
are assessing the impact of
such a limitation and how we
will respond to it.”
A U.S. official said the move
Vice President
Reassures Allies
TALLINN, Estonia—U.S.
Vice President Mike Pence arrived in Estonia on Sunday
for a three-day trip that officials said was aimed at reassuring allies along Russia’s
border that the Trump administration will back them in resisting Russian aggression.
Mr. Pence met for nearly
an hour with Estonian Prime
Minister Juri Ratas, reinforcing the point that the administration wants to help Russia’s pro-Western neighbors
defend themselves against
cyberattacks, propaganda and
military intimidation, people
who attended the meeting
said.
—Peter Nicholas
to trim down staff could slow
down the embassy’s ability to
issue visas, among other possible consequences.
The largest-to-date diplomatic expulsion involving Washington and Moscow occurred in
1986, when President Ronald
Reagan ordered 55 Soviet diplomats to leave the country.
Russia’s relationship with the
U.S. has been a major factor in
Mr. Trump’s first months in office. During the presidential
campaign, Mr. Trump avoided
criticizing Mr. Putin even as he
claimed China, Mexico and others were dealing unfairly with
the U.S., chiefly in terms of trade.
Mr. Trump also has voiced
skepticism over U.S. intelligence findings that Russia
meddled through hacking and
propaganda in the presidential
election to favor Mr. Trump.
—Felicia Schwartz
in Washington
contributed to this article.
MAXIM SHIPENKOV/EUROPEAN PRESSPHOTO AGENCY
BY JONATHAN CHENG
Russian President Vladimir Putin attended a parade on Sunday.
THE WALL STREET JOURNAL.
Monday, July 31, 2017 | A7
* * * *
WORLD NEWS
BY CHRISTOPHER M. MATTHEWS
AND JOSÉ DE CÓRDOBA
U.S. government officials
are considering stepping up
sanctions against Venezuela
by targeting its vital oil industry, although an embargo
against Venezuelan crude oil
imports into the U.S. is off the
table for now, people familiar
with the deliberations say.
The measures could be announced as early as Monday,
the people say, after a vote
Sunday pushed by embattled
Venezuelan President Nicolás
Maduro to elect a special assembly that will rewrite the
constitution. Venezuela’s opposition is boycotting the vote,
fearing the assembly could dissolve the opposition-controlled
congress or postpone elections.
The U.S. Treasury Department didn’t immediately respond to a request for comment on the potential
sanctions. The U.S. government levied sanctions on 13
high-ranking Venezuelan offi-
cials Wednesday for alleged
corruption, human-rights violations and undermining democracy in the South American country. While more
sanctions against other individuals are also under consideration, on Friday, Vice President Mike Pence vowed
“strong and swift economic actions” if the vote goes ahead.
The Venezuelan government
has responded defiantly, dismissing sanctions and warnings
from Washington. Mr. Maduro
and his top aides have insisted
the government would notch a
triumph in Sunday’s vote.
Observers say broader sanctions against Venezuela could
accelerate an economic meltdown and push the cashstrapped country to the brink
of default on its debts.
The toughest of possible
sanctions—an embargo on imports of Venezuelan oil—isn’t
on the table right now, these
people said, but could be considered later. Options being
considered include a ban on
Major Source
While Venezuelan oil exports to the U.S. have slipped, the country
remains the third biggest U.S. supplier.
Share of U.S. oil imports, by source
100%
others
75
Saudi
Arabia
50
Canada
MARCO BELLO/REUTERS
U.S. Takes Aim
At Oil Industry
In Venezuela
25
Venezuela
0
1975 ’80
’90
Source: U.S. Energy Information Administration
sales of U.S. oil and refined
products to Venezuela, and financial restrictions on the
country’s state oil firm, they
said. Those measures are seen
as potentially crippling for the
Venezuelan government without being too disruptive for the
U.S. economy. No final decision
has been made, the people said.
“Even limited new US-imposed sanctions or discussions
of broader sanctions could be a
catalyst for Venezuela defaulting on its upcoming debt payments,” Barclays said in a recent
note to investors. Venezuela’s
oil industry supplies 95% of the
country’s hard currency.
2000
’10
’16
THE WALL STREET JOURNAL.
“The dollars aren’t there to
pay for the food and medicine
Venezuelans need,” said Moisés
Naím, a former trade and economy minister in Venezuela.
U.S. refiners, including
Valero Energy Corp., Phillips 66
and Chevron Corp., have lobbied strongly against a ban on
Venezuelan oil imports, because refiners on the U.S. Gulf
Coast rely on Venezuela for
heavier grades of crude oil to
convert into fuel.
Venezuela
sells
about
750,000 barrels a day to the
U.S., mostly to Gulf Coast refiners.
The most likely option, say
Security forces faced off against demonstrators on Sunday.
the people familiar with U.S.
discussions, is a ban on exports
to Venezuela of refined petroleum products and lighter
crude grades that Venezuela
mixes with the heavy crude it
then sells to the U.S. That could
force Venezuela to import light
crude at higher prices from
distant places like Algeria or
Nigeria, and deepen its steady
oil output decline, says Francisco Monaldi, a Venezuela expert at Rice University.
Another option is to ban
state oil company Petróleos de
Venezuela from using the U.S.
banking system and U.S. currency, the people say.
Such sanctions would stop
U.S. firms from buying Venezuelan oil and make it difficult for
any oil trader or firm to do so,
pushing Venezuela into default,
said Russ Dallen, a managing
partner at investment bank Caracas Capital.
The U.S. could also ban U.S.
companies from investing in
Venezuela’s energy sector, these
people said. That would drive
out oil-field service firms such
as Halliburton Co. and Schlumberger Ltd., which provide key
technology and expertise in oil
drilling and production.
—Ian Talley
contributed to this article.
CARACAS,
Venezuela—
Deadly protests flared across
Venezuela as President Nicolás
Maduro’s supporters voted SunBy Ryan Dube,
Anatoly Kurmanaev
and Juan Forero
day for a new assembly to redraft the constitution, a pivotal
move that has been sharply
criticized by countries from Argentina to the U.S.
At least six people died, according to the attorney general’s
office, amid clashes between antigovernment protesters and
state security forces on a day
that the president called vital
toward unwinding the country’s
political and economic crisis.
The opposition said as many as
16 people died in the past 24
hours in the protests. The government has denied any deaths
related to the election.
Government opponents warn
that the new assembly will lead
to a dictatorship. Mr. Maduro
and his allies, speaking on state
television, celebrated what they
called a large turnout. They say
the new assembly, which will
have overwhelming powers,
will permit them to more easily
deal with unrest and a devastated economy.
But there were short lines
and few voters at more than
50 polling stations in Caracas
and Maracaibo, Venezuela’s
second-biggest city, that were
visited by reporters from The
Wall Street Journal. Pollster
Datanalisis said before the
election that just 13% of the 19
million registered voters were
very open to voting.
Many voters said they
worked for the state. Others,
like Vanessa Castillo, a 30-yearold single mother of four, said
they feared losing benefits from
a government-subsidized food
program if they stayed home.
To urge voters to the polls,
top Maduro administration
aides have publicly warned state
workers—who number nearly 3
MIRAFLORES PALACE/REUTERS
Protests Turn Deadly as Maduro Backers Vote on New Assembly
Venezuelan President Nicolás Maduro cast a ballot on Sunday.
million—that the government
will keep tabs on whether they
voted. “I didn’t want to vote,
but in my house they were go-
ing to take away [the benefits],”
said Ms. Castillo.
In Caracas, protesters used
garbage, bricks and tree logs
to block roads. In an opposition-controlled neighborhood,
a large explosion hit police on
motorbikes. In another area,
the National Guard launched
tear gas during clashes with
protesters.
On Sunday, pro-government
voters were electing 545 delegates for the constituent assembly from some 6,000 handpicked ruling party officials
and allies. The government’s
state television apparatus interviewed voters pleased they
were voting for an assembly
that they said would bring calm.
—Kejal Vyas, Mayela Armas
and Sheyla Urdaneta
contributed to this article.
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BRUSSELS—The European
Union on Saturday launched
legal action against Poland
over part of the government’s
planned overhaul of its court
system, a move that could result in the government being
fined and taken to the bloc’s
top courts.
The EU’s executive arm, the
European Commission, sent a
letter to the Warsaw government formally raising concerns after a new law on the
organization of the Polish
court system was formally adopted on Friday.
The law is part of a package
of measures pushed by Poland’s
nationalist government that
would have allowed the government to restaff the judicial
bench, from the Supreme Court
down to small, local courts.
On Wednesday, Brussels
warned that the democratic
rule of law remains at risk in
Poland, even after President
Andrzej Duda vetoed legislation that would have retired
every high court judge.
Poland and the EU are in an
extraordinary standoff over
whether the former communist country can put virtually
the entire judiciary under the
control of the justice minister
and remain a full-fledged
member of the union.
Brussels could seek broader,
unprecedented sanctions against
Poland, although it is unlikely
that would win sufficient backing from all EU member states.
While Mr. Duda vetoed the
government’s effort to restaff
ARTUR WIDAK/NURPHOTO/ZUMA PRESS
BY LAURENCE NORMAN
Demonstrators at Krakow’s District Court on Wednesday protested the government’s judicial overhaul.
the Supreme Court, he allowed
through legislation that affects
who sits in lower courts.
The commission said this
law breaches EU rules since it
sets different retirement ages
for male and female judges.
More broadly, by giving the
government the power to pick
whose terms can be extended
beyond retirement age, “the
independence of Polish courts
will be undermined,” it said.
Poland has a month to respond to recommendations
that would bring Polish law
back in line with EU norms.
Failing that, the commission
would move to the second of a
three-stage infringement process that would end with Po-
land being taken to court.
A spokeswoman for the Polish Foreign Ministry didn’t respond to a request to comment Saturday.
European Commission First
Vice President Frans Timmermans also wrote to the Polish
government on Friday, inviting
the foreign and justice ministers
to Brussels to discuss the situation. In recent weeks, Warsaw
has brushed off such requests.
The EU has limited room to
maneuver in its broader ruleof-law showdown with Poland.
The governing Law and Justice party says the reforms are
needed to purge officials who
entered public service during
the communist era. Previous
warnings have done little to
sway the government.
The bloc’s most severe punishment—stripping a member
country’s EU voting rights—requires unanimous backing from
all member countries. But this
is unlikely given Hungary’s support for the Polish government.
The fight is part of broader
tensions between Brussels and
some of the bloc’s newer members in Eastern Europe, which
have chafed at the bloc’s policies
and oversight. The EU has also
raised a host of worries over
legislation passed by Hungarian
Prime Minister Viktor Orban.
—Drew Hinshaw
and Emre Peker
contributed to this article.
WORLD WATCH
QATAR
Knife Attacker Was
Suspected Islamist
Arab States Meet
To Discuss Sanctions
A 26-year-old Palestinian man
suspected of killing one person
and injuring six others in a stabbing spree at a Hamburg supermarket on Friday was known to
authorities as a suspected Islamist, authorities said Saturday.
The attack seemed at least in
part motivated by Islamist extremism, officials said. But no
links to terrorist or Islamist networks on the part of the suspect, who was taken into custody, have been found, officials
said. The identity of the suspect,
who police said was born in the
United Arab Emirates, wasn’t released.
A friend and the head of the
Four Arab states that cut ties
with Qatar met Sunday to discuss the crisis, insisting on compliance with a list of demands
while refraining for now from
imposing more punitive measures against the Gulf state.
It was the second meeting
for the foreign ministers of
Saudi Arabia, the United Arab
Emirates, Egypt and Bahrain
since the countries cut diplomatic ties and transport links
with Qatar on June 5. The quartet accuses Qatar of supporting
extremists. Qatar denies the
charges and sees them as politically motivated.
—Associated Press
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Elementary-school sumo wrestlers await a hoped-for television
interview at the Wanpaku tournament in Tokyo on Sunday.
asylum-seeker shelter in which
the suspect lived had reported
that the man seemed to be
adopting more radical religious
views, officials said. Authorities
added him to a list of suspected
Islamists. But investigators
didn’t determine he posed an
immediate threat.
—Anton Troianovski
Companies also continue to
reap the fruits of their recent
zeal for cutting costs, Mr.
Probyn said. “We underestimated some of the cost-cutting
and restructuring that has gone
on within the various industries; that has permitted earnings to keep doing well.”
Sales, too, rose in the quarter, by an expected 5%, the second-biggest increase in more
than five years, according to
data from Thomson Reuters.
The figures reflect actual results for about half the S&P 500
index, and analysts’ estimates
for those that had yet to report
results as of Friday.
On Friday, the Commerce Department reported that gross
domestic product rose at a 2.6%
rate in the second quarter, up
from 1.2% in the first quarter.
Executives say even rapid
progress on a tax rewrite or an
infrastructure bill is unlikely to
help improve profits soon.
“We’re halfway through the
year, and they haven’t done [tax
overhaul],” Christopher Nassetta, CEO of Hilton Worldwide
Holdings Inc. said last week.
“We’re not going to have
enough time for it to trickle
through and really benefit this
year.”
The White House didn’t respond to a request for comment.
“Political and policy uncertainty continues to weigh on
health care, taxation, regulation
and trade,” Debra Cafaro, chief
executive of Ventas Inc., a realestate investment firm specializing in senior housing and
health-care property, said Friday. “Washington has been
wildly unpredictable.”
As executives discuss results with investors and analysts, events in Washington
have faded into the background. S&P 500 companies
that mentioned President Donald Trump or his administration during their latest conference calls are down by a third
compared with three months
ago, according to an analysis
by research firm Sentieo.
The market has also largely
stopped reacting to blow-byblow developments in Washington, despite uncertainty over
the size, shape and timing of
any tax and infrastructure initiatives, said Quincy Krosby,
chief market strategist with
As executives discuss
results, Washington
has faded into the
background.
Prudential Financial Inc.
Last week, congressional Republicans and the Trump administration outlined some
plans for tax changes to cut individual and corporate tax rates
“as much as possible” with a
timeline to advance legislation
this fall. Many specifics aren’t
yet known. President Trump
has also promised to put $1 trillion toward infrastructure,
likely from a mix of private and
public funding, although details
remain unclear.
Corning Inc. CEO Wendell
Weeks, who was at the White
House this month to announce
new U.S. investment and hiring,
told analysts last week that he
still expects Congress to overhaul the tax code—eventually.
“What I am much less confident about is how the political
math works in any given year,”
Mr. Weeks said. “So I think calling timing on that one is above
my pay grade.”
Honeywell International Inc.
CEO Darius Adamczyk earlier
this month said he hoped lawmakers would advance plans for
revamping the tax code as soon
as the current quarter. Still, he
isn’t counting on it.
“I think there’s more uncertainty in that now than maybe
even before, so I can’t let that
sort of rule the business,” Mr.
Adamczyk said.
That uncertainty could make
it difficult for companies to sustain robust earnings growth,
said Omar Aguilar, chief investment officer of equities for
Charles Schwab Investment
Management.
Companies are reporting
solid cash flow, but capital
spending has been weak until
recently. Uncertainty over tax
policy may exacerbate that reluctance to invest, Mr. Aguilar
said. “Tax reform is clearly
what the future may require for
these numbers to continue on
the same pace.”
Profits Defy Washington Gridlock
Monday, July 31, 2017 | A9
THE WALL STREET JOURNAL.
WORLD NEWS
The U.S. and Iran on Saturday
reported their second confrontation of the week in the waters
off the Persian Gulf, as political
tensions between them flare.
By Asa Fitch in Dubai
and Dion Nissenbaum
in Washington
Unable to agree on
plan to help turn back
Taliban, White House
is exploring its options
BY DION NISSENBAUM
WASHINGTON—President
Donald Trump’s reservations
about sending more troops to
Afghanistan have triggered a
new exploration of an option
long considered unlikely: withdrawal.
Unable to agree on a plan to
send up to 3,900 more American forces to help turn back Taliban advances in Afghanistan,
the White House is taking a new
look at what would happen if
the U.S. decided to scale back its
military presence instead, according to current and former
Trump administration officials.
“It’s a macro question as to
whether the U.S., this administration, and this president are
committed to staying,” one senior administration official said.
“It doesn’t work unless we are
there for a long time, and if we
don’t have the appetite to be
there a long time, we should
just leave. It’s an unanswered
question.”
The exploration is an outgrowth of a deep divide at the
White House, where the president and his top advisers are reluctant to send more American
troops to Afghanistan without a
clear strategy.
There appears to be support
in the administration for a modest plan to send a few thousand
more U.S. troops to Afghanistan, to put more pressure on
Pakistan to crack down on militant sanctuaries, and to seek
help from China, India and Pakistan in reaching regional peace
deals. But there is no consensus,
said people involved in the debate, making it unlikely that the
U.S. would send more forces to
help the Afghan government repel Taliban advances this summer.
Administration officials face
a conundrum: They want to
avoid setting deadlines for pulling out troops, but they are
A U.S. Marine walked by Afghan army soldiers at a training exercise in Helmand province in July.
wary of embracing an openended commitment that could
pull more U.S. forces back into a
deadly, 16-year-old conflict.
With discussions bogged
down, administration officials
are taking a new look at pulling
out most U.S. forces and focusing on a more limited counterterrorism strategy that might
allow the U.S. to reduce its military presence by relying more
on drone strikes and special
forces to target extremists.
“It is becoming clearer and
clearer to people that those are
the options: go forward with
something like the strategy we
have developed, or withdraw,”
said the senior administration
official, referring to the modest
plan.
But the idea is anathema to
American military leaders who
have argued that the U.S. needs
to send more troops to halt Taliban gains on the battlefield.
“At best, that is a very low
minority view,” one senior U.S.
military official said of with-
FAISAL MAHMOOD/REUTERS
The U.S. Navy said several
vessels operated by Iran’s Islamic Revolutionary Guard
Corps in the Gulf approached
American ships at high speed
on Friday. After the U.S. Navy
failed to reach the Iranian ships
by radio, a Navy helicopter
fired warning flares at a safe
distance, according to the U.S.
Naval Forces Central Command.
The Iranian ships subsequently stopped moving toward U.S. ships, it said, describing the interaction as
“safe and professional.”
The IRGC, however, said an
American Nimitz-class aircraft
carrier accompanied by a warship came near IRGC boats patrolling Iran’s Resalat oil-andgas field. The aircraft carrier
flew a helicopter close to the
Iranian vessels on Friday afternoon, according to the official
Islamic Republic News Agency.
The IRGC accused the
American forces of firing “provocative and unprofessional”
warnings on its vessels before
leaving the area. The vessels
continued on their mission,
the IRGC said.
Confrontations between U.S.
and Iranian vessels in the Persian Gulf are common. On Tuesday, the U.S. Navy said it fired
warning shots at an Iranian patrol boat that came within 150
yards of ships conducting an exercise in the waterway.
Tensions have been escalating over Iran’s ballistic-missile
program and its compliance
with a 2015 nuclear deal with six
world powers that gave it relief
from international sanctions.
U.S. Weighs Afghan Drawdown
OMAR SOBHANI/REUTERS
Navy Fires
Warning
Flares at
Iran Ships
Shehbaz Sharif, who is set to become prime minister, said Pakistan needs ‘strength through unity.’
Pakistan Leadership Change
Expected to Bolster Military
BY SAEED SHAH
ISLAMABAD—The removal
of Nawaz Sharif as Pakistan’s
prime minister by the courts
and the takeover of the position by his younger brother
Shehbaz Sharif could hand
more power to the country’s
military establishment, political experts said Sunday.
Shehbaz Sharif—who will
become prime minister in the
coming weeks, the ruling
party said over the weekend—
has a history of being less
confrontational with the
armed forces, experts say, and
he is expected to focus on delivering major electricity projects to help resolve a crippling
energy shortage ahead of elections next year, leaving the
military with even more autonomy to make policy and
carry out operations.
“Public welfare and the
country’s development is our
agenda,” Shehbaz Sharif said
in a statement Sunday. “We
need to take Pakistan forward
with strength through unity,
not disorder.”
Pakistan’s Supreme Court
on Friday disqualified Nawaz
Sharif from office for not be-
ing “honest,” a requirement
for lawmakers under the country’s constitution, and ordered
a trial over allegations of corruption. He denies any wrongdoing. Mr. Sharif’s party said
he stepped down immediately
following the court’s judgment, but stressed he hadn’t
been found guilty of any act of
corruption.
The armed forces could
become more powerful
with Shehbaz Sharif
as prime minister.
Confrontation between civilian authorities and the military has been the central
driver of political turmoil in
Pakistan’s 70-year history.
Nawaz Sharif was removed
twice as prime minister by the
military in the 1990s. His third
term beginning in 2013 was
marked by repeated clashes
with the army, especially over
his desire for peace with traditional foe India.
Shehbaz Sharif believes in
finding ways to work with
Pakistan’s armed forces, while
Nawaz Sharif tried to assert
civilian supremacy over them,
an approach that led to nearconstant friction, officials
said.
In particular, the military
seeks to retain control over
foreign and security policies,
officials and analysts said.
“I think Shehbaz will avoid
the land mines,” said Arif
Nizami, editor of Pakistan Today, a daily newspaper. “Shehbaz is very cautious and careful. He’ll try to have a more
cordial relationship with the
military.”
Shehbaz Sharif is likely to
be cooler than Nawaz Sharif
on relations with the U.S. and
harder on India, in favor of
better regional ties elsewhere,
in particular with China, Turkey and to a lesser extent,
with Iran, said a former official who worked closely with
him.
“Shehbaz believes more in a
regional bloc,” said the former
official. “He respects the reality of the U.S. and wants a
good working relationship, but
thinks you don’t have to get
down on your knees.”
Slow Exit
U.S. troops in Afghanistan
100 thousand
75
50
25
0
2002
’10
’17
Source: U.S. Central Command
THE WALL STREET JOURNAL.
drawing U.S. troops. “It’s flawed
because it doesn’t address the
primary concerns of getting to a
point where Afghanistan is able
to secure itself.”
Defense Secretary Jim Mattis
had predicted that the administration would have a new policy
in place by mid-July. But a
string of high-level meetings
this month has yet to produce a
consensus.
The indecision has given
more time for skeptics of a
modest increase, like White
House chief strategist Steve
Bannon, to explore unconventional alternatives. One such
proposal offered by former
Blackwater founder Erik Prince
would rely on contractors instead of U.S. troops to work
with Afghan security forces.
Mr. Prince has briefed key
administration officials at the
White House, Mr. Mattis, Central Intelligence Agency Director Mike Pompeo and various
lawmakers, including Sen. Bob
Corker (R., Tenn.), according to
people familiar with the meetings.
“I’m all for continuing to try
to come to a conclusion that is
something that will change the
trajectory there,” said Mr.
Corker, chairman of the Senate
Foreign Relations Committee.
White House interest in Mr.
Prince’s plan was piqued by his
Wall Street Journal op-ed in
May that called for creation of
an American viceroy who would
have expansive power to push
reforms in Afghanistan.
Mr. Prince refined his ideas
and created a more detailed proposal presented to Trump administration officials looking for
alternatives to a troop increase.
The proposal, seen by The
Wall Street Journal, outlines
ways for the U.S. to quickly replace most U.S. troops with contractors who would help carry
out airstrikes and work side by
side with Afghan forces across
the country.
“The goal is to provide a
clear exit lane and provide a
clear end to the longest war in
U.S. history,” Mr. Prince said in
an interview. So far, Mr. Prince
has yet to generate enough interest among key officials, who
view his plan with skepticism.
THE WALL STREET JOURNAL.
A10 | Monday, July 31, 2017
IN DEPTH
Low-cost producer
Monetary Fund. Its national
budget has quadrupled to over
$114 billion over the past 15
years.
The social spending helps
regular Emiratis with housing
costs, water bills and cheap
electricity—subsidies that the
U.A.E. government has been unwilling to significantly cut for
fear of street protests.
The Persian Gulf country also
has major military commitments, spending about $23 billion a year on defense—more
than conflict-heavy countries
like Israel and Iraq—as it helps
fight wars in Syria and Yemen.
The U.A.E. is among OPEC’s
worst offenders in pumping too
much oil. It has cut only about
half the amount it promised, according to the International Energy Agency, which advises governments and companies about
energy trends.
A U.A.E. official said the
country’s oil production is tied
up in joint ventures with foreign
oil companies that are hard to
change, making it difficult to
cut output. The country’s officials have said they plan to cut
more oil production and recently announced limits on their
oil exports.
In a move that could put
pressure on the U.A.E., OPEC
and Russia are planning a meeting of midlevel officials in Abu
Dhabi on Aug. 7, the cartel said,
“to assess how conformity levels can be improved.”
Overall, OPEC on Nov. 30
agreed to cut production by 1.2
million barrels a day, a deal that
took almost a year to negotiate
and raised expectations for an
oil-market rally. Instead, member exports in June were
120,000 barrels a day lower
than October, according to
Producers Under Pressure
OPEC has lost market share as shale drillers boost U.S. output. The cartel's members, including Saudi
Arabia, have expanded national budgets in recent years and depend on oil's contribution to revenue.
World oil production
Other
Saudi spending includes King Abdullah University of Science and Tech.
BLOOM
Continued from Page One
attractions, had largely avoided
the crowds.
The source of this particular
mass contagion, however, came
on so suddenly that it left everybody in a state of bafflement.
People had gone absolutely
loony for lavender.
At a 17-acre farm here, Lavender by the Bay, more than
1,000 visitors descend each
weekend when the fragrant
flower is in bloom. The farm
sells lavender in sachets, essential oils and bath salts. It sells
culinary lavender for use in
baking and tea, and lavender
pillow mist that, according to
the farm’s website, will “transport you to our fields” and
“bring the spa home to you.”
To cope with the crowds and
soothe cranky neighbors, the
farm began charging admission
when the lavender bloomed ($8
on weekends, $5 during the
week), prohibited tour buses,
trucked in portable toilets
(stocked with lavender-scented
wipes) and—at the town’s request—removed more than an
acre of lavender this year to
add about 100 parking spots.
The farm has made money off
admissions, offset by expenses
to accommodate visitors.
There is no doubt that lavender-peeping, here and elsewhere, has become a bona fide
thing. One obvious question has
proven more difficult to answer: Why?
Serge Rozenbaum, who said
he did nothing to cultivate his
crop’s newfound fan base,
bought Lavender by the Bay in
2002 with one goal—to grow
lavender, and nothing else. He
said he first fell in love with
lavender when, as a child, he
met a man on a donkey selling
it in a market in his native
Paris.
While driving his golf cart
around his fields this summer,
the 66-year-old pointed to his
beehives (painted lavender),
shipping containers (painted
lavender) and Adirondack
chairs (also lavender). He
plucked sprigs of lavender from
his meticulous fields, rubbing
them between his fingers and
describing their “finish” as if
he were a sommelier.
“I’m French,” said Mr.
Rozenbaum, who was wearing
a lavender polo. “I don’t like
Saudi government spending vs. revenue
Russia
Canada
U.S.
OPEC
Spending
100 million barrels a day
800 billion Saudi riyal*
75
600
50
400
25
200
0
Revenue
0
2008 ’09
’10
’11
’12
’13
’14
’15
’16
’17
2002 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13
*3.75 riyal = $1 at the current exchange rate
Sources: International Energy Agency (production); Saudi Arabian Ministry of Finance (revenue, spending)
TASNEEM ALSULTAN FOR THE WALL STREET JOURNAL
For decades, OPEC was the
low-cost producer of oil. During
the boom years of 2011 through
2014, OPEC members, which
largely fund national spending
with oil revenue, could balance
their budgets with oil prices $10
to $40 a barrel less than most
oil companies needed to fund
their spending and pay dividends. Today, OPEC needs $10
to $20 a barrel more than Big
Oil and U.S. exploration and
production outfits, the investment bank said in a report to
clients.
OPEC members once drew
their power from the giant reserves of what is known as
“easy oil”—conventional crude
that costs as little as $3 per
barrel to pump. That cost guaranteed both fat profits when
prices were high and the ability
to hunker down when the market tanked.
Several years of $100 a barrel oil prices lasting until 2014
coincided with big military, security and domestic spending to
pacify restive populations during the Arab Spring, hold back
the tide of Islamic State and influence the Syrian civil war.
Those spending obligations
meant OPEC was fundamentally
unprepared for the oil-price
crash that followed.
The U.A.E. spends only $12 to
pump a barrel of oil but needs
oil to sell at $67 to cover its
government expenditures, according to the International
OPEC’s Mohammad Barkindo, rear left, Kuwait’s Issam Almarzooq, Russia’s Alexander Novak and Saudi Arabia’s Khalid al-Falih in Russia.
Kpler, a firm that tracks tanker
movements to measure exports.
“OPEC will have lot of difficulties to respect its commitments because of budgetary difficulties faced by some its
member countries,” said Chakib
Khelil, the former oil minister of
OPEC member Algeria.
Ecuador’s oil minister, Carlos
Perez, went on state television
this month to say the tiny producer was no longer sticking
with its production pledges,
“because of the needs that the
country has.”
Iraq faces a budget squeeze
from its war with Islamic State.
It pledged to cut over 200,000
barrels a day but has cut less
than half that amount on average through June, according to
the IEA.
“Completely untrue and
groundless,” Iraq’s Oil Minister
Jabbar al-Luaiby said of the
overproduction
accusation.
“Iraq is in full compliance with
the OPEC declaration.”
In Saudi Arabia, which produces 30% of OPEC’s output, oil
revenue has fallen 60% since the
mid-2014 peak in oil prices. In
that time period government
spending declined only 18%, according to Goldman Sachs.
Instead of cutting spending,
the Saudis have drawn down
$246 billion of their foreign reserves and issued a $17 billion
sovereign bond.
“We calculate, and a lot of
people we know calculate,
there’s about three more years
of this they could deal with,
mediocrity.”
In France, lavender farms
are a popular tourist attraction.
That, at least to some extent,
seems to explain why some of
the new arrivals are making pilgrimages here. “It’s a substitute
for Provence,” said Johnny
Guan, 39 years old, who was
posing for selfies with his girlfriend.
One aspect of the lavender
craze, according to the farmers
and locals, is that the majority
of the new visitors are of Asian
descent. On a recent day, many
visitors were born in a swath of
Asian countries: China, Vietnam, Japan and Korea. Many
first- and second-generation
Asian-Americans, and young
Asian students studying in the
U.S., also trek to the farm,
about 100 miles from New York
City.
Some carry parasols, wear
white or purple dresses, and
spend hours shooting photos in
the fields. Others bring children
or are accompanied by small
dogs. Almost everybody comes
with a cellphone or camera.
Hoang Dinh, 25, who lives in
Manhattan, said he was lured
out to East Marion in part by
stories he had heard of the lavender fields in France. But he
with regard to drawdowns in
the sovereign funds—and then
they’ve got a very severe problem,” said Tim Dove, chief executive of Fort Worth-based Pioneer Natural Resources Co., a
shale driller.
Saudi officials said they can
withstand low prices for longer
than any other country.
The Saudis haven’t dialed
back increases in defense and
infrastructure spending, including a $23 billion Riyadh metro
system expected to be completed in 2019. Defense and security spending jumped 50% between 2010 and 2013, and
defense spending grew again
last year to $50 billion.
The kingdom is working on
plans for an IPO of part of its
state-owned oil firm, Saudi Arabian Oil Co., known as Aramco.
The listing, likely the largestever public offering, is expected
to fetch tens of billions of dollars that Crown Prince Mohammed bin Salman has said he
plans to put in a sovereignwealth fund to invest in new industries.
The impending IPO was the
impetus behind Saudi Arabia’s
decision late last year to reverse
itself and push OPEC to cut production and raise oil prices, according to people close to the
kingdom’s oil ministry. The
value of the IPO could depend in
part of the price of oil, which
the Saudis want to rise to $60 a
barrel, the people said.
Mr. Falih denied the cuts are
designed to lift the IPO price.
THE WALL STREET JOURNAL.
Saudi and other OPEC officials once believed U.S. shale
producers needed oil prices of
$80 a barrel or higher to function. The U.S. financial system
and bankruptcy process helped
ensure that oil fields continued
to pump, even though more
than 250 North American oil
drillers and service companies
have gone bust during the oil
slump, according to Haynes and
Boone, a law firm specializing in
the energy industry.
The continued production
helped pay down debt while
companies reorganized. When
the producers emerged from
bankruptcy, new owners had the
old debt load wiped clean. With
a clean slate, plumbing once expensive shale fields became
more economical. Other companies on the ropes sold to stronger rivals that can manage the
fields more effectively or issued
new shares to raise capital.
On Friday, big U.S. oil firms
reported some of their strongest quarterly profits since the
price crash.
Less oil in storage
There are signs that OPEC’s
goal of reducing oil in storage, a
proxy for the global oil glut, is
slowly starting to happen. U.S.
inventories have fallen in 14 of
the past 16 weeks.
Lower imports into the U.S.
have played a role, with Saudi
Arabia intentionally lowering its
shipments. Imports from Saudi
Arabia to the U.S. are at a two-
PETER J. SMITH FOR THE WALL STREET JOURNAL
Continued from Page One
ters—including those in Iraq
and the United Arab Emirates—
demanding to know why they
weren’t cutting production as
much as promised, according to
people familiar with the matter.
“Some have underperformed.
We have talked to them,” Mr.
Falih told reporters, adding he
didn’t “mince words.”
Iraq denied it wasn’t meeting
targets and said OPEC was getting bad information.
OPEC has been under pressure from U.S. shale producers,
who since about 2008 have
helped to nearly double U.S. oil
production.
The output has stolen market
share from the cartel’s members
and pushed prices lower. OPEC’s
share of the global oil market
has shrunk to 40% today from
55% in the early 1970s, when its
embargo on sales to the West
quadrupled oil prices in six
months.
The dynamic working against
OPEC is that, collectively, its
members need the highest oil
prices of any industry player—
more than companies such as
Exxon Mobil Corp., Royal Dutch
Shell PLC and most U.S. shale
producers, according to Goldman Sachs.
KOVALEV PETER/TASS/ZUMA PRESS
OPEC
Visitors like taking selfies in fields of lavender on Long Island.
also came with another mission, he said: “Instagram picture, man!” Photos with lavender are all over social media, he
said.
A glance at WeChat, the Chinese social network with nearly
a billion monthly active users—
and a history of driving huge
numbers of visitors to obscure
places—shows that lavender
has indeed become a popular
topic. More than 20 official accounts, not affiliated with the
farm, promote it in Chinese.
“If you want to look at lavender you don’t have to go to
France!” reads one posting.
“New York Long Island’s
Provence will satisfy you!”
Lavender hasn’t always been
a tourist attraction, or even
particularly beloved. For Victorians who ascribed meaning to
flowers, there was nothing romantic about it. “One of the
things it signified was distrust,” said Diane Miske, former head horticulturist of the
Robison York State Herb Garden at Cornell.
On a recent visit with her
husband, Tim, to Mr. Rozenbaum’s field, Sui McCarthy, 34,
from the Flushing neighborhood in Queens, wrangled her
5-year-old and baby into a lavender-painted chair for a photo.
year low, down by about a third
since January, data-tracking
firm ClipperData said Friday.
Russia, the world’s largest
crude producer but not an OPEC
member, has gradually cut output by about 300,000 barrels a
day since the agreement, the
IEA said.
Oil prices have risen over 9%
since last week’s meeting in St.
Petersburg, when Saudi Arabia
said it would go further by also
placing a cap on its exports.
Officially, OPEC said the cartel as a whole is complying with
its production-cut agreement,
with output averaging more
than one million barrels a day
less this year compared with
October, helped by larger-thanagreed cuts by Saudi Arabia.
But monthly figures show
output recently has moved
higher, according to observers
including the IEA, which said
seven of the 11 OPEC members
that pledged to cut were producing more than promised.
OPEC has a long history of
fractious relations among its
members, a collection of regimes from the Middle East, Africa and South America.
Even the cartel’s most powerful moment, the 1973 oil embargo, divided the group, with
only its Arab members cutting
off crude to Western nations
that supported Israel.
When oil prices began falling
in July 2014, then-Saudi oil minister Ali al-Naimi said OPEC no
longer had the power—or will—
to cut production and save the
market. U.S. shale producers
were too powerful.
But Mr. Naimi said he believed OPEC members’ still had
essential advantages, such as
the ability to produce at extremely low cost.
Mr. Naimi was replaced in
May 2016 by Mr. Falih, a Western-educated oilman with long
experience at Aramco. Mr. Falih
has said Saudi Arabia and even
OPEC couldn’t make a difference by cutting production on
its own.
He reached out to Alexander
Novak, energy minister in Russia, where low oil prices were
creating a budget crunch.
“We both had an extended
crisis,” Mr. Novak said in an interview. “We both wanted results.”
OPEC’s agreement last year
with Russia and other big producers gave the cartel a coalition that controlled about 55%
of global oil output, its earlier
level of dominance. Knowing
that OPEC members cheated on
production pledges in the past,
the cartel created a compliance
committee to monitor production and scold members who
pumped more.
In April, Mr. Falih was upset
after reading a news article
about Iraq pumping over its
limit and stealing market share
from Saudi Arabia.
“See, they are laughing at
us,” Mr. Falih wrote in a WhatsApp message to a group of
peers, according to people familiar with the exchange.
In Iraq, there is a strong feeling that the country should be
exempt from cutting production
because of the war against Islamic State, said Luay al-Khatteeb, an adviser to the Iraqi parliament.
OPEC members said they are
trying now to negotiate a way
to quit the production cuts early
next year without sending the
market into another downturn.
—Georgi Kantchev
and Nathan Hodge
contributed to this article.
Ms. McCarthy, an ethnic Chinese born in Myanmar, said
lavender is beloved by many
Chinese.
“We love lavender,” she said.
“We use lotion and cream and
face cleanser.”
Some suggest that a source
of the craze is a 2000 romantic
film from Hong Kong that includes a scene shot in a lavender field in France. A Taiwanese soap opera that ran in the
early 2000s, called “Lavender,”
features a boy giving lavender
buds to a girl with heart disease.
Then again, one visitor to
the farm suggested the flower
probably got a boost from a
Tom Cruise movie called “Lavender Sky.” (This doesn’t exist,
although “Vanilla Sky” does.)
For now, East Marion has reverted to its traditional bucolic
state. Mr. Rozenbaum and his
family have cut their crop,
which they sell at New York
City farmers markets.
How does he explain the
Long Island lavender craze?
“It’s one of the few essences
that goes straight to your
brain,” he said. “There’s no filter.”
—Esther Fung contributed
to this article.
THE WALL STREET JOURNAL.
Monday, July 31, 2017 | A10A
NY
* *
GREATER NEW YORK
Gang Fears Enter Classroom Millennials’ Exit
Teachers and police try
to spot students at risk
as MS-13-linked killings
jolt Long Island schools
Police Reject Trump’s
Advice on Suspects
CENTRAL ISLIP, Long Island—Patricia Christian, a highschool teacher here, said helping non-English speakers learn
the language is her calling. But
keeping students outside of the
grasp of gangs has become part
of the job.
In April, four young men
were found dead in a park less
than 2 miles from Central Islip
High School. One was a former
student in the high school in
neighboring Brentwood. In September, the killing of two Brentwood High School girls, Kayla
Cuevas and Nisa Mickens, shook
the town, alarming parents and
teachers alike. Law enforcement
said it believes the killings were
carried out by members of a
gang called MS-13.
The homicides drew attention from Washington. President Donald Trump visited
Brentwood on Friday to talk
about gang eradication, saying
MS-13 “has shed gruesome
bloodshed throughout the
United States,” transforming
“peaceful parks” into bloodstained fields. Mr. Trump
promised the crowd MS-13 “will
be out of here quickly.”
Following the killings, the
Suffolk County Police Department launched a gang intervention program with the school
district called the Brentwood
Youth Initiative. It focuses on
identifying students who may
be vulnerable to being pressured to join a gang and connecting them with mentorship
programs and athletics and music, said Suffolk County Police
Commissioner Timothy Sini.
It “provides them a practical
path leading a law-abiding life,”
Mr. Sini said.
The victims of the April quadruple homicide weren’t stu-
STEVE REMICH FOR THE WALL STREET JOURNAL
BY MARIANA ALFARO
AND ZOLAN KANNO-YOUNGS
A memorial to Michael Lopez Banegas near where he and
three others were killed in April in Central Islip.
dents in Central Islip. A school
district representative said the
event was tragic, but not
school-related. The Brentwood
school district didn’t return requests for comment.
MS-13, or Mara Salvatrucha,
was formed during the 1980s in
Los Angeles by immigrants from
El Salvador who left the country
during a civil war and sought to
defend themselves against Mexican gangs. The gang later expanded across the U.S. in regions with large populations of
Central American immigrants,
many of them in the country
without proper documentation.
MS-13 has had a presence
for several years on Long Island where a large population
of immigrants from El Salvador,
Honduras and Nicaragua has
settled, particularly in the communities of Brentwood and
Central Islip. These demographics have made Long Island a
New York City-area police departments pushed back after President
Donald Trump appeared to advocate
that officers not be so careful in the
handling of suspects.
When Mr. Trump spoke Friday in
Brentwood, a community in Long Island’s Suffolk County that has been
hard hit by violence from MS-13, he
said: “And when you see these towns
and when you see these thugs being
thrown into the back of a paddy
wagon—you just see them thrown in,
rough—I said, please don’t be too nice.”
The Suffolk County Police Department said in a statement: “As a department, we do not and will not tolerate “rough[ing]” up prisoners.”
The Nassau County Police Department, also on Long Island, said it
trains officers to follow procedures.
“Any violations of these procedures
would be investigated immediately
and dealt with swiftly,” said Detective Lt. Richard LeBrun. The White
House didn’t respond to a request for
comment.
—Corinne Ramey
main destination for unaccompanied children fleeing gang violence in Central America. Lawenforcement officials say MS-13
is responsible for 27 murders in
Suffolk County since 2013.
Monica Martinez, a Suffolk
County legislator and Democrat, worked as a teacher at the
high school and assistant principal at Brentwood East Middle
School from 2000 to 2014. She
said she knew she had gang
members in her class. She
would often see signs of MS-13
written in notebooks.
“One kid, I really loved him,”
she said. “Once, I pulled him
aside and said, ‘Why are you
doing this?’ He said, ‘I can’t get
out.’ ”
Many teachers, Ms. Martinez
said, want to talk more to their
students and their families
about the violence. But they
also have to focus on preparing
them for their exams.
“It’s a growing problem,”
Ms. Martinez said of MS-13.
“It’s nationwide but it’s really
come down here on the island.”
In the case of Ms. Christian,
who teaches at Central Islip
High School, she interacts
daily with young students who
speak little to no English,
many of them immigrants
from Latin America.
Protecting students from
gang violence is hard when
some members themselves are
in the classroom. Ms. Christian
said she has had cases of students who feel so bullied or
pressured that they don’t go
out in the hallway until after
the bell.
She said sometimes she will
get someone to escort them,
because the end of the school
day is “usually when stuff will
happen, like getting jumped.”
—Joseph De Avila
contributed to this article.
Latest Baseball Greats Join Hall of Fame
Hits New Jersey
Office Market
BY KEIKO MORRIS
New Jersey’s struggling office market is facing another big
challenge: the exodus of millennials.
Landlords have faced numerous hurdles during the past decade, from the recession to vacant corporate
PROPERTY
campuses left
behind after
company consolidations. The latest is an
“alarming” outflow of young
workers from the state, according to a report from real-estate
services firm CBRE Group Inc.
Attracting and retaining millennial employees has been a
priority for companies making
real-estate decisions, brokers
and analysts said.
“If a certain amount of millennial talent is not here, companies will look elsewhere,” said
William Forcello, CBRE research
manager and one of the authors
of the report.
The preferences of the millennial generation, typically
those born between the early
1980s and late 1990s, already
have placed New Jersey’s
largely suburban office buildings in a tough position. This
younger workforce is known for
favoring urban settings and
workplaces that are close to
where they socialize.
New Jersey’s millennials are
concentrated along the state’s
waterfront in locations such as
Hoboken, Jersey City and Newark, offering downtown communities and plentiful transit connections to New York City.
Both landlords and employers have taken note of the exodus, said brokers and real-estate
analysts. A number of landlords
have been investing heavily to
renovate older buildings, adding
lobbies with Wi-Fi, baristas and
wine bars, lounge seating and
cafeterias offering a variety of
food options. Others are subsidizing beefed-up transportation
to and from train stations and
hip downtowns using vans or
ride-sharing apps.
Retention and recruiting millennials is one of the top concerns driving real estate decisions.
Today,
companies’
human-resource leaders are
having much more say in the
process than in the past, said
Andrew Judd, managing principal for the New Jersey region at
real-estate firm Cushman &
Wakefield.
“Smart companies have HR
people at the table and in some
cases they are driving it,” Mr.
Judd said of the decisions-making process. “The last thing you
want to do is make a move and
find you don’t have a labor pool
to draw from.”
The younger workforce is being squeezed by New Jersey’s
high cost of living and the burden of educational debt that often can’t be supported by entrylevel wages. The report cites an
average statewide salary of
$36,000 for graduates with a
bachelor-of-arts degree.
People between the ages of
18 and 34 made up the segment
leaving the state at a higher rate
than any other age group between 2007 and 2014, according
to U.S. Census Bureau data. In
2014, the number of millennials
moving to the state fell short of
those leaving, making for a net
loss of 57,566.
57,566
Net loss of millennials in New
Jersey in 2014
Those moving out aren’t going that far, said Michele
Siekerka, chief executive of the
New Jersey Business & Industry
Association. Many are moving
to Pennsylvania and New York.
“This is our future workforce,”
she said. “New Jersey has always been known for having a
highly skilled workforce, and we
need to maintain that.”
Many landlords have shaped
their strategies around appealing to millennials, said Jeffrey
Heller, principal and managing
director of the New Jersey operation for real-estate services
firm Avison Young. The company is the leasing agent for a
recently renovated complex
called Park Avenue at Morris
County in Florham Park. The
owner revamped the atrium of
the flagship building and added
two vans to transport employees to and from the train station
and downtown Morristown. The
owner also created an open
space for collaborating in the
atrium of the main building.
HANS PENNINK/ASSOCIATED PRESS
Higher-End Joints Give
All You Can Eat a Try
BY CHARLES PASSY
Camping in Comfort Pitched in Queens
Luxury or glamour camping—also known as glamping—
is coming to New York City.
Gateway National Recreation
Area, a national park that encompasses parts of the city and
New Jersey, is partnering with
Terra Glamping, a company
that specializes in this high-end
approach to outdoor recreation,
to offer glamping starting Aug.
11 through late September.
The plan calls for five
glamping sites to be set up in
the park’s Fort Tilden area,
which is situated on Queens’
Rockaway Peninsula. Each site
is billed as a comfy affair, replete with a 12-by-14-foot safari-style sleeping tent that includes a queen bed with
memory-foam mattress. An
outdoor lounge, a restroom
and shower facilities are
among the shared amenities.
A continental breakfast is included in the cost, which ranges
from $200 to $250 a night,
with weekend prices on the
higher end.
The experience is “basically
like being in a hotel room,”
TERRA GLAMPING
BY CHARLES PASSY
Upscale camping will be coming to part of a national park in Fort
Tilden in Queens. The tent is outfitted with a queen-size bed.
said David Levine, one of
Terra Glamping’s co-founders.
The company runs a similar
glamping operation along California’s northern coast.
Gateway opened traditional
campsites within its park system, currently priced at $30 a
night, to the general public
starting in 2012 as a way to
give locals a chance to experience camping without venturing far from home. But the
park’s team has looked for
ways to broaden its appeal for
those who might not want to
rough it and pitch their own
tents. “We’re trying to offer a
range of possibilities,” said a
Gateway spokeswoman.
In that regard, Gateway
rolled out a similar offering earlier this summer, with tiny
house-style cabins available for
nightly rental in other parts of
the park system. Demand has
exceeded expectations, with the
cabins selling out as soon as
they become available, according to Jon Staff, founder of Getaway, the tiny-house company
that has joined with the park on
the offering.
Once considered something
of an oddity, glamping has become more mainstream in the
camping community, though
some traditionalists still scoff
at such fancy setups.
Darshan Kalyani, an analyst
who tracks the camping industry for market researcher
IBISWorld, said glamping appeals to a “very niche market,”
but one that can easily see
spending up to four figures for
a night in the great outdoors.
Or the great indoors, for
that matter. Trump International Hotel & Tower, near
Central Park on Manhattan’s
West Side, offers a “Glamping
By the Park” package, starting
at $1,425 a night, according to
the hotel’s website. The offering lets hotel guests experience
“camping” in a tent that is set
up in their suites, the hotel
says. A make-your-own s’mores kit is included in the price.
JOHN TAGGART FOR THE WALL STREET
COOPERSTOWN CLUB: Newly inducted, from left, Bud Selig, Ivan Rodriguez, John Schuerholz, Tim Raines Sr. and Jeff Bagwell on Sunday.
Restaurants that offer allyou-can-eat dining are often
more about quantity than
quality. But a number of
higher-end New York City establishments are looking to reverse that trend.
Kesté Pizza & Vino, the pizzeria that offers authentic Neapolitan-style pies, has introduced a
daily $20 unlimited-slices promotion, dubbed “Marathon
Pizza,” at its Williamsburg location in Brooklyn.
In a more extravagant vein,
Megu, a Japanese restaurant in
Chelsea, is rolling out a $300
“Imperial Oyster Experience,”
with all-you-can-eat oysters,
including some pricier and
rarer varieties, for two diners,
in addition to a bottle of Champagne. The bivalves are served
with 16 accompaniments.
These stuff-yourself specials
join longstanding ones at
places ranging from Hill Coun-
try Barbecue Market in Manhattan’s Flatiron District, which
runs a $32 Monday all-youcan-eat special, to Chez Oskar,
a French restaurant in Brooklyn’s Fort Greene neighborhood
that has a $20 Tuesday offering of unlimited mussels.
Restaurateurs offer such
deals for a variety of reasons.
Some say they do it to try to
increase business on slower
nights. Others say it is just a
way to have some fun.
Megu owner Jon Bakhshi
says it was the latter that inspired him to come up with
his concept. An “oyster bar in
the middle of summer just had
a nice ring to it,” he said.
Restaurant-industry insiders warn there could be consequences. “You can devalue
what you’re serving,” said
Jonathan Shepard, executive
chef at Harlem Burger Co. and
Harlem Pizza Co., two restaurants that don’t offer any allyou-can-eat specials.
Kesté in Brooklyn offers a daily $20 unlimited-slices promotion.
A10B | Monday, July 31, 2017
NY
THE WALL STREET JOURNAL.
* *
GREATER NEW YORK
BY LESLIE BRODY
Some New York City public
school students are getting a
high-tech twist on mental
health care: telepsychiatry.
Northside Center, a nonprofit agency in Harlem with
clinics in city schools, has received conditional state approval to let its psychiatrists
have virtual visits with students and prescribe medicine
using videoconference technology. It expects the final goahead before school starts in
September.
If so, Northside Center
would join the expanding
ranks of agencies across New
York offering telepsychiatry
since the state Office of Mental Health set rules for its use
in licensed clinics two years
ago. So far, the office has approved 46 programs statewide
to offer telepsychiatry, including Astor Services for Children
& Families, which uses it in
seven clinics in public schools
in the Bronx.
Telepsychiatry has grown
nationwide to serve patients
in rural areas and elsewhere
without easy access to care,
especially as the price of
equipment has dropped. “Everyone is trying to get on
board with this technology,”
said Northside Center’s executive director, Thelma Dye.
46
Programs in New York state with
approval to offer telepsychiatry.
Skeptics have questioned
whether telepsychiatry risks
losing the intimacy and subtle
cues of face-to-face meetings,
and some express concern that
its convenience could escalate
the use of medication as a
quick fix. Others are concerned about potential privacy
violations if virtual sessions
get hacked.
The state requires clinics to
use dedicated, secure transmission links, and video cameras that can pan and tilt so a
psychiatrist can check a patient’s body language and surroundings.
The Office of Mental Health
supports telepsychiatry, saying it “helps bring care directly to patients.”
Sonia Barnes-Moorhead, executive vice president of the
foundation at Astor Services,
said it took some time to work
out the technical kinks but
staff and students quickly became comfortable with telepsychiatry when it started in
its Bronx clinics in the past
school year. She said her
agency doesn’t use it with its
most severe cases, but in general, “the feedback has been
tremendous.”
Jean Holland, clinic director
at Northside Center, said videoconferencing saves specialists from spending time traveling among schools, a key
benefit due to a widespread
shortage of child psychiatrists.
A psychiatrist must meet a
child in person before any virtual sessions can take place.
The center aims to use telepsychiatry largely for evaluations and monitoring medications, rather than long-term
counseling, which usually is
provided by social workers.
Ms. Holland said a parent
or guardian will stay with a
child during every virtual
visit, and a social worker
might join them as well, so the
child is “not just sitting there
in a room without support.”
The center applied to use
the technology in its clinics at
P.S. 161 in Harlem and two
charter schools, KIPP NYC College Prep High School in the
South Bronx and East Harlem
Scholars Academy.
Supporters say videoconferencing makes it easier for
school staff to update a psychiatrist on a student’s behavior. But Claudia Gold, a pediatrician and author of “The
Silenced Child,” expressed
concern: She has long argued
that many children are overmedicated, and said the quick
LESLIE BRODY/THE WALL STREET JOURNAL
Virtual Therapy Coming to Schools
Northside Center Executive Director Thelma Dye, right, shows how
telepsychiatry works with the help of social worker Jessica Gulmi.
convenience of telepsychiatry
could exacerbate that problem.
When a child acts out, she
said, too often psychiatrists
look to adjusting medication
first before taking time to
delve into deeper family problems that could be affecting
behavior, such as parental
conflict or substance abuse.
Telepsychiatry “will solve
the problem of the shortage of
child psychiatrists, but unfor-
tunately it makes the path of
medication that much easier
than dealing with underlying
issues,” Dr. Gold said.
Ms. Holland, at Northside
Center, said that can be a risk
at some agencies, but “we are
very conservative in prescribing medication, especially with
very young children.”
Ms. Barnes-Moorhead said
techniques to manage medications are similar whether faceto-face or through technology.
company is growing and is expected to have 500 employees
by the end of the year.
Built in 1912, the 210,000square-foot building has undergone improvements such as a
new lobby, elevator modernization, a new heating, ventilation
and air conditioning system, and
replacement of the building’s
windows, the William Kaufman
Organization said. Located in the
Greenwich Village Historic District, it originally was designed as
a warehouse and trade school.
LIVWRK and David Brecher of
FM Capital have lured Stink Studios to the team’s overhaul of the
former ship-engine repair building
at 160 Van Brunt St., where Tesla
has an office and showroom, according to Asher Abehsera, chief
executive of LIVWRK.
Italian bakery Princi, which is
owned by Starbucks Corp., is
building out a store in the
119,000-square-foot building, purchased for $21.5 million in 2014.
So far 89,000 square feet has
been leased, Mr. Abehsera said.
Stink would double the size of
its current Dumbo office, taking
13,000 square feet in Red Hook.
The company is slated to build
out a production studio on the
premises where it could shoot
marketing content, said Chris
Mele, Stink managing director.
The new space also would have
editing and voice-over recording
facilities, he said.
—Keiko Morris
PROPERTY WATCH
MEATPACKING DISTRICT
WILLIAM KAUFMAN ORGANIZATION/SAGE REALTY CORP.
Kobalt Music Scores
Bigger Space in Move
The landmark building at 2 Gansevoort St., built in 1912, has undergone extensive renovations.
An independent music-services company is relocating and
expanding its New York City office in a former warehouse loft
building in the Meatpacking District.
Kobalt Music, which has 10
offices around the world, has
signed a lease for 23,000 square
feet and will take the entire sixth
floor of 2 Gansevoort St., a landmark, nine-story building, according to the property owner, the
William Kaufman Organization.
Kobalt, which raised $75 million in a funding round earlier
this year, is relocating from 220
W. 42nd St. and will double the
size of its office in one of Midtown South’s coveted office
neighborhoods.
A Kobalt spokesman said the
RED HOOK
Stink Studios Doubles
Space in Relocation
The partners behind the conversion of an industrial building in
the Red Hook section of Brooklyn
are adding a global digital-marketing firm to a tenant roster
that includes Tesla Inc.
Every child deserves to
wake up with hope.
For about the same amount you spend buying
coffee every morning, you can provide an entire
year’s tuition for a girl in Kenya, giving her the
education she needs to improve her and her
family’s livelihood. Sponsor a girl today and help
her achieve a better tomorrow.
EAST AFRICA
CHILDREN’S HOPE
EastAfricaChildrensHope.org
Coffee Art by Sam DeBey
THE WALL STREET JOURNAL.
LIFE&ARTS
Monday, July 31, 2017 | A11
ANALYSIS
Who Decides What You Want?
Streaming services such as Netflix and Spotify push music and movies they helped create
BY BEN FRITZ
Some streaming services highlight content that they helped create, such as Netflix’s wrestling comedy, ‘Glow,’ below left, and the crime drama, ‘Ozark,’ below.
JASON SCHNEIDER (ILLUSTRATION); NETFLIX (2)
IN ANCIENT TIMES, when readers bought actual books in outposts known as stores, one always
had to be a little skeptical of the
titles stacked on tables by the
front door.
Some were the newest and most
popular reads. Others were there
because publishers had made deals
with the biggest retailers to put
their books front and center, grabbing the attention of browsers
who weren’t sure what they
wanted.
In the on-demand entertainment
world, where companies that began as neutral distribution platforms have become multi-headed
media giants, we need a similar
dose of skepticism when we walk
in the digital front door.
The first time you use Spotify
or Netflix, the experience is astounding. Want to drive crosscountry to early ’90s hip-hop that
reminds you of middle-school
dances? Feeling blue and want to
bury your sorrows in old episodes
of “Cheers?” They’re just a search
and a click away. (All examples are
hypothetical, of course, based on
people with lower-brow taste than
mine.)
After a while, though, you don’t
always know what you want to listen to or watch when you log on.
That’s where the content highlighted by these streaming services starts to matter and the behind-the-scenes deals they strike
may influence your choices.
Such deals have given rise to a
debate about “fake artists on Spotify” reported earlier on the website Music Business Worldwide.
The artists aren’t “fake,” but
rather real, low-profile individuals
who are commissioned to create
certain types of popular music and
sometimes use pseudonyms. Their
music, all instrumental, fills massively popular playlists with titles
such as “Sleep,” “Peaceful Piano”
and “Yoga and Meditation.”
As anyone who has used Spotify
knows, popular playlists are often
featured when you open the app,
above recommendations based on
what you’ve listened to.
So what’s the problem? Reports
in the New York Times and elsewhere suggest that Spotify may
have special deals with so-called
“fake artists,” paying them less
than the standard share of its revenue that goes to Arcade Fire or
Beyonce for each play.
Thus, Spotify might prefer that
you listen to these tracks rather
than others. Listen to whatever
you want, in other words, but
might we suggest these appetizing
options that carry a better profit
margin for us?
A Spotify spokesman says,
“We have never programmed a
playlist due to cost. Playlists are
programmed based on how each
track performs and connects with
listeners.”
Spotify isn’t the only digital
powerhouse with reasons to steer
users to certain content.
Last time I opened Netflix, I had
to scroll down two screens to find
my list of the programming I had
indicated I wanted to watch, skipping past seemingly every recent
series, movie and stand-up special
Netflix has made, including
“Ozark” and “Glow.”
The more that people watch Netflix originals, of course, the more the
company can control its own destiny
rather than engaging in sometimesdifficult negotiations to buy content
from other studios and networks. A
Netflix spokesman declined to comment. (Don’t worry, I scrolled all the
way down to find that episode of
“Star Trek: The Next Generation”
I’ve been jonesing to rewatch).
Nothing ever stopped us from
combing a bookstore for an obscure poetry anthology and nothing is stopping us today from
clicking, searching or setting the
DVR to record exactly what we
want to hear or watch, regardless
of what’s presented to us.
But humans are fundamentally
lazy, as illustrated by the sky-high
ratings for all those unfunny sitcoms that used to air between
“Friends and “Seinfeld.” When
something that looks reasonably
appealing is presented to us, we
may not bother to search for something else or wonder why it has the
marquee spot on the home page.
You probably don’t care about
“fake artists” on Spotify for the
same reason other artists and record labels do: Because they worry
they’ll make less money.
But just as it’s important to
know who owns your favorite
newspaper or who contributes
money to your elected officials,
you should care about what Spotify and other streaming services
would like you to hear or watch.
Because it may be the songs and
videos that make them more
money, not the ones you’re most
likely to enjoy.
FILM REVIEW | By Joe Morgenstern
PARAMOUNT PICTURES
COLD REALITIES OF
GLOBAL WARMING
Al Gore in ‘An Inconvenient Sequel: Truth to Power,’ directed by Bonni Cohen and Jon Shenk
CONSIDERING the potential for
incandescent polemics, “An Inconvenient Sequel: Truth to Power” is
relatively restrained. Al Gore paraphrases Mike Tyson’s deathless
maxim that “everyone has a plan
until they get punched in the
mouth.” That’s by way of noting
how the political climate has
changed with the rise of Donald
Trump, who had previously referred to climate change as a hoax
and called for Mr. Gore’s Nobel
Peace Prize to be rescinded. Yet
the film doesn’t dwell on the
Trump administration’s hostility
to climate science, and, because of
the production’s release date, it
includes only an end-title mention
of last month’s announcement
that the U.S. would withdraw from
the Paris climate accords. Rather,
the emphasis is on the intensifying impact of global warming
caused by human activity, on
heartening signs of progress in renewable energy, and on the need
for sustaining hope that brighter
days will come.
Eleven years after “An Inconvenient Truth” Mr. Gore remains a
prodigy of hope, with energy that
seems endlessly renewable. During
much of the intervening time he
continued to travel the beleaguered globe with the slide show
that became the core content of
the first film, though the campaign against carbon emissions
sometimes seemed doomed. “If I
said there weren’t times I considered this a personal failure I’d be
lying,” he says at one point in this
new documentary feature, which
was directed by Bonni Cohen and
Jon Shenk.
At another he says: “There
came a time for me when I
thought, wow, we could really
lose the struggle. We need to recruit more people.” The results of
that recruiting effort provide
many of the settings for “An Inconvenient Sequel”—climate leadership training sessions where the
former vice president exhorts eager recruits to action.
Please see FILM page A13
THE WALL STREET JOURNAL.
A12 | Monday, July 31, 2017
LIFE & ARTS
onds of recovery, but not as intensely as on Tuesdays. Fridays he
walks for 20 to 30 minutes for recovery. He goes long on the weekends, usually walking 75 to 90
minutes, alternating between
pavement and dirt trails.
Mr. Luettchau also focuses on
his shoulders and upper back. Every morning he turns on ESPN in
his living room and spends 10 to
15 minutes performing 100 pushups, 200 sit-ups and a sets of forward and lateral raises with 10pound dumbbells.
The Diet
ADRIENNE GRUNWALD FOR THE WALL STREET JOURNAL
Mr. Luettchau is the first to admit
he has terrible eating habits. “I’m
148 pounds soaking wet and 5 feet,
10 inches,” he says. “I eat whatever I want, whenever I want.”
He averages breakfast three
mornings a week: apple juice and a
bowl of Rice Krispies with 2%
milk. He packs a lunch of pretzels,
Gatorade and a turkey sandwich
with cheese and mayo on white
bread. Mr. Luettchau avoids whole
grain bread. “I think it tastes like
cardboard,” he says. He has pasta
for dinner at least twice a week.
“A go-to is poor man’s chicken
parm,” he says. “I dump a box of
frozen Perdue chicken nuggets into
my pasta and sauce.” He has a
weakness for brownies.
The Gear & Cost
WHAT’S YOUR WORKOUT | By Jen Murphy
Leaving Runners in the Dust
A globally competitive race walker smokes rivals on the track; a low-key approach to gear and diet
IF RICHARD LUETTCHAU II wore
a Fitbit, it might melt down. As a
competitive race walker, he clocks
steps at a faster pace than the average adult runs. “The movement
looks like a wonky tango, so it’s
easy to mock,” he says. “But it’s
incredibly difficult.”
Mr. Luettchau, a geographic information specialist at Mott MacDonald, an engineering consultancy
in Iselin, N.J., is a runner at heart.
After a successful high school crosscountry career, he went on to race
cross-country and track at Stockton
University in Galloway, N.J. But he
struggled with injuries. “By sophomore year I wasn’t fast enough to
score at the conference meets,” he
says. “So my coach asked if I
wanted to try race walking.” Skeptical but wanting to contribute to the
team, Mr. Luettchau gave it a try.
He was a natural.
“There were some jokes when I
started training, but once I proved
I was good, the teasing ended,” he
says. “None of my friends will race
me. No one wants to get beat by a
walker.”
Race walking requires the
walker to be in contact with the
ground at all times. Only when the
front foot’s heel touches down can
the back foot’s toe lift off. And the
race walker’s knee must stay
straight through the leg swing. “It
sounds easy,” he says. “But it defi-
nitely limits your speed. When you
run, you can float.”
Mr. Luettchau, 32, says he still
prefers running. But he’s internationally competitive at race walking, so he keeps at it. He was the
USA Track & Field national champion in the 10,000-meter race walk
in 2013 and qualified for Olympic
trials in the 20-kilometer race in
2012 and 2016. He will compete
July 30 at the USATF 10,000-meter
Race Walk Championships in
Manalapan, N.J.
He race walks January through
August and devotes fall to running,
racing 5K, 10K and half-marathon
distances. “I think alternating both
sports has helped limit injuries in
my body,” he says. Mr. Luettchau
and his wife live in Bridgewater, N.J.
The Workout
Mr. Luettchau does a 45-minute
workout after work Monday
through Thursday. He alternates
race walking at a park and a high
school track. Monday he might
80s
<0
60s
0s
Calgary
10s
80s
70s
Winnipeg
p
Portland
P
d
Eugene
70s
Seattle
100s
20s
Billings
Bismarckk
70s
Toronto
T
Mpls./St.. Paul
Pau
i
Boise
Ottawa
ttawa
Albany
A
b
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Augusta
A
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40s
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Boston
50s
60s
Hartford
rtford
Milwaukee
k
Detroit
t
Buffalo
l
New
Yorkk
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Cleve
Cl
l d
Cleveland
90s
Chicago
Ch
Chic
g
80s
Reno
Salt Lake
L
City 70s
Des
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80s Ph
Philadelphia
hil d lphi
Cheyenne
y
Omaha
h
Pittsburgh
g
Sacramento
Springfield
p g
Denver
Indianapolis
d
p li
San
an Francisco
hington
hi
gton D.C.
DC
Washington
Kansas
Ch
Charles
l
t
Charleston
70s
Topeka
80s
90s
Colorado
C
Colorad
l d
City
Richmond
h
d
Las
Springs
p
70s
LLouisville
Lou
ill
St.. Lou
Louis
60s
Wichita
hit
Vegas
Ve
Raleigh
l igh
h
Nashville
h ill
70s
Angeles
Los A
Ange
Charlotte
C
h l tt
Santa
ta FFe
Memphis
ph
h
100s
Columbia
C
b
Albuquerque
Albuque
b
q
Ph
i
Phoenix
Oklahoma
kklahoma City
Warm
San Diego
Atlanta
Atl
t
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Tucson
T
c
Birmingham
i
g
h
El P
Paso
Dallas
ll
Jack
Jackson
FFt. Worth
th D
100s
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ll
Pierre Sioux
P
50s
70s
60s
Mobile
bil
90s
Anchorage
A h g
Austin
A
ti
Houston
t
w Orleans
New
80s
80s
San
an Antonio
Miami
U.S. Forecasts
City
Amsterdam
Athens
Baghdad
Bangkok
Beijing
Berlin
Brussels
Buenos Aires
Dubai
Dublin
Edinburgh
Hi
71
90
116
96
89
80
75
58
108
65
64
Today
Tomorrow
Lo W Hi Lo W
58 pc 72 59 pc
74 s
87 74 s
83 s 118 89 s
80 pc 93 80 t
73 s
85 75 c
66 t
86 67 t
58 pc 74 57 pc
54 c
60 47 sh
94 s 109 96 pc
51 t
67 53 pc
51 t
63 50 t
5
7
8
22
23
27
25
28
41
37
32
38
Cold
T-storms
Stationary
Snow
34
8 “Stop! They set
us up!”
39
42
43
52
33
29
40
48
3 Veterans Day mo. 33 Shaw with a
clarinet
4 Bonanza finds
34 Plus column
5 Music for
entry
meditation
36 Harry Potter and
6 James Garfield’s
Lord Voldemort,
middle name
e.g.
7 Lustful look
37 Caterer’s job
26
31
47
12
20
36
46
11
18
24
35
Rain
10
15
19
21
9
17
70s
90s
6
14
16
80s
Showers
Flurries
Ice
International
4
13
44
49
45
50
53
51
54
56
57
61
62
City
Frankfurt
Geneva
Havana
Hong Kong
Istanbul
Jakarta
Jerusalem
Johannesburg
London
Madrid
Manila
Melbourne
Mexico City
Milan
Moscow
Mumbai
Paris
Rio de Janeiro
Riyadh
Rome
San Juan
Seoul
Shanghai
Singapore
Sydney
Taipei
Tokyo
Toronto
Vancouver
Warsaw
Zurich
Today
Tomorrow
Hi Lo W Hi Lo W
80 67 t
88 67 t
85 67 pc 89 67 t
88 71 pc 90 74 pc
92 84 t
92 82 t
83 74 s
83 75 s
91 75 pc 90 74 s
91 71 s
90 69 s
64 43 s
62 45 pc
71 55 pc 71 57 pc
95 68 pc 90 66 pc
88 81 t
89 79 t
59 42 s
60 42 s
78 52 pc 79 56 pc
93 73 s
96 74 s
75 61 pc 78 58 pc
87 81 sh 87 79 sh
80 62 pc 76 59 pc
81 63 s
82 65 s
113 85 s 113 86 s
90 69 s
91 71 s
90 81 pc 89 81 pc
84 77 t
91 77 pc
96 88 t
96 87 pc
88 80 c
88 79 t
65 51 sh 65 50 s
92 81 c
96 81 t
89 78 pc 86 74 t
84 64 pc 83 69 t
75 59 s
81 64 s
85 64 t
93 71 s
84 64 pc 89 66 pc
64
55
58
59
60
63
65
66
Across
1 Church law
26 Negating word
27 Mistreated
6 “Thrilla in Manila” 29 Nightmare for a
winner
babysitter
9 Fishhook feature 30 Hefty book
13 Love, to Luciano
14 Play the ponies
15 Houston
footballer until
1996
23 Green claymation
character
31 Highway division
56 Find darling
32 Lamb’s lament
57 It’s hot
35 They’re hot
61 Barcelona boys
40 Pen for porkers
62 Toes tally
16 They’re hot
41 Smooth and flat
63 Striker’s demand
42 Lunch for
aardvarks
64 Conks out
19 It’s hot
43 Fermented honey
drink
24 Shapely leg, in
slang
44 Hawn of
“Private
Benjamin”
25 “My country, ___
of thee...”
46 Victoria’s Secret
buy
21 Spa attractions
50 For each
18 Nick of “The
Prince of Tides”
21 Victim of a patio
zapper
20 Sawyer on TV
22 Lusitania sinker
52 They’re hot
65 Forerunner of
58-Down
66 Involuntary jerk
Buddy
Lee or Grant:
Abbr.
Minions follow
them
Far from flavorful
Circle spokes
48 Make amends
49 Bus. letter
accompanier
51 So far
38 Gives an opinion
on, e.g.
9 Playbill write-ups 39
10 “Sleeper” director 44
11 Quaintly stylish
45
12 Quarterback
Favre
46
15 Quick ballroom
dance
47
17 “If ___ a
Hammer”
HOT STUFF | By Aaron L. Peterson
28 Mariner’s milieu
29 Fair-haired
32 Like some straws
50 Lowly workers
53 Son of Aphrodite
54 Hwys.
55 Rice Krispies
sound
58 U.S. spy org.
59 Pack animal
60 “Shiny Happy
People” band
Previous Puzzle’s Solution
C
A
N
A
L
A
S
A
N
A
S
I
L
O
K
N
O
B
R
H
Y
T
H
M
I
C
A
L
S E
M E A
O G R
P A N
Y
R E
E
A L
S
T E
I G E N
D I D A
I N X
D
M
R A Y
E L S
I G A T
T A B
U R A T
N DM Y
E
A P
S
N O
A C T
L A H
A S E R
S T E
H
I P
O C T A
A L A Y
G U N S
I E
E
G O
S O U L
H I D
G A L
A R T
S E Y
M
O
V
E
O
N
S
O
F
A
B
E
D
E
V
I
L
MO
A L
C E
Y
G
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N
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L
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A
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I
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N
D
O
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R
S
Down
The contest answer is BADGE. Each of the five
1 Baseball’s Ripken theme answers begins with a homophone of a
2 Bordeaux buddy
Solve this puzzle online and discuss it at WSJ.com/Puzzles.
s
s...sunny; pc... partly cloudy; c...cloudy; sh...showers;
t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice
Today
Tomorrow
City
Hi Lo W Hi Lo W
Anchorage
65 54 c
64 55 pc
Atlanta
88 67 s
87 69 s
Austin
98 70 pc 98 76 pc
Baltimore
86 66 s
89 68 s
Boise
100 67 s 101 68 s
Boston
82 66 s
82 68 s
Burlington
85 62 pc 82 62 s
Charlotte
85 61 s
88 66 s
Chicago
85 66 s
87 69 pc
Cleveland
86 68 s
87 69 pc
Dallas
93 75 pc 89 74 pc
Denver
85 59 t
85 55 t
Detroit
88 68 pc 89 68 pc
Honolulu
87 73 pc 87 75 sh
Houston
94 75 pc 93 77 pc
Indianapolis
84 66 s
85 68 pc
Kansas City
81 63 pc 82 65 pc
Las Vegas
105 87 s 106 87 pc
Little Rock
88 69 s
87 71 pc
Los Angeles
85 68 pc 88 72 pc
Miami
87 78 t
89 82 t
Milwaukee
84 67 pc 85 69 pc
Minneapolis
86 67 pc 85 66 pc
Nashville
89 68 s
90 71 s
New Orleans
89 75 pc 90 76 pc
New York City
87 71 s
88 73 s
Oklahoma City
85 64 pc 85 64 t
100s
Today
Tomorrow
City
Hi Lo W Hi Lo W
Omaha
83 64 pc 87 66 pc
Orlando
85 73 t
87 74 t
Philadelphia
89 70 s
91 72 s
Phoenix
102 86 pc 105 85 pc
Pittsburgh
84 63 s
85 66 s
Portland, Maine 83 62 s
82 62 s
Portland, Ore.
90 60 s
97 67 s
Sacramento
99 65 s 104 69 s
St. Louis
90 72 s
91 73 pc
Salt Lake City
95 70 pc 97 70 s
San Francisco
75 57 pc 77 60 pc
Santa Fe
79 57 t
80 57 pc
Seattle
81 60 s
89 66 s
Sioux Falls
83 62 pc 86 61 pc
Wash., D.C.
87 70 s
89 72 s
3
Tampa
Ta
p
Honolulu
l l
70s
2
30
100+
Jacksonville
Jack
l d
Orlando
1
30s
Montreal
Helena
l
80s
“I tried running with music in
ninth grade and realized I changed
my pace based on what beat I was
listening to, so I stopped,” he says.
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.
70s VVancouver
The Playlist
Richard Luettchau II stretches, left, and sets his watch, above,
before a training session at a park in Edison, N.J., top. He still enjoys
running but picked up race walking in college after battling injuries.
Weather
Edmonton
d
t
build up to his threshold pace,
about six minutes 40 seconds a
mile. That’s a pace to turn most
runners green with envy. Tuesday
he does ¼-mile repeats, with 30
seconds of recovery, for 3,000
meters. Wednesdays he works out
at a lighter pace.
“As I’ve gotten older, the rest
days have become important,” he
says. “I used to go hard every day,
but my legs don’t bounce back like
they used to.” Thursdays he might
do 200-meter repeats with 30 sec-
Mr. Luettchau is a minimalist when
it comes to gear. “I don’t use GPS or
anything fancy,” he says. “I bought
my basic Coleman watch for $20 off
of Amazon.” He typically goes
through three to five pairs of sneakers a year, at roughly $65 per pair.
He runs in Asics-Gel Cumulus and
race walks in Asics GT-1000s.
“I look for clearance deals at the
outlet stores or coupons from retailers like Kohl’s and they end up
being a pretty decent price,” he
says. He spends $85 to $100 on his
racing sneakers, Asics Gel-DS
Racer, but says they last all year.
“Clothing is always tough for me,
since I have longer legs and a short
torso,” he says. “I find myself wearing the C9 brand from Target.”
musical note (ti for TEA, la for LAH, re for RAY, sol
for SOUL and mi for ME). Converting the notes to
their letter equivalents (in the fixed-do system,
where do is C, re is D, etc.) yields the contest
answer.
THE WALL STREET JOURNAL.
Monday, July 31, 2017 | A13
LIFE & ARTS
ART REVIEW
Painting the Bible
In New Spain
BY WILLARD SPIEGELMAN
New York
WITH THE EXCEPTION of the 20th-century
works by Kahlo, Rivera, Orozco and Siqueiros, “Mexican art” used to mean pre-colonial.
Modernist tastes preferred the “primitive,”
especially the pre-Columbian. Historians, intellectuals and painters ignored or demoted
most work from the post-contact days as
manifestations of Spanish imperialism and
conquest. In the past quarter-century, the art
of New Spain in the period we think of as
the Baroque has gained new respect.
As both consequence and proof of this upward revaluation, consider the stunning small
exhibition “Cristóbal de Villalpando: Mexican
Painter of the Baroque” at the Met Fifth Avenue. Villalpando (c. 1649-1714) was born and
probably trained in Mexico City. Through
prints, he knew the work of major European
predecessors, especially Peter Paul Rubens, a
name synonymous with the Baroque. Most of
his art came through religious commissions.
With 11 pictures, the Met show gives a
North American audience a sample of New
Spain’s greatest painter at the turn of the
18th century. (It was curated by Ronda Kasl,
curator of Latin American Art at the Met;
Jonathan Brown, professor of fine arts at
New York University; and Clara Bargellini,
professor at the National Autonomous University of Mexico.) It is actually anything but
small, especially because its centerpiece is
the staggering 14-by-28-foot oil from Puebla
Cathedral called “Moses and the Brazen Serpent and the Transfiguration of Jesus”
(1683) on view for the first time outside
Mexico. It occupies the atrium of the Met’s
Robert Lehman Wing, and viewers can see it
as no one in Mexico has. At home, it hangs
on a chapel wall. You look up at it. In New
York, you see it from the floor and, even
more stunningly, from the entry to the Lehman wing above, where you come upon it
from a higher angle, virtually head-on.
Extraordinary in conception and execution, the two-part picture is unprecedented
in the history of art. The idea was probably
suggested by Manuel Fernández de Santa
Cruz, the bishop of Puebla. The picture has
two halves, two subjects. It combines scenes
from the Old Testament (below) and the
New (above): the desert in Numbers, and
Mounts Tabor and Calvary in the Gospels.
There is separation and continuity between the parts, as in the Old and New Testaments themselves. The Numbers scene was
thought to prefigure the Transfiguration. Below, we see Moses and the serpent he brings
forth to save those Israelites who can be
healed from the plague of deadly snakes visited upon them for speaking out against
God. Above, we see the Transfiguration of
Jesus, witnessed by the apostles Peter,
James and John.
The eye wanders up and down, seeing
differences, making connections. Below, all
is crowded darkness. Some figures are almost cartoonish in their agony. At the top,
with only seven figures, all is purity and
light: clouds, luminous clothing, rays of sun.
With its two scenes, the picture is divided
horizontally but united vertically. A torrent
of water flows from above into the bottom
scene. On high, God the father points to Jesus, who points to Moses and Elijah, and at
whose feet sit the three apostles overwhelmed by his transfiguration into light.
Beneath, we see the brazen serpent on its
pole, an anticipation of Christ’s cross, pictured above. God and Jesus look down; the
Old Testament figures are looking up. Moses
appears in both halves, clothed in glistening
armor that makes him, especially at the bottom, into something like a Spanish conquistador, with heavily muscled calves.
One could keep looking, but other pictures beckon from one of the Lehman’s anterooms. These demonstrate their maker’s
strengths and weaknesses. Villalpando had
dynamic brushwork but lacked excellence in
drawing. His art is intense and sumptuous,
everything we think of as baroque. His people’s faces are often unprepossessing,
doughy and puffy (an ugly, roly-poly little
Jesus, a chinless Virgin Mary). He is more
committed to the swirling, dynamic flow of
drapery and clouds than to finely chiseled,
CLOCKWISE FROM TOP: LA CATEDRAL DE NUESTRA SEÑORA DE LA INMACULADA CONCEPCIÓN, PUEBLA, MEXICO (2); FORDHAM UNIVERSITY COLLECTION
A colossal depiction of Old and New Testament scenes reveals
how the European Baroque influenced colonial Mexican art
Clockwise from above: Cristóbal de Villalpando’s ‘Moses and the Brazen Serpent and the
Transfiguration of Jesus’ (1683), ‘The Deluge’ (1689) and ‘The Adoration of the Magi’ (1683)
realistic human features. In an “Adoration of
the Magi” (1683), the most conventional of
the pictures, Balthazar has an over-the-top
headdress with plumes, and a long pearl
pendant earring. The costumes often get
more attention than their wearers.
The two smallest, most crowded pictures
are oils on copper from the Ochavo chapel in
the Puebla Cathedral. “The Deluge” (1689) is
all darkness broken by lightning flashes.
Noah’s ark is like no boat you’ve ever seen,
floating as if through the air. In front, a
woman on a bull (did Europa and Zeus wander in here?) holds a child. Villalpando could
powerfully fashion the world’s end.
And also its beginning. Villalpando signed
“The Deluge” and “Adam and Eve in Paradise”
(1689) with his name and then “Inventor” to
signal his role as a God-like creator. The second picture compresses eight episodes from
Genesis into a space as packed as a medieval
tapestry. God creates Adam; the entire Trinity
breathes life into him; Eve is born; the serpent tempts; Eve eats, then Adam. You know
the rest. A rising sun is on the upper left,
darkness on the upper right.
Villalpando worked big even when working small. Excess in miniature: that’s the Baroque, Old World and New.
Cristóbal de Villalpando:
Mexican Painter of the Baroque
The Met Fifth Avenue, through Oct. 15
Mr. Spiegelman’s most recent book is
“Senior Moments: Looking Back, Looking
Ahead” (Farrar Straus Giroux).
FILM
Continued from page A11
Sequels are, by definition,
more of the similar, if not
the same, and this one covers some familiar ground. It
also spends an inordinate
amount of time at the 2015
Paris conference where the
climate agreement was negotiated. But the world—the
physical world—has changed
dramatically since the first
film was released, and “An
Inconvenient Sequel” reflects those changes with
startling visuals. In Greenland, glaciers have been exploding from within because
of rising temperatures. In
Miami, roads and sidewalks
have been raised in response to rising sea levels.
Some of the videos are so
familiar—lashing storms,
widespread floods, raging
fires, droughts associated
with political upheavals and
refugee crises—that the
mind glazes over, and Mr.
Gore acknowledges the
problem: “Every night on
the evening news is like a
nature walk through the
Book of Revelation.”
But the man who was often faulted for dispassion
during his long political career unleashes the wrath of
a country preacher at certain
moments here. “What were
you thinking?” he imagines
future generations wondering about us. “Couldn’t you
hear what the scientists
were saying? Couldn’t you
hear what Mother Nature
was screaming at you?” And
he brings good news along
with the litany of tempests
and record temps—the
growth of wind and solar
power on exponential curves
that were unimaginable a decade ago. No more tilting
against windmills when the
world is tilting for them.
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THE WALL STREET JOURNAL.
A14 | Monday, July 31, 2017
SPORTS
NFL | By Jason Gay
It seems crazy to
imagine the end of football. The game is so beloved, so profitable,
and, frankly, such a cultural mirror that it feels
like a permanent feature of American life. Without football, what the
heck happens to Sunday? (Or Saturday, or Monday, or an ever-expanding number of weekday nights.)
There are a lot of institutions
and franchises and schools with a
deep interest in football’s continued
prosperity. The game is a godsend
for the entertainment industry,
which is why it commands billions.
That’s why if football ever vanishes, it will likely vanish from
within.
From the players. And parents.
Consider the conversation of the
past week. A disturbing medical
study was released showing brain
damage in the brains of 110 of 111
deceased NFL players.
Shortly afterward, a PhD-candidate offensive lineman in Baltimore
abruptly retired at age 26. In Pittsburgh, a two-time Super Bowl
champion quarterback wondered
out loud if the 2017 football season
should be his last.
As NFL teams begin their preseason preparations, players were
confronted with an ominous query:
How worried are you about continuing to play this game?
Let’s be clear: football, an overtly
physical game of speed and collision, has always carried bodily risk.
Busted knees. Degraded hips, shoulders, ankles, fingers. Careers at the
pro level tend to be mercilessly
short, and players often leave with
chronic pain, which can continue
long after leaving the sport.
But it’s the grimmer, previouslyunknown risks which are finally
catching up to football. After years
of denial and obfuscation, there is
widening agreement that football
carries long-term risk from head injuries. A new study in the Journal of
the American Medical Association
found signs of the progressive neurological disease known as chronic
traumatic encephalopathy, or CTE,
in 87% of 202 brains donated from
deceased high school, college, semi
pro and pro football players.
The report’s stunner was that 110
out of 111 figure—of 111 brains donated by late NFL players, all but
one showed signs of CTE.
Sure, we could go around and
around about the study’s limited and
self-selecting sample—the late players’ families who donated brains
suspected a problem—and how it
can’t be seen as representative of
the full football-playing population.
The authors don’t deny its biases.
But is that enough comfort to
players still receiving hits, or their
families? Take a look at the recent
comments of 35-year-old Steelers
quarterback Ben Roethlisberger,
who has suffered concussions in the
past.
“This [JAMA study] shows
there’s nothing to mess with,” Ro-
SHANE KEYSER/TRIBUNE NEWS SERVICE/ZUMA PRESS
Could Football Ever End?
Kansas City Chiefs defensive end Jaye Howard and teammate Chris Jones put pressure on Pittsburgh Steelers quarterback Ben Roethlisberger.
ethlisberger told the Pittsburgh
Tribune-Review last week. “If you
want to mess with your brain, you
can’t put a new one in. You can’t
have a brain transplant. If you want
to mess with your brain, go ahead.
I’m not going to. I love my family
and kids.”
“I want to play catch with my
kids. I want to know my kids’
names. As much as I want my kids
to remember what I did and watch
me play the game, I also want
to remember them when I’m 70
years old.”
A new concussion study
provokes more
existential worry—and
an early retirement.
The study was reportedly a factor in the sudden decision last week
of Baltimore Ravens offensive lineman John Urschel—currently pursuing a doctorate in mathematics at
MIT—to retire early from game. Urschel did not mention the JAMA report publicly, but the Baltimore Sun
cited team sources as saying the
study was involved in Urschel’s
choice to walk away.
He’s not the first premature exit.
A year ago, there was the Buffalo
linebacker A.J. Tarpley, leaving at
23 after a pair of concussions. “I am
walking away from the game I love
to preserve my future health,” Tarpley said at the time. In 2015 there
was San Francisco rookie standout
Chris Borland, relinquishing millions after a single year in the NFL.
“If there was no possibility of brain
damage, I’d still be playing,” Borland told ESPN.
On and on the quiet drumbeat of
early exits goes, attracting far less
media attention than, say, a quarterback controversy or locker room
dust-up. Widows and children of
dead players give heartbreaking interviews, and after a somber wave
of respect, they fade from the conversation. Same with the NFL’s
nearly billion-dollar settlement with
former players. It’s a lot easier to
argue about Colin Kaepernick’s job
odyssey, or Rob Gronkowski’s latest
goof, than it is to confront an existential threat to the game.
At this point playing football—
even watching football—requires a
sharp dissonance between one’s enjoyment of it and the growing evidence. Make no mistake: I’m right
there with the shameless compartmentalizers. I love football, write
about it, often celebrate it in print
like a face-painted fan in the parking
lot. Come September, I’ll be back
with my pom-poms. Count on it.
But even the devoted have to feel
twinges of conflict now. Consider
this recent editorial in the Dallas
Morning News sounding the alarm
about football in Texas, where the
sport is basically religion.
“We’re as crazy about football as
anyone in Texas, but this new data
gives a sense of urgency to our
push for more study on concussions
in all sports,” the Morning News
editorial said. (That “all sports” is a
nod to games like soccer, hockey
and others, where concussions are
also a hazard. Still, football’s the
game where the head has been routinely weaponized.)
Football has always been a
trade-off. There are many, many
former players among us who feel
every second was worth it. And
there will always be players willing
to take a chance with their health
for a shot at their dream. They’re
not the only American laborers
making such a choice, and in football, there’s potentially millions to
be made.
In the meantime, current players
trade in their own rationalizations:
Those players in that CTE study
were from a different era.
The game is smarter now about
handling head injuries.
My equipment’s better.
I haven’t had a bad concussion.
You can get hurt doing anything.
“We’re not hitting head-to-head
all the time,” Jets linebacker Jordan
Jenkins told the Journal’s Jim Chairusmi on Saturday. “CTE is something we have to be worried about,
but that specific sample isn’t completely accurate. People who played
pre-2000s, that’s a different story.
There’s not nearly as much contact
[now]. We aren’t hitting in the first
days of camp—[years ago,] it was
like that. I feel this generation of
football is safer, not softer.”
It’s possible science will catch up
and offer a clearer view. My colleague Matthew Futterman has written about a blood test in development that will give a fast and
conclusive diagnosis of concussions.
But such a test “may reveal more
vividly how dangerous the game really is,” Futterman wrote. Dr. Ann
McKee, a neuropathologist and the
director of Boston University’s CTE
Center, told him it isn’t the big hits,
but a career of lesser blows, that appears to be the underlying problem.
“It’s looking like that—not the concussions, but the duration, the years
of playing—is the most significant
factor,” McKee told the Journal last
fall. McKee was one of the co-authors of the recent JAMA study.
Will anything ever alleviate the
worry? A few months ago, there
was a brief stir when Gisele Bündchen, the fashion mogul and spouse
of Patriots superstar Tom Brady,
aired her anxieties about her husband’s long-term health, and appeared to suggest he’s played with
head injuries that were not disclosed. Brady’s father, Tom Sr., has
said publicly would be hesitant to
let his son play football were he a
kid growing up today.
Brady has five Super Bowl rings,
and has gotten as much out of football as anyone who’s ever played it.
And he loves the game too much to
leave it. On the verge of turning 40,
he’s back out on the field for the
New England Patriots.
It’s hard to know what to say,
other than: Good luck.
MLB
BY JARED DIAMOND
Marc Wilmore solidified his love
affair with the Los Angeles Dodgers after receiving his driver’s license in 1979, when he and his
brother often sneaked off to $1.75
bleacher seats at Dodger Stadium.
Following the Dodgers on television became a ritual in the decades that followed.
This year, the Dodgers have the
best record in the majors—and
Wilmore can’t watch them on TV.
He hasn’t been able to do so for
the last four seasons, the result of
an ongoing dispute that has kept
more than 80% of the team’s
games out of millions of fans’ living rooms. As the Dodgers speed
toward the playoffs, Wilmore finds
himself tuning into highlights on
MLB Network instead.
“It’s like something has been
taken away from your life,” said
Wilmore, a writer and producer.
At a time when regional sports
networks are contentious components of cable packages because of
their high costs, these types of
carriage disputes aren’t uncommon. The YES Network, the New
York Yankees’ home, was blacked
out on Comcast for the entire 2016
season because of a similar feud.
The scope of the Dodgers’ discord, however, is virtually unprec-
edented. In an era when almost every sporting event imaginable is
broadcast on demand around the
world, one of baseball’s iconic
franchises hasn’t been televised to
a large portion of fans in its home
market—the country’s second-largest—since 2013.
Following that season, the
Dodgers and Time Warner Cable
launched a new channel, SportsNet
LA, the product of a 25-year
broadcasting agreement valued at
$8.35 billion. The network was
available to Time Warner Cable’s
1.5 million households, according
to SNL Kagan, a group within S&P
Global Market Intelligence. The region’s other major pay-TV providers, including DirecTV, refused to
carry it, citing high distribution
costs for all of their customers, including those who had no intention of watching the Dodgers.
Charter Communications’ acquisition of Time Warner Cable in
May 2016 increased SportsNet LA’s
reach, but the network remains
unavailable to a majority of payTV customers in the area, with no
end to the standoff in sight.
The upshot is that there is little
impetus to fix the situation. The
organization is doing fine: The
Dodgers get paid under the
SportsNet LA deal regardless. The
team’s average home attendance of
more than 45,000 leads MLB for
KEITH BIRMINGHAM/ZUMA PRESS
TV DISPUTE LEAVES
DODGER FANS IN DARK
The Dodgers’ average home attendance of more than 45,000 leads Major League Baseball for the fifth straight year.
the fifth straight year, and its
player payroll of close to $250 million is the highest in the sport.
But the absence of Dodgers
broadcasts isn’t hurting DirecTV
and others enough to make them
desperate to strike a deal. One
person familiar with the negotiations said that Time Warner offered the channel to other providers at a reduced rate before the
2016 season, adding that DirecTV
hasn’t consented to a meeting “at
any price” since April 2014. AT&T,
DirecTV’s parent company, declined to comment.
What’s unusual about the fight
in Los Angeles is the length of
time it has gone on and the number of people affected. The Yan-
kees-Comcast battle impacted
about 900,000 subscribers; DirecTV, the second-largest pay-TV
provider in the Los Angeles area,
has approximately 1.1 million subscribers alone, according to SNL
Kagan. All told, about 60% of the
region’s 4.2 million pay-TV households don’t have SportsNet LA.
Even a recent lawsuit couldn’t
pave the way to a resolution. In
November, the Department of Justice sued DirecTV and AT&T, alleging that DirecTV acted as the
“ringleader” of a collusion effort
with other local pay-TV providers
to keep SportsNet LA off the air.
The lawsuit was settled in March,
requiring DirecTV not to share
competitively sensitive informa-
tion with its rivals, but the settlement didn’t require DirecTV to
start carrying the channel.
Naturally, there has been plenty
of corporate back-and-forth, with
both sides blaming the other for
the ongoing fight. Stacey Mitch, a
spokeswoman for Charter, said
that the company “made a fair offer to DirecTV” and that “DirecTV
has simply not been interested in
carrying the Dodgers.”
None of this is any consolation
to a frustrated Dodgers fan base.
“They don’t care how it happens,”
said Gary Lee, the founder of the
popular Dodgers fan site, Dodgers
Nation. “Just make it happen.”
—Joe Flint contributed to
this article.
THE WALL STREET JOURNAL.
Monday, July 31, 2017 | A15
OPINION
Venezuela Heads for Civil War
Forget
all
you’ve heard
about dialogue
in Venezuela
between the
regime and
AMERICAS the opposition. Hungry,
By Mary
hurting VeneAnastasia
zuelans are
O’Grady
done talking.
The country is
in the early stages of civil war.
Sunday’s Cuban-managed electoral power play was the latest
provocation.
In my column two weeks
ago, “How Cuba Runs Venezuela,” I failed to mention Havana’s 2005 takeover of the
Venezuelan office that issues
national identity cards and
passports. It was a Castro-intelligence coup, carried out with
then-President Hugo Chávez’s
permission. The move handed
Havana the national Rolodex
necessary to spy on Venezuelans and surreptitiously colonize the country. Islamic extremists received Venezuelan
passports to give them false
cover when crossing borders.
Regime supporters got the papers they need to vote under
more than one identity.
This is something to keep in
mind when Venezuelan strongman Nicolás Maduro reports
the results of Sunday’s election
for representatives to draft a
new constitution. In polls,
some 80% of Venezuelans oppose Mr. Maduro’s “constituent assembly.” But the opposition
boycotted
Sunday’s
election because they know
Cuba is running things, that
voter rolls are corrupted, and
that there is no transparency
in the operation of electronic
voting machines.
Opposition leaders in Caracas are still trying to use peaceful means to unseat Mr. Maduro.
Last week they orchestrated an
effective 48-hour national strike
and on Friday another day of
demonstrations.
But grass-roots faith and
hope in a peaceful solution has
been lost. One symptom of this
desperation is the mass exodus
under way. On Tuesday the
Panam Post reported that
“more than 26,000 people
crossed the border into Colombia Monday, July 26, according
to the National Director of Migration in [the Colombian city
of] Cúcuta.”
Venezuelan applications for
asylum in the U.S. were up
160% last year, making Venezuelans No. 1 among asylum seekers to the U.S. According to the
United Nations Refugee Agency,
there were 27,000 Venezuelan
asylum seekers world-wide in
2016. By mid-July this year
there were already 50,000.
Last week the National
Guard arrested and badly beat
violinist Wuilly Arteaga, who
has become a national symbol
of peace. Many of those fleeing
say they fear that after Sunday
the regime crackdown will intensify. Some of those staying
behind have already begun to
launch counteroffensives. This
provides the regime an excuse
for increasing repression, yet
there is a growing sense that
violence is the only remaining
option.
The regime has the armored
vehicles, the high-powered rifles, and the SWAT gear. But
the population has the numbers
and the anger. It also may increasingly have support from
dissident government forces.
Consider what happened in
the municipality of Mario
Briceño Iragorry in the state of
Aragua earlier this month,
when the pro-government
mayor and the regime’s paramilitary, known as colectivos,
began looting shops that were
closed during a one-day national strike.
The regime has rifles
and armored vehicles,
but the people have
numbers and anger.
Eyewitness testimonies sent
to me by a source in Caracas
describe how townspeople
tried to defend the shops. The
mayor brought in paramilitary
reinforcements. But the town
was saved when the judicial
police arrived from the state
capital of Maracay. According
to the Venezuelan daily El Nacional, they arrested the
mayor, who was armed, and
“many” colectivos.
The judicial police, who
number around 12,000 and conduct criminal investigations,
are Venezuela’s largest national
police agency. They are also responsible for protecting Attorney General Luisa Ortega Díaz.
Ms. Ortega broke with the regime in March when the Maduro-controlled Supreme Court
tried to dissolve the opposition-controlled legislature. She
is an outspoken critic of Mr.
Maduro’s constituent assembly.
She has not been arrested,
probably because the regime
doesn’t want to confront the judicial police.
There are also dissident
members of the military but
their possible role in recovering democracy seems difficult.
The leadership is pro-regime
and though there are rumors
of grumbling among the lower
ranks, organizing a coup requires communication. The security and intelligence apparatus installed by Cuba makes
that challenging.
But a citizens’ revolt, led by
young people whose families
are starving, is already under
way. Last week after 24-yearold Ender Caldera died from
injuries sustained in a demonstration in Timotes, Merida,
his friends exacted revenge by
intercepting an armored National Guard truck on a mountain road and setting it afire.
Numerous other National
Guard vehicles have been
torched in Caracas.
The state of Barinas, where
the late Hugo Chávez was
born, was once a regime
stronghold. Today it is an antigovernment pressure-cooker
where dissidents burn debris
in the streets and confront the
National Guard. It is the state
with the highest number of
protest fatalities in the country since the street protests
began in April.
Mr. Maduro tried Sunday to
put a “democratic” imprimatur
on his power grab. But by the
afternoon there were at least
six dead in clashes with the regime. On the streets of Venezuela, it is now fight or flight.
Write to O’Grady@wsj.com.
The High Cost of Raising Prices
By Andy Kessler
M
ost investors love
companies with pricing power. Me? Not so
much. Consider the life of a
wealthy expat who asked a
broker to show him the most
expensive apartments in
Rome. The first, at €20,000 a
month, was a dump. So was
the second, at €18,000. Yet the
third apartment, at €16,000,
was well-maintained, with
gorgeous views of the Italian
capital. Sensing confusion, the
broker explained that the first
two apartments had sat empty
for months—and the owners
kept raising prices to make up
for the lost rent.
Sound familiar? The U.S.
Postal Service has seen firstclass mail volume drop from a
peak of 103.7 billion letters in
2001 to 61.2 billion last year. It
raised rates from 34 cents to
49 cents to make up the difference. Movie tickets sold in the
U.S. peaked at nearly 1.6 billion in 2002. Last year only 1.3
billion were sold. Meantime,
average ticket prices jumped
from $5.81 to $8.65.
The more prices rise, the
more customers bolt. It’s like
running up a down escalator
and never getting to the top.
With the stock market hitting
highs just about every day, investors need to be wary of
companies that raise prices to
make their numbers. These
stocks make for spectacular
sell-offs on even the slightest
earnings miss. Case in point:
Starbucks, the $4.65 macchiato maker, slid nearly 10% on
Friday.
Disney’s stock has been
stuck around $100 for the past
few years as investors bite
their nails over cord-cutters.
ESPN and cable networks were
over half of Disney profits in
2012. Figuring the party would
rage on, ESPN signed multibillion-dollar TV deals with the
National Football League and
the National Basketball Association. The Oakland Raiders’
Derek Carr makes $25 million
a year? Thanks, ESPN.
What do ESPN, eBay
and the post office
have in common? Ask
a kangaroo in a bar.
Yet the sports channel’s
subscribers have dropped
from 100 million in 2011 to 89
million today. So ESPN raised
prices, from $4.69 per sub a
month to $7.21 today, a fee five
times as high as any other
channel. This newspaper reported earlier this month that
Disney is in talks with cable
operator Altice USA to raise
prices again by perhaps 6% a
year and institute “minimum
penetration guarantees” to
make up the difference. We’ve
seen this movie before: ESPN
may be a few price increases
away from losing another 11
million subscribers.
I had a friend who worked
at General Electric for decades. He told me that in
strategy sessions with his
management, Jack Welch
would constantly berate them,
saying, “Any idiot can raise
prices.” Except he used a
stronger word than idiot to
coax them into squeezing out
costs, adding features, improving services and generally
delighting customers. Contrast
this with Berkshire Hathaway.
Vice Chairman Charlie Munger
found that with See’s Candies
“we could raise prices 10% a
year and no one cared. Learning that changed Berkshire.”
But $40 for a pound of Crunchy
Nutty Goodness Peanut Brittle?
Lobster is cheaper.
There’s a long list of price
bumpers. Walk down any supermarket aisle. Kellogg’s
prices constantly snap, crackle
and mostly pop. Procter &
Gamble toothpaste sizes
shrink faster than my cavity
count, always less for the same
price. Now private-equity
firms are circling P&G. Same
for Nestlé. Expect rising beer
and liquor prices soon.
Empires are lost on rising
prices. Until recently, rather
than innovate in mobile or
cloud computing, Microsoft
kept raising the price of its
Windows operating system to
computer manufacturers. Tablets and phones ate their
lunch. Fees rose at eBay until
Amazon took its growth away.
Booksellers raised effective
prices on digital books to offset the decline of physical copies. I never understood that
one.
The Durbin amendment to
2010 Dodd-Frank Act cut the
fees banks could charge on
debit-card transactions. Banks
simply cut back on free checking, adding annoying low-balance and overcharge fees,
making up the difference elsewhere. Not sure how this affected personal-safe sales.
Increasing prices attracts
others to attack your market.
Amazon’s Jeff Bezos warns:
“Your margin is my opportunity.” We’ll see devastation
from rising prices in lots of
places: ObamaCare premiums,
personal tax rates in Illinois,
cap-and-trade costs in California, wages in China.
Competition solves much of
this problem. Investors love
protected businesses, but
eventually relentless price increases kill them all. Consumers are the kangaroo at the
bar in the old cartoon: The
bartender says, “Say, we don’t
get a lot of kangaroos in here.”
The kangaroo replies, “No, and
with these prices, I can see
why!” Call me a kangaroo, but
I prefer to invest in companies
that lower prices and offer
more.
Mr. Kessler writes on technology and markets for the
Journal.
Last Supper at Nani’s Table
By Angela Rocco
DeCarlo
I
love big family dinners.
Bringing out the Wedgwood china and Waterford
crystal makes me happy. Cooking does not. I want to see
smiling faces around the table.
To me, the food is incidental.
For an Italian-American this is
something of a scandal.
I grew up in Chicago, and
my husband and I raised our
three sons there. We all live in
California now, but we haven’t
forgotten the endless Italian
family dinners of homemade
ravioli around my parents’
heavily carved walnut dining
table. Purchased in 1926, it
was the centerpiece of their
bungalow on South Mayfield
Avenue, a stone’s throw from
Oak Park.
After my parents and sister
died, the bungalow had to be
sold. Before that, though, I engineered a Last Supper at the
house. The whole gang
trekked 2,000 miles for a salute to our happy past in Nani
and Papa’s dining room.
What was meant as a pilgrimage to our Chicago home
served only to remind us how
many loved ones we had lost.
Italians seem to lack the capacity for frivolity where death is
concerned. I admire the Irish
in that regard. They have a gift
We came for the
memories. My son left
with the furniture.
for festive send-offs. We Italians hearken back to pagan
times when the only appropriate response to death was to
wail and curse the gods.
You never saw a sadder
group seated around a table.
The eldest son, Mark, a comedian and author, folded his
arms tightly across his chest.
“All the people who sat with
us around Nani’s table,” he
croaked. “They’re all gone.”
The middle son, Dr. Michael,
sat silent, tears in his eyes.
Danny, the youngest, had insisted on bringing his two
babies: “I want them to
spend at least one night under Nani and Papa’s roof.”
We sat for a while in silence, immobile with grief.
Then Mark piped up. “If no
one wants Nani’s table, I’d like
it,” he said. “And if no one
wants their bedroom set, I’d
like that, too.”
The pall was lifted, and
the memories started flowing. Mark had been the first
grandchild born to the family. Remember the crib that
Auntie Cookie had given
him? It fit snugly next to
Nani’s side of the bed so she
could hold his foot while he
sucked both thumbs. A born
comedian.
Now that Nani and Cookie
and all the rest had left us,
Mark wanted the bedroom set.
He also decided he needed the
lovely stained-glass window
from Nani and Papa’s bedroom. He spirited it away
without telling us.
We immediately planned a
First Dinner with Nani’s dining
table at Mark’s house in the
Hollywood Hills. Of course, my
husband and I were left to arrange transport of these
newly minted family heirlooms from Chicago to California. And we had the privilege of trying to fill the odd
space where the stained glass
had been.
In California we had Nani’s
table refinished and the
chairs reupholstered. Mark
installed the stained-glass
window in his front door,
where it looks beautiful. It
was a lot of work—and cost a
lot of money—but it was
worth it.
It’s a good thing to want to
hold on to one’s grandparents,
one’s family connections. Italians understand this, even if
we can’t put any cheer in our
teary wakes. Our First Dinner
at Mark’s house was wonderful.
Best of all, I didn’t have to
cook.
Ms. DeCarlo formerly covered culture, travel and entertainment for the Chicago Tribune and the Las Vegas
Review-Journal.
BOOKSHELF | By Robert K. Landers
The Adventurer
As Also-Ran
Lincoln’s Pathfinder
By John Bicknell
(Chicago Review, 355 pages, $26.99)
A
ccepting the Republican Party’s first presidential
nomination in July 1856, John C. Frémont declared
that the very “design of the nation, in asserting its
own independence and freedom,” made it imperative “to
avoid giving countenance to the extension of slavery.” This
assertion about the hottest issue of the day would be
Frémont’s “only substantive statement of the campaign,”
John Bicknell notes in “Lincoln’s Pathfinder.” At the time,
candidates for president customarily chose not to stoop to
speechifying or actively seeking the voters’ favor.
That was fine with Frémont, a dashing explorer (nicknamed “the Pathfinder”) whose best-selling reports on his
expeditions in the American West had made him famous.
Though he had served briefly in 1850-51 as one of California’s first U.S. senators, the 43-year-old former Democrat
was “a babe in the woods
when it came to politics,” Mr.
Bicknell says. Residing in New
York City, the Republican candidate spent most of his time
“fencing, riding his horse, and
taking long walks through
what was then still not an
entirely urban landscape.”
The campaign for Frémont
was left to others, chiefly his
wife, Jessie, the daughter of
former Sen. Thomas Hart
Benton of Missouri. Besides
organizing the campaign, she
made the case for Frémont to
newspapermen and influential public
figures whom she received in her New York
home. Though women couldn’t vote, Mr. Bicknell notes,
“Republicans were not shy about making direct appeals to
women”—presumably hoping they would sway the men in
their lives. Next to Frémont’s heroic but taciturn persona,
Jessie’s own appeared “beautiful, graceful, intellectual, and
enthusiastic,” as Frank Leslie’s Weekly described her.
Women’s clubs sprang up in the North in her name. Women
imitated her hairstyle, adopted her favorite color (violet)
for their outfits, named their newborns after her—and
turned out “in huge numbers” for Frémont rallies, which
had banners hailing “Jessie’s Choice.”
Frémont faced strong opposition in the general election.
Even his famous father-in-law, believing that preserving the
Union was more urgent than containing slavery, was voting
Democratic. Though candidate Frémont is the leading
character in “Lincoln’s Pathfinder,” his opponents and the
forces arrayed against the nascent, anti-slavery Republican
Party necessarily play large roles, too.
President Franklin Pierce, hoping for a second term,
might have been the Democratic candidate. But Pierce, of
New Hampshire, had alienated many in New England, a key
part of his political base, with his strong support for the
Kansas-Nebraska Act (1854). That law, instead of preserving
the 1820 Missouri Compromise’s ban on slavery north of a
certain latitude, let the settlers in each of the new territories of Kansas and Nebraska vote to decide whether the
state would be free or slave. The law led to violent conflict
in “Bleeding Kansas” and prompted many Northern Whigs
and some Northern Democrats who opposed slavery’s
extension to leave their parties for the new Republican one.
A dashing explorer before his nomination,
Frémont spent the presidential campaign fencing,
riding his horse and strolling in New York.
The Democratic Party, refusing in June 1856 to nominate
the weakened Pierce, instead nominated James Buchanan of
Pennsylvania, a Northerner with Southern sentiments.
Having recently served as U.S. minister to England,
Buchanan at 65 was an elder statesman with a glittering
political resume devoid of significant accomplishment.
A third candidate appeared on the November ballot:
former president Millard Fillmore, nominated by the
American Party of so-called Know Nothings. Distressed by
Irish and German immigration after 1845, Know Nothings
opposed full citizenship for Catholics and further Catholic
immigration. Fillmore tempered the party’s anti-Catholicism
and emphasized preserving the Union—which meant
appeasing the South. “He had no delusions of winning,” Mr.
Bicknell says, but hoped to throw the election into the
House, where “bargaining might produce almost any result.”
Mr. Bicknell, a former editor at Congressional Quarterly and
the author of “America 1844” (2014), tells the election story
skillfully—though the reader may experience some confusing
moments due to the large cast of characters and the multiple
parties and factions. But “Lincoln’s Pathfinder” is about more
than the making of the president, 1856. Mr. Bicknell explores
what was happening out in the country, where sectional
strife and violence were raising the specter of disunion.
It wasn’t only settlers in Kansas who were bleeding in
the mid-1850s. So were Native Americans and U.S. soldiers
in Nebraska, as the Army, in one case, turned a dispute
over a lost cow into a fight that wiped out a detachment of
its own soldiers and, in its effort to establish its authority a
year later, attacked a Sioux camp, slaughtering 85 Native
Americans. In Washington, a Northern antislavery senator
was beaten in the Senate chamber by a Southern
congressman. Mormons were fighting exposure and starvation
as they trekked westward to their Zion in Utah. Fugitive
slaves were desperately seeking freedom in the North, despite
the Fugitive Slave Act (1850). All of this Mr. Bicknell
captures in detailed excursions from the election narrative.
When the November 1856 ballots were counted, Buchanan
was the victor, though with the lowest percentage of the
popular vote (45.3%) since 1824. Fillmore got 21.5% but
received almost 44% of the popular vote in the South.
Frémont, for his part, got a third of the popular vote, all
but a smidgen of it in the North, winning a total of 11
states. Had he also carried Pennsylvania and Indiana or
Illinois (where Abraham Lincoln had given more than 50
speeches on his behalf), he would have been the victor.
In 1860, Lincoln added those three states, three others
and part of a fourth to Frémont’s 11 and became
president. Frémont may have been Lincoln’s “pathfinder,”
showing him how the country’s political forces responded
to a Republican candidate, but Lincoln had the political
skills that Frémont lacked.
Mr. Landers, a former editor at the Wilson Quarterly,
posts his reviews and essays at robertklanders.com.
THE WALL STREET JOURNAL.
A16 | Monday, July 31, 2017
OPINION
T
REVIEW & OUTLOOK
LETTERS TO THE EDITOR
The Regime Change Solution in Korea
Kill Executive Orders Held by Unilateral Fiat
he North Korean crisis is accelerating as also improve if the Kim regime is overthrown
dictator Kim Jong Un moves closer to from within by generals or a political faction that
holding U.S. cities hostage to nuclear wasn’t determined to threaten the world with a
blackmail. Some in the U.S. innuclear arsenal.
The CIA director talks
telligence community are adThe U.S. does have policy
mitting they have underestitools
to promote this strategy,
about separating Kim especially
mated the threat, and
if the goal of regime
from his missiles.
President
Trump
again
change is clearly stated. Some
tweeted his frustration with
are economic, such as the North
China’s refusal to restrain its
Korea Sanctions and Policy Enclient state. A new U.S. strategy is needed, so it’s hancement Act that cuts off North Korean banks
notable that CIA Director Mike Pompeo recently from the dollar-based international financial syssuggested that the Trump Administration may tem. The Trump Administration recently began
be contemplating a goal of regime change in to sanction Chinese banks and trading companies
Pyongyang.
that violate U.N. sanctions, and the list should be
“It would be a great thing to denuclearize the expanded.
peninsula, to get those weapons off of that, but
Washington could also promote the truth to
the thing that is most dangerous about it is the the North Korean people and elites about the
character who holds the control over them to- Kim family’s crimes. If army officers believe that
day,” Mr. Pompeo told the Aspen Security Forum Kim is leading the regime toward disaster, they
10 days ago. “So from the Administration’s per- will have an incentive to plot against him.
spective, the most important thing we can do is
The Trump Administration can encourage
separate those two. Right? Separate capacity that calculation by drawing a red line at further
and someone who might well have intent and long-range missile tests. Shooting down future
break those two apart.”
test launches would deny the North’s researchMr. Pompeo is right. Israel is believed to have ers the data to perfect their re-entry vehicles. It
nuclear weapons but its arsenal is defensive. would also show U.S. resolve to stop the North’s
Democratic India doesn’t threaten its neighbors sprint to obtain an intercontinental missile that
with a first strike. The nature of the regime mat- could strike the U.S. mainland.
ters as much as the weapons, and in North Korea
The other audience for this policy is in Beithat means the dynastic cult that attributes su- jing. Chinese leaders have long calculated that
pernatural powers to its young, reckless leader a nuclear North might serve the strategic purKim Jong Un.
pose of driving the U.S. out of the region. And
The U.S. has no time to waste after the if the U.S. pursues regime change in the North,
North’s latest missile test on Friday that experts Beijing will at first react angrily and blame
say flew far enough to put in jeopardy Los Ange- Washington for destabilizing the region.
les and Denver. Media reports last week say the
But a debate is already underway among ChiDefense Intelligence Agency now believes the nese elites about the wisdom of supporting the
North will be able to deploy a nuclear-capable Kim dynasty. China might decide to manage the
ballistic missile by next year. Thanks for letting process of regime change rather than allow a
us know. For years U.S. intelligence agencies chaotic collapse or war on the Korean peninsula,
have predicted the North was several years away perhaps by backing a faction within the army to
from posing such a threat.
take power.
Mr. Trump blasted China on Saturday for doA military dictatorship beholden to China is
ing “NOTHING FOR us with North Korea, just no guarantee of reconciliation between North
talk. We will no longer allow this to continue.” and South. But it would be preferable to the erChina continues to preach the illusion of a diplo- ratic Kim regime and its strategy of nuclear
matic solution even as it abets the North’s eva- blackmail. A new government would need to
sions of international sanctions. The U.S. and its grow the economy to build its legitimacy, and it
allies need to raise the ante if the world is going would need foreign investment.
to avoid another Korean war.
North Korea has become an urgent threat beA policy of regime change needn’t require an cause U.S. administrations pursued endless acinvasion or immediate unification of North and commodation. Let’s hope Mr. Pompeo is signalSouth Korea. Security in Northeast Asia could ing that this era is over.
V
Putin’s Advances in Syria
ladimir Putin confirmed Sunday that type that Moscow sold to Tehran and pose a pohe is expelling 755 U.S. diplomats from tential threat to U.S. and NATO aircraft flying
Russia in retaliation for new sanctions missions in the region.
passed last week by ConMr. Putin’s long-term lease
The Kremlin solidifies solidifies his position as the
gress. But a more important
thumb in the eye of the
primary defender of the Assad
its strategic gains
Trump Administration came
regime and sends a message to
for backing Assad.
last week as Mr. Putin moved
regional allies that it plans to
to consolidate Russia’s straremain even after the defeat of
tegic gains in Syria.
Islamic State around Raqqa.
On Wednesday Mr. Putin ratified a 49-year Russia’s other long-term Syrian lease is for the
lease on Hmeymim air base, near the coastal naval base at Tartus, where Moscow bases deSyrian town of Latakia. Russia has used the base stroyers, frigates, submarines, minesweepers
since 2015 to launch operations to defend Bashar and other ships.
Assad’s forces, attack U.S.-backed rebels and
The solidified Russian presence shows the naprovide cover for Iran’s Revolutionary Guard ivete of Barack Obama’s 2015 claim that Mr. PuCorps operations inside the country.
tin was entering “a quagmire” in Syria. Mr.
Russia bases a variety of offensive and defen- Obama’s abdication in Syria created the opening
sive capabilities at Hmeymim, including Sukhoi for Mr. Putin to intervene. But it should also be
SU-35 fighters, attack helicopters and, occasion- a dose of reality to President Trump’s hopes that
ally, advanced reconnaissance aircraft that fly Russia will cooperate to stabilize Syria by workin from Russia and land for refueling. The base ing out a diplomatic solution. The only solution
is also home to a contingent of Russian troops Mr. Putin wants is a victory for Mr. Assad, Iran
and advanced S-300 air defense systems of the and the Kremlin.
T
A Fiduciary Rule Reckoning
he Obama era imposed many destruc- establish control. In a flim-flam worthy of Robtive regulations, but few were more ert Preston’s con man in “The Music Man,” Laarrogantly conceived than the Labor bor made an end run around the Securities and
Department’s new fiduciary
Exchange Commission by
An opportunity for the claiming authority to regulate
rule on retirement accounts.
The good news is that the bu- Fifth Circuit to roll back these retirement accounts.
reaucratic victory may be
In the musical, Preston’s
regulatory overreach. character bases his authority
rolled back.
Though the new rule took
to lead a band on a degree
partial effect on June 9, Labor
from a nonexistent Conservarecently said it now opposes allowing an en- tory of Music in Gary, Ind. Labor did much the
forcement provision that would encourage same by invoking the 1974 Employee Retireclass-action lawsuits. President Trump also or- ment Income Security Act (Erisa), which gave
dered a review of the economic damage, which it the authority to reduce the regulatory burwon’t be complete until later this year. Mean- dens on IRAs. Labor turned that on its head and
time, the Fifth Circuit Court of Appeals on Mon- used Erisa to impose a new, industry-altering
day will hear arguments from business groups regulation.
seeking to overturn a lower-court decision upThe arbitrary and capricious way this rule
holding the rule.
was created and imposed is a fitting subject for
The rule applies a fiduciary standard to the the Fifth Circuit’s attention, not least for what
broker-dealers and insurance agents who assist it says about the legal doctrine of Chevron deftheir clients with IRAs. The claim is that this erence. Under this doctrine, courts are supwill protect ordinary investors from brokers posed to defer to regulatory agencies when the
who recommend certain investments because language from Congress isn’t clear. Labor natuof the commissions they get. But the new rule rally is banking on Chevron to sustain its naked
imposes many new burdens, from new disclo- power grab.
sure requirements to changes to compensation
But as Judge Brett Kavanaugh of the D.C. Cirpractices.
cuit Court of Appeals pointed out in a recent
As so often happens, the new reality is harm- dissent in an unrelated case, in a narrow class
ing the very people the rule is meant to help. of cases involving major agency rules “of great
One problem is that small investors often can’t economic and political significance,” the Suafford the higher costs associated with the fee- preme Court has articulated a “countervailing
based investments the rule promotes. Another canon” that reflects both common sense and
is that some firms will no longer serve the re- the Constitution’s separation of powers.
tirement funds of small business plans because
Judge Kavanaugh puts it simply: “For an
the account balances aren’t large enough for the agency to issue a major rule, Congress must
risk. Then there’s the added paperwork and clearly authorize the agency to do so. If a statcosts that are many times Labor estimates.
ute only ambiguously supplies authority for the
The main legal objection is the flimsy au- major rule, the rule is unlawful.” Let’s hope the
thority Labor used to up-end an industry and Fifth Circuit takes note.
“A Bad GOP Dream” (Review &
Outlook, July 20) gets it all wrong
on why I led a 10-state coalition
asking President Trump to rescind
the Obama administration’s 2012 Deferred Action for Childhood Arrivals
(DACA) program. Phasing out DACA
is about the rule of law, not the
wisdom of any particular immigration policy.
It’s a mystery to me how the
Journal could accuse our coalition
of political grandstanding when the
editorial board itself acknowledges
that “DACA has similar constitutional deficiencies” as the Obamaera memo that created the Deferred
Action for Parents of Americans
(DAPA) program in 2014. Indeed, in
both cases the executive branch
“usurped Congress’s law-writing
power,” as you say in your editorial.
The rule of law shouldn’t be dismissed because the Journal agrees
with policies contained in DACA.
That’s the very same rationale that
the Obama administration used
when creating DAPA, DACA and
many other administrative rules.
To be clear: Our request does not
ask the federal government to deport any alien currently covered by
DACA. Nor does it ask the Trump
administration to rescind DACA permits that have already been issued.
Rather, the request is to phase out
these unlawful actions by not renewing or issuing any new DACA
permits.
We agree with the Journal that a
way to address the constitutional
deficiencies of DACA is through
Congress. But our coalition took action because the program remains in
place through sheer unilateral executive fiat.
Last year, when a Texas-led lawsuit of 26 states culminated in the
U.S. Supreme Court blocking President Obama’s unlawful deferred-action policies, including DAPA, thencandidate Trump was completely
correct when he said that the
court “blocked one of the most unconstitutional actions ever undertaken by a President.” DACA is exactly like DAPA and needs to be
phased out to preserve the rule of
law and constitutional separation
of powers.
KEN PAXTON
Texas Attorney General
Austin, Texas
Your editorial is spot on. In
March, more than 550 college and
university presidents sent a letter to
President Trump thanking him for
his positive comments about the
outstanding group of young people
known as Dreamers. Your editorial
correctly notes that the president
and a bipartisan majority in Congress understand that Dreamers are
talented and high-achieving individuals who contribute in many ways
to American society. In terms of the
I was amazed reading your edito- illegal immigration challenges facing
rial “Running the Schumer Blockour nation, these people should not
ade” (July 11) in which you accuse
be on the list because, well, they
the Democrats of abuse of process
are not problems. They are assets.
and sabotaging the presidency. Tell
The small group of state attorme, what did you call it when, after neys general who are asking the
Justice Scalia’s death, Mitch McCon- secretary of Homeland Security to
nell looked President Obama right in end the program allowing Dreamthe eye and told him he would
ers to work and, in many cases, atnever get that Supreme Court vatend college in this country should
cancy filled? I don’t think that is
stop immediately while the Trump
what the Founders intended.
administration and Congress work
ETHEL GRILL on a solution that will allow these
New York bright and productive young people
to live here without fear and unSomeone needs to remind Sen.
certainty.
Schumer why Donald Trump was
TERRY W. HARTLE
Senior Vice President
elected.
American Council on Education
RICHARD LARUE
Orlando, Fla.
Washington, D.C.
The Dems Aren’t Any Worse
Than the GOP Under Obama
Americans Hate the Philosophy of ObamaCare
In “Congress Won’t End ObamaCare, So Here’s How to Mend It” (oped, July 24), Jason Furman fails to
address the major reason why many
Americans detest the Affordable Care
Act. It is not about economics and
exchanges, it is about philosophy of
government. The ACA significantly
expands the already extensive involvement of the federal government
in the provision and regulation of
health care and makes a hash of the
principles of limited government.
Particularly offensive is the individual mandate, which poses an existential threat to freedom of conscience.
Regarding health-care reform, Mr.
Furman quotes the bard: “striving to
better, oft we mar what’s well.” Setting aside the question of what is
“well,” here is some advice from Albert Jay Nock: “In proportion, as you
give the state power to do things for
you, you give it power to do things
to you.”
JAMES C. CARPER
Columbia, S.C.
teract to exchange goods and services, Mr. Furman argues that the
health-care market is a forum for rejiggering subsidies for buyers (the insured) and reimbursements for sellers (insurers)—all funded with
buyers’ (taxpayers’) money.
DEAN KEDENBURG
Leucadia, Calif.
Mr. Furman makes a powerful case
that the Affordable Care Act is working just fine, if you’re willing to
overlook the huge damage done to
about 15% of ACA participants who
do not get government subsidies.
The mortgage-sized premiums combined with huge deductibles mean
many of these people forego preventive care for which they must pay
out of pocket.
He recommends “strengthening
the individual mandate by increasing
the penalty for going without coverage, though neither party seems
likely to consider the idea.” But they
may not have a choice in the matter.
As one false start by the Democrats
Well-spun, but not a whole piece
and two by Republicans have made
of cloth. That is my reaction to Mr.
clear, you can’t have a health-insurFurman’s piece. You’d think from his
ance system unless you cover pre-exarticle that the only problem with
isting conditions, and you can’t cover
ObamaCare is the marketplaces. He
pre-existing conditions unless you
makes no mention of the exploding
have either mandatory participation
Medicaid costs.
or a single-payer system. Otherwise,
To improve the rest of ObamaCare, costs become prohibitive.
he likes the idea of plans “that would
JIM KUDLINSKI
Overland Park, Kan.
reimburse health insurers for large
losses from very sick enrollees,” “tarMr. Furman needs to explain how
geted subsidy increases to increase
it makes sense that people working
affordability,” and he wants to “enfull time cannot afford health care,
sure that insurance companies conwhile the able-bodied poor, too lazy
tinue to be reimbursed for the costto work, have no deductibles.
sharing subsidies they provide for
MARSHALL BULZA
households.” Sounds like Mr. FurLos Angeles
man’s plan is to throw more money
at the problem. I wish some Harvard
professor would tell me how America
is going to pay back all the debts we
are incurring.
NES COBURN
Minneapolis
THE WALL STREET JOURNAL
Pepper ...
And Salt
Mr. Furman contends that all we
really need to do to mend health care
is improve the marketplaces set up
by ObamaCare. For an economics
professor, Mr. Furman has a most
strange interpretation of a marketplace. While those of us who have
lived through the life lessons of Econ
101 view markets as places where
buyers and sellers competitively inLetters intended for publication should
be addressed to: The Editor, 1211 Avenue
of the Americas, New York, NY 10036,
or emailed to wsj.ltrs@wsj.com. Please
include your city and state. All letters
are subject to editing, and unpublished
letters can be neither acknowledged nor
returned.
“I’ve had a good life. I only wish that,
just once, I’d been stalked
on Facebook.”
THE WALL STREET JOURNAL.
Monday, July 31, 2017 | A17
OPINION
By David R. Henderson
And John H. Cochrane
C
limate change is often
misunderstood as a package deal: If global warming is “real,” both sides of
the debate seem to assume, the climate lobby’s policy
agenda follows inexorably.
It does not. Climate policy advocates need to do a much better job
of quantitatively analyzing economic costs and the actual, rather
than symbolic, benefits of their policies. Skeptics would also do well to
focus more attention on economic
and policy analysis.
Even if world temperatures
rise, the appropriate
policy response is still
an open question.
To arrive at a wise policy response, we first need to consider
how much economic damage climate
change will do. Current models
struggle to come up with economic
costs consummate with apocalyptic
political rhetoric. Typical costs are
well below 10% of gross domestic
product in the year 2100 and beyond.
That’s a lot of money—but it’s a
lot of years, too. Even 10% less GDP
in 100 years corresponds to 0.1 percentage point less annual GDP
growth. Climate change therefore
does not justify policies that cost
more than 0.1 percentage point of
growth. If the goal is 10% more
GDP in 100 years, pro-growth tax,
regulatory and entitlement reforms
would be far more effective.
Yes, the costs are not evenly
spread. Some places will do better
and some will do worse. The American South might be a worse place to
grow wheat; Southern Canada might
be a better one. In a century, Miami
might find itself in approximately
the same situation as the Dutch city
of Rotterdam today.
But spread over a century, the
costs of moving and adapting are
not as imposing as they seem. Rotterdam’s dikes are expensive, but
not prohibitively so. Most buildings
are rebuilt about every 50 years. If
we simply stopped building in
flood-prone areas and started building on higher ground, even the
costs of moving cities would be
bearable. Migration is costly. But
much of the world’s population
moved from farms to cities in the
20th century. Allowing people to
move to better climates in the 21st
will be equally possible. Such investments in climate adaptation are
small compared with the investments we will regularly make in
houses, businesses, infrastructure
and education.
And economics is the central
question—unlike with other environmental problems such as chemical pollution. Carbon dioxide hurts
nobody’s health. It’s good for plants.
Climate change need not endanger
anyone. If it did—and you do hear
such claims—then living in hot Arizona rather than cool Maine, or living with Louisiana’s frequent floods,
would be considered a health catastrophe today.
Global warming is not the only
risk our society faces. Even if science tells us that climate change is
ALAMY STOCK PHOTO
Climate Change Isn’t the End of the World
A dike and a windmill in Rotterdam, a city already prone to floods.
real and man-made, it does not tell
us, as President Obama asserted,
that climate change is the greatest
threat to humanity. Really? Greater
than nuclear explosions, a world
war, global pandemics, crop failures
and civil chaos?
No. Healthy societies do not fall
apart over slow, widely predicted,
relatively small economic adjustments of the sort painted by climate
analysis. Societies do fall apart from
war, disease or chaos. Climate policy must compete with other longterm threats for always-scarce resources.
Facing this reality, some advocate
that we buy some “insurance.” Sure,
they argue, the projected economic
cost seems small, but it could turn
out to be a lot worse. But the same
argument applies to any possible
risk. If you buy overpriced insurance against every potential danger,
you soon run out of money. You can
sensibly insure only when the premium is in line with the risk—which
brings us back where we started, to
the need for quantifying probabilities, costs, benefits and alternatives.
And uncertainty goes both ways.
Nobody forecast fracking, or that it
would make the U.S. the world’s
carbon-reduction leader. Strategic
waiting is a rational response to a
slow-moving uncertain peril with
fast-changing technology.
Global warming is not even the
obvious top environmental threat.
Dirty water, dirty air and insectborne diseases are a far greater
problem today for most people
world-wide. Habitat loss and human
predation are a far greater problem
for most animals. Elephants won’t
make it to see a warmer climate. Ask
them how they would prefer to spend
$1 trillion—subsidizing high-speed
trains or a human-free park the size
of Montana.
Then, we need to know what effect proposed policies have and at
what cost. Scientific, quantifiable or
even vaguely plausible cause-and-effect thinking are missing from much
advocacy for policies to reduce carbon emissions. The Intergovernmental Panel on Climate Change’s “scientific” recommendations, for example,
include “reduced gender inequality &
marginalization in other forms,”
“provisioning of adequate housing,”
“cash transfers” and “awareness
raising & integrating into education.” Even if some of these are worthy goals, they are not scientifically
valid, cost-benefit-tested policies to
cool the planet.
Climate policy advocates’ apocalyptic vision demands serious analysis, and mushy thinking undermines
their case. If carbon emissions pose
the greatest threat to humanity, it
follows that the costs of nuclear
power—waste disposal and the occasional meltdown—might be bearable. It follows that the costs of genetically modified foods and
modern pesticides, which can feed
us with less land and lower carbon
emissions, might be bearable. It follows that if the future of civilization
is really at stake, adaptation or geoengineering should not be unmentionable. And it follows that symbolic, ineffective, political grab-bag
policies should be intolerable.
Mr. Henderson is a research fellow with the Hoover Institution and
an economics professor at the Naval
Postgraduate School. Mr. Cochrane
is a senior fellow of the Hoover Institution and an adjunct scholar of
the Cato Institute.
Kim Jong Un Is Going Ballistic in More Ways Than One
By Henry Sokolski
And Zachary Keck
A
mong the many types of missiles North Korea is perfecting
is a short-range system that
Kim Jong Un is almost certain to export. Although not as worrisome as
the intercontinental ballistic missile
Pyongyang tested last Friday, this
weapon has a highly accurate front
end optimized to knock out overseas
U.S. and allied bases, Persian Gulf oil
fields, key Israeli assets and eventually even commercial shipping and
warships. The good news is there’s
still time to halt the system’s proliferation, but only if we act quickly.
The missile in question is an advanced version of a Scud, a 185- to
620-mile-range missile that has been
in use world-wide for decades. What
makes the version North Korea just
tested so different is that it has a
maneuvering re-entry vehicle, or
MaRV, which allows the missile’s
warhead to maneuver late in flight
both to evade missile defenses and
achieve pinpoint accuracy. China,
Russia, the U.S. and South Korea
have all tested MaRVs but decided,
so far, not to export them. Iran has
also tested a MaRV, raising questions
about Tehran’s possible cooperation
with Pyongyang.
The worry now is how far and
quickly this technology might
spread. Pyongyang has already sold
ballistic missiles to seven countries,
including Iran, Syria and Saddam
Hussein’s Iraq. These sales generate
precious hard currency for the Kim
regime, which is otherwise difficult
to come by as Washington continues
to ratchet up sanctions.
Pyongyang will have no trouble
finding customers. While only Iran
or Pakistan might consider purchasing a North Korean ICBM, 15 countries besides North Korea already
possess older Scud missile systems
they might want to upgrade. Getting
a MaRV version would be an affordable way to threaten targets that
previously could have been knocked
out only by a nuclear warhead or
scores of missiles.
If Syria—which previously purchased Scuds from North Korea—
were to acquire this missile, it would
need only a handful to wipe out the
bases the U.S. uses to launch airstrikes within its borders. Rebels in
Yemen have repeatedly fired Scuds
at Saudi air bases. Most have either
missed their targets or been shot
down by Saudi forces. A MaRV would
ensure a successful strike. If Hezbollah, a North Korean arms customer,
got its hands on the new system, it
could make good on its threats to
take out Israeli chemical plants and
North Korea has developed
advanced short-range
weapons and is almost
certain to export them.
the Dimona nuclear reactor. Eventually, if paired with capable surveillance systems, MaRV Scuds could
even be used against moving targets
such as warships or oil tankers.
If these missiles spread, hostile
nations and terror groups won’t
need nuclear weapons to threaten
America or its allies. They will be
able to upgrade their threat level by
merely trading up the Scuds they already have.
What should the Trump administration do about this? First, start
talking more candidly about the
threat. The U.S. Navy has been clear
that it’s now vulnerable to China’s
highly precise conventional MaRV
missiles. Our government now needs
to spotlight the threat North Korea’s
MaRV Scuds will pose if these systems proliferate globally.
Second, along with developing defenses to cope with this threat, the
U.S. needs to double down on blocking illicit missile exports. In 1987
Ronald Reagan worked with the
Group of Seven nations to create the
international Missile Technology
Control Regime, which today urges
missile suppliers (including Russia
and China) not to export missiles capable of lifting 1,100 pounds for distances over 185 miles—precisely the
type that North Korea might sell.
The MTCR also serves as the basis
for the 105-nation Proliferation Security Initiative, which allows countries to search ships and airplanes
carrying proscribed missile technology. These tools for stifling the illegal trade of missiles have already
been developed. It’s time to hone
and use them.
Finally, America must get serious
about restricting missile sales more
generally. President Reagan wanted
to eliminate what he called “nuclear
missiles.” His efforts to do so—the
MTCR and the Intermediate Nuclear
Forces Treaty, which banned an entire class of ground-based nuclearcapable missiles—suggest he was focused on eliminating missiles ideally
suited for surprise first strikes.
Given that today’s missiles are accurate enough to destroy their intended targets with conventional
warheads, it’s time to update our
thinking in this area.
Persuading the world’s major
powers to sign on to new missiletrade restrictions will be no simple
feat. Russia, for one, has already violated the existing INF Treaty. Yet before this violation, Moscow proposed
expanding the INF to include other
countries, especially China, the
world’s largest land-based missile
power. Bringing all parties to the table in good faith will be a long-term
proposition. But given the missile
threats that are already emerging,
the time to begin is now.
Mr. Sokolski is executive director
and Mr. Keck a fellow at the Nonproliferation Policy Education Center.
Claremont’s Social Justice Warriors Face the Music
By Sophie Mann
I
t’s been a rough year for free
speech on campus, but there are
glimmers of hope in Southern
California. The colleges of the Claremont University Consortium have
been laying down the law in response
to those who act out to advance their
idea of social justice.
Consider the case of Jonathan
Higgins. In June, Pomona College announced that Mr. Higgins had been
hired as the new director of the
Queer Resource Center of the Claremont Colleges, which Pomona administers. Elliot Dordick, a student
and writer at Pitzer College, looked
at the new administrator’s Twitter
feed and reported his findings at
TheCollegeFix.com and in the Claremont Independent, a conservative
student newspaper where I currently
serve as deputy editor. Mr. Higgins,
who is black, had responded to a
tweet asking, “Who are you automatically wary of/keep at a distance
because of your past experiences?”
His answer: “White gays and well
meaning white women.” In another
tweet he asserted: “I finally have
nothing to say other than police are
meant to service and protect white
supremacy.”
A day after the Fix and the Independent ran the article, Pomona announced that Mr. Higgins wouldn’t
be taking the position after all. In
an email to the Pomona student
body, Associate Dean Jan CollinsEaglin wrote that “we have reopened the national search for the
Director of the Queer Resource
Center.”
Then, two weeks ago, Claremont
McKenna College announced punishments for 10 students who had violated college policy in April during a
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raucous protest against Manhattan
Institute fellow Heather Mac Donald,
author of “The War on Cops.” The
protesters, who spent the evening
chanting “No cops, no KKK, no fascist
USA!,” blockaded entrances to the
building where Ms. Mac Donald was
speaking, so that she ended up addressing an almost empty hall.
“The blockade breached institutional values of freedom of expression
and assembly,” the college declared in
a statement. “Furthermore, this action violated policies of both the College and The Claremont Colleges that
prohibit material disruption of college
programs and created unsafe conditions in disregard of state law.” The
punishments included suspensions, in
contrast with Vermont’s Middlebury
College, where students who disrupted a lecture by social scientist
Charles Murray—and attacked and injured a professor as she was leaving
the venue—received nothing more severe than “probation.”
So instead of defending Dr. Higgins for his high “intersectional” victim status—Pomona had originally
touted him as “a motivational
speaker dedicated to empowering all
A withdrawn job offer to
a bigoted administrator,
and serious punishment
for disrupting a speech.
LGBTQ students with an emphasis on
students of color”—they treated him
as a professional whose behavior
made him unfit for the job. And Claremont McKenna kept its promise to
protect free speech on campus. In his
original statement following the protest, the college’s president, Hiram
Chodosh, wrote, “The breach of our
freedoms to listen to views that challenge us and to engage in dialogue
about matters of controversy is a serious, ongoing concern we must address effectively.” Bravo to him for
keeping his word.
Even at the University of California, Berkeley, where spring riots shut
down speeches by conservative controversialists Milo Yiannopoulos and
Ann Coulter, administrators now say
they’ll allow the College Republicans
to bring author Ben Shapiro for an
appearance in the fall, a request the
dean of students initially denied.
That actions such as these are
considered unusual, even courageous, is a sign of just how bad
things are on campus today. But colleges and universities across the
country should be following the examples being set in California.
Ms. Mann is a Robert L. Bartley
Fellow at The Wall Street Journal
and a rising senior at Scripps College, part of the Claremont University Consortium.
Notable & Quotable: Left-Wing Rhetoric
From “Assassination Fantasies”
by Seth Barron, City-Journal.org,
July 28:
Following President Trump’s declaration on Twitter Wednesday that
transgender people would not be
permitted to serve in the armed
forces, protesters converged on
Times Square. . . . A few handmade
signs stood out in the relatively
compact crowd, in particular one
that read, in black against a red
background,
Lincoln
Garfield
McKinley
Kennedy
Trump
The first four names on this list,
of course, are the presidents murdered in office, in chronological order; the last embodies the seeming
wish of many on the American Left
that someone put him on it for
real. . . . The sign was held aloft for
the duration of the event, in full
view of the crowd, the media, the
NYPD, and at least a dozen elected
officials, but garnered no comment
or acknowledgement. . . .
Public advocate Tish James spoke
at the rally, and, in view of the sign
calling for his death, led chants in
favor of resistance to Trump. James
first ascended to office in 2003, after her predecessor, Council Member James E. Davis, was shot to
death by a rival at City Hall. . . .
Council Member Corey Johnson,
speaking at Wednesday’s protest,
said that Trump’s announcement “is
not just an attack on trans service
members; this is an attack on the
entire United State military by this
president.” Another city legislator,
Jumaane Williams, tweeted a picture of the rally, including the sign
calling for Trump’s assassination,
with the inscrutable comment, “At
42nd street rally against @realDonaldTrump #transmilitaryban. You
cannot hate nearly. #istandforhumandignity”—presumably meaning
that there is no limit to the amount
of hate that one should feel toward
the president.
A18 | Monday, July 31, 2017
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Monday, July 31, 2017 | B1
THE WALL STREET JOURNAL.
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Europe’s Lenders Are Stabilizing
Finally a European Banking Recovery?
European bank shares
have soared...
Euro Stoxx Bank Index
...but profits are still stagnant.
European Banking Authority
weighted average of return on
equity for European banks
140
10 %
130
8
120
6
110
4
J
F
M
A
M
J
J
2012 ’13
’14
’15
’16
’17
Sources: WSJ Market Data Group (Euro Stoxx); European Banking Authority (equity)
By Max Colchester,
Jeannette Neumann
and Patricia
Kowsmann
solid if uninspiring results, a
welcome change that shows
the sector’s grinding restructuring is starting to pay off.
Not long ago, investors fretted about whether European
banks had enough capital to
survive
downturns
and
whether they would be able to
level their mountains of bad
loans. Many problems remain,
but investors now have moremundane worries, such as
profitability and margins. European banks still badly lag
behind their U.S. peers in
profits and dividends.
On Friday, UBS Group AG
and Credit Suisse Group AG
posted better-than-expected
profits; both have thrown
more effort into their wealthmanagement
businesses.
French bank BNP Paribas SA
logged a decline in its secondquarter profit but still beat
analysts’ expectations. Barclays PLC posted a loss, but
that came from charges linked
to its retreat from Africa.
“The capital question is
now done,” said Barclays Chief
Executive Jes Staley. “Now the
final thing is earnings.”
European bank shares have
shot up 50% over the past year
as investors bet on lenders
riding a European economic
recovery and a lightening of
regulations. European fund
managers are still piling into
the sector and see banks in
the European Union as the
most undervalued stocks, according to a survey this month
by Bank of America. A newfound optimism has permeated once-gloomy bank boardrooms.
“I think European banks are
at a turning point,” Frédéric
Please see BANKS page B2
JIM HUDELSON/THE SHREVEPORT TIMES/AP
THE WALL STREET JOURNAL.
LONDON—After years of
crisis Europe’s banks are finally stabilizing.
On Friday, several of Europe’s largest lenders reported
A Payless outlet in Louisiana. The retailer acquired more than $700 million in debt after a buyout.
Private Equity Takes Fire
As Some Retailers Struggle
Creditors question
if taste for dividends
fueled woes in sector
already suffering
BY LILLIAN RIZZO
A wave of retail bankruptcies washing through court
has revived an old debate
about the role of private-equity firms in accelerating the
problems of companies in distress.
Payless ShoeSource Inc.,
Gymboree Corp., rue21 Inc.,
and True Religion Apparel
Inc. were all acquired by pri-
vate-equity firms during the
past decade. Now, lawyers for
creditors have questioned
whether private-equity firms
share blame for the retailers’
financial collapse, in some
cases by loading debt on the
companies.
In the case of Payless, investors Golden Gate Capital
and Blum Capital, after a leveraged buyout in 2012, over
the next two years paid themselves $350 million in dividends—in total putting more
than $700 million in debt on
the company. In 2016, Payless
said in court papers, it had
about $2.3 billion in global net
sales, and nearly $840 million
KEYWORDS | By Christopher Mims
Why an iPhone Priced
At $1,400 Isn’t Crazy
How much
would you pay
for an iPhone?
This September, Apple
will unveil not
just the usual two new
iPhones, but also an ultradeluxe 10th-anniversary
model, according to reports
from multiple analysts. They
expect this device to include
premium features such as an
OLED screen, 3-D imaging
and a retina scanner, and
they expect it to command a
premium price, between
$1,000 and $1,400, depending on whom you ask.
The speculation has met
with howls of protest from
some Apple watchers. At
$1,400, it would cost twice
what an entry-level iPhone
7 does—and nearly twice
what the potentially comparable Samsung Galaxy S8
now costs.
Yet there is plenty of evidence that those who say
that price is untenable will
be eating crow come fall.
The launch of a pricey
new iPhone would have big
implications for Apple’s financials, and it would bode
well for Apple’s continued
dominance in mobile phones.
Here are five reasons for Apple to go big, pricewise:
Boosting the brand
An ultraexpensive edition
of the iPhone makes sense as
a shot in the arm for the
whole brand. Apple’s slow
and steady approach to adding new features and incrementally refining its gadgets
has given us a powerful device with a thriving ecosystem of apps and third-party
services. But the same forces
that made the iPhone ubiquitous and reliable have also
made it about as exciting as
a Toyota Corolla.
The next iPhone has the
potential to upend that
stodgy image by being a
“halo device,” says Janell
Townsend, a professor of
marketing at Oakland University in Rochester Hills,
Please see MIMS page B4
in debt.
Vendors and landlords alleged in court papers that the
dividend payouts, along with
other payments to the investors, left the retailer particularly vulnerable to collapse
just as technology and shifting
consumer behavior upended
the retail industry.
“The depletion of their coffers put the company on a
dangerous path that ultimately
led to this instant bankruptcy
filing,” a group of Payless’s
unsecured creditors said in
June court papers.
Golden Gate in a statement
said that the firm supported
Please see RETAIL page B2
Dealing With Debt
Three private-equity-backed retailers in bankruptcy, by the numbers
COMPANY IN BANKRUPTCY
Payless ShoeSource
Gymboree
True Religion Apparel
PRIVATE-EQUITY BACKER
Golden Gate Capital,
Blum Capital
Bain Capital
TowerBrook
Capital Partners
DEBT AS OF BANKRUPTCY
DEBT FROM LEVERAGED BUYOUT
$838M
As of filing
in April
$1.09B
As of filing
in June
$535M
As of filing
in July
$382M
$1.05B
$545M
From 2012 LBO
From 2010 LBO
From 2013 LBO
Note: Debt as of bankruptcy includes debt owed to banks
and other lenders. Excludes trade and other creditors.
Sources: Dealogic; bankruptcy filings; public filings
THE WALL STREET JOURNAL.
See more at WSJMarkets.com
Dow Faces
A Revolt
As DuPont
Deal Nears
BY DAVID BENOIT
A quartet of well-known activist investors has lined up to
pounce on plans to break up
DowDuPont, the $150 billion
chemicals behemoth that will
be created by merging Dow
Chemical Co. and DuPont Co.,
potentially waging an unprecedented attack on the firm and
Dow chief Andrew Liveris.
Jana Partners LLC and
Trian Fund Management LP
have privately levied concerns
with how the merged company
might be divided, according to
people familiar with the matter, joining Glenview Capital
Management and Third Point
LLC, which had already voiced
criticism. All four view Mr.
Liveris as a roadblock to shifting certain pieces in ways they
think will create value, the
people said.
The swelling discontent
threatens to upend his plans
to close out his legacy by
transforming two storied companies.
Since the merger announcement in December 2015, the
plan was to combine the two
firms and then splinter them
into three. The investors have
voiced a view that the materials company expected to
emerge from the breakup—the
new version of Dow Chemical—needs to shrink.
An attack by four activists
on one company or executive
would be highly unusual and
would complicate the already
daunting task of standing up
three separate, publicly traded
companies in the 18 months
after the merger closes, expected in August.
“The sole focus should be
on creating the right number
of spinoff entities and stocking
them with the right assets to
position each to create maximum long-term shareholder
value, and not on empirebuilding or ego-massaging by
Mr. Liveris or anyone else,”
Jana founder Barry Rosenstein
said in an email to The Wall
Street Journal.
In an interview from his office, Mr. Liveris called such assumptions “BS.”
“I’ve spent a decade rejiggering the company’s portfolio
for the future,” he said. “I will
tell you that I see nothing sacred in the portfolio, ever.”
He said the next iteration of
Dow will be poised for growth
and innovation.
Dow and DuPont are in the
midst of reviewing how they
will break up, and some
Please see DEAL page B8
INSIDE
HOLLYWOOD’S
NEWEST STUDIO
MAKES MOVE
MOVIES, B5
SPY
GLUT OF EGGS
SCRAMBLES
MARKET
COMMODITIES, B9
LIQUIDITY
RESILIENCY
PERFORMANCE
B2 | Monday, July 31, 2017
INDEX TO BUSINESSES
B
Banco Santander S.A. B2
Barclays.......................B1
BLUM Capital Partners
.....................................B1
Management.............B1
Golden Gate Capital... B1
Gymboree....................B1
H
Hilton Worldwide
Holdings....................A8
Honeywell International
.....................................A8
Hubba..........................B4
Pioneer Natural
Resources..................B2
Plan B..........................B5
Platterz ....................... B4
Prada ........................... B3
Prudential Financial ... A8
R
Real Matters...............B4
rue21 ........................... B1
I
S
Intel.............................B3
Invesco ...................... B10
Samsung Electronics
............................. B3,B10
SoftBank Group..........A1
Sony.............................B5
Sprint..........................A1
Star VPN.....................B4
J
Jana Partners ............. B1
JD.com.........................B3
C
K
T
Cal-Maine Foods.........B9
Charter Communications
.....................................A1
Comcast.................A1,B5
ConocoPhillips.............B2
Corning........................A8
Kering..........................B3
KLA-Tencor................B10
Tesla............................B5
Third Point..................B1
Time Warner...............B5
TowerBrook Capital
Partners....................B2
Trian Fund Management
.....................................B1
True Religion Apparel.B1
21st Century Fox........B5
D
Dow Chemical.............B1
DuPont ........................ B1
E
eBay ............................ A4
EOG Resources ........... B2
ExpressVPN.................B4
F-G
Ford Motor..................B3
Fulfil.IO........................B4
Glenview Capital
L
Lam Research ........... B10
Lumiata.......................B4
LVMH Moet Hennessy
Louis Vuitton............B3
M
Micron Technology....B10
Microsoft.............A4,B10
N
Netflix..................A11,B5
O
Oracle .......................... B5
U
UBS Group...................B1
V
Verizon Communications
.....................................A1
Viacom.........................B5
P
W
Payless ShoeSource ... B1
Walt Disney................B5
INDEX TO PEOPLE
B
F
P
Bellettini, Francesca
.....................................B3
Bezos, Jeff................B10
Bigelow, Kathryn
.....................................B5
Blaze, Matt.................A4
Boal, Mark...................B5
Boyd, Bill.....................A3
Breen, Edward ............ B8
Briefer, Laura..............A3
Butters, John..............B9
Field, Doug..................B5
Pitt, Brad.....................B5
C
Curchack, Walter ........ B2
D
Dudley, Alex................A1
E
Ellison, Larry...............B5
Ellison, Megan............B5
G
R
Gardner, Dede.............B5
Gates, Bill ................. B10
Guberman, Joel...........B4
Rai, Bipan....................B9
Richman, Doug............B3
Rosenstein, Barry.......B1
K
S
King, Stephen ............. B5
Krosby, Quincy............A8
Sharma, Ray ............... B4
Shultz, Dick.................B3
Spears, Chris .............. A3
L
Liveris, Andrew...........B1
Luettchau, Richard
...................................A12
M
Continued from the prior page
Oudéa, CEO of France’s Société
Générale SA said recently.
Now the test is whether
European banks can live up
to the hype. The main problem: Interest rates are still at
rock-bottom levels. “After a
long, long deleveraging process we are entering into a
phase where we can show
some growth” in Spanish
loan volume, Santander CEO
José Antonio Álvarez told
analysts.
But with interest rates so
low, it is hard to make significant profits on those loans.
The benchmark rate that underpins most Spanish mortgage loans, on which rates
typically float, is eventually
expected to rise “but nothing
spectacular,” Mr. Álvarez
said. Currently, it is still slipping.
In other countries, the
pain could be prolonged because customers have locked
in long-term, low-interest
loans; even if rates do go up
it could take time for banks
to see profits. In Germany, for
example, 85% of mortgages
RETAIL
Continued from the prior page
Payless, alongside Blum,
since the company’s 2012 acquisition, “including making
investments in critical systems and providing operational support that enabled
Payless to better compete in
the hyper-competitive and
rapidly changing retail environment.” Blum didn’t respond to requests for comment.
In general, private-equity
executives say they often
help companies improve operations and grow and that,
sometimes, economic forces
are beyond what any company could weather.
Moreover, retail woes are
much bigger than private equity and extend to many
companies that aren’t owned
by such investors. Some private-equity investments haven’t had the problems others are experiencing.
Bankruptcy cases are
messy by nature, and creditors—typically facing losses—
are often determined to minimize them. In Payless’s case,
which moved closer to exiting bankruptcy protection
U
Ungerleider, Howard...B8
Manfra, Jeanette........A4
Mnuchin, Steven ........ A2
Moscogiuri, Brian
.....................................B9
Musk, Elon..................B5
BANKS
T
Thomas, Sharoon........B4
W
West, James...............B2
Z
Zifkin, Ben .................. B4
are fixed rate, according to
Deutsche Bank.
To counter this, lenders
have been slashing costs and
shutting businesses. In Italy
alone, banks are planning to
cut at least 17,500 jobs this
year, according to a trade
union. Barclays has cut 60,000
people from its payroll over the
past year.
Banks have also moved
away from making loans to
European banks
moved at a glacial
pace to revamp after
the financial crisis.
selling products not linked to
interest rates, such as insurance or investment advice.
The number of big European banks with noninterest
revenue accounting for over
40% of their operating income rose to 54 from 49 in
the past year, according to
the European Central Bank.
Spanish banks CaixaBank SA
and Banco de Sabadell SA
beat analysts’ forecasts on
Friday as higher fees helped
Investors Await Detail on Shale Plans
BY LYNN COOK
AND ALISON SIDER
Some American oil producers might be pumping
the brakes on new drilling,
but as the leading shale
players get set to report
earnings this week, investors
will be watching closely to
see how much the industry
is really slowing its ambitious plans for
THE WEEK growth.
AHEAD
Investors and
analysts are eager to hear
management teams at Pioneer
Natural Resources Co., EOG
Resources Inc. and other
shale companies detail their
plans for the second half of
2017.
Anadarko Petroleum
Corp. and ConocoPhillips already reported and could
serve as bellwethers for this
earnings season. They lost
more than expected in the
second quarter as crude languished under $50 a barrel
for most of the period,
prompting them to announce
plans to rein in spending.
Together, they shaved a
combined $500 million out
of their $9.2 billion budgets.
Investors, initially skeptical, came around to the idea
of belt tightening—when
they learned where it was
happening. Anadarko’s stock
dropped 3% in overnight
trade last Monday after its
cuts were announced. But the
stock rallied back Tuesday
morning when Chief Executive Al Walker and other executives explained that the
preponderance of cuts would
come from international and
deep-water divisions, not U.S.
shale operations.
In fact, Anadarko is in the
process of restarting 3,000
wells in Colorado shale country that shut in the wake of a
deadly home explosion in the
spring.
boost profit. The sudden
jump in bank fee income
since the start of the year
“was like someone flipped a
switch,”
said
Kinner
Lakhani, an analyst at
Deutsche Bank.
European banks moved at
a glacial pace to restructure
aft er the financial crisis but
have acted more rapidly over
the past year. A handful of
teetering banks in Italy and
Spain have been wound
down, merged or bailed out.
In June, Spain’s struggling
Banco Popular Español SA
was rescued and sold to Santander. Earlier this month,
the Italian government took
control of long-troubled
Banca Monte dei Paschi di Siena SpA. Meanwhile, big
lenders have tapped shareholders to fund extensive restructuring. UniCredit SpA,
Deutsche Bank and Credit Suisse raised a total of nearly
$30 billion of fresh equity
from shareholders.
Some of the overhauls are
starting to work. On Friday,
Bank of Ireland PLC announced it will pay its first
dividend since the country
was mauled by the financial
crisis. The once-limping
Banco Comercial Português
Machinery used to fracture shale formations at a Royal Dutch Shell site near Mentone, Texas.
“We’re going to continue
to watch the market, see
what oil prices do, try
to pace our spending this
year and next year,” Mr.
Walker said.
ConocoPhillips said it is on
track to end the year with less
than $20 billion in debt,
thanks to extensive oil-and-gas
field sales in Canada and the
natural-gas-rich Barnett Shale
near Fort Worth, Texas. The
company is dialing down
spending for the rest of this
year by $200 million but continues to ramp up in oily areas
like the Eagle Ford shale of
south Texas. Conoco shares
rose 6% last week.
U.S. oil drillers have redeployed more than 240 rigs
since the start of the year, but
those increases are slowing
substantially. The secondquarter rig count was only
23% higher than the first
quarter, and so far in July it is
up just 5% over the second
quarter, according to a report
from RigData.
Even if U.S. energy outfits
take a break from drilling,
oil production is likely to
keep rising. That is because
many producers in the Permian Basin of West Texas and
New Mexico have hedging
contracts on 65% of their
production for the rest of
this year at $50 a barrel, ensuring they will get that
price even if crude trades
lower, according to a new
analysis from IHS Markit
Ltd.
Also, many wells around
Texas have been drilled but
not yet fracked, the completion stage that unlocks fuel
from the ground. According to
the latest federal estimate,
the number of drilled-but-uncompleted wells is over
6,000—a backlog that could
take the next 18 months to
work off as wells are hooked
up to pipelines, analyst James
West of Evercore ISI said.
Pioneer, which reports
Tuesday, expects to drill its
1,000th well in the Permian
later this year as it charts a
path to pump one million
Lending in the eurozone has
slowly picked up.
Annual percent changes
Companies
4%
an increase in the availability of bank loans over the
past six months, according to
a recent survey by the ECB.
Still, hurdles remain. First,
there are too many banks.
ECB officials have repeatedly
said that the sector needs to
consolidate, but bank executives remain wary of doing
deals. Second, €1 trillion
($1.18 trillion) of bad loans
continues to sit on balance
sheets. While the amount of
ers. The creditors, which are
slated to receive nothing,
point to dividends and fees
received by Bain and its affiliates. Representatives for
Gymboree and Bain declined
to comment.
True Religion filed for
chapter 11 protection in early
July. Shortly after, a junior
debt lender, Ares Management LP, raised concerns
about the proposed restructuring plan, which will leave
the creditor with a slim recovery while private-equity
backer TowerBrook Capital
Partners LP is slated to receive the same or higher return as Ares. Typically in
bankruptcy, lenders expect to
be paid before equity owners.
TowerBrook Capital took
the denim retailer private in
an $835 million buyout four
years ago. During the firstday hearing, an attorney for
Ares said the firm didn’t support the plan and an investigation may be needed to better understand TowerBrook’s
role. A TowerBrook spokeswoman declined to comment,
while a True Religion representative didn’t respond to
requests for comment.
In Payless’s case, creditors
argued that hundreds of millions of dollars in debt put
on the retailer due to Golden
Gate and Blum ultimately led
to the retailer’s financial collapse. Since the 2012 buyout,
Payless took on more than
$700 million in debt to support the leveraged buyout,
dividend recaps and payments related to a so-called
advisory agreement, court
papers show.
During that same time,
Payless was also grappling
with dwindling mall foot
traffic, consumers shifting to
spending online, changing
trends and many store
leases. Since the bankruptcy
filing, hundreds of Payless
stores have been closed, and
employees have been laid
off.
For Payless’s creditors, the
tactic of raising their voice in
court paid off, to an extent.
Following heated exchanges
in filings and in the courtroom, as well as private negotiations, the private-equity
backers and lenders have
agreed to give more than $20
million to the company,
which will be used toward
beefing up the creditors’ recoveries. Meanwhile, the
creditors have agreed not to
bring any legal claims against
the backers following the
bankruptcy filing.
Bad loans are declining.
Ratio of nonperforming loans
and advances
Households
Spain
25%
2
20
0
15
–2
10
–4
Ireland
Italy
Portugal
5
2011 ’12
’13
’14
’15
’16
’17
2014 ’15
’16
’17
Sources: European Banking Authority (loans); European Central Bank (lending)
THE WALL STREET JOURNAL.
SA announced it is raising
salaries to precrisis levels after an average 6% cut since
2014. Its CEO, Nuno Amado,
said “it is a sign of normalization for BCP, both internally and for the outside.”
This is feeding back into
the European economy. Banklending volumes have been
gradually recovering since
early 2014. Small and medium-size businesses in the
eurozone have said there is
Paying the Boss
Dividend-related leveraged loan
and high-yield bond volume for
private equity-owned retail
borrowers
$20 billion
15
10
5
0
2010 ’11 ’12 ’13 ’14 ’15 ’16 ’17
Note: Data exclude ‘retail food and drug’
sector. Amount for 2017 is through June.
Source: LCD, a part of
S&P Global Market Intelligence
THE WALL STREET JOURNAL.
True Religion Apparel filed for bankruptcy protection this month.
this month, lenders owed a
majority of its debts will take
control of the company.
“A large number of private-equity takeovers of public retailers occurred in the
2011 to 2013 time frame,
when money was cheap and
interest rates were low,” said
restructuring attorney Walter
Curchack of Loeb & Loeb LLP.
“Retail is a cyclical business
and there’s little room for error, which puts an overleveraged retailer particularly at
high risk.”
Since 2010, more than $90
billion in leveraged loans and
high-yield bonds were raised
for private-equity-owned retail borrowers to make dividend payouts to their investors, according to LCD, a part
of S&P Global Market Intelligence. That is in addition to
the leverage often assumed in
the buyout itself.
Gymboree’s June bankruptcy filing occurred days
after it couldn’t make a semi-
annual interest payment on
debt dating back to Bain Capital’s $1.8 billion 2010 buyout. Public filings show Bain
also received fees from Gymboree in the years after the
buyout.
Earlier this month, Gymboree’s unsecured creditors, including vendors and landlords owed an estimated
$220 million, said in court
papers they have been investigating potential claims
against Bain and other insid-
barrels a day in a decade, up
from a little more than
235,000 barrels a day in
2016.
Pioneer executives have
long been bullish on U.S.
shale despite low oil prices,
in part because the company
has hedged much of its production to get higher-thanmarket prices, but also because the company continues
to wring out costs from its
operations.
However, even Pioneer has
signaled its outlook for this
year and next could be tempered if low oil prices persist—an idea that is getting
more traction since the head
of Royal Dutch Shell PLC last
week warned that oil prices
might be “lower forever.”
“We’re not going to drill
ourselves into oblivion,” Tim
Dove, chief executive of Pioneer, said in late June at an
energy conference hosted by
J.P. Morgan. “It just doesn’t
make sense.”
—Bradley Olson
contributed to this article.
bad loans is starting to ease,
clearing them could be a
slow process, Italy’s bad
loans could take a decade to
work through before coming
in line with wider European
levels, according to an analysis by Morgan Stanley. A
crash in shipping lending
continues to pinch German
banks. A restructuring of
Deutsche Bank is far from
complete.
Tougher regulations could
also be on the horizon. The
ECB is reviewing how the
banks model risk. In January,
new accounting rules will start
to be phased in that force European banks to cover for potential losses on loans in real
time, which is expected to add
billions to their loan provisions. The global Basel rules
are still being hammered out,
which could result in banks
having to change how they
calculate risk. European bank
executives are in the dark over
how onerous those changes
will be.
“It could get worse before
it gets better,” said Filippo Alloatti, senior credit analyst at
Hermès Investment Management.
—Giovanni Legorano
contributed to this article
Signs of Health
RICHARD B. LEVINE//ZUMA PRESS
A
BUSINESS & FINANCE
MATTHEW BUSCH/BLOOMBERG NEWS
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.
Alibaba Group Holding
.....................................B3
AllianceBernstein
Holding....................B10
Amazon.com........B5,B10
Anadarko Petroleum
.....................................B2
Annapurna Pictures....B5
Apple...........................B4
Ares Management......B2
THE WALL STREET JOURNAL.
* ***
THE WALL STREET JOURNAL.
Monday, July 31, 2017 | B3
* * * *
BUSINESS NEWS
Aluminum Car Parts Lose Speed
Samsung
Tops Intel
As Biggest
Chip Firm
BY CHESTER DAWSON
Samsung Electronics Co.,
the South Korean technology
company best known for its
smartphones and television
sets, has taken the title of
world’s largest chip maker by
revenue, knocking Intel Corp.
from a perch it held for nearly
a quarter-century.
Aluminum may not be the
new steel, according to a new
study, as auto makers’ use of a
single predominant lightweight
material such as aluminum in
vehicles like Ford Motor Co.’s
F-150 pickup is giving way to a
patchwork of materials replacing heavier sheet metal.
Long seen as a lighter but
far more expensive alternative
to steel for automotive manufacturers, aluminum has enjoyed a surge as engineers
scramble to shave weight amid
tighter emissions standards.
A study to be issued Monday by Ducker Worldwide says
the use of aluminum in vehicles
is projected to grow 42% over
the next decade, but at a slower
pace than in previous forecasts.
The average vehicle sold today weighs nearly 4,000
pounds and is made of rubber,
plastic, steel, aluminum, upholstery and other materials.
Auto makers have worked to
make every component—from
JEFF KOWALSKY/BLOOMBERG NEWS
Study expects use of
the metal to grow, but
other materials also will
take the place of steel
Ford shifted in 2014 from steel sheet metal to aluminum for its best-selling F-150’s body panels.
body panels and engines to
brackets and windshields—
lighter, often by substituting
materials that can add costs
but improve miles per gallon.
Ford’s shift in 2014 from
steel sheet metal to aluminum
for the best-selling F-150’s body
panels, which represent a
meaty portion of a vehicle’s
structure, was seen as a tipping
point for aluminum because
sales and production volumes
of Ford’s truck are so high.
Designers more recently
have decided to use a mix of
materials including magnesium
and carbon fiber to achieve
weight savings, and steelmakers have rolled out stronger but thinner, lighter steels.
At the same time, the
Trump administration is considering softening fuel econ-
omy regulations, which could
slow so-called light-weighting
efforts as urgency fades.
“You’ll probably never see
anything again that’s as aluminum intensive,” Dick Shultz,
co-author of the Ducker study,
said in an interview. While Ford
slimmed down its F-150 by 700
pounds via aluminum, it also
added $1,000 in costs per vehicle, he said, while predicting the
next generation F-150 would
likely use less aluminum in favor of other materials.
A Ford spokesman declined
to comment on the next-generation F-150.
General Motors Co., Ford’s
chief rival, has said its updated
full-size trucks due in 2019 will
use a blend of materials to
achieve weight savings.
“Everyone is pursuing the
multimaterial approach,” said
Doug Richman, a vice president at Kaiser Aluminum and
technical chair of trade group
The Aluminum Association’s
transport arm. “It’s a pretty
clear and durable trend that’s
been helped by significant advances in joining technology
and production experience.”
The Ducker study was commissioned by the aluminum
trade group; steelmakers also
commission Ducker for research.
Auto makers have improved
fusing steel with other materials on assembly lines to
achieve a better balance of
strength and durability. The
new Chrysler Pacifica minivan,
for example, has all-aluminum
sliding doors, the industry’s
first high-volume magnesium
rear liftgate and 22% more
high-strength steel throughout
its body than its predecessor.
Saint Laurent Readies Online Sales in China
BY MATTHEW DALTON
PARIS—French fashion house
Saint Laurent is launching online sales in China, a major step
in the storied brand’s efforts to
expand in China’s rapidly growing domestic market.
Saint Laurent Chief Executive Francesca Bellettini said
the brand is teaming up with
online fashion retailer Farfetch
to sell over the internet in
China. The brand will sell merchandise on a new online platform recently announced by
Farfetch in a joint venture with
JD.com, China’s second-biggest e-commerce company.
The announcement marks a
cautious foray into China’s
freewheeling internet market
by one of the most elite brands
in fashion. Until relatively recently, luxury firms had been
reluctant to sell over the internet in China because of concerns that China’s main online
retailers, JD.com and Alibaba
Group Holding Ltd., run marketplaces that are riddled with
counterfeit goods. Only a few
luxury brands have the size to
attempt online sales in China
without teaming up with either e-commerce giant.
But Farfetch’s partnership
with JD.com helped ease concerns about knockoffs, Saint
Laurent said.
“Protecting the brand from
counterfeiting is fundamental
for Saint Laurent,” Ms. Bellettini said in an interview, adding that the agreement with
Farfetch would “guarantee to
our clients secured purchases
in addition to a very efficient
service.”
The importance of the Chinese domestic market is overcoming the industry’s concerns
about relinquishing some control over physical distribution
there. Chinese consumers, who
account for 30% of global luxury spending, are increasingly
shopping at home—partly the
result of efforts by Beijing to
block Chinese tourists from
bringing expensive merchandise back from abroad.
That means selling to the
Chinese consumer in China has
become key to the luxury industry’s growth.
Ms. Bellettini said Saint
Laurent’s sales to Chinese consumers have surged in recent
years despite a slowdown in
the global luxury market. Kering Co., which owns Saint Laurent, Gucci and other brands,
last week reported that sales
rose “sharply” across Asia,
“particularly in mainland
China.”
“There is this population of
millennial Chinese, very well
educated, in particular Chinese
university students, that are
incredibly literate with the
brand,” she said.
Saint Laurent has taken a
relatively conservative approach to expanding in China.
It has only 18 stores in the
country, concentrated in Beijing and Shanghai, compared
with dozens opened by luxury
competitors such as Prada
SpA and Louis Vuitton. Ms.
Bellettini said the online sales
push will help the brand reach
customers in smaller Chinese
cities without risking overexpansion. “We will be able to
deliver to these locations without a physical store,” Ms. Bellettini said.
By Timothy W. Martin
in Seoul and
Ted Greenwald
in San Francisco
Samsung’s semiconductor
unit, whose fortunes come
largely from selling memory
chips used in mobile devices,
delivered second-quarter sales
of $15.7 billion and operating
profit of $7.1 billion. Intel,
which dominates the calculating engines known as microprocessors, reported quarterly
revenue of $14.8 billion and
operating profit of $3.8 billion.
It marks the first quarter in
which Samsung, for years a
distant No. 2 to Intel in the
roughly $365 billion semiconductor industry, has topped
the Santa Clara, Calif.-based
chip pioneer in semiconductor
sales, according to IC Insights
Inc., a semiconductor-market
researcher. It is an advantage
industry analysts expect Samsung to maintain at least
through the end of this year
as a shortage of memory chips
persists.
Samsung, which started
making chips for wristwatches
in the 1970s, has become a
dominant player in two major
types of memory chips: one
for data storage, known as
NAND, and another, known as
DRAM, that gives devices their
multitasking speed by holding
data needed in the short term.
A surge in demand for
memory has caused prices to
soar over the past year, benefiting Samsung.
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B4 | Monday, July 31, 2017
THE WALL STREET JOURNAL.
* *
TECHNOLOGY
WSJ.com/Tech
Canada Touts Tech Jobs as U.S. Wavers
Stepped-up campaign
for workers focuses
on uncertainties under
Trump administration
MIMS
Continued from page B1
Mich., and a visiting professor at the University of Zurich. Halo devices have exceptional features
representing key attributes
of a brand and serve to influence consumers’ perceptions of all products in the
line, she says.
Take the Dodge Challenger SRT Demon. It has an
840-horsepower engine,
making it the world’s fastest
production car. Not many
people will shell out $85,000
for one, but it can draw
them to its lesser siblings,
which start at $27,000.
Crazy new tech
A big reason companies
have halo products is that
they give them a way to test
new technologies, says Dr.
Townsend. While many of
the potential features of the
anniversary iPhone are found
in other high-end smartphones, notably the Galaxy
S8, Apple is said to be cooking up other technologies,
such as an advanced 3-D sensor array.
If crammed into a conventional iPhone, all the
new hardware might take
too big of a bite of Apple’s
margins. Yet while Dodge is
unlikely to put an 840horsepower engine into the
company’s family-friendly
crossover sport-utility vehicle, Apple has a history
of spreading its high-tech
components across entire
product lines once their
Canada is trying to lure talent to its startups such as Shopify as the U.S. curbs immigration.
ing tech sector.
“A year ago, the only people
I could talk to were ex-Canadians who missed home, but the
talent was lacking,” said Mr.
Zifkin, who returned last month
from a recruiting trip in the
San Francisco Bay Area. There,
he met with 20 candidates for
senior management positions.
“This time it’s much better.”
The effort comes as the
Trump administration in April
launched a review aimed at
stricter enforcement of immi-
gration rules and other laws
governing entry of workers
into the U.S.
Any changes could affect
thousands of foreigners on
H1-B visas, widely used to employ high-skilled workers in
the U.S. tech and other whitecollar sectors.
“You’re running a startup.
You’re involved in one of the
most uncertain businesses of
all time,” Ray Sharma, CEO of
Extreme Venture Partners, says
he tells tech founders who
aren’t U.S. citizens but are living in the U.S. or considering it.
“Now you’re introducing your
residency as part of that uncertainty? That’s crazy.”
Extreme Venture, based in
Toronto, helps relocate startups based in the U.S. and elsewhere to Canada and assists in
securing Canadian citizenship
for employees.
“It’s such an easy sell sometimes,” said Mr. Sharma. “It’s
like, ‘You had me at Canada.’ ”
One taker was fulfil.io, a
costs come down.
The iPhone's average selling prices peak over the holidays, with the
new phones. iPhone sales drive Apple's gross profit margin, which is
off its March 2015 high.
Supplies are limited
Cutting-edge products often can’t be made in quantities Apple demands. During
its most recent holiday quarter, Apple sold nine iPhones
a second. Apple faced supply
shortfalls for the iPhone 7
Plus, and before that for the
iPhone 6, and analysts are
saying the 10th-anniversary
iPhone might face delays.
The solution, as Apple
watcher John Gruber observed, is simply to charge
more. If Apple’s high-end
iPhone is aimed at a new
segment—people willing to
pay more than $1,000 for a
phone—Apple can charge
whatever it likes to balance
supply and demand for the
device, rather than worrying
about whether increasing the
price will hurt its overall
market share. And even if
the high-end iPhone’s list
price were “just” $1,000, Apple could get people to pay
more—as it always does—by
offering a small amount of
storage on the base model,
and then charging for more.
All about the ASP
With a phone priced upward of $1,400, Apple would
have the opportunity to
move the single most important metric on its balance
sheet: the average selling
price of a new iPhone. This
number, which hit a record
of $695 in the fiscal quarter
ended in December 2016, is
the most important driver of
Apple’s gross profit margin.
In technology, prices usu-
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lawyer Joel Guberman said
was “unworkable.”
But last month, the Canadian government announced a
pilot program aimed at cutting
this kind of wait and the red
tape involved. Under the program, work permits and temporary resident visas are issued in two weeks instead of
one year.
Platterz Inc., an online-catering platform, has already
used the government program
for three new hires, two of
whom arrived in Canada last
week. “When we started, we
had someone from the government call us every day to walk
us through the process,” said
Eran Henig, CEO of the Toronto startup. “I never would
have expected that kind of attention from the government.”
Canada’s stepped-up recruitment effort is getting under way at a time of expansion
in its tech industry. Startups
such as Shopify Inc., which develops software for online retailers, and Real Matters Inc.,
a real-estate data and software
firm, have launched initial
public offerings in recent
years. The country is becoming a hub for artificial intelligence. Venture-capital investment hit a record in 2016, with
C$3.2 billion invested in 530
deals, up 41% from the previous year, according to the Canadian Venture Capital and
Private Equity Association.
Cash Cow
iPhone's average selling price
$695
$700
600
500
400
300
200
100
0
1Q 2013
ADNAN ABIDI/REUTERS
TORONTO—Canada’s technology sector, which has long
struggled to compete with
sunny Silicon Valley, is seizing
on the U.S.’s hardening stance
on immigration in a bid to lure
top talent.
The pitch: Come to Canada,
where there are cosmopolitan
cities, affordable health care
and, most important, more
certainty around work permits
and entrance requirements
that many executives feel is
lacking under the Trump administration.
Ben Zifkin, chief executive
of Hubba Inc., tells potential
employees currently in the
U.S.: “You don’t have to stay in
Canada forever, just the current presidential term.” The
company, based in Toronto,
helps online retailers manage
product information.
Mr. Zifkin says he is only
half-joking. But his message is
part of a coordinated push for
talent by Canadian executives,
government officials and venture capitalists to pounce on
what they see as a rare opportunity for the nation’s matur-
KEVIN VAN PAASSEN/BLOOMBERG NEWS
BY DAVID GEORGE-COSH
AND JACQUIE MCNISH
cloud-based software platform
that aids companies in their
supply-chain operations. Two
of the company’s founders decided to come to Canada in
May from their native India
after they had to leave the U.S.
when their H1-B visas expired
and renewal proved difficult.
They closed their first sales
deal a month later.
“Canada looks like the right
place to grow,” said one, Sharoon Thomas, fulfil.io CEO.
“I’m just surprised that we
didn’t think of it first.”
It can still be difficult to
poach engineers and programmers from Silicon Valley,
where large tech firms such as
Alphabet Inc.’s Google and
Facebook Inc. reign. There, the
salaries are higher, the venture-capital sector bigger and
the winters warmer.
Meredith Trotter, a data
scientist at Lumiata Inc., an
artificial-intelligence analytics
firm in San Mateo, Calif., said
she has plans to return to her
native Canada but hasn’t
found anything superior to her
current job that would compel
her to make the move now.
“Even when those jobs start
becoming real, I’m not sure I’ll
be ready to go home,” Ms.
Trotter said.
Until recently, it could
take as much as a year for
foreigners offered a job in
Canada to receive a work
permit, which immigration
Q2 ’17
Apple Inc. gross profit margin
42%
March 31, 2015: 41%
40
The more expensive an iPhone is, the more people will lust after it.
ally decline over time, but Apple bucks that trend by increasing the feature set of
each subsequent phone. Since
the company discontinued the
cheaper iPhone 5C, average
selling price has been rising.
High cost = desire
The final reason a pricey
iPhone makes sense is that,
paradoxically, the more expensive Apple makes the device, the more people will
lust after it.
Conspicuous consumption
was first described in “The
Theory of the Leisure Class”
by Thorstein Veblen, who
singled out products that,
contrary to logic, sold better
when their prices went up.
When the iPhone came out
in 2007, it was the epitome
of a “Veblen good”—rare
and, at $599 with a two-year
contract, expensive.
For the same reasons, an
expensive anniversary version could once again make
the iPhone a Veblen good,
says M. Berk Talay, professor
of marketing at the University of Massachusetts Lowell.
Much like the Mercedes-Benz
vehicle line, where each class
clearly telegraphs how much
the buyer paid, the new
iPhone lineup could boost
the Apple brand’s ability to
signal wealth, he says.
This could be helpful to
Apple in China. The company
38
36
34
1Q 2013
Source: the company
has been hurt by double-digit
decreases in sales there, but
Chinese consumers have a
history of gravitating toward
luxury goods. A higher-priced
iPhone could convey status,
something that has been
harder to do since 2014, when
Apple last changed the look of
its handsets. If Apple releases
a new iPhone at such a lofty
Q2 ’17
THE WALL STREET JOURNAL
price, expect reviewers to
make unfavorable comparisons with devices such as
Samsung’s Galaxy S8, which
packs in advanced features
for about $750. But if the analysts are right, we can expect
that, by the end of 2017, Apple might report record-setting numbers in the most important area of its business.
Apple Removes VPN Apps in China
BY JOSH CHIN
BEIJING—Apple Inc. has
removed software from its
app store in China that allowed users to circumvent the
country’s vast system of internet filters.
Several popular apps giving users access to virtual
private networks, or VPNs,
that tunnel through China’s
sophisticated system of internet filters disappeared from
the mainland China version of
Apple’s App Store on Saturday.
One service, ExpressVPN,
said in a blog post that Apple
had notified it that its iOS
app was removed from the
Chinese App Store.
ExpressVPN published a
copy of the notice, which said
the app included content that
was illegal in China.
Another company, Star
VPN, said on its Twitter account that it, too, had received the notice. Searches in
the China App store for a
number of popular VPN apps
turned up no results Saturday
evening.
“We’re disappointed in this
development, as it represents
the most drastic measure the
Chinese government has
taken to block the use of
VPNs to date, and we are
troubled to see Apple aiding
China’s censorship efforts,”
the ExpressVPN blog post
said.
Apple later confirmed the
removals in a written statement, citing new rules that
require VPN providers to obtain licenses from regulators.
“We have been required to
remove some VPN apps in
China that do not meet the
new regulations. These apps
remain available in all other
markets where they do business,” it said.
China’s internet regulators
haven’t responded to multiple
requests for comment about
their regulation of VPNs.
Apple’s move is aimed at
helping the company stay on
the safe side of a raft of
tough new cybersecurity regulations designed to solidify
Beijing’s grip on the Chinese
internet. Earlier this month,
the Cupertino, Calif., technology giant said that, because
of the new rules, it planned
to store all of its Chinese customers’ data on servers oper-
ated by a government-controlled company.
In the past, Apple has removed individual apps from
the Chinese App Store that
ran afoul of China’s censors,
but it is rare for the company
to eliminate several at once.
Chinese authorities have
moved aggressively in recent
weeks to tighten controls
Users had been able
to circumvent the
nation’s internet filters
with the software.
over VPNs, which are used by
everyone from political activists to scientists to multinational enterprises to access
uncensored internet content
beyond China’s borders.
A southern China data-services company with more
than 160 clients said it received orders last week from
the Ministry of Public Security, which runs China’s police
forces, to cut off access to
foreign providers of VPNs.
Those orders came days after
a luxury hotel in Beijing, the
Waldorf Astoria, said in a letter to guests that it had
stopped offering VPNs “due
to legal issues in China.”
Earlier this month, a wellknown Chinese provider said
it had been told by regulators
to stop service.
The tightening of controls
comes as China edges closer
to a fall Communist Party
conclave, at which most of
the country’s top leaders are
set to be replaced. Internet
controls in China typically
wax and wane according to
the gravity of political events,
but many of the recent moves
are in line with a long-term
drive by Chinese President Xi
to harden China’s internet
against outside threats by exerting more control over
flows of data.
As part of that push,
China’s Ministry of Industry
and Information Technology
issued a notice in January of
plans to “clean up” the internet-services market, including
a crackdown on the use of unapproved VPNs in cross-border business activities, by
March of next year.
THE WALL STREET JOURNAL.
Monday, July 31, 2017 | B5
* *
MEDIA & MARKETING
Little Studio Makes Move Into Spotlight
Megan Ellison’s
Annapurna distributes
‘Detroit’ as it seeks
more control and profit
Hits and Misses
Domestic box office totals of
previous Annapurna movies
released by other studios
2012
The Master
Killing Them Softly
Zero Dark Thirty
2013
American Hustle
Her
2014
Foxcatcher
BY BEN FRITZ
2015
Joy
2016
Everybody
Wants Some
Sausage Party
20th Century Women
150
26
12
56
3.4
98
5.7
Source: Box Office Mojo
ANNAPURNA PICTURES/EVERETT COLLECTION
Hollywood’s newest studio
doesn’t operate out of a majestic multiacre lot or a sleek
office tower but an unmarked
former art gallery whose
lobby is decorated with thousands of VHS tapes arranged
in a giant “A.”
Megan Ellison’s Annapurna
Pictures has a distinct vibe
that isn’t imposing like Twentieth Century Fox or Universal
Pictures, nor high-tech like
Netflix Inc. or Amazon.com
Inc. Like its social-media savvy
millennial founder, Annapurna
projects an image that is retro,
artistic and bespoke, even as it
is investing hundreds of millions of dollars to compete directly against those giant
companies and others that
dominate Hollywood.
Personally wealthy thanks
to her father, billionaire Oracle Corp. co-founder Larry Ellison, the 31-year-old Ms. Ellison has produced and financed
several Oscar-nominated pictures in the past five years, including midbudget adult dramas “Zero Dark Thirty,” “Her”
and “Foxcatcher.”
Until now, though, Annapurna has been a small
company whose movies are released by other studios, such
as Sony Pictures Entertainment and Viacom Inc.’s Paramount Pictures.
Last year, Ms. Ellison decided she wanted more control
over how her movies are released and full credit, as well
as full profits, when they succeed, according to people familiar with her thinking. She
tripled Annapurna’s staff to
nearly 120 so it could release
and market its own movies,
and produce television shows
and videogames.
The release this past week-
$16M
15
96
A scene from ‘Detroit,’ director Kathryn Bigelow’s dramatization of that city’s riots in 1967. Early reviews have been positive.
end of “Detroit,” a historical
drama from “Zero Dark
Thirty” director Kathryn Bigelow, marked the first time
Annapurna has distributed and
marketed a film itself.
Annapurna’s
expansion
Megan Ellison
has been
frustrated with
other studios
that controlled
when her films
were released.
comes as the original, midbudget movies Ms. Ellison favors
are struggling for attention
against major studios’ superheroes and reboots. At the
same time, deep-pocketed Am-
azon and Netflix have aggressively moved onto Annapurna’s turf, raising prices
for the hottest indie movie
ideas and increasing competition for consumers.
“The fact that Megan is
building an independent outfit
and taking the risks she is taking puts her in a pretty singular space,” said Dede Gardner,
a partner in Brad Pitt’s production company, Plan B, that
has signed a deal to work on
several projects with Annapurna.
Ms. Ellison, who never
gives interviews, declined to
comment through a spokeswoman.
Privately held Annapurna
doesn’t share financial results,
but it has had a mixed record
at the box office. Along with
such hits as “Sausage Party”
and “American Hustle” have
been flops including “Her” and
“The Master.”
Ms. Ellison has been frustrated working with other studios that controlled when her
movies were released and how
they were advertised, leading
her to build those capabilities
in-house, said the people close
to her.
With “Detroit,” Annapurna
is using a particularly risky
movie to make that leap, and
not only because so few adult
dramas have succeeded at the
box office recently. The $35
million picture about the killing of three African-Americans
by police during riots in 1967
is opening near the end of a
summer packed with big budget event films, known in the
industry as tentpoles. After
playing in 20 theaters this
weekend, it will be released
nationwide Friday against an
adaptation of the popular Stephen King book “The Dark
Tower.”
Annapurna didn’t initially
intend to release “Detroit” itself. After financing the movie,
the company late last year offered it to other Hollywood
studios, but was unable to
strike a deal. At least two
companies passed after concluding its commercial prospects were small, according to
people at studios who evaluated the film.
Early reviews for “Detroit”
have been positive. It garnered a solid $365,455 at the
box office in 20 theaters this
weekend.
THE WALL STREET JOURNAL.
“This is the kind of movie
Hollywood used to make on a
regular basis, but the industry
[now] relies on mega-megatentpoles that sell in China,”
said “Detroit” writer and producer Mark Boal. “Megan has
a different business model.”
Focus Features, part of
Comcast Corp.’s Universal,
and Fox Searchlight, part of
21st Century Fox Inc.’s Twentieth Century Fox, are the two
remaining studio labels making low- to midbudget adult
movies, similar to Annapurna.
Other major studios like Walt
Disney Co., Viacom’s Paramount and Time Warner Inc.’s
Warner Bros. have exited that
segment after sustaining
losses.
Netflix and Amazon, meanwhile, are betting big. They
have bid the prices for hot pictures at festivals such as Sundance so high that Focus and
Fox Searchlight have pulled
back on acquiring finished
films, once a key part of their
business. Now, both primarily
produce movies themselves
and look to develop long-term
relationships with filmmakers,
said people close to those
companies.
BY TIM HIGGINS
An Early Look Inside
Of Tesla’s Model 3
FREMONT, Calif.—A first
peek inside Tesla Inc.’s new
Model 3 compact car revealed a
starker, cozier interior than the
more spacious and luxurious
Model S. But as the sedan sped
off, the experience felt similar.
On Friday, the Silicon Valley
auto maker showed off details
of the all-electric sedan’s interior for the first time, allowing
a roughly 10-minute test ride
around the factory.
The Model 3 represents a
milestone for Chief Executive
Elon Musk, who has long
wanted to create an electric car
for the masses. He is betting
the new vehicle can help fuel
massive growth for his 14-yearold company, projecting Tesla
will produce a half-million cars
next year, after delivering about
76,000 Model S sedans and
Model X sport-utility vehicles
last year.
The Model 3’s exterior was
revealed in March last year, but
details about the interior have
been scarce.
The $35,000 sedan is noticeably bare-bones inside—
gone are the displays and instrument panel behind the
steering wheel and the numerous switches and buttons
found in the cockpit of traditional cars. Instead, the Model 3
makes greater use of a video
screen in the center dash that
controls most of the car’s functions.
“We’ve intentionally gone
for a very simple interior,” Mr.
Musk told reporters Friday at
the factory.
Buttons on the steering
wheel—coordinated with the
15-inch dash screen—allowed
for adjustments of the sideview mirrors and steering
wheel. Instead of traditional air
vents, the Model 3’s system directs air flow using vertical and
horizontal air streams. Those
streams run the length of the
dash and can be directed in
various configurations by tapping the video screen.
“The engineering and the
design teams worked together
very hard to make a simple
economical interior that’s simple and elegant—it’s not just
deleting a bunch of stuff,” Doug
Field, senior vice president of
engineering, told reporters.
By removing and consolidating buttons, Tesla said it was
able to find savings to devote
money to other areas, such as
providing a base battery pack
capable of going 220 miles on
one charge. A longer-range version offers up to 310 miles.
The drive felt similar to the
Model S, humming quietly and
starting quickly from a standstill.
‘Atomic Blonde’ with Charlize Theron was No. 4 at the box office.
Estimated Box-Office Figures, Through Sunday
SALES, IN MILLIONS
FILM
DISTRIBUTOR
WEEKEND* CUMULATIVE % CHANGE
1. Dunkirk
Warner Bros.
2. The Emoji Movie Sony
3. Girls Trip
Universal
$28.1
$25.7
$20.1
$102.8
$25.7
$65.5
-44
—
-36
4. Atomic Blonde Focus Features
5. Spider-Man:
Sony
Homecoming
$18.6
$13.5
$18.6
$278.4
—
-39
*Friday, Saturday and Sunday
Source: comScore
‘Dunkirk’ Retains
Box Office Crown
BY ERICH SCHWARTZEL
ANDREJ SOKOLOW/DPA/ZUMA PRES
FREMONT, Calif.—Tesla
Inc. Chief Executive Elon
Musk on Friday disclosed new
pricing tiers, battery range
and other details of the allelectric Model 3 sedan that
he hopes will help transform
the Silicon Valley niche car
maker into a more mass-market company.
The four-door sedan will
start at $35,000, as promised,
but will also be offered in a
$44,000 version that has a
range of as much as 310 miles
between charges, 90 miles
more than the base model and
higher than the all-electric
Chevrolet Bolt’s 238-mile
range.
The prices exclude any federal tax credits in the U.S.
Tesla has received more
than 500,000 reservations for
the Model 3, Mr. Musk told reporters at the auto maker’s
factory in Fremont.
He reiterated that he believes the company can build
10,000 vehicles a week, or
500,000 a year, by the end of
next year and cautioned that
the next few months could be
bumpy as the car maker ramps
up production. Production of
the Model 3 began earlier this
month.
Later in the evening, during
a live-streamed event outside
the Fremont factory, Mr. Musk
showcased the first deliveries
of the sedan to employee customers, who will help identify
any glitches as they drive the
automobile.
Deliveries of the first vehicles to nonemployee purchases
might begin in September or
October, according to the auto
maker.
Tesla revealed that the base
Model 3 has a 220-mile range
and can accelerate from zero
to 60 miles an hour in 5.6 seconds, according to Tesla. The
more expensive version can
reach 60 mph in 5.1 seconds.
For an additional $5,000, customers can add premium features including a nicer interior, a glass roof and a more
powerful speaker system.
Excitement for the car and
for Mr. Musk’s vision of personal transportation has
helped Tesla shares soar more
than 50% this year, lifting its
market value past that of Ford
Motor Co., and Friday is “key
FOCUS FEATURES/EVERETT COLLECTION
Tesla Rolls Out New Model 3 Sedan
Tesla has received more than 500,000 reservations for the Model 3, Tesla CEO Elon Musk said.
to maintaining hype,” Colin
Langan, an analyst for UBS,
told investors this week in a
note.
“Expectations are high;
therefore positive media reaction to the production vehicle
is important,” he said.
But Mr. Musk must walk a
fine line in marketing the
Model 3: stoking excitement
without drawing customers
away from the more expensive Model S sedan and
Model X sport-utility vehicle.
Second-quarter sales fell
short of analysts’ expectations, fueling concerns that
demand for those models
was softening.
The Model 3’s arrival represents a potential inflection
point for the automotive industry.
Car makers long have
talked about electrification
but haven’t captured the popular attention of customers as
Tesla has in 14 years.
“If it’s successful—in terms
of volume and attracting
mainstream buyers as promised—it could be the breakthrough we need to, at least,
have wider traction for electric vehicles,” said Michelle
Krebs, an analyst for Autotrader. “But there’s a big challenge…They’ve got to launch it
flawlessly and build it in high
volume flawlessly and deliver
what they promised.”
A pair of new releases
failed to unseat the World War
II drama “Dunkirk” from its
top spot at the box office this
weekend.
“The Emoji Movie” and
“Atomic Blonde” both arrived
with decent debuts, while second-week
grosses
for
“Dunkirk” declined 44% to an
estimated $28.1 million in the
U.S. and Canada.
Christopher Nolan’s acclaimed war drama, released
by Time Warner Inc.’s Warner
Bros., has been a hit, with
$102.8 million so far.
“The Emoji Movie,” a critically panned animated movie
starring the smiley faces and
icons that populate smartphones, grossed $25.7 million
in second place. That is a fine
start for the film, released by
Sony Corp.’s Sony Pictures Entertainment, considering it
cost a modest $50 million to
produce.
“We’re thrilled with it,” said
Adrian Smith, Sony’s president
of domestic distribution.
“There’s still a month of prime
summer moviegoing left.”
“Atomic Blonde,” an R-rated
action film starring Charlize
Theron released by the Focus
Features division of Comcast
Corp.’s Universal Pictures,
grossed a fair $18.6 million in
fourth place. Taking the No. 3
spot was Universal’s own
“Girls Trip,” which is now the
highest-grossing live-action
comedy of the year with $65.5
million.
Both “Atomic Blonde” and
“The Emoji Movie” were given
“B” grades by opening-weekend audiences, according to
the CinemaScore market-research firm.
In other box-office news,
“An Inconvenient Sequel,” the
follow-up to former Vice President Al Gore’s 2006 documentary on climate change,
opened in four locations and
collected $130,000. It will expand to more theaters in the
coming week.
THE WALL STREET JOURNAL.
B6 | Monday, July 31, 2017
An Extraordinary
Adventure
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October 22-November 9, 2017
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THE WALL STREET JOURNAL.
Monday, July 31, 2017 | B7
MARKETS DIGEST
S&P 500 Index
Dow Jones Industrial Average
Last Year ago
2472.10 t 0.44, or 0.02% last week
High, low, open and close for each of
the past 52 weeks
21830.31 s 250.24, or 1.16% last week Trailing P/E ratio 19.83
P/E estimate *
18.42
High, low, open and close for each of
Dividend yield
2.29
the past 52 weeks
19.88
17.87
2.51
All-time high 21830.31, 07/28/17
Current divisor 0.14602128057775
Last
Year ago
Trailing P/E ratio 23.94 25.03
P/E estimate *
18.94 18.42
Dividend yield
1.97
2.11
All-time high: 2477.83, 07/26/17
2450
21600
2375
20800
New to the Market
Public Offerings of Stock
IPOs in the U.S. Market
Initial public offerings of stock expected this week; might include some
offerings, U.S. and foreign, open to institutional investors only via the
Rule 144a market; deal amounts are for the U.S. market only
Expected
pricing date Filed
Issuer/business
8/1
6/30
Clementia Pharmaceuticals CMTA
Biopharmaceutical
Nq
company focused on the
research of bone diseases.
8/2
5/5
Venator Materials
Manufacturer of chemical
products including
pigments and additives.
65-day moving average
2300
20000
65-day moving average
2225
19200
Week's high
200-day moving average
2150
17600
Monday's open
t
Friday's close
200-day moving average
18400
UP
Friday's close
t
DOWN
Monday's open
Week's low
2075
16800
2000
Symbol/
Pricing
primary Shares Range($)
exchange (mil.) Low/High
VNTR
N
N
D
J
F
M
A
M
J
JA
t
Primary
market
NYSE weekly volume, in billions of shares
1925
J
t
O
Composite
S
O
N
D
J
F
M
A
M
J
S
O
N
D
J
F
M
A
M
J
J
Lockup
expiration Issue date
Aug. 1
Feb. 2, ’17
Offer Offer amt Through Lockup
Symbol price($) ($ mil.) Friday (%) provision
Issuer
Ramaco Resources
J
Nasdaq Composite
Latest Week
Close
Net chg
% chg
52-Week
Close (l)
Low
Dow Jones
1.16
Industrial Average 21841.18 21496.13 21830.31 250.24
Transportation Avg 9543.64 9147.30 9227.07 -244.20
Utility Average
726.10 714.34
-1.42
724.06
Total Stock Market 25736.95 25479.05 25595.53 -20.12
652.41
Barron's 400
662.88 650.48
-4.19
-2.58
-0.20
-0.08
-0.64
17888.28
7648.44
625.44
21514.15
521.59
-0.20
-0.21
5046.37
4660.46
% chg
High
l 21830.31
l
9742.76
l
737.51
l 25692.25
l
661.93
t 13.08, or -0.20%
% chg
YTD 3-yr. ann.
18.4
17.6
1.8
14.0
19.3
10.5
2.0
9.8
10.0
8.4
8.7
3.5
8.7
7.5
7.1
6460.84 6318.62
5995.77 5847.05
6374.68
5908.92
-13.08
-12.61
l
6422.75
l 5950.73
23.5
24.9
18.4
21.5
12.8
14.2
2472.10
1762.34
865.00
-0.44
-11.58
-3.25
-0.02
-0.65
-0.37
1425.80 1429.26
11891.66 11954.69
526.70
528.66
3931.35 3988.25
527.51
531.53
94.64
95.23
81.72
85.56
132.50
134.88
1084.29 1092.99
10.29
8.84
-6.58
30.09
-1.54
-38.70
-9.80
0.46
1.92
0.03
-14.55
0.93
-0.46
2484.04 2459.93
1795.14 1758.22
877.73 861.44
l
2085.18
1476.68
703.64
2477.83
1791.93
876.06
l
l
10.4
6.1
3.2
13.7
13.0
16.3
l
1156.89
0.25 10289.35
-0.29
455.65
-0.96
2834.14
-1.81
463.78
0.48
66.90
2.30
73.03
0.02
126.75
-1.31
755.73
9.94
9.36
Philadelphia Stock Exchange
1450.39 17.2
11965.72 10.8
533.62
9.9
4075.95 17.7
554.66 -3.9
99.33 40.0
112.86 -22.4
192.66 -16.1
1138.25 42.5
22.51 -13.3
l
l
l
l
l
l
l
l
l
6400
6350
21 24 25 26 27 28
July
7.7
7.9
9.6
Americas
Brazil
Canada
Mexico
Chile
2848.22
368.89
248.73
2283.04
Global
Global ex U.S.
Developed ex U.S.
Global Small-Cap
Global Large-Cap
3806.16
2520.33
2440.02
5189.20
3609.93
DJ Americas
Sao Paulo Bovespa
S&P/TSX Comp
IPC All-Share
Santiago IPSA
595.33
65497.13
15128.65
51213.60
3856.62
Stoxx Europe 600
Stoxx Europe 50
Eurozone
Euro Stoxx
Euro Stoxx 50
Belgium
Bel-20
France
CAC 40
Germany
DAX
Israel
Tel Aviv
Italy
FTSE MIB
Netherlands AEX
Spain
IBEX 35
Sweden
SX All Share
Switzerland Swiss Market
U.K.
FTSE 100
378.34
3086.75
375.73
3467.73
3944.56
5131.39
12162.70
1451.48
21430.36
525.53
10536.10
561.69
9019.31
7368.37
Asia-Pacific
Australia
China
Hong Kong
India
Japan
Singapore
South Korea
Taiwan
1674.76
5702.80
3253.24
26979.39
32309.88
19959.84
3330.75
2400.99
10423.05
Europe
DJ Asia-Pacific TSM
S&P/ASX 200
Shanghai Composite
Hang Seng
S&P BSE Sensex
Nikkei Stock Avg
Straits Times
Kospi
Weighted
Low
0.53
0.08
0.22
–0.24
0.29
0.51
0.38
0.17
0.31
–0.03
1.26
–0.36
–0.68
1.32
–0.48
–1.01
0.22
0.46
1.57
0.27
–0.63
–0.46
1.08
0.63
1.05
–1.37
0.90
–1.13
0.07
–0.35
0.47
1.02
0.88
–0.70
0.50
–2.00
–0.13
2384.42
311.55
206.73
2003.49
•
3204.05
2088.07
2035.46
4354.21
3040.83
503.67
56162.38
14349.10
44364.17
3127.54
328.80
2730.05
313.77
2906.98
3365.38
4321.08
10144.34
1378.66
16098
438.61
8263.5
485.25
7593.20
6634.40
1407.97
5156.6
2953.39
21574.76
25765.14
16083.11
2787.27
1958.38
8902.30
•
•
High
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
YTD
% chg
2851.08
369.68
249.42
2398.98
12.5
13.1
16.3
1.0
3806.16
2520.33
2440.02
5196.39
3609.93
13.3
16.7
15.4
12.3
13.4
596.96
69052.03
15922.37
51713.38
3856.62
10.2
8.7
–1.0
12.2
19.7
396.45
3276.11
392.06
3658.79
4041.03
5432.40
12888.95
1478.96
21788
536.26
11135.4
596.72
9127.61
7547.63
4.7
2.5
7.3
5.4
9.4
5.5
5.9
–1.3
11.4
8.8
12.7
5.1
9.7
3.2
1680.85
5956.5
3288.97
27131.17
32383.30
20230.41
3354.71
2451.53
10513.96
17.7
0.7
4.8
22.6
21.3
4.4
15.6
18.5
12.6
Source: SIX Financial Information;WSJ Market Data Group
Consumer Rates and Returns to Investor
Selected rates
A consumer rate against its
benchmark over the past year
New car loan
t
4.00%
3.50
t
New car loan
3.00
2.50
2.00
A S ON D J FMAM J J
2016
2017
Interest rate
6300
25600
25500
21 24 25 26 27 28
July
3.00%
Think Mutual Bank
Rochester, MN
1.89%
800-288-3425
Chase Bank
Detroit, MI
1.95%
800-242-7324
Lake Elmo Bank
Lake Elmo, MN
1.99%
651-777-8365
Pentagon Federal Credit Union
2.24%
Alexandria, VA
877-412-4381
Yield/Rate (%)
Last (l)Week ago
Federal-funds rate target
1.00-1.25 1.00-1.25
Prime rate*
4.25
4.25
Libor, 3-month
1.31
1.31
Money market, annual yield
0.32
0.33
Five-year CD, annual yield
1.44
1.44
30-year mortgage, fixed†
3.96
3.95
15-year mortgage, fixed†
3.15
3.13
Jumbo mortgages, $424,100-plus† 4.33
4.33
Five-year adj mortgage (ARM)† 3.30
3.41
New-car loan, 48-month
3.06
3.00
HELOC, $30,000
5.18
5.21
2.24%
800-578-4270
3-yr chg
52-Week Range (%)
Low 0 2 4 6 8 High (pct pts)
0.25 l
l
3.50
0.76 l
0.23 l
1.17 l
l
3.44
l
2.70
l
4.02
l
3.07
l
2.87
l
4.57
1.25
4.25
1.32
0.36
1.44
4.33
3.50
4.88
4.03
3.36
5.21
Crude oil, $ per barrel
25400
574.67
182.12
14.36
5.46
2.56 1.31
3.09 -5.40
49.71
3.94
8.61 -7.46
93.34
-0.52 -0.56 -8.68
WSJ Dollar Index
86.10
-0.40 -0.46 -7.35
Euro, per dollar
0.8510 -0.0062 -0.72 -10.48
Yen, per dollar
U.K. pound, in dollars
110.69
-0.45 -0.40 -5.40
1.31
1.07
6.41
52-Week
Low Close(l) High
% Chg
DJ Commodity
506.18
TR/CC CRB Index
166.50
0.01
Natural gas, $/MMBtu
2.55
93.34
WSJ Dollar Index
85.20
Euro, per dollar
0.85
Yen, per dollar
99.88
195.14
l
0.61
1.00
1.00
1.07
-0.07
0.05
-0.41
-0.36
-0.38
-0.28
-0.16
0.68
Bankrate.com rates based on survey of over 4,800 online banks. *Base rate posted by 70% of the nation's largest
banks.† Excludes closing costs.
Sources: SIX Financial Information; WSJ Market Data Group; Bankrate.com
1.00
–10
One year ago 0.00
–15
t
1
3 6
month(s)
1 2 3 5 710
years
maturity
30
–4.4
13.36
4.42 –26.3 –23.9
Symbol/
July 31
Primary Amount
exchange ($mil.)
Bank of Princeton
Finance
BPRN
Nq
40.0
Sandler O'Neill & Prtnrs
n.a.
“Shelf registrations” allow a company to prepare a stock or bond for
sale, without selling the whole issue at once. Corporations sell as
conditions become favorable. Here are the shelf sales, or takedowns,
over the last week:
Takedown date/ Deal value Registration
Registration date ($ mil.)
(mil.)
Bookrunner(s)
$69.6
$200.0
Stephens, Stifel
$65.0
$100.0
$6.0
$100.7
Piper Jaffray, BMO Cptl Mkts,
Stifel
Canaccord Genuity
...
Jefferies, Leerink Prtnrs, Stifel
$100.8
$6.6
$50.0
$252.0
$576.6
$325.1
...
Roth Cptl Ptnrs
GS, JPM
GS, JPM, Credit Suisse
Public and Private Borrowing
Treasurys
Sale
Final
maturity Issuer
0.96 -4.89
l
118.18
l
l
8.44
1.34 -0.70
Total
($mil.)
Aug. 1 July 1, 2035 Regional
Transportation
Auth
Aug. 2 April 23, 2018 Massachusetts
Tuesday, August 1
Auction of 4 week bill;
announced on July 31; settles on August 3
Rating
Bookrunner/
Fitch Moody’s S&P Bond Counsel(s)
188.4 AA
N.R.
AA Preliminary
/Dinsmore & Shohl
1,500.0 N.R.
N.R.
Aug. 3 June 15, 2020 Multnomah
Portland) PSD #1J
169.0 N.R.
Aa1
Aug. 3 prelim.
Multnomah
Portland) PSD #1J
219.9 N.R.
Aa1
Aug. 3 prelim.
South Carolina
157.2 N.R.
N.R.
Aug. 4 prelim.
Austin City313.5 N.R.
Texas
Bay Area Toll
1,100.0 N.R.
Authority
(BATA)
California
200.0 N.R.
Health Facs
Fin Auth
Kentucky
176.8 N.R.
Turnpike
Authority
New Jersey
265.0 N.R.
Hlth Care
Fac Fin Au
North Carolina
222.5 N.R.
Orlando City-Florida 221.2 N.R.
N.R.
N.R. Preliminary/
Mintz Levin
Cohn Ferris
AA+ Preliminary/
Hawkins Delafield
& Wood
AA+ Preliminary/
Hawkins Delafield
& Wood
N.R. Preliminary/
Pope Flynn
Group
N.R. Goldman & Co/—
N.R.
N.R. BofA Merrill/—
N.R.
N.R. M. Stanley/—
Aa3
N.R. M. Stanley/—
N.R.
N.R. J P Morgan
Securities LLC/—
N.R.
N.R.
205.4 N.R.
N.R.
N.R. BofA Merrill/—
N.R. J P Morgan
Securities LLC/—
N.R. Piper Jaffray/—
496.5 N.R.
N.R.
N.R. Wells Fargo & Co/—
Aug. 4 prelim.
Aug. 4 prelim.
93.56 -0.46
l
Aug. 4 prelim.
Aug. 4 prelim.
Aug. 4 prelim.
Aug. 4 prelim.
San Antonio
City-Texas
Washington
Metro Area
Transit Au
Source:Thomson Reuters/Ipreo
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 250.24
points, or 1.16%, on the week. A $1 change in the price of any DJIA stock =
6.85-point change in the average. To date, a $1,000 investment on Dec. 31 in
each current DJIA stock component would have returned $33,316, or a gain
of 11.10%, 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
13.73
8.39
7.05
4.81
4.72
29.13
3.71
7.51
3.66
4.87
199.49
25.41
51.43
25.06
33.35
Boeing
Verizon
Caterpillar
Wal-Mart Stores
Chevron
BA $241.27
VZ
47.94
CAT 114.10
WMT 79.81
CVX 108.12
$1,578
928
1,262
1,172
936
Euro
2.68
2.36
2.18
1.81
1.67
2.87
1.48
0.98
1.60
0.58
19.65
10.14
6.71
10.96
3.97
Walt Disney
Merck
Coca-Cola
Procter & Gamble
Intel
DIS 109.96
MRK 64.11
KO
46.01
PG
90.21
INTC 35.31
1,063
1,107
1,130
1,099
988
2017
1.65
1.56
1.25
0.98
0.43
2.06
3.43
1.93
1.43
0.39
14.11
23.49
13.22
9.79
2.67
Travelers
Goldman Sachs
McDonald’s
Home Depot
J.P. Morgan Chase
TRV
GS
MCD
HD
JPM
127.21
223.61
155.85
148.08
91.28
1,051
939
1,300
1,119
1,076
–0.33
–0.45
–0.51
–0.65
–0.66
–0.63
–0.45
–0.77
–0.52
–0.56
–4.31
–3.08
–5.27
–3.56
–3.84
UnitedHealth Group UNH 191.15
Visa
V
99.15
Apple
AAPL 149.50
Exxon Mobil
XOM 79.60
DuPont
DD
83.98
1,205
1,276
1,304
897
1,162
–0.92
–0.99
–1.01
–1.02
–1.47
–0.79
–0.33
–0.32
–0.75
–0.38
–5.41
–2.26
–2.19
–5.14
–2.60
American Express AXP
Pfizer
PFE
Cisco Systems
CSCO
MSFT
Microsoft
General Electric
GE
84.80
33.15
31.52
73.04
25.53
1,160
1,041
1,073
1,190
820
–1.90 –2.79
–2.14 –1.28
–2.56 –3.46
–3.74 –4.62
–5.42 –11.44
–19.11
–8.77
–23.70
–31.64
–78.34
IBM
IBM
Nike
NKE
Johnson & Johnson JNJ
United Technologies UTX
MMM
3M
144.29
58.67
131.85
118.87
199.72
885
1,162
1,161
1,098
1,133
WSJ Dollar index
Sources: Ryan ALM; Tullett Prebon; WSJ Market Data Group
Corporate Borrowing Rates and Yields
Bond total return index
Spread +/- Treasurys,
Yield (%)
in basis pts, 52-wk Range
Last Wk ago
Last
Low High
Total Return
52-wk
3-yr
10-yr Treasury, Ryan ALM
DJ Corporate
Aggregate, Barclays Capital
High Yield 100, Merrill Lynch
Fixed-Rate MBS, Barclays
Muni Master, Merrill
EMBI Global, J.P. Morgan
2.291
2.945
2.510
5.031
2.830
1.866
5.549
-5.36 2.61
0.90 4.01
-0.25 2.62
10.018 3.699
0.31 2.43
0.271 2.927
4.501 4.654
40
309
10
-5
315
Friday’s
price ($) Bookrunner(s)
Off the Shelf
Aug. 4 prelim.
2.26
s Yen
40
318
29
13
326
34.4
103.25 -2.28
l
1.20
2016
2.232
2.923
2.480
4.974
2.790
1.851
5.490
10.75
Aug. 4 prelim.
3.93
10%
–5
40.9
Akcea Thera
AKCA July 14/$8.00
Co-Diagnostics
CODX July 12/$6.00
1364.40 -5.97
Yen, euro vs. dollar; dollar vs.
major U.S. trading partners
2.00
Friday
67.0
0.7
l
Plus, get deeper money-flows data and
email delivery of key stock-market
data.
All are available free at
WSJMarkets.com
0
0.2
46.8
54.45 19.50
Real-time U.S. stock
quotes are available on
WSJ.com. Track mostactive stocks, new
highs/lows, mutual
funds and ETFs.
5
1.2
23.49
l
l
1127.80
U.S. Dollar Index
589.81 11.16
l
Crude oil, $ per barrel 39.51
3.00
1.3
Deals of $ 150 million or more expected this week
YTD
% chg
U.S. Dollar Index
4.00
–0.9
Public and Municipal Finance
Natural gas, $/MMBtu 2.941 -0.020 -0.68 -21.03
Gold, $ per troy oz.
1268.40 13.50 1.08 10.30
5.00%
19.83
PetlQ
PETQ July 21/$16.00
Calyxt
CLXT July 20/$8.00
Monday, July 31
Auction of 13 and 26 week bills;
announced on July 27; settles on August 3
Benchmark Yields and Rates
Treasury yield curve Forex Race
Bankrate.com avg†:
UniBank for Savings
Whitinsville, MA
TR/CC CRB Index
Yield to maturity of current bills,
notes and bonds
10.2
Federal Street Acquisition 10.12
FSACU July 19/$10.00
t 20.12, or -0.08%
25700
DJ Commodity
WSJ
.COM
35.8
0.5
Triumph Bancorp
July 27
Finance
Aug. 17,316
Tetraphase PharmaceuticalsJuly 27
Healthcare
June 16,317
Neuralstem
July 27
Healthcare
June 8,317
Reata Pharmaceuticals
July 26
Healthcare
June 23,317
FORM Holdings
July 26
Telecommunications
June 26,315
Moelis & Co
July 25
Finance
Nov. 25,316
Sarepta Therapeutics
July 24
Healthcare
Feb. 25,316
Last Week
Close Net chg %Chg
U.K. pound, in dollars
20.37
2.0
Issuer/Industry
Commodities and
Currencies
t
U.S. consumer rates
Prime rate
5.3
7.8
8.1
2.9
4.4
2.3
29.7 13.4
10.4
1.0
3.7 10.2
8.5 -5.8
-26.6 -23.3
20.6 21.1
-26.7 -6.4
Gold, $ per troy oz.
1.5
DJ US TSM
s
DJ TSM
The Global Dow
DJ Global Index
DJ Global ex U.S.
Global Dow Euro
52-Week Range
Close
30.3
Kala Pharmaceuticals
KALA July 20/$15.00
TPG RE Finance Trust
TRTX July 20/$20.00
23.47
Expected Issuer/Business
s
World
Close
Latest Week
% chg
...
Secondaries and follow-ons expected this week in the U.S. market
Sources: SIX Financial Information; WSJ Market Data Group
International Stock Indexes
44.7
Sources: WSJ Market Data Group; FactSet Research Systems
last week
Region/Country Index
180 days
% Chg From
Friday3s Offer 1st-day
close ($) price close
Company SYMBOL
IPO date/Offer price
RBB Bancorp
RBB July 26/$23.00
6450
Other Indexes
Russell 2000
1452.09
NYSE Composite
11985.80
Value Line
534.70
NYSE Arca Biotech 4089.56
NYSE Arca Pharma
540.39
KBW Bank
97.45
PHLX§ Gold/Silver
86.74
PHLX§ Oil Service
139.21
PHLX§ Semiconductor 1120.51
CBOE Volatility
11.50
–53.7
Other Stock Offerings
Standard & Poor's
500 Index
MidCap 400
SmallCap 600
% Chg From
Friday3s Offer 1st-day
close ($) price close
last week
Nasdaq Stock Market
Nasdaq Composite
Nasdaq 100
81.0
IPO Scorecard
Redfin
21.70
RDFN July 28/$15.00
Sienna Biopharmaceuticals 19.54
SNNA July 27/$15.00
The DJIA fell 317 points, erasing all of its gains for the
year, amid concerns about Argentina debt, the condition
of a big Portuguese bank and earnings woes in the U.S.
Major U.S. Stock-Market Indexes
Low
13.50
METC
Performance of IPOs, most-recent listed first
Weekly P/E data based on as-reported earnings from Birinyi Associates Inc.
High
20.00/ Citi, GS, BofA ML,
22.00 JPM, Barclays, DB,
UBS, RBC Cptl
Mkts
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.
Company SYMBOL
IPO date/Offer price
Financial Flashback
The Wall Street Journal, July 31, 2014
30
20
10
0
JA
22.7
Sources: Dealogic; WSJ Market Data Group
16000
S
13.00/ MS, Leerink Prtnrs
15.00
Lockup Expirations
Bars measure the point change from Monday's open
JA
Bookrunner(s)
7.2
53
492
34
18
407
Sources: J.P. Morgan; Ryan ALM; S&P Dow Jones Indices; Barclays Capital; Merrill Lynch
Sources: WSJ Market Data Group; S&P Dow Jones Indices. For more information on the Dow Jones
Industrial Average and the 30 industrials, please visit www.djindexes.com
B8 | Monday, July 31, 2017
THE WALL STREET JOURNAL.
* ***
MONEY & INVESTING
Continued from page B1
changes from the current plan
are likely, people familiar with
the matter said. Both Dow and
DuPont say everything is on
the table.
The investors’ complaints
could grow louder if the review doesn’t produce the
moves they want, people familiar with some of their
thinking said.
A war on multiple fronts
would also be the clearest test
yet of whether activists can
keep successfully pushing
companies to slim down—or if
their corporate counterparts
are regaining ground in arguing that breadth of business is
sometimes needed to ensure
stability and spur innovation
and gains over the long term.
Mr. Liveris said “noisy” investors who don’t understand
the chemicals business are
trying to push him to create
value in a spreadsheet. He said
he wouldn’t judge the review
until it is finished and added
that any changes must take
MICHAEL NAGLE/BLOOMBERG NEWS
DEAL
Andrew Liveris says Dow’s next iteration will be poised for growth.
into account how employees
would be affected. Mr. Liveris,
63 years old, has agreed to
stay on for another year as
DowDuPont’s executive chairman, postponing his planned
retirement.
The business at the nexus
of the dispute with the activists is Dow Corning, a pioneer
in silicones used in products
from laundry detergent to
building insulation. Dow
Chemical took full ownership
of the longtime joint venture
with Corning Inc. in a separate
deal announced the same day
as the Dow-DuPont merger.
Dow Chemical executives
say Dow Corning fits hand in
glove with traditional chemicals and thus should belong
with the materials business,
which would become the new
Dow in an eventual split. Undoing the deal in the coming
breakup would destroy benefits, they argue.
They also say Dow Corning’s earnings before interest,
taxes, depreciation and amortization have doubled since
the takeover after years of
stagnant growth—evidence,
they say, of the boost the
combination has gotten. They
now expect silicones to generate $2 billion in additional
Ebitda, double the original
goal.
Executives from both Dow
and Dow Corning talk about
how having silicones and commodity chemicals together has
helped sales grow because
they are visible to more customers when combined. Dow’s
head of research talks excitedly about scientists using robots to experiment with mixing silicone with chemicals
Dow has long manufactured,
hoping to discover new materials. Dow Chemical shares,
meanwhile, are at record
highs.
“When you come to a fork
and you go left, everyone can
always hypothesize on what
would have happened if you
went right, but no one can
ever know,” Dow Chief Financial Officer Howard Unger-
leider said in an interview.
“Dow Corning is the perfect
example of: We know both
sides of the fork.”
The activists argue Dow
Corning is among the pieces
that should be removed from
the new Dow. Instead, they
say, it should be part of the
specialty-products company.
Days after the review was
announced in May, Third Point
released a proposal it said
would add $20 billion in market value when compared with
the original plan. In that proposal, Third Point estimated
Dow Corning would be worth
$20.4 billion based on current
valuations of specialty-chemical firms, compared with $11.9
billion as part of a larger materials company.
In a quarterly letter to investors, Glenview said it
largely backed Third Point’s
proposal and raised the prospect of calling a special meeting to replace directors. Trian
and Jana have both privately
pushed changes, according to
people familiar with the matter.
At the same time, the activists could be happy if several
other changes are made, but
Dow Corning isn’t moved, people familiar with those investors said.
The original breakup plan
can be revised if 11 members
of the DowDuPont board
agree. The 16-member board
comprises eight directors from
each company.
Third Point is among the
biggest holders in Dow Chemical. Even after selling some of
its stake, it still owns $1 billion of Dow shares. It, Glenview and Jana together hold
2.5%. Trian owns 1.1% of DuPont after cutting its stake by
more than half since the deal
was announced.
The activists say DuPont
and its chief executive, Edward Breen, appear more receptive to their ideas than Mr.
Liveris. Mr. Breen told analysts last week the review
aimed to “ensure maximum
shareholder value is created”
and that the work was being
done as fast as possible.
Mr. Liveris said he is
aligned with Mr. Breen and in
close contact, even briefly taking a call from him during an
interview for this article.
52 wk
Prem Ttl
Fund (SYM)
NAV Close /Disc Ret
Gabelli Glbl Multimedia GGT 9.62 9.32 -3.1 38.5
GDL Fund GDL
11.76 10.27 -12.7 12.5
India Fund IFN
31.57 28.41 -10.0 19.5
Japan Sml Cap JOF 13.58 11.86 -12.7 26.3
Korea Fund KF
45.97 41.72 -9.2 24.4
Mexico Fund MXF
20.26 17.98 -11.3 11.7
Morgan-Stanley Asia-Pac APF 19.62 17.23 -12.2 18.5
MS China a Shr Fd CAF 25.65 22.35 -12.9 26.4
MS Emerging Fund MSF 19.00 16.94 -10.8 21.2
MS India Invest IIF
38.84 35.00 -9.9 30.2
New Germany Fund GF 19.21 17.24 -10.3 31.0
Swiss Helvetia Fund SWZ 13.88 12.64 -8.9 23.3
Templeton Dragon TDF 23.86 21.45 -10.1 29.7
Templeton Emerging EMF 17.74 15.97 -10.0 34.7
Virtus Total Return Fund ZF 13.41 12.47 -7.0 16.3
Voya Infr Indls & Matls IDE 16.08 15.69 -2.4 38.1
Wells Fargo Gl Div Opp EOD
6.30 NA 13.7
Prem12 Mo
Fund (SYM)
NAV Close /Disc Yld
U.S. Mortgage Bond Funds
BlackRock Income Trust BKT 6.71 6.31 -6.0 4.9
Nuveen Mtg Opp Term Fd JLS
25.57 NA 5.2
Investment Grade Bond Funds
Blackrock Core Bond Tr BHK 14.79 13.95 -5.7 5.6
BlkRk Credit Alloc Incm BTZ 14.84 13.45 -9.4 6.4
John Hancock Income Secs JHS 15.56 14.75 -5.2 5.6
MFS Inc Tr MIN
4.55 4.31 -5.3 9.0
WstAstClymr InfLnkd Fd WIW 12.65 11.21 -11.4 3.3
WstAssetClymr InflLnk Sec WIA 12.93 11.42 -11.7 2.9
Loan Participation Funds
Apollo Sr Fltg Rate Fd AFT 18.16 17.04 -6.2 7.3
BlackRock FR Incm Strat FRA 15.03 14.26 -5.1 5.7
Blkrk FltRt InTr BGT 14.52 14.00 -3.6 5.4
BlackstoneGSO Strat Cred BGB 17.12 16.12 -5.8 8.4
Blackstone GSO Sr Float BSL 17.73 17.85 +0.7 6.5
Eagle Point Credit ECC NA 20.46 NA 7.7
Eaton Vance FR Incm Tr EFT 15.55 15.27 -1.8 5.7
EatonVnc SrFltRate EFR 15.21 14.88 -2.2 6.0
Eaton Vance Sr Incm Tr EVF 7.18 6.66 -7.2 5.8
First Trust Sr FR Fd II FCT 14.28 13.39 -6.2 6.1
FT Sr Floating Rate 2022 FIV 9.90 9.97 +0.7 NS
Invesco Credit Opps Fund VTA 13.04 12.05 -7.6 7.2
Invesco Senior Income Tr VVR 4.90 4.53 -7.6 6.1
Nuveen Credit Strt Inc Fd JQC NA 8.68 NA 7.2
NuvFloatRteInco Fd JFR NA 11.83 NA 6.6
Nuv Float Rte Opp Fd JRO NA 11.82 NA 7.0
Nuveen Senior Income Fund NSL NA 6.83 NA 6.7
Pioneer Floating Rate Tr PHD 12.57 11.92 -5.2 6.1
Voya Prime Rate Trust PPR 5.72 5.31 -7.2 5.9
High Yield Bond Funds
AllianceBernstein Glbl AWF 14.06 12.99 -7.6 7.0
Barings Glbl Short Dur HY BGH 21.42 20.18 -5.8 9.3
BlackRock Corp Hi Yd Fd HYT 12.32 11.30 -8.3 8.1
BlkRk Debt Strat Fd DSU 12.79 11.74 -8.2 6.8
BlackRockDurInco Tr BLW 17.07 15.96 -6.5 9.3
Brookfield Real Assets RA NA NA NA NS
Credit Suisse High Yld DHY 2.80 2.85 +1.8 9.6
DoubleLine Incm Solutions DSL 21.54 21.19 -1.6 8.7
Dreyfus Hi Yd Strat Fd DHF 3.61 3.50 -3.0 9.0
Fst Tr Hi Inc Lg/Shrt Fd FSD 18.33 17.14 -6.5 7.1
Guggenheim Strat Opps Fd GOF 19.78 21.09 +6.6 10.3
Ivy High Income Opps Fund IVH 16.49 15.91 -3.5 9.6
Neuberger Berman HYS NHS 13.51 11.99 -11.3 7.8
NexPoint Credit Strat Fd NHF 24.26 21.94 -9.6 11.7
Nuveen Credit Opps 2022 JCO NA 10.18 NA NS
Nuveen Gl Hi Incm Fd JGH NA 17.27 NA 8.6
Nuveen High Incm Dec18 JHA NA 10.05 NA 5.7
Nuveen High Incm Dec19 JHD NA 10.27 NA 5.9
Nuveen Hi Incm Nov 2021 JHB NA 10.16 NA NS
Pioneer High Income Trust PHT 10.85 10.00 -7.8 9.1
Prud Gl Shrt Dur Hi Yd GHY 16.57 15.08 -9.0 8.1
Prudentl Sh Dur Hi Yd Fd ISD 16.80 15.31 -8.9 8.0
Wells Fargo Incm Opps Fd EAD NA 8.72 NA 9.1
Wstrn Asset Glbl Hi Inco EHI NA 10.33 NA 10.0
Wstrn Asset High Inco II HIX 7.81 7.29 -6.7 9.2
Wstrn Asset Opp Fd HIO NA 5.15 NA 7.7
West Asst HY Def Opp Fd HYI NA 15.52 NA 8.2
Other Domestic Taxable Bond Funds
Apollo Tactical Incm Fd AIF 17.55 16.47 -6.2 9.0
Ares Dynamic Credit Alloc ARDC NA 16.48 NA 7.5
Barings Corp Investors MCI NA 15.36 NA 3.9
BlackRock Multi-Sector IT BIT 19.75 18.46 -6.5 10.5
BlackRock Taxable Mun Bd BBN 23.33 23.41 +0.3 6.9
Doubleline Oppor Credit DBL 22.18 24.61 +11.0 7.9
Duff & Phelps Utl & Cp Bd DUC 9.85 9.24 -6.2 6.5
Prem12 Mo
Fund (SYM)
NAV Close /Disc Yld
EtnVncLtdFd EVV
15.22 14.10 -7.4 7.4
Franklin Ltd Duration IT FTF NA 11.86 NA 9.95
GuggenheimTaxableMuni GBAB 23.25 22.89 -1.5 6.7
Invesco High Incm 2023 IHIT 10.12 10.10 -0.2 NS
John Hancock Investors JHI 18.83 18.20 -3.3 7.6
KKR Income Opps Fund KIO NA NA NA 9.0
MFS Charter MCR
9.39 8.68 -7.6 8.6
MFS Multimkt MMT 6.72 6.25 -7.0 8.6
Nuveen Build Am Bd Fd NBB NA 21.25 NA 6.0
PIMCO Corporate & Incm PTY 14.87 16.89 +13.6 10.5
PIMCO Corporate & Incm PCN 15.32 17.79 +16.1 10.2
PIMCO HiInco PHK
6.91 8.68 +25.6 12.8
PIMCO Inco Str Fd PFL 11.60 12.27 +5.8 9.1
PIMCO Incm Strategy Fd II PFN 10.32 10.75 +4.2 9.2
Putnam Mas Inco PIM 5.04 4.74 -6.0 6.6
Putnam Premier Income Tr PPT 5.56 5.37 -3.4 5.7
Wells Fargo Multi-Sector ERC NA 13.51 NA 8.8
World Income Funds
Abeerden Asia-Pacific FAX 5.58 5.15 -7.7 8.0
Etn Vnc Short Dur Fd EVG NA 14.10 NA 7.4
Legg Mason BW Glbl Incm BWG 15.37 13.52 -12.0 5.4
MS EmMktDomDebt EDD 9.03 8.22 -9.0 8.7
PIMCO Dynamic Credit PCI 23.20 22.89 -1.3 11.6
PIMCODynamicIncomeFund PDI 28.48 30.65 +7.6 13.5
PIMCO Income Opportunity PKO 25.28 27.06 +7.0 9.7
PIMCO Strat Income Fund RCS NA 10.34 NA 9.0
Templeton Emerging TEI 12.90 11.36 -11.9 5.4
Templeton Global GIM 7.43 6.70 -9.8 6.5
Wstrn Asset Emerg Mkts EMD 17.58 NA NA NA
Wstrn Asset Gl Def Opp Fd GDO 19.29 18.16 -5.9 7.6
National Muni Bond Funds
AllianceBrnstn NtlMun AFB 14.97 14.06 -6.1 4.7
Blackrock Invest BKN 15.86 15.32 -3.4 5.5
BlackRockMun2030Target BTT 23.82 23.17 -2.7 4.1
BlackRock Municipal Trust BFK 14.47 14.55 +0.6 5.8
BlackRockMuni BLE 15.11 15.54 +2.8 5.7
BlackRockMuni Tr BYM 15.21 14.56 -4.3 5.4
BlkRk MuniAssets Fd MUA 14.23 15.34 +7.8 4.6
BlkRk Munienhanced MEN 11.96 12.33 +3.1 5.7
BlkRk MuniHldgs Inv MFL 14.85 15.16 +2.1 5.8
BlkRk MuniHldgs Qlty II MUE 14.18 14.05 -0.9 5.6
BlkRk MuniVest MVF 9.71 9.83 +1.2 6.0
BlkRk MuniVest II MVT 15.33 15.93 +3.9 5.9
BlkRk MuniYield MYD 14.91 15.50 +4.0 5.7
BlkRk MuniYld Quality MQY 15.85 15.93 +0.5 5.6
BlkRk MuniYld Qlty II MQT 13.92 13.56 -2.6 5.6
BlRkMunyldQltyIII MYI 14.47 14.56 +0.6 5.7
Deutsche Mun Income Tr KTF 12.70 13.22 +4.1 6.2
Dreyfus Mun Bd Infr Fd DMB 14.18 13.41 -5.4 5.1
Dreyfus Strat Muni Bond DSM 8.46 8.74 +3.3 5.8
Dreyfus Strategic Munis LEO 8.67 9.12 +5.2 5.7
Eaton Vance Mun Bd Fd EIM 13.79 12.82 -7.0 5.1
Eaton Vance Mun Income EVN 13.41 12.98 -3.2 5.4
EV National Municipal Opp EOT 21.92 22.31 +1.8 4.6
Invesco Adv Mun Incm II VKI 12.23 11.72 -4.2 5.8
Invesco Mun Incm Opps Tr OIA 7.59 7.98 +5.1 5.2
Invesco Mun Opportunity VMO 13.60 13.15 -3.3 6.2
Invesco Municipal Trust VKQ 13.59 12.91 -5.0 5.8
Invesco Qlty Mun Inco IQI 13.69 12.82 -6.4 5.6
Invesco Inv Grade Muni VGM 14.08 13.52 -4.0 5.7
Invesco Value Mun Incm Tr IIM 16.33 15.32 -6.2 5.0
MainStay DefinedTerm MMD 20.15 20.10 -0.2 5.4
MFS Munl Inco MFM 7.38 7.29 -1.2 5.3
Nuveen AMT-Free Quality NEA NA 13.89 NA 5.5
Nuveen AMT-Free Mun NVG NA 15.48 NA 5.8
Nuveen Mun Credit Incm Fd NZF NA 15.23 NA 6.0
Nuveen Enhncd Mun Val Fd NEV NA 14.60 NA 5.9
Nuveen Intermed Dur Mun NID NA 13.51 NA 4.9
NuveenMuniIncoOpp Fd NMZ NA 13.55 NA 6.2
Nuveen Muni Value Fund NUV NA 10.17 NA 3.9
Nuveen Qual Mun Incm Fd NAD NA 14.32 NA 5.7
Nuveen Sel Tax Free NXP NA 14.59 NA 3.8
Nuveen Sel TF NXQ
NA 13.93 NA 3.7
PIMCO MuniFd PMF 12.85 13.87 +7.9 6.3
Pimco Muni Inc II PML 12.16 13.40 +10.2 5.9
PIMCO Muni Inc III PMX 11.05 11.91 +7.8 6.1
Pioneer Mun Hi Inc Adv Tr MAV 12.00 11.63 -3.1 5.7
Pioneer Mun Hi Incm Tr MHI 12.83 12.07 -5.9 5.3
Putnam Tr PMM
7.89 7.59 -3.8 5.5
PutnamMuniOpportunities PMO 13.17 12.57 -4.6 5.3
Wstrn Asset Mngd Muni MMU 13.98 14.20 +1.6 5.5
WesternAssetMunTrFund MTT 21.43 22.52 +5.1 4.9
Single State Muni Bond
BlackRock CA Municipal Tr BFZ 15.34 14.53 -5.3 5.4
BlkRk MuniHldgs CA Qlty MUC 15.53 14.69 -5.4 5.1
Blkrck MunHl NJ Qlty MUJ 15.56 14.82 -4.8 5.6
Prem12 Mo
Fund (SYM)
NAV Close /Disc Yld
BlRk MuHldg NY Qlty MHN 14.85 14.09 -5.1 5.0
BlkRk MuniYld CA Fd MYC 15.61 15.23 -2.4 5.2
BlkRk MuniYld CA Quality MCA 15.73 15.17 -3.6 5.1
BlkRk MuniYld MI Qlty MIY 15.48 14.14 -8.7 5.4
BlRk Muyld NY Qlty MYN 14.25 13.24 -7.1 5.0
Eaton Vance CA Mun Bd EVM 12.51 11.78 -5.8 5.2
Invesco CA Value Mun Incm VCV 13.53 12.75 -5.8 5.1
Invesco PA Value Mun Incm VPV 14.10 12.52 -11.2 5.2
Invesco Inv Grade NY Muni VTN 14.69 13.87 -5.6 5.2
Nuveen CA AMT-Free Qual NKX NA 15.82 NA 5.1
Nuveen CA Muni Value NCA NA 10.30 NA 4.1
Nuveen CA Quality Muni NAC NA 15.23 NA 5.5
Nuveen MD Qual Muni NMY NA 13.12 NA 5.0
Nuveen MI Qual Muni NUM NA 13.92 NA 4.9
Nuveen NJ Qual Muni NXJ NA 13.90 NA 5.3
Nuveen NY AMT-Free NRK NA 13.29 NA 5.0
Nuveen NY Qual Muni NAN NA 14.30 NA 5.1
Nuveen OH Qual Muni NUO NA 15.21 NA 4.8
Nuveen PA Qual Muni NQP NA 13.61 NA 5.3
Nuveen VA Qual Muni NPV NA 13.29 NA 4.4
PIMCO California Muni PCQ 14.24 17.02 +19.5 5.4
PIMCO California Mun II PCK 8.68 10.35 +19.2 5.5
52 wk
Prem Ttl
Fund (SYM)
NAV Close /Disc Ret
General Equity Funds
Specialized Equity Funds
Griffin Inst Access RE:L NA NA NA NS
Griffin Inst Access RE:M NA NA NA NS
NexPointRlEstStrat;A 21.36 NA NA 11.7
NexPointRlEstStrat;C 21.30 NA NA 10.9
NexPointRlEstStrat;Z 21.30 NA NA 12.0
Resource RE Div Inc:L
NA NA NA NS
SharesPost 100
25.53 NA NA -1.8
Tot Inc+ RE:A
29.32 NA NA 6.1
Tot Inc+ RE:C
28.62 NA NA 5.3
Tot Inc+ RE:I
29.63 NA NA 6.4
Versus Cap MMgr RE Inc:F 27.40 NA NA 4.3
Versus Cap MMgr RE Inc:I 27.45 NA NA 4.6
Wildermuth Endwmnt Str 12.43 NA NA 10.0
Wildermuth Endwmnt S:C 12.29 NA NA 9.1
Wildermuth Endwmnt S:I 12.43 NA NA NS
Income Preferred Stock Funds
The Relative Value:CIA VFLEX 25.18 NA NA NS
Convertible Sec's. Funds
Calmos Dyn Conv and Inc CCD 20.91 20.74 -0.8 14.0
World Equity Funds
BMO LGM Front ME 10.26 NA NA 16.4
Prem12 Mo
Fund (SYM)
NAV Close /Disc Yld
U.S. Mortgage Bond Funds
Vertical Capital Income 12.60 NA NA 3.0
Loan Participation Funds
504 Fund
9.83 NA NA 3.5
FedProj&TrFinanceTender 10.05 NA NA NS
Invesco Sr Loan A
6.67 NA NA 4.5
Invesco Sr Loan B
6.67 NA NA 4.5
Invesco Sr Loan C
6.69 NA NA 3.8
Invesco Sr Loan IB
6.68 NA NA 4.8
Invesco Sr Loan IC
6.67 NA NA 4.6
Invesco Sr Loan Y
6.67 NA NA 4.8
RiverNorth MP Lending RMPLX 25.20 NA NA NS
Sierra Total Return:T SRNTX 25.04 NA NA NS
Voya Senior Income:A 12.65 NA NA 5.4
Voya Senior Income:C 12.63 NA NA 5.0
Voya Senior Income:I 12.62 NA NA 5.7
Voya Senior Income:W 12.66 NA NA 5.7
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:I NA NA NA NS
PIMCO Flexible Cr I;Inst 10.39 NA NA NS
PionrILSInterval
10.58 NA NA 9.6
WA Middle Mkt Dbt
NA NA NA 8.4
WA Middle Mkt Inc WMF NA NA NA 8.4
Other Domestic Taxable Bond Funds
Capstone Church Capital 11.64 NA NA 1.2
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
GL Beyond Income
3.86 NA NA NE
Palmer Square Opp Income NA NA NA 6.1
Resource Credit Inc:A
NA NA NA 6.4
Resource Credit Inc:C
NA NA NA 5.7
Resource Credit Inc:I
NA NA NA 6.6
Resource Credit Inc:W NA NA NA 6.2
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, July 28, 2017
52 wk
Prem Ttl
Fund (SYM)
NAV Close /Disc Ret
General Equity Funds
Adams Divers Equity Fd ADX 17.29 14.79 -14.5 21.5
Boulder Growth & Income BIF 11.80 9.90 -16.1 22.1
Central Securities CET 30.92 25.73 -16.8 31.3
CohSteer Opprtnty Fd FOF 13.99 13.18 -5.8 20.5
Cornerstone Strategic CLM 13.30 14.85 +11.7 6.3
EtnVnc TaxAdvDiv EVT 22.48 22.14 -1.5 14.5
Gabelli Dividend & Incm GDV 23.74 22.34 -5.9 19.1
Gabelli Equity Trust GAB 6.39 6.29 -1.6 21.4
Genl American Investors GAM 41.30 35.01 -15.2 19.1
Guggenheim Enh Fd GPM 8.75 8.39 -4.1 16.0
HnckJohn TxAdv HTD 26.53 25.68 -3.2 10.4
Liberty All-Star Equity USA 6.54 5.70 -12.8 20.8
Royce Micro-Cap RMT 9.83 8.68 -11.7 20.1
Royce Value Trust RVT 16.54 14.84 -10.3 25.8
Source Capital SOR 43.87 39.40 -10.2 10.4
Tri-Continental TY
28.25 24.98 -11.6 21.8
Specialized Equity Funds
Adams Natural Rscs Fd PEO 22.03 19.15 -13.1 3.3
AllnzGI NFJ Div Interest NFJ 14.58 13.38 -8.2 15.2
AlpnGlblPrProp AWP 7.29 6.56 -10.0 26.0
ASA Gold & Prec Metals ASA 13.51 11.99 -11.3 -24.9
BlkRk Enh Cap Inco CII 16.08 15.23 -5.3 17.7
BlkRk Engy Res Tr BGR 14.47 13.21 -8.7 2.4
BlackRock Enh Eq Div Tr BDJ 9.57 8.89 -7.1 18.1
52 wk
Prem Ttl
Fund (SYM)
NAV Close /Disc Ret
BlackRock Enh Gl Div Tr BOE 14.44 13.51 -6.4 19.7
BlkRk Intl Grwth&Inco BGY 6.88 6.44 -6.4 17.4
BlkRk Health Sci BME 35.12 36.67 +4.4 11.1
BlackRck Rscs Comm Str Tr BCX 9.63 8.59 -10.8 15.3
BlackRock Science & Tech BST 25.37 23.82 -6.1 42.7
BlackRock Utility & Infr BUI 21.10 21.26 +0.8 11.7
CBREClarionGlblRlEstIncm IGR 8.86 7.87 -11.2 -2.8
Central Fund of Canada CEF 13.36 12.48 -6.6 -14.8
ClearBridge Amer Engy CBA 9.72 9.19 -5.5 15.7
ClearBridge Engy MLP Fd CEM 16.04 15.58 -2.9 7.2
Clearbridge Engy MLP Opp EMO 13.31 12.63 -5.1 7.5
Clearbridge Engy MLP TR CTR 13.54 12.97 -4.2 8.7
Cohen & Steers Infr Fd UTF 25.43 23.13 -9.0 18.7
C&S MLP Incm & Engy Opp MIE 11.74 10.78 -8.2 14.2
Cohen & Steers Qual Inc RQI 13.68 13.12 -4.1 -3.2
CohnStrsPfdInco RNP 22.92 20.94 -8.6 5.3
Cohen & Steers TR RFI 13.56 12.76 -5.9 -1.9
CLSeligmn Prem Tech Gr Fd STK 20.99 22.56 +7.5 38.2
Divers Real Asset Incm Fd DRA
17.82 NA 12.1
Duff & Phelps DNP
9.98 11.27 +13.0 14.9
Duff&PhelpsGblUtilIncFd DPG 18.85 16.81 -10.8 4.8
Eaton Vance Eqty Inco Fd EOI 14.32 13.84 -3.4 13.5
Eaton Vance Eqty Inco II EOS 15.26 15.08 -1.2 21.8
EtnVncRskMngd ETJ 9.95 9.38 -5.7 7.4
Etn Vnc Tax Mgd Buy-Write ETB 16.14 16.69 +3.4 12.5
Eaton Vance BuyWrite Opp ETV 14.54 15.40 +5.9 14.3
Eaton Vance Tax-Mng Div ETY 11.80 11.53 -2.3 18.8
EatonVanceTax-MngdOpp ETW 11.46 11.79 +2.9 21.4
EtnVncTxMngGlDvEqInc EXG 9.47 9.35 -1.3 18.4
Fiduciary/Clymr Opp Fd FMO 13.78 14.18 +2.9 12.0
FT Energy Inc & Growth Fd FEN 24.72 25.50 +3.2 8.1
FstTrEnhEqtIncFd FFA 16.16 15.02 -7.1 20.4
First Tr Engy Infr Fd FIF 19.75 18.89 -4.4 14.6
First Tr MLP & Engy Incm FEI 15.29 15.83 +3.5 9.6
Gabelli Hlthcr & Well GRX 11.98 10.59 -11.6 2.1
Gabelli Utility Tr GUT 5.54 7.01 +26.5 15.1
GAMCOGlblGoldNatRscs&Inc GGN 5.59 5.59 0.0 0.4
GoldmanSachsMLPIncOpp GMZ
9.83 NA 13.6
Goldman Sachs MLPEnergy GER
7.38 NA 14.0
John Hancock Finl Opps Fd BTO 34.50 35.32 +2.4 40.0
Macquarie Glbl Infrstrctr MGU 28.12 25.23 -10.3 23.4
NeubergerBermanMLPIncm NML 10.47 9.87 -5.7 23.8
Neubrgr Brm Rl Est Sec Fd NRO 5.94 5.50 -7.4 0.5
Nuveen Dow 30 Dynamic DIAX
16.81 NA 21.4
Nuveen Core Eq Alpha JCE
15.24 NA 12.4
Nuveen Diversified Div JDD
12.89 NA 13.9
Nuveen Engy MLP Fd JMF
12.90 NA 17.6
52 wk
Prem Ttl
Fund (SYM)
NAV Close /Disc Ret
NuvNASDAQ100DynOver QQQX
22.28 NA 29.1
Nuveen Real Est Incm Fd JRS
11.44 NA 2.0
NuvS&P500DynOverwrite SPXX
15.52 NA 18.6
NuveenS&P500Buy-Write BXMX
14.04 NA 15.3
Reaves Utility Fund UTG 34.86 35.30 +1.3 19.7
Tekla Hlthcr Investors HQH 26.50 25.76 -2.8 7.1
Tekla Healthcare Opps Fd THQ 20.14 18.55 -7.9 14.5
Tekla Life Sciences HQL 21.62 21.65 +0.1 20.8
Tekla World Hlthcr Fd THW 15.71 14.93 -5.0 10.0
Tortoise Energy TYG 28.45 30.48 +7.1 7.4
Tortoise MLP Fund NTG 18.80 19.35 +2.9 11.8
Voya Gl Equity Div IGD 8.25 7.74 -6.2 18.3
Income Preferred Stock Funds
Calamos Strat Fd CSQ 12.49 11.93 -4.5 24.7
Cohen & Steers Dur Pfd LDP 27.39 26.74 -2.4 14.1
Cohen & Strs Sel Prf Inco PSF 28.05 28.88 +3.0 11.1
FT Interm Duration Pfd FPF 25.12 24.80 -1.3 14.0
Flaherty & Crumrine Dyn DFP 26.73 26.51 -0.8 14.7
Flaherty & Crumrine Pfd FFC 20.56 20.52 -0.2 3.0
John Hancock Pfd Income HPI 22.12 22.19 +0.3 3.3
John Hancock Pfd II HPF 21.86 22.22 +1.6 6.0
John Hancock Pfd Inc III HPS 19.50 19.06 -2.3 2.2
JHancock Pr Div PDT 16.20 16.99 +4.9 6.5
LMP Cap & Inco Fd SCD 15.78 14.48 -8.2 14.7
Nuveen Preferred & Incm JPI
25.20 NA 10.6
Nuveen Pfd Incm Opps Fd JPC
10.57 NA 9.6
Nuveen Pfd Secs Incm Fd JPS
10.33 NA 15.9
TCW Strategic Income Fund TSI
5.60 NA 8.5
Virtus Global Dividend ZTR 12.86 13.04 +1.4 22.6
Convertible Sec's. Funds
AdvntClymrFd AVK 17.64 16.72 -5.2 22.7
AllianzGI Conv & Incm NCV 6.79 7.19 +5.9 19.9
AllianzGI Conv & Incm II NCZ 6.09 6.43 +5.6 24.8
AllianzGI Div Incm ACV 22.46 21.67 -3.5 26.4
AllianzGI Equity & Conv NIE 22.20 20.15 -9.2 13.0
Calamos Conv Hi Inco Fd CHY 11.93 12.12 +1.6 18.0
Calamos CHI
11.31 11.61 +2.7 24.1
World Equity Funds
Alpine Tot Dyn Div AOD 9.80 8.84 -9.8 24.5
Calamos Global Tot Ret Fd CGO 13.09 NA NA NA
Cdn Genl Inv CGI
29.27 21.28 -27.3 20.4
China Fund CHN
21.58 19.52 -9.5 32.3
Clough Global Opp Fd GLO 11.88 11.14 -6.2 28.2
EtnVncTxAdvGblDiv ETG 18.08 17.36 -4.0 25.2
EatonVance TxAdv Opport ETO 24.32 24.65 +1.4 20.4
First Trust Dynamic Eur FDEU 19.63 18.92 -3.6 26.3
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 July 28, 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
ELS
S. Zell
No. of shrs in Price range ($) $ Value
trans (000s) in transaction (000s)
Close ($) Ytd (%)
Buyers
July 21
Equity Lifestyle Properties
July 24
Cable One
CABO
CBI
805
87.43
D. Graham
B
25
742.52
D
D
D
159*
30*
14*
July 19-20 Tile Shop Holdings
July 24-25
July 21
TTS
P. Kamin
P. Kamin
P. Kamin
July 25
July 25
July 25
July 25
Regulus Therapeutics
RGLS
S. Papadopoulos
W. Rastetter
T. Wright
J. Hagan
July 24
July 24
General Electric
July 21
July 21
July 21
Viper Energy Partners
J. Rohr
J. Brennan
GE
D
DI
O
CEO
87.68
21.6
18,237 758.22
22.0
70,410
14.31-14.50
13.42-13.78
14.01
2,294
403
198
14.65 -25.1
1,000
275
275
220
.91
.91
.91
.91
910
250
250
200
1.02 -54.7
27
10
25.50
25.80
699
258
25.53 -19.2
DI
D
VNOM
T. Stice
CEOI
S. West
D
R. Pantermuehl O
31
31
18
14.75
14.75
14.75
454
454
273
17.16
7.3
July 20-21 AngioDynamics
ANGO
J. Clemmer
CEO
25
15.64-15.79
392
16.38
-2.9
July 26
July 24
Home BancShares
HOMB
J. Allison
J. Allison
CB
CB
15
15
25.46
24.68
382
370
24.77 -10.8
July 27
Akamai Technologies
AKAM
F. Salerno
D
5
46.83
234
46.89 -29.7
Borrowing Benchmarks | WSJ.com/bonds
Money Rates
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.
Sellers
July 21
Equity Lifestyle Properties
ELS
S. Zell
CBI
805
87.43
70,410
87.68
21.6
July 24
July 25
American Express
AXP
K. Chenault
S. Squeri
CEO
O
790
95
84.30-85.12
85.41
66,805
8,096
84.80
14.5
453
63
116.42-116.50
116.39
52,728 116.61
7,378
J. Leiden
CEO
I. Smith
CO
S. Arbuckle
O
J. Chodakewitz O
217
134
102
47
157.42-162.08
157.56-162.40
159.00-162.67
158.08-162.04
34,868 154.16 109.3
21,531
16,453
7,522
July 24-25 PepsiCo
July 24
I. Nooyi
M. Khan
PEP
July 19-21 Vertex Pharmaceuticals
July 19-21
July 19-21
July 19-21
VRTX
CEO
O
11.4
244.955
252.014
All items
Core
COF
R. Fairbank
CEO
367
86.20-87.80
84.97
-2.6
July 24
Netflix
NFLX
R. Hastings
CEO
109
187.89-189.69
20,599 184.04
48.7
July 24
Cable One
CABO
D. Graham
BI
25
742.52
18,237 758.22
22.0
July 24
Spark Therapeutics
ONCE
A. Mehra
DI
212
70.04-73.10
71.33
42.9
July 24
July 20
Johnson & Johnson
JNJ
P. Stoffels
D. Caruso
O
CFO
103
83
133.14
136.72
13,673 131.85
11,291
14.4
Prime rates
July 24
DXC Technology
DXC
M. Nefkens
O
128
80.00-80.05
10,270
78.43
13.3
July 25
Floor Decor Holdings
FND
G. West
DI
261
38.50
10,047
35.54
10.9
U.S.
Canada
Japan
HPQ
M. Whitman
D
444
19.29-19.36
8,579
19.17
29.2
July 25-26 HP Inc
14,862
Buying and selling by sector
Basic Industries
Business services
Capital goods
Consumer durables
Consumer nondurables
Consumer services
Energy
Buying
43,510
0
0
0
75,324
233,280
205,983
Selling
7,887,997
20,446,994
0
7,247,770
13,106,127
41,418,065
12,609
1.6
1.7
Latest
Week
ago
52-Week
High
Low
Buying
Finance
Health care
Industrial
Media
Technology
Transportation
Utilities
2,002,435
475,406
1,004,468
1,966
234,150
0
0
Selling
88,877,722
134,095,791
16,127,211
8,270
52,532,578
577,837
16,387,500
Sources: Thomson Financial; WSJ Market Data Group
Secondary market
Fannie Mae
4.25 4.25 4.25 3.50
2.95 2.95 2.95 2.70
1.475 1.475 1.475 1.475
0.00
0.50
0.25
1.50
1.13
0.00
0.50
0.25
1.50
0.00
0.50
0.50
1.75
0.00
0.50
0.25
1.50
Other short-term rates
1.06
1.38
0.15
1.75
1.75
1.75
1.00
1.1800
1.3125
1.1200
1.1600
1.1700
1.2000
1.3125
1.1600
1.1700
1.1900
0.3300
0.5625
0.2000
0.2800
0.3000
Federal funds
1.1800
1.3125
0.9700
1.1600
1.1700
Six month
One year
—52-WEEK—
High Low
1.45500 1.45306 1.46544 1.11170
1.72900 1.73567 1.82761 1.43210
Euro Libor
One month
Three month
Six month
One year
-0.398
-0.377
-0.299
-0.187
-0.402
-0.376
-0.300
-0.187
-0.369
-0.302
-0.192
-0.064
-0.405
-0.378
-0.308
-0.190
One month
Three month
Six month
One year
52-Week
high
low
-0.371
-0.329
-0.272
-0.152
Latest
-0.374
-0.331
-0.272
-0.152
Value
Traded
-0.366
-0.297
-0.183
-0.045
-0.375
-0.332
-0.274
-0.163
52-Week
High
Low
DTCC GCF Repo Index
3.00
3.00
3.00
2.25
Treasury
MBS
1.25
1.23
1.26
0.59
Libor
1.23167 1.23222 1.23389 0.49390
1.31056 1.31444 1.31667 0.75910
1.085
1.110
52.600 1.366 0.244
72.600 1.506 0.257
Open Implied
Settle Change Interest Rate
Commercial paper (AA financial)
One month
Three month
Discount
Week
ago
Call money
90 days
U.S. government rates
Effective rate
High
Low
Bid
Offer
3.543 3.473 3.865 2.808
3.575 3.497 3.899 2.837
Latest
Week
Latest ago
Euro interbank offered rate (Euribor)
30-year mortgage yields
Policy Rates
U.S.
Sector
0.980 0.955 0.980 0.160
1.180 1.050 1.180 0.250
1.130 1.105 1.130 0.395
4 weeks
13 weeks
26 weeks
30 days
60 days
Overnight repurchase
Based on actual transaction dates in reports received this past week
Sector
0.09
0.07
—52-WEEK—
High Low
Treasury bill auction
International rates
Euro zone
Switzerland
Britain
Australia
* Half the transactions were indirect **Two day transaction
p - Pink Sheets
Chg From (%)
May '17 June '16
U.S. consumer price index
July 25-26 Capital One Financial
31,973
Week
Latest ago
Inflation
June index
level
July 28, 2017
DTCC GCF Repo Index Futures
Treasury Jly
Treasury Aug
Treasury Sep
98.890 0.005 8883 1.110
98.880 unch. 3204 1.120
98.865 -0.005 2084 1.135
Notes on data:
U.S. prime rate is the base rate on corporate loans posted by at least 70% of the 10 largest U.S. banks,
and is effective June 15, 2017. Other prime rates aren’t directly comparable; lending practices vary
widely by location; Discount rate is effective June 15, 2017. DTCC GCF Repo Index is Depository
Trust & Clearing Corp.'s weighted average for overnight trades in applicable CUSIPs. Value traded is in
billions of U.S. dollars. Federal-funds rates are Tullett Prebon rates as of 5:30 p.m. ET. Futures on the
DTCC GCF Repo Index are traded on NYSE Liffe US.
Sources: Federal Reserve; Bureau of Labor Statistics; DTCC; SIX Financial Information;
General Electric Capital Corp.; Tullett Prebon Information, Ltd.
THE WALL STREET JOURNAL.
Monday, July 31, 2017 | B9
MARKETS
BY DAVID GEORGE-COSH
TORONTO—The Canadian
dollar is on a tear, and traders
and investors are betting it
will remain strong.
The currency, known as the
loonie for the bird on its single-dollar
CURRENCIES
coin, is up
about 10%
against the
U.S. dollar since early May,
boosted by a string of strong
economic indicators and the
Bank of Canada’s first policy
rate increase in seven years.
On July 18, investors took a
net long position in the Canadian dollar—a bet that the currency would appreciate—for
the first time since March. On
Friday, data from the U.S.
Commodity Futures Trading
Commission showed investors
held about 26,000 more long
than short contracts on the
‘It looks like the
loonie’s strength is
here to stay,’ one
strategist said.
Canadian dollar in the week
ended July 25, up from about
8,000 long contracts in the
prior week.
“There’s a lot of things conspiring to keep the Canadian
dollar firm around these levels,” said Bipan Rai, senior
macro strategist at CIBC Capital Markets. “It looks like the
loonie’s strength is here to
stay.”
The quick rise of the Canadian dollar reflects recent signals that Canada’s economy
has turned a corner after the
commodities slump. Traders
and currency analysts say it is
unlikely to climb significantly
higher, and its strength could
even damp the country’s resurgent growth, posing a challenge for policy makers.
Currently trading around
the 80 U.S. cent mark, the Ca-
nadian dollar had not long ago
been hurt by an oil-price
slump, becoming one of the
worst-performing currencies
over the past three years. It
sunk to as low as 68 U.S. cents
in January 2016 after hitting
parity with the greenback in
early 2013.
That weakness began to unwind throughout the past year
as the currency, weighed down
by investors taking bearish
bets, helped the Canadian
economy sputter back to life.
The loonie is also playing
catch-up after its steep decline
in April, when the U.S. slapped
onerous tariffs on Canadian
lumber, spooking investors
who rushed to reduce their exposure to the export-sensitive
Canadian economy. The tariffs,
and related fears about hardline changes to the North
American Free Trade Agreement, pushed the currency to a
14-month low.
The Canadian dollar began
to strengthen in May amid reports showing exports jumped
nearly 18% to 48.69 billion Canadian dollars (US$38.78 billion), the strongest 12-month
showing in nearly six years.
Meanwhile, economic indicators measuring employment,
retail sales and business-investment intentions gave the
Bank of Canada confidence the
time was right for a rate rise.
Earlier this month, the Bank
of Canada moved to raise its
policy rate a quarter of a percentage point to 0.75%, and
overnight index swaps show
investors believe the central
bank will increase the rate
again by the end of the year.
That caused the loonie to post
its biggest rally in about a
year, as the U.S. dollar closed
at C$1.2751, down from
C$1.2916 the previous day.
Since then, the Canadian
dollar has crept even higher,
boosted by a softer greenback
and more good economic news
out of Canada. The currency
rallied Friday after strongerthan-expected May gross domestic product figures, closing
near 80.40 U.S. cents.
Currencies
U.S.-dollar foreign-exchange rates in late New York trading
Country/currency
in US$
US$vs,
YTDchg
Fri
per US$ (%)
Americas
Vietnam dong
Argentina peso
.0562 17.7980 12.2
Brazil real
.3193 3.1321 –3.8
Canada dollar
.8043 1.2434 –7.5
Chile peso
.001530 653.70 –2.4
Colombia peso
.0003333 3000.45 –0.1
Ecuador US dollar
1
1 unch
Mexico peso
.0562 17.7782 –14.3
Peru new sol
.3083 3.244 –3.2
Uruguay peso
.03524 28.3800 –3.3
Venezuela b. fuerte .098726 10.1291 1.3
Europe
Asia-Pacific
Australian dollar
.7986 1.2522
China yuan
.1484 6.7374
Hong Kong dollar
.1280 7.8099
India rupee
.01559 64.133
Indonesia rupiah .0000750 13327
Japan yen
.009034 110.69
Kazakhstan tenge .003057 327.09
Macau pataca
.1242 8.0540
Malaysia ringgit
.2336 4.2815
New Zealand dollar
.7515 1.3307
Pakistan rupee
.00949 105.355
Philippines peso
.0198 50.548
Singapore dollar
.7371 1.3567
South Korea won .0008891 1124.70
Sri Lanka rupee
.0065104 153.60
Taiwan dollar
.03301 30.295
Thailand baht
.02996 33.380
–9.8
–3.0
0.7
–5.6
–1.5
–5.4
–2.0
1.7
–4.6
–7.9
0.9
1.9
–6.3
–6.9
3.5
–6.7
–6.8
in US$
US$vs,
YTDchg
Fri
per US$ (%)
.00004400
22729 –0.2
Country/currency
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
.04507 22.187 –13.6
.1580 6.3287 –10.5
1.1751 .8510 –10.5
.003856 259.31 –11.9
.009703 103.06 –8.8
.1264 7.9103 –8.5
.2762 3.6200 –13.5
.01680 59.514 –2.9
.1232 8.1191 –10.8
1.0321 .9689 –4.9
.2835 3.5279 0.1
.0386 25.9100 –4.3
1.3136 .7613 –6.0
Middle East/Africa
Bahrain dinar
Egypt pound
Israel shekel
Kuwait dinar
Oman sul rial
Qatar rial
Saudi Arabia riyal
South Africa rand
2.6513 .3772
.0559 17.8830
.2809 3.5604
3.3053 .3025
2.5970 .3851
.2761 3.622
.2666 3.7507
.0769 13.0081
unch
–1.4
–7.5
–1.0
0.02
–0.5
unch
–5.0
Close Net Chg % Chg YTD%Chg
WSJ Dollar Index 86.10 –0.37–0.43 –7.35
LEVINE ROBERTS/NEWSCOM/ZUMA PRESS
As Canadian Dollar
Claws Back Ground,
Investors Get Bullish
Demand for eggs hasn’t kept up with producers’ efforts to restock in the wake of the avian flu that devastated flocks two years ago.
Glut of Eggs Shells U.S. Farmers
BY JESSE NEWMAN
AND JACOB BUNGE
A glut of eggs is putting
pressure on suppliers and
farmers who are struggling to
win back business two years
after
the
COMMODITIES worst bout
of avian influenza in
U.S. history devastated egglaying flocks.
Poultry farms in the U.S.
have fully restocked and rebuilt egg supplies since the
outbreak, but demand hasn’t
kept up. Some buyers who
found alternatives during the
outbreak haven’t returned.
Egg prices are near a decade
low, a situation that cheers
shoppers in grocery aisles but
is spurring losses for industry
giants and farmers.
“We do not expect to see
any meaningful improvement
until there is a better balance
of supply and demand,” said
Dolph Baker, chief executive of
Cal-Maine Foods Inc., the
largest U.S. egg supplier by
sales. The company last Monday blamed the egg glut for its
first annual loss in more than
a decade, adding that the average price of eggs sold to its
customers dropped 42% over
the past year.
Large shell eggs, the type
sold at the grocery store, recently cost 98 cents a dozen at
wholesale in the U.S. Midwest,
a 62% drop from the past two
years, according to market-research firm Urner Barry.
Wholesale prices reported by
the firm declined to 10-year
lows in 2016 and haven’t averaged more than $1 a dozen on
a weekly basis all this year.
The average price U.S. consumers paid for a dozen eggs
last month was $1.33, down
48% from two years ago, according to federal data.
“This is historic,” said Brian
Moscogiuri, an analyst who
tracks the egg market for
Urner Barry.
Earlier in the decade, the
egg market enjoyed a strong
run thanks to consumers’
growing appetite for protein
and all-day breakfast offerings
at restaurant chains. But bird
flu led to the destruction of 34
million egg-laying hens as it
struck farms in 2015.
The resulting egg shortfalls
and record prices drove producers to quickly refill their
barns, bringing the nation’s
egg-laying hen population to a
record 319 million in December 2016, according to the U.S.
Department of Agriculture.
The U.S. flock overall has
shrunk since then, but egg
production in June still totaled
about 7.5 billion, close to the
monthly record of eight billion
reached late last year.
Demand for U.S. eggs hasn’t
rebounded nearly as quickly.
U.S. egg exports have
picked up this year but remain
below levels seen before the
onset of bird flu as buyers
such as Mexico and Canada
import eggs from alternative
suppliers or produce more
themselves. According to the
USDA, the U.S. exported the
equivalent of 170 million
dozen eggs last year, or 55%
less than the 375 million dozen
shipped overseas in 2014.
Some U.S. food makers like
bakeries and other companies
that use egg products also
73%
The percentage of S&P 500 companies
that have reported better-than-estimated
sales for the second quarter. Should that
figure hold, it would mark a record
performance.
U.S. Sales Top Forecasts
Wall Street might be underestimating the strength of
American corporations.
With 57% of S&P companies
having reported earnings for the
latest quarter, some 73% have
posted sales above analysts’ expectations, a record should it
hold through the remainder of
Egg Drop
As egg-laying hen populations have rebounded from an historic
avian-influenza outbreak, egg prices have plunged.
U.S. table egg-laying
chicken population
350 million chickens
MONEYBEAT
U.S. wholesale price for a dozen
large white eggs in the Midwest
310M
300
earnings season, according to
FactSet.
The proportion of companies
beating sales estimates is running well above the five-year average of 53%.
The slew of top-line beats
put the S&P 500’s revenue
growth on track to rise 5.2% year
to year in the April-through-June
period. Only the first quarter’s
7.7% revenue growth has been
higher in the past five years.
Better-than-expected sales
bode well for earnings in the
quarters ahead.
$3.00 a dozen
2.50
250
2.00
200
1.50
$0.98
150
1.00
100
50
0
0.50
Major bird flu
outbreak
2012
’13
’14
0
’15
’16
’17
2012 ’13
’14
’15
’16
have been slow to embrace
eggs again. High prices compelled some to reformulate
their recipes, substituting in
ingredients such as soy or
whey protein or simply making do with fewer eggs.
Recent bird-flu outbreaks
on farms across Europe and
Asia have given food companies
further cause to stick with egg
alternatives rather than risk another supply disruption, industry officials say. Another deterrent is the time and expense of
changing their labels back to include eggs.
’17
Companies had struggled to
expand sales consistently since
the financial crisis, often relying
on cost-cutting to increase margins and boost their bottom
lines. With margins stretched, investors questioned how long
American corporations could
boost profits without a pickup in
sales.
Not only are companies beating sales forecasts, they are doing so by a wider margin.
Companies have reported
revenue 1.2% above analyst expectations, better than the 0.5%
average over the past five years,
says John Butters, FactSet’s senior earnings analyst.
—Chris Dieterich
ONLINE
WSJ
.COM
For more
MoneyBeat blog
posts, go to
blogs.wsj.com/
MoneyBeat
Sources: Tullett Prebon, WSJ Market Data Group
Sources: USDA (population); Urner Barry (prices)
THE WALL STREET JOURNAL.
THE TICKER | Market events coming this week
Monday
Chicago PMI
June, previous
July, expected
65.7
59.5
Earnings expected*
Estimate/Year Ago($)
Affiliated Managers
3.24/3.06
Alexandria Real Estate
0.43/(1.72)
Loews
0.76/0.59
Roper
2.21/1.56
SBA Comm.
0.20/0.26
Vornado
0.48/1.15
Tuesday
Total vehicle sales
Domestically produced, at an
annual rate
VINCENT MUNDY/BLOOMBERG NEWS
June, previous
July, expected
16.5 mil.
16.7 mil.
Construction spending
May, previous
0.00%
June, expected up 0.4%
ISM mfg. index
June, previous
July, expected
A Mondelez plant in Ukraine. The company is expected to report higher earnings on Wednesday.
Personal income
June, previous
up 0.4%
July, expected
up 0.4%
Personal spending
May, previous
up 0.1%
June, expected up 0.1%
Earnings expected*
Estimate/Year Ago($)
Apple
1.57/1.42
CME Group
1.20/1.14
EOG Resources
0.11/(0.38)
Pfizer
0.65/0.64
Phillips 66
1.01/0.94
Simon Property
1.15/1.45
EIA status report
down 7.2
down 1
Earnings expected*
Estimate/Year Ago($)
Earnings expected*
Estimate/Year Ago($)
AIG
1.20/0.98
Dominion Energy
0.67/0.71
MetLife
1.28/0.83
Mondelez
0.46/0.44
Prudential
2.70/1.84
Tesla
(1.86)/(1.06)
Thursday
Initial jobless claims
Previous
244,000
Expected
242,000
Previous change in stocks in
billions of cubic feet
Mort. bankers indexes
Purch., previous down 2%
Refinan., prev.
up 3%
Crude oil
Gasoline
down 1.9
EIA report: natural gas
Wednesday
Previous change in stocks in
millions of barrels
57.8
56.3
Distillates
Activision Blizzard
0.30/0.54
Aetna
2.37/2.21
Allergan
3.92/3.35
Duke Energy 1.02/1.07
Kraft Heinz
0.96/0.85
Regeneron
3.16/2.82
Friday
Nonfarm payrolls
June, previous 222,000
July, expected 180,000
Unemployment rate
June, previous
4.4%
July, expected
4.3%
International trade
deficit (billions)
May, previous
46.5
June, expected
44.4
up 17
Earnings expected*
Factory orders
May, previous down 0.8%
June, expected up 3.0%
ISM non-mfg. index
June, previous
57.4
July, expected
57.0
Estimate/Year Ago($)
Ameren
CBOE
Cigna
Newell
Sempra
WellCare
0.71/0.61
0.86/0.60
2.48/1.98
0.87/0.78
0.86/0.79
2.24/2.23
* 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
B10 | Monday, July 31, 2017
THE WALL STREET JOURNAL.
MARKETS
THE DAILY SHOT By Lev Borodovsky and Colin Barr
Why the Consumer Keeps Chugging Along
Questions about the
health of the U.S. consumer
have ticked up in recent
weeks, with another tepid
GDP reading on Friday and
earnings reports from major
credit-card lenders showing
rising delinquencies. For
some investors, those
signals amplified concerns
about the spending outlook
at a time of soft wage
growth, stalling car sales
and a growing overhang of
auto and student-loan debt.
But some key measures of
consumer health show why
many investors remain
upbeat: Consumer leverage
and monthly obligations
remain far below the levels
they reached on the eve of
the Great Recession.
Consumers have been
cautious on revolving debt,
such as credit cards and
home-equity loans—where
they got hit hard during the
recession. The mortgage
market remains tight and
homes are expensive (bigger
down payments are
required), which is keeping a
lid on home-loan growth.
While consumer credit
excluding mortgages is
hitting new highs, reflecting
the spike in student debt and
auto loans since the crisis,
total household leverage is
not rising and debt service
ratios have fallen. The
consumer picture isn’t a
uniformly happy one, but for
now the outlook appears
relatively upbeat.
WSJ
subscribers can get
The Daily Shot—
a chart-by-chart briefing
on markets and economics—
sent to their email
each morning. Subscribe at
wsj.com/newsletters
Overall household leverage remains well below peak levels, one positive sign for the U.S. consumer.
Recession
125%
Total debt as a share of household disposable income, quarterly
Consumer credit plus mortgage debt
Consumers
dial back
debt
Debt
exceeds
income
100%
75
U.S. recessions
50
25
0
1960
1970
1980
1990
2000
2010
Red flags include a recent slowdown in wage growth, an uptick in credit-card delinquencies and steadily rising nonrevolving debt.
Median wage growth, monthly
Change from a year earlier, three-month rolling average
Credit-card delinquency rate, quarterly
Auto and student loans (nonrevolving
debt) as a share of GDP, quarterly*
6%
8%
16%
Growth has
slowed in
recent months
Recessions
4
6
Recent
reversal
8
2
0
4
0
2000
’05
’10
’15
0
2000
’17
’05
’10
’15
’17
’05
2000
’17
’15
’10
Consumer credit (excluding mortgages) has risen to new highs, but credit-card and mortgage debt are down from a decade ago.
30%
26.6% 8%
Recessions
Home mortgages as a share
of GDP, quarterly*
Credit-card debt as a share
of GDP, quarterly*
Consumer credit as a share of
disposable income, quarterly
Excluding mortgages
Recessions
Recession peak
10
’05
’10
’15
Recession peak
4%
3
4
40
2
2
20
1
0
0
0
Recessions
60
6
20
80%
Home-equity loans
as a share of GDP, quarterly*
2000
’05
’10
’15
’10
’05
’15
2000
HEARD ON THE STREET
Email: heard@wsj.com
FINANCIAL ANALYSIS & COMMENTARY
German, U.S. Yields Differ Less
Continental Drift
Yield spread between 10-year U.S. Treasurys and German bunds
2.4 percentage points
2.2
2.0
1.8
1.6
1.4
2016
’17
THE WALL STREET JOURNAL.
Source: FactSet
in the glory years of globalization. Relatively synchronized monetary policy meant
yields fell together on both
sides of the Atlantic.
Where policy goes now is
key. Markets doubt how far
the Federal Reserve might
get with its tightening, and
seem unflustered by the
prospect of the central bank
shrinking its balance sheet.
Investors may be too relaxed,
but in the absence of fiscal
stimulus and inflation, much
higher yields for Treasurys
might be hard to achieve in
the near term.
The European Central
Bank, meanwhile, is set to
move out of emergency-policy territory. Support for low
yields on German bunds is
likely to diminish as the ECB
starts to move gently toward
an exit from its bond purchases. While policy rates
are likely to remain ultralow
for a long time to come, that
implies a steeper yield curve
in Germany, with the central
bank exerting less influence
over longer-term interest
rates.
An important constraint
on the ECB’s continuing bond
purchases is in Germany;
even though the ECB is talking about the flexibility of
the program, any tweaks
seem unlikely to result in
larger purchases of bunds.
Meanwhile, the eurozone
economy is growing strongly,
reducing the allure of German debt as a haven. The
rise in the euro this year
suggests that faith in the
currency bloc is recovering.
German yields still look out
of sync with economic good
news such as the record in
the influential Ifo business
climate index.
The spotlight moves to
ECB President Mario Draghi’s
speech at the Fed’s Jackson
Hole conference in August.
His last appearance there in
2014 foreshadowed eurozone
QE, sending the U.S.-German
spread wider. This summer’s
visit could bring the two
sides closer together again.
—Richard Barley
OVERHEARD
Online shoppers can commiserate with Jeff Bezos.
Those who prefer to comparison-shop and eschew Amazon.com’s “Buy now with 1click” feature put items they
want to buy in their carts.
Sometimes, though, so-called
dynamic pricing gives them a
rude surprise as the price
rises before they can return
to complete their order.
There is no place with
prices quite as dynamic as
the stock market, of course,
and Mr. Bezos learned that
the hard way last week.
While he probably didn’t have
a shiny plaque that reads
“World’s Richest Person ” in
his virtual shopping cart, he
got the accolade on Thursday
after Amazon’s share price
gave him a net worth on paper of around $92 billion,
overtaking Microsoft cofounder Bill Gates.
But then the shares of
Amazon dropped in late trading and fell even more on Friday in reaction to disappointing results.
Another item for the wish
list.
Asset Managers Keep Spending Money to Make Money
Sudden Reversal
Share-price performance,
year to date
20%
10
Invesco
Franklin Resources
0
–10
J
F
M
A
M
J
J
Source: WSJ Market Data Group
were up an average 19%, a
remarkable performance for
a sector that has struggled
in recent years. But these
five stocks fell by an average
of 4.5% over two days.
Second-quarter results
were mixed when it came to
flows. AllianceBernstein,
which suffered major outflows last year, saw a surprising $4.7 billion net inflow for the quarter. Invesco,
which has lately enjoyed inflows thanks largely to its
strong suite of exchangetraded funds, recorded a
$600 million outflow, largely
due to a redemption by a
sovereign-wealth fund.
Expenses were the bigger
factor. Invesco appears to
have sparked the sector selloff with its warning that
costs would be elevated in
the coming year. The company cited investments in
new growth areas, including
its robo-advisory service and
Recessions
Recession peak
0
2000
*Annualized quarterly GDP Sources: Federal Reserve (leverage, delinquency, mortgages, nonrevolving debt, consumer credit, credit-card debt, home-equity loans); Bureau of Labor Statistics (wage growth)
Prominent asset managers
fell back to earth last week
as the fundamental challenges they face resurfaced.
Investors had grown
newly optimistic on the sector over the first half of the
year amid ever-higher equity
markets and even signs that
active managers were outperforming their benchmarks
for the first time in years.
That came to an end when
five of the biggest publicly
listed investment managers—AllianceBernstein, Invesco, Legg Mason, T. Rowe
Price and Franklin Resources—reported earnings
last week.
From the start of the year
through Wednesday, they
14.7%
Up from 9.3%
in 1Q 2000
Recessions
12
Recessions
4
2
2000
Many of the trades embraced by markets after
President Donald Trump’s
election have been slowly unwinding in 2017. Here is an
important one that could
have further to go: the gap
between U.S. and German
government bond yields.
The spread between 10year Treasurys and bunds
ballooned after Mr. Trump’s
November victory to a level
not seen since before the fall
of the Berlin Wall, around 2.3
percentage points by the end
of 2016. U.S. yields rose
sharply on the idea of reflation and stimulus, while Europe appeared stuck in a rut.
At 1.75 percentage points, the
gap is close to its pre-election level.
But even that is unusual
by historical standards. Between 1990 and 2014, the
spread was only rarely wider
than 1 percentage point, and
over that period averaged
just 0.2 point, according to
data from FactSet.
Such a tight relationship
between German and U.S.
bonds reflected the long
global bull market for bonds
’17
the acquisition of a European ETF company.
On Friday Franklin Resources Chief Financial Officer Ken Lewis told investors
he is “leaving no stone unturned” looking for cost
cuts. But he added it would
still be a challenge to
achieve lower expenses next
year given the need to fund
new strategic initiatives.
These kinds of investments make complete sense.
Faced with changes in investor behavior favoring passive, low-cost alternatives,
traditional asset managers
can’t just stand still. It is urgent for them to develop
new online distribution
methods such as robo advis-
ers and to offer more lowcost products like ETFs.
Based on their reaction
this week, investors in these
companies needed a reminder that these investments cost money.
This points to a key distinction between asset managers: Some can better afford to spend money on
future technologies than others. Invesco, which attracted
a net $13 billion of inflows in
2016, is in a much better
place than Franklin, which
saw a whopping $68 billion
of outflows.
It can be hard to plan for
the future when you are
busy trying to close an open
wound.
—Aaron Back
’05
’10
’15
THE WALL STREET JOURNAL.
WSJ.com/Heard
TheseChip
MakersHave
LongMemory
Those holding their breath
for an inevitable plunge in
memory chip prices can
breathe a little easier.
A handful of key earnings
reports last week suggests
the peak in memory prices
isn’t at hand. Samsung Electronics, the world’s largest
maker of DRAM and NAND
Flash memory, posted record
profits for the second quarter that were driven in large
part by its chip-making business. That comes a month after record earnings from
memory rival Micron Technology. Lam Research and
KLA-Tencor, which make
tools used by chip makers,
reported record operating
profits last week helped by
capital investments in memory production.
These companies are benefiting from a resilient memory market. Memory is a volatile market that can turn
quickly, but DRAM prices are
still about 30% below their
five-year peak, with new demand drivers like automated
cars still in their infancy.
Also, the current players
in the market have a strong
motivation to behave rationally. Samsung, which has
boosted memory production
sharply in past cycles, said in
its earnings call last week
that it will manage its chipmaking business with a
“profitability focus” rather
than chase market share.
Lam CEO Martin Anstice said
in his company’s call that
capital spending should remain stable at levels well below prior cyclical peaks.
Some things could still upset the balance, such as a
group of memory fabs under
construction in China that
may come online next year.
But for now, it is nice to
know that the painful lessons
of the past haven’t been forgotten.
—Dan Gallagher
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