VOL. XXXII NO.

66
WEDNESDAY, MAY 7, 2014
Are You Talking to Yourself?
PERSONAL JOURNAL 25
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EUROPE EDITION
WSJ.com
Climate Change Said to Hurt U.S. Economy
Climate change is having a
negative impact on peoples
everyday lives and damaging
the U.S. economy as extreme
weather brings flooding,
droughts and other disasters
to every region in the nation,
a federal advisory committee
has concluded.
The congressionally man-
dated National Climate As-
sessment, produced by more
than 300 experts overseen by
a panel of 60 scientists, con-
cludes that the nation has al-
ready suffered billions of dol-
lars in damages from severe
weather-related disruptions,
which it says will continue to
get worse.
The document, considered
the most comprehensive anal-
ysis of the effects of climate
change on the U.S., was re-
leased by the climate panel af-
ter a final vote by the authors
Tuesday morning. President
Barack Obama is planning to
promote it in a series of
events this week, calling for
action to combat the trend
and using the report to bring
public attention to climate-
change-related problems.
This national climate as-
sessment is the loudest and
clearest alarm bell to date sig-
naling the need to take urgent
action, said John Holdren, as-
sistant to the president for
science and technology, dur-
ing a news-media call on the
report.
The report, by the Federal
National Climate Assessment
and Development Advisory
Committee, details the effects
of climate change on every
state and every sector of the
economy, from rapidly reced-
ing ice in Alaska to heat waves
and coastal flooding in the
Northeast. Rising seas in the
South put major cities such as
Miami at risk, it says.
The report pins much of
the increase in climate change
on human behavior. It says,
however, that it isnt too late
to implement policies to re-
duce greenhouse-gas emis-
sions, and calls on govern-
ments at all levels to find
ways to lower the carbon
emissions, particularly from
energy production.
Over recent decades, cli-
mate science has advanced
significantly. Increased scru-
tiny has led to increased cer-
tainty that we are now seeing
impacts associated with hu-
man-induced climate change,
Please turn to page 7
BY ALICIA MUNDY
$1.75 (C/V) - KES 250 - NAI 375 - 1.70
Children watched an Israeli woman brandish an M16 rifle on Tuesday in the West Bank settlement of Efrat, near Bethlehem, during a
traditional military weapons display to mark the 66th anniversary of the founding of the state of Israel. Related article on page 3
Israelis Celebrate 66th Anniversary of Their State
Agence France-Presse/Getty Images
Merck Deal
With Bayer
Part of Shift
Merck & Co.s agreement to
sell its nonprescription medi-
cine and consumer-product
business to Bayer AG for $14.2
billion is just the latest in a
wave of mergers and acquisi-
tions that is reshaping the
global pharmaceutical industry.
When all the dust settles,
the industry will look differ-
ent in many ways than it did
just a few weeks ago. Many
companies are narrowing
their focus after years of di-
versifying, dropping out of
noncore businesses and bulk-
ing up in sectors where they
believe they have the size and
expertise to generate signifi-
cant sales growth.
If all are completed, the
announced and proposed
deals will leave fewer compet-
itors with larger revenue
streams in each segment of
the drug business, from pre-
scription medicines and vac-
cines to drugs for livestock
and pets. The deals are also
likely to lead to large layoffs,
a prospect that has many em-
ployees worried.
The narrowing of focus
also carries some risks, leav-
ing companies more vulnera-
ble to setbacks in their re-
maining businesses, analysts
and industry officials say.
Companies are being told
by their shareholders to focus
on what they are historically
the best at, said Mark Schoe-
nebaum, a pharmaceutical in-
dustry analyst with ISI Group.
That varies from company to
company. So companies are
buying their strengths and
selling their weaknesses.
The announced and pro-
posed deals include Pfizer
Inc.s more than $106 billion
takeover offer for AstraZen-
eca PLC, which the latter so
far is rejecting. They also in-
clude Valeant Pharmaceutical
Industries Ltd.s nearly $46
billion offer for Allergan Inc.
and more than $20 billion in
agreed deals involving Novar-
tis AG, GlaxoSmithKline PLC
and Eli Lilly & Co.
Bayers agreement with
Merck will give it such brands
as the allergy medicine Clari-
tin and Coppertone sunscreen
to add to its stable of nonpre-
scription products, including
Bayers namesake aspirin and
the Aleve pain reliever. Merck
and Bayers combined nonpre-
scription businesses had total
sales of $7.4 billion in 2013.
Bayer, based in Leverkusen,
Germany, expects the Merck
deal to make it the No. 2 over-
the-counter drug company by
Please turn to page 17
BY PETER LOFTUS
Quick Action Pays Off in Banking
The diverging fortunes of
two top European banks, Bar-
clays PLC and UBS AG, high-
light how some lenders are
reaping rewards for moving
quickly to restructure ailing
businesses, while others are
getting punished for dragging
their feet.
At UBS, first-quarter earn-
ings beat analysts expecta-
tions Tuesday. The banks
shares gained 1.2% By con-
trast, Barclays missed fore-
casts with lackluster figures
weighed down by a collapse
in operating profit at its in-
vestment bank. Barclayss
shares fell 5.2%.
Since the start of the year,
investors have sent UBS stock
up by about 9% while Bar-
clayss has fallen by a similar
amount.
The contrast reflects dif-
ferent approaches at the two
banks since the financial cri-
sis. UBS, laid low by the crisis
in 2008, bit the bullet of a
major revamp. The bank has
undergone years of restruc-
turing that curbed its pres-
ence in investment banking,
particularly in the costly and
relatively high-risk debt-trad-
ing business, and refocused
its efforts on wealth manage-
ment and private banking.
UBS decided to make fun-
Please turn to page 21
By Margot Patrick,
John Letzing
and Joe Ortiz
AstraZeneca chief details its
go-it-alone strategy............... 15
Heard on the Street: Bayer
bets on consumers................ 28
Some EU nations plan to tax
stock trades by 2016............ 22
Inside
With the hryvnia
faring worse than the
ruble, Ukraine needs
a financial lifeline
nowand that would
be a blow to Putin
Opinion......................14
New puzzle over the fate of huge hoard of
Nazi-looted art following the death of
Cornelius Gurlitt in Munich
Europe News........................................................ 6
28 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
HEARDON THE STREET
Email: heard@wsj.com FINANCIAL ANALYSIS & COMMENTARY WSJ.com/Heard
The Cost
Behind
Twitters
Nose Dive
Paying employees with
shares may not involve cash.
But as Twitter investors are
learning, it comes at a real
cost.
Shares of the micromes-
saging platform tumbled
Tuesday as a lockup expired
on stock amounting to
roughly two-thirds of its di-
luted share count. Some of
those shares were held by
early Twitter investors. Many
were held by employees who
were granted them to aug-
ment cash salaries.
The lockup expiration was,
for many, the first opportu-
nity to sell, making it a one-
time event. But stock-based
compensation will continue to
weigh on Twitter. And the
load could grow heavier if the
share-price slide continues.
Stock-based-compensa-
tion expense was equal to a
whopping 50% of Twitters
sales in the first quarter. This
figure has been lower for
Twitter in previous quarters,
but it appears to be the new
normal. For 2014, Twitter ex-
pects stock-based-compensa-
tion expense of more than
50% of its projected revenue.
Like tech peers, Twitter
needs stock-based compensa-
tion to lure the best and
brightest engineers and ad
salespeople. Allowing employ-
ees to participate in its mar-
ket performance theoretically
allows the social-media com-
pany to pay them more than it
would have been able to oth-
erwise. It also aligns employ-
ees interests with Twitters.
An added benefit is that
Twitter, like other tech com-
panies, guides investors and
analysts to pro forma earn-
ings figures that exclude
stock-based-compensation
costs. And Wall Street duly
plays along with this charade.
For investors, though, the
costs are real. And with the
stock having fallen 46% since
the beginning of the year,
they may grow. The risk is
that the shares, the companys
compensation currency, con-
tinue to become less valuable.
That could force Twitter to is-
sue even more shares, further
diluting existing shareholders.
And even after Tuesdays
drop, Twitter still doesnt
look particularly cheap. On a
diluted basis, it trades at
about 19 times analyst esti-
mates for 2014 sales. That
compares with less than 14
times for Facebook.
Wall Street analysts may
be willing to look past share-
based-compensation expenses
when evaluating Twitters re-
sults. Savvy investors will do
their own math.
Miriam Gottfried
ECBs Easing Expectation
For the European Central
Bank, it may be better to
travel hopefully than to ar-
riveat least if quantitative
easing is the destination.
The Organization for Eco-
nomic Cooperation and Devel-
opment Tuesday joined the
chorus of calls for ECB action,
recommending an immediate
cut in interest rates to zero
from 0.25% and for the central
bank to be ready to undertake
further nonconventional ac-
tion, such as bond purchases.
But it is worth looking at
what bond markets are doing
already to ease financial con-
ditions in the euro zone.
One aim of any bond-buy-
ing program would be to ease
monetary conditions by driv-
ing down real interest rates.
That would come via both an
increase in inflation expecta-
tions and a fall in nominal
yields thanks to large-scale
purchases.
That might be particularly
helpful for southern European
nations. Nominal yields have
fallen sharply; in Spain and It-
aly, 10-year bonds now yield a
shade less than 3%, closing in
on U.S. 10-year levels of
around 2.6%. But real yields,
crudely measured by subtract-
ing inflation from nominal
bond yields, are high. In Spain,
inflation is just 0.3%, giving an
inflation-adjusted yield of
around 2.7%. That is much
higher than in the precrisis
periodand much higher than
in the U.S.
Still, real yields are falling
thanks to the rally in bond
markets. At the start of 2013,
Spains 10-year real yield was
3.9%; at the height of the crisis
in mid-2012 Madrid faced real
yields of over 4.5%.
Spanish nominal yields
could yet fall further. The
Spanish economy appears to
be benefiting from the steps
undertaken by the govern-
ment. Stronger growth should
help reduce the credit pre-
mium Spain pays to borrow
versus Germany; cheaper bor-
rowing costs should support
growth.
Meanwhile, the ECBs as-
sumption is that euro-zone in-
flation is close to its lowest
point. Markets still are pricing
in a very gradual return over
time to an inflation rate of
around 2%. It is currently at
0.7% for the euro zone.
At least some of the appe-
tite for debt from southern
European nations may be
down to investors who are an-
ticipating more action by the
ECB. But insofar as that drives
real yields lower, the market is
doing the ECBs job for it: it is
loosening policy.
That has echoes of the
ECBs Outright Monetary
Transactions program, which
was designed to buy bonds of
troubled countries in exchange
for economic reforms. Yields
fell without the central bank
spending a cent.
The expectation of ECB ac-
tion may be just as powerful
as the real thing.
Richard Barley
Bayer Buy of Merck Unit Adds Up
It pays to focus. Amid a se-
ries of pharmaceutical deals
aimed at streamlining diverse
portfolios and strengthening
core areas, German pharma-
ceutical company Bayer is
bulking up in consumer health,
shelling out $14.2 billion to
purchase Merck & Co.s busi-
ness in this area.
Shareholders, who sent
Bayers shares down about 1%
Tuesday, were likely rattled by
the price. Bayer is paying 21
times last years earnings be-
fore interest, taxes, deprecia-
tion and amortization. Mercks
business includes brands such
as Coppertone sun cream and
Claritin allergy medication.
Bayer can argue that is a price
worth paying. But the German
companys deal is only one
step in sharpening its priori-
ties.
Bayer had clearly flagged
its intention to bolster its
over-the-counter division. Buy-
ing Mercks business keeps the
company in the No. 2 position
by sales, behind Johnson &
Johnson, after GlaxoSmith-
Kline last month joined forces
with Novartis in consumer
health care. Bayer also gets a
leading position in the U.S.,
the largest market globally,
and improves its standing in
key areas including dermatol-
ogy and cold, allergy and flu.
Sizable consumer busi-
nesses dont come cheap. Deals
such as Reckitt Benckisers
2012 purchase of Schiff Nutri-
tion also attracted valuations
well over 20 times Ebitda.
That Bayer beat Reckitt in the
bidding for Mercks business is
hardly a comfort: The U.K.
consumer-goods company is a
serial acquirer of assets at
toppy prices. But given Bayer
agreed to a side deal with
Merck to collaborate on car-
diovascular drugs, the German
company likely didnt rely on
cash alone to beat its rival.
And despite the alarming
headline figure, Bayers num-
bers seem to work. Cheap fi-
nancing means the deal will
add to its core earnings per
share. Meanwhile, based on
Bayers figures, the business it
is buying has an Ebitda margin
of about 30%. This is boosted
by products like Claritin,
which are still on prescription
in certain markets. That will
boost profitability in Bayers
consumer unit.
Tax benefits may help jus-
tify the price as well. Under
U.S. rules, Bayer will be able to
effectively use the deal to re-
duce its tax bill in coming
years. Knock the net present
value of those benefits off the
deal price, and Bayer would be
paying a multiple in the high
teens, according to people fa-
miliar with the matter. Bayers
target for annual cost savings
of $200 million by 2017
doesnt look ambitious and
would reduce that multiple
further.
Bayer is, however, left with
unfinished business. It argu-
ably still needs to bulk up in
animal health. Meanwhile, its
materials division is highly cy-
clical, less profitable and
slower growing than Bayers
health-care and crop-sciences
units.
Buying Mercks consumer
business is a start. But Bayer
has yet to show it can main-
tain concentration.
Helen Thomas
Health Kick
Breakdown of consumer-health
sales for Bayer including Merck
assets, 2013
Note: Figures dont add up to 100% due
to rounding
Source: the company
The Wall Street Journal
Dermatology
27%
Cold,
allergy,
sinus, u
21%
Nutrition
18%
Analgesics
15%
Gastro-
intestinal
10%
Other
8%
Talk about a case of mis-
taken corporate identity.
Once again, Merck KGaA,
the Germany-based supplier
of products for the pharma-
ceuticals and chemicals sec-
tors, was getting confused
with the other Merck. That
would be Merck & Co., the
U.S.-based pharmaceuticals
and consumer-care concern.
The U.S. company on
Tuesday announced it had
agreed to sell its over-the-
counter medicine and con-
sumer-product division to
Germanys Bayer for $14.2
billion. But that prompted
the German Merck to issue
a news release of its own
clarifying that it will keep
its consumer health busi-
ness. It also noted that it
holds the global rights to
the name and trademark
Merck, except in the U.S.
and Canada.
The confusion arises
from the fact that Merck of
the U.S. is a former subsid-
iary of its German name-
sake.
This isnt the first time
the German Merck has had
to go to pains to point out
the difference. In February,
protesters gathered outside
its London offices, only to
discover that they had the
wrong company. Perhaps it
is time for one of the two
to consider a name change.
OVERHEARD
E&P Stocks Are
Looking Riskier
Something is bubbling up
in the oil patch. And tempting
as it is to stay close in hopes
of seeing a gusher, it might be
time to start backing away.
Exploration-and-produc-
tion stocks have diverged
sharply from oil, notes Matt
Gohd, senior strategist at
WallachBeth Capital. Over the
past five years, the SPDR S&P
Oil & Gas Exploration & Pro-
duction exchange-traded fund
has tended to track the oil
price. Since last September,
though, the ETF has broken
away, rising 18% while oil is
down slightly.
One explanation for this
involves another fuel many
E&P companies produce: nat-
ural gas. After years of low
prices brought about by the
excess supply of the shale
boom, they have risen as a
harsh winter helped run down
inventories.
Front-month gas futures
have risen by one third since
the end of September, with
some spectacular spikes in
the first quarter.
But without a tailwind
from oil, it is hard to justify
this rally on gas alone. With
U.S. oil inventories hovering
around multidecade highs and
Chinas economic growth con-
tinuing to show signs of
weakness, it is hard to see oil
prices rising strongly.
The consensus estimate
for forward cash flow per
share for the ETFs companies
has barely budged since last
summer, and the earnings es-
timate has actually fallen.
Even so, the ETF recently hit
its highest level ever.
Meanwhile, the funds mul-
tiple of forward cash flow is
around 5.5 times, up from 4.5
times at the start of the year
and the highest since the
summer of 2011, when Libyas
civil war had just kicked oil
prices up.
The risk is that E&P inves-
tors are now chasing momen-
tum. That leaves them vulner-
able to sharp corrections, as
happened after similar early-
year rallies in 2011 and 2012.
For this to happen, rather
than very bad news, all you
need is a cessation of good
news, Mr. Gohd says. At that
moment, investors might
quickly refocus on the fact
that oil isnt firing this rally
and run for cover.
Liam Denning
Even amid calls for the ECB to act, bond
markets are helping to ease conditions.
Parting Ways
Spanish 10-year yield and Spanish ination
The Wall Street Journal Source: FactSet
8
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2
4
6
%
10 12 14 02 04 06 08
Yield
Ination
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Customers browse discounted shirts at a department
store in Madrid, Spain
2 | Wednesday, May 7, 2014
AM IM UK SW FR IT SP TK BR PL IS AE GR
THE WALL STREET JOURNAL.
PAGE TWO
i i i
Business & Finance
n Americas dirty and un-
wanted coal is being em-
braced by the EU as one of
the cleanest energy markets
increased imports of U.S. coal
to 47.2 million tons from 13.6
million tons in 2003. 15
n Fiat Chrysler aims to more
than double sales of its Jeeps
in 2018, make Dodge a niche,
performance-car brand and
boost sales of its premium Alfa
Romeo and Maserati cars. 15
n The rivalry among Audi,
BMW and Mercedes-Benz for
rights to the top-selling pre-
mium car maker increasingly
rests with sales performance
in China as first-quarter re-
sults prove. 17
n Several U.S. telecom deals
under consideration could usher
in an era of consumers getting
new options to be entertained
and communicate wherever and
however they choose, though
the path is perilous. 20
n U.S. regulators filed a civil
lawsuit against a Toronto con-
sultant and four other people
for allegedly making millions of
dollars in profit by manipulat-
ing trading of two Chinese
companies shares. 9
n Hong Kong developers have
resorted to discounts and other
incentives to lure buyers to ex-
pensive new apartments, while
many are rediscovering older
apartment buildings. 18
i i i
World-Wide
n Hollande said he would
forge ahead with his plans to
cut public spending and grant
tax breaks to business, adding
that GEs proposed $17 billion
purchase of Alstoms power di-
vision isnt satisfactory. 6, 16
n The Vatican disclosed that it
has defrocked hundreds of
priests and punished thousands
more for sexual abuse of chil-
dren over the past decade. 6
n A building fire that killed
dozens Friday in Odessa was
likely sparked by rebels on the
roof who accidentally dropped
Molotov cocktails, according to
a preliminary investigation by
Ukraines government. 4
n China is taking a more-cau-
tious approach to Africa after a
series of big loans and invest-
ments in resource deals over
recent years failed to pan out. 9
n Some spouses of foreign
visa holders in the U.S. will be
allowed to work under a new
White House plan to attract
skilled employees. 8
n Three gunmen stormed a
school in Nigerias capital in a
bid to kidnap a small bus full
of children. 10
nA leader of Indias main oppo-
sition partyand, some believe,
the next finance ministersays
in an interview he wants to see
India become an export power-
house like China. 10
Whats News
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Pyongyangs Nuclear Drive
Puts China in a Quandary
handful of crude nuclear bombs. A
report from the think tank 38
North, affiliated with Johns
Hopkins University, says North
Korea conducted at least one
engine test of what is likely a
road-mobile intercontinental
ballistic missile in late March or
early April.
Once Pyongyang manages to
miniaturize a nuclear device to sit
on top of a rocket, half the
planets economy in the Asian
Pacific and more than half of its
people will be at the mercy of Mr.
Kim. One comforting thought is
that North Korea may be years
away from acquiring that
capability. And even if Mr. Kim is
eventually able to deliver a
nuclear bomb accurately, he likely
wont because he knows that his
recalcitrant nation instantly would
be reduced to ashes. In other
words, hell choose regime
survival over suicide.
Still, none of the carrot-and-
stick tactics adopted so far to stop
North Korea have worked.
Over the years, North Korea
and its immediate neighbors,
along with the U.S., have huddled
periodically in six-party talks to
try to find a way around the
impasse. Among other
inducements to get Pyongyang to
change course have been the
prospect of security guarantees,
support to develop a peaceful
nuclear-energy program, and even
the possibility of a U.S.
presidential visit.
But those talks are now on ice.
From Pyongyangs perspective,
nuclear weapons are its ultimate
protection against an attack aimed
at regime change; it has taken to
calling them a treasured sword.
The U.N. has imposed stern
sanctions on North Korea, and the
U.S. applies additional unilateral
ones. Yet sanctions so far have
had only limited impact on a
country that operates on the
outlaw margins of the
international economy, relying for
hard currency on the exports of
arms, narcotics and fake bank
notes.
By comparison, Iran is more
integrated into the global economy
and feels the punishing effects of
sanctions more keenly. Life in
Pyongyang, in fact, may even be
improving. Recent visitors report
more taxis cruising the streets and
well-stocked shops.
If North Korea goes ahead with
a fourth test, as seems inevitable,
more sanctions will follow,
possibly targeting North Korean
financial flows as well as Kim
family money, if it can be
identified. Theres a chance that
Mr. Kim might flinch if his lavish
lifestyle were threatened, and he
could no longer buy the loyalty of
Pyongyangs elites, or fund his
military fantasies.
Of course, its always possible
the regime may collapse. It has to
be assumed that many senior
officials fear for their lives after
the execution of Mr. Jang, which
has exposed cracks in a
government that once appeared
monolithic. But dont count on an
uprising against Mr. Kim, who has
been surprisingly efficient at
consolidating his control over the
military since taking over as
leader after his father, Kim Jong
Il, died in December 2011.
Well have to live with him
whether we like him or not, says
Mr. Chun, the former national-
security adviser, who calls Mr. Kim
more reckless, more ruthless and
more dangerous than his father.
BEIJINGWhile a territorial
dispute threatens to drag China
and Japan into conflict, a separate,
slow-motion crisis building on the
Korean peninsula could further
inflame their
rivalry.
Evidence North
Korea is about to
pull the trigger on
its fourth nuclear
test underlines
that the North is
marching determinedly, one step
at a time, toward the day when it
can target any city in the Asian
Pacificand potentially large
population centers in the U.S.
with nuclear attack.
South Koreas Foreign Minister
Yun Byung-se last month called
the fourth test a potential game-
changer.
True, a fourth test will add
pressure on the U.S. to bolster its
missile defenses in the region
and it could bring South Korea
and Japan closer to contemplating
their own nuclear deterrents,
separate from the U.S.
This is Chinas nightmare: a
nuclear arms race on its doorstep,
and one that adds muscle to its
rival Japan as the two wrangle
over a set of islets in the East
China Sea.
But will Chinas leaders act?
They are looking at North Korea
increasingly as a strategic liability
rather than an asset, says a
senior South Korean Foreign
Ministry official.
Beijing, he says, is alarmed at
North Koreas direction under Kim
Jong Un, a novice dictator with a
short-back-and-sides hairdo who
has shown the world his ruthless
side by executing his own uncle.
Yet it would be a huge leap for
Beijing to actually abandon one of
its few real friends in the world.
No other country has more
influence on North Korean
behavior: Without Chinese food
and oil, the North Korean economy
might collapse. But thats likely
not an outcome Beijing desires,
even though the execution in
December of Jang Song Thaek
robbed Beijing of one of its best
friends in Pyongyang. China still
values North Korea as a buffer
against U.S. forces stationed in
South Korea, and it fears that a
messy implosion of a nuclear-
armed regime could spill chaos
over its borders.
In the end, the demise of a
socialist ally may be too unnerving
a prospect for the Chinese
Communist Party, which frets
about its own mortality.
And those calculations are
what may embolden Pyongyang to
keep going with its nuclear tests.
They know that China will not
go beyond strong rhetoric, says
Chun Yung-woo, a former
national-security adviser to the
South Korean president who was
speaking at the recent Asan
Plenum in Seoul that brings
together some of the worlds top
strategic thinkers on Asia.
North Korea likely possesses a
CHINAS WORLD | By AndrewBrowne
Soldiers applaud Mr. Kim in a photo released Tuesday by a state news agency.
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THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 27
OFF THE WALL
Stressed Koreans Seek
Serenity in Faux Prisons
People Check In for Meditation With a Penal Theme
I
t is still dark. The chilly air leaks
in at the windowsill. Theres no
clock on the wall. Park Woo-sub
assumes he needs to wait a bit lon-
ger for breakfast to be served
through a slot at the bottom of the
door to his solitary cell.
This is my third time in
prison, says the unshaven 58-
year-old, who looks as if he has
had a sleepless
night.
He is wearing a
regulation blue
uniform with an ID
number on his
chest.
He closes his
eyes and tries to
meditate. It isnt
that there is any-
thing else to do in
the 60-square-foot cell whose only
furnishings are a toilet, a tiny sink
and a table. Many random
thoughts swirl about in his head.
Being confined to a prison can
be suffocating, but it also offers
time to focus solely on me and
spend some quiet time with my-
self, he says.
In his earlier incarcerations, he
was behind bars for participating
in the democratization movement
that swept across South Korea in
the 1980s. This time, he was ad-
mitted voluntarily. He walked into
the cell and locked himself in.
In a country where the social
pressure to do well in school and
to find highly paid jobs is intense,
an industry is attempting to come
up with some extreme relaxation.
In the middle of nowhere on
the outskirts of Hongcheon, 94 ki-
lometers northeast of Seoul, Kwon
Yong-seok runs Prison Inside Me,
a stress-reduction center with a
penal theme. A meditation build-
ing, auditorium and management
center sit on a 2-acre piece of land.
I didnt know how to stop
working back then, said the soft-
spoken 47-year-old Mr. Kwon, look-
ing back on his life as a public
prosecutor on Jeju Island in the
late 1990s. I felt like I was being
swept away against my will, and it
seemed I couldnt control my own
life.
One day, Mr. Kwon asked a
prison governor, who was an old
acquaintance of his, whether he
could spend a week behind bars
for therapeutic reasons. That was
out of the question, he was told.
Besides, he himself felt that a
whole week would be too long a
stay.
Although South Korea is slowly
inching toward a better work-life
balance, with the government and
businesses emphasizing the impor-
tance of taking longer vacations in
a somewhat paradoxical effort to
improve productivity, people still
work notoriously long hours. The
latest available data compiled by
the Organization for Economic Co-
operation and Development show
South Koreans worked the longest
hours among 34 OECD members in
2011, after Mexico, with 2,090
hours a year. The OECD average
was 1,765 hours.
Too much work is a quality-of-
life issue. The country ranked 26th
in the Life Satisfaction category of
the annual Better Life Index for
2013, an OECD measure of how
people evaluate
the quality of their
lives. South Kore-
ans gave their
lives a 4.3 on a
scale of 0 to 10,
lower than the
OECD average of
6.6.
In June last
year, the construc-
tion of the prison-
like spiritual house was completed.
It took a year and cost Mr. Kwon
and his wife Roh Ji-hyang, head of
a theater company, 2 billion won,
or $19 million. Parts of the cost
were covered by donations and
loans from friends and relatives.
Mr. Kwon says the goal of the facil-
ity, which has 28 solitary confine-
ment cells, isnt to make a profit.
On top of private meditation
sessions, paying guests are helped
to reflect on their lives and learn
how to free themselves from what
Mr. Kwon calls the inner prison,
through meditation, spiritual
classes and healing plays in a
group session in the auditorium. A
two-night stay costs 150,000 won
or about $146.
So far, it hasnt been as easy for
the couple to run the place as they
had envisioned. They had to cut
the length of stays to as little as
two days because people arent
willing to, or simply cant, take
time off. Also the facility had to
make another big concession to
modernityallowing guests to
check their smartphones at least
once a day.
People seem nervous without
a phone and simply worry too
much about an emergency, which
seldom happens, said Mr. Kwon.
One recent morning, about 20
people attended a personality
analysis class conducted by a Cath-
olic priest, a session aimed at
helping participants understand
themselves as well as others, one
of the essential elements to find-
ing inner peace, according to Mr.
Kwon.
As soon as a short break
started, people rushed to grab
their phones. Someone might
have called me or left a message,
said Park Seong-ho who quickly
swiped the screen to see whether
any new messages had arrived.
While generally satisfied with
the quality of programs, it would
have been more helpful for self-
control if the facility had been in
poorer shape like in a real prison,
Mr. Park said, it is too clean and
warm to be called a prison.
Life in prison, though physically
constrained, can be free in that
there is less pressure from modern
living. Some of the countrys intel-
lectuals and political dissidents
have said they found inspiration
and peace of mind while serving
time in real prisons.
Former South Korean President
Kim Dae-jung, who was an avid
reader, once famously said, I wish
I could go back to prison, com-
plaining that he lacked time to
read books because of his busy
schedule.
The former president, who won
the Nobel Peace Prize in 2000,
spent six years in prison and
nearly 10 years under house arrest
for his democratization move-
ments. His writings in jail were
later published under the title of
Prison Writings. Another famous
book, Thoughts From Prison by
Shin Young-bok, a political dissi-
dent-turned-professor, became a
classic for its thought-provoking
self-examination.
To be honest, the two-day-
three-night program is too short.
But the reality is people complain
if we make it longer, Mr. Kwon
said. I only wish people could get
a rare chance, even if forcibly, to
reflect on the past and take it
easy.
BY JAEYEON WOO
Hongcheon, South Korea
Online
>>
Watch a video on Prison Inside Me
at WSJ.com/OffTheWall. Park Woo-sub inside his cell at Prison Inside Me, a stress-reduction center.
B
a
e
J
o
n
g
-
h
w
a
f
o
r
T
h
e
W
a
l
l
S
t
r
e
e
t
J
o
u
r
n
a
l
To be honest, the two-
day-three-night program
is too short.
THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 3
NEWS
ArmedCiviliansFight VenezuelanUnrest
CARACASAs Venezuelas civil
unrest stretches into a fourth
month, the government has relied
mostly on National Guard troops to
contain protesters. But it also has
another, less formal tool: gangs of
armed, pro-government civilians.
Mobs of civilians on motorcycles
have swarmed antigovernment dem-
onstrations, sometimes firing weap-
ons, sometimes swinging bats, and
have stormed a university and burst
into apartment blocks in search of
adversaries, witnesses and rights
groups said. Created under late Pres-
ident Hugo Chvezs government,
these so-called colectivosor collec-
tivesare the self-appointed guard-
ians of Venezuelas socialist revolu-
tion.
But the recent protests under
President Nicols Maduro have thrust
them into a far more prominent role,
say human-rights groups and opposi-
tion members. Among their concerns
is that the civilian groups, while loyal
to the government, arent explicitly
under its command, and can largely
act as they please.
Jos Pinto, who as head of the
Tupamaro Revolutionary Movement
is one of Venezuelas best-known
colectivo commanders, character-
ized the opposition in the same gen-
eral language used by government
officials: as a fanatical, fascist right
wing intent on seizing power with
the help of the Obama administra-
tion.
Since we know how the empire
acts, Mr. Pinto said in an interview,
referring to the U.S., it forces us to
take measures.
A large man with a raspy bari-
tone, Mr. Pinto, 62 years old, denied
his group was violent, but said the
group favors a tough crackdown on
protesters, whom he called bugs.
I think that the government
needs to use an iron hand against
these [protesters] because we know
they are not students, they are not
housewives. They are gang mem-
bers, criminals, paramilitaries, he
said, speaking in his office a block
from Congress.
To many Venezuelans, groups
like the Tupamaros and other colec-
tivos are similar to Irans Basij para-
military force, a paramilitary orga-
nization deployed to put down
dissent. Without uniforms or other
identifying signsmembers often
wear helmets, dark glasses and
masksthey are tough to identify.
The job of the colectivos is to
generate chaos and panic in the
streets, said Juan Guaid, an oppo-
sition congressman who said colec-
tivos held him at gunpoint while
raiding his political partys offices.
With them around, you have to be
on the lookout for a beating, shoot-
ing, a killing.
Human-rights groups and local
media say that the colectivos may
have had a hand in as many as a
dozen of the 41 deaths in the pro-
tests. The crackdown appears to
have largely worked: The protests
are now far smaller than they were
when they exploded across the
country in February over rampant
crime and a crumbling economy.
But in a country where the oppo-
sition says the judicial system is in
the hands of the presidents office,
no colectivo leaders have been ar-
rested over this years violence. Hu-
man Rights Watch, a New York ad-
vocacy group, on Monday released a
report saying that judges and prose-
cutors in Venezuela have repeatedly
ignored evidence of systematic hu-
man-rights abuses by government
security forces.
The colectivos operate with the
explicit encouragementsometimes
heartily delivered in speechesof
the countrys leaders, including Mr.
Maduro, who recently called on
them to fight fire with fire against
the governments adversaries. We
will not accept campaigns to de-
monize the Venezuelan colectivos,
Mr. Maduro said in one speech. If
there is a conscience someplace, its
in these colectivos.
Underscoring the two mens
close ties, Mr. Maduro gave Mr.
Pinto a high-profile role on the first
day of discussions the government
held in recent weeks with some op-
position leaders to end the unrest.
Known to his followers as El
Gordo, or The Fat Man, Mr. Pinto
has publicly defended the Tupama-
ros, saying the movement is based
on profound love of humanity. He
described his organization as a po-
litical party and community group
that cares for the well-being of the
people in the poor 23rd of January
neighborhood that is Caracass bas-
tion of government support.
The Venezuelan Observatory of
Social Conflict, a Caracas organiza-
tion that studies social unrest here,
said colectivos attacked nearly a
third of the protests staged in March.
And human-rights groups have col-
lected detailed testimony from wit-
nesses and victims nationwide.
Jos Caldern, 56, said he saw
colectivos and National Guard
troops fight the antigovernment
residents of a Caracas neighborhood
as they threw debris down on them
from high-rise apartments. What I
saw was that about 70 members of
the colectivos showed up with guns,
shooting in the air, he said, calling
it a rampage.
Marino Alvarado, head of the
rights group, Provea, which is com-
piling reports on the colectivos, said
the groups have been detaining
people, firing off tear gas, shooting
at protesters and against homes
and with the cooperation of the
states forces.
Tracing their origins to the ur-
ban leftist guerillas of the 1960s,
armed civilian groups faithful to
Venezuelas populist government
grew in power under Mr. Chvez,
who was accused by opposition
leaders of arming civilian groups in
his 14 years in power.
There are now in Venezuela
roughly a dozen major armed civil-
ian groups, with 2,000 to 3,000
members, said Javier Ciurlizza,
Latin America director for the Inter-
national Crisis Group, a Brussels-
based organization that does in-
depth reports on conflicts world-
wide, including here.
Juan Forero
contributed to this article.
BY EZEQUIEL MINAYA
Motorcyclists supporting President Nicols Maduro riding in Caracas during a rally for peace in February. Some Venezuelans accuse such supporters of violence.
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Israel Fears Squeeze From Europe Over Settlements
BRUSSELSAs Middle East
peace talks founder, Israeli leaders
are bracing for the European Union
to resume its effort to put an eco-
nomic squeeze on Jewish settle-
ments in the West Bank and other
disputed territories that the EU con-
siders illegal.
The EU had been working on a
guideline that would prevent goods
manufactured in settlements from
carrying a Made in Israel label.
The 28-member bloc also had been
drafting a list of potential legal risks
for European companies doing busi-
ness in the territoriesa list that
might cause some to rethink their
operations.
Such measures were effectively
put on hold when Israeli and Pales-
tinian negotiators began talks last
summer, though EU officials say
work on them has continued. With
the talks now suspended, and the
April 29 deadline for extending them
past, Israeli officials fear the EU will
pick up where it left off.
Were already hearing about
such initiatives, and we understand
that it is in the drawer and waiting
for someone to pull it out, David
Walzer, the Israeli ambassador to
the EU, said in an interview. Am I
worried? Yes. Do I think its some-
thing they will definitely do? I hope
not.
He added, I hope they under-
stand this can be destructive for the
efforts to revive the peace process in
the near future.
Hanan Ashrawi, a prominent Pal-
estinian legislator, said the EU
should resume the labeling push.
Its long overdueit should have
happened decades ago, she said.
EU foreign ministers plan to is-
sue a statement on the Mideast talks
when they meet in Brussels on Mon-
day. Its tone and content are still be-
ing discussed, but one diplomat said
it would call on both sides to rededi-
cate themselves to negotiation and
re-emphasize the benefits of peace.
U.S. Secretary of State John
Kerry took the lead in bringing Is-
raelis and Palestinians together for
the talks, with European leaders
largely on the sidelines. But they
have sought to exert economic lever-
age on Israel through their extensive
financial and trade ties.
Shortly before the talks began,
for instance, the EU announced
guidelines to ensure that no EU
funding would go to organizations
with links to the Israeli settlements,
angering Israel.
With the talks under way, the EU
promised unprecedented economic
benefits for both sides if they
reached a deal. The U.K. and France,
among others, pushed unsuccess-
fully for the EU to spell out specific
benefits, arguing that would in-
crease the EUs ability to influence a
deal.
At the same time, individual
countries, including Britain and Den-
mark, have moved to impose their
own voluntary labeling scheme for
products from the territories.
EU officials have publicly played
down the import of some of these
moves, saying they flow from the
EUs long-standing position that
Jewish settlements in the West
Bank, as well as those in the Golan
Heights and East Jerusalem, are ille-
gal. Israel captured those territories
in the 1967 Middle East war.
As the talks hit turbulence last
week, Catherine Ashton, the EUs
foreign-policy chief, called on both
sides to show restraint. Negotia-
tions are the best way forward,
Baroness Ashton said. The exten-
sive efforts deployed in recent
months must not go to waste.
Israeli officials criticized that
statement, saying the talks stalled
because Fatah, the largest Palestin-
ian faction, announced it was recon-
ciling with Hamas, which the U.S.
and EU label a terrorist group and
which doesn't recognize Israels
right to exist.
The Palestinians say Israel was
simply seeking an excuse to end the
talks. Many figures in the Israeli
government hold views objection-
able to Palestinians, Ms. Ashrawi
said, but that didnt cause Palestin-
ian Mahmoud Abbas to end talks.
BY NAFTALI BENDAVID
26 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
SPORTS
The Draft: Whats Your Teams Strategy?
The NFL draft is a time of lying.
The rumor-laden run-up to the
leagues annual draft has become so
famous for misinformation, in fact,
that Arizona Cardinals coach Bruce
Arians said the greatest smoke
screen now is simply telling the truth
about player evaluations. No one be-
lieves it, Arians said.
But dont let this keep you from
understanding Thursdays draft.
Through a series of interviews with
league executives and data analysis,
the Journal assembled a comprehen-
sive guide to each teams strategy in
the draft.
Arizona Cardinals: Their calling
card has been consistent: Wait for
the later rounds to take low-risk,
high-reward players at skill positions
such as running back, wide receiver
and quarterback.
Atlanta Falcons: Theyre known for
drafting multiple players at the
same spot. They took four defensive
backs and two defensive ends in
2013, and two offensive linemen
with their top two picks in 2012.
Baltimore Ravens: Baltimore loves
to draft from the smallest schools,
such as Joe Flacco (Delaware, 2008).
Since 2009, 17 picks came out of
non-major-conference schools. Alma
maters last season included Harvard
and Elon.
Buffalo Bills: The Bills put their
faith in the combine and in measur-
ables: They loved quarterback E.J.
Manuels huge hands, cornerback
Stephon Gilmores athleticism and a
number of players 40-yard dash
times. No team loves speed more.
Carolina Panthers: General man-
ager Dave Gettleman has only se-
lected five players since arriving in
2013. Three of them (two defensive
tackles and one linebacker) have the
ability to rush the passer. Gettle-
man, who previously worked for the
pass-rush obsessed Giants, said hell
take another one if the talent is
there.
Chicago Bears: GM Phil Emery loves
tall players, having selected wide re-
ceivers Alshon Jeffery and Marquess
Wilson, both above 6-foot-3, as well
as 6-foot-3 safety Brandon Hardin.
Cincinnati Bengals: The Bengals
dont need to watch many college
games. They took a league-high 12
Southeastern Conference players in
the top four rounds since 2008, in-
cluding wideouts A.J. Green and pass
rusher Carlos Dunlap.
Cleveland Browns: New GM Ray
Farmer has hinted that he isnt ob-
sessed with quarterbacks, a wel-
come change from previous regimes
who reached for first-round passers.
The Browns have had bad drafts
lately, and worse, no teams picks
have started more games. That is
why theyve lost.
Dallas Cowboys: Jerry Jones will
sometimes make a splash by trading
up (cornerback Morris Claiborne) or
picking a flashy player (receiver Dez
Bryant), but more often he loves to
fill needs early, then take linebackers
and defensive backs.
Detroit Lions: If there is a risky
player on the board who looks to be
dropping, he likely wont get past De-
troit. In the past few years, the Lions
have taken a player who started play-
ing football at age 21 (Ezekiel Ansah),
one with a torn ACL (Ryan Broyles)
and a string of players with off-the-
field problems.
Denver Broncos: They get Peyton
Manning what he needs: good run-
ning backs and a solid defense. Re-
ceivers, if drafted at all, will come
late.
Green Bay Packers: The Packers
like to use the draft for two things:
protecting franchise quarterback
Aaron Rodgers, and ensuring that
the opposing quarterback is uncom-
fortable. Since 2009, no team has
selected more offensive linemen (9),
and only one has selected more de-
fensive linemen (9).
Houston Texans: Every team says it
picks the best player available, but
Houston lives by it. In the seven
drafts run by GM Rick Smith, the
Texans have taken players at the
same position with back-to-back
picks seven times.
Indianapolis Colts: The Colts want
bulk. Theyve drafted six tight ends
since 2008, a trend that is bound to
continue as offensive coordinator
Pep Hamilton builds his offense.
Jacksonville Jaguars: Second-year
GM Dave Caldwell comes from an
Atlanta franchise that believes in
depth, so look for more cornerbacks
and some pass rushers this year.
Kansas City Chiefs: GM John Dorsey
was a scouting director in Green Bay,
so hes obsessed with getting as many
picks as possible, and with player
measurements. Insiders say hes
known as a savant who wants to
memorize every players hand size.
Miami Dolphins: Coach Joe Philbin
clearly likes to start young players:
Since 2009, Dolphins draft picks
have started 572 times, second-most
in the NFL. The organization has
also (finally) discovered there is
some talent in their home state, tak-
ing six Florida college products in
the past three years.
Minnesota Vikings: A curious
trend: GM Rick Spielman likes to
draft teammates together. UCLA
(2013), Florida State (2013), Penn
State (2013), USC (2012), Arkansas
(2012), Notre Dame (2012) have all
had pairs taken by the Vikes in the
same year.
New England Patriots: Bill Belichick
likes drafting players coached by
friends (Nick Saban at Alabama, Greg
Schiano at Rutgers), but hes better
known for his relentless filling of
needs; even a special-teams role can
be a high pick.
New Orleans Saints: In the past
five drafts, no team has made fewer
picks than the Saints 16. That is no
surprise, given that the window for
aging quarterback Drew Brees to
win big in New Orleans is closing,
meaning there is less emphasis on
young players. When the Saints do
draft? Theyve taken six straight de-
fensive players with their top pick.
New York Giants: Because the Gi-
ants have been a solid veteran group
for so long, there have been fewer
holes requiring need-based picks.
So GM Jerry Reese has been remark-
ably balanced recently. What he
hasnt gotten is starters. Only two
teams have fewer than the Giants
297 starts by players drafted in the
past five years.
New York Jets: Coach Rex Ryan and
the Jets have spent their past five
first-round picks on defensive line-
men and cornerbacks. But oddly,
since 2009, when Ryan took over,
only the Ravens have drafted more
offensive players. So look for de-
fense early and then a bunch of of-
fensive linemen and wideouts.
Oakland Raiders: Lets say, gener-
ously, that the Raiders havent
shown much of a drafting philoso-
phy these past few years (although
the Al Davis era of worshiping speed
seems to have ended). None of the
teams top four draft picks last year
played a full season, one didnt
make the team, and injury-prone top
pick D.J. Hayden played in just eight
games.
Philadelphia Eagles: No team has ac-
quired more picks via trades in the
past decade, but last years draft, un-
der coach Chip Kelly, was positively
boring. His plan is clear: Create the
ultrafast offense he wants with play-
ers on the roster while drafting foun-
dations on the offensive line and de-
fense.
Pittsburgh Steelers: Their vaunted
defense relies more on the scheme.
Their offense, less famous, needs
the elite talent. That is why only
two teams have selected more offen-
sive players in the past decade. The
Steelers love two types: Big Ten al-
ums (15 of them) and offensive line-
men (nine since 2009).
St. Louis Rams: Coach Jeff Fisher is
comfortable moving down in the
drafthe traded the slot that pro-
duced Robert Griffin III in 2012be-
cause he believes there is value in
taking chances on guys later. The
Rams want speed on offense, tough-
ness on defense and, most of all, lots
of picks.
San Diego Chargers: Last year, new
GM Tom Telesco broke a five-year
Chargers streak when he didnt take
a running back. He is attempting to
build a healthy, deep team and avoid
the luxury picks of his predeces-
sor.
San Francisco 49ers: They have been
in win-now mode since Jim Harbaugh
became coach in 2011, so it is no sur-
prise they use the draft to fill needs
and grab immediate starters. This
year: How about a taller receiver to
help beat those Seattle defenders?
Seattle Seahawks: The Seahawks
have conquered the draft, but not
with their psychic abilities. The bril-
liant selections of players like Rich-
ard Sherman and Russell Wilson
were more about quantity. Since
2011, the Seahawks have selected a
league-high 30 players.
Tampa Bay Buccaneers: New GM
Jason Licht got pieces for Lovie
Smiths Cover 2 defense in free
agency, so hell likely go heavy on
offense in his first Bucs draft. Like
his predecessor, Licht was clearly
more concerned with adding veter-
ans in free agency than drafting.
Tennessee Titans: Recently, no team
has embraced defensive linemen like
the Titans. Their plan is usually clear:
glamour positions at the top of the
draft (wide receiver, running back,
quarterback) then defensive players
at the bottom. Only two teams have
taken more defenders in the past de-
cade.
Washington Redskins: Youll have
to wait to see them work their spe-
cialty: The late-round running back.
Washington has taken seven running
backs since 2009, and all were se-
lected after the fourth round.
BY KEVIN CLARK
Clockwise from top: NFL
Commissioner Roger Goodell;
cornerback Richard Sherman of the
Seattle Seahawks, who like to find
value in quantity; former Browns
quarterback Brandon Weeden, a
product of Clevelands weakness for
first-round passers; and receiver A.J.
Green of the Cincinnati Bengals, who
covet speedy SEC products. A
s
s
o
c
i
a
t
e
d
P
r
e
s
s
(
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e
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)
;
G
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(
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4 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
EUROPE NEWS
Dissent Emerges in Merkels Party Over Sanctions
BERLINGerman Chancellor An-
gela Merkels efforts to pressure
Russia arent only facing resistant
businesses and skeptical voters. Her
own party is now having misgivings
too.
Ms. Merkel threatened Moscow
with sweeping economic sanctions
after meeting with U.S. President
Barack Obama in Washington on Fri-
day. Yet on Tuesday, the parliamen-
tary leadership of her conservative
parties declined to discipline its for-
eign-policy spokesmanan oppo-
nent of sanctions against Russia
for attending a birthday party
alongside Russian President Vladi-
mir Putin in St. Petersburg last
week.
Another senior conservative law
maker, who criticized a German-led
military-monitoring mission to east-
ern Ukraine after its members and
accompanying Ukrainian officers
were abducted last month, also es-
caped a reprimand from parliamen-
tary leaders at their regular meeting
on Tuesday.
The refusal of Ms. Merkels own
lawmakers to crack down on inter-
nal dissenters despite a media up-
roar over the lawmakers unscripted
encounter with the Russian presi-
dent underlines the fine line the
chancellor is treading as she seeks
to maintain a joint front with the
U.S. and European allies against
Moscow for allegedly fueling unrest
in Ukraine.
Such vocal dissent is reminiscent
of the difficulties Ms. Merkel faced
as head of the previous government
in closing ranks behind her policy to
extend financial support to cash-
strapped euro-zone countries.
Her government is already con-
tending with hefty opposition from
German companies with business in-
terests in Russia. Ms. Merkels call
for economic sanctions against Rus-
sia should Ukraine be unable to hold
its planned presidential election
May 25 came despite lobbying by
the likes of chemical giant BASF SE,
engineering group Siemens AG,
Volkswagen AG and others.
Russias image in Germany has
deteriorated as violence has spiraled
in Ukraine. Even so, a TNS Emnid
poll conducted for the news maga-
zine Focus in late April showed 84%
of respondents calling for a diplo-
matic solution to the conflict in
Ukraine. Only 45% backed further
sanctions against Russia. The con-
servative parties also have histori-
cally stronger ties to German busi-
ness, which has been the most
outspoken constituency in opposing
economic sanctions against Russia.
Yet discomfort of some conser-
vatives about Ms. Merkels rhetoric
on Russia also reflects a popular
analysis of the conflict in Ukraine.
The view I lean towards is that
the EU, driven by the Baltic States
and Poland, drove Putin into a cor-
ner by offering an association
agreement to Kiev without consider-
ation for the diplomatic implica-
tions, said a prominent conserva-
tive with close ties to business. If
you go into your neighbors back-
yard and make noise, then you are
the troublemaker.
However, Wolfgang Bosbach, a
veteran Christian Democrat law-
maker, said: We cannot allow any-
one to drive a wedge between Eu-
rope and the U.S. in this crisis.
Economic interests cannot trump
political necessities.
Mr. Bosbach said Ms. Merkel
forcefully defended her and Mr.
Obamas joint threat of sanctions
against Russia at a closed-door
meeting of her parliamentary group
Tuesday, telling lawmakers the cost
to Russia of its policy in Ukraine
should be raised if Moscow is to
back down.
Anton Troianovski and Andrea
Thomas contributed to this article.
BY BERTRAND BENOIT
Reuters
Russian forces Saturday try to block Tatars from crossing a Crimean border checkpoint to meet with the Tatars leader.
Tatars Face Crackdown
The new authorities in Crimea
have accused Tatar leaders of ex-
tremism and threatened a crack-
down, reinforcing fears of renewed
persecution that led most of the
community to oppose the regions
recent annexation by Russia.
The warning and other recent
moves to clamp down on dissent
signal some of the most significant
challenges to freedom of expression
and movement in Crimea since Mos-
cow took control of it from Ukraine
in March after a secession vote that
was unrecognized by most of the
world.
On Monday, Crimeas chief pros-
ecutor Natalia Poklonskaya said
members of the Crimean Tatars
self-governing council, known as the
Mejlis, were suspected of extremist
activity. She didnt announce any
charges but warned that the council
could be dissolved and banned
across Russia. The threat comes af-
ter the breakaway regions new au-
thorities last month barred a promi-
nent leader of the Muslim group
from returning to Crimea for five
years after he left for meetings in
Kiev.
Ms. Poklonskaya said the accusa-
tion and warning were in response
to an incident Saturday when more
than 1,000 Tatars drove to the Cri-
mean border near the city of Ar-
myansk to protest against the Cri-
mean authorities refusal to allow
Mustafa Dzhemilev, the Crimean Ta-
tar leader, to return home. Crimean
Tatar leaders say that those who
took part in the protest on the bor-
der have also faced scrutiny by law
enforcement.
The Mejlis has hundreds of
branches across Crimea, helping Ta-
tars with education, housing, lan-
guage rights and other grass-roots
matters.
The timing of the warning comes
shortly before Crimean Tatars plan
to commemorate the 70th anniver-
sary of their exile from Crimea to
Central Asia on May 18.
While pressuring Tatar leaders
unhappy with the return to rule
from Moscow, the Kremlin has tried
to win over the masses. Last month,
President Vladimir Putin signed a
law rehabilitating Crimean Tatars
after Stalins repressions and has
promised them other aid.
The 70-year-old Mr. Dzhemilev
spent more than a decade in Soviet
jails for defending the rights of Cri-
mean Tatars. The Kremlin initially
courted him, hoping to persuade
him to support the Russian project
in Crimea. Such support would have
resonated because the Tatars gener-
ally view him as an elder statesman.
But Mr. Dzhemilev rebuffed Rus-
sias entreaties in a phone conversa-
tion with Mr. Putin and later spoke
out forcefully against the annexa-
tion.
Last month, as he left Crimea
headed for Kiev, he said he was told
by the new border authorities that
he wouldnt be allowed to return to
Crimea for five years. When Mr.
Dzhemilev tried to fly from Kiev to
Crimea via Moscow last week in an-
other attempt to return home, the
Russians refused to let him onto the
connecting flight. He flew back to
Kiev and tried to drive to Crimea
but was stopped at the border.
Though the legal basis of the ban
has never been explained, it appears
to have originated with Crimeas
separatist leaders. Those who come
here with bad intentions won't be
allowed to enter, Crimea govern-
ment chief Sergei Aksenov said of
Mr. Dzhemilev recently.
Tatars have been enraged at the
treatment of a man who was a baby
when Stalin kicked his family out of
Crimea and spent most of his life
campaigning for the Tatars right to
return.
That they wouldnt let this man
come home where he has family,
where he has a house is a challenge
thrown to all of us, said Ilmi Um-
erov, head of the local government
in the Bakhchysarai region of Cri-
mea.
Tatars constitute over 10% of
Crimeas population, and their his-
tory here predates the Russians ini-
tial conquest of Crimea from the Ot-
toman Empire in the late 18th
century.
BY PHILIP SHISHKIN
Deadly Fire in Odessa
May Have Been Accident
A horrific fire that killed dozens
in a hulking Odessa building where
pro-Russian protesters had taken
cover was likely sparked by rebels
on the roof who accidentally
dropped Molotov cocktails, accord-
ing to a preliminary investigation by
the government.
The finding is likely to further
anger separatists in eastern Ukraine
who view the new government in
Kiev with deep suspicion. It comes
as authorities said the situation on
the border with Russia has grown
increasingly tense, and France
warned of the prospect of chaos
and civil war if the presidential
election set for later this month is
upended.
The two-month-old government
has been pressing a military offen-
sive in the east to try to quell a pro-
Russian insurgency, but is increas-
ingly losing its grip in the regions of
Luhansk and Donetsk, which both
border Russia. The unrest spread
Friday to the Black Sea port of
Odessa, which was hit by rioting
that led to a fire that claimed 42
lives.
Serhiy Chebotar, Ukraines dep-
uty interior minister, who is now
working in Odessa, said Tuesday
that the fire began on the higher
floors and quickly spread through
the trade-union building, where pro-
Russian protesters had taken refuge
from a mob of pro-Kiev militants.
The fire began from the roof.
There were extremists there, we
found casings and firearms, Mr.
Chebotar said. But something unex-
pected happened; their Molotov
cocktails fell, and ignited the higher
floors of the building.
This version of events is likely to
be contested by grieving relatives of
those who perished in the fire or
died jumping out of windows. Four
others were killed in the rioting.
Pro-Russian activists in Odessa
believe the fire was a deliberate
atrocity committed by Ukrainian na-
tionalists. Russian media have com-
pared the fire to the worst Nazi
crimes against civilians and sug-
gested it was a plot by Kiev.
We are dealing with real geno-
cide, a genocide of Russian and
Ukrainian people in todays 21st cen-
tury, the speaker of the lower house
of Russias parliament, Sergei Nary-
shkin, said of the fire, which he
blamed on riotous radicals, the In-
terfax news agency reported.
Acting President Oleksandr
Turchynov on Tuesday dismissed
the head of the Odessa regional ad-
ministration, having already fired
the chief of the regional police and
much of his senior staff.
The fire occurred after a pro-
Ukraine rally was attacked by pro-
Russian protesters, whose ranks in-
cluded a small group of armed
militants. The fighting escalated be-
fore some people escaped to the
trade-union building, where both
sides threw Molotov cocktails and
the fire began.
Video footage shows some pro-
Ukraine activists helping people
trapped in the burning building es-
cape by leaning scaffolding against
the walls. There were other pro-
Ukraine protesters who were attack-
ing people.
Among the dead was Vadim Pap-
ura, a 17-year-old political-science
student, whose funeral was Tuesday.
He had taken part in the clashes and
sought cover in the trade-union
building, then jumped from the third
floor to escape the flames, according
to his friend Timur Lyubinski.
His body was so disfigured that
friends and family identified him by
the striped pants he was wearing
that day. His open coffin, with his
face reconstructed, sat in front of
the apartment block where he had
once lived, as his parents, friends
and fellow students gathered for the
emotional service.
Ukraine and the West have
blamed Russia for instigating the re-
volt in the east, a charge Moscow
has denied.
The government in Kiev, which
took office after pro-Western pro-
tests toppled President Viktor Yanu-
kovych, is seeking to regain control
in the eastern regionsMr. Yanuk-
ovychs base of support. The presi-
dential election scheduled for May
25 is viewed in the West as key to
bolstering its legitimacy.
If the election isnt held there is
a risk of chaos and civil war; that is
whats at stake, French President
Franois Hollande said in an inter-
view on BFM television and RMC ra-
dio.
Russian Foreign Minister Sergei
Lavrov said that Moscow wouldnt
commit to recognizing the outcome
of the presidential vote.
U.S. President Barack Obama said
last week that Russian attempts to
disrupt the vote could trigger new,
more punitive sanctions against
broad sectors of the Russian econ-
omy.
By Philip Shishkin
in Odessa, Ukraine and
Lukas I. Alpert in Moscow
THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 25
PERSONAL JOURNAL
A Heart-to-Heart With Your Closest Friend
Self-Talk Can Allow People to Give Themselves Objective, Helpful Feedback; Improving the Negative
Do you ever talk to yourself?
Be honest.
Researchers say talking to
yourself, out loud, is more com-
mon than many of us might care
to admit. Psychologists call it self
talk and say how we do it makes
a big difference in both our mood
and our behavior.
Most people engage in self-talk,
experts say, though some do it
louder and
more often than
others. When I
asked, I heard
from people who talk to them-
selves in the basement, in their cu-
bicle at work and at the urinal in
the mens room. One woman turns
the car radio down so she can hear
herself better.
Self-talk is what happens when
you make yourself the target of
your own comments, advice or re-
minders. Experts consider it a sub-
set of thinking. Youre having a
conversation with yourself.
My father talks to himself
pretty much everywhere, including
at the dinner table. He is more in-
terested than anyone else is in
what he has to say, he says. He
taught my two sisters and me to
high-five ourselves when we do
something well.
Sometimes self-talk is auto-
matic. Other times we do it delib-
erately to influence our own be-
havior. What happens with self-
talk is you stimulate your action,
direct your action and evaluate
your action, says Antonis Hatzi-
georgiadis, associate professor at
the University of Thessaly in
Trikala, Greece, who studies self-
talk and the psychology of sports
performance.
Motivational self-talk includes
what we say to psych ourselves
up: Come on! Lets go! You
can do this! Instructional self-talk
walks us through a specific task. If
you are driving, you might tell
yourself to turn right at the next
light, and then you do it. It
sounds simple, but you get the
correct reaction, says Dr. Hatzi-
georgiadis.
Instructional self-talk is helpful
when learning or practicing a new
sport or task, he says. For exam-
ple, a swimmer can remind himself
to keep his elbow high during free-
style. Before giving a speech,
someone might tell herself, Speak
slower and Make eye contact.
It is important to be short, pre-
ciseand consistent. You have to
sustain it, Dr. Hatzigeorgiadis
says. You instruct yourself until it
becomes automatic.
The way you address yourself
matters, too. Research published
in the Journal of Personality and
Social Psychology in February
found people who spoke to them-
selves as another person would
using their own name or the pro-
noun youperformed better
under stress than people who used
the word I.
In one study, University of
Michigan researchers induced
stress in participants by telling
them they had to prepare a speech
to give to a panel of judges about
their qualifications for a dream
job. They were given five minutes
to prepare and told they couldnt
use notes.
Half the participants were in-
structed to work through their
anxiety using the first-person pro-
noun (Why am I nervous?). The
other half were told to address
themselves by name or the pro-
noun you (Why are you ner-
vous?). Afterward, each partici-
pant was asked to estimate how
much shame he or she experienced
right after the speech, and how
much subsequent ruminating they
did.
The results were consistent:
People whose self-talk used their
names or you reported less
shame and ruminated less than
the ones who used I. The judges
found the performances of those
using you to be more confident,
less nervous and more persuasive.
When people think of them-
selves as another person, it al-
lows them to give themselves ob-
jective, helpful feedback, says
Ethan Kross, associate professor of
psychology and director of the
Self-Control and Emotion Labora-
tory at the University of Michigan.
Don Ingraham, a 77-year-old re-
tired chief executive of a chemical
distribution company, has been
talking to himself for more than
70 years. He was a lonely child
his brothers were much older
and invented three imaginary
friends, Bobby Palmer, Bobby En-
gine and Ainsley Oates, with whom
he had regular conversations.
As an adult, Mr. Ingraham com-
pliments himself when he does
something well, such as the level
base he built for an outdoor sink
on the flagstone patio at his Aus-
tin County ranch, in Texas.
Good job! he said to himself.
You took the time to make it
right. Sometimes, he scolds him-
self. He says its his conscience
speaking. While cleaning up tree
branches after an ice storm this
winter, he accidentally jabbed a
sharp stick into his arm. I used
some barnyard words that follow
the word dumb, he says.
Both positive and negative
words can influence us in positive
and negative ways. Say to yourself,
This job interview is going to be
a cakewalk, and you might not
get pumped up enough to ace it.
Conversely, tell yourself, You just
lost that match, you need to focus
harder, and it could spur you to
do better in the future.
With critical self-talk, identify
why you are being negative and
focus on making it better. Dont
say: I bombed that presentation.
Say: That wasnt your best
effort. You need to buckle down
now and try harder.
Kathy Gruver, a 44-year-old al-
ternative-medicine practitioner in
Santa Barbara, Calif., once made
herself cry while talking to herself
about what to say to her then-boy-
friend, who hadnt called when he
said he would.
Since then, she has learned to
speak to herself positively. She re-
peats daily affirmations, coaches
herself on handling difficult clients
and walks through the steps of her
flying-trapeze workout. I think
its healthy to talk to yourself, she
says. Throw your Bluetooth in, so
people think youre on the phone,
and let it all out.
Write to Elizabeth Bernstein at
Elizabeth.Bernstein@wsj.com, or
follow her on Facebook and
Twitter at EBernsteinWSJ.
BY ELIZABETH BERNSTEIN
Howto Improve Your Self Talk
It is perfectly OK to talk to yourself, as long as your words are encouraging and not berating, experts say.
Think of yourself as a life-long best friend who is honest and direct but most of all supportive.
Remind yourself of the desired outcome, so you dont wander ofpoint.
EXAMPLES: This company needs more leaders who are good at
listening. I ama problem-solver I can bring a newperspective here.
BEFORE A FIRST DATE
DURING COMPETITION BEFORE AJOB INTERVIEW
BEFORE PUBLIC SPEAKING
Take a step back and talk to yourself in a calming tone that
is slightly distanced.
EXAMPLES: Relax. You look ne, stop worrying. Remember to listen.
Repeat the specic directions that you knowhelp
you performbetter.
EXAMPLES: Dont rush. Pause for emphasis. Make eye contact.
Build your condence by reminding yourself of
all the positives.
EXAMPLES: You are well prepared. You have the skills.
I
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l
u
s
t
r
a
t
i
o
n
s
b
y
K
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l
e
T
.
W
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b
s
t
e
r
BONDS: ON
RELATIONSHIPS
THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 5
AnnuAl Meeting
June 1617, 2014 WAshington, D.C.
2014 Dow Jones & Company, Inc. All rights reserved. 6C757
For more information, please visit CFONetwork.wsj.com or call + 1 212.416.2300.
2014 MeMbers & Guests
ProuDly suPPorteD by:
this June, The Wall Street Journal CFo network, an invitation-only membership of more than 100 chief fnancial
offcers from the worlds largest companies, will convene again in Washington, D.C., to address key concerns in
fnancial leadership. in interviews led by the Journals senior editors, network members will hear from leading policy
makers, economists and other subject experts on topics including the global economy, the 2014 midterm elections,
regulation, and cybersecurity, among other subjects.
Members will also participate in member-only working group sessions to develop recommendations in critical areas
such as leadership, managing growth, health care, social change, and American manufacturing.
the CFo networks deliberations and recommendations are published shortly after the annual meeting in a special
worldwide report in The Wall Street Journal and on WsJ.com.
David Adams
Aimia inc.
Sean Aggarwal
trulia, inc.
Michael J. Angelakis
Comcast Corporation
Donald J. Ball
VsP global
Daniel N. Bass
Fortress investment group
Kaushik Basu
the World bank
Richard Beckert
CA technologies
Michael Berman
general growth Properties, inc.
Kevin Berryman
international Flavors & Fragrances inc.
Jeremy Bird
270 strategies
Werner Brandt
sAP Ag
Judy L. Brown
Perrigo Company
Todd Buehl
AbC supply Co., inc.
Frank Calderoni
Cisco systems, inc.
Paul Carbone
Dunkin brands, inc.
Andrew Ceresney
u.s. securities and
exchange Commission
Marcia Dall
erie insurance group
George S. Davis
Qualcomm incorporated
Robyn M. Denholm
Juniper networks, inc.
Fredrik Eliasson
CsX Corporation
Joseph J. Euteneuer
sprint nextel Corporation
Nicholas C. Fanandakis
DuPont
Mark Flaherty
sally beauty holdings, inc.
Frank Friedman
Deloitte llP
Jason Furman
White house Council of
economic Advisers
William J. Gerber
tD Ameritrade, inc.
Shantanu Ghosh
genpact limited
Robert Glenning
hackensack university
health network
Patrick Grismer
yuM! brands, inc.
Peter D. Hart
Peter D. hart research Associates
Larry Hilsheimer
scotts Miracle-gro Company
Douglas Holtz-Eakin
American Action Forum
Anthony Hull
realogy Corporation
Robert F. Hull
lowes Companies, inc.
Karen Ignagni
Americas health
insurance Plans (AhiP)
Luc Jobin
Canadian national
railway Company
Hugh F. Johnston
PepsiCo
John M. Jureller
Frontier Communications Corporation
Robert M. Knight, Jr.
union Pacifc Corporation
Jeff Knox
u.s. Department of Justice
Kevin Lenahan
Atlantic health system, inc.
Abraham Mathews
infosys bPo limited
Bill Maw
liquidnet holdings, inc.
Greg Maxwell
Phillips 66
R. Perley McBride
leap Wireless international, inc.
Bill McInturff
Public opinion strategies
Karen McLoughlin
Cognizant technology solutions
Frank Mergenthaler
the interpublic group of Companies, inc.
Roger Millay
towers Watson & Co.
Arthur Minson
time Warner Cable
Michael Monahan
Pitney bowes inc.
James E. Moylan, Jr.
Ciena Corporation
Pete H. Nachtwey
legg Mason, inc.
Indra K. Nooyi
PepsiCo
Bill Oplinger
Alcoa inc.
Aldo J. Pagliari
snap-on incorporated
Kenneth S. Parks
WesCo international, inc.
Kavita Patel
the brookings institution
Frank Perier
Forest laboratories, inc.
James Perry
trinity industries, inc.
Christopher H. Peterson
ralph lauren Corporation
Thomas Piquemal
eDF
Ruth Porat
Morgan stanley
Karan Rai
ADs inc.
Gebhard F. Rainier
hyatt hotels Corporation
Paul Reilly
Arrow electronics, inc.
John Rother
national Coalition on health Care
David Rowland
Accenture
David Schulz
Armstrong World industries, inc.
Thomas Seifert
symantec
Suresh C. Senapaty
Wipro limited
Francis J. Shammo
Verizon Communications inc.
Bob Shanks
Ford Motor Company
Steve Shebik
the Allstate Corporation
J. Donald Sheets
Dow Corning Corporation
Harmit Singh
levi strauss & Co.
Timothy Sloan
Wells Fargo & Company
Sean Stack
Aleris
Ewout Steenbergen
Voya Financial, inc.
John Stephens
At&t, inc.
Christopher J. Swift
the hartford Financial
services group, inc.
Anthony Thomas
Windstream holdings, inc.
Dr. Ralf P. Thomas, Dipl.-Kfm.
siemens Ag
Gregory Thompson
Axiall
Dominique Thormann
renault
Carol B. Tom
the home Depot, inc.
Kenneth R. Trammell
tenneco inc.
Anthony C. Trunzo
Flir systems, inc.
Lori A. Varlas
Central garden & Pet Company
Richard Veldran
the Dun & bradstreet
Corporation
Michael Ventling
ey
Robin L. Washington
gilead sciences, inc.
Dale Williams
tempur sealy
international, inc.
Alexandra Wrage
trACe international
E. Lee Wyatt
Fortune brands home
& security, inc.
Ron Wyden
Chairman, senate Finance Committee
u.s. senator (D., ore.)
David Wyshner
Avis budget group, inc.
24 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
Major players & benchmarks
Credit derivatives
Spreads oncredit derivatives are one way the market rates
creditworthiness. Regions that are treading inroughwaters
cansee spreads swing toward the maximumand vice versa.
Indexes beloware for five-year swaps.
Markit iTraxxIndexes SPREADRANGE, in pct. pts.
Mid-spread, since most recent roll
Index: series/version in pct. pts. Mid-price Coupon Maximum Minimum Average
Europe: 21/1 0.69 101.53% 0.01% 0.81 0.69 0.73
Eur. HighVolatility: 20/1 0.85 100.69 0.01 1.29 0.85 1.08
Europe Crossover: 21/1 2.72 110.40 0.05 3.11 2.70 2.85
Asia ex-JapanIG: 21/1 1.27 98.74 0.01 1.40 1.19 1.26
Japan: 21/1 0.86 100.71 0.01 0.90 0.83 0.85
Note: Data as of May 5
Spreads
Spreads on
ve-year swaps
for corporate
debt; based on
Markit iTraxx
indexes.
In percentage points
3.00
2.00
1.00
0
1
t
Australia
t
Japan
2013
Nov.
2014
Dec. Jan. Feb. Mar. April
Index roll
Source: Markit Group
BehindEurope's deals: Bank revenue rankings, Global (ex US)
Behind every IPO, bond offering, merger deal or syndicated loanis one or more investment banks. Here are
investment banks ranked by year-to-date revenues fromrecent deals.
PERCENTAGEOFTOTAL REVENUE
Revenue, Equity Debt Mergers &
in millions share capital markets capital markets acquisitions Loans
GoldmanSachs $835 6.4% 29% 30% 36% 5%
JPMorgan 784 6.0 28 39 22 11
Deutsche Bank 658 5.0 21 45 20 14
MorganStanley 614 4.7 36 33 23 9
Citi 535 4.1 23 46 20 11
Credit Suisse 531 4.1 29 33 28 10
Bankof America Merrill Lynch 503 3.9 25 36 29 9
Barclays 476 3.6 15 49 20 16
HSBC 454 3.5 19 55 7 19
Source: Dealogic
Tracking
credit
markets &
dealmakers
Dow Jones Industrial Average P/E: 16
LAST: 16401.02 t129.53, or 0.78%
YEAR TO DATE: t175.64, or 1.1%
OVER 52 WEEKS s1,344.82, or 8.9%
Note: Price-to-earnings ratios are for trailing 12 months
17000
16500
16000
15500
15000
14500
7 14 21 28
Feb.
7 14 21 28
Mar.
4 11 17 25
Apr.
2
High
Close
Low
50day
moving average
t
StoxxEurope 50: Tuesday's best andworst...
Previous
close, in STOCKPERFORMANCE
Company Country Industry Volume local currency Previous session YTD 52-week
BGGrp United Kingdom Integrated Oil &Gas 9,857,704 1,266 1.16% -2.4% 10.0%
Tesco United Kingdom Food Retailers &Wholesalers 19,628,316 287.80 0.81 -13.9 -21.7
Glencore Xstrata PLC United Kingdom General Mining 23,041,998 321.00 0.47 2.6 -6.8
Vodafone Group United Kingdom Mobile Telecommunications 69,796,014 223.90 0.45 -8.7 11.7
UBS Switzerland Banks 12,020,621 18.32 0.27 8.3 9.4
Barclays United Kingdom Banks 76,029,546 245.00 -5.22% -9.9 -17.3
AstraZeneca United Kingdom Pharmaceuticals 3,705,878 4,678 -2.71 30.9 40.1
Deutsche Bank Germany Banks 7,939,557 30.53 -2.37 -12.0 -16.6
AXA France Full Line Insurance 9,014,680 17.58 -2.14 -13.0 19.5
Lloyds Banking Group PLC United Kingdom Banks 172,532,031 78.50 -1.41 -0.5 45.2
...Andthe rest of Europe's blue chips
Latest,
in local STOCKPERFORMANCE
Company/Country (Industry) Volume currency Latest YTD 52-week
Zurich Insurance Group 262,657 252.30 0.20% -2.4% -2.9%
Switzerland (Full Line Insurance)
National Grid 6,801,606 840.00 0.18 6.6 1.8
United Kingdom(Multiutilities)
Telefonica S.A. 21,668,839 12.29 0.16 3.8 8.9
Spain (Fixed Line Telecommunications)
Novartis AG 3,308,517 77.05 0.13 8.2 12.1
Switzerland (Pharmaceuticals)
Telefon L.M. Ericsson B 7,354,909 78.75 0.13 0.3 -1.3
Sweden (Telecommunications Equipment)
Diageo 2,101,574 1,827 0.08 -8.7 -7.4
United Kingdom(Distillers &Vintners)
Nestle 2,573,972 67.75 ... 3.8 2.9
Switzerland (Food Products)
GlaxoSmithKline 7,194,441 1,626 -0.09 0.9 -1.3
United Kingdom(Pharmaceuticals)
Reckitt Benckiser Grp 898,340 4,835 -0.10 0.9 4.3
United Kingdom(Nondurable Household Products)
ENI 19,104,313 18.60 -0.11 6.3 1.1
Italy (Integrated Oil &Gas)
Deutsche Telekom 8,902,363 12.25 -0.12 -1.4 36.7
Germany (Mobile Telecommunications)
BP PLC 20,305,556 501.00 -0.14 2.7 6.3
United Kingdom(Integrated Oil &Gas)
INGGroep 11,841,518 10.19 -0.15 0.8 58.7
Netherlands (Life Insurance)
Allianz SE 1,526,007 123.80 -0.16 -5.0 6.2
Germany (Full Line Insurance)
ABB 8,357,634 20.51 -0.19 -12.6 -3.8
Switzerland (Industrial Machinery)
HSBC Hldgs 25,837,931 604.10 -0.26 -8.8 -15.4
United Kingdom(Banks)
Financiere Richemont 889,058 87.20 -0.29 -1.8 12.7
Switzerland (Clothing &Accessories)
Royal Dutch Shell A 3,057,357 2,347 -0.32 8.5 5.6
United Kingdom(Integrated Oil &Gas)
Banco Bilbao Vizcaya Argn 16,872,857 8.80 -0.33 -0.7 21.1
Spain (Banks)
Siemens 2,110,349 93.91 -0.36 -5.4 17.3
Germany (Diversified Industrials)
Latest,
in local STOCKPERFORMANCE
Company/Country (Industry) Volume currency Latest YTD 52-week
Roche Holding Part. Cert. 710,841 252.00 -0.40% 1.1% 8.0%
Switzerland (Pharmaceuticals)
Moet Hennessy Louis Vuitt 489,814 140.00 -0.46 5.6 4.4
France (Clothing &Accessories)
Unilever 2,027,821 2,592 -0.54 4.4 -7.2
United Kingdom(Food Products)
Standard Chartered 3,218,241 1,281 -0.54 -5.8 -22.7
United Kingdom(Banks)
Sanofi SA 1,993,284 77.99 -0.59 1.1 -7.5
France (Pharmaceuticals)
L'Air Liquide 430,975 102.45 -0.63 -0.3 4.9
France (Commodity Chemicals)
Unilever CVA 3,284,399 30.31 -0.64 3.5 -7.1
Netherlands (Food Products)
Banco Santander S.A. 34,857,863 7.11 -0.71 11.5 33.4
Spain (Banks)
Credit Suisse Group AG 9,146,777 27.19 -0.77 -0.3 0.6
Switzerland (Banks)
Anheuser-Busch InBev 1,511,731 76.61 -0.79 -0.8 4.4
Belgium(Brewers)
SAP 3,056,876 56.29 -0.79 -9.7 -9.3
Germany (Software)
Total 4,085,764 50.72 -0.82 13.9 31.9
France (Integrated Oil &Gas)
British American Tobacco 3,395,922 3,367 -0.88 4.0 -7.2
United Kingdom(Tobacco)
Bayer 2,184,427 99.07 -0.93 -2.8 22.1
Germany (Specialty Chemicals)
BHP Billiton 5,467,927 1,912 -0.98 2.3 3.5
United Kingdom(General Mining)
Rio Tinto 3,147,465 3,215 -0.99 -5.7 6.4
United Kingdom(General Mining)
Daimler 3,190,073 65.16 -1.12 3.6 50.3
Germany (Automobiles)
Schneider Electric 930,557 66.92 -1.17 5.6 16.4
France (Electrical Components &Equipment)
BNP Paribas 4,867,266 51.80 -1.26 -8.6 18.0
France (Banks)
BASF 2,956,813 80.21 -1.32 3.5 9.9
Germany (Commodity Chemicals)
Sources: SIX Financial Information
DJIAcomponent stocks
Volume, CHANGE
Stock Symbol in millions Latest Points Percentage
AT&T T 18.2 $35.53 0.23 0.64%
AmExpress AXP 2.4 86.34 1.02 1.17
Boeing BA 3.3 130.99 0.97 0.74
Caterpillar CAT 2.1 103.92 0.60 0.57
Chevron CVX 4.2 125.12 0.24 0.19
CiscoSys CSCO 18.0 22.75 0.20 0.89
CocaCola KO 7.2 40.53 0.23 0.55
Disney DIS 8.3 81.04 0.18 0.22
DuPont DD 2.0 67.24 0.15 0.22
ExxonMobil XOM 6.5 102.72 0.19 0.18
GenElec GE 18.7 26.23 0.34 1.30
GoldmanSachs GS 2.6 154.61 1.74 1.11
HomeDpt HD 5.0 77.42 1.27 1.61
Intel INTC 17.5 26.25 0.08 0.31
IBM IBM 2.4 190.19 1.07 0.56
JPMorgChas JPM 19.5 53.41 0.81 1.50
JohnsJohns JNJ 3.9 99.71 0.29 0.29
McDonalds MCD 2.4 101.02 0.12 0.12
Merck MRK 11.4 57.23 1.40 2.39
Microsoft MSFT 21.7 39.12 0.31 0.80
Nike B NKE 1.8 72.36 0.93 1.27
Pfizer PFE 46.8 29.49 0.47 1.57
ProctGamb PG 3.2 81.22 0.48 0.58
3M MMM 1.8 139.46 1.15 0.82
TravelersCos TRV 1.8 90.07 0.58 0.64
UnitedTech UTX 1.5 116.14 0.68 0.58
UtdHlthGp UNH 3.4 75.30 0.07 0.09
Verizon VZ 10.4 47.45 0.06 0.13
VISAClA V 2.1 205.94 1.19 0.57
WalMart WMT 4.6 78.19 0.43 0.55
Source: WSJ Market Data Group
Credit-default swaps: European companies
At itsmost basic, thepricingof credit-default swapsmeasureshowmuchabuyer hastopaytopurchase-and
howmuch a seller demands to sell-protection fromdefault on an issuer's debt. The snapshot belowgives a
sense whichway the market was moving yesterday.
Showing the biggest improvement...
CHANGE, in basis points
Yesterday Yesterday Five-day 28-day
ageas 89 2 1 7
TEConnectivity 43 1 1 1
Bca Naz del Lavoro 66 1 5 5
Smiths Gp 85 1 1 3
RioTinto 93 1 3 ...
Dixons Retail 176 1 17 2
Lanxess 123 ... 5 13
BASFSchweiz 23 ... ... ...
Next 52 ... 2 3
UPCGermanyHoldCo1 9 ... 1 4
Andthe most deterioration
CHANGE, in basis points
Yesterday Yesterday Five-day 28-day
Unilever 28 ... ... ...
Dexia Cr Loc 182 1 3 10
Rhodia 45 ... ... ...
ACE 29 ... ... 1
Daimler 43 ... 2 1
BcoPopEspanol 156 ... 6 13
RegionSicily 213 1 1 13
Commerzbank 94 ... 5 4
TelecomItalia 187 ... 10 32
Statoil 36 ... ... 2
Source: Markit Group
BLUE CHIPS & BONDS
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Below, a look at the Dow Jones Stoxx
50, the biggest and best known
companies in Europe, including the U.K.
6 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
Hollande Vows to Retain Tax Cuts
French President Franois Hol-
lande said he would forge ahead
with his plans to cut public spend-
ing and grant tax breaks to busi-
ness, acknowledging French people
are angry after he failed to deliver
on pledges to turn around the econ-
omy.
During an hourlong television in-
terview on Tuesday marking the
second anniversary of his election,
Mr. Hollande said he regretted not
moving faster with some measures
and not alerting the French people
to the gravity of Frances problems.
He said France must quickly imple-
ment tax cuts for business, calling
that the only way to boost jobs.
We must go faster still because
[the situation] is unbearable for the
French people, Mr. Hollande said.
He also said he has brought forward
plans to ease the tax burden for the
poorest and will fast-track over-
hauls to cut down on layers of local
government.
The 59-year-old president came
to power in May 2012 at a time of
turmoil in the euro zone. Over the
first two years of a five-year man-
date, financial tensions have abated
and the wider euro currency bloc
has exited recession. But the French
economy has struggled to grow and
unemployment has continued to
rise. Tax increases implemented to
plug holes in public finances have
further angered the French people
while failing to achieve the results
Mr. Hollande had hoped for.
With his own popularity at re-
cord lows early this year and unem-
ployment still rising, the president
switched tack and said he would fo-
cus on spending cuts to fund tax
breaks for businesses to help them
invest and recruit.
But those policies didnt prevent
his Socialist Party from suffering a
stinging defeat in municipal elec-
tions in March. The pro-business
slant has also proved controversial
among Mr. Hollandes own support
base. Plans to cut 50 billion ($69
billion) from the budgets for the
years 2015 to 2017 scraped through
parliament last week with a thin
majority as 41 lawmakers from the
Socialist majority abstained.
A day before the television inter-
view, a survey of 1,004 people by
polling company CSA showed only
20% of French people are confident
Mr. Hollande can effectively deal
with Frances problems. That
marked the lowest score ever for a
French president in CSAs monthly
survey, which has been running
since 1993. I have nothing to lose,
Mr. Hollande said.
Mr. Hollande called on the
French to be patient and not to lose
confidence. Im not a president
who should be regretful, he said.
I am the president who should be
rebounding, responding and react-
ing.
Recent economic forecasts indi-
cate French people still have some
time to wait until a tangible recov-
ery emerges. Unemployment will
reach 10.4% this year and economic
growth will accelerate to only 1.5%
next year, below the governments
forecast of 1.7%, the European Com-
mission said Monday.
BY WILLIAM HOROBIN
French President Franois Hollande, pictured third from left addressing apprentice bakers on Tuesday, vowed to go faster with policies to boost economic growth.
R
e
u
t
e
r
s
Vatican Cites
Punishments
For Abusers
ROMEThe Vatican disclosed
that it has defrocked hundreds of
priests and punished thousands
more for sexual abuse of children
over the last decade, as it sought to
demonstrate to a United Nations
panel its commitment to tackling a
scandal that has shaken the church.
In comments to the U.N.s Com-
mittee Against Torture, a Vatican
delegation also said it has halted
the practice of protecting clerics
found to have abused children, and
has granted victims financial com-
pensation. In the past, it often
transferred guilty priests to other
parishes, a practice that has drawn
widespread criticism.
Theres no climate of impunity
[within the Catholic Church], theres
total commitment to clean the
house, to work to not have a repeti-
tion of abuses, Archbishop Silvano
Tomasi, the Vaticans chief envoy in
Geneva, told U.N. panel members in
a second day of questioning as part
of the groups process to monitor
the Holy Sees implementation of
the anti-torture treaty.
The archbishop for the first time
provided a clear breakdown of de-
frocking as a result of sexual crimes
against minors. He said the Holy See
laicized a total of 848 priests be-
tween 2004 and 2013 for sexual
abuses, with 2,572 receiving other
punishments, such as accepting a
life of penance and prayers or a ban
on public ministries. He added that
most of the abuses took place be-
tween the 1950s and the 1980s.
The data showed that 43 priests
were defrocked last year, down from
the 70 of 2012; 358 were otherwise
punished in 2013 and 348 in 2012.
The Vatican has decided that any
priest who has been punished for
sexual abuse but hasnt been de-
frocked can have no further contact
with children, said the Vatican offi-
cial in response to questions from
the panel, which is made up of inde-
pendent experts and not representa-
tives of other U.N. states.
Archbishop Tomasi also said that
Holy See policy is to report credi-
ble accusations against a cleric to
the civil authorities of the country
where it took place, while it also
tries to compensate victims. Victims
groups have charged that the Vati-
can hasnt done enough to push
church authorities to report abuse.
Members of Pope Francis newly
appointed Pontifical Commission for
the Protection of Minors, including
Boston Cardinal Sean OMalley, said
over the weekend they hope to in-
troduce a more consolidated prac-
tice of holding bishops or others
with supervisory responsibility ac-
countable for priests who abuse
children under their watch or who
fail to stop them from repeating
their abuses.
In February, a U.N. Committee on
the Rights of the Child criticized the
Vatican for focusing more on shield-
ing members of the clergy than on
protecting victims in its response to
the sexual abuse cases, which the
committee said has numbered in the
tens of thousands.
Tuesdays disclosure of the num-
ber of priests punished didnt sat-
isfy some victims groups. What
parents need are the names and
whereabouts of child-molesting cler-
ics, said David Clohessy, the U.S. di-
rector of the Survivors Network of
those Abused by Priests, or SNAP.
BY LIAM MOLONEY
EUROPE NEWS
Collector Behind Nazi-Looted Trove Dies
BERLINCornelius Gurlitt, the
octogenarian son of one of Adolf
Hitlers major art dealers, died in
his Munich home on Tuesday
morning, leaving the fate of his
roughly 1,400 artworks unclear.
Legal questions now abound
over howand even ifNazi-
looted works in the collection
could be returned to Holocaust
victims and their heirs. It is un-
certain whether the collector, who
was never married and had no
children, left a will. The authority
of a government-appointed task
force assigned to probe the looted
works provenance and coordinate
their return to previous owners
also has been thrown into limbo.
The 81-year-old Mr. Gurlitt
stepped from complete obscurity
into world-wide prominence last
fall after revelations that Bavarian
tax authorities had confiscated in
early 2012 what is regarded as the
largest-ever trove of Nazi-looted
art in private hands.
Mr. Gurlitt died in the presence
of his doctor and caretakers, a few
weeks after requesting that he re-
turn home from a Bavarian hospi-
tal where he had undergone inten-
sive heart surgery, his spokesman
said Tuesday.
The trove includes many unre-
markable works on paper but also
several valuable paintings. One of
those, an Henri Matisse portrait
that Matisse dealers say could
fetch up to $20 million at auction,
is being pursued by the heirs of
the late French art dealer Paul
Rosenberg, including Anne Sin-
clair, a prominent journalist and
ex-wife of former International
Monetary Fund head Dominique
Strauss-Kahn.
That painting and several other
artworks were looted from Holo-
caust victims during World War II.
It is unclear how the works ended
up in the collection of Mr. Gurlitts
father, Hildebrand, a successful
Nazi-era dealer whom Hitler had
tapped to lead his unrealized Fh-
rermuseum in Linz, Austria, after
the war.
Local German officials decision
not to disclose the find for nearly
two years or pressure Mr. Gurlitt
to return any looted artwork to
heirs of their original owners
drew criticism of Germany from
the U.S., France and Israel.
At the time, Bavarian tax au-
thorities justified the decision to
keep the discovery a secret be-
cause of their continuing investi-
gation into Mr. Gurlitts finances.
The Augusburg prosecutors office
in charge of the investigation
didnt answer calls seeking com-
ment.
Although that investigation will
lapse now that Mr. Gurlitt is dead,
fresh hurdles abound, mainly sur-
rounding a simple question: who
has inherited Mr. Gurlitts estate?
Christopher Marinello, a lawyer
for the Rosenberg heirs, says the
family will continue pursuing the
case, but that well have to wait
for the estate process to run its
course.
It is unclear, though, whom Mr.
Marinello should even contact or
who will be handling the estate
process. If an heir to Mr. Gurlitts
estate isnt found, it would be
turned over to the German state.
Given Mr. Gurlitts perpetually
frail state of health, a German
court appointed Munich-based
lawyer Christoph Edel as his legal
guardian late last year. But Mr.
Edels position was voided as
soon as Mr. Gurlitt died, Mr.
Gurlitts spokesman, Stephan
Holzinger, told The Wall Street
Journal.
Mr. Holzinger says he doesnt
even know if Mr. Gurlitt has a will
and that his own contract will
only continue for the next few
days.
The only guy who could give
orders in [the restitution of art]
was Mr. Edel, but now his job has
ended, said Mr. Holzinger. The
job right now is to find out whats
in the willif there is a will.
The lack of certainty about a
finished will may in part be due to
the tensions that have plagued Mr.
Gurlitts own legal team since it
came together earlier this year.
In January, The Journal re-
ported that Mr. Gurlitt was willing
to negotiate the return of works of
art within the collection, but Mr.
Gurlitts lawyer, Hannes Hartung,
was fired soon afterward
Several families, including the
Rosenberg heirs, complained that
Mr. Hartung was unwilling to rule
out a demand for monetary com-
pensation for returning Nazi-
looted art.
Last month tax authorities an-
nounced they would return Mr.
Gurlitts artwork. Through his le-
gal guardian, Mr. Gurlitt re-
sponded to international com-
plaints by giving the government-
appointed task force that had
already been examining the prove-
nance authority to spend a year
researching it and helping arrange
restitution for works that it deter-
mined were looted.
But even that task force is un-
certain now with whom it should
coordinate since Mr. Gurlitt is
dead.
We want to fulfill our duty to
research this work as seriously as
before, said task force spokesman
Matthias Henkel. We are still
working on determining with
whom to speak now.
BY MARY M. LANE
THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 23
Major stockmarket indexes Stock indexes fromaround the world, grouped by region. Showninlocal-currency terms.
PREVIOUS SESSION PERFORMANCE
Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk.
EUROPE Stoxx Europe 600 336.04 -0.85 -0.25% 2.4% 11.7%
Stoxx Europe 50 2959.28 -11.11 -0.37 1.4 7.1
Euro Zone Euro Stoxx 321.00 -1.73 -0.54 2.1 16.2
Euro Stoxx 50 3149.79 -21.50 -0.68 1.3 14.5
Austria ATX 2480.29 -21.75 -0.87 -2.6 2.6
Belgium Bel-20 3089.51 0.45 0.01% 5.7 14.6
Czech Republic PX 1010.58 2.01 0.20 2.2 4.5
Denmark OMXCopenhagen 640.49 -0.67 -0.10 13.2 29.1
Finland OMXHelsinki 7329.40 -12.51 -0.17 -0.1 18.3
France CAC-40 4428.07 -34.62 -0.78 3.1 13.3
Germany DAX 9467.53 -61.97 -0.65 -0.9 16.7
Hungary BUX 17660.38 286.84 1.65 -4.9 -3.9
Ireland ISEQ 4904.38 -22.95 -0.47 8.0 24.5
Italy FTSE MIB 21521.65 -118.31 -0.55 13.5 27.6
Netherlands AEX 396.54 -0.90 -0.23 -1.3 10.9
Norway All-Shares 649.17 1.32 0.20 7.7 22.9
Poland WIG 50873.54 -324.88 -0.63 -0.8 14.2
Portugal PSI 20 7552.34 34.22 0.46 15.1 19.9
Russia RTSI 1172.91 29.47 2.58% -18.7 -19.2
PREVIOUS SESSION PERFORMANCE
Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk.
Spain IBEX35 10481.40 4.40 0.04 5.7 23.3
Sweden OMXStockholm 440.66 -1.13 -0.26% 4.0 16.8
Switzerland SMI 8395.77 -13.30 -0.16 2.4 5.2
Turkey BIST 100 75190.31 429.5 0.57 10.9 -16.2
U.K. FTSE 100 6798.56 -23.86 -0.35 0.7 4.2
ASIA-PACIFIC DJ Asia-Pacific TSM 1432.54 6.31 0.44 -1.1 -1.1
Australia SPX/ASX200 5481.40 19.20 0.35 2.4 6.6
China Shanghai Composite 2028.04 0.68 0.03 -4.2 -9.3
Hong Kong Hang Seng 21976.33 Closed -5.7 -4.1
India S&P BSE Sensex 22508.42 63.30 0.28 6.3 13.2
Japan Nikkei Stock Average 14457.51 Closed -11.3 5.6
Singapore Straits Times 3245.56 3.96 0.12 2.5 -4.1
South Korea Kospi 1959.44 Closed -2.6 -0.3
AMERICAS DJ Americas 472.25 -3.26 -0.69 1.4 14.1
Brazil Bovespa 53967.75 521.58 0.98 4.8 -2.6
Mexico IPC 41468.93 421.05 1.03 -2.9 -1.7
Note: Americas index data are as of 3:00p.m. ET. Sources: SIXFinancial Information; WSJ Market Data Group
Cross rates U.S.-dollar and euro foreign-exchange rates inglobal trading
USD GBP CHF SEK RUB NOK JPY ILS EUR DKK CDN AUD
Australia 1.0684 1.8136 1.2219 0.1642 0.0302 0.1805 0.0105 0.3098 1.4877 0.1993 0.9811 ...
Canada 1.0890 1.8486 1.2455 0.1673 0.0308 0.1840 0.0107 0.3157 1.5164 0.2032 ... 1.0193
Denmark 5.3602 9.0991 6.1306 0.8237 0.1515 0.9056 0.0528 1.5541 7.4640 ... 4.9223 5.0171
Euro 0.7181 1.2191 0.8214 0.1104 0.0203 0.1213 0.0071 0.2082 ... 0.1340 0.6595 0.6722
Israel 3.4491 5.8550 3.9449 0.5300 0.0975 0.5828 0.0340 ... 4.8029 0.6435 3.1673 3.2284
Japan 101.5629 172.4052 116.1604 15.6073 2.8709 17.1596 ... 29.4458 141.4240 18.9475 93.2646 95.0620
Norway 5.9187 10.0471 6.7694 0.9095 0.1673 ... 0.0583 1.7160 8.2417 1.1042 5.4351 5.5399
Russia 35.3763 60.0520 40.4608 5.4363 ... 5.9770 0.3483 10.2565 49.2607 6.5998 32.4858 33.1119
Sweden 6.5074 11.0465 7.4427 ... 0.1839 1.0995 0.0641 1.8867 9.0614 1.2140 5.9757 6.0909
Switzerland 0.8743 1.4842 ... 0.1344 0.0247 0.1477 0.0086 0.2535 1.2175 0.1631 0.8029 0.8184
U.K. 0.5891 ... 0.6738 0.0905 0.0167 0.0995 0.0058 0.1708 0.8203 0.1099 0.5410 0.5514
U.S. ... 1.6975 1.1437 0.1537 0.0283 0.1690 0.0098 0.2899 1.3925 0.1866 0.9183 0.9360
Source: ICAPPlc.
MSCI indexes
Developed and emerging-market regional and country indexes
fromMSCI as of May 06, 2014
Price-to- LOCAL-CURRENCY
Dividend earnings PERFORMANCE
yield ratio MSCI Index Last Daily YTD 52-wk.
2.50% 16 MSCI ACWI* 414.79 -0.02% 1.5% 12.3%
2.50 17 World(DevelopedMarkets) 1,689.77 -0.05 1.7 14.5
2.40 17 Worldex-EMU 205.54 -0.08 1.5 13.1
2.40 18 Worldex-UK 1,700.23 -0.05 1.6 14.5
3.10 16 EAFE 1,939.05 0.11 1.2 10.6
2.70 12 EmergingMarkets (EM) 1,001.01 0.24 -0.2 -3.7
3.20 17 EUROPE 115.01 -0.25 2.6 12.9
3.20 19 EMU 204.31 0.16 3.3 24.6
3.10 18 Europe ex-UK 123.69 -0.31 2.8 15.0
4.00 14 Europe Value 117.57 -0.19 3.6 16.6
2.40 21 Europe Growth 108.28 -0.31 1.6 9.3
2.30 18 Europe Small Cap 272.42 -0.30 4.5 26.2
3.60 6 EMEurope 245.77 -0.65 -10.5 -17.7
3.50 15 UK 2,011.04 0.00 0.9 5.7
3.30 17 Nordic Countries 207.03 -0.54 2.6 11.8
4.20 4 Russia 670.74 -0.72 -15.4 -8.2
3.00 17 SouthAfrica 1,186.69 -0.69 4.3 23.6
3.00 13 ACASIAPACIFICEX-JAPAN 474.52 0.21 1.4 -2.0
2.00 14 Japan 726.17 0.00 -9.8 0.9
3.50 9 China 57.90 -0.64 -8.3 -4.7
1.40 17 India 849.19 -0.18 3.9 11.5
1.10 10 Korea 568.84 0.00 -3.5 1.9
2.70 17 Taiwan 316.24 -0.12 4.5 8.3
1.90 19 USBROADMARKET 2,140.29 -0.16 1.6 18.6
1.50 31 USSmall Cap 3,198.36 0.18 -0.9 21.0
3.30 17 EMLATINAMERICA 3,317.86 -0.14 3.7 -12.1
*Twenty-four developed and 21 emerging markets Source: MSCI
S&PDowJones Indices
Price-to-
Dividend earnings PERFORMANCE(euros) PERFORMANCE(U.S.dollars)
yield* ratio* S&PDowJones Index Last Daily 52-wk. Last Daily 52-wk.
2.41%18.77 Global TSM 3279.51 -0.10% 11.5%
2.84 18.68 Global DOW 1702.27 -0.53% 7.1% 2519.01 -0.14 14.0
2.96 13.84 Global Titans 50 227.62 -0.72 3.9 236.88 -0.32 10.6
3.14 20.24 DevEurope TSM 3524.38 0.16 20.0
2.35 19.55 DevelopedMarkets TSM 3301.67 -0.15 13.4
2.97 13.70 S&PBMI EmgMarkets 255.72 0.47 -5.4
3.32 19.95 S&PEurope 350 1373.49 -0.30 11.3 1718.45 0.00 18.5
3.07 25.24 S&PEuro 1364.83 -0.56 16.1 1730.55 -0.27 23.5
3.70 23.54 Europe Dow 1408.02 -0.34 11.4 2083.47 0.05 18.6
3.72 9.16 BRIC50 369.67 0.30 -12.6 491.09 0.70 -6.9
1.92 20.02 U.S. TSM 19611.83 -0.59 15.7
Kuwait Titans 30 -c 214.68 -0.60 4.4
Price-to-
Dividend earnings PERFORMANCE(euros) PERFORMANCE(U.S.dollars)
yield* ratio* S&PDowJones Index Last Daily 52-wk. Last Daily 52-wk.
TurkeyTitans 20 -c 773.54 0.66% -15.2%
5.14%17.46 Global Select Div 265.37 0.11 13.9
5.50 16.16 Asia/Pacific Select Div 297.10 0.24% -10.4% 354.26 0.63 -4.6
U.S. Select Dividend -d 1299.72 -0.33 16.5
3.14 23.66 S&PGlbNat Resources 2020.85 -0.12 -2.6 2797.67 0.28 3.7
2.09 19.67 Islamic Market 2801.63 -0.16 13.3
2.41 17.14 Islamic Market 100 3076.61 -0.25 14.1
Islamic Turkey -c 4337.58 -0.03 -7.0
3.18 22.68 Sustainability Europe 111.43 -0.32 11.2 170.66 0.07 18.4
3.59 27.72 S&PGlbInfrastructure 1562.12 -0.05 3.8 2458.57 0.34 10.6
2.02 17.02 Luxury 2054.44 -0.46 12.1
DJ-UBSCommodity-p 121.52 0.39 3.8 137.36 0.39 4.0
*Fundamentals are based on data in U.S. dollar. Footnotes: a-in USdollar. b-dividends reinvested. c-in local currency. Note:All data as of 2 p.m.ET. Source: S&PDowJones Indices
GLOBAL MARKETS LINEUP
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Commodities Prices of futures contracts withthe most openinterest
EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.MDEX: Bursa Malaysia
Derivatives Berhad; LIFFE: London International Financial Futures Exchange; COMEX: Commodity Exchange; LME: London Metals Exchange;
NYMEX: NewYork Mercantile Exchange;ICE-EU: ICE Futures Europe. *Data as 5/2/2014.
ONE-DAY CHANGE Year Year
Commodity Exchange Last price Net Percentage high low
Corn (cents/bu.) CBOT 517.75 9.75 1.92% 524.50 421.75
Soybeans (cents/bu.) CBOT 1459.25 -4.00 -0.27% 1,520.50 1,234.00
Wheat (cents/bu.) CBOT 738.75 9.75 1.34 744.00 557.25
Live cattle (cents/lb.) CME 138.200 0.675 0.49 139.950 129.225
Cocoa ($/ton) ICE-US 2,918 -9 -0.31 3,047 2,643
Coffee (cents/lb.) ICE-US 202.50 -2.75 -1.34 219.00 114.65
Sugar (cents/lb.) ICE-US 17.19 -0.28 -1.60 18.57 15.24
Cotton (cents/lb.) ICE-US 94.00 -0.75 -0.79 96.76 82.39
Rapeseed (euro/ton) LIFFE 356.00 -1.00 -0.28 386 343
Cocoa (pounds/ton) LIFFE 1,812 -10 -0.55 1,898 1,670
Robusta coffee ($/ton) LIFFE 2,146 -8 -0.37 2,216 1,565
Copper ($/lb.) COMEX 3.0520 -0.0015 -0.05 3.3970 2.8720
Gold ($/troy oz.) COMEX 1307.90 -1.40 -0.11 1,392.20 1,206.00
Silver ($/troy oz.) COMEX 19.580 0.009 0.05 22.220 18.685
Aluminum($/ton)* LME 1,777.50 -3.50 -0.20 1,886.00 1,686.50
Tin ($/ton)* LME 22,900.00 -150.00 -0.65 23,770.00 21,410.00
Copper ($/ton)* LME 6,666.00 24.00 0.36 7,422.00 6,430.00
Lead ($/ton)* LME 2,082.00 -13.00 -0.62 2,242.00 2,033.00
Zinc ($/ton)* LME 2,012.50 -16.50 -0.81 2,132.50 1,948.00
Nickel ($/ton)* LME 18,230 160 0.89 18,585 13,425
Crude oil ($/bbl.) NYMEX 99.65 0.17 0.17 104.10 90.89
Heating oil ($/gal.) NYMEX 2.8897 -0.0167 -0.57 3.0480 2.8434
RBOBgasoline ($/gal.) NYMEX 2.8861 -0.0231 -0.79 3.0610 2.7629
Natural gas ($/mmBtu) NYMEX 4.817 0.102 2.16 4.9160 3.9100
Brent crude ($/bbl.) ICE-EU 106.57 -0.55 -0.51 110.91 103.60
Gas oil ($/ton) ICE-EU 894.50 -1.25 -0.14 936.50 873.75
Sources: SIX Financial Information; WSJ Market Data Group
Currencies Londonclose onMay 6
Per In
AMERICAS Per euro In euros U.S. dollar U.S. dollars
Argentina peso-a 11.1419 0.0898 8.0015 0.1250
Brazil real 3.1034 0.3222 2.2287 0.4487
Canada dollar 1.5164 0.6595 1.0890 0.9183
Chile peso 785.35 0.001273 564.00 0.001773
Colombia peso 2670.76 0.0003744 1918.00 0.0005214
Ecuador US dollar-f 1.3925 0.7181 1 1
Mexico peso-a 18.1072 0.0552 13.0036 0.0769
Peru sol 3.9010 0.2563 2.8015 0.3570
Uruguay peso-e 32.023 0.0312 22.997 0.0435
U.S. dollar 1.3925 0.7181 1 1
Venezuela bolivar 8.84 0.113094 6.35 0.157480
ASIA-PACIFIC
Australia dollar 1.4877 0.6722 1.0684 0.9360
1-mo. forward 1.4911 0.6707 1.0708 0.9339
3-mos. forward 1.4971 0.6680 1.0751 0.9301
6-mos. forward 1.5068 0.6637 1.0821 0.9241
China yuan 8.6712 0.1153 6.2272 0.1606
Hong Kong dollar 10.7945 0.0926 7.7520 0.1290
India rupee 83.4163 0.0120 59.9050 0.0167
Indonesia rupiah 16045 0.0000623 11523 0.0000868
Japan yen 141.42 0.007071 101.56 0.009846
1-mo. forward 141.40 0.007072 101.54 0.009848
3-mos. forward 141.34 0.007075 101.50 0.009852
6-mos. forward 141.26 0.007079 101.44 0.009858
Malaysia ringgit-c 4.5321 0.2206 3.2547 0.3072
NewZealand dollar 1.5885 0.6295 1.1408 0.8766
Pakistan rupee 137.584 0.0073 98.805 0.0101
Philippines peso 61.555 0.0162 44.206 0.0226
Singapore dollar 1.7369 0.5758 1.2473 0.8017
South Korea won 1434.66 0.0006970 1030.30 0.0009706
Taiwan dollar 41.882 0.02388 30.078 0.03325
Thailand baht 45.052 0.02220 32.354 0.03091
Per In
EUROPE Per euro In euros U.S. dollar U.S. dollars
Euro zone euro 1 1 0.7181 1.3925
1-mo. forward 1.0001 0.9999 0.7182 1.3923
3-mos. forward 1.0002 0.9998 0.7183 1.3922
6-mos. forward 1.0003 0.9997 0.7184 1.3920
Czech Rep. koruna-b 27.426 0.0365 19.696 0.0508
Denmark krone 7.4640 0.1340 5.3602 0.1866
Hungary forint 306.82 0.003259 220.34 0.004538
Norway krone 8.2417 0.1213 5.9187 0.1690
Poland zloty 4.1969 0.2383 3.0140 0.3318
Russia ruble-d 49.261 0.02030 35.376 0.02827
Sweden krona 9.0614 0.1104 6.5074 0.1537
Switzerland franc 1.2175 0.8214 0.8743 1.1437
1-mo. forward 1.2172 0.8216 0.8741 1.1440
3-mos. forward 1.2166 0.8220 0.8737 1.1446
6-mos. forward 1.2155 0.8227 0.8729 1.1456
Turkey lira 2.9116 0.3435 2.0909 0.4783
U.K. pound 0.8203 1.2191 0.5891 1.6975
1-mo. forward 0.8205 1.2188 0.5892 1.6971
3-mos. forward 0.8209 1.2182 0.5895 1.6963
6-mos. forward 0.8216 1.2172 0.5900 1.6949
MIDDLE EAST/AFRICA
Bahrain dinar 0.5249 1.9051 0.3770 2.6528
Egypt pound-a 9.7732 0.1023 7.0186 0.1425
Israel shekel 4.8029 0.2082 3.4491 0.2899
Jordan dinar 0.9859 1.0143 0.7081 1.4123
Kuwait dinar 0.3908 2.5591 0.2806 3.5635
Lebanon pound 2108.14 0.0004744 1513.95 0.0006605
Saudi Arabia riyal 5.2226 0.1915 3.7506 0.2666
South Africa rand 14.6243 0.0684 10.5024 0.0952
United Arab dirham 5.1146 0.1955 3.6731 0.2723
a-floating rate b-financial c-government rate c-commercial
rate d-Russian Central Bank rate.
Source: ICAPPlc.
THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 7
U.S. NEWS
Trade Deficit Narrows
As Demand Increases
The U.S. trade gap narrowed in
March as both exports and imports
rose, a sign of strengthening de-
mand at home and overseas that
should bolster the economy.
But the Commerce Department
had assumed a larger narrowing in
the trade deficit when it estimated
last week that U.S. economic output
barely expanded in the first three
months of 2014.
As a result, economists on Tues-
day predicted a revised government
estimate later this month would
show the nations gross domestic
product contracted for the first time
since the first quarter of 2011, in-
stead of growing at a seasonally ad-
justed annual rate of 0.1%.
J.P. Morgan Chase economists
now estimate GDP contracted at a
0.8% pace in the first three months
of 2014.
Macroeconomic Advisers pegged
the decline at 0.6%. Even some of
the more optimistic estimates point
to slight output shrinkage in the
first quarter. Barclays Capital econo-
mists see a 0.2% decline, and BNP
Paribas put the GDP drop at a 0.1%
pace.
Exports were weak at the start
of the quarter and simply didnt re-
cover enough by the end of the
quarter, Capital Economics econo-
mist Paul Ashworth said.
Still, exports rebounded in March
after severe weather disrupted
transportation networks this winter.
Rising imports point to stronger do-
mestic demand, even though they
subtract from the GDP calculation.
The improvement came despite
sluggish or slowing growth in parts
of the world, a sign of resilience in
the global economy.
Its not very good for the first
quarter [GDP estimate], but it does
imply, as does a load of other data,
that the second quarters going to be
much, much better, Mr. Ashworth
said.
In March, U.S. exports rose a sea-
sonally adjusted 2.1% from February
to $193.91 billion, while U.S. imports
rose 1.1% to $234.29 billion, the
Commerce Department said Tues-
day.
The trade deficit shrank 3.6% to
$40.38 billion.
Exports in March were up 5%
from a year earlier, and imports
were up 5.9%.
The U.S. exported more capital
goods and industrial supplies in
March, and imported more con-
sumer goods and food. Exports of
services rose to $58.81 billion, the
highest level on record, and total ex-
ports rose at their fastest monthly
pace since last June.
U.S. petroleum exports rose, and
petroleum imports fell to their low-
est level since December.
Not including petroleum, exports
and imports both hit record highs in
March.
U.S. food exports were almost
flat in March, but dairy and egg ex-
ports rose 20% from the prior
month.
California Dairies Inc., the na-
tions second-largest dairy process-
ing cooperative, sends about 15% of
its production overseas, mostly but-
ter and powdered milk sold to Asia
and the Middle East.
The co-ops exports are up a bit
this year after very significant
growth in 2013, but growth is ta-
pering because of high prices for
U.S. milk, said Chief Executive An-
drei Mikhalevsky.
I would expect there to be very
little growth year on year, just based
on where market conditions and
prices are right now, Mr. Mikha-
levsky said, though demand contin-
ues to be strong all around the
world.
U.S. exports to Canada in March
rose 17% to their highest level on re-
cord, while imports to the U.S. were
up 15.8%, not adjusted seasonally.
Exports to China rose 9.6%, while
Chinese imports to the U.S. were up
1.6%.
U.S. exports to the European
Union rose 17.2%, and imports from
the EU rose 20.1%.
U.S. trade with Russia wasnt de-
railed by growing geopolitical ten-
sions over Ukraine.
Exports to Russia grew 9%, and
imports to the U.S. rose 36%, though
month-to-month figures can be vola-
tile.
A surge in exports helped boost
the U.S. economy in the second half
of 2013.
But after narrowing to $35.17 bil-
lion in November, the trade gap be-
gan to widen in December. It
reached $41.87 billion in February,
its widest level since last September,
before shrinking in March.
The Commerce Department last
week estimated that exports fell at a
7.6% seasonally adjusted annual rate
in the first three months of the year,
and net exports subtracted 0.83 per-
centage point from GDP for the
quarter.
But most economists expect the
U.S. economy will regain momentum
in the second quarter following its
weak winter stretch.
Consumer spending and retail
sales rose in February and March, as
did factory production.
Nonfarm employers added
288,000 jobs in April, according to
the Labor Department.
The Federal Reserve said last
week that growth in economic ac-
tivity has picked up recently, after
having slowed sharply during the
winter in part because of adverse
weather conditions.
Global demand for exported U.S.
ethanol has been strong this year
even as harsh winter weather dis-
rupted production of the corn-based
biofuel, driving up prices, according
to Archer Daniels Midland Co.
We worked every logistical an-
gle and ran our plant hard, deliver-
ing large volumes amid record in-
dustry margins, company President
Juan Luciano told analysts last
week.
Eric Morath contributed
to this article.
BY BEN LEUBSDORF
Tubes of steel stacked at the Port of Tampa in Florida. U.S. exports and imports both rose in March.
B
l
o
o
m
b
e
r
g
N
e
w
s
Climate Change Hits
Economy, Report Says
the report said.
The report will almost certainly
generate pushback from conserva-
tives, with some saying that pro-
posed mitigation measures cost
business too much and will hurt the
nations economic recovery, and oth-
ers saying it exaggerates the prob-
lem altogether.
The Heartland Institute, a con-
servative think tank, said in a state-
ment on its website Sunday that the
report consistently reaches overly
pessimistic conclusions. Its senior
environmental expert, James Taylor,
said in an interview Tuesday morn-
ing, Keep in mind that this is a re-
port produced for and with the
Obama White House.
The report highlights problems
even at the community level. Super-
storm Sandy, which destroyed much
of New Jerseys northern beaches in
2012, and the heat wave in the Mid-
west the same year, are among ex-
amples the administration will use
this week to try to raise concerns
among average Americans about cli-
mate change.
The report also emphasizes ad-
aptationthe notion that society
needs to find ways to prepare for
and adjust to some of the changes.
Every American will find things
that matter to them in this report,
said one of the lead authors, Donald
Wuebbles, a professor of atmo-
spheric science at the University of
Illinois.
The latest climate assessment,
released in 2009, said generally that
climate change is affecting the coun-
try. The new report, Mr. Wuebbles
said, shows how further shifts in
each area could hurt sectors of the
economy such as transportation or
force local populations to move.
The White House campaign to
publicize the report will include
eight television meteorologists.
Americans feel comfortable with
local weather reporters, who can
Continued from first page discuss climate-change warnings
without being politicized, said an
administration official. The presi-
dent will do one-on-one interviews
Tuesday with NBCs Today show
co-anchor Al Roker and Ginger Zee
of ABCs Good Morning America,
said the official.
Several authors said the strong
warnings in the assessment werent
presented to scare people, but to
convey the importance of prepara-
tion and mitigation in, for example,
U.S. ports.
Those concerned about climate
changes applauded the assessment.
The authors show the urgency of
climate change issues in major cities
and small towns across the country,
said Daniel J. Weiss, senior fellow at
the liberal-leaning Center for Ameri-
can Progress. He said the report is
too specific about effects such as
droughts, eroding shore lines and
flooding to be ignored.
The national climate assessment
was mandated by Congress in 1990
as a quadrennial review. Environ-
mental issues havent been among
recent administrations hottest is-
sues. There have only been two
other reports, in 2000 and in 2009.
It doesnt offer specific remedies be-
cause of its limited scope but does
suggest a need for urgency.
The report bolsters tough air and
water pollution limits promoted by
Mr. Obama, administration officials
said. Its release could help buffer
backlash from new regulations re-
stricting carbon emissions from ex-
isting coal-fired power plants,
scheduled to be unveiled at the be-
ginning of June.
Jerry Melilloa scientist at the
Marine Biological Laboratory and
chairman of the advisory commit-
teepointed to a wide range of im-
pacts that are already emerging in
different regions of the nation, in-
cluding: rising sea levels, droughts,
prolonged periods of high tempera-
tures and more episodes of heavy
and sustained precipitation.
Miami, Norfolk, Va., and Ports-
mouth, N.H., were among the most
vulnerable areas to flooding if the
sea level rises, the scientists said.
In terms of the most concerning cli-
mate change-related impacts, near
or at top of the list, said Dr. Melillo,
is sea-level rise along the vast
coastlines of the U.S.
Colleen McCain Nelson
contributed to this article.
Source: U.S. National Climate Assessment The Wall Street Journal
*In constant 2013 dollars
Disaster Hot Spots
Number of billion-dollar* weather-related disasters from 1980 to 2013
Texas
Calif.
Mont.
Ariz.
Nev.
Idaho
Colo.
N.M.
Utah
Ore.
Wyo.
Ill.
Kan.
Iowa
Neb.
S.D.
Fla.
Puerto Rico
Minn.
Okla.
N.D.
Wis.
Ala. Ga.
Mo.
Ark.
La.
N.Y.
Pa.
Ind.
Tenn.
N.C.
Ky.
Mich.
Va.
Miss.
Ohio
S.C.
Maine
W.Va.
Vt.
N.J.
N.H.
Mass.
Conn.
Md.
Del.
R.I.
Alaska
Hawaii
Wash.
1-8 9-16 17-25 26-35 36-44 45-54
President Obama is set to
promote the federal
advisory panels findings
in a series of events
scheduled this week.
22 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
Emerging Markets Long/Short Equity
These funds primarily take long/short positions in emerging market equities. At least
60% of assets are invested in emerging market equities. Ranked on % total return
(dividends reinvested) inEuros for one year ending May 06, 2014
Leading 10Performers
FUND FUND LEGAL %Return in $US **
RATING* NAME FUNDMGM'T CO. CURR. BASE YTD 1-YR 2-YR 5-YR
1 Harmony DMCapital Limited USDCYM 43.90 65.33 57.27 NS
Feeder Fund
3 EFGHermes EFG-Hermes Fin USDBMU 15.80 40.31 27.01 9.19
MEDA Mgmt(Egypt)Ltd
NS EFGHermes EFG-Hermes Fin USDBMU 14.74 37.36 18.11 0.20
Egypt Mgmt(Egypt)Ltd
1 Northwest Northwest USDCYM -8.77 32.48 58.30 51.15
Warrant Fund Ltd USD Investment Management Ltd
2 Violet AppleTree Capital USDCYM 9.43 28.06 9.74 NS
Emerging Markets ltd.
4 Voltan Voltan Capital USDBMU 7.63 22.88 15.54 NS
Frontier Markets (Offshore), Ltd Management
4 Voltan Voltan Capital USDUSA 7.63 22.88 15.54 NS
Frontier Markets Fund(Onshore)LP Management
5 LBNChina+ LBNAdvisers Ltd USDCYM 1.08 22.75 19.93 20.41
Opportunity Fund
3 GLS Global GLS Capital USDUSA 2.93 21.92 4.54 1.01
Opportunities LP Management, LLC
4 AP Asia Ajia Partners USDCYM -3.79 21.85 13.92 16.33
Absolute Return Fund Class A Asset Management Inc.
NOTE: Changes in currency rates will affect performance and rankings. Source: Morningstar, Ltd
KEY: ** 2YRand 5YRperformance is annualized 1 Olivers Yard, 55-71 City Road
NA-not available due to incomplete data; London EC1Y 1HQUnited Kingdom
NS-fund not in existence for entire period www.morningstar.co.uk; Email: mediaservice@morningstar.com
Phone: +44 (0)203 107 0038; Fax: +44 (0)203 107 0001
MARKETS
Fund Scorecard
Euros Surge Adds
To Deflation Worry
Stocks in Europe slipped Tues-
day as the euro surged to its highest
level against the dollar in seven
weeks, adding to concerns about
low inflation.
The inflation-sapping strength in
the euro adds extra complexity to
the European Central Banks policy
meeting this week as the central
bank has previously
noted that the euros as-
cent weighs on prices.
The euro resilience
seems driven by market expecta-
tions of no action by the ECB on
Thursday as well as persistent spec-
ulations of central bank reserve di-
versification into euros, said ana-
lysts at Citigroup.
Stocks fell despite forecast-beat-
ing services-sector data from Italy
and Spain, as investors worried the
lofty euro could help tip the cur-
rency bloc into deflation. Tensions
in Ukraine and more downbeat earn-
ings reports also weighed on equi-
ties.
The Stoxx Europe 600 index de-
clined 0.3% to 336.04, while the
U.Ks FTSE 100 fell 0.4% to 6798.56,
Germanys DAX lost 0.7% to 9467.53
and Frances CAC-40 fell 0.8% to
4428.07.
Sterling hit a more than 4-year
high amid speculation that the Bank
of England could raise interest rates
sooner than expected.
The dollar also fell to a fresh
three-week low against the yen, and
a seven-week low against the Swiss
franc. Analysts observed that many
investors are giving up on the posi-
tive bets on the greenback that were
popular at the start of the year.
The dollar had been expected to
climb in response to signs of resur-
gence in the U.S. economy, but a
mixed bag of data, with weak
growth alongside bright spots in
measures of employment, has left
the currency under pressure.
The euro was trading at $1.3930
late afternoon Tuesday in New York,
up from $1.3875 late Monday, while
the pound was at $1.6982 from
$1.6867. The dollar was buying
101.60 from 102.14 and 0.8740
Swiss franc from 0.8778 franc.
Activity in Spains services sec-
tor grew at the strongest pace since
before the global debt crisis in
April, with the purchasing managers
index rising to 56.5 from 54.0 in
March.
The Italian PMI came in at 51.1,
up from 49.5 in March. For the euro
area as a whole, the composite PMI,
which combines services and manu-
facturing, delivered a reading of 54,
meeting expectations. Meanwhile,
the U.K. services PMI reading also
beat forecasts to hit 58.7, from a
March figure of 57.6.
U.S. stocks also fell, with de-
clines concentrated in smaller high-
growth and consumer Internet
stocks.
The Dow Jones Industrial Aver-
age fell 129.53 points, or 0.8%, to
16401.02, its third loss in four ses-
sions, and left it 1% below the all-
time high of 16580.84 on April 30.
The S&P 500 index lost 16.94
points, or 0.9%, to 1867.72 and the
Nasdaq Composite Index gave up
57.30 points, or 1.4%, to 4080.76.
The Russell 2000 index of small-
capitalization stocks was down 1.3%
in late trade, underscoring the re-
cent relative weakness in higher-
growth stocks.
The yield on the benchmark 10-
year U.S. Treasury note fell 0.016
percentage point to 2.595%.
Among European stocks, Bar-
clays shares dropped 5.2% after a
worse-than-expected fall in fixed-in-
come trading cut the U.K lenders
profit at its investment bank in half.
Aberdeen Asset Management
slid 2.4% after it reported a 12% de-
cline in pretax profit for the first
half, saying investors wariness of
emerging markets reduced the flow
of new business.
In commodities markets, gold fell
70 cents to $1,308.30 a troy ounce
on the Comex division of the New
York Mercantile Exchange. Crude oil
on Nymex rose two cents to $99.50
a barrel.
BY JOSIE COX
AND TOMMY STUBBINGTON
MARKET
REPORT
Some EU Nations Vow
To Tax Trades by 2016
BRUSSELSA group of Euro-
pean Union countries led by France
and Germany pledged Tuesday to
start taxing the trading of shares
and some derivatives by 2016, amid
opposition by countries that are
worried about the taxs economic
impact and its legal grounding.
The group supporting the finan-
cial-transactions tax presented its
latest political agreement at a meet-
ing of finance ministers, saying the
tax should be implemented step by
step. It would start with a levy on
shares and some derivativeswhich
havent yet been specifiedby Janu-
ary 2016. Later, the tax could be ex-
panded to trading of other financial
products.
A final proposal on the first step
of the tax, including what deriva-
tives would be covered, will be
agreed on by the end of the year,
the statement said.
The group of 11 countries is
working from an earlier proposal by
the European Commission, the EUs
executive body. Under that proposal,
which is opposed by some EU coun-
tries, a 0.1% tax would apply to
share and bond trades, and 0.01% to
derivative transactions between fi-
nancial institutions, if at least one
party is located in the EU.
Countries that already have a tax
on financial transactions that ex-
tends to products not covered under
the first step of the proposed new
levy would be able to maintain their
current taxes, in addition to the
new, harmonized levies.
The proposal is ambitious, said
French Finance Minister Michel
Sapin. Previously there were de-
bates without end. Now the deadline
is the end of this year.
German Finance Minister Wolf-
gang Schuble said, Some still have
problems with [taxing] share deriv-
atives, but just taxing shares also
doesnt make sense.
The statement was signed by 10
of the 11 countries participating in a
special EU coordination procedure,
known as enhanced cooperation,
to launch the financial-transactions
tax. An 11th member, Slovenia,
didnt sign the political statement,
following the resignation of its
prime minister and likely early elec-
tions.
Countries that opted not to par-
ticipate in the enhanced coopera-
tion, including the U.K., Denmark
and Sweden, said the tax could have
a negative impact on economic
growth and capital markets. They
questioned the legal basis for the
enhanced-cooperation agreement if
the levys effect extends beyond the
territory of the countries enforcing
it.
This is not a tax on bankers, it
is a tax on jobs, investments, pen-
sioners, said U.K. Chancellor of the
Exchequer George Osborne, who
also voiced concerns about the lack
of detail in the statement and its
potential impact on countries that
opted out.
Theres absolutely nothing on
which derivatives would be included
and absolutely nothing on the po-
tential extraterritorial impact, he
said.
The lack of detail was partly a
result of the inability of the coun-
tries that wish to go forward with
the tax to agree on the details.
The final outcome is a minimum
common denominator in terms of
the positions of the countries, said
Spanish Finance Minister Luis de
Guindos.
Tom Fairless
and Gabriele Steinhauser
contributed to this article.
BY VIKTORIA DENDRINOU
German Finance Minister Wolfgang Schuble and Frances Michel Sapin, shown April 7, support taxing share trades.
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SPORTS CLOTHING
Adidas Profit Takes a Hit
Adidas AGs first-quarter net profit
plunged due to weakness at its golf
division and unfavorable currency
effects that will continue to weigh on
full-year results.
Net profit fell 34% to 204 million
($283.2 million), while sales fell 6% to
3.53 billion. Adidas attributed the
decline in sales to continued weakness
in emerging market currencies, a
double-digit sales decrease at
TaylorMade-Adidas Golf, and weakness
in North America.
Strong performances particularly in
the emerging markets and in our own
retail were masked by strategic
changes to how we go to market at
TaylorMade-Adidas Golf as well as
adverse currency effects, Chief
Executive Officer Herbert Hainer said.
Analysts had anticipated a weak
quarter from Adidas because of a
different phasing of World Cup-related
shipments compared with previous
years.
Neetha Mahadevan
AUTOMOTIVE PARTS
Michelin to Close Tire Plant
Tire maker Compagnie Gnrale
des Etablissements Michelin SA said
on Tuesday that it will close its truck
tire plant in Budapest, Hungary, due to
its lack of competitiveness while the
European truck tire market remains
depressed.
The closing is in response to the
adverse trends and aggressive
competition in the European truck tire
market, which remains volatile and
23% down on its historic peak in
2007, the group said.
One the worlds biggest tire makers,
Michelin has been faced with
weakness in some of its core
automobile markets over the past few
years. It has restructured part of its
businesses as it seeks to grab its
share of the pickup in demand that is
expected to begin this year.
The group booked a provision of
39 million ($54.3 million) in its first-
half accounts for the closing of the
plant.
Graldine Amiel
TECHNOLOGY
Tesco to Launch Smartphone
Tesco PLC plans to roll out an own-
brand smartphone using Google Inc.s
Android software, pitching for the
budget end of the market following
the success of its own tablet
computer.
The U.K. retailer will launch the
deviceto be known as the Hudl
Phoneby the end of this year,
according to a spokesman for the
company, who said he believed Tesco
was the first retailer to offer its own
smartphone.
Tesco didnt give any details on
pricing, but the new smartphone will
likely fill a similar position to the Hudl
tablet, which was launched last year
at 119 ($201), toward the bottom of
the market.
Peter Evans
BUSINESS BRIEFS
Online
>>
For more breaking news, go to
WSJ.com/Business and follow
@wsjbusiness on Twitter.
8 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
Colleges Dont Buy Happiness
A word to high-school seniors re-
jected by their first choice: A degree
from that shiny, elite college on the
hill may not matter nearly as much
as you think.
A new Gallup survey of 30,000
college graduates of all ages in all
50 states has found that highly se-
lective schools dont produce better
workers or happier people, but in-
spiring professorsno matter where
they teachjust might.
The poll, undertaken this spring,
is part of a growing effort to mea-
sure how well colleges do their jobs.
This survey adds an interesting
twist, because it looked not only at
graduates after college; it tried to
determine what happens during col-
lege that leads to well-being and
workplace engagement later in life.
The poll didnt measure gradu-
ates earnings. Rather, it was rooted
in 30 years of Gallup research that
shows that people who feel happy
and engaged in their jobs are the
most productive. That relatively
small group at the top didnt dispro-
portionately attend the prestigious
schools that Americans have long
believed provided a golden ticket to
success. Instead, they forged mean-
ingful connections with professors
or mentors, and made significant in-
vestments in long-term academic
projects and extracurricular activi-
ties.
It matters very little where you
go; its how you do it that counts,
said Brandon Busteed, executive di-
rector of Gallup Education. Having
a teacher who believes in a student
makes a lifetime of difference.
The poll is the brainchild of for-
mer Indiana Republican Gov. Mitch
Daniels, who became president of
Purdue University in January 2013.
As he prepared for the job, Mr. Dan-
iels said he kept bumping into the
same problem: a lack of bench-
marked data to measure the value of
a college degree. Last spring, during
a trip to Gallups D.C. offices, he
seized on the idea of applying their
engagement and well-being ques-
tions, which had been used in other
contexts, to college graduates. The
index will soon be broken down to
the level of individual schools for
those that have the will, and frankly,
the nerve, Mr. Daniels said.
There is a lot we dont know
about higher education, and there is
a sense its skating on its reputa-
tion, Mr. Daniels said. We needed
to know with more rigor how well
the experience is serving people.
The poll found that just 39% of
college graduates feel engaged at
workmeaning, for instance, that
they enjoyed what they did on a
daily basis and are emotionally and
intellectually connected to their
jobs. And only 11% reported they
were thriving in five different as-
pects of their lives, among which
are financial stability, a strong so-
cial network and a sense of purpose.
That relatively small handful of
graduateswho tend to be more
productivewent to a variety of
colleges, though they were slightly
more likely to go to larger schools
and less likely to have attended for-
profits.
The strongest correlation for
well-being emerged from a series of
questions delving into whether
graduates felt emotionally sup-
ported at school by a professor or
mentor. Those who did were three
times as likely to report they
thrived as adults. Graduates who re-
ported having experiential and
deep learning were twice as likely
to be engaged at work as those who
didnt.
University of Pennsylvania Pro-
fessor Martin Seligman, who has
studied the psychology of happi-
ness, said it was impossible to know
whether the college experiences Gal-
lup asked about were the cause of
later success or simply coincidental
to it.
One hopeful possibility is that if
college were changed to produce
more emotional support, this would
result in much more engagement
later in life, he wrote in an email.
Another, less interesting possibil-
ity is that people engaged at work
who said they were emotionally
supported in college are simply up-
beat to begin with, and that rosy
outlook colors their memories.
Other, less fuzzy correlations
were between debt and entrepre-
neurship. About 26% of graduates
with no undergraduate debt started
their own business, compared with
just 20% of those carrying debt
from $20,000 to $40,000. Nearly
three-quarters of U.S. college gradu-
ates leave school with debt; among
those who do, the average is nearly
$30,000. Graduates with that
amount of debt were one-third as
likely to report they were thriving
as graduates without debt reported.
The surveys most dramatic take-
awaythat graduation from an elite
college provides no discernible ad-
vantage over Podunk Uechoes a
refrain that began getting traction
about a decade ago. Stacy Dale, an
economist at Mathematica, a New
Jersey research firm, co-wrote a pa-
per in 2004 that found that stu-
dents who were accepted to elite
schools, but attended less selective
schools, went on to earn just as
much money as their elite counter-
parts.
Individual traits matter more
than where you went, Ms. Dale
said. Its a lot more important what
you learn later in life than where
you got your undergraduate de-
gree.
BY DOUGLAS BELKIN
Concordia University undergraduate-degree candidates get pumped up as the 2014 graduation ceremony begins in Irvine, Calif., on Saturday.
Z
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U.S. NEWS
U.S. Seeks
Wider Pool
Of Skilled
Employees
Spouses of H-1B visa holders be-
ing sponsored for a green card by
their employers will be allowed to
work in the U.S. as part of a new
initiative by the Obama administra-
tion to attract high-skilled foreign
workers.
Deputy Secretary of Homeland
Security Alejandro Mayorkas and
Commerce Secretary Penny Pritzker
announced Tuesday that the admin-
istration plans this and other revi-
sions to regulations for the H-1B and
other skilled-worker visas.
Mr. Mayorkas said the goal was
twofold: to encourage highly
skilled, specially trained individuals
to remain in the United States and
to maintain competitiveness with
other countries that attract skilled
foreign workers and offer employ-
ment authorization for spouses.
Ms. Pritzker noted that many
U.S. businesses are launched by im-
migrants. She mentioned Andy
Grove, the former CEO of Intel Corp.
who was born in Hungary; Google
Inc. co-founder Sergey Brin, born in
Russia; and Jerry Yang, who co-
founded Yahoo and is from Taiwan.
The rules are expected to go into
effect after a 60-day public-com-
ment period.
Congress allows 85,000 new H-1B
visas to be issued each year, 20,000
of which are reserved for people
with advanced degrees. Under exist-
ing regulations, the Department of
Homeland Security doesnt extend
employment authorization to depen-
dents of H-1B visa holders, who nor-
mally have specialized skills in engi-
neering, programming and other
high-tech fields.
The decision stops short of giv-
ing spouses of all H-1B visa holders
blanket approval to work in the U.S.
Spouses would become eligible only
after the visa holders company has
petitioned for an immigrant visa for
the foreign employee, putting the
employee on track for legal perma-
nent residency. Lawful permanent
residents generally qualify to be-
come U.S. citizens after five years.
Allowing H-1B spouses to work
would be an important change.
Sometimes people arent willing to
come to the U.S. if their spouse
cant work, said Stephen Yale-
Loehr, a professor of immigration
law at Cornell Law School.
Another revision announced
Tuesday will ease requirements for
applicants of an EB-1 work visa, is-
sued to researchers and professors
with extraordinary ability. To qual-
ify, applicants currently must sub-
mit awards, scholarly articles and a
host of evidence to prove their out-
standing recognition in and contri-
bution to a particular field. The new
rule will allow applicants to present
comparable evidence that is accept-
able, the official said. The U.S. is-
sues 40,000 such visas each year.
BY MIRIAM JORDAN
Source: Gallup-Purdue Index Internet survey of 29,560 adults with a bachelors degree or higher, and 1,557 adults with an associates degree, conducted Feb. 4-March 7;
margin of error for bachelors degree or higher: 0.9-1.0 percentage points
Degrees of Satisfaction
A snapshot of the well-being of college graduates at work, by major, in various aspects of their lives and in relation to their school debt
Workplace engagement Percentage of graduates thriving in
at least one domain of well-being
College majors and engagement Share who are thriving by
undergraduate debt level
Actively
disengaged
Not
engaged
49%
Engaged
39%
12%
Purpose
Full-time
employment
Engagement
at work
Social
Physical
Community
Financial
$40,001+
$20,001
$40,000
$10,001
$20,000
$1
$10,000
No debt 14% thriving
11
7
4
2
Science
Business
Social
sciences
Arts and
humanities
63%
61
53
52
38%
37
41
41
54%
49
42
47
35
The Wall Street Journal
Under a newinitiative,
spouses of H-1B visa
holders being sponsored
for a green card will be
able to work in the U.S.
THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 21
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nARIXABSOLUTERETURNINVESTABLEINDEX
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NAV OT OT CYM 06/07.00 GBP25839.68 5.3 10.9 9.8
Data provided by:
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Cumulative share-price performance
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13 14 2012
nALEXANDRAINVESTMENTMANAGEMENT
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Trading AdvantEdge EUR OT OT GGY 03/31 EUR 115.72 -1.3 -11.8 -6.6
Trading AdvantEdge GBP OT OT GGY 03/31 GBP 123.43 -1.7 -12.0 -6.5
Differing Fortunes for UBS and Barclays
damental changes to its investment
bank in the light of the regulatory
changes coming into force and to
concentrate more on its wealth-
management business, said
Shailesh Raikundlia, banking analyst
at Espirito Santo Investment Bank.
With the benefit of hindsight thats
been shown to be the right decision,
especially as regulations have
turned out to be even more onerous
than expected.
At Barclays, Chief Executive Ant-
ony Jenkins is expected Thursday to
announce a major overhaulinclud-
ing deep cuts in the investment
bank and a withdrawal from retail
operations in continental Europe,
steps investors have long been agi-
tating for.
The contrast between Barclays
and UBS mirrors a divide across
much of the European banking sec-
tor. Banks such as BNP Paribas and
Socit Gnrale have gone some
way to rebuilding their capital bases
and coupling a leaner investment
bank with a strong domestic retail
franchise. Shares in both those
banks have outperformed the sector
in the past 12 months. In contrast,
Credit Suisse AG and Royal Bank of
Scotland Group PLC have made less
headway in shrinking their invest-
ment-banking operations. Shares in
both have underperformed their
peers over the past year.
On Tuesday, UBS said net profit
rose nearly 7% to about 1.1 billion
Swiss francs ($1.25 billion) in the
three months ended March 31, com-
pared with 988 million francs a year
earlier. Analysts had forecast a
profit of 838 million francs. Pretax
profit, after adjusting for some pro-
visions, rose 97% to 1.5 billion
francs.
Continued from first page
The bank, Switzerlands biggest,
also said it had made progress re-
vamping its structure to prevent
problems in one area from affecting
others.
Arun Melmane, an analyst at
Canaccord, said the strategy of op-
erating a reduced investment bank
and streamlining operations ap-
peared to be working. I got a sense
of consistency in their numbers,
Mr. Melmane said.
At Barclays, meanwhile, pretax
profit fell 5% to 1.69 billion ($2.86
billion) from 1.79 billion, after ad-
justing for some provisions and
fluctuations in the value of the
banks debt.
A 41% collapse in revenue from
the banks fixed-income, currencies
and commodities, or FICC, division
was particularly surprising, noted
analysts at Oriel Securities. The de-
cline in FICC, which was bigger than
analysts had expected, compared
with roughly 20% declines at rivals,
which have also seen clients pull
back from bond trading because of
persistently low and stable interest
rates.
The focus at Barclays now
switches to what Mr. Jenkins says
Thursday about his plan for the in-
vestment bank. Mr. Jenkins has had
an uneasy relationship with Bar-
clayss investment bank since taking
over the top spot in 2012 from for-
mer CEO Bob Diamond, the divi-
sions main architect. The new CEO
pledged to make Barclays simpler
and turn around what he said had
become an aggressive and self-serv-
ing culture in the unit. But he didnt
make any major changes to the
banks business model in his first
strategic review in February 2013.
Recent weeks have seen the de-
parture of a series of the invest-
ment-banking units senior execu-
tives and deal makersincluding
the banks top executives in the U.S.
and Asiaraising fears among ana-
lysts that clients could take their
business elsewhere if the exodus
continues. Mr. Jenkins has also been
under attack from investors for rais-
ing bonuses at the investment bank
last year despite a fall in revenue
and profit.
At Thursdays strategic update,
analysts expect Barclays to get out
of some types of bond trading and
retreat further from money-losing
retail-banking operations in Europe.
Finance Director Tushar
Morzaria told analysts that part of
the FICC decline reported Tuesday
was from repositioning the busi-
ness, including exiting most com-
modities trading. Mr. Morzaria de-
clined to say what other business
could be culled. Unwanted assets,
including some worth about 54 bil-
lion already marked as noncore,
could be moved into a so-called bad
bank, a person familiar with the
matter said.
Ahead of the strategic update,
Berenberg Bank analysts sounded a
note of caution. We would like to
see Barclays lay out a path to sepa-
rate the Investment Bank, they
wrote, but doubt whether manage-
ment will go as far.
nOTHERFUNDS
For information about these funds, please contact us on Tel: +44(0) 207 842 9694/9633
Medinvest Plc Dublin OT EQ IRL 09/30 USD NS.00 NS 1.3 -4.4
nWINTONCAPITAL MANAGEMENTLTD
Tel: +44(0)2076105350Fax: +44(0)2076105301
Winton Evolution EURCls H GL OT CYM 03/31 EUR 1176.64 0.0 4.9 3.6
Winton Evolution GBP Cls G GL OT CYM 03/31 GBP 1191.46 0.0 5.4 4.0
Winton Evolution USDCls F GL OT CYM 03/31 USD 1500.04 0.1 5.5 3.9
Winton Futures EURCls C GL OT VGB 03/31 EUR 251.18 -0.2 3.2 2.8
Winton Futures GBP Cls D GL OT VGB 03/31 GBP 273.59 -0.1 3.6 3.2
Winton Futures JPY Cls E GL OT VGB 03/31 JPY 17588.25 -0.1 3.7 3.0
Winton Futures USDCls B GL OT VGB 03/31 USD 896.78 -0.1 3.7 3.1
Barclays CEO Antony Jenkins is expected to announce a major overhaul.
B
l
o
o
m
b
e
r
g
N
e
w
s
The contrast between
Barclays and UBS
mirrors a divide across
much of the European
banking sector.
THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 9
Knife Attacks in China Fuel Fears
SHANGHAIAt least six people
were injured in a knife attack Tues-
day, in the third stabbing at a Chi-
nese train station since March and
the latest challenge to President Xi
Jinpings increasingly blunt anti-
crime rhetoric.
Police said before midday a single
man slashed people outside a down-
town railway station in the southern
Chinese city of Guangzhou. An armed
police officer fired at and wounded
the attacker, police said, helping au-
thorities capture the perpetrator
with help from others.
Initially, Chinas state-run Xinhua
news agency and media in Guang-
zhou had reported that the stabbing
was the work of more than one per-
son. Local media retracted early re-
ports that said a second assailant
had also been captured.
Chinas state media published dif-
ferent assessments of the injuries
suffered by the six victims, who po-
lice said were all local citizens. Au-
thorities said they couldnt immedi-
ately identify the assailant, and
provided no information about his
potential motivation.
Video and photos circulated Tues-
day in Chinas major media showed a
roped-off plaza in front of the
Guangzhou station with ambulance
workers attending to a person on the
ground. One photo showed a blood-
ied man being carried near a
McDonalds restaurant.
Another photo circulating on Chi-
nese social media showed a police
officer aiming his gun at a man in a
white hat and black track pants hold-
ing a long blade. The veracity of the
photo couldnt be confirmed.
Though the motivation behind the
attack isnt clear, the violence at one
of Chinas busiest railway stations is
likely to increase public worries that
ethnic strife may be spreading.
On April 30, two people identified
by authorities as religious extremists
killed themselves while setting off
explosives at a train station in
Chinas Xinjiang region.
The attack in Urumqi, the re-
gional capital, also killed a third per-
son and injured 79 people.
In March, assailants armed with
knives attacked a train station in the
southern city of Kunming, leaving
more than 30 dead. The government
later described the attackers as sepa-
ratists from Xinjiang, and foreign se-
curity analysts said the incident ap-
peared organized, targeted civilians
and took place far from Xinjiang
where violent unrest is more com-
mon. Later that month, five people
were killed in a knife attack at a
market in the south-central Chinese
city of Changsha, in what state me-
dia said started as a dispute between
two bakery employees.
In recent weeks, President Xi has
visited special police in Beijing and
military officers in Xinjiang with or-
ders to crush separatists and terror-
ists. He has called assailants rats
and pledged an iron fist by Chinas
street cops. Chinas government last
month said more police officers in
cities, including Guangzhou, will
carry handguns.
Foreign Ministry spokeswoman
Hua Chunying told reporters on
Tuesday that the Guangzhou stab-
bing remains under investigation.
What I want to stress is whoever
carried out this violent action and
for whatever reasons, they will be
brought to justice, because these are
criminal acts, she said.
Tougher policies are likely on the
way, according to Li Wei, an antiter-
rorism expert with the China Insti-
tutes of Contemporary International
Relations, who pointed to an antiter-
rorism law that has been considered
since 2005 and would aim to better
demarcate responsibilities among se-
curity forces.
Mr. Xi, who also heads Chinas
military, appeared to step up antiter-
rorist activity following an incident
in Beijing last October, which author-
ities called a terrorist attack.
In that incident, authorities said,
a married couple and the husbands
mother steered their jeep onto a
sidewalk toward Mao Zedongs por-
trait near Tiananmen Square and ig-
nited the vehicle, killing themselves
along with two other people and in-
juring around 40 tourists.
BY JAMES T. AREDDY
A man local media say is a suspect is taken away after Tuesdays knife attack.
R
e
u
t
e
r
s
Beijing Turns More Wary on Africa Deals
Chinese Premier Li Keqiang is
using an official visit to Africa this
week to pledge more loans and
trade deals to governments that
control the commodities and oil that
Beijing needs to fuel its economy.
But Mr. Lis pledges so fartrade
agreements with Ethiopia and an ex-
pansion of a credit line to African
nations to $30 billion from $20 bil-
lionbelie the fact that China is
taking a more-cautious approach to
the continent after a series of big
loans and investments in resource
deals over recent years have failed
to pan out.
Chinas foreign direct investment
into Africa is falling. Chinese com-
panies invested $2.5 billion in Africa
in 2012, the latest official available
figures, down from $3.2 billion in
2011 and lower than a peak of $5.5
billion in 2008, according to Chinas
Ministry of Commerce.
Beijing, meanwhile, is ramping
up investments in big oil-and-gas
and mining companies in the U.S.,
Australia and Canada. Developed na-
tions accounted for 15% of Chinese
foreign direct investment in 2012,
double the share a decade ago.
Chinas big push into Africa,
which began as its economy revved
up more than a decade ago, has led
to some successes. But it has also
caused problems. Some African offi-
cials have berated China for acting
like a colonial power. Deals have
foundered amid claims Chinese
companies breached safety and en-
vironmental standards.
Other projects have gotten
bogged down in the complexities of
doing business in Africa. In some
cases, China is trying to renegotiate
contractsmany involving loans to
build infrastructure in return for re-
sourcesthat no longer make sense
now that commodity prices have
fallen sharply from record levels.
Chinese were out there throw-
ing money at anyone who would
take it, and a lot of strange deci-
sions were made, said Derek Scis-
sors, a resident scholar at the Amer-
ican Enterprise Institute in
Washington. Now, he said, theyre
not as frantic.
Nigerian Finance Minister Ngozi
Okonjo-Iweala said her government
has received more than half of a $3
billion loan for infrastructure signed
last year, but the disbursements
meant for passenger rail and agri-
culture have been slow to arrive.
They are taking their time.
Africa clearly is still crucial to
Beijing. The continent supplies
about a fifth of Chinas oil needs,
second only to the Middle East, ac-
cording to data from BP PLC. Some
deals have worked well. Jinchuan
Group International Resources
Co.s net profit jumped more than
fourfold last year because of its
$1.36 billion purchase in 2011 of a
South African copper and cobalt
miner. China National Offshore Oil
Corp., or Cnooc, has investments in
oil fields in Nigeria.
Mr. Li, in a speech to the African
Union in Addis Ababa on Monday,
vowed that trade between China and
Africa would double to $400 billion
by 2020, while Chinas cumulative
investment in the region would qua-
druple to $100 billion. The premier
will travel to Nigeria on Wednesday
to attend a World Economic Forum
meeting, where he will speak on
Thursday, before visiting Angola,
one of Chinas largest suppliers of
crude oil, and Kenya.
A $3 billion Chinese loan to
Ghana, signed in 2011, exemplifies
some of the difficulties China is fac-
ing.
The loan from state-owned China
Development Bank was meant to fi-
nance infrastructure projects, in-
cluding building a pipeline to bring
gas to Ghana from an offshore proj-
ect. The loan was collateralized by
Ghanaian crude production.
But only $600 million of the loan
has so far been disbursed, Ghanaian
officials said. As the price of crude
oil has fallen, there have been dis-
agreements over collateral. China
has complained Ghanas government
hasnt adequately prepared its infra-
structure projects, local officials
said.
Ghanas president, John Dramani
Mahama, admits to some delays in
projects and believes China is being
more selective in its financing.
China itself is changing its pol-
icy, Mr. Mahama said in an inter-
view in Accra, the capital. They are
looking more at projects that have
the potential to repay over time.
By Wayne Arnold
in Hong Kong
and DrewHinshaw
in Accra, Ghana
Troubled Transactions | Top 10 China-Africa stalled, failed or canceled deals by value
Announcement
2006
2011
2007
2009
2012
2011
2011
2007
2008
2011
China Railway Construction
China Railway Construction
Sinopec
Ex-Im Bank
Sinomach
China Development Bank*
Sinohydro
Gezhouba
Sinoma
China State Construction Engineering
Nigeria
Libya
Angola
Democratic Republic of the Congo
Gabon
Ghana
Libya
Nigeria
Nigeria
Libya
Investor
Transport
Transport
Energy
Metals
Metals
Energy
Real estate
Energy
Real estate
Real estate
Invested country Sector
Railway
Railway
Oil
Steel
Gas
Construction
Hydro
Construction
Construction
Subsector Deal value, in billions of U.S. dollars
Source: The American Enterprise Institute, Derek M. Scissors
*Only $600 million of the $3 billion was paid out.
The Wall Street Journal
$7.5
4.2
3.4
3.0
3.0
3.0
1.8
1.4
1.4
1.3
WORLD NEWS
SEC Sues
For Alleged
China Stock
Scheme
U.S. regulators filed a civil law-
suit Monday against a Toronto con-
sultant and four other people for al-
legedly helping two Chinese
companies enter U.S. markets and
making millions of dollars in profit
by manipulating trading of the com-
panies shares.
The consultant, S. Paul Kelley of
Oakville, Ontario, and two of his as-
sociates agreed to settle the Securi-
ties and Exchange Commission law-
suit. The other two people havent
settled. Mr. Kelley agreed to pay
more than $6.2 million. He and the
two others who settled neither ad-
mitted nor denied wrongdoing.
Lawyers for Mr. Kelley and a sec-
ond defendant who settled, Robert
S. Agriogianis of Florham Park, N.J.,
declined to comment. Steve Feder, a
lawyer for another defendant,
George Tazbaz of Oakville, Ontario,
said Mr. Tazbaz denies any wrong-
doing, and he hopes to be fully vin-
dicated. Arthur Fillmore II, a lawyer
for defendant Shawn A. Becker of
Overland Park, Kan., said his client
got caught in a net that trapped
one too many fish. A lawyer for the
fifth defendant, Roger D. Lockhart of
Holiday Island, Ark., couldnt be
reached for comment. Mr. Lockhart
settled by agreeing to pay more than
$3.1 million.
The SEC alleged Mr. Kelley and
three associates arranged reverse
merger transactions that brought
China Auto Logistics Inc. and Guan-
wei Recycling Corp. into the U.S.,
and then orchestrated a plan to
drive up the companies stock prices
so they could sell the shares they
owned at inflated levels. No one
from China Auto Logistics or Guan-
wei Recycling has been charged with
any wrongdoing. Representatives of
the companies couldnt be reached
for comment.
The case is the latest of several
the SEC has filed against gatekeep-
ersconsultants, financiers and
others who helped Chinese compa-
nies gain access to U.S. markets.
The alleged scheme took place in
2008 and 2009, according to the
SEC lawsuit filed in U.S. District
Court in New Jersey. Mr. Kelley and
three associates reached secret
agreements with management at
China Auto and Guanwei Recycling
in which they would pay the costs of
helping the companies gain U.S. list-
ings in exchange for 30% to 40% of
the resulting stock, the SEC alleged.
Mr. Kelley and the others then ex-
ecuted reverse mergerstransactions
in which a foreign company merges
with a U.S. shell company to gain the
shells public listingbetween the
two Chinese companies and shells
that Mr. Kelley and his associates
controlled, the SEC alleged.
After that, Mr. Kelley and his as-
sociates hired Mr. Becker, a stock
promoter, to tout the stocks of China
Auto and Guanwei Recycling, ac-
cording to the SEC.
Besides the $6.2 million pay-
ment, Mr. Kelley agreed to be barred
from the securities industry. Mr.
Agriogianis entered into a coopera-
tion agreement with the SEC, re-
flecting his assistance in the case,
with financial sanctions against him
to be determined later.
The SECs case remains pending
against Messrs. Becker and Tazbaz.
BY MICHAEL RAPOPORT
20 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
Media Deals: Power, Money, Promises
This Is the Telecom Future Many Envisioned, but in the U.S. Will It Give Too Much Control to Too Few Companies?
The communications industry
long has promised a future where
wireless service, video and the In-
ternet are offered in one conve-
nient package. Three huge possible
U.S. deals now are bringing that fu-
ture into view.
Cellphone and Internet provider
AT&T Inc. is looking to buy satel-
lite company DirecTV. Cable and
Internet provider Comcast Corp. is
considering offering mobile-phone
service over Wi-Fi if its planned
$45 billion merger with Time War-
ner Cable Inc. is approved. And
cellphone company Sprint Corp.
says it could provide home Internet
connections over wireless if it is
allowed to buy smaller rival T-Mo-
bile US Inc.
In theory, the deals would usher
in an era in which consumers
would get new, flexible options to
be entertained and communicate
wherever and however they choose.
But the path to that idealized
world is perilous, requiring that
regulators approve mergers that
would create still-bigger companies
in industries where Americans al-
ready have few choices.
There are two possible out-
comes, says Blair Levin, a former
Federal Communications Commis-
sion chief of staff who helped draft
the agencys road map for increas-
ing broadband access.
In one, the companies bulk up
and start competing aggressively,
creating exciting new services.
In the other, new competition
from technologies such as Internet
broadband via wireless or mobile-
phone service via Wi-Fi dont pan
out, giving the biggest legacy compa-
nies more pricing power than ever.
It is impossible to know which
one will prevail, says Mr. Levin, a
fellow at the Aspen Institute think
tank. Anybody who thinks they
know is probably wrong.
Consumers have a lot on the
line. Wireless, pay TV and broad-
band Internet service gobble up a
big slice of Americans time and
money. Annual household spending
on telephone, pay TV and Internet
service averaged $2,237 in 2012,
the Labor Department says. That
was up 20% from 2007, while over-
all household spending rose just
3.6%.
Any of these deals individually
would represent a major shift,
says Rick Kaplan, former head of
the FCCs wireless bureau. Taken
together, it is a pretty impressive
transformation of the industry in a
very short period of time, says
Mr. Kaplan, the head of strategic
planning at the National Associa-
tion of Broadcasters.
A marriage of AT&T and Direc-
TV would produce the most obvi-
ous birth of a megatelecom.
DirecTV offers pay television by
satellite to more than 20 million
subscribers nationwide. AT&T is
the second-largest U.S. cellphone
carrier, behind Verizon Communi-
cations Inc., with 85.1 million re-
tail wireless subscribers. AT&T also
has 16.5 million broadband Internet
customers. But its pay-TV footprint
is small, with 5.6 million users.
Telecommunications analyst
Craig Moffett of MoffettNathanson
figures their merger would reduce
pay-TV choices in about 25% of the
U.S. Elsewhere, though, it would
make AT&T a formidable competi-
tor to cable companies such as
Comcast.
Regulators are inclined to look
favorably on the proposed deal be-
cause they view offering voice or
video alone as a dying business
model, a person familiar with the
FCCs thinking says.
AT&T declines to comment. Di-
recTV refers to recent conference
calls, such as one in February, in
which Chief Executive Mike White
said Comcasts offer for Time War-
ner Cable changed the competitive
landscape and that DirecTV was
looking at how to strengthen its
position.
AT&T is working on a two-track
approach to video, promoting its
pay-TV service U-verse while build-
ing services that would circumvent
cable or satellite to deliver video
and TV content over the Internet
and to wireless devices.
The combined company, with
annual revenue of roughly $160 bil-
lion, theoretically would be in a
stronger position to persuade the
owners of TV shows and movies to
sell AT&T the necessary licenses.
Sprints ambition to buy T-Mo-
bile is more contentious.
It would combine the countrys
third- and fourth-largest wireless
carriers and has drawn skepticism
from the FCC and the Justice De-
partment. The deal would leave the
U.S. with three enormous wireless
carriers and no viable competitors.
The combination would have nearly
$60 billion in annual revenue and
around 85 million retail wireless
subscribers. The next biggest com-
petitor, regional carrier U.S. Cellu-
lar Corp., has just 4.7 million. A
Sprint acquisition also would re-
move T-Mobile from a market
where its aggressive marketing has
kept a lid on consumer prices.
Sprint Chairman Masayoshi Son
has made his case in Washington
that a combined Sprint and T-Mo-
bile would add a well-armed com-
petitor to Verizon and AT&T.
He also plans to beam high-
speed Internet service to house-
holds. Sprint is testing the technol-
ogy with satellite-TV company
Dish Network Corp. in Corpus
Christi, Texas. But while such tech-
nology is getting faster and more
efficient at carrying data-heavy
traffic like video, many analysts
doubt it will ever be a robust alter-
native.
The continued importance of
those wired connections means
regulators are giving particularly
close scrutiny to the planned
merger of Comcast and Time War-
ner Cable.
Comcast CEO Brian Roberts
says his company needs to bulk up
to compete effectively with satel-
lite-TV operators, phone companies
such as Verizon and relatively new
entrants in the video market such
as tech heavyweights Google Inc.,
Apple Inc. and Amazon.com Inc.
The cable industrys traditional re-
gional structure has limitations
that our national competitors dont
have, Mr. Roberts said this year.
Comcast says merging with
Time Warner Cable would increase
competition and spark innovation.
Comcast told the FCC that the
company is studying the possibility
of offering mobile-phone service
that runs mainly on Wi-Fi.
Wi-Fi airwaves already carry
about 57% of wireless data traffic
in North America, according to
Cisco Systems Inc. And Comcast
says it plans to expand the number
of wireless hot spots in its network
this year to eight million from one
million.
But while technological ad-
vances have made phone over Wi-
Fi feasible, it still is inferior to typ-
ical wireless service and needs to
use the cellular network as a back-
stop.
If regulators approve the deal,
Comcast would be the countrys
largest Internet broadband sup-
plier, with more than $85 billion in
revenue and more than 32 million
broadband subscribers, almost 16
million more than No. 2 AT&T.
Part of AT&Ts reasoning in
making overtures to DirecTV now
is to get in front of authorities
while they are considering the
Comcast deal, a person familiar
with the matter says.
The fear is that consolidation
resulting from a Comcast deal
would raise the regulatory bar for
subsequent proposals.
Regulators review each deal on
its merits, but the FCC and Justice
Department say they would be
mindful of related developments in
the industry.
Companies say regulators ought
to view the landscape through a
wide-angle lens.
The FCC needs to account for
companies that may enter the busi-
ness down the line, says T-Mobile
Chief Executive John Legere. The
analysis would be much more than
the three or four that are on the
table now, he says. It would be
the adjacent industry and other
types of competition.
And Michael Keeley, an anti-
trust lawyer with Axinn, Veltrop &
Harkrider LLP, says regulators will
have no choice but to consider the
deals collective impact.
Even if they try to review the
deals separately, the common is-
sues will lead the reviews to all run
together, he says.
Gautham Nagesh
and Shalini Ramachandran
contributed to this article.
By Ryan Knutson,
Thomas Gryta
and Brent Kendall
BUSINESS & FINANCE
*Doesnt include satellite broadband services Note: Wireless data are for 1Q 2014, broadband and pay TV data are for 4Q 2013.
Sources: MoffettNathanson (broadband); SNL Kagan (Pay TV); New Street Research (wireless)
Photo: Getty Images
Several possible deals
would transform the
communications and
media markets.
Convergence or
Consolidation?
The Wall Street Journal
COMCAST
AT&T
TIME
WARNER
CABLE
TIME
WARNER
CABLE
VERIZON
COX
23%
18%
13%
10%
6%
DIRECTV
DISH
22%
20%
14% 8%
11%
5%
5%
SPRINT T-MOBILE
34%
28%
15%
Pay TV Wireless Broadband*
MARKET SHARE
OF SELECTED
COMPANIES
13%
TRACFONE
U.S. consumers have a lot on the line. Wireless, pay
TV and broadband Internet service gobble up a big
slice of Americans time and money.
THE HIGH COURT
COMMERCIAL
Record No. 2014/59 COS
IN THE MATTER OF
ACCENTURE PUBLIC LIMITED COMPANY
AND IN THE MATTER OF THE COMPANIES
ACTS 1963 TO 2013
AND IN THE MATTER OFAPROPOSED
REDUCTION OF CAPITALPURSUANT
TO SECTION 72 OF THE COMPANIES ACT
1963
NOTICE IS HEREBY GIVEN that an Order oI the High Court
oI Ireland made on 29 April 2014 (the ~Court Order) cf
the redution oI the share apital oI Aenture Publi Iimited
Company (the ~Company together with the minute approved
by the High Court oI Ireland setting out the redution oI the
Company`s share apital by an amount oI US$10,955,000,000
was registered by the Registrar oI Companies on 29 April 2014
and this notie is given in ompliane with the Court Order.
Dated: 7th May 2014
Signed: ARTHUR COX
Solicitors,
Earlsfort Terrace,
Dublin 2,
Ireland
(Ref: MAMcL/M2C/AC049/005)
Legal Notices
ADVERTISEMENT
PUBLIC NOTICES
10 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
WORLD NEWS
India Opposition Leader Looks to Exports
ATTARI, IndiaArun Jaitley, a
leader of Indias main opposition
partyand, some believe, the next
finance ministersays he wants to
see India become an export power-
house like China.
Those are big words even amid
the current political frenzy in India,
as thousands of candidates battle
for seats in Parliament this month in
national elections. And it is a prom-
ise that politicians here have made
before, and failed to deliver on.
Mr. Jaitleys views matter be-
cause polls suggest his Bharatiya Ja-
nata Party will win enough seats in
Parliament to form the next govern-
ment. A significant part of the BJPs
campaign message has been eco-
nomic growth.
In an interview with The Wall
Street Journal last week, Mr. Jaitley
said, We will do a massive opera-
tion to start the process of moving
in the direction of low-cost manu-
facturing.
Specifically, he cited the need for
lower interest rates on corporate
borrowing, an overhaul of Indias
complex tax structures, and reduc-
tion in red tape and bureaucracy
something India is famed for. Cur-
rently, interest rates are in the low
double digits.
The BJP has also promised to
create new industrial areas, reminis-
cent of the idea of the special eco-
nomic zones in China that nurtured
manufacturing there decades ago.
The obstacles to Indian export
competitiveness are well known. For
starters, India lacks the modern
roads, ports and power plants that
China has already spent a quarter-
century building.
And while Indian labor costs are
low, there is a shortage of skilled la-
bor, and it can be difficult to fire
factory workers. For reasons like
these, many manufacturers find
other countries more attractive.
The BJP will consider labor-law
changes, Mr. Jaitley said, but it
wont be its first fix for the econ-
omy. He declined to identify what
might be first on the list, saying it
would be a decision made once any
new government is formed. Regard-
ing labor laws, he said: Reforms
are the art of the possible. Nobody
should start with the most difficult
reform process.
Another big hurdle for any na-
tional government trying to remake
Indias economy in Chinas image is
that state governments control
many important industrial policies,
such as land acquisition and indus-
trial licensing, limiting the central
governments hand.
In the dusty village of Attari near
the border of Pakistan, Mr. Jaitley
stood before a crowd of farmers and
talked about factory jobs.
We need lots of jobs which can
only come from export-oriented
manufacturing like they have in
China, he said, wiping sweat from
his face.
The mostly male crowd of 800-
or-so people, many in beards and
colorful turbans, cheered. He spoke
for 15 minutes before moving on to
the next village.
Mr. Jaitley, a lawyer and former
commerce minister, is among the
BJPs most outspoken and influen-
tial politicians. He is running for a
parliamentary seat from Amritsar in
the state of Punjab.
He is widely viewed as a possible
finance minister, if his party does
well, because of his experience and
his close ties to the BJPs candidate
for prime minister, Narendra Modi.
The results of the national election
wont be known until May 16.
Mr. Jaitley declined to speculate
on whether he might get a cabinet
post.
In addition to policies promoting
urban development, tourism and
property development, he said the
BJP wants to focus on creating man-
ufacturing jobs. Indias economy is
suffering from high inflation and
low growth. The country has been
led by the Congress party for the
past decade, and while political poll-
ing here is notoriously unreliable,
the numbers suggest voters are
looking for a change.
The BJP has pledged to create 10
million new jobs a year for the next
five years if it comes to power. The
only way India can generate that
kind of employment is through ex-
ports. Producing cheaper products
is the only way India can compete
with countries such as China, South
Korea, Malaysia and Indonesia
known for their low-cost manufac-
turing, Mr. Jaitley said.
India has some of the lowest
wage rates in the world, but it has
failed to become a big exporter like
Asias other large economies. Manu-
facturing still makes up only about
15% of Indias gross domestic prod-
uct. Despite Indias expansion in the
past 20 years, its share of global ex-
ports has been stuck below 2%.
Chinas slice of the worlds exports
has jumped from less than 3% in
1995 to close to 12% last year.
And while China is a trade-sur-
plus country, India has been run-
ning a huge trade deficit over the
years, meaning its imports far ex-
ceed exports. Indias trade deficit
came in at $138 billion in the finan-
cial year that ended March 31, up
from $18 billion for the year ended
March 31, 2000.
Critics say the BJP is making
promises it cant keep. Although
surveys suggest it is ahead in the
polls, a parliamentary majority
seems out of reach. That means a
coalition government would need
to be formed with other parties
an often unruly arrangement that
can trip up any one partys poli-
cies.
Even an aggressive push to re-
vamp the economy would take years
and hundreds of billions of dollars
to make India more competitive,
economists say.
India needs to address problems
in infrastructure such as roads,
ports and power plants, said Rajiv
Biswas, chief economist for Asia-Pa-
cific at IHS, in Singapore. India has
the brain power, but it should im-
part vocational training to create a
skilled manpower base for manufac-
turing companies.
The BJP in the past has opposed
foreign direct investment in super-
markets and some other types of re-
tail. Mr. Jaitley said the party wants
to open most other industries, in-
cluding defense and infrastructure,
to more foreign control, which could
also help exports.
Foreign direct investment, he
said, is always welcome except in
certain sectors where we think the
Indian economy is not ready for it.
BY PRASANTA SAHU
AND ANANT VIJAY KALA
Percentage of
world exports
The Wall Street Journal
Source: U.N. Conference on trade
and development
0
3
6
9%
00 1995 10
1.66%
INDIA
11.76%
CHINA
Trade
Routes
Arun Jaitley, center, attended a BJP election rally in Amritsar in April.
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New Violence Hits Nigeria Before Economic Forum
Three gunmen stormed a school
in Nigerias capital on Tuesday in a
bid to kidnap a small bus full of chil-
dren, the latest violent incident in
the country as it prepares to host an
event to showcase its economy.
Also on Tuesday, the Nigerian
government continued to battle an
elusive Islamist militant group hold-
ing several hundred teenage girls
hostage.
On Wednesday, the country plans
to welcome thousands of business
and political leaders attending the
World Economic Forum/Africa in
Abuja.
The forum is intended to display
the achievements of a country that
this year overtook South Africa as
the continents top economy. Chinas
premier, Li Keqiang, as well as Afri-
can heads of state and top execu-
tives, are among those expected to
attend.
Tuesdays attack occurred a 15-
minute drive away from where at-
tendees are to register for their
name badges, near Nigerias seat of
government.
No one was wounded in the at-
tack, which occurred at 8 a.m. local
time, at a school in Abujas Nyanya
district. The assailants stole a school
bus after unsuccessfully trying to
kidnap some of the students.
There was no claim of responsi-
bility, but suspicion fell immediately
on Boko Haram, the radical Islamist
group that operates out of strong-
holds in the rural northeast of Nige-
ria, along the border with Cameroon.
The latest attacks have exposed a
government that still hasnt been
able to tackle an insurgency raging
in the Nigerias north, threatening to
divide the country between an im-
poverished Muslim north and a
largely prosperous Christian south.
Nigerian security services have
proved unableand often unwill-
ingto beat back the brutal insur-
gency.
The attacks also offered another
propaganda victory for Boko Haram,
whose war to eradicate schools from
Nigeria is attracting global atten-
tionand condemnation.
We are doing everything we can
and will continue to do so until the
girls are freed, President Goodluck
Jonathan vowed on Sunday.
The next day, Boko Harams
leader, Abubakar Shekau, appeared
in a video claiming responsibility for
the abduction and threatening to sell
the girls as slaves as their spoils in
a war against the Nigerian state.
We would also give their hands
in marriage because they are our
slaves, he said in the nearly hour-
long video. We would marry them
out at the age of 9. We would marry
them out at the age of 12.
The girls werent seen in the
video, and their whereabouts arent
known. But Boko Haram militants
have surfaced frequently, raiding vil-
lages and slaughtering students in
schools.
I dont think the troops are re-
ally even fighting this battle out
there, said Jacob Zenn, an Africa
analyst at the Jamestown Founda-
tion research institution in Washing-
ton. I still [hear] the same rhetoric
from Jonathan: This is a temporary
issue. But nobodys really doing any-
thing on the ground.
The U.S. is assembling a team of
military and law-enforcement spe-
cialists and investigators to help Ni-
geria search for the abducted girls,
officials said.
The State Department said de-
tails of the teamincluding its size,
composition and dutieswould be
worked out in a meeting Tuesday
between Secretary of State John
Kerry and President Barack Obama.
Mr. Kerry offered the U.S. team
in a phone call Tuesday with Mr.
Jonathan. Jennifer Psaki, a State De-
partment spokeswoman, said Mr.
Jonathan welcomed the U.S. aid
offer, but didnt explicitly say
whether he accepted it. Nonetheless,
she said Mr. Kerry took the Nigerian
leaders response as a go-ahead to
make plans to assemble and send
the team.
Although the Nigerians had been
searching for the girls since they
disappeared in April, they havent
requested U.S. assistance.
The team will be known as a co-
ordination cell, and will be over-
seen by the U.S. Embassy in Abuja.
The White House said the U.S. move
fits with the administrations inter-
est in aiding in the search.
President Obama has directed
that we do everything we can to
help the Nigerian government find
and free these girls, White House
press secretary Jay Carney said.
Meanwhile, villagers in the north
on Tuesday streamed into the
nearby city of Maiduguri, saying
Boko Haram had attacked their
hometown, Warabe, and kidnapped
an additional eight girls, ages 12 to
15. They were heavily armed, and
shooting, recalled Mohammed
Adam, a village resident.
Nigeria isnt the only country
grappling with Boko Haram. Also on
Tuesday, several dozen attackers
overpowered their way on to a mili-
tary base in Cameroon, the govern-
ment there said, freeing a suspected
member from detention.
But there appears to be ground-
level resistance to raid suspected
Boko Haram hide-outs.
In recent weeks, the group has
been distributing videos showing
the decapitation of government
troops, whose carcasses are then
displayed to jubilant Boko Haram
members.
By DrewHinshaw
in Accra, Ghana, and
Gbenga Seun Ijagba
in Abuja, Nigeria
The mother of one of the missing girls cries at a rally in Abuja on Tuesday.
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THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 19
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The saIe represents one
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THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 11
WORLD NEWS
Pakistans Geo TV
Fights for Survival
ISLAMABADMedia mogul Mir
Shakil-ur-Rahman has played an out-
size role in shaping Pakistans poli-
tics in recent years.
Now, his empire is struggling for
survival after colliding with the
countrys most powerful institution:
the military establishment.
The clash was sparked by the
shooting last month of Hamid Mir,
the star journalist of Mr. Rahmans
Geo TV channel. Geo reporters al-
leged on broadcasts that the mili-
tarys main spy agency was behind
the attack. The military angrily de-
nied the claim, and is now pushing
to shut the network.
Pakistans media regulator began
hearings Tuesday on whether to
close the channel.
The controversy is reversing
fragile gains made by increasingly
assertive Pakistani media over the
past decade, analysts and media
professionals say.
Media has become a power cen-
ter in Pakistan, said Absar Alam, an
anchor at Aaj News, a competing
news channel.
That has triggered alarm among
traditional power players who think
that they should have the exclusive
right to shape opinion.
Central to the drama is Dubai-
based Mr. Rahman, who owns Paki-
stans biggest-selling newspaper, the
Urdu-language Jang, in addition to
Geo, the leading TV news channel.
According to employees, Mr.
Rahman is intimately involved with
editorial decisions at both outlets,
which have pushed for the prosecu-
tion of former military ruler Pervez
Musharraf, campaigned for peace
with archenemy India, and high-
lighted the abduction of suspected
militants by security forces. Geo was
also instrumental in bringing to an
end Mr. Musharrafs regime in 2008
with heavy coverage of an opposi-
tion movement led by lawyers that
made a hero out of Supreme Court
Chief Justice Iftikhar Chaudhry.
The political sway of his media
empire has alarmed some Paki-
stanis, including rival media organi-
zations, the military and some poli-
ticians. If one person has the
power to set the political agenda,
that is frightening, said Moeed
Pirzada, an anchor at the competing
Express News, which has echoed
military criticism of Geo. He is run-
ning a monopoly.
The boldness of Mr. Rahmans
media group mirrors the larger
struggle between civilian and mili-
tary forces for power as a country
ruled by the army for half its his-
tory tries to develop democratically.
Mr. Rahmans publications were
critical of the previous civilian gov-
ernment of the Pakistan Peoples
Party, which barred its members
from appearing on Geo for more
than a year in protest. They offered
friendlier coverage of Prime Minis-
ter Nawaz Sharif, elected a year ago.
Mr. Sharif, in turn, is widely seen
as supporting Mr. Rahman in his
confrontation with the military. Mr.
Sharif visited Mr. Mir after the as-
sassination attempt but denied he
was taking sides. The government
established a judicial commission to
investigate the shooting and denied
any conflict of interests.
Geo was somewhat softer on
this government, said Hasan Askari
Rizvi, a security analyst. There is a
feeling in military circles that after
the shooting, Geo reacted this way
because they had some kind of gov-
ernment support, the analyst said.
To get the country out of its
troubles, well all have to work to-
gether, the government, the media
and the security forces, the prime
minister said during a visit to Lon-
don on April 30.
On the night of the shooting on
April 19, Geo reporters alleged Inter-
Services Intelligence was behind the
assassination attempt. ISI has a rep-
utation for intimidating journalists.
Mr. Rahman was intimately in-
volved in Geos move to go with ac-
cusations against ISI and to pay lit-
tle attention to other possible
suspects, such as the Pakistani Tali-
ban who had Mr. Mir on their de-
clared hit list, company insiders say.
A spokesman for the ISI wasnt
available to comment. The military,
speaking for the ISI, has described
the allegations aired by Geo as base-
less. The military then demanded
that Geo be shut down for a false
and scandalous campaign against
the ISI and for a history of acting
illegally in furtherance of anti-Paki-
stan agenda.
After the attack on Mr. Mir, a
sustained and relentless campaign
of harassment and intimidation has
been unleashed against its report-
ers and managers, the company said
Sunday in a front-page story pub-
lished in The News, the groups in-
fluential English language daily.
The groups news channel has
been shifted to the end of the cable
lineup, while newspaper distributors
have been pressured not to sell its
newspapers, the story said.
Mr. Rahmans father founded the
media group with the Jang newspa-
per more than 70 years ago. The son
started as a reporter, then launched
The News in the early 1990s and
Geo in 2002 as television in Pakistan
was opened to private channels.
BY SAEED SHAH
Protesters outside the Geo TV building in April showed support for the army.
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Child Age 11 Is Forced
To Wed to Settle a Feud
GRILAGAN, PakistanEight
months ago, 11-year-old Amna was
married off to a man three times
her age to settle a crime her uncle
had committed.
The uncle had raped another girl
in the village, according to tribal el-
ders. Following tribal custom preva-
lent in highly conservative parts of
Pakistan, the elders gave Amna and
her 17-year-old cousin, Zulhaj, to
that girls family. Nobody asked
their opinion.
Such compensation marriages
are technically illegal under Paki-
stani law. But in a country with
fraying central authority, the formal
judicial system with its slow, cor-
rupt course is often abandoned in
favor of traditional tribal justice.
With little faith in the courts, the
practice of swaragiving away
women as punishment for their fam-
iliesremains an option for settling
village disputes in tribal areas domi-
nated by the Pashtun ethnic group
in Pakistans northwest. It also re-
mains prevalent in the tribal-domi-
nated parts of Baluchistan and Pun-
jab provinces.
People have no trust in the law
and the legal system prevailing
here, said Muhammad Gul, a mem-
ber of the village elders council, or
jirga, in the village of Grilagan,
which decided the fate of Amna and
Zulhaj.
The jirga resolves the dispute in
a day. It is theeasiest way.
In Pakistani courts, criminal
cases can take five years to resolve
while civil cases take up to 10.
The Grilagan girls, from a remote
corner of northwest Pakistan, were
both married to the brother of the
raped girl, who is in his mid-30s.
Within Pashtun tribal culture and
under Islamic law, men can marry
multiple wives.
The younger girl, Amna, has
been allowed to stay at her fathers
house until she reaches puberty, a
rare concession to her young age.
Even very young girls are usually
forced to move into a new husbands
home, where they are likely to be
treated as domestic slaves and pos-
sibly sexually abused.
It isnt clear why the jirga in this
case allowed Amna to remain at
home. But local activist Zubair Tor-
wali suggested it may have been be-
cause the authorities wouldnt have
been able to turn a blind eye to a
case involving such a young girl.
Zulhaj is already living in her
new husbands home. Speaking to
The Wall Street Journal last month
in front of the jirga in Grilagan, she
said she wasnt being mistreated.
But she appeared frightened to
speak in front of a room full of the
all-male tribal elders.
She said she was 17, contradict-
ing claims by jirga members that
she was 19. Amna was kept hidden.
The Pashto word swara literally
describes a woman riding on the
back of an animal. It is a reference
to the way girls were traditionally
handed over in such deals, riding on
horseback or donkeys.
The practice was outlawed in
November 2011 and authorities
dont keep detailed data on compen-
sation marriages, making it difficult
to get an exact picture of how com-
mon it is. The police will investigate
only if a community member alerts
them. Even then, they often register
the case as a kidnapping, not a com-
pensation marriage.
Responsibility for clamping
down on the practice falls to provin-
cial authorities. Barrister Zafarullah
Khan, a top official in the Ministry
of Law, Justice and Human Rights,
said that progress has been slow.
The law has been changed and
it is up to the provinces to stop this
inhumane practice. These are mostly
tribal societies and [swara] is em-
bedded in the culture and the social
beliefs, he said. If people dont re-
port cases to the authorities, they
cant intervene, he explained.
Samar Minallah Khan, a womens
rights activist who has been cam-
paigning against the practice for
more than a decade, said she is
aware of more than a hundred cases
in 2013 alone, and believes that is
just the tip of the iceberg.
The Grilagan village jirga said
they had settled seven disputes
through swara in the past nine
months.
The girls are usually immature,
a jirga member acknowledged.
Ms. Khan said villagers often
hand over their daughters because
they are poor and dont have much
else to offer. Economic reasons
have a lot to do with it, she said.
The family says we cant give
land or money as compensation, so
it is convenient to give a girl.
In the tribal cultures of Pakistan,
which span a range of linguistic
groups across the country, the idea
of giving a girl in compensation is
closely caught up with a deeply en-
trenched code of honor. The cultural
code dictates that the wronged
party has to seek revenge to restore
their honor.
In the past, the practice of swara
was more symbolic. The girl was
handed over as a symbol of peace
between the two families and was
generally treated with more respect.
Today, it has become more about re-
venge, said Ms. Khan.
There is no point treating the
girl well because the community ex-
pects you to mistreat her, she said.
Unless you rape her and abuse her,
you arent a real Pashtun or Punjabi
tribal, they say.
Islam doesnt condone the prac-
tice. Under Islamic law, punishment
is meant to target the perpetrator,
not a related woman or child. The
victims family can seek blood
money in compensation.
When Ms. Khan intervenes in
swara cases, she said she uses Islam
to encourage people to accept a dif-
ferent way of settling disputes.
However, some local Pakistani
human-rights activists said swara is
the lesser evil as it prevents bloody
tribal conflicts sparked by the need
to avenge an offense.
The appearance of swara is very
ugly, but it settles disputes of many
generations, said Hazer Gul, a hu-
man-rights activist from the trou-
bled Swat Valley in northwest Paki-
stan. The sacrifice of one girls life
is seen as preventing conflict for
generations to come.
BY ANNABEL SYMINGTON
The village council of elders, or jirga, in Grilagan decided the fate of girls given in compensation marriages.
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Giving a girl is closely
caught up with a deeply
entrenched code of honor.
18 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
As Home Sales Fall, Discounts Multiply
HONG KONGHong Kongs once-
sizzling property market has turned
so frosty that developers have re-
sorted to discounts and other incen-
tives to lure buyers to new apartment
complexes.
The new units are still expensive
even after the givebacks. Some units
are commanding US$2,500 a square
foot, or more, which rivals new lux-
ury condos in Manhattan.
But the price cuts make for a con-
trast with the overheated market of
just two years ago, before the gov-
ernment stepped in to cool price
rises.
Incentives ranging from 18-month
payment delays to limited-time dis-
counts and cash rebates are aimed at
stoking a market that turned stag-
nant last year as buyers sat out and
transaction totals fell. Some develop-
ers are also offering second mort-
gages via nonbank finance companies
worth up to 25% of the purchase
price of more expensive properties.
(Banks in Hong Kong are allowed to
lend no more than 50% on apart-
ments costing over 10 million Hong
Kong dollars, or US$1.3 million.)
Everybody is doing it, Nicole
Wong, a real-estate analyst at broker-
age firm CLSA, said of the discounts.
Youve more supply fighting for a
smaller amount of money and fewer
buyers.
After a bull run that sent house
prices doubling from 2008 to 2013,
the government sought to rein in the
market with various measures start-
ing in late 2012. They included higher
minimum down payments and sales
taxes levied on transactions, or
stamp duties, of up to 8.5%. As a re-
sult, the number of Hong Kong real-
estate transactions fell to a 23-year
low last year.
The authorities also imposed a so-
called double-stamp duty, of 17%, on
property purchases made by non-
Hong Kong residents, including those
from mainland China, who were often
blamed for pushing up the price of
real estate.
Hong Kongs measures iced the
market, especially deterring foreign
buyers and speculators, according to
analysts. The number of residential
transactions declined 56% in 2013,
according to government data. Prices
rose only slightly compared with
2012, according to an index by prop-
erty agency Centaline. Government
figures show an increase in 2013, but
a slight decline in the first two
months of 2014.
Developers have had to sweeten
their offers. Late last year, the dis-
counts started to appear.
So far, efforts are working. Spring
is traditionally busy and large crowds
of aspiring homeowners have
crowded the showrooms at the
launches of new projects.
Its like Marks & Spencers with a
Christmas sale, said Wong Leung
Sing, an analyst at Centaline, refer-
ring to the department-store chain.
While fewer transactions are be-
ing done in the overall housing mar-
ket, sales of new apartments are on
the rise, according to government fig-
ures. Transactions increased 23% in
the years first quarter from a year
earlier, for a total value of HK$32 bil-
lion, a 28% increase from last year.
The Hong Kong government has
said it has no intention of repealing
the cooling measures at the moment.
Even luxury condos are being dis-
counted. Connie Law, a 52-year-old
homemaker, recently explored 10 new
developments to buy. She settled on
a three-bedroom apartment of 1,280
square feet in a new development in
Hong Kongs middle-class Quarry Bay
neighborhood.
Ms. Law said that after a 4.25%
discount from the developer, her fam-
ily paid HK$27.3 million for the flat,
about twice the price of a comparably
sized flat in the 29-year-old buildings
that line the rest of the block.
The discount was a help, Ms.
Law said.
The citys largest developer, Sun
Hung Kai Properties Ltd., is
among the most aggressive in price
cutting. In April, it opened a 144-
unit development in the suburb of
Fanling. With prices starting at
HK$8,814 a square foot, the new
units were offered at about 10% be-
low similar-size units at a compa-
rable one-year-old building nearby.
The company said it would offer
additional 5% discounts to those who
paid in cash, 3% to anyone who signs
a contract before May 31 and 2% for
those who dont need a second mort-
gage to finance the purchase. Sun
Hung Kai is also offering one-year
bridge loans for as much as 70% of
an apartments value.
In February, the company set the
price for a batch of 156 apartments at
its large Riva project in suburban
Yuen Long at 40% lower than for the
first bunch of units it sold at the
same development in March 2013.
A spokeswoman said the com-
panys strategy adjusts prices to
market sentiment.
Earlier this year, at a new devel-
opment called The Avenue in the
citys bustling Wanchai neighbor-
hood, Sino Land Co. and Hopewell
Holdings Ltd. offered 17.5% discounts
for cash buyers. Factoring in the dis-
counts, the new units sold at around
HK$19,000 a square foot, or about
20% cheaper than comparable up-
scale units in nearby buildings.
The price reductions so far have
been focused only on new apart-
ments, but analysts say it is inevita-
ble that sellers of existing units will
follow suit.
Still, some home buyers remain
cautious. After Raymond Ho, a 50-
year-old accountant at an electronic-
components company, sold his two-
bedroom apartment in Kowloon, he
was inundated with calls from agents.
He is now looking to buy in one of
several new developments in the
northern New Territories suburbs for
easier access to mainland China,
where he often travels for work.
He has looked at several develop-
ments but hasnt made an offer yet.
The prices do look attractive at first
glance, but I know that its also a
gimmick, he said. Theres a lot of
choice.
BY JASON CHOW
Change in average house prices
30
5
0
5
10
15
20
25
%
10 2009 11 12 13 14*
0.5%
*First two months
Source: Hong Kong government
The Wall Street Journal
ANewDay
Hong Kongs housing market has
cooled after prices doubled from 2008
to 2013. Developers are offering
incentives to spur sales.
P
a
l
a
n
i
M
o
h
a
n
f
o
r
T
h
e
W
a
l
l
S
t
r
e
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t
J
o
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n
a
l
Buyers Rediscover Roomier Vintage Apartments
Hong Kongs apartment market
for years has been dominated by
sparkling, new towers with views
and pricesunseen almost any-
where else in the world.
But the high cost and relatively
small size of those units are begin-
ning to turn buyers and renters
away, and many of them are redis-
covering an earlier generation of
apartment buildings that was
largely ignored during the frenzy of
the citys housing boom.
The older apartment buildings
dont necessarily charm from the
outside. Built from the 1960s to
1980s, they often have faded exteri-
ors dotted with air conditioners and
laundry hanging out to dry.
Yet many of these buildings are
located in prime neighborhoods, and
boast more space and better layouts
than the new towers. Meanwhile,
they offer far lower prices that ap-
pear to be holding up better than
the market overall.
These apartments also are getting
scarcer. For every 10 deluxe new
high-rise apartments on the block,
there is just one of these vintage
units for sale, real-estate brokers say.
That ratio was about seven-to-one a
decade ago, brokers say. In some
ways, the vintage buildings are com-
parable to classic six apartments in
prime New York neighborhoods or
Victorians in San Franciscobut at a
discount to the overall market.
Older flats are getting fewer
and fewer and they are turning
more and more precious, said
Jackie Cheung, an investment man-
ager and a district councilor in
Hong Kongs Mid-Levels, a prime
neighborhood halfway up the citys
prestigious Peak district that is
home to many older buildings.
These vintage buildings still fall
into the citys high-end category,
where prices have risen the most in
recent years.
Recent government measures to
curb price increases appear to be hav-
ing an effect on the high-end market.
Overall rental prices in the Mid-Levels
neighborhood are down 1.8% in the
past year, according to JLL, formerly
Jones Lang LaSalle. Meanwhile,
prices for a selection of apartments
built in the 1970s in the neighborhood
are flat over the same period, accord-
ing to Centaline Property Agency.
While prices of older buildings
have held up relatively well, rents of
these apartments are also as much
as one-third cheaper than new
buildings. And what they lack in
amenities like health clubs they
make up for with location, space,
wide balconies and mature gardens
that provide a respite from the fren-
zied city.
I see more tenants in the Mid-
Levels looking for older towers now
due to more space than the younger
apartments, said local property
agent Jason Wong.
Some residents in these older
apartment buildings belong to a
classy club outside their buildings,
Mr. Wong said. They dont really
care if their apartment has a club-
house.
In a city where architectural his-
tory often takes a back seat to new
development, these buildings date
back to a time when Britain ruled
Hong Kong as an imperial colony
and the apartments were filled with
British businessmen and govern-
ment officials.
Today, selling points include the
citys lowest crime rates and prox-
imity to the University of Hong
Kong, the citys oldest university. It
also has prestigious high schools
such as St. Paul Co-educational Col-
lege.
I moved there because my son
was admitted to school nearby, said
Patrick Wong, a retired civil servant
who moved into his 1,760 square-
foot Mid-Levels apartment three de-
cades ago. The neighborhood is
very quiet and charming, full of
greenery. I used to walk to my office
every day. He has lived in the same
apartment for three decades.
Mr. Wong, 62 years old, said he
doesnt care if his apartment has a
fancy clubhouse or not. If I want to
do exercise, I go out and hike in this
charming and green neighborhood,
which is much better and healthier
than running in the gym inside the
clubhouse, he said.
BY CHESTER YUNG
Realty Garden, built in 1971, is an older high rise in the Mid-Levels district.
P
a
l
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n
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M
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f
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J
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INTERNATIONAL PROPERTY: HONG KONG
Of the Boil
Total value of residential property sales in Hong Kong
Sources: Hong Kong government (total values); Centaline (index) HK$10 billion = $1.3 billion
*An index created by Centaline, the citys largest brokerage rm, tracks the prices of signed transactions from the rm Through April 27
Centa-City Leading Index*
The Wall Street Journal
125
0
25
50
75
100
05
Weekly data
10 14 2000
118.40
HK$60 billion
0
10
20
30
40
50
12 13 14 2011
Primary
sales
Secondary
sales
12 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
OPINION: REVIEW & OUTLOOK
V
oice of America and Radio Free
Europe played an important role
in winning the war of ideas
against Communism during the Cold
War. But more recently the U.S. interna-
tional-broadcasting system has suffered
mission drift: Its programs have at times
run counter to U.S. foreign-policy objec-
tives, and its massive bureaucracy is in-
efficient. Meanwhile, Washingtons ad-
versaries have created slick broadcast
organs, such as the Kremlins Russia To-
day and Beijings CCTV, to advance their
strategic interests and disseminate their
illiberal worldviews.
So its welcome news that the House
Foreign Affairs Committee passed a bi-
partisan package of reforms designed to
address long-standing governance prob-
lems in the system. The legislation
would create a new U.S. International
Communications Agency, with a full-time
CEO, to administer Voice of America and
the various Freedom broadcasters, in-
cluding Radio Free Europe/Radio Liberty
and the Middle East
Broadcasting Network.
The agency would re-
place the current Broad-
casting Board of Gover-
nors, a nine-member
board of part-time over-
seers that has proved practically de-
funct in terms of its capacity to tell a
message around the world, as then-Sec-
retary of State Hillary Clinton put it in
2013, despite roughly $700 billion in an-
nual funding. Crucially, the legislation
would also clarify the mission of Voice
of America: to support U.S. foreign-pol-
icy goals. The Freedom broadcasters,
which are meant to serve as a surro-
gate press in closed societies, will be
consolidated under one administrative
roof and required to share content and
avoid duplicating efforts.
A full-time director is
essential for holding tax-
payer-funded broadcast-
ers accountable. Weve
documented quality-con-
trol lapses at Voice of
America in these pages. Despite several
reminders, we still see texts that are di-
rectly copied and pasted from Persian
news sources, a Voice of America Per-
sian editor warned his colleagues in a
2012 email obtained by the Journal. The
same year, Voice of America ran a soft-
ball interview with an Iranian nuclear
negotiator that could have aired on Ira-
nian state TV but for the fact that the
American government had funded it. U.S.
taxpayers shouldnt tolerate such pro-
grams.
Voice of America neednt become a
crude propagandistic outlet. You need
to have an open mind but not so much
that your brains fall out, as Jeff Ged-
min, a former president of Radio Free
Europe/Radio Liberty, told us. If you
need to run an interview with a regime
figure, do itbut frame it, rebut it. Make
it clear that were not moral relativists,
that were not sympathizers of the re-
gime. By ensuring that Voice of America
reflects American interests, and improv-
ing the systems governance, the House
reform package will help retool U.S.
broadcasters for the new war of ideas.
G
ood political news is scarce in
Latin America these days, so its
worth noting the upset victory on
Sunday by Vice President Juan Carlos Va-
rela in Panamas presidential election.
The real victor is Panamas young democ-
racy.
Mr. Varela defeated the former mayor
of Panama City and the candidate backed
by current President Ricardo Martinelli,
who was term-limited. The economy has
boomed during Mr. Martinellis tenure, as
has government spending, so his former
housing minister Jos Domingo Arias,
who he anointed as his partys candidate,
was a clear favorite. Mr. Varelawho
broke with the president in 2011 alleging
corruption in procurementwas a long
shot.
But Mr. Martinelli overplayed his
hand. In January he added his wife to the
party ticket as the vice-presidential can-
didate, even though this is expressly for-
bidden in the constitution. Using the of-
fice of the president and the resources of
the state to campaign for a favorite suc-
cessor is also a no-no. Mr. Martinelli did
it anyway. Such tactics that are all too
reminiscent of other Latin family dynas-
ties earned a popular counterreaction.
Mr. Varela isnt a career politician and
he made fighting corruption the center-
piece of his campaign. In a region where
the rule of law is often treated like a
mere suggestion, his promise to end the
cronyism of the Martinelli era and the
broader political class helped him win
votes on both the right and left in the fi-
nal days.
Mr. Varela did make other promises
that dont inspire confidence. He wants
to put price controls on staple foods,
which would lead to shortages. Increases
in government subsidies will strain fiscal
accounts. But at least Panamas voters
rejected the family electoral gambit, and
if Mr. Varela disappoints, they know hes
term-limited in five years too.
D
ont look now, but U.S. federal
regulators are poised to take the
worst features of the banking sys-
tem and impose them on large managers
of mutual funds. The result is likely to be
more risk for taxpayers and more costs
for investors.
The federal Financial Stability Over-
sight Council is now considering whether
to name such large asset managers as
BlackRock and Fidelity as systemically
important financial institutions. This
would serve as an induction ceremony
into the too-big-to-fail club, making the
firms eligible for taxpayer assistance in
a crisis and encouraging them to take on
more debt as they fall under bank-style
regulation.
Not that either firm wants to join this
club, because theyre not banks. They
dont lend out depositors money with a
promise to return it. Rather, they are
agents that invest on behalf of clients,
who bear the risk of loss. The firms dont
even hold the clients moneycustodians
do thatand the asset managers have no
claim on client funds.
So if BlackRock and Fidelity were to
go bankrupt, the investors in their funds
should not suffer any losses. Even as the
investment bank Lehman Brothers went
bust in 2008, its asset management arm
Neuberger Berman was walled off from
the failing firm and its clients didnt lose
a nickel. Now independent, Neuberger
operates as a partnership and manages
more than $200 billion of assets. Its dif-
ficult to conceive of a scenario in which
an asset manager can trigger a crisis in
the financial system.
But as taxpayers have sadly learned
since the financial crisis, concepts like
systemic risk have never been precisely
defined and remain in the eye of the reg-
ulator. Although the bureaucrats have
never agreed to live by a clear set of
rules, in 2012 the stability council did is-
sue a regulation laying out the process
for designating non-banks as systemi-
cally important. And this
rule listed various criteria
that could bring a giant
financial company up for
possible induction into
the club. By any reason-
able reckoning, neither
BlackRock nor Fidelity qualifies.
The first test is that a non-bank must
have at least $50 billion in assets. But
neither firm does, unless you count as-
sets that dont belong to themclient
funds that neither the asset managers
nor their creditors have any claim on. Be-
cause of arcane accounting rules, some of
these assets appear on the balance
sheets of these companies, but Fidelity
and BlackRock cant borrow against them
and can neither gain nor lose anything
on them, except management fees.
The firms also dont have enough de-
rivatives exposure to matter. They dont
carry much debt. They dont rely on
short-term funding. As far as we can tell,
no one in the market is betting on their
success or failure via credit-default
swaps. So wheres the systemic risk?
The average person might shrug and
wonder why it matters if some giant fi-
nancial firm has to bear another layer of
regulation. Why not use a belt-and-sus-
penders approach to prevent the next
crisis, right?
The problem is that six years of Wash-
ington blather since the financial crisis
have obscured the fact that turning such
firms into banks would make them more
risky, not less. Bank regulation has tradi-
tionally been much more onerousalbeit
less effectivethan secu-
rities regulation because
banks are able to do much
more dangerous things
with customer money.
Mutual funds have to
put client assets in exactly
the instruments in which theyve prom-
ised to invest. Brokerages have to keep
client cash in paper issued by the gov-
ernment. Banks, on the other hand, are
allowed to take depositors moneywith
Uncle Sam guaranteeing its returnand
then lever it up and lend it out to dry
cleaners, restaurants, condo developers
and all manner of other ventures at
home and abroad. While banks maintain
thin levels of capital, mutual funds are
hardly allowed to use any leverage at all.
They have to maintain $3 of assets for
every dollar of cash they borrow.
Both firms, and especially BlackRock,
do offer products that are less regulated
than mutual funds, but their role as
agents remains the same. Clients know
how their money is being invested and
they bear the risks. If they wish to invest
in derivatives, then the clients, not Fidel-
ity or BlackRock, are the counterparties
in such trades.
Bank regulatorsand especially those
at the Federal Reservelove to make
speeches about the dangers of shadow
banking. By this they mean extensions
of credit that occur outside regulated
banks. But the biggest dangers of such fi-
nancing occur when taxpayers are per-
ceived to be standing behind it, and
when loose monetary policy at the Fed
ensures its rapid expansion.
The conceit of the Obama era is that
regulators know best in all things, and so
the more of finance that can be put un-
der their sway the better. Well all learn
just how wrong that is if regulators bring
high leverage and taxpayer backing from
the world of banking into the rest of the
financial economy.
A New Voice of America
Electoral Upset in Panama
The Feds Target Money Managers
U.S. international
broadcasting gets a
21st-century upgrade.
Regulators want to
make BlackRock and
Fidelity too big to fail.
Im living the American Dream
since it gave up home ownership.
Pepper . . . and Salt
THE WALL STREET JOURNAL
THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 17
China Drives Growth
At German Car Makers
FRANKFURTBMW AG reported
that strong sales in China helped
boost its first-quarter profit by 11%
from a year earlier and secured its
position as the worlds leading pre-
mium-car maker.
But the bitter rivalry among
BMW, Audi AG and Daimler AGs
Mercedes-Benz in the global market
for luxury cars is heating up. First-
quarter earnings from the major
German auto makers show that
China is the proving ground that
could decide the winner.
BMW demonstrated that trend
when it reported on Tuesday that
net profit rose to 1.5 billion ($2.09
billion) in the period ended March
31.
Total revenue, including its Mini
and Rolls Royce brands, rose 4% to
18 billion. Sales of BMW brand cars
rose 12% to 428,259 vehicles in the
quarter, with sales in China surging
25% and accounting for a quarter of
its total. BMW volumes in the U.S.
and Europe were each up just 3%.
Deliveries in the Chinese mar-
ket exceeded expectations, said
Friedrich Eichiner, BMWs chief fi-
nancial officer.
The boost from China helped
BMW maintain its position as the
biggest premium manufacturer by
volume and the most profitable.
Audi, the No. 2 premium brand
by volume world-wide, reported
pretax profit of 1.3 billion on a 10%
sales increase to 13 billion. Audi
hasnt yet disclosed net profit. Audi
sold 412,846 vehicles in the first
quarter, up 12%, and hasnt dis-
closed its first-quarter volume in
China.
Daimler, which has vowed to re-
take the top spot from BMW, re-
ported a 93% increase in net profit
to 1.09 billion in the first quarter
on a 13% increase in sales, including
trucks, buses and vans, to 30 bil-
lion. Sales of Mercedes-Benz cars
rose 14% to 389,476, boosted by a
52% jump in China. In April, Mer-
cedes sold 133,077 vehicle, up 14%.
Sales in China, aided by the launch
of a long wheel-base C-class sedan,
rose 38% in the month.
BMW affirmed its outlook of a
significant growth in sales and
earnings this year. Some analysts
remain skeptical, citing moderate
sales growth in the quarter, typi-
cally the strongest for car makers.
BMW, Audi and Mercedes are
rolling out lots of models this year.
BMW is pushing into electric vehi-
cles with the launch of the i3 com-
pact followed by the i8 plug-in hy-
brid sports car.
BMW said that it sold 1,000 i3
cars in March and that the company
has ramped up production of the i3
at a plant in Leipzig, Germany. BMW
has built more than 5,000 i3 cars so
far. It is focusing on the U.S., which
BMW believes will be the largest
market for electric vehicles.
Sarah Sloat
contributed to this article.
BY WILLIAM BOSTON
BMWs first-quarter China sales rose 25%. The race for top seller among German car brands increasingly depends on China.
I
m
a
g
i
n
e
c
h
i
n
a
BUSINESS & FINANCE
Fiat Envisions Big Sales Gains
ings before interest, taxes and depre-
ciation if annual volumes were al-
lowed to rise to 10,000 cars a year
from the current cap of 7,000 cars.
Fiat Chryslers sales goal of seven
million cars a year depends mainly on
the Jeep and Alfa Romeo brands.
Company executives said they plan to
more than double world-wide Jeep
sales to 1.9 million vehicles a year by
2018. Alfa Romeo will get a fresh
start with a 5 billion infusion of cap-
ital to build out its portfolio with
eight new models by 2018.
Alfa Romeo has been a long-de-
layed project for Mr. Marchionne. Fiat
Chrysler aims to build Alfa Romeo
sales to 400,000 vehicles, up from
just 74,000 last year. The first new
vehicle is set to come in 2015, fol-
lowed by vehicles of varying sizes in
2016 through 2018.
For the first time in its history
Alfa Romeo will have a fully equipped
showroom, said Harald Wester, the
brands president.
The company also released ambi-
tious sales goals for its upscale Mase-
Continued from page 15 rati and several new models, includ-
ing a convertible and sports coupe
called the Alfieri. By 2018, it aims to
more than quadruple sales to 75,000
and lift revenue more than threefold
from 1.7 billion to 6 billion.
Maserati will deliver double-digit
margins throughout the plan period,
said Mr. Wester, who also is chief ex-
ecutive for Maserati.
Jeep, which now builds all its
models in the U.S., will add produc-
tion in Europe, China and Latin Amer-
ica with a goal of building 900,000
vehicles outside North America by
2018, said Michael Manley, brand
chief executive. The company plans to
add two new Jeep models, a small
SUV next year and full-size Grand
Wagoneer in 2019.
This alone represents one of the
greatest opportunities the Jeep brand
has had in recent history, Mr. Manley
said, speaking to investors and ana-
lysts on Tuesday.
Fiat Chrysler also is planning to
add 1,300 sales outlets around the
world, mostly in Europe, Asia and
Latin America. The company expects
the global utility-vehicle market to
gro from14 million sales in 2013 to 18
million in 2018, most of it coming
from Asia.
With Alfa Romeos return to the
U.S., the Chrysler brand will move
downscale and become its main-
stream, high-volume competitor with
a fuller line of cars and SUVs, and two
new plug-in people haulers. With the
change, the Chrysler brand hopes to
more than double sales by 2018 to
800,000 vehicles.
The move would better define
Chrysler, which now has three mod-
els, all of which overlap with similar
vehicles in the middle-market Dodge
product line.
Dodge will be repositioned as the
auto makers U.S. performance
brand and drop two models, the
Avenger sedan and Caravan minivan,
to eliminate duplicate models with
the Chrysler brand.
Fiat Chrysler would launch in 2016
a plug-in hybrid of its Town & Coun-
try that would get an estimated 32 ki-
lometers per liter, and a newcompact
car called the Chrysler 100.
AstraZeneca Makes a Stand
most recent cash-and-stock proposal
valued at 50 ($84) a share sub-
stantially undervalued the com-
pany. Tuesday, AstraZeneca shares
fell 2.7% to close at 46.78 in Lon-
don trading.
U.K. opposition leader Ed Mili-
band has called for an immediate
independent assessment of
whether Pfizers proposed takeover
is in the national interest, after ac-
cusing the U.K. government of
cheerleading for the deal in an
open letter to Prime Minister David
Cameron.
Mr. Camerons spokesman said
Tuesday that the government was
unapologetic in its active engage-
ment with both parties over a po-
tential deal, stressing that any deci-
sion was a matter for the companies,
their boards and shareholders.
U.K. Business Secretary Vince
Cable said the government was
very alive to national-interest
considerations, and has not ruled
out intervening.
Continued from page 15 Representatives from Pfizer
and AstraZeneca will be called be-
fore a U.K. parliamentary commit-
tee in coming weeks to discuss the
potential takeover, a representa-
tive from the Department for Busi-
ness, Innovation and Skills said
Tuesday.
While a committee could ask dif-
ficult questions over a proposed
deal, it would have no powers to
block it.
AstraZenecas strategy update
comes a day after Pfizer sought to
increase pressure on the British
company to enter talks on creating
the worlds biggest pharmaceutical
company. Pfizer also reported de-
clining quarterly results that under-
scored why it is interested in a tie-
up.
In an interview Monday, Pfizer
Chief Executive Ian Read said the
offer was compelling and urged
the U.K.-based company to enter
talks.
Jonathan D. Rockoff
contributed to this article.
BayerBuysMerckUnit
global sales, Bayer chief executive
Marijn Dekkers said Tuesday. Ranking
No. 1 will be the OTC businesses of
Novartis and GlaxoSmithKline, which
the companies plan to combine into a
joint venture with $10 billion in yearly
sales from such products as Excedrin
pain medicine and Aquafresh tooth-
paste.
The biggest OTC companies are
consolidating to help them compete
more effectively for shelf space in
large retail pharmacy chains such as
Walgreen Co., Dr. Dekkers said.
Merck, based in Whitehouse
Station, N.J., has a strong presence
in U.S. retailers but not as much
market share overseas. We now
have an opportunity to take the
Merck product brands and make
them more global, Dr. Dekkers said.
That opportunity is stronger in
emerging-market countries such as
China and Brazil than it is in
developed European markets that
already have established brands, Dr.
Dekkers said. The deal will also help
Bayer expand its market share in the
U.S. and give it an entry into the
market for foot-care products such as
shoe inserts, via Mercks Dr. Scholls
brand.
The acquisition is Bayers sec-
ond-biggest ever, after its $17 billion
purchase of Germanys Schering AG
in 2006.
Merck and Bayer also agreed to
form a collaboration to co-develop
and market certain prescription heart
drugs, including Bayers Adempas, a
Continued from first page treatment for a form of high blood
pressure. Merck will pay Bayer $1 bil-
lion upfront, plus potential additional
milestone payments of up to $1.2 bil-
lion if sales goals are reached.
Merck is slimming down after
bulking up with its 2009 acquisition
of Schering-Plough Corp. of the U.S.,
which brought in the OTC and con-
sumer products business. That unit
had $1.9 billion in sales last year,
down 3% from the year before, con-
stituting about 4% of Mercks total
revenue.
Merck said in January it was ex-
ploring options for the OTC busi-
ness because it didnt have a strong
presence outside North America. To
gain global scale, Merck would have
needed to make hefty acquisitions,
Merck Chief Executive Kenneth Fra-
zier said Tuesday.
Merck also said in January it was
exploring options for its division
that makes drugs and vaccines for
pets and livestock, which had $3.4
billion in sales last year. But Merck
has decided to keep its animal-
health unit, Mr. Frazier said Tues-
day, because it already has a strong
global presence and a leading mar-
ket position, in contrast to the con-
sumer business.
We should be looking for oppor-
tunities to augment our already
leading animal-health franchise, he
said.
Michael Calia,
Neetha Mahadevan
and Jonathan D. Rockoff
contributed to this article.
Combined Impact
Source: Bayer The Wall Street Journal
Claritin
Aspirin
Aleve
Bepanthen
Canesten
Dr Scholls
Alka-Seltzer
Coppertone
One A Day
Supradyn
Merck
Bayer
Bayer
Bayer
Bayer
Merck
Bayer
Merck
Bayer
Bayer
576
464
321
310
257
232
214
207
176
158
Product Company 2013 sales in millions
The deal with Merck signicantly broadens Bayers
range of over-the-counter products.
Top ten Merck and Bayer brands by sales
THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 13
OPINION
Letters To
The Editor
* * *
Hungarian Justice
Hungarys Jobbik Stands
Out (Europe News, April 23)
cited threatening marches by
groups linked to far-right Job-
bik that are only a bad memory
of the past. According to the
penal code adopted in 2012,
uniformed crime is punish-
able and paramilitary organiza-
tions are banned. Images of
uniform-wearing groups are
from registered demonstrations
under strict police control,
where attendees exercise their
constitutional freedom of as-
sembly.
The Roma killings mentioned
in your article happened in
2008-09, the assailants were ar-
rested in 2009, and they were
sentenced in 2013 to life impris-
onment. Following this shameful
occurrence, the Orbn govern-
ment strengthened public secu-
rity and declared zero tolerance
for ethnic discrimination.
FERENC KUMIN
Deputy State Secretary for
International Communications
Budapest
* * *
Please, Some
Subtlety on Germany
Is it surprising that the Ger-
mans are scared of Russia, as
John Vinocur writes in his April
29 op-ed, The Chancellors
Choice, quoting former German
culture minister Michael Nau-
mann? Not so long ago, we Ger-
mans had half a million Red
Army soldiers occupying the
eastern part of our land, poised
to invade the West through the
Fulda Gap. Who in the West,
other than North Americans
safely installed on their side of
the Atlantic, isnt afraid of Rus-
sia under Vladimir Putin? Ger-
manys ridiculously small mili-
tary of 183,000 active soldiers
cannot deter him, but neither
could all of Western Europes
forces combined. Granted, we
were utopian fools to disarm to
such an absurd level, relying in-
stead on the Americans to save
us. This might have been a safe
bet until an even more utopian
set of leaders took charge in
Washington in 2009.
I hope that the West will
have still time to act as dis-
cretely as possible on the Ro-
man maxim, si vis pacem, para
bellum (if you want peace, pre-
pare for war). Meanwhile, those
49% of Germans wanting their
government to mediate between
Russia and the U.S. might be
lamentable dreamers, but that
doesnt mean that they are
turning against the West. What
else can they hope for than for
their chancellor, a scientist
speaking Russian as well as Pu-
tin speaks German, to keep a
cool head while working the
phones? Its still more prudent
than the loudmouthed rhetoric
currently dominating Americas
airwaves.
UWE SIEMON-NETTO
Laguna Woods, California
Amid all the discussion about
raising the U.S. minimum wage,
its easy to forget that there are
thousands, if not millions, of
Americans who work for less than
the minimum wagesome even
for negative wages (imagine that).
Principal among these less-than-
the-minimum are self-employed
workers, tradesmen and women
and small business owners,
especially those starting new busi-
nesses.
Working so many hours for so
little money isnt the plan, but
sometimes thats how things work
out until you can manage to get
ahead.
After covering overhead, in-
cluding minimum wage for their
employees, small business owners
may end up losing moneyi.e.,
making negative income. How
much is that per hour? Bank-
ruptcy may provide some relief,
but then watch out for the taxes
related to forgiveness of debt in-
come.
Most small business owners,
though, will either hang on and
hope things get better, or quietly
fold before they get worse. The
only thing the owners cannot do
is hire anybody for less than the
minimum wageunless they take
in a partner who as co-owner will
be exempt.
I was a teenage entrepreneur: I
delivered newspapers. After fold-
ing the papers, delivering them,
going around in the evenings to
collect payments, keeping my bike
going and (rarely) borrowing my
fathers car for the extra-heavy
Sunday papers, I had no idea what
my hourly wage worked out to be.
Many folks in other categories
are paid nothing or next-to-noth-
ing. Interns, some of those in
work-study programs, job train-
ees, family farmers, kids doing
chores and, depending on how you
define work, ordinary students.
And what about the domestic
workers known as mothers or
fathers? Surely they deserve a
wage commensurate with their re-
sponsibilities of raising the next
generation. Same goes for those
caring for disabled family mem-
bers.
The largest category of zero-
salaried workers are the millions
who volunteer their services and
expertise for nonprofit organiza-
tionschurches, YMCAs, schools,
hospitals, kids sports leagues,
recreation programs; the list is
endless. So its OK for them to
work for $0 per hour, or for the
minimum wage, but illegal for
anything in between. Does that
make sense? If they can agree to
work for $0 per hour, why not for
$1 or $5 or any other number
agreed to?
The answer, of course, is that
these volunteers and all those oth-
ers who make sub-minimum
wages or none at all are doing so
by choice. Government steps in to
dictate wages for the poorwho
are then barred from working for
less, even if they want to. With
fewer jobs available because busi-
nesses are forced to pay higher
wages, then the jobless poor are
forced onto the doleand pre-
sumably will vote for those who
provide the best dole.
So the minimum wage, like so
many government programs, is re-
ally a scam that never gets
busted. Isnt that how these pro-
grams grow? There are always a
few vocal supporters of any pro-
gram and a lot of silent victims
who mostly dont even know what
effect the programs have on the
public at large and the economy
as a whole.
Minimum-wage laws raise busi-
ness costs and increase
unemployment. But they also
require bureaucratswho make a
lot more than minimum wageto
administer the dole and regulate
wages. So whats not for politi-
cians to like?
Mr. Heyer is a lawyer in Olean,
N.Y.
The Last Marines Leave Sangin Valley
Sangin Valley,
Afghanistan
For days I have
been putting the
same question to
soldiers of the Af-
ghan National Army: How do you
feel about the imminent departure
of Coalition forces? The answers
are always variations on this one:
We are happy and sad, they say.
The Americans are our friends
and partners. They helped us tre-
mendously. We are sad to see
them go. But we are happy that
they can go back to their families.
And we are happy that we can
now defend our own country and
defeat the enemy.
Its a heartening reply, accom-
panied by assurances that they
have the military situation well in
hand. They had better. The fight-
ing season begins in a few days,
once the poppy harvest is brought
in. Few places in Afghanistan have
seen as much bloodshed as this
fertile belt running along the
banks of the Helmand River. The
British, who lost more than 100 of
their troops here, found it impos-
sible to control. The U.S. Marines
took over in 2010, losing another
50 men.
The Marines won the fight. But
now they are gone for good. Late
Sunday night, I watched them de-
part from Forward Operating Base
Nolay, the last of what were once
30 bases in the valley. As a final
order of business they picked up
the trash, turned over the garbage
cans, and drove away, a long con-
voy of heavily armored vehicles
slowly making their way to Camp
Leatherneck in the desert, 60
miles away.
So are the Afghans ready?
The Marines who have been
training and advising them for the
past year are cautiously optimis-
tic. The Afghans have been con-
ducting security operations on
their own for a year while the Ma-
rines have mostly stuck to their
bases. They have shown initiative,
adaptability, discipline, coordina-
tion and a fighting spirit. At a
time when nobodys talking about
winning, one Marine officer tells
me, they are talking about win-
ning.
The best evidence was the
peaceful April 5 national election,
in which Afghan soldiers and
police were able to maintain
securityand ballot-box integ-
rityat more than 6,000 polling
places. Nobody expected the
Afghans to perform so well. In
Sangin alone, some 5,000 people,
or 58% of the electorate, turned
out to vote; in the 2009 election,
just 179 people did.
Nobody expected, either, that
the Taliban would be unable to
disrupt the vote. The tables are
turned now, says Maj. Gen. Sayed
Malouk, the top Afghan com-
mander in Helmand province.
The enemy used to do the attack-
ing. Now we are the ones attack-
ing them.
Whether the Afghans can sus-
tain the momentum is another
question. A few Afghan officers
are willing to share their doubts.
Do you have the equipment and
support you need to win the
war? I ask one mid-ranking of-
ficer.
No sir, he says. These weap-
ons we have are old. Once theyve
been broken we dont have spare
parts.
Could his unit count on the
central government in Kabul to
make up the shortfalls?
Unfortunately Im not sure,
he admits. In the past theyve
proven they cant help. We should
have air support, a good radar-
control system, MRAPsthe last
of these being the heavily ar-
mored, IED-resistant vehicles that
are to the Afghan Armys Humvees
roughly what a Humvee is to a
Dodge Dart.
As evidence of what he means,
the wreckage of a smashed Afghan
Humvee sits in the yard of the
base, the victim of the improvised
explosive devices that are the Tal-
ibans weapon of choice. We hope
that when Coalition forces leave
here we will end up with better
vehicles, says another senior
Afghan officer. He all but implores
me to make sure the point gets
conveyed to the American public.
The officer isnt likely to get
his wish, nor is it clear that he
should: An army that lacks the
logistical ability to keep its Hum-
vees on the road is unlikely to
succeed with MRAPs. Afghani-
stans military will continue to
evolve to where it is Afghan sus-
tainable, says Brig. Gen. Daniel
Yoo, the senior Coalition officer in
the region. Every military wants
better equipment. What the
Afghans need, as opposed to what
they want, is the ability to take
good care of what they have.
For that they still need help.
The NATO mission wraps up in
December, and the size of the
remaining U.S. force is up in the
air. Right now 10 to 12,000 [U.S.
troops] is what were looking at,
says Brig. Gen. Yoo, adding that
the larger the American force, the
fewer the overall risks. The
Obama administration is rumored
to be contemplating a force of
5,000too small to make a differ-
ence, large enough to make trou-
ble. Its the same mistake the
president made in Iraq.
Its fashionable to write off
Afghanistan as another lost war.
Anyone who spends time in
Sangin today would know it isnt.
But whether Americas withdrawal
from the Sangin Valley is remem-
bered as a transition or a retreat
depends on whether Mr. Obama
wants to win a war he has spent
his presidency fighting, or merely
declare victory and go home.
Write to bstephens@wsj.com
[ Global View ]
BY BRET STEPHENS
An Afghan soldier in southern Afghanistans Sangin district last June.
A
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BY JOHN H. HEYER
Small business owners dont
plan all those hours for little
pay. Sometimes it just works
out that way.
The Afghan forces talk
about winning, but they
lack basic equipment.
The Real Minimum Wage: Zero
16 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
UBS...............................................................1
U.S. Cellular............................................... 20
Verizon Communications...........................20
Merck.......................................................1,28
Novartis.................................................15,28
Pfizer..........................................................15
Reckitt Benckiser Group........................... 28
Roche Holding............................................15
Royal Bank of Scotland.............................21
Sanofi ......................................................... 15
Sino Land................................................... 18
Societe Generale........................................21
Sprint..........................................................20
Sun Hung Kai Properties.......................... 18
Tesco...........................................................22
Time Warner Cable....................................20
T-Mobile US............................................... 20
Twitter........................................................28
Dish Network.............................................20
Drax Group................................................. 15
E.ON SE......................................................15
European Central Bank..............................22
Federal Reserve......................................... 22
Fiat............................................................. 15
Foresight Energy........................................16
Generale des Etablissements Michelin....22
General Electric..........................................16
GlaxoSmithKline........................................ 28
Google....................................................20,22
Guanwei Recycling.......................................9
Hopewell Holdings.....................................18
Jinchuan Group International Resources...9
Johnson & Johnson................................... 28
Arch Coal....................................................16
AstraZeneca...............................................15
AT&T...........................................................20
Audi ............................................................ 17
Barclays...................................................1,22
Bayer....................................................... 1,28
BMW...........................................................17
BNP Paribas............................................... 21
China Auto Logistics................................... 9
China National Offshore Oil ....................... 9
Citigroup.....................................................22
Comcast......................................................20
Commerzbank............................................ 22
Daimler.......................................................17
DirecTV.......................................................20
Aberdeen Asset Management..................22
Adidas.........................................................22
Alstom........................................................16
Amazon.com...............................................20
Apple.......................................................... 20
INDEX TO BUSINESSES
Businesses
This index of businesses mentioned in
todays issue of The Wall Street Journal
is intended to include all significant
reference to companies. First reference
to the companies appears in bold face
type in all articles except those
on page one and the editorial pages.
Corrections
Amplifications
Readers can alert the London news-
room of The Wall Street Journal to
any errors in news articles by email-
ing wsjcontact@wsj.com or by call-
ing +44 (0)20 7842 9901.
BUSINESS & FINANCE
France Rebuffs GE Bid
For Alstom Power Unit
PARISFrench President Fran-
ois Hollande said Tuesday that
General Electric Co.s proposed $17
billion purchase of Alstom SAs
power division isnt satisfactory and
the government has the authority to
secure a better deal.
Last week, GE proposed acquir-
ing the Alstom unit that manufac-
tures turbines and other heavy ma-
chinery for power plants. The
division accounts for almost three-
quarters of Alstoms annual revenue.
Today we have sufficient means
to apply pressure to ensure that at
the end of the process it is good for
Alstom, good for French industry
and good for energy diversification
in the country, Mr. Hollande said
during an interview on French tele-
vision channel BFMTV.
Mr. Hollande referred to the let-
ter sent Monday by Economy Minis-
ter Arnaud Montebourg, who told
GE Chief Executive Jeffrey Immelt
that the government would reject
the deal as it stands.
The French government regularly
weighs in on private corporate deci-
sions, particularly in industries it
considers strategic.
GE contends the deal is good for
Alstom and France, and said it was
open to further talks. We appreci-
ate the engagement of the French
government, a spokesman for GE
said Monday. We believe our pro-
posal is good for France, for Alstom
and for GE. As our letter to Presi-
dent Hollande stressed, we are open
to continuing dialogue.
Much is at stake for Mr. Hollande
in the contest for Alstom. The com-
pany had to be bailed out a decade
ago and has fallen on tough times.
But it remains an important em-
ployer and industrial icon in France,
where it makes the TGV bullet
trains and power turbines for the
countrys fleet of nuclear plants.
Mr. Montebourg, who has been
the leading government voice
against the deal, said Paris was
open to negotiations and suggested
that GE transfer its own locomotive
and rail-signaling business to Al-
stom to augment the French com-
panys high-speed and commuter-
trains business.
Last week, Alstoms board en-
dorsed the GE offer, which is under-
going a monthlong review. Siemens
AG has said it intends to submit its
own bid. The German company has
made a preliminary proposal to take
over the power unit and transfer
some of its train business to Alstom.
Mr. Montebourg has publicly
suggested he prefers the Siemens
offer. During the TV interview, Mr.
Hollande indicated he wants the Sie-
mens bid to be considered.
Today, Id prefer to improve the
bids, Mr. Hollande said. There is
another offer that we will try and
make appear, the president said, in
an apparent reference to Siemens.
Mr. Hollande said an investment
in Alstom by the French state isnt
a hypothesis at the moment.
Mondays letter comes after Mr.
Immelt personally sought to reas-
sure officials, including Messrs.
Montebourg and Hollande, about the
deal, citing GEs long history of in-
volvement in France. It is the first
indication that Mr. Hollande might
use a provision in French law that
would permit the government to
block certain transactions for stra-
tegic reasons.
The previous French administra-
tion passed a law allowing the gov-
ernment to block the sale of assets
that are deemed strategic. In his let-
ter, Mr. Montebourg stressed the
government considers Alstom to
have a crucial role in the French
economic environment as a supplier
of equipment to the countrys nu-
clear-energy industry.
Ted Mann in New York
contributed to this article.
BY INTI LANDAURO
AND WILLIAM HOROBIN
An Alstom employee worked on a turbine in Rugby, England, last month.
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Unloved in U.S., Dirty Coal Makes Its Way to Europe
inventory levels, the U.S. coal indus-
try expects thef EU to be a good
long-term bet. Several U.S. mining
companies, including Foresight En-
ergy LLC and Arch Coal Inc., re-
cently opened new sales offices on
the Continent.
The big gaineraccounting for
roughly one-third of U.S. exports, up
from almost nothing 10 years ago
has been high-sulfur coal taken from
thick coal seams in Illinois and Indi-
ana. It is shipped nearly 1,300 kilo-
meters down the Mississippi River
to a terminal on the Gulf of Mexico.
From there, it heads across the At-
lantic to people like Dave Docker,
head of fuel procurement at Drax,
who buys nine million tons of coal a
year on global markets.
Mr. Docker says the Illinois and
Indiana coal, shunned in some
places in the U.S. because of its high
sulfur content, offers a less-expen-
sive alternative than coal from
nearby European mineseven in-
cluding transportation costs.
Phil Gonet, president of the Illi-
nois Coal Association, says geogra-
phy helps keep prices low. Our coal
is easy to extract and were right
next door to two rivers that can take
the coal to anywhere in the world,
he says, referring to the Mississippi
and Ohio rivers. Mr. Gonet argues
that Illinois Basin coal is a cost-ef-
fective fuel alternative given new
scrubbing technology that removes
sulfur from power-plant emissions.
Continued from previous page The Illinois Basinlocated in Illi-
nois, Indiana and Kentuckypos-
sesses some of the worlds richest
coal seams, but high sulfur and ash
content caused the coal to be
shunned after the passage of the
Clean Air Act in 1970. By 2002, min-
ing in Illinois reached its lowest lev-
els since the Great Depression.
That is when a handful of compa-
nies, led largely by two private oper-
ators, Chris Cline and Robert Mur-
ray, snapped up mines on the cheap.
The acquirers betcorrectlyon
scrubbing technology that can re-
move almost all the sulfur. They also
counted on the coal appetite of ex-
port markets such as the U.K.
Mr. Clines Foresight Energy
Draxs top U.S. supplierlast year
offered its coal for as little as $65 a
ton in Europe, including freight,
compared with $80 a ton from U.K.
mines near the Drax power plant.
For Mr. Docker, the coals low
cost is a saving grace. He has made
enough other improvements to plant
operationsin particular, new tech-
nology to remove sulfur betterto
allow Drax to burn cheap dirty coal
and still comply with strict EU laws.
The Drax power plant was built
in northern England in the 1970s,
following the conventional model of
building power plants next to coal
mines.
In 2005, EU regulators set up
rules that fixed Draxs sulfur-emis-
sions quota at 33,000 tons a year.
Drax, which bought almost all of its
coal from local mines, began import-
ing cleaner coal from Russia and Co-
lombia that contains less than 1%
sulfur, compared with the 2.5%-3%
sulfur content of Illinois Basin coal.
At the same time, Drax also
started burning dried vegetation
that emits almost no sulfur and re-
duced the amount of coal needed.
One of Draxs six boilers now burns
biomass, or compressed plant and
wood material, much of it imported
from the U.S. The plan is to convert
two more of the boilers to biomass
fuel by 2020.
Drax was emitting less than the
allotted 33,000 tons of sulfur by us-
ing the cleaner Russian and Colom-
bian coal and the biomass, giving
Mr. Docker a chance to burn dirtier
coal. I have headroom now to emit
more sulfur, and that can be filled
with Illinois Basin [coal], he says.
His engineers would prefer Appala-
chian coal, which is cleaner, burns
more efficiently and doesnt impose
as much wear on the boilers. But
its too expensive, Mr. Docker says.
Appalachian coal typically sells for
20% more than Illinois Basin coal.
The use of high-sulfur Illinois Ba-
sin coal in Europe is disrupting the
plans of policy makers hoping to
wean the EU off dirty fuel sources,
and has angered environmentalists
who contend its high sulfur content
damages the environment, despite
power plants now using scrubbers to
remove more than 90% of the sulfur.
Imports have also brought high-cost
coal mines in Germany, Poland and
the U.K. to the brink of closure. U.K.
coal output fell 24% last year to 13
million tons.
Tara Connolly, a Greenpeace ac-
tivist in Brussels, says dirty coal
shouldnt be burned no matter how
cheap it is and that quotas simply
give companies permission to con-
tinue polluting, just not as much.
Quotas have allowed the U.S. to
export its emissions to Europe, Ms.
Connolly says. She says that a better
approach would be an outright ban
of dirty coal in favor of alternative
clean-energy sources such as wind,
solar and biomass. We want to end
the Age of Coal, she says.
EU officials are aware of the rise
in high-sulfur Illinois Basin coal im-
ports and are concerned, says Joe
Hennon, a spokesman for the Euro-
pean Commission, the EUs executive
arm. Weve seen the increase in
shale gas in the U.S. and more U.S.
coal coming to Europe, he says.
Many EU countries are in viola-
tion of the blocs emissions rules,
and 19 have been subject to formal
complaints from the European Com-
mission. Drax and the U.K. havent
faced any complaints, Mr. Hennon
says.
The EU is studying possible new
rules governing emissions from coal-
fired power plants.
Jan Hromadko in Frankfurt
contributed to this article. The Drax power plant, the U.K.s largest, uses high-sulfur coal from the U.S.
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14 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
OPINION
Ukraines future as a sovereign
nation is under threat as Russia
continues to behave aggressively
in the region. President Obama
and European leaders are consid-
ering imposing broader economic
sanctions to punish Vladimir Pu-
tin for unlawfully annexing Cri-
mea. They should do it quickly.
This would make it clear to
the Kremlin, which is deeply in-
volved in managing Russias econ-
omy and military, that belligerent
behavior has consequences. But in
addition to hurting Russia with
sanctions, the U.S. should
strengthen Ukraine economically.
This will help the country with-
stand Mr. Putins attempted take-
over.
One way to increase the
chances of a prosperous future in
Ukraine is to strengthen the na-
tions currency, the hryvniafor a
stable monetary foundation is
necessary for economic growth.
Even as the value of the Russian
ruble has fallen almost 9% against
the dollar in 2014, Mr. Putin takes
comfort in knowing that the
hryvnia is doing worse: It has
plummeted 35% against the dollar
since January. The currencys
weakness is part of his plan to
bring Ukraine to its knees.
This is where America and our
European allies can throw a
wrench into Mr. Putins designs,
rather than standing idly by as
the hryvnia collapses under physi-
cal and psychological intimidation
from Russia. We should encourage
the establishment of a Ukrainian
currency board, an institutional
arrangement that anchors the
value of national money to a
more stable currency. Under a
currency board, the hryvnia
would be convertible into the dol-
lar or the euro at a fixed rate, and
backed by Ukraines own hard
currency reserves. The
International Monetary Fund
would supplement the reserves
with a special-purpose loan ar-
rangement.
A currency board would help
Ukraines money become as reli-
able and stable as the worlds
dominant reserve currencies. The
effects would ripple throughout
the economy: Foreign investors
could have confidence that the
hryvnia is not in a death spiral,
and Ukrainians would know that
Mr. Putin cannot annihilate the
value of their personal savings.
Such stability would encourage
the nation under siege to main-
tain its faith in free people and
free markets.
Equally important: Moscow
would immediately face the dis-
maying reality that Ukraines
money is suddenly far more de-
pendable than its own. Russia is
already on a spending blowout to
save the ruble as economic condi-
tions deteriorate: Russias central
bank has spent more than $23 bil-
lion intervening in foreign
exchange markets since January.
On April 25, the bank raised its
key interest rate by 50 basis
points to 7.5%, a desperate at-
tempt to tamp down the inflation-
ary effects of a weakening ruble.
Monetary policy is not Russias
forte in global affairs, and so the
U.S. and Europe should use their
advantage strategically to hurt a
vulnerable adversary.
In an April 10 letter to Trea-
sury Secretary Jack Lew, Sen. Ted
Cruz (R., Texas) and I suggested
that the Treasury Department
work with the International Mon-
etary Fund to create a currency
board to help Ukraine transition
to more solid economic footing.
The IMF has a long track record
of supporting currency boards
and currency board-like systems.
Johns Hopkins economist Steve
Hanke, for instance, has designed
such systems for Estonia, Lithua-
nia, Bosnia-Herzegovina and Bul-
garia. Estonia has enjoyed a re-
markable political and economic
transformation thanks in large
part to a currency board
introduced in 1992, which helped
the country transition to the euro
zone.
Strengthening the national
currency and bringing a disci-
plined monetary regime would
send a powerful signal of support
to Kiev as the new government
attempts to bring economic re-
form and democratic institutions
to Ukraine. Most important, es-
tablishing a currency board would
avoid wasting IMF and other in-
ternational assistance, which in-
cludes U.S. taxpayer dollars, on an
unstable economy.
At a time when it is vital to
bolster trust in democracy and
free markets, Ukrainian leaders
and the IMF should recognize the
value of a stable monetary base
and financial system. The IMF
should provide the technical expe-
rience necessary to ensure that
the system, which would be run
by Ukrainian monetary
authorities, is implemented prop-
erly. The IMF, after all, was estab-
lished for the precise purpose of
managing a fixed-rate exchange
system anchored by a gold-linked
dollar.
America must continue to urge
innovative measures to demon-
strate that we stand with the
Ukrainian people, who have al-
ready shown courage and convic-
tion in confronting Mr. Putins
menacing threats. And so we
should extend to them the safe-
haven benefits of having a
trustworthy sovereign currency.
Mr. Rubio, a Republican from
Florida, is a member of the Sen-
ate Foreign Relations Committee.
Ukraines 200-hryvnia note depicts the writer and poet Lesya Ukrainka (1871-1913).
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Ukraine Needs a LifelineNow
BY MARCO RUBIO
Anchoring the hryvnia to a
more stable currency would
help Kiev immensely and
deliver a blow to Putin.
Thorold Barker, Editor,
Europe, Middle East & Africa
Bruce Orwall, Senior Editor, Europe
Gren Manuel, Executive Editor, Europe
Terence Roth, Managing Editor, Europe
Lauren Berkemeyer, Marketing
Kate Dobbin, Communications
Florence LeFevre, Institutional Sales Europe
Jonathan Wright, Circulation Sales
Kelly Leach, Publisher
Published since 1889 by
Dow Jones & Company
2014 Dow Jones & Company. All Rights Reserved
Under pressure from China,
Norwegian Prime Minister Erna
Solberg and other key officials
have declined to meet the Dalai
Lama when the Tibetan spiritual
leader visits Norway this week.
Oslos decision signals the suc-
cess of Beijings escalating cam-
paign to deny the Dalai Lama and
Tibets democratic government-in-
exile the standing they need to
find a just solution to the Tibetan
issue. The setback in Norway
marks a worrying trend that
should spur consultations among
European countries and the
United States on steps to resist
Beijings pressure.
We havent been able to work
with China on international issues
for four years, Ms. Solberg told a
press conference Monday, refer-
ring to the difficult situation
that Norway has faced since 2010,
when Beijing broke off high-level
ties with Oslo after the Norwe-
gian-based Nobel Committee
awarded its Peace Prize to jailed
Chinese dissident Liu Xiaobo.
Norway has heretofore been a
staunch supporter of Tibet and
has constantly promoted efforts
to bring about a negotiated solu-
tion. But when the Nobel Commit-
tee awarded Mr. Liu the prize in
2010for his prominent work on
Charter 08, a manifesto for de-
mocracy, constitutionalism and
human-rights reforms in commu-
nist ChinaBeijing reacted fero-
ciously. The Chinese government
called on foreign countries to
boycott the award ceremony,
where Mr. Lius own absence (due
to his imprisonment on subver-
sion charges) was poignantly
represented by an empty chair.
Although the Nobel Committee
acts independently of the Norwe-
gian government, Norway was im-
mediately made the target of dip-
lomatic and commercial
retaliation.
Norways experience is not
unique. Lithuania and Estonia,
whose leaders have defied Beijing
by receiving the Dalai Lama, have
also experienced political retalia-
tion. Britain appears to have
come under marked pressure as
well; citing unnamed sources, the
British press reported that Prime
Minister David Camerons trip to
China late last year had been pre-
ceded by a commitment that he
would not raise the issue of Tibet.
To reverse this decline in in-
ternational support for Tibet, Eu-
rope, the U.S., India, Japan and
other democracies would have to
develop a united stand that pro-
tects against Chinas divide-and-
conquer strategy, and band to-
gether to show respect for the
Dalai Lama and the Tibetan exile
government. But why should
they? After all, one might argue,
Tibets fate is sealed and 60 years
of occupation will not be undone
by giving a respectful welcome to
the Tibetan religious leader.
Beijings policies in Tibet are
closely linked to its behavior in
the rest of the region and the
world. Beijing takes an expansive
view of the core interests it
claims in Tibet, for example by
meddling in Nepal to thwart Ti-
betan refugees escape to safety.
Further afield, Beijing sees its po-
sition in Tibetwhich China in-
vaded in the 1950sas a reason
to obstruct international action
on other matters, lest interven-
tion elsewhere create a precedent
to intervene to stop Chinas re-
pression inside Tibet.
Coordination among the
worlds democracies is also vitally
important in light of Beijings
plans to exert control over the se-
lection of the next Dalai Lama. It
is equally and similarly crucial
with regard to the current Dalai
Lamas own plans for the future
of his spiritual office, and to the
work of the Tibetan government-
in-exile based in northern India.
Without a unified position on
these matters, the void left be-
hind by the Dalai Lama will be
swiftly exploited by Beijing.
Aside from acting to stop Bei-
jings repression in Tibet, the sur-
vival of Tibetan Buddhism and de-
mocracy-in-exile has profound
implications for the future politi-
cal development of China. Promi-
nent Chinese dissidents, such as
human-rights lawyer Teng Biao,
argue that high-level meetings be-
tween world leaders and the Dalai
Lama have a direct effect on
Chinas human-rights perfor-
mance. Declining to meet with the
Dalai Lama and failing to pursue
Tibetan human rights thus under-
mines these dissidents, who speak
out at great personal risk.
While defying Beijing is not
easy, world leaders would likely
find their citizens in strong sup-
port of a new, principled position
that recognizes the moral and
strategic importance of Tibet. De-
spite Chinas sustained pressure
on governments, support for Ti-
bet remains surprisingly strong
among European publics. In a re-
cent Ifop poll conducted in France
and Germany, more than 80% of
respondents said they want their
leaders to meet with the Dalai
Lama, and equal or higher num-
bers said they want their leaders
to raise the issue of Tibet when
they meet with Chinese President
Xi Jinping. Meanwhile, a whop-
ping 90% of French respondents
and 92% of German respondents
said they favor a meeting be-
tween Mr. Xi and the Dalai Lama
to pursue a negotiated solution.
Prime Minister Solbergs deci-
sion has drawn protest within
Norway. But she still has time to
find a way to welcome the Dalai
Lama. Better still, she could take
steps to pave the way out of the
predicament that so many democ-
racies find themselves in, by en-
tering into consultations with Eu-
ropean countries and the United
States over new, coordinated poli-
cies on Tibet. Only that will ar-
rest the current dynamic of con-
stant concessions, which not only
mean terrible consequences for
Tibetans, but also lost honor and
legitimacy for our democracies.
Mr. Mecacci is president of the
International Campaign for Tibet
and a former member of the Ital-
ian parliament. Ms. Bork is direc-
tor of democracy and human
rights at the Foreign Policy Ini-
tiative and board member of the
International Campaign for Tibet.
Oslo Snubs the Dalai Lama
BY MATTEO MECACCI AND ELLEN BORK
Under pressure fromChina,
Norways prime minister does
not plan to meet the Tibetan
religious leader this week.
Comments? The Journal
welcomes readers responses to
all articles and editorials. It is
important to include your full
name, address and telephone
number. Please send letters to
the editor to: Letters@WSJ.com
Wednesday, May 7, 2014
Pound/Euro 0.8203 g 0.32% Yen/$ 101.56 g 0.50% Global Dow 2514.62 g 0.31% Gold 1308.30 g 0.05% Oil 99.50 0.02% 3-month Libor 0.22485 10-year Treasury 5/32 yield 2.595%
THE WALL STREET JOURNAL. europe.WSJ.com
Hong Kong Property Developers
Seek to Stoke a Frosty Market
INTERNATIONAL PROPERTYREPORT 18
The Real Cost Behind
Twitters Nose Dive
HEARDONTHE STREET 28
AstraZenecaDefendsShunningPfizerBid
LONDONAstraZeneca PLC
fleshed out its stand-alone strategy
Tuesday with ambitious new reve-
nue targets, four days after turning
down a $106 billion takeover bid
from Pfizer Inc. that has ignited
fierce U.K. political debate.
The U.K. drug maker, which said
New York-based Pfizers offer sub-
stantially undervalued its business,
said it is aiming to generate annual
revenue of more than $45 billion by
2023, an 84% increase on the $25.71
billion it booked in 2013.
AstraZeneca also highlighted the
potential value of its pipeline of
cancer, asthma and diabetes drugs
in development, forecasting the new
drugs to generate peak annual sales
of between $23 billion to $63 bil-
lion, depending on the proportion
that might receive regulatory ap-
proval.
The increasingly visible success
of our independent strategy high-
lights the future prospects for our
shareholders, said AstraZeneca
Chairman Leif Johansson.
In an interview on Friday, Chief
Executive Pascal Soriot said Astra-
Zenecas pipeline was underappre-
ciated, highlighting 11 drugs in the
final stages of clinical testing and a
very strong oncology franchise.
Valuing a drug companys pipe-
line is notoriously difficult. Pipeline
drugs might be blocked by regula-
tors or discontinued as ineffective;
alternatively they could generate
billions of dollars in annual sales.
Roughly one-fifth of AstraZen-
ecas current valuation is based on
projected sales of its pipeline drugs,
said Credit Suisse, almost twice as
high as the average for the com-
panys European rivals including
Sanofi SA, Novartis AG and Roche
Holding AG.
New sales estimates AstraZeneca
gave Tuesday for its pipeline drugs
include as much as $6.5 billion for
its biggest hope: cancer treatment
MEDI4736, a total that would in-
clude sales in combination with
other drugs, compared with analyst
estimates of $2 billion to $7 billion
cited by the company.
AstraZeneca also set out new
revenue targets for its five growth
areas. Annual revenue estimates for
2023 now include $3.5 billion from
its blood-thinning pill Brilinta, $8
billion from its portfolio of diabetes
drugs and $8 billion from respira-
tory drugs.
The company said it expects
mid-to-high-single-digit percentage
revenue growth in emerging mar-
kets and low-single-digit revenue
growth in Japan.
Analysts at Jefferies, a broker-
age, said in a note to clients that the
new business forecasts appeared
overly optimistic, particularly
with regard to the updated targets
for the five growth areas.
AstraZeneca is facing flat or de-
clining revenue in coming years, as
its best-selling drugs lose patent
protection, but Mr. Soriot has fo-
cused on rebuilding the companys
pipeline and returning it to growth.
Pfizer has been pursuing its Brit-
ish rival since November, but Astra-
Zeneca has rejected the advances.
Last week, AstraZeneca said Pfizers
Please turn to page 17
BY HESTER PLUMRIDGE
AND NICHOLAS WINNING
Fiat Predicts Big Sales Gains
AUBURN HILLS, Mich.Fiat
Chrysler Automobiles NVs top exec-
utives rolled out a five-year plan that
projects big gains for a revamped Alfa
Romeo, its Jeep sport-utility line and
a Chrysler brand that is being reposi-
tioned as a mass-market competitor.
Chief Executive Sergio Mar-
chionne on Tuesday described the
outlook as the first day of a new life
for FCA and stressed a marketing
and investment strategy reflecting
the combined companys global ambi-
tions. Fiat Chrysler aims to increase
world-wide sales to seven million by
2018, from 4.4 million last year.
Still, a large first quarter net loss
provided a reminder of the challenges
it faces. Fiat on Tuesday posted a loss
of 319 million ($444 million) for the
year earlier period. The loss reflected
one-time costs connected to Fiats
payoff of a note held by a United Auto
Workers union healthcare trust, and
currency turmoil in Venezuela. With-
out those extra costs, Fiat said it
would have earned 71 million on a
12% increase in revenues for the quar-
ter.
In Europe, the Milan-based auto
maker aims to reverse years of losses
by moving Fiat up-market and adding
new premium Alfa Romeo and Jeep
models to fill its underused factories
in the region, boosting exports to
40% of European production by 2018.
With the regions auto market
showing signs of recovery, Fiat hopes
to increase European sales to 1.5 mil-
lion by 2018, mostly by expanding
sales outside of Italy. We were wait-
ing for a tailwind and the moment
has come, said Alfredo Altavilla, the
regions chief operating officer.
The auto maker also hopes to
boost sales of its small-car Fiat brand
over the next five years to 1.9 million,
up from 1.5 million today. Gains
would come mostly fromexpansion in
Asia and Latin America. It doesnt ex-
pect any growth in Europe.
How Mr. Marchionne would fi-
nance the sales expansion wasnt im-
mediately disclosed. However, he in-
dicated it wont involve a sale of the
companys stake in the Ferrari sports-
car brand. With Fiat heavily in debt
and burning cash in Europe, analysts
have pointed to an IPO of Ferrari as
one way to fund a turnaround. Fiat
was slated to report first-quarter re-
sults later in the day.
While Mr. Marchionne rejected the
idea of selling Ferrari, he argued the
brand is worth much more than the
4.3 billion ($6 billion) that analysts
have estimated, and could return
well in excess of 1 billion in earn-
Please turn to page 17
BY CHRISTINA ROGERS
AND MIKE RAMSEY
Fiat Chrysler CEO Sergio Marchionne, above on Tuesday, presented a plan to significantly expand sales over five years.
B
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e
w
s
EU Opens Its Arms
To Dirty U.S. Coal
DRAX, EnglandEven as it faces
increased regulatory scrutiny at
home, Americas dirty and unwanted
coal is being embraced in one of the
worlds cleanest energy markets: the
European Union.
At the biggest power plant in the
U.K., operated by Drax Group PLC, a
small black mountain of a million
tons of coal sits at the base of a
dozen 374-foot cooling towers.
Much of it is high-sulfur coal
from under the plains of Illinois and
Indianaexactly the kind of high-
emission, power-plant fuel receiving
closer scrutiny from U.S. regulators
and courts. Last week, the Supreme
Court ruled in favor of enforcing
regulations that require power
plants in 28 states to cut coal emis-
sions that blow across state lines.
Many U.S. power plants were al-
ready reducing emissions in antici-
pation of tougher Environmental
Protection Agency rules that take ef-
fect in 2015. Now, the Supreme
Court ruling could affect 1,000
power plants in the eastern U.S. that
might need to install additional pol-
lution controls or cut back on coal
consumption.
These are tough times for the
global coal industry, which has been
battered in recent years by regula-
tions, the U.S. boom in extracting
gas from shale-rock formations, and
lower prices caused by softening de-
mand from China. Coal now gener-
ates about 39% of electric power in
the U.S., off from 55% in 1990.
Low domestic demand has re-
newed the focus on U.S. exports,
which are on track for a record-set-
ting third straight year of more than
100 million tons. The 28-nation EU
imported 47.2 million tons of U.S.
coal last year, up from 13.6 million
tons in 2003. Exports to the U.K.
alone are up tenfold in the same pe-
riod. The U.S. ranked second only to
Russia in supplying Europe with coal
last year.
Germanys decision to phase out
of nuclear power after the 2011
Fukushima nuclear disaster in Japan
has also made it a significant buyer
of U.S. coal, mostly because the
commodity is so inexpensive.
Before the financial crisis, Eu-
rope was happy to favor the envi-
ronment, but when the economy
started not doing well, they werent
quite ready to accept the high power
price, so energy consumers re-
turned to coal, says Daniel Rohr, an
analyst for Morningstar Inc.
Since 2003, German imports of
U.S. coal have risen to more than 15
million tons from under a million
tons. A spokesman for E.ON SE, Ger-
manys largest power and natural-
gas utility, says it now purchases
more than four million tons of coal a
year, or 17% of its total, from the
U.S., up from 800,000 tons in 2010.
E.ON operates power plants in sev-
eral European countries.
Although sales have tapered off
in recent weeks because of higher
Please turn to next page
BY JOHN W. MILLER
U.S. coal exports to:
The Wall Street Journal
Source: Global Trade Information Services
50
0
10
20
30
40
2005 10 13
European
Union
47.2
million
tons
U.K.
12.3
million
tons
Frances Hollande says GEs bid for
Alstom falls short.................................. 16
China is biggest prize for German
premium-car makers............................ 17
14 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
OPINION
Ukraines future as a sovereign
nation is under threat as Russia
continues to behave aggressively
in the region. President Obama
and European leaders are consid-
ering imposing broader economic
sanctions to punish Vladimir Pu-
tin for unlawfully annexing Cri-
mea. They should do it quickly.
This would make it clear to
the Kremlin, which is deeply in-
volved in managing Russias econ-
omy and military, that belligerent
behavior has consequences. But in
addition to hurting Russia with
sanctions, the U.S. should
strengthen Ukraine economically.
This will help the country with-
stand Mr. Putins attempted take-
over.
One way to increase the
chances of a prosperous future in
Ukraine is to strengthen the na-
tions currency, the hryvniafor a
stable monetary foundation is
necessary for economic growth.
Even as the value of the Russian
ruble has fallen almost 9% against
the dollar in 2014, Mr. Putin takes
comfort in knowing that the
hryvnia is doing worse: It has
plummeted 35% against the dollar
since January. The currencys
weakness is part of his plan to
bring Ukraine to its knees.
This is where America and our
European allies can throw a
wrench into Mr. Putins designs,
rather than standing idly by as
the hryvnia collapses under physi-
cal and psychological intimidation
from Russia. We should encourage
the establishment of a Ukrainian
currency board, an institutional
arrangement that anchors the
value of national money to a
more stable currency. Under a
currency board, the hryvnia
would be convertible into the dol-
lar or the euro at a fixed rate, and
backed by Ukraines own hard
currency reserves. The
International Monetary Fund
would supplement the reserves
with a special-purpose loan ar-
rangement.
A currency board would help
Ukraines money become as reli-
able and stable as the worlds
dominant reserve currencies. The
effects would ripple throughout
the economy: Foreign investors
could have confidence that the
hryvnia is not in a death spiral,
and Ukrainians would know that
Mr. Putin cannot annihilate the
value of their personal savings.
Such stability would encourage
the nation under siege to main-
tain its faith in free people and
free markets.
Equally important: Moscow
would immediately face the dis-
maying reality that Ukraines
money is suddenly far more de-
pendable than its own. Russia is
already on a spending blowout to
save the ruble as economic condi-
tions deteriorate: Russias central
bank has spent more than $23 bil-
lion intervening in foreign
exchange markets since January.
On April 25, the bank raised its
key interest rate by 50 basis
points to 7.5%, a desperate at-
tempt to tamp down the inflation-
ary effects of a weakening ruble.
Monetary policy is not Russias
forte in global affairs, and so the
U.S. and Europe should use their
advantage strategically to hurt a
vulnerable adversary.
In an April 10 letter to Trea-
sury Secretary Jack Lew, Sen. Ted
Cruz (R., Texas) and I suggested
that the Treasury Department
work with the International Mon-
etary Fund to create a currency
board to help Ukraine transition
to more solid economic footing.
The IMF has a long track record
of supporting currency boards
and currency board-like systems.
Johns Hopkins economist Steve
Hanke, for instance, has designed
such systems for Estonia, Lithua-
nia, Bosnia-Herzegovina and Bul-
garia. Estonia has enjoyed a re-
markable political and economic
transformation thanks in large
part to a currency board
introduced in 1992, which helped
the country transition to the euro
zone.
Strengthening the national
currency and bringing a disci-
plined monetary regime would
send a powerful signal of support
to Kiev as the new government
attempts to bring economic re-
form and democratic institutions
to Ukraine. Most important, es-
tablishing a currency board would
avoid wasting IMF and other in-
ternational assistance, which in-
cludes U.S. taxpayer dollars, on an
unstable economy.
At a time when it is vital to
bolster trust in democracy and
free markets, Ukrainian leaders
and the IMF should recognize the
value of a stable monetary base
and financial system. The IMF
should provide the technical expe-
rience necessary to ensure that
the system, which would be run
by Ukrainian monetary
authorities, is implemented prop-
erly. The IMF, after all, was estab-
lished for the precise purpose of
managing a fixed-rate exchange
system anchored by a gold-linked
dollar.
America must continue to urge
innovative measures to demon-
strate that we stand with the
Ukrainian people, who have al-
ready shown courage and convic-
tion in confronting Mr. Putins
menacing threats. And so we
should extend to them the safe-
haven benefits of having a
trustworthy sovereign currency.
Mr. Rubio, a Republican from
Florida, is a member of the Sen-
ate Foreign Relations Committee.
Ukraines 200-hryvnia note depicts the writer and poet Lesya Ukrainka (1871-1913).
B
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Ukraine Needs a LifelineNow
BY MARCO RUBIO
Anchoring the hryvnia to a
more stable currency would
help Kiev immensely and
deliver a blow to Putin.
Thorold Barker, Editor,
Europe, Middle East & Africa
Bruce Orwall, Senior Editor, Europe
Gren Manuel, Executive Editor, Europe
Terence Roth, Managing Editor, Europe
Lauren Berkemeyer, Marketing
Kate Dobbin, Communications
Florence LeFevre, Institutional Sales Europe
Jonathan Wright, Circulation Sales
Kelly Leach, Publisher
Published since 1889 by
Dow Jones & Company
2014 Dow Jones & Company. All Rights Reserved
Under pressure from China,
Norwegian Prime Minister Erna
Solberg and other key officials
have declined to meet the Dalai
Lama when the Tibetan spiritual
leader visits Norway this week.
Oslos decision signals the suc-
cess of Beijings escalating cam-
paign to deny the Dalai Lama and
Tibets democratic government-in-
exile the standing they need to
find a just solution to the Tibetan
issue. The setback in Norway
marks a worrying trend that
should spur consultations among
European countries and the
United States on steps to resist
Beijings pressure.
We havent been able to work
with China on international issues
for four years, Ms. Solberg told a
press conference Monday, refer-
ring to the difficult situation
that Norway has faced since 2010,
when Beijing broke off high-level
ties with Oslo after the Norwe-
gian-based Nobel Committee
awarded its Peace Prize to jailed
Chinese dissident Liu Xiaobo.
Norway has heretofore been a
staunch supporter of Tibet and
has constantly promoted efforts
to bring about a negotiated solu-
tion. But when the Nobel Commit-
tee awarded Mr. Liu the prize in
2010for his prominent work on
Charter 08, a manifesto for de-
mocracy, constitutionalism and
human-rights reforms in commu-
nist ChinaBeijing reacted fero-
ciously. The Chinese government
called on foreign countries to
boycott the award ceremony,
where Mr. Lius own absence (due
to his imprisonment on subver-
sion charges) was poignantly
represented by an empty chair.
Although the Nobel Committee
acts independently of the Norwe-
gian government, Norway was im-
mediately made the target of dip-
lomatic and commercial
retaliation.
Norways experience is not
unique. Lithuania and Estonia,
whose leaders have defied Beijing
by receiving the Dalai Lama, have
also experienced political retalia-
tion. Britain appears to have
come under marked pressure as
well; citing unnamed sources, the
British press reported that Prime
Minister David Camerons trip to
China late last year had been pre-
ceded by a commitment that he
would not raise the issue of Tibet.
To reverse this decline in in-
ternational support for Tibet, Eu-
rope, the U.S., India, Japan and
other democracies would have to
develop a united stand that pro-
tects against Chinas divide-and-
conquer strategy, and band to-
gether to show respect for the
Dalai Lama and the Tibetan exile
government. But why should
they? After all, one might argue,
Tibets fate is sealed and 60 years
of occupation will not be undone
by giving a respectful welcome to
the Tibetan religious leader.
Beijings policies in Tibet are
closely linked to its behavior in
the rest of the region and the
world. Beijing takes an expansive
view of the core interests it
claims in Tibet, for example by
meddling in Nepal to thwart Ti-
betan refugees escape to safety.
Further afield, Beijing sees its po-
sition in Tibetwhich China in-
vaded in the 1950sas a reason
to obstruct international action
on other matters, lest interven-
tion elsewhere create a precedent
to intervene to stop Chinas re-
pression inside Tibet.
Coordination among the
worlds democracies is also vitally
important in light of Beijings
plans to exert control over the se-
lection of the next Dalai Lama. It
is equally and similarly crucial
with regard to the current Dalai
Lamas own plans for the future
of his spiritual office, and to the
work of the Tibetan government-
in-exile based in northern India.
Without a unified position on
these matters, the void left be-
hind by the Dalai Lama will be
swiftly exploited by Beijing.
Aside from acting to stop Bei-
jings repression in Tibet, the sur-
vival of Tibetan Buddhism and de-
mocracy-in-exile has profound
implications for the future politi-
cal development of China. Promi-
nent Chinese dissidents, such as
human-rights lawyer Teng Biao,
argue that high-level meetings be-
tween world leaders and the Dalai
Lama have a direct effect on
Chinas human-rights perfor-
mance. Declining to meet with the
Dalai Lama and failing to pursue
Tibetan human rights thus under-
mines these dissidents, who speak
out at great personal risk.
While defying Beijing is not
easy, world leaders would likely
find their citizens in strong sup-
port of a new, principled position
that recognizes the moral and
strategic importance of Tibet. De-
spite Chinas sustained pressure
on governments, support for Ti-
bet remains surprisingly strong
among European publics. In a re-
cent Ifop poll conducted in France
and Germany, more than 80% of
respondents said they want their
leaders to meet with the Dalai
Lama, and equal or higher num-
bers said they want their leaders
to raise the issue of Tibet when
they meet with Chinese President
Xi Jinping. Meanwhile, a whop-
ping 90% of French respondents
and 92% of German respondents
said they favor a meeting be-
tween Mr. Xi and the Dalai Lama
to pursue a negotiated solution.
Prime Minister Solbergs deci-
sion has drawn protest within
Norway. But she still has time to
find a way to welcome the Dalai
Lama. Better still, she could take
steps to pave the way out of the
predicament that so many democ-
racies find themselves in, by en-
tering into consultations with Eu-
ropean countries and the United
States over new, coordinated poli-
cies on Tibet. Only that will ar-
rest the current dynamic of con-
stant concessions, which not only
mean terrible consequences for
Tibetans, but also lost honor and
legitimacy for our democracies.
Mr. Mecacci is president of the
International Campaign for Tibet
and a former member of the Ital-
ian parliament. Ms. Bork is direc-
tor of democracy and human
rights at the Foreign Policy Ini-
tiative and board member of the
International Campaign for Tibet.
Oslo Snubs the Dalai Lama
BY MATTEO MECACCI AND ELLEN BORK
Under pressure fromChina,
Norways prime minister does
not plan to meet the Tibetan
religious leader this week.
Comments? The Journal
welcomes readers responses to
all articles and editorials. It is
important to include your full
name, address and telephone
number. Please send letters to
the editor to: Letters@WSJ.com
Wednesday, May 7, 2014
Pound/Euro 0.8203 g 0.32% Yen/$ 101.56 g 0.50% Global Dow 2514.62 g 0.31% Gold 1308.30 g 0.05% Oil 99.50 0.02% 3-month Libor 0.22485 10-year Treasury 5/32 yield 2.595%
THE WALL STREET JOURNAL. europe.WSJ.com
Hong Kong Property Developers
Seek to Stoke a Frosty Market
INTERNATIONAL PROPERTYREPORT 18
The Real Cost Behind
Twitters Nose Dive
HEARDONTHE STREET 28
AstraZenecaDefendsShunningPfizerBid
LONDONAstraZeneca PLC
fleshed out its stand-alone strategy
Tuesday with ambitious new reve-
nue targets, four days after turning
down a $106 billion takeover bid
from Pfizer Inc. that has ignited
fierce U.K. political debate.
The U.K. drug maker, which said
New York-based Pfizers offer sub-
stantially undervalued its business,
said it is aiming to generate annual
revenue of more than $45 billion by
2023, an 84% increase on the $25.71
billion it booked in 2013.
AstraZeneca also highlighted the
potential value of its pipeline of
cancer, asthma and diabetes drugs
in development, forecasting the new
drugs to generate peak annual sales
of between $23 billion to $63 bil-
lion, depending on the proportion
that might receive regulatory ap-
proval.
The increasingly visible success
of our independent strategy high-
lights the future prospects for our
shareholders, said AstraZeneca
Chairman Leif Johansson.
In an interview on Friday, Chief
Executive Pascal Soriot said Astra-
Zenecas pipeline was underappre-
ciated, highlighting 11 drugs in the
final stages of clinical testing and a
very strong oncology franchise.
Valuing a drug companys pipe-
line is notoriously difficult. Pipeline
drugs might be blocked by regula-
tors or discontinued as ineffective;
alternatively they could generate
billions of dollars in annual sales.
Roughly one-fifth of AstraZen-
ecas current valuation is based on
projected sales of its pipeline drugs,
said Credit Suisse, almost twice as
high as the average for the com-
panys European rivals including
Sanofi SA, Novartis AG and Roche
Holding AG.
New sales estimates AstraZeneca
gave Tuesday for its pipeline drugs
include as much as $6.5 billion for
its biggest hope: cancer treatment
MEDI4736, a total that would in-
clude sales in combination with
other drugs, compared with analyst
estimates of $2 billion to $7 billion
cited by the company.
AstraZeneca also set out new
revenue targets for its five growth
areas. Annual revenue estimates for
2023 now include $3.5 billion from
its blood-thinning pill Brilinta, $8
billion from its portfolio of diabetes
drugs and $8 billion from respira-
tory drugs.
The company said it expects
mid-to-high-single-digit percentage
revenue growth in emerging mar-
kets and low-single-digit revenue
growth in Japan.
Analysts at Jefferies, a broker-
age, said in a note to clients that the
new business forecasts appeared
overly optimistic, particularly
with regard to the updated targets
for the five growth areas.
AstraZeneca is facing flat or de-
clining revenue in coming years, as
its best-selling drugs lose patent
protection, but Mr. Soriot has fo-
cused on rebuilding the companys
pipeline and returning it to growth.
Pfizer has been pursuing its Brit-
ish rival since November, but Astra-
Zeneca has rejected the advances.
Last week, AstraZeneca said Pfizers
Please turn to page 17
BY HESTER PLUMRIDGE
AND NICHOLAS WINNING
Fiat Predicts Big Sales Gains
AUBURN HILLS, Mich.Fiat
Chrysler Automobiles NVs top exec-
utives rolled out a five-year plan that
projects big gains for a revamped Alfa
Romeo, its Jeep sport-utility line and
a Chrysler brand that is being reposi-
tioned as a mass-market competitor.
Chief Executive Sergio Mar-
chionne on Tuesday described the
outlook as the first day of a new life
for FCA and stressed a marketing
and investment strategy reflecting
the combined companys global ambi-
tions. Fiat Chrysler aims to increase
world-wide sales to seven million by
2018, from 4.4 million last year.
Still, a large first quarter net loss
provided a reminder of the challenges
it faces. Fiat on Tuesday posted a loss
of 319 million ($444 million) for the
year earlier period. The loss reflected
one-time costs connected to Fiats
payoff of a note held by a United Auto
Workers union healthcare trust, and
currency turmoil in Venezuela. With-
out those extra costs, Fiat said it
would have earned 71 million on a
12% increase in revenues for the quar-
ter.
In Europe, the Milan-based auto
maker aims to reverse years of losses
by moving Fiat up-market and adding
new premium Alfa Romeo and Jeep
models to fill its underused factories
in the region, boosting exports to
40% of European production by 2018.
With the regions auto market
showing signs of recovery, Fiat hopes
to increase European sales to 1.5 mil-
lion by 2018, mostly by expanding
sales outside of Italy. We were wait-
ing for a tailwind and the moment
has come, said Alfredo Altavilla, the
regions chief operating officer.
The auto maker also hopes to
boost sales of its small-car Fiat brand
over the next five years to 1.9 million,
up from 1.5 million today. Gains
would come mostly fromexpansion in
Asia and Latin America. It doesnt ex-
pect any growth in Europe.
How Mr. Marchionne would fi-
nance the sales expansion wasnt im-
mediately disclosed. However, he in-
dicated it wont involve a sale of the
companys stake in the Ferrari sports-
car brand. With Fiat heavily in debt
and burning cash in Europe, analysts
have pointed to an IPO of Ferrari as
one way to fund a turnaround. Fiat
was slated to report first-quarter re-
sults later in the day.
While Mr. Marchionne rejected the
idea of selling Ferrari, he argued the
brand is worth much more than the
4.3 billion ($6 billion) that analysts
have estimated, and could return
well in excess of 1 billion in earn-
Please turn to page 17
BY CHRISTINA ROGERS
AND MIKE RAMSEY
Fiat Chrysler CEO Sergio Marchionne, above on Tuesday, presented a plan to significantly expand sales over five years.
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EU Opens Its Arms
To Dirty U.S. Coal
DRAX, EnglandEven as it faces
increased regulatory scrutiny at
home, Americas dirty and unwanted
coal is being embraced in one of the
worlds cleanest energy markets: the
European Union.
At the biggest power plant in the
U.K., operated by Drax Group PLC, a
small black mountain of a million
tons of coal sits at the base of a
dozen 374-foot cooling towers.
Much of it is high-sulfur coal
from under the plains of Illinois and
Indianaexactly the kind of high-
emission, power-plant fuel receiving
closer scrutiny from U.S. regulators
and courts. Last week, the Supreme
Court ruled in favor of enforcing
regulations that require power
plants in 28 states to cut coal emis-
sions that blow across state lines.
Many U.S. power plants were al-
ready reducing emissions in antici-
pation of tougher Environmental
Protection Agency rules that take ef-
fect in 2015. Now, the Supreme
Court ruling could affect 1,000
power plants in the eastern U.S. that
might need to install additional pol-
lution controls or cut back on coal
consumption.
These are tough times for the
global coal industry, which has been
battered in recent years by regula-
tions, the U.S. boom in extracting
gas from shale-rock formations, and
lower prices caused by softening de-
mand from China. Coal now gener-
ates about 39% of electric power in
the U.S., off from 55% in 1990.
Low domestic demand has re-
newed the focus on U.S. exports,
which are on track for a record-set-
ting third straight year of more than
100 million tons. The 28-nation EU
imported 47.2 million tons of U.S.
coal last year, up from 13.6 million
tons in 2003. Exports to the U.K.
alone are up tenfold in the same pe-
riod. The U.S. ranked second only to
Russia in supplying Europe with coal
last year.
Germanys decision to phase out
of nuclear power after the 2011
Fukushima nuclear disaster in Japan
has also made it a significant buyer
of U.S. coal, mostly because the
commodity is so inexpensive.
Before the financial crisis, Eu-
rope was happy to favor the envi-
ronment, but when the economy
started not doing well, they werent
quite ready to accept the high power
price, so energy consumers re-
turned to coal, says Daniel Rohr, an
analyst for Morningstar Inc.
Since 2003, German imports of
U.S. coal have risen to more than 15
million tons from under a million
tons. A spokesman for E.ON SE, Ger-
manys largest power and natural-
gas utility, says it now purchases
more than four million tons of coal a
year, or 17% of its total, from the
U.S., up from 800,000 tons in 2010.
E.ON operates power plants in sev-
eral European countries.
Although sales have tapered off
in recent weeks because of higher
Please turn to next page
BY JOHN W. MILLER
U.S. coal exports to:
The Wall Street Journal
Source: Global Trade Information Services
50
0
10
20
30
40
2005 10 13
European
Union
47.2
million
tons
U.K.
12.3
million
tons
Frances Hollande says GEs bid for
Alstom falls short.................................. 16
China is biggest prize for German
premium-car makers............................ 17
THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 13
OPINION
Letters To
The Editor
* * *
Hungarian Justice
Hungarys Jobbik Stands
Out (Europe News, April 23)
cited threatening marches by
groups linked to far-right Job-
bik that are only a bad memory
of the past. According to the
penal code adopted in 2012,
uniformed crime is punish-
able and paramilitary organiza-
tions are banned. Images of
uniform-wearing groups are
from registered demonstrations
under strict police control,
where attendees exercise their
constitutional freedom of as-
sembly.
The Roma killings mentioned
in your article happened in
2008-09, the assailants were ar-
rested in 2009, and they were
sentenced in 2013 to life impris-
onment. Following this shameful
occurrence, the Orbn govern-
ment strengthened public secu-
rity and declared zero tolerance
for ethnic discrimination.
FERENC KUMIN
Deputy State Secretary for
International Communications
Budapest
* * *
Please, Some
Subtlety on Germany
Is it surprising that the Ger-
mans are scared of Russia, as
John Vinocur writes in his April
29 op-ed, The Chancellors
Choice, quoting former German
culture minister Michael Nau-
mann? Not so long ago, we Ger-
mans had half a million Red
Army soldiers occupying the
eastern part of our land, poised
to invade the West through the
Fulda Gap. Who in the West,
other than North Americans
safely installed on their side of
the Atlantic, isnt afraid of Rus-
sia under Vladimir Putin? Ger-
manys ridiculously small mili-
tary of 183,000 active soldiers
cannot deter him, but neither
could all of Western Europes
forces combined. Granted, we
were utopian fools to disarm to
such an absurd level, relying in-
stead on the Americans to save
us. This might have been a safe
bet until an even more utopian
set of leaders took charge in
Washington in 2009.
I hope that the West will
have still time to act as dis-
cretely as possible on the Ro-
man maxim, si vis pacem, para
bellum (if you want peace, pre-
pare for war). Meanwhile, those
49% of Germans wanting their
government to mediate between
Russia and the U.S. might be
lamentable dreamers, but that
doesnt mean that they are
turning against the West. What
else can they hope for than for
their chancellor, a scientist
speaking Russian as well as Pu-
tin speaks German, to keep a
cool head while working the
phones? Its still more prudent
than the loudmouthed rhetoric
currently dominating Americas
airwaves.
UWE SIEMON-NETTO
Laguna Woods, California
Amid all the discussion about
raising the U.S. minimum wage,
its easy to forget that there are
thousands, if not millions, of
Americans who work for less than
the minimum wagesome even
for negative wages (imagine that).
Principal among these less-than-
the-minimum are self-employed
workers, tradesmen and women
and small business owners,
especially those starting new busi-
nesses.
Working so many hours for so
little money isnt the plan, but
sometimes thats how things work
out until you can manage to get
ahead.
After covering overhead, in-
cluding minimum wage for their
employees, small business owners
may end up losing moneyi.e.,
making negative income. How
much is that per hour? Bank-
ruptcy may provide some relief,
but then watch out for the taxes
related to forgiveness of debt in-
come.
Most small business owners,
though, will either hang on and
hope things get better, or quietly
fold before they get worse. The
only thing the owners cannot do
is hire anybody for less than the
minimum wageunless they take
in a partner who as co-owner will
be exempt.
I was a teenage entrepreneur: I
delivered newspapers. After fold-
ing the papers, delivering them,
going around in the evenings to
collect payments, keeping my bike
going and (rarely) borrowing my
fathers car for the extra-heavy
Sunday papers, I had no idea what
my hourly wage worked out to be.
Many folks in other categories
are paid nothing or next-to-noth-
ing. Interns, some of those in
work-study programs, job train-
ees, family farmers, kids doing
chores and, depending on how you
define work, ordinary students.
And what about the domestic
workers known as mothers or
fathers? Surely they deserve a
wage commensurate with their re-
sponsibilities of raising the next
generation. Same goes for those
caring for disabled family mem-
bers.
The largest category of zero-
salaried workers are the millions
who volunteer their services and
expertise for nonprofit organiza-
tionschurches, YMCAs, schools,
hospitals, kids sports leagues,
recreation programs; the list is
endless. So its OK for them to
work for $0 per hour, or for the
minimum wage, but illegal for
anything in between. Does that
make sense? If they can agree to
work for $0 per hour, why not for
$1 or $5 or any other number
agreed to?
The answer, of course, is that
these volunteers and all those oth-
ers who make sub-minimum
wages or none at all are doing so
by choice. Government steps in to
dictate wages for the poorwho
are then barred from working for
less, even if they want to. With
fewer jobs available because busi-
nesses are forced to pay higher
wages, then the jobless poor are
forced onto the doleand pre-
sumably will vote for those who
provide the best dole.
So the minimum wage, like so
many government programs, is re-
ally a scam that never gets
busted. Isnt that how these pro-
grams grow? There are always a
few vocal supporters of any pro-
gram and a lot of silent victims
who mostly dont even know what
effect the programs have on the
public at large and the economy
as a whole.
Minimum-wage laws raise busi-
ness costs and increase
unemployment. But they also
require bureaucratswho make a
lot more than minimum wageto
administer the dole and regulate
wages. So whats not for politi-
cians to like?
Mr. Heyer is a lawyer in Olean,
N.Y.
The Last Marines Leave Sangin Valley
Sangin Valley,
Afghanistan
For days I have
been putting the
same question to
soldiers of the Af-
ghan National Army: How do you
feel about the imminent departure
of Coalition forces? The answers
are always variations on this one:
We are happy and sad, they say.
The Americans are our friends
and partners. They helped us tre-
mendously. We are sad to see
them go. But we are happy that
they can go back to their families.
And we are happy that we can
now defend our own country and
defeat the enemy.
Its a heartening reply, accom-
panied by assurances that they
have the military situation well in
hand. They had better. The fight-
ing season begins in a few days,
once the poppy harvest is brought
in. Few places in Afghanistan have
seen as much bloodshed as this
fertile belt running along the
banks of the Helmand River. The
British, who lost more than 100 of
their troops here, found it impos-
sible to control. The U.S. Marines
took over in 2010, losing another
50 men.
The Marines won the fight. But
now they are gone for good. Late
Sunday night, I watched them de-
part from Forward Operating Base
Nolay, the last of what were once
30 bases in the valley. As a final
order of business they picked up
the trash, turned over the garbage
cans, and drove away, a long con-
voy of heavily armored vehicles
slowly making their way to Camp
Leatherneck in the desert, 60
miles away.
So are the Afghans ready?
The Marines who have been
training and advising them for the
past year are cautiously optimis-
tic. The Afghans have been con-
ducting security operations on
their own for a year while the Ma-
rines have mostly stuck to their
bases. They have shown initiative,
adaptability, discipline, coordina-
tion and a fighting spirit. At a
time when nobodys talking about
winning, one Marine officer tells
me, they are talking about win-
ning.
The best evidence was the
peaceful April 5 national election,
in which Afghan soldiers and
police were able to maintain
securityand ballot-box integ-
rityat more than 6,000 polling
places. Nobody expected the
Afghans to perform so well. In
Sangin alone, some 5,000 people,
or 58% of the electorate, turned
out to vote; in the 2009 election,
just 179 people did.
Nobody expected, either, that
the Taliban would be unable to
disrupt the vote. The tables are
turned now, says Maj. Gen. Sayed
Malouk, the top Afghan com-
mander in Helmand province.
The enemy used to do the attack-
ing. Now we are the ones attack-
ing them.
Whether the Afghans can sus-
tain the momentum is another
question. A few Afghan officers
are willing to share their doubts.
Do you have the equipment and
support you need to win the
war? I ask one mid-ranking of-
ficer.
No sir, he says. These weap-
ons we have are old. Once theyve
been broken we dont have spare
parts.
Could his unit count on the
central government in Kabul to
make up the shortfalls?
Unfortunately Im not sure,
he admits. In the past theyve
proven they cant help. We should
have air support, a good radar-
control system, MRAPsthe last
of these being the heavily ar-
mored, IED-resistant vehicles that
are to the Afghan Armys Humvees
roughly what a Humvee is to a
Dodge Dart.
As evidence of what he means,
the wreckage of a smashed Afghan
Humvee sits in the yard of the
base, the victim of the improvised
explosive devices that are the Tal-
ibans weapon of choice. We hope
that when Coalition forces leave
here we will end up with better
vehicles, says another senior
Afghan officer. He all but implores
me to make sure the point gets
conveyed to the American public.
The officer isnt likely to get
his wish, nor is it clear that he
should: An army that lacks the
logistical ability to keep its Hum-
vees on the road is unlikely to
succeed with MRAPs. Afghani-
stans military will continue to
evolve to where it is Afghan sus-
tainable, says Brig. Gen. Daniel
Yoo, the senior Coalition officer in
the region. Every military wants
better equipment. What the
Afghans need, as opposed to what
they want, is the ability to take
good care of what they have.
For that they still need help.
The NATO mission wraps up in
December, and the size of the
remaining U.S. force is up in the
air. Right now 10 to 12,000 [U.S.
troops] is what were looking at,
says Brig. Gen. Yoo, adding that
the larger the American force, the
fewer the overall risks. The
Obama administration is rumored
to be contemplating a force of
5,000too small to make a differ-
ence, large enough to make trou-
ble. Its the same mistake the
president made in Iraq.
Its fashionable to write off
Afghanistan as another lost war.
Anyone who spends time in
Sangin today would know it isnt.
But whether Americas withdrawal
from the Sangin Valley is remem-
bered as a transition or a retreat
depends on whether Mr. Obama
wants to win a war he has spent
his presidency fighting, or merely
declare victory and go home.
Write to bstephens@wsj.com
[ Global View ]
BY BRET STEPHENS
An Afghan soldier in southern Afghanistans Sangin district last June.
A
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BY JOHN H. HEYER
Small business owners dont
plan all those hours for little
pay. Sometimes it just works
out that way.
The Afghan forces talk
about winning, but they
lack basic equipment.
The Real Minimum Wage: Zero
16 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
UBS...............................................................1
U.S. Cellular............................................... 20
Verizon Communications...........................20
Merck.......................................................1,28
Novartis.................................................15,28
Pfizer..........................................................15
Reckitt Benckiser Group........................... 28
Roche Holding............................................15
Royal Bank of Scotland.............................21
Sanofi ......................................................... 15
Sino Land................................................... 18
Societe Generale........................................21
Sprint..........................................................20
Sun Hung Kai Properties.......................... 18
Tesco...........................................................22
Time Warner Cable....................................20
T-Mobile US............................................... 20
Twitter........................................................28
Dish Network.............................................20
Drax Group................................................. 15
E.ON SE......................................................15
European Central Bank..............................22
Federal Reserve......................................... 22
Fiat............................................................. 15
Foresight Energy........................................16
Generale des Etablissements Michelin....22
General Electric..........................................16
GlaxoSmithKline........................................ 28
Google....................................................20,22
Guanwei Recycling.......................................9
Hopewell Holdings.....................................18
Jinchuan Group International Resources...9
Johnson & Johnson................................... 28
Arch Coal....................................................16
AstraZeneca...............................................15
AT&T...........................................................20
Audi ............................................................ 17
Barclays...................................................1,22
Bayer....................................................... 1,28
BMW...........................................................17
BNP Paribas............................................... 21
China Auto Logistics................................... 9
China National Offshore Oil ....................... 9
Citigroup.....................................................22
Comcast......................................................20
Commerzbank............................................ 22
Daimler.......................................................17
DirecTV.......................................................20
Aberdeen Asset Management..................22
Adidas.........................................................22
Alstom........................................................16
Amazon.com...............................................20
Apple.......................................................... 20
INDEX TO BUSINESSES
Businesses
This index of businesses mentioned in
todays issue of The Wall Street Journal
is intended to include all significant
reference to companies. First reference
to the companies appears in bold face
type in all articles except those
on page one and the editorial pages.
Corrections
Amplifications
Readers can alert the London news-
room of The Wall Street Journal to
any errors in news articles by email-
ing wsjcontact@wsj.com or by call-
ing +44 (0)20 7842 9901.
BUSINESS & FINANCE
France Rebuffs GE Bid
For Alstom Power Unit
PARISFrench President Fran-
ois Hollande said Tuesday that
General Electric Co.s proposed $17
billion purchase of Alstom SAs
power division isnt satisfactory and
the government has the authority to
secure a better deal.
Last week, GE proposed acquir-
ing the Alstom unit that manufac-
tures turbines and other heavy ma-
chinery for power plants. The
division accounts for almost three-
quarters of Alstoms annual revenue.
Today we have sufficient means
to apply pressure to ensure that at
the end of the process it is good for
Alstom, good for French industry
and good for energy diversification
in the country, Mr. Hollande said
during an interview on French tele-
vision channel BFMTV.
Mr. Hollande referred to the let-
ter sent Monday by Economy Minis-
ter Arnaud Montebourg, who told
GE Chief Executive Jeffrey Immelt
that the government would reject
the deal as it stands.
The French government regularly
weighs in on private corporate deci-
sions, particularly in industries it
considers strategic.
GE contends the deal is good for
Alstom and France, and said it was
open to further talks. We appreci-
ate the engagement of the French
government, a spokesman for GE
said Monday. We believe our pro-
posal is good for France, for Alstom
and for GE. As our letter to Presi-
dent Hollande stressed, we are open
to continuing dialogue.
Much is at stake for Mr. Hollande
in the contest for Alstom. The com-
pany had to be bailed out a decade
ago and has fallen on tough times.
But it remains an important em-
ployer and industrial icon in France,
where it makes the TGV bullet
trains and power turbines for the
countrys fleet of nuclear plants.
Mr. Montebourg, who has been
the leading government voice
against the deal, said Paris was
open to negotiations and suggested
that GE transfer its own locomotive
and rail-signaling business to Al-
stom to augment the French com-
panys high-speed and commuter-
trains business.
Last week, Alstoms board en-
dorsed the GE offer, which is under-
going a monthlong review. Siemens
AG has said it intends to submit its
own bid. The German company has
made a preliminary proposal to take
over the power unit and transfer
some of its train business to Alstom.
Mr. Montebourg has publicly
suggested he prefers the Siemens
offer. During the TV interview, Mr.
Hollande indicated he wants the Sie-
mens bid to be considered.
Today, Id prefer to improve the
bids, Mr. Hollande said. There is
another offer that we will try and
make appear, the president said, in
an apparent reference to Siemens.
Mr. Hollande said an investment
in Alstom by the French state isnt
a hypothesis at the moment.
Mondays letter comes after Mr.
Immelt personally sought to reas-
sure officials, including Messrs.
Montebourg and Hollande, about the
deal, citing GEs long history of in-
volvement in France. It is the first
indication that Mr. Hollande might
use a provision in French law that
would permit the government to
block certain transactions for stra-
tegic reasons.
The previous French administra-
tion passed a law allowing the gov-
ernment to block the sale of assets
that are deemed strategic. In his let-
ter, Mr. Montebourg stressed the
government considers Alstom to
have a crucial role in the French
economic environment as a supplier
of equipment to the countrys nu-
clear-energy industry.
Ted Mann in New York
contributed to this article.
BY INTI LANDAURO
AND WILLIAM HOROBIN
An Alstom employee worked on a turbine in Rugby, England, last month.
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Unloved in U.S., Dirty Coal Makes Its Way to Europe
inventory levels, the U.S. coal indus-
try expects thef EU to be a good
long-term bet. Several U.S. mining
companies, including Foresight En-
ergy LLC and Arch Coal Inc., re-
cently opened new sales offices on
the Continent.
The big gaineraccounting for
roughly one-third of U.S. exports, up
from almost nothing 10 years ago
has been high-sulfur coal taken from
thick coal seams in Illinois and Indi-
ana. It is shipped nearly 1,300 kilo-
meters down the Mississippi River
to a terminal on the Gulf of Mexico.
From there, it heads across the At-
lantic to people like Dave Docker,
head of fuel procurement at Drax,
who buys nine million tons of coal a
year on global markets.
Mr. Docker says the Illinois and
Indiana coal, shunned in some
places in the U.S. because of its high
sulfur content, offers a less-expen-
sive alternative than coal from
nearby European mineseven in-
cluding transportation costs.
Phil Gonet, president of the Illi-
nois Coal Association, says geogra-
phy helps keep prices low. Our coal
is easy to extract and were right
next door to two rivers that can take
the coal to anywhere in the world,
he says, referring to the Mississippi
and Ohio rivers. Mr. Gonet argues
that Illinois Basin coal is a cost-ef-
fective fuel alternative given new
scrubbing technology that removes
sulfur from power-plant emissions.
Continued from previous page The Illinois Basinlocated in Illi-
nois, Indiana and Kentuckypos-
sesses some of the worlds richest
coal seams, but high sulfur and ash
content caused the coal to be
shunned after the passage of the
Clean Air Act in 1970. By 2002, min-
ing in Illinois reached its lowest lev-
els since the Great Depression.
That is when a handful of compa-
nies, led largely by two private oper-
ators, Chris Cline and Robert Mur-
ray, snapped up mines on the cheap.
The acquirers betcorrectlyon
scrubbing technology that can re-
move almost all the sulfur. They also
counted on the coal appetite of ex-
port markets such as the U.K.
Mr. Clines Foresight Energy
Draxs top U.S. supplierlast year
offered its coal for as little as $65 a
ton in Europe, including freight,
compared with $80 a ton from U.K.
mines near the Drax power plant.
For Mr. Docker, the coals low
cost is a saving grace. He has made
enough other improvements to plant
operationsin particular, new tech-
nology to remove sulfur betterto
allow Drax to burn cheap dirty coal
and still comply with strict EU laws.
The Drax power plant was built
in northern England in the 1970s,
following the conventional model of
building power plants next to coal
mines.
In 2005, EU regulators set up
rules that fixed Draxs sulfur-emis-
sions quota at 33,000 tons a year.
Drax, which bought almost all of its
coal from local mines, began import-
ing cleaner coal from Russia and Co-
lombia that contains less than 1%
sulfur, compared with the 2.5%-3%
sulfur content of Illinois Basin coal.
At the same time, Drax also
started burning dried vegetation
that emits almost no sulfur and re-
duced the amount of coal needed.
One of Draxs six boilers now burns
biomass, or compressed plant and
wood material, much of it imported
from the U.S. The plan is to convert
two more of the boilers to biomass
fuel by 2020.
Drax was emitting less than the
allotted 33,000 tons of sulfur by us-
ing the cleaner Russian and Colom-
bian coal and the biomass, giving
Mr. Docker a chance to burn dirtier
coal. I have headroom now to emit
more sulfur, and that can be filled
with Illinois Basin [coal], he says.
His engineers would prefer Appala-
chian coal, which is cleaner, burns
more efficiently and doesnt impose
as much wear on the boilers. But
its too expensive, Mr. Docker says.
Appalachian coal typically sells for
20% more than Illinois Basin coal.
The use of high-sulfur Illinois Ba-
sin coal in Europe is disrupting the
plans of policy makers hoping to
wean the EU off dirty fuel sources,
and has angered environmentalists
who contend its high sulfur content
damages the environment, despite
power plants now using scrubbers to
remove more than 90% of the sulfur.
Imports have also brought high-cost
coal mines in Germany, Poland and
the U.K. to the brink of closure. U.K.
coal output fell 24% last year to 13
million tons.
Tara Connolly, a Greenpeace ac-
tivist in Brussels, says dirty coal
shouldnt be burned no matter how
cheap it is and that quotas simply
give companies permission to con-
tinue polluting, just not as much.
Quotas have allowed the U.S. to
export its emissions to Europe, Ms.
Connolly says. She says that a better
approach would be an outright ban
of dirty coal in favor of alternative
clean-energy sources such as wind,
solar and biomass. We want to end
the Age of Coal, she says.
EU officials are aware of the rise
in high-sulfur Illinois Basin coal im-
ports and are concerned, says Joe
Hennon, a spokesman for the Euro-
pean Commission, the EUs executive
arm. Weve seen the increase in
shale gas in the U.S. and more U.S.
coal coming to Europe, he says.
Many EU countries are in viola-
tion of the blocs emissions rules,
and 19 have been subject to formal
complaints from the European Com-
mission. Drax and the U.K. havent
faced any complaints, Mr. Hennon
says.
The EU is studying possible new
rules governing emissions from coal-
fired power plants.
Jan Hromadko in Frankfurt
contributed to this article. The Drax power plant, the U.K.s largest, uses high-sulfur coal from the U.S.
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12 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
OPINION: REVIEW & OUTLOOK
V
oice of America and Radio Free
Europe played an important role
in winning the war of ideas
against Communism during the Cold
War. But more recently the U.S. interna-
tional-broadcasting system has suffered
mission drift: Its programs have at times
run counter to U.S. foreign-policy objec-
tives, and its massive bureaucracy is in-
efficient. Meanwhile, Washingtons ad-
versaries have created slick broadcast
organs, such as the Kremlins Russia To-
day and Beijings CCTV, to advance their
strategic interests and disseminate their
illiberal worldviews.
So its welcome news that the House
Foreign Affairs Committee passed a bi-
partisan package of reforms designed to
address long-standing governance prob-
lems in the system. The legislation
would create a new U.S. International
Communications Agency, with a full-time
CEO, to administer Voice of America and
the various Freedom broadcasters, in-
cluding Radio Free Europe/Radio Liberty
and the Middle East
Broadcasting Network.
The agency would re-
place the current Broad-
casting Board of Gover-
nors, a nine-member
board of part-time over-
seers that has proved practically de-
funct in terms of its capacity to tell a
message around the world, as then-Sec-
retary of State Hillary Clinton put it in
2013, despite roughly $700 billion in an-
nual funding. Crucially, the legislation
would also clarify the mission of Voice
of America: to support U.S. foreign-pol-
icy goals. The Freedom broadcasters,
which are meant to serve as a surro-
gate press in closed societies, will be
consolidated under one administrative
roof and required to share content and
avoid duplicating efforts.
A full-time director is
essential for holding tax-
payer-funded broadcast-
ers accountable. Weve
documented quality-con-
trol lapses at Voice of
America in these pages. Despite several
reminders, we still see texts that are di-
rectly copied and pasted from Persian
news sources, a Voice of America Per-
sian editor warned his colleagues in a
2012 email obtained by the Journal. The
same year, Voice of America ran a soft-
ball interview with an Iranian nuclear
negotiator that could have aired on Ira-
nian state TV but for the fact that the
American government had funded it. U.S.
taxpayers shouldnt tolerate such pro-
grams.
Voice of America neednt become a
crude propagandistic outlet. You need
to have an open mind but not so much
that your brains fall out, as Jeff Ged-
min, a former president of Radio Free
Europe/Radio Liberty, told us. If you
need to run an interview with a regime
figure, do itbut frame it, rebut it. Make
it clear that were not moral relativists,
that were not sympathizers of the re-
gime. By ensuring that Voice of America
reflects American interests, and improv-
ing the systems governance, the House
reform package will help retool U.S.
broadcasters for the new war of ideas.
G
ood political news is scarce in
Latin America these days, so its
worth noting the upset victory on
Sunday by Vice President Juan Carlos Va-
rela in Panamas presidential election.
The real victor is Panamas young democ-
racy.
Mr. Varela defeated the former mayor
of Panama City and the candidate backed
by current President Ricardo Martinelli,
who was term-limited. The economy has
boomed during Mr. Martinellis tenure, as
has government spending, so his former
housing minister Jos Domingo Arias,
who he anointed as his partys candidate,
was a clear favorite. Mr. Varelawho
broke with the president in 2011 alleging
corruption in procurementwas a long
shot.
But Mr. Martinelli overplayed his
hand. In January he added his wife to the
party ticket as the vice-presidential can-
didate, even though this is expressly for-
bidden in the constitution. Using the of-
fice of the president and the resources of
the state to campaign for a favorite suc-
cessor is also a no-no. Mr. Martinelli did
it anyway. Such tactics that are all too
reminiscent of other Latin family dynas-
ties earned a popular counterreaction.
Mr. Varela isnt a career politician and
he made fighting corruption the center-
piece of his campaign. In a region where
the rule of law is often treated like a
mere suggestion, his promise to end the
cronyism of the Martinelli era and the
broader political class helped him win
votes on both the right and left in the fi-
nal days.
Mr. Varela did make other promises
that dont inspire confidence. He wants
to put price controls on staple foods,
which would lead to shortages. Increases
in government subsidies will strain fiscal
accounts. But at least Panamas voters
rejected the family electoral gambit, and
if Mr. Varela disappoints, they know hes
term-limited in five years too.
D
ont look now, but U.S. federal
regulators are poised to take the
worst features of the banking sys-
tem and impose them on large managers
of mutual funds. The result is likely to be
more risk for taxpayers and more costs
for investors.
The federal Financial Stability Over-
sight Council is now considering whether
to name such large asset managers as
BlackRock and Fidelity as systemically
important financial institutions. This
would serve as an induction ceremony
into the too-big-to-fail club, making the
firms eligible for taxpayer assistance in
a crisis and encouraging them to take on
more debt as they fall under bank-style
regulation.
Not that either firm wants to join this
club, because theyre not banks. They
dont lend out depositors money with a
promise to return it. Rather, they are
agents that invest on behalf of clients,
who bear the risk of loss. The firms dont
even hold the clients moneycustodians
do thatand the asset managers have no
claim on client funds.
So if BlackRock and Fidelity were to
go bankrupt, the investors in their funds
should not suffer any losses. Even as the
investment bank Lehman Brothers went
bust in 2008, its asset management arm
Neuberger Berman was walled off from
the failing firm and its clients didnt lose
a nickel. Now independent, Neuberger
operates as a partnership and manages
more than $200 billion of assets. Its dif-
ficult to conceive of a scenario in which
an asset manager can trigger a crisis in
the financial system.
But as taxpayers have sadly learned
since the financial crisis, concepts like
systemic risk have never been precisely
defined and remain in the eye of the reg-
ulator. Although the bureaucrats have
never agreed to live by a clear set of
rules, in 2012 the stability council did is-
sue a regulation laying out the process
for designating non-banks as systemi-
cally important. And this
rule listed various criteria
that could bring a giant
financial company up for
possible induction into
the club. By any reason-
able reckoning, neither
BlackRock nor Fidelity qualifies.
The first test is that a non-bank must
have at least $50 billion in assets. But
neither firm does, unless you count as-
sets that dont belong to themclient
funds that neither the asset managers
nor their creditors have any claim on. Be-
cause of arcane accounting rules, some of
these assets appear on the balance
sheets of these companies, but Fidelity
and BlackRock cant borrow against them
and can neither gain nor lose anything
on them, except management fees.
The firms also dont have enough de-
rivatives exposure to matter. They dont
carry much debt. They dont rely on
short-term funding. As far as we can tell,
no one in the market is betting on their
success or failure via credit-default
swaps. So wheres the systemic risk?
The average person might shrug and
wonder why it matters if some giant fi-
nancial firm has to bear another layer of
regulation. Why not use a belt-and-sus-
penders approach to prevent the next
crisis, right?
The problem is that six years of Wash-
ington blather since the financial crisis
have obscured the fact that turning such
firms into banks would make them more
risky, not less. Bank regulation has tradi-
tionally been much more onerousalbeit
less effectivethan secu-
rities regulation because
banks are able to do much
more dangerous things
with customer money.
Mutual funds have to
put client assets in exactly
the instruments in which theyve prom-
ised to invest. Brokerages have to keep
client cash in paper issued by the gov-
ernment. Banks, on the other hand, are
allowed to take depositors moneywith
Uncle Sam guaranteeing its returnand
then lever it up and lend it out to dry
cleaners, restaurants, condo developers
and all manner of other ventures at
home and abroad. While banks maintain
thin levels of capital, mutual funds are
hardly allowed to use any leverage at all.
They have to maintain $3 of assets for
every dollar of cash they borrow.
Both firms, and especially BlackRock,
do offer products that are less regulated
than mutual funds, but their role as
agents remains the same. Clients know
how their money is being invested and
they bear the risks. If they wish to invest
in derivatives, then the clients, not Fidel-
ity or BlackRock, are the counterparties
in such trades.
Bank regulatorsand especially those
at the Federal Reservelove to make
speeches about the dangers of shadow
banking. By this they mean extensions
of credit that occur outside regulated
banks. But the biggest dangers of such fi-
nancing occur when taxpayers are per-
ceived to be standing behind it, and
when loose monetary policy at the Fed
ensures its rapid expansion.
The conceit of the Obama era is that
regulators know best in all things, and so
the more of finance that can be put un-
der their sway the better. Well all learn
just how wrong that is if regulators bring
high leverage and taxpayer backing from
the world of banking into the rest of the
financial economy.
A New Voice of America
Electoral Upset in Panama
The Feds Target Money Managers
U.S. international
broadcasting gets a
21st-century upgrade.
Regulators want to
make BlackRock and
Fidelity too big to fail.
Im living the American Dream
since it gave up home ownership.
Pepper . . . and Salt
THE WALL STREET JOURNAL
THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 17
China Drives Growth
At German Car Makers
FRANKFURTBMW AG reported
that strong sales in China helped
boost its first-quarter profit by 11%
from a year earlier and secured its
position as the worlds leading pre-
mium-car maker.
But the bitter rivalry among
BMW, Audi AG and Daimler AGs
Mercedes-Benz in the global market
for luxury cars is heating up. First-
quarter earnings from the major
German auto makers show that
China is the proving ground that
could decide the winner.
BMW demonstrated that trend
when it reported on Tuesday that
net profit rose to 1.5 billion ($2.09
billion) in the period ended March
31.
Total revenue, including its Mini
and Rolls Royce brands, rose 4% to
18 billion. Sales of BMW brand cars
rose 12% to 428,259 vehicles in the
quarter, with sales in China surging
25% and accounting for a quarter of
its total. BMW volumes in the U.S.
and Europe were each up just 3%.
Deliveries in the Chinese mar-
ket exceeded expectations, said
Friedrich Eichiner, BMWs chief fi-
nancial officer.
The boost from China helped
BMW maintain its position as the
biggest premium manufacturer by
volume and the most profitable.
Audi, the No. 2 premium brand
by volume world-wide, reported
pretax profit of 1.3 billion on a 10%
sales increase to 13 billion. Audi
hasnt yet disclosed net profit. Audi
sold 412,846 vehicles in the first
quarter, up 12%, and hasnt dis-
closed its first-quarter volume in
China.
Daimler, which has vowed to re-
take the top spot from BMW, re-
ported a 93% increase in net profit
to 1.09 billion in the first quarter
on a 13% increase in sales, including
trucks, buses and vans, to 30 bil-
lion. Sales of Mercedes-Benz cars
rose 14% to 389,476, boosted by a
52% jump in China. In April, Mer-
cedes sold 133,077 vehicle, up 14%.
Sales in China, aided by the launch
of a long wheel-base C-class sedan,
rose 38% in the month.
BMW affirmed its outlook of a
significant growth in sales and
earnings this year. Some analysts
remain skeptical, citing moderate
sales growth in the quarter, typi-
cally the strongest for car makers.
BMW, Audi and Mercedes are
rolling out lots of models this year.
BMW is pushing into electric vehi-
cles with the launch of the i3 com-
pact followed by the i8 plug-in hy-
brid sports car.
BMW said that it sold 1,000 i3
cars in March and that the company
has ramped up production of the i3
at a plant in Leipzig, Germany. BMW
has built more than 5,000 i3 cars so
far. It is focusing on the U.S., which
BMW believes will be the largest
market for electric vehicles.
Sarah Sloat
contributed to this article.
BY WILLIAM BOSTON
BMWs first-quarter China sales rose 25%. The race for top seller among German car brands increasingly depends on China.
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BUSINESS & FINANCE
Fiat Envisions Big Sales Gains
ings before interest, taxes and depre-
ciation if annual volumes were al-
lowed to rise to 10,000 cars a year
from the current cap of 7,000 cars.
Fiat Chryslers sales goal of seven
million cars a year depends mainly on
the Jeep and Alfa Romeo brands.
Company executives said they plan to
more than double world-wide Jeep
sales to 1.9 million vehicles a year by
2018. Alfa Romeo will get a fresh
start with a 5 billion infusion of cap-
ital to build out its portfolio with
eight new models by 2018.
Alfa Romeo has been a long-de-
layed project for Mr. Marchionne. Fiat
Chrysler aims to build Alfa Romeo
sales to 400,000 vehicles, up from
just 74,000 last year. The first new
vehicle is set to come in 2015, fol-
lowed by vehicles of varying sizes in
2016 through 2018.
For the first time in its history
Alfa Romeo will have a fully equipped
showroom, said Harald Wester, the
brands president.
The company also released ambi-
tious sales goals for its upscale Mase-
Continued from page 15 rati and several new models, includ-
ing a convertible and sports coupe
called the Alfieri. By 2018, it aims to
more than quadruple sales to 75,000
and lift revenue more than threefold
from 1.7 billion to 6 billion.
Maserati will deliver double-digit
margins throughout the plan period,
said Mr. Wester, who also is chief ex-
ecutive for Maserati.
Jeep, which now builds all its
models in the U.S., will add produc-
tion in Europe, China and Latin Amer-
ica with a goal of building 900,000
vehicles outside North America by
2018, said Michael Manley, brand
chief executive. The company plans to
add two new Jeep models, a small
SUV next year and full-size Grand
Wagoneer in 2019.
This alone represents one of the
greatest opportunities the Jeep brand
has had in recent history, Mr. Manley
said, speaking to investors and ana-
lysts on Tuesday.
Fiat Chrysler also is planning to
add 1,300 sales outlets around the
world, mostly in Europe, Asia and
Latin America. The company expects
the global utility-vehicle market to
gro from14 million sales in 2013 to 18
million in 2018, most of it coming
from Asia.
With Alfa Romeos return to the
U.S., the Chrysler brand will move
downscale and become its main-
stream, high-volume competitor with
a fuller line of cars and SUVs, and two
new plug-in people haulers. With the
change, the Chrysler brand hopes to
more than double sales by 2018 to
800,000 vehicles.
The move would better define
Chrysler, which now has three mod-
els, all of which overlap with similar
vehicles in the middle-market Dodge
product line.
Dodge will be repositioned as the
auto makers U.S. performance
brand and drop two models, the
Avenger sedan and Caravan minivan,
to eliminate duplicate models with
the Chrysler brand.
Fiat Chrysler would launch in 2016
a plug-in hybrid of its Town & Coun-
try that would get an estimated 32 ki-
lometers per liter, and a newcompact
car called the Chrysler 100.
AstraZeneca Makes a Stand
most recent cash-and-stock proposal
valued at 50 ($84) a share sub-
stantially undervalued the com-
pany. Tuesday, AstraZeneca shares
fell 2.7% to close at 46.78 in Lon-
don trading.
U.K. opposition leader Ed Mili-
band has called for an immediate
independent assessment of
whether Pfizers proposed takeover
is in the national interest, after ac-
cusing the U.K. government of
cheerleading for the deal in an
open letter to Prime Minister David
Cameron.
Mr. Camerons spokesman said
Tuesday that the government was
unapologetic in its active engage-
ment with both parties over a po-
tential deal, stressing that any deci-
sion was a matter for the companies,
their boards and shareholders.
U.K. Business Secretary Vince
Cable said the government was
very alive to national-interest
considerations, and has not ruled
out intervening.
Continued from page 15 Representatives from Pfizer
and AstraZeneca will be called be-
fore a U.K. parliamentary commit-
tee in coming weeks to discuss the
potential takeover, a representa-
tive from the Department for Busi-
ness, Innovation and Skills said
Tuesday.
While a committee could ask dif-
ficult questions over a proposed
deal, it would have no powers to
block it.
AstraZenecas strategy update
comes a day after Pfizer sought to
increase pressure on the British
company to enter talks on creating
the worlds biggest pharmaceutical
company. Pfizer also reported de-
clining quarterly results that under-
scored why it is interested in a tie-
up.
In an interview Monday, Pfizer
Chief Executive Ian Read said the
offer was compelling and urged
the U.K.-based company to enter
talks.
Jonathan D. Rockoff
contributed to this article.
BayerBuysMerckUnit
global sales, Bayer chief executive
Marijn Dekkers said Tuesday. Ranking
No. 1 will be the OTC businesses of
Novartis and GlaxoSmithKline, which
the companies plan to combine into a
joint venture with $10 billion in yearly
sales from such products as Excedrin
pain medicine and Aquafresh tooth-
paste.
The biggest OTC companies are
consolidating to help them compete
more effectively for shelf space in
large retail pharmacy chains such as
Walgreen Co., Dr. Dekkers said.
Merck, based in Whitehouse
Station, N.J., has a strong presence
in U.S. retailers but not as much
market share overseas. We now
have an opportunity to take the
Merck product brands and make
them more global, Dr. Dekkers said.
That opportunity is stronger in
emerging-market countries such as
China and Brazil than it is in
developed European markets that
already have established brands, Dr.
Dekkers said. The deal will also help
Bayer expand its market share in the
U.S. and give it an entry into the
market for foot-care products such as
shoe inserts, via Mercks Dr. Scholls
brand.
The acquisition is Bayers sec-
ond-biggest ever, after its $17 billion
purchase of Germanys Schering AG
in 2006.
Merck and Bayer also agreed to
form a collaboration to co-develop
and market certain prescription heart
drugs, including Bayers Adempas, a
Continued from first page treatment for a form of high blood
pressure. Merck will pay Bayer $1 bil-
lion upfront, plus potential additional
milestone payments of up to $1.2 bil-
lion if sales goals are reached.
Merck is slimming down after
bulking up with its 2009 acquisition
of Schering-Plough Corp. of the U.S.,
which brought in the OTC and con-
sumer products business. That unit
had $1.9 billion in sales last year,
down 3% from the year before, con-
stituting about 4% of Mercks total
revenue.
Merck said in January it was ex-
ploring options for the OTC busi-
ness because it didnt have a strong
presence outside North America. To
gain global scale, Merck would have
needed to make hefty acquisitions,
Merck Chief Executive Kenneth Fra-
zier said Tuesday.
Merck also said in January it was
exploring options for its division
that makes drugs and vaccines for
pets and livestock, which had $3.4
billion in sales last year. But Merck
has decided to keep its animal-
health unit, Mr. Frazier said Tues-
day, because it already has a strong
global presence and a leading mar-
ket position, in contrast to the con-
sumer business.
We should be looking for oppor-
tunities to augment our already
leading animal-health franchise, he
said.
Michael Calia,
Neetha Mahadevan
and Jonathan D. Rockoff
contributed to this article.
Combined Impact
Source: Bayer The Wall Street Journal
Claritin
Aspirin
Aleve
Bepanthen
Canesten
Dr Scholls
Alka-Seltzer
Coppertone
One A Day
Supradyn
Merck
Bayer
Bayer
Bayer
Bayer
Merck
Bayer
Merck
Bayer
Bayer
576
464
321
310
257
232
214
207
176
158
Product Company 2013 sales in millions
The deal with Merck signicantly broadens Bayers
range of over-the-counter products.
Top ten Merck and Bayer brands by sales
THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 11
WORLD NEWS
Pakistans Geo TV
Fights for Survival
ISLAMABADMedia mogul Mir
Shakil-ur-Rahman has played an out-
size role in shaping Pakistans poli-
tics in recent years.
Now, his empire is struggling for
survival after colliding with the
countrys most powerful institution:
the military establishment.
The clash was sparked by the
shooting last month of Hamid Mir,
the star journalist of Mr. Rahmans
Geo TV channel. Geo reporters al-
leged on broadcasts that the mili-
tarys main spy agency was behind
the attack. The military angrily de-
nied the claim, and is now pushing
to shut the network.
Pakistans media regulator began
hearings Tuesday on whether to
close the channel.
The controversy is reversing
fragile gains made by increasingly
assertive Pakistani media over the
past decade, analysts and media
professionals say.
Media has become a power cen-
ter in Pakistan, said Absar Alam, an
anchor at Aaj News, a competing
news channel.
That has triggered alarm among
traditional power players who think
that they should have the exclusive
right to shape opinion.
Central to the drama is Dubai-
based Mr. Rahman, who owns Paki-
stans biggest-selling newspaper, the
Urdu-language Jang, in addition to
Geo, the leading TV news channel.
According to employees, Mr.
Rahman is intimately involved with
editorial decisions at both outlets,
which have pushed for the prosecu-
tion of former military ruler Pervez
Musharraf, campaigned for peace
with archenemy India, and high-
lighted the abduction of suspected
militants by security forces. Geo was
also instrumental in bringing to an
end Mr. Musharrafs regime in 2008
with heavy coverage of an opposi-
tion movement led by lawyers that
made a hero out of Supreme Court
Chief Justice Iftikhar Chaudhry.
The political sway of his media
empire has alarmed some Paki-
stanis, including rival media organi-
zations, the military and some poli-
ticians. If one person has the
power to set the political agenda,
that is frightening, said Moeed
Pirzada, an anchor at the competing
Express News, which has echoed
military criticism of Geo. He is run-
ning a monopoly.
The boldness of Mr. Rahmans
media group mirrors the larger
struggle between civilian and mili-
tary forces for power as a country
ruled by the army for half its his-
tory tries to develop democratically.
Mr. Rahmans publications were
critical of the previous civilian gov-
ernment of the Pakistan Peoples
Party, which barred its members
from appearing on Geo for more
than a year in protest. They offered
friendlier coverage of Prime Minis-
ter Nawaz Sharif, elected a year ago.
Mr. Sharif, in turn, is widely seen
as supporting Mr. Rahman in his
confrontation with the military. Mr.
Sharif visited Mr. Mir after the as-
sassination attempt but denied he
was taking sides. The government
established a judicial commission to
investigate the shooting and denied
any conflict of interests.
Geo was somewhat softer on
this government, said Hasan Askari
Rizvi, a security analyst. There is a
feeling in military circles that after
the shooting, Geo reacted this way
because they had some kind of gov-
ernment support, the analyst said.
To get the country out of its
troubles, well all have to work to-
gether, the government, the media
and the security forces, the prime
minister said during a visit to Lon-
don on April 30.
On the night of the shooting on
April 19, Geo reporters alleged Inter-
Services Intelligence was behind the
assassination attempt. ISI has a rep-
utation for intimidating journalists.
Mr. Rahman was intimately in-
volved in Geos move to go with ac-
cusations against ISI and to pay lit-
tle attention to other possible
suspects, such as the Pakistani Tali-
ban who had Mr. Mir on their de-
clared hit list, company insiders say.
A spokesman for the ISI wasnt
available to comment. The military,
speaking for the ISI, has described
the allegations aired by Geo as base-
less. The military then demanded
that Geo be shut down for a false
and scandalous campaign against
the ISI and for a history of acting
illegally in furtherance of anti-Paki-
stan agenda.
After the attack on Mr. Mir, a
sustained and relentless campaign
of harassment and intimidation has
been unleashed against its report-
ers and managers, the company said
Sunday in a front-page story pub-
lished in The News, the groups in-
fluential English language daily.
The groups news channel has
been shifted to the end of the cable
lineup, while newspaper distributors
have been pressured not to sell its
newspapers, the story said.
Mr. Rahmans father founded the
media group with the Jang newspa-
per more than 70 years ago. The son
started as a reporter, then launched
The News in the early 1990s and
Geo in 2002 as television in Pakistan
was opened to private channels.
BY SAEED SHAH
Protesters outside the Geo TV building in April showed support for the army.
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Child Age 11 Is Forced
To Wed to Settle a Feud
GRILAGAN, PakistanEight
months ago, 11-year-old Amna was
married off to a man three times
her age to settle a crime her uncle
had committed.
The uncle had raped another girl
in the village, according to tribal el-
ders. Following tribal custom preva-
lent in highly conservative parts of
Pakistan, the elders gave Amna and
her 17-year-old cousin, Zulhaj, to
that girls family. Nobody asked
their opinion.
Such compensation marriages
are technically illegal under Paki-
stani law. But in a country with
fraying central authority, the formal
judicial system with its slow, cor-
rupt course is often abandoned in
favor of traditional tribal justice.
With little faith in the courts, the
practice of swaragiving away
women as punishment for their fam-
iliesremains an option for settling
village disputes in tribal areas domi-
nated by the Pashtun ethnic group
in Pakistans northwest. It also re-
mains prevalent in the tribal-domi-
nated parts of Baluchistan and Pun-
jab provinces.
People have no trust in the law
and the legal system prevailing
here, said Muhammad Gul, a mem-
ber of the village elders council, or
jirga, in the village of Grilagan,
which decided the fate of Amna and
Zulhaj.
The jirga resolves the dispute in
a day. It is theeasiest way.
In Pakistani courts, criminal
cases can take five years to resolve
while civil cases take up to 10.
The Grilagan girls, from a remote
corner of northwest Pakistan, were
both married to the brother of the
raped girl, who is in his mid-30s.
Within Pashtun tribal culture and
under Islamic law, men can marry
multiple wives.
The younger girl, Amna, has
been allowed to stay at her fathers
house until she reaches puberty, a
rare concession to her young age.
Even very young girls are usually
forced to move into a new husbands
home, where they are likely to be
treated as domestic slaves and pos-
sibly sexually abused.
It isnt clear why the jirga in this
case allowed Amna to remain at
home. But local activist Zubair Tor-
wali suggested it may have been be-
cause the authorities wouldnt have
been able to turn a blind eye to a
case involving such a young girl.
Zulhaj is already living in her
new husbands home. Speaking to
The Wall Street Journal last month
in front of the jirga in Grilagan, she
said she wasnt being mistreated.
But she appeared frightened to
speak in front of a room full of the
all-male tribal elders.
She said she was 17, contradict-
ing claims by jirga members that
she was 19. Amna was kept hidden.
The Pashto word swara literally
describes a woman riding on the
back of an animal. It is a reference
to the way girls were traditionally
handed over in such deals, riding on
horseback or donkeys.
The practice was outlawed in
November 2011 and authorities
dont keep detailed data on compen-
sation marriages, making it difficult
to get an exact picture of how com-
mon it is. The police will investigate
only if a community member alerts
them. Even then, they often register
the case as a kidnapping, not a com-
pensation marriage.
Responsibility for clamping
down on the practice falls to provin-
cial authorities. Barrister Zafarullah
Khan, a top official in the Ministry
of Law, Justice and Human Rights,
said that progress has been slow.
The law has been changed and
it is up to the provinces to stop this
inhumane practice. These are mostly
tribal societies and [swara] is em-
bedded in the culture and the social
beliefs, he said. If people dont re-
port cases to the authorities, they
cant intervene, he explained.
Samar Minallah Khan, a womens
rights activist who has been cam-
paigning against the practice for
more than a decade, said she is
aware of more than a hundred cases
in 2013 alone, and believes that is
just the tip of the iceberg.
The Grilagan village jirga said
they had settled seven disputes
through swara in the past nine
months.
The girls are usually immature,
a jirga member acknowledged.
Ms. Khan said villagers often
hand over their daughters because
they are poor and dont have much
else to offer. Economic reasons
have a lot to do with it, she said.
The family says we cant give
land or money as compensation, so
it is convenient to give a girl.
In the tribal cultures of Pakistan,
which span a range of linguistic
groups across the country, the idea
of giving a girl in compensation is
closely caught up with a deeply en-
trenched code of honor. The cultural
code dictates that the wronged
party has to seek revenge to restore
their honor.
In the past, the practice of swara
was more symbolic. The girl was
handed over as a symbol of peace
between the two families and was
generally treated with more respect.
Today, it has become more about re-
venge, said Ms. Khan.
There is no point treating the
girl well because the community ex-
pects you to mistreat her, she said.
Unless you rape her and abuse her,
you arent a real Pashtun or Punjabi
tribal, they say.
Islam doesnt condone the prac-
tice. Under Islamic law, punishment
is meant to target the perpetrator,
not a related woman or child. The
victims family can seek blood
money in compensation.
When Ms. Khan intervenes in
swara cases, she said she uses Islam
to encourage people to accept a dif-
ferent way of settling disputes.
However, some local Pakistani
human-rights activists said swara is
the lesser evil as it prevents bloody
tribal conflicts sparked by the need
to avenge an offense.
The appearance of swara is very
ugly, but it settles disputes of many
generations, said Hazer Gul, a hu-
man-rights activist from the trou-
bled Swat Valley in northwest Paki-
stan. The sacrifice of one girls life
is seen as preventing conflict for
generations to come.
BY ANNABEL SYMINGTON
The village council of elders, or jirga, in Grilagan decided the fate of girls given in compensation marriages.
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Giving a girl is closely
caught up with a deeply
entrenched code of honor.
18 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
As Home Sales Fall, Discounts Multiply
HONG KONGHong Kongs once-
sizzling property market has turned
so frosty that developers have re-
sorted to discounts and other incen-
tives to lure buyers to new apartment
complexes.
The new units are still expensive
even after the givebacks. Some units
are commanding US$2,500 a square
foot, or more, which rivals new lux-
ury condos in Manhattan.
But the price cuts make for a con-
trast with the overheated market of
just two years ago, before the gov-
ernment stepped in to cool price
rises.
Incentives ranging from 18-month
payment delays to limited-time dis-
counts and cash rebates are aimed at
stoking a market that turned stag-
nant last year as buyers sat out and
transaction totals fell. Some develop-
ers are also offering second mort-
gages via nonbank finance companies
worth up to 25% of the purchase
price of more expensive properties.
(Banks in Hong Kong are allowed to
lend no more than 50% on apart-
ments costing over 10 million Hong
Kong dollars, or US$1.3 million.)
Everybody is doing it, Nicole
Wong, a real-estate analyst at broker-
age firm CLSA, said of the discounts.
Youve more supply fighting for a
smaller amount of money and fewer
buyers.
After a bull run that sent house
prices doubling from 2008 to 2013,
the government sought to rein in the
market with various measures start-
ing in late 2012. They included higher
minimum down payments and sales
taxes levied on transactions, or
stamp duties, of up to 8.5%. As a re-
sult, the number of Hong Kong real-
estate transactions fell to a 23-year
low last year.
The authorities also imposed a so-
called double-stamp duty, of 17%, on
property purchases made by non-
Hong Kong residents, including those
from mainland China, who were often
blamed for pushing up the price of
real estate.
Hong Kongs measures iced the
market, especially deterring foreign
buyers and speculators, according to
analysts. The number of residential
transactions declined 56% in 2013,
according to government data. Prices
rose only slightly compared with
2012, according to an index by prop-
erty agency Centaline. Government
figures show an increase in 2013, but
a slight decline in the first two
months of 2014.
Developers have had to sweeten
their offers. Late last year, the dis-
counts started to appear.
So far, efforts are working. Spring
is traditionally busy and large crowds
of aspiring homeowners have
crowded the showrooms at the
launches of new projects.
Its like Marks & Spencers with a
Christmas sale, said Wong Leung
Sing, an analyst at Centaline, refer-
ring to the department-store chain.
While fewer transactions are be-
ing done in the overall housing mar-
ket, sales of new apartments are on
the rise, according to government fig-
ures. Transactions increased 23% in
the years first quarter from a year
earlier, for a total value of HK$32 bil-
lion, a 28% increase from last year.
The Hong Kong government has
said it has no intention of repealing
the cooling measures at the moment.
Even luxury condos are being dis-
counted. Connie Law, a 52-year-old
homemaker, recently explored 10 new
developments to buy. She settled on
a three-bedroom apartment of 1,280
square feet in a new development in
Hong Kongs middle-class Quarry Bay
neighborhood.
Ms. Law said that after a 4.25%
discount from the developer, her fam-
ily paid HK$27.3 million for the flat,
about twice the price of a comparably
sized flat in the 29-year-old buildings
that line the rest of the block.
The discount was a help, Ms.
Law said.
The citys largest developer, Sun
Hung Kai Properties Ltd., is
among the most aggressive in price
cutting. In April, it opened a 144-
unit development in the suburb of
Fanling. With prices starting at
HK$8,814 a square foot, the new
units were offered at about 10% be-
low similar-size units at a compa-
rable one-year-old building nearby.
The company said it would offer
additional 5% discounts to those who
paid in cash, 3% to anyone who signs
a contract before May 31 and 2% for
those who dont need a second mort-
gage to finance the purchase. Sun
Hung Kai is also offering one-year
bridge loans for as much as 70% of
an apartments value.
In February, the company set the
price for a batch of 156 apartments at
its large Riva project in suburban
Yuen Long at 40% lower than for the
first bunch of units it sold at the
same development in March 2013.
A spokeswoman said the com-
panys strategy adjusts prices to
market sentiment.
Earlier this year, at a new devel-
opment called The Avenue in the
citys bustling Wanchai neighbor-
hood, Sino Land Co. and Hopewell
Holdings Ltd. offered 17.5% discounts
for cash buyers. Factoring in the dis-
counts, the new units sold at around
HK$19,000 a square foot, or about
20% cheaper than comparable up-
scale units in nearby buildings.
The price reductions so far have
been focused only on new apart-
ments, but analysts say it is inevita-
ble that sellers of existing units will
follow suit.
Still, some home buyers remain
cautious. After Raymond Ho, a 50-
year-old accountant at an electronic-
components company, sold his two-
bedroom apartment in Kowloon, he
was inundated with calls from agents.
He is now looking to buy in one of
several new developments in the
northern New Territories suburbs for
easier access to mainland China,
where he often travels for work.
He has looked at several develop-
ments but hasnt made an offer yet.
The prices do look attractive at first
glance, but I know that its also a
gimmick, he said. Theres a lot of
choice.
BY JASON CHOW
Change in average house prices
30
5
0
5
10
15
20
25
%
10 2009 11 12 13 14*
0.5%
*First two months
Source: Hong Kong government
The Wall Street Journal
ANewDay
Hong Kongs housing market has
cooled after prices doubled from 2008
to 2013. Developers are offering
incentives to spur sales.
P
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Buyers Rediscover Roomier Vintage Apartments
Hong Kongs apartment market
for years has been dominated by
sparkling, new towers with views
and pricesunseen almost any-
where else in the world.
But the high cost and relatively
small size of those units are begin-
ning to turn buyers and renters
away, and many of them are redis-
covering an earlier generation of
apartment buildings that was
largely ignored during the frenzy of
the citys housing boom.
The older apartment buildings
dont necessarily charm from the
outside. Built from the 1960s to
1980s, they often have faded exteri-
ors dotted with air conditioners and
laundry hanging out to dry.
Yet many of these buildings are
located in prime neighborhoods, and
boast more space and better layouts
than the new towers. Meanwhile,
they offer far lower prices that ap-
pear to be holding up better than
the market overall.
These apartments also are getting
scarcer. For every 10 deluxe new
high-rise apartments on the block,
there is just one of these vintage
units for sale, real-estate brokers say.
That ratio was about seven-to-one a
decade ago, brokers say. In some
ways, the vintage buildings are com-
parable to classic six apartments in
prime New York neighborhoods or
Victorians in San Franciscobut at a
discount to the overall market.
Older flats are getting fewer
and fewer and they are turning
more and more precious, said
Jackie Cheung, an investment man-
ager and a district councilor in
Hong Kongs Mid-Levels, a prime
neighborhood halfway up the citys
prestigious Peak district that is
home to many older buildings.
These vintage buildings still fall
into the citys high-end category,
where prices have risen the most in
recent years.
Recent government measures to
curb price increases appear to be hav-
ing an effect on the high-end market.
Overall rental prices in the Mid-Levels
neighborhood are down 1.8% in the
past year, according to JLL, formerly
Jones Lang LaSalle. Meanwhile,
prices for a selection of apartments
built in the 1970s in the neighborhood
are flat over the same period, accord-
ing to Centaline Property Agency.
While prices of older buildings
have held up relatively well, rents of
these apartments are also as much
as one-third cheaper than new
buildings. And what they lack in
amenities like health clubs they
make up for with location, space,
wide balconies and mature gardens
that provide a respite from the fren-
zied city.
I see more tenants in the Mid-
Levels looking for older towers now
due to more space than the younger
apartments, said local property
agent Jason Wong.
Some residents in these older
apartment buildings belong to a
classy club outside their buildings,
Mr. Wong said. They dont really
care if their apartment has a club-
house.
In a city where architectural his-
tory often takes a back seat to new
development, these buildings date
back to a time when Britain ruled
Hong Kong as an imperial colony
and the apartments were filled with
British businessmen and govern-
ment officials.
Today, selling points include the
citys lowest crime rates and prox-
imity to the University of Hong
Kong, the citys oldest university. It
also has prestigious high schools
such as St. Paul Co-educational Col-
lege.
I moved there because my son
was admitted to school nearby, said
Patrick Wong, a retired civil servant
who moved into his 1,760 square-
foot Mid-Levels apartment three de-
cades ago. The neighborhood is
very quiet and charming, full of
greenery. I used to walk to my office
every day. He has lived in the same
apartment for three decades.
Mr. Wong, 62 years old, said he
doesnt care if his apartment has a
fancy clubhouse or not. If I want to
do exercise, I go out and hike in this
charming and green neighborhood,
which is much better and healthier
than running in the gym inside the
clubhouse, he said.
BY CHESTER YUNG
Realty Garden, built in 1971, is an older high rise in the Mid-Levels district.
P
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INTERNATIONAL PROPERTY: HONG KONG
Of the Boil
Total value of residential property sales in Hong Kong
Sources: Hong Kong government (total values); Centaline (index) HK$10 billion = $1.3 billion
*An index created by Centaline, the citys largest brokerage rm, tracks the prices of signed transactions from the rm Through April 27
Centa-City Leading Index*
The Wall Street Journal
125
0
25
50
75
100
05
Weekly data
10 14 2000
118.40
HK$60 billion
0
10
20
30
40
50
12 13 14 2011
Primary
sales
Secondary
sales
10 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
WORLD NEWS
India Opposition Leader Looks to Exports
ATTARI, IndiaArun Jaitley, a
leader of Indias main opposition
partyand, some believe, the next
finance ministersays he wants to
see India become an export power-
house like China.
Those are big words even amid
the current political frenzy in India,
as thousands of candidates battle
for seats in Parliament this month in
national elections. And it is a prom-
ise that politicians here have made
before, and failed to deliver on.
Mr. Jaitleys views matter be-
cause polls suggest his Bharatiya Ja-
nata Party will win enough seats in
Parliament to form the next govern-
ment. A significant part of the BJPs
campaign message has been eco-
nomic growth.
In an interview with The Wall
Street Journal last week, Mr. Jaitley
said, We will do a massive opera-
tion to start the process of moving
in the direction of low-cost manu-
facturing.
Specifically, he cited the need for
lower interest rates on corporate
borrowing, an overhaul of Indias
complex tax structures, and reduc-
tion in red tape and bureaucracy
something India is famed for. Cur-
rently, interest rates are in the low
double digits.
The BJP has also promised to
create new industrial areas, reminis-
cent of the idea of the special eco-
nomic zones in China that nurtured
manufacturing there decades ago.
The obstacles to Indian export
competitiveness are well known. For
starters, India lacks the modern
roads, ports and power plants that
China has already spent a quarter-
century building.
And while Indian labor costs are
low, there is a shortage of skilled la-
bor, and it can be difficult to fire
factory workers. For reasons like
these, many manufacturers find
other countries more attractive.
The BJP will consider labor-law
changes, Mr. Jaitley said, but it
wont be its first fix for the econ-
omy. He declined to identify what
might be first on the list, saying it
would be a decision made once any
new government is formed. Regard-
ing labor laws, he said: Reforms
are the art of the possible. Nobody
should start with the most difficult
reform process.
Another big hurdle for any na-
tional government trying to remake
Indias economy in Chinas image is
that state governments control
many important industrial policies,
such as land acquisition and indus-
trial licensing, limiting the central
governments hand.
In the dusty village of Attari near
the border of Pakistan, Mr. Jaitley
stood before a crowd of farmers and
talked about factory jobs.
We need lots of jobs which can
only come from export-oriented
manufacturing like they have in
China, he said, wiping sweat from
his face.
The mostly male crowd of 800-
or-so people, many in beards and
colorful turbans, cheered. He spoke
for 15 minutes before moving on to
the next village.
Mr. Jaitley, a lawyer and former
commerce minister, is among the
BJPs most outspoken and influen-
tial politicians. He is running for a
parliamentary seat from Amritsar in
the state of Punjab.
He is widely viewed as a possible
finance minister, if his party does
well, because of his experience and
his close ties to the BJPs candidate
for prime minister, Narendra Modi.
The results of the national election
wont be known until May 16.
Mr. Jaitley declined to speculate
on whether he might get a cabinet
post.
In addition to policies promoting
urban development, tourism and
property development, he said the
BJP wants to focus on creating man-
ufacturing jobs. Indias economy is
suffering from high inflation and
low growth. The country has been
led by the Congress party for the
past decade, and while political poll-
ing here is notoriously unreliable,
the numbers suggest voters are
looking for a change.
The BJP has pledged to create 10
million new jobs a year for the next
five years if it comes to power. The
only way India can generate that
kind of employment is through ex-
ports. Producing cheaper products
is the only way India can compete
with countries such as China, South
Korea, Malaysia and Indonesia
known for their low-cost manufac-
turing, Mr. Jaitley said.
India has some of the lowest
wage rates in the world, but it has
failed to become a big exporter like
Asias other large economies. Manu-
facturing still makes up only about
15% of Indias gross domestic prod-
uct. Despite Indias expansion in the
past 20 years, its share of global ex-
ports has been stuck below 2%.
Chinas slice of the worlds exports
has jumped from less than 3% in
1995 to close to 12% last year.
And while China is a trade-sur-
plus country, India has been run-
ning a huge trade deficit over the
years, meaning its imports far ex-
ceed exports. Indias trade deficit
came in at $138 billion in the finan-
cial year that ended March 31, up
from $18 billion for the year ended
March 31, 2000.
Critics say the BJP is making
promises it cant keep. Although
surveys suggest it is ahead in the
polls, a parliamentary majority
seems out of reach. That means a
coalition government would need
to be formed with other parties
an often unruly arrangement that
can trip up any one partys poli-
cies.
Even an aggressive push to re-
vamp the economy would take years
and hundreds of billions of dollars
to make India more competitive,
economists say.
India needs to address problems
in infrastructure such as roads,
ports and power plants, said Rajiv
Biswas, chief economist for Asia-Pa-
cific at IHS, in Singapore. India has
the brain power, but it should im-
part vocational training to create a
skilled manpower base for manufac-
turing companies.
The BJP in the past has opposed
foreign direct investment in super-
markets and some other types of re-
tail. Mr. Jaitley said the party wants
to open most other industries, in-
cluding defense and infrastructure,
to more foreign control, which could
also help exports.
Foreign direct investment, he
said, is always welcome except in
certain sectors where we think the
Indian economy is not ready for it.
BY PRASANTA SAHU
AND ANANT VIJAY KALA
Percentage of
world exports
The Wall Street Journal
Source: U.N. Conference on trade
and development
0
3
6
9%
00 1995 10
1.66%
INDIA
11.76%
CHINA
Trade
Routes
Arun Jaitley, center, attended a BJP election rally in Amritsar in April.
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New Violence Hits Nigeria Before Economic Forum
Three gunmen stormed a school
in Nigerias capital on Tuesday in a
bid to kidnap a small bus full of chil-
dren, the latest violent incident in
the country as it prepares to host an
event to showcase its economy.
Also on Tuesday, the Nigerian
government continued to battle an
elusive Islamist militant group hold-
ing several hundred teenage girls
hostage.
On Wednesday, the country plans
to welcome thousands of business
and political leaders attending the
World Economic Forum/Africa in
Abuja.
The forum is intended to display
the achievements of a country that
this year overtook South Africa as
the continents top economy. Chinas
premier, Li Keqiang, as well as Afri-
can heads of state and top execu-
tives, are among those expected to
attend.
Tuesdays attack occurred a 15-
minute drive away from where at-
tendees are to register for their
name badges, near Nigerias seat of
government.
No one was wounded in the at-
tack, which occurred at 8 a.m. local
time, at a school in Abujas Nyanya
district. The assailants stole a school
bus after unsuccessfully trying to
kidnap some of the students.
There was no claim of responsi-
bility, but suspicion fell immediately
on Boko Haram, the radical Islamist
group that operates out of strong-
holds in the rural northeast of Nige-
ria, along the border with Cameroon.
The latest attacks have exposed a
government that still hasnt been
able to tackle an insurgency raging
in the Nigerias north, threatening to
divide the country between an im-
poverished Muslim north and a
largely prosperous Christian south.
Nigerian security services have
proved unableand often unwill-
ingto beat back the brutal insur-
gency.
The attacks also offered another
propaganda victory for Boko Haram,
whose war to eradicate schools from
Nigeria is attracting global atten-
tionand condemnation.
We are doing everything we can
and will continue to do so until the
girls are freed, President Goodluck
Jonathan vowed on Sunday.
The next day, Boko Harams
leader, Abubakar Shekau, appeared
in a video claiming responsibility for
the abduction and threatening to sell
the girls as slaves as their spoils in
a war against the Nigerian state.
We would also give their hands
in marriage because they are our
slaves, he said in the nearly hour-
long video. We would marry them
out at the age of 9. We would marry
them out at the age of 12.
The girls werent seen in the
video, and their whereabouts arent
known. But Boko Haram militants
have surfaced frequently, raiding vil-
lages and slaughtering students in
schools.
I dont think the troops are re-
ally even fighting this battle out
there, said Jacob Zenn, an Africa
analyst at the Jamestown Founda-
tion research institution in Washing-
ton. I still [hear] the same rhetoric
from Jonathan: This is a temporary
issue. But nobodys really doing any-
thing on the ground.
The U.S. is assembling a team of
military and law-enforcement spe-
cialists and investigators to help Ni-
geria search for the abducted girls,
officials said.
The State Department said de-
tails of the teamincluding its size,
composition and dutieswould be
worked out in a meeting Tuesday
between Secretary of State John
Kerry and President Barack Obama.
Mr. Kerry offered the U.S. team
in a phone call Tuesday with Mr.
Jonathan. Jennifer Psaki, a State De-
partment spokeswoman, said Mr.
Jonathan welcomed the U.S. aid
offer, but didnt explicitly say
whether he accepted it. Nonetheless,
she said Mr. Kerry took the Nigerian
leaders response as a go-ahead to
make plans to assemble and send
the team.
Although the Nigerians had been
searching for the girls since they
disappeared in April, they havent
requested U.S. assistance.
The team will be known as a co-
ordination cell, and will be over-
seen by the U.S. Embassy in Abuja.
The White House said the U.S. move
fits with the administrations inter-
est in aiding in the search.
President Obama has directed
that we do everything we can to
help the Nigerian government find
and free these girls, White House
press secretary Jay Carney said.
Meanwhile, villagers in the north
on Tuesday streamed into the
nearby city of Maiduguri, saying
Boko Haram had attacked their
hometown, Warabe, and kidnapped
an additional eight girls, ages 12 to
15. They were heavily armed, and
shooting, recalled Mohammed
Adam, a village resident.
Nigeria isnt the only country
grappling with Boko Haram. Also on
Tuesday, several dozen attackers
overpowered their way on to a mili-
tary base in Cameroon, the govern-
ment there said, freeing a suspected
member from detention.
But there appears to be ground-
level resistance to raid suspected
Boko Haram hide-outs.
In recent weeks, the group has
been distributing videos showing
the decapitation of government
troops, whose carcasses are then
displayed to jubilant Boko Haram
members.
By DrewHinshaw
in Accra, Ghana, and
Gbenga Seun Ijagba
in Abuja, Nigeria
The mother of one of the missing girls cries at a rally in Abuja on Tuesday.
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THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 19
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THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 9
Knife Attacks in China Fuel Fears
SHANGHAIAt least six people
were injured in a knife attack Tues-
day, in the third stabbing at a Chi-
nese train station since March and
the latest challenge to President Xi
Jinpings increasingly blunt anti-
crime rhetoric.
Police said before midday a single
man slashed people outside a down-
town railway station in the southern
Chinese city of Guangzhou. An armed
police officer fired at and wounded
the attacker, police said, helping au-
thorities capture the perpetrator
with help from others.
Initially, Chinas state-run Xinhua
news agency and media in Guang-
zhou had reported that the stabbing
was the work of more than one per-
son. Local media retracted early re-
ports that said a second assailant
had also been captured.
Chinas state media published dif-
ferent assessments of the injuries
suffered by the six victims, who po-
lice said were all local citizens. Au-
thorities said they couldnt immedi-
ately identify the assailant, and
provided no information about his
potential motivation.
Video and photos circulated Tues-
day in Chinas major media showed a
roped-off plaza in front of the
Guangzhou station with ambulance
workers attending to a person on the
ground. One photo showed a blood-
ied man being carried near a
McDonalds restaurant.
Another photo circulating on Chi-
nese social media showed a police
officer aiming his gun at a man in a
white hat and black track pants hold-
ing a long blade. The veracity of the
photo couldnt be confirmed.
Though the motivation behind the
attack isnt clear, the violence at one
of Chinas busiest railway stations is
likely to increase public worries that
ethnic strife may be spreading.
On April 30, two people identified
by authorities as religious extremists
killed themselves while setting off
explosives at a train station in
Chinas Xinjiang region.
The attack in Urumqi, the re-
gional capital, also killed a third per-
son and injured 79 people.
In March, assailants armed with
knives attacked a train station in the
southern city of Kunming, leaving
more than 30 dead. The government
later described the attackers as sepa-
ratists from Xinjiang, and foreign se-
curity analysts said the incident ap-
peared organized, targeted civilians
and took place far from Xinjiang
where violent unrest is more com-
mon. Later that month, five people
were killed in a knife attack at a
market in the south-central Chinese
city of Changsha, in what state me-
dia said started as a dispute between
two bakery employees.
In recent weeks, President Xi has
visited special police in Beijing and
military officers in Xinjiang with or-
ders to crush separatists and terror-
ists. He has called assailants rats
and pledged an iron fist by Chinas
street cops. Chinas government last
month said more police officers in
cities, including Guangzhou, will
carry handguns.
Foreign Ministry spokeswoman
Hua Chunying told reporters on
Tuesday that the Guangzhou stab-
bing remains under investigation.
What I want to stress is whoever
carried out this violent action and
for whatever reasons, they will be
brought to justice, because these are
criminal acts, she said.
Tougher policies are likely on the
way, according to Li Wei, an antiter-
rorism expert with the China Insti-
tutes of Contemporary International
Relations, who pointed to an antiter-
rorism law that has been considered
since 2005 and would aim to better
demarcate responsibilities among se-
curity forces.
Mr. Xi, who also heads Chinas
military, appeared to step up antiter-
rorist activity following an incident
in Beijing last October, which author-
ities called a terrorist attack.
In that incident, authorities said,
a married couple and the husbands
mother steered their jeep onto a
sidewalk toward Mao Zedongs por-
trait near Tiananmen Square and ig-
nited the vehicle, killing themselves
along with two other people and in-
juring around 40 tourists.
BY JAMES T. AREDDY
A man local media say is a suspect is taken away after Tuesdays knife attack.
R
e
u
t
e
r
s
Beijing Turns More Wary on Africa Deals
Chinese Premier Li Keqiang is
using an official visit to Africa this
week to pledge more loans and
trade deals to governments that
control the commodities and oil that
Beijing needs to fuel its economy.
But Mr. Lis pledges so fartrade
agreements with Ethiopia and an ex-
pansion of a credit line to African
nations to $30 billion from $20 bil-
lionbelie the fact that China is
taking a more-cautious approach to
the continent after a series of big
loans and investments in resource
deals over recent years have failed
to pan out.
Chinas foreign direct investment
into Africa is falling. Chinese com-
panies invested $2.5 billion in Africa
in 2012, the latest official available
figures, down from $3.2 billion in
2011 and lower than a peak of $5.5
billion in 2008, according to Chinas
Ministry of Commerce.
Beijing, meanwhile, is ramping
up investments in big oil-and-gas
and mining companies in the U.S.,
Australia and Canada. Developed na-
tions accounted for 15% of Chinese
foreign direct investment in 2012,
double the share a decade ago.
Chinas big push into Africa,
which began as its economy revved
up more than a decade ago, has led
to some successes. But it has also
caused problems. Some African offi-
cials have berated China for acting
like a colonial power. Deals have
foundered amid claims Chinese
companies breached safety and en-
vironmental standards.
Other projects have gotten
bogged down in the complexities of
doing business in Africa. In some
cases, China is trying to renegotiate
contractsmany involving loans to
build infrastructure in return for re-
sourcesthat no longer make sense
now that commodity prices have
fallen sharply from record levels.
Chinese were out there throw-
ing money at anyone who would
take it, and a lot of strange deci-
sions were made, said Derek Scis-
sors, a resident scholar at the Amer-
ican Enterprise Institute in
Washington. Now, he said, theyre
not as frantic.
Nigerian Finance Minister Ngozi
Okonjo-Iweala said her government
has received more than half of a $3
billion loan for infrastructure signed
last year, but the disbursements
meant for passenger rail and agri-
culture have been slow to arrive.
They are taking their time.
Africa clearly is still crucial to
Beijing. The continent supplies
about a fifth of Chinas oil needs,
second only to the Middle East, ac-
cording to data from BP PLC. Some
deals have worked well. Jinchuan
Group International Resources
Co.s net profit jumped more than
fourfold last year because of its
$1.36 billion purchase in 2011 of a
South African copper and cobalt
miner. China National Offshore Oil
Corp., or Cnooc, has investments in
oil fields in Nigeria.
Mr. Li, in a speech to the African
Union in Addis Ababa on Monday,
vowed that trade between China and
Africa would double to $400 billion
by 2020, while Chinas cumulative
investment in the region would qua-
druple to $100 billion. The premier
will travel to Nigeria on Wednesday
to attend a World Economic Forum
meeting, where he will speak on
Thursday, before visiting Angola,
one of Chinas largest suppliers of
crude oil, and Kenya.
A $3 billion Chinese loan to
Ghana, signed in 2011, exemplifies
some of the difficulties China is fac-
ing.
The loan from state-owned China
Development Bank was meant to fi-
nance infrastructure projects, in-
cluding building a pipeline to bring
gas to Ghana from an offshore proj-
ect. The loan was collateralized by
Ghanaian crude production.
But only $600 million of the loan
has so far been disbursed, Ghanaian
officials said. As the price of crude
oil has fallen, there have been dis-
agreements over collateral. China
has complained Ghanas government
hasnt adequately prepared its infra-
structure projects, local officials
said.
Ghanas president, John Dramani
Mahama, admits to some delays in
projects and believes China is being
more selective in its financing.
China itself is changing its pol-
icy, Mr. Mahama said in an inter-
view in Accra, the capital. They are
looking more at projects that have
the potential to repay over time.
By Wayne Arnold
in Hong Kong
and DrewHinshaw
in Accra, Ghana
Troubled Transactions | Top 10 China-Africa stalled, failed or canceled deals by value
Announcement
2006
2011
2007
2009
2012
2011
2011
2007
2008
2011
China Railway Construction
China Railway Construction
Sinopec
Ex-Im Bank
Sinomach
China Development Bank*
Sinohydro
Gezhouba
Sinoma
China State Construction Engineering
Nigeria
Libya
Angola
Democratic Republic of the Congo
Gabon
Ghana
Libya
Nigeria
Nigeria
Libya
Investor
Transport
Transport
Energy
Metals
Metals
Energy
Real estate
Energy
Real estate
Real estate
Invested country Sector
Railway
Railway
Oil
Steel
Gas
Construction
Hydro
Construction
Construction
Subsector Deal value, in billions of U.S. dollars
Source: The American Enterprise Institute, Derek M. Scissors
*Only $600 million of the $3 billion was paid out.
The Wall Street Journal
$7.5
4.2
3.4
3.0
3.0
3.0
1.8
1.4
1.4
1.3
WORLD NEWS
SEC Sues
For Alleged
China Stock
Scheme
U.S. regulators filed a civil law-
suit Monday against a Toronto con-
sultant and four other people for al-
legedly helping two Chinese
companies enter U.S. markets and
making millions of dollars in profit
by manipulating trading of the com-
panies shares.
The consultant, S. Paul Kelley of
Oakville, Ontario, and two of his as-
sociates agreed to settle the Securi-
ties and Exchange Commission law-
suit. The other two people havent
settled. Mr. Kelley agreed to pay
more than $6.2 million. He and the
two others who settled neither ad-
mitted nor denied wrongdoing.
Lawyers for Mr. Kelley and a sec-
ond defendant who settled, Robert
S. Agriogianis of Florham Park, N.J.,
declined to comment. Steve Feder, a
lawyer for another defendant,
George Tazbaz of Oakville, Ontario,
said Mr. Tazbaz denies any wrong-
doing, and he hopes to be fully vin-
dicated. Arthur Fillmore II, a lawyer
for defendant Shawn A. Becker of
Overland Park, Kan., said his client
got caught in a net that trapped
one too many fish. A lawyer for the
fifth defendant, Roger D. Lockhart of
Holiday Island, Ark., couldnt be
reached for comment. Mr. Lockhart
settled by agreeing to pay more than
$3.1 million.
The SEC alleged Mr. Kelley and
three associates arranged reverse
merger transactions that brought
China Auto Logistics Inc. and Guan-
wei Recycling Corp. into the U.S.,
and then orchestrated a plan to
drive up the companies stock prices
so they could sell the shares they
owned at inflated levels. No one
from China Auto Logistics or Guan-
wei Recycling has been charged with
any wrongdoing. Representatives of
the companies couldnt be reached
for comment.
The case is the latest of several
the SEC has filed against gatekeep-
ersconsultants, financiers and
others who helped Chinese compa-
nies gain access to U.S. markets.
The alleged scheme took place in
2008 and 2009, according to the
SEC lawsuit filed in U.S. District
Court in New Jersey. Mr. Kelley and
three associates reached secret
agreements with management at
China Auto and Guanwei Recycling
in which they would pay the costs of
helping the companies gain U.S. list-
ings in exchange for 30% to 40% of
the resulting stock, the SEC alleged.
Mr. Kelley and the others then ex-
ecuted reverse mergerstransactions
in which a foreign company merges
with a U.S. shell company to gain the
shells public listingbetween the
two Chinese companies and shells
that Mr. Kelley and his associates
controlled, the SEC alleged.
After that, Mr. Kelley and his as-
sociates hired Mr. Becker, a stock
promoter, to tout the stocks of China
Auto and Guanwei Recycling, ac-
cording to the SEC.
Besides the $6.2 million pay-
ment, Mr. Kelley agreed to be barred
from the securities industry. Mr.
Agriogianis entered into a coopera-
tion agreement with the SEC, re-
flecting his assistance in the case,
with financial sanctions against him
to be determined later.
The SECs case remains pending
against Messrs. Becker and Tazbaz.
BY MICHAEL RAPOPORT
20 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
Media Deals: Power, Money, Promises
This Is the Telecom Future Many Envisioned, but in the U.S. Will It Give Too Much Control to Too Few Companies?
The communications industry
long has promised a future where
wireless service, video and the In-
ternet are offered in one conve-
nient package. Three huge possible
U.S. deals now are bringing that fu-
ture into view.
Cellphone and Internet provider
AT&T Inc. is looking to buy satel-
lite company DirecTV. Cable and
Internet provider Comcast Corp. is
considering offering mobile-phone
service over Wi-Fi if its planned
$45 billion merger with Time War-
ner Cable Inc. is approved. And
cellphone company Sprint Corp.
says it could provide home Internet
connections over wireless if it is
allowed to buy smaller rival T-Mo-
bile US Inc.
In theory, the deals would usher
in an era in which consumers
would get new, flexible options to
be entertained and communicate
wherever and however they choose.
But the path to that idealized
world is perilous, requiring that
regulators approve mergers that
would create still-bigger companies
in industries where Americans al-
ready have few choices.
There are two possible out-
comes, says Blair Levin, a former
Federal Communications Commis-
sion chief of staff who helped draft
the agencys road map for increas-
ing broadband access.
In one, the companies bulk up
and start competing aggressively,
creating exciting new services.
In the other, new competition
from technologies such as Internet
broadband via wireless or mobile-
phone service via Wi-Fi dont pan
out, giving the biggest legacy compa-
nies more pricing power than ever.
It is impossible to know which
one will prevail, says Mr. Levin, a
fellow at the Aspen Institute think
tank. Anybody who thinks they
know is probably wrong.
Consumers have a lot on the
line. Wireless, pay TV and broad-
band Internet service gobble up a
big slice of Americans time and
money. Annual household spending
on telephone, pay TV and Internet
service averaged $2,237 in 2012,
the Labor Department says. That
was up 20% from 2007, while over-
all household spending rose just
3.6%.
Any of these deals individually
would represent a major shift,
says Rick Kaplan, former head of
the FCCs wireless bureau. Taken
together, it is a pretty impressive
transformation of the industry in a
very short period of time, says
Mr. Kaplan, the head of strategic
planning at the National Associa-
tion of Broadcasters.
A marriage of AT&T and Direc-
TV would produce the most obvi-
ous birth of a megatelecom.
DirecTV offers pay television by
satellite to more than 20 million
subscribers nationwide. AT&T is
the second-largest U.S. cellphone
carrier, behind Verizon Communi-
cations Inc., with 85.1 million re-
tail wireless subscribers. AT&T also
has 16.5 million broadband Internet
customers. But its pay-TV footprint
is small, with 5.6 million users.
Telecommunications analyst
Craig Moffett of MoffettNathanson
figures their merger would reduce
pay-TV choices in about 25% of the
U.S. Elsewhere, though, it would
make AT&T a formidable competi-
tor to cable companies such as
Comcast.
Regulators are inclined to look
favorably on the proposed deal be-
cause they view offering voice or
video alone as a dying business
model, a person familiar with the
FCCs thinking says.
AT&T declines to comment. Di-
recTV refers to recent conference
calls, such as one in February, in
which Chief Executive Mike White
said Comcasts offer for Time War-
ner Cable changed the competitive
landscape and that DirecTV was
looking at how to strengthen its
position.
AT&T is working on a two-track
approach to video, promoting its
pay-TV service U-verse while build-
ing services that would circumvent
cable or satellite to deliver video
and TV content over the Internet
and to wireless devices.
The combined company, with
annual revenue of roughly $160 bil-
lion, theoretically would be in a
stronger position to persuade the
owners of TV shows and movies to
sell AT&T the necessary licenses.
Sprints ambition to buy T-Mo-
bile is more contentious.
It would combine the countrys
third- and fourth-largest wireless
carriers and has drawn skepticism
from the FCC and the Justice De-
partment. The deal would leave the
U.S. with three enormous wireless
carriers and no viable competitors.
The combination would have nearly
$60 billion in annual revenue and
around 85 million retail wireless
subscribers. The next biggest com-
petitor, regional carrier U.S. Cellu-
lar Corp., has just 4.7 million. A
Sprint acquisition also would re-
move T-Mobile from a market
where its aggressive marketing has
kept a lid on consumer prices.
Sprint Chairman Masayoshi Son
has made his case in Washington
that a combined Sprint and T-Mo-
bile would add a well-armed com-
petitor to Verizon and AT&T.
He also plans to beam high-
speed Internet service to house-
holds. Sprint is testing the technol-
ogy with satellite-TV company
Dish Network Corp. in Corpus
Christi, Texas. But while such tech-
nology is getting faster and more
efficient at carrying data-heavy
traffic like video, many analysts
doubt it will ever be a robust alter-
native.
The continued importance of
those wired connections means
regulators are giving particularly
close scrutiny to the planned
merger of Comcast and Time War-
ner Cable.
Comcast CEO Brian Roberts
says his company needs to bulk up
to compete effectively with satel-
lite-TV operators, phone companies
such as Verizon and relatively new
entrants in the video market such
as tech heavyweights Google Inc.,
Apple Inc. and Amazon.com Inc.
The cable industrys traditional re-
gional structure has limitations
that our national competitors dont
have, Mr. Roberts said this year.
Comcast says merging with
Time Warner Cable would increase
competition and spark innovation.
Comcast told the FCC that the
company is studying the possibility
of offering mobile-phone service
that runs mainly on Wi-Fi.
Wi-Fi airwaves already carry
about 57% of wireless data traffic
in North America, according to
Cisco Systems Inc. And Comcast
says it plans to expand the number
of wireless hot spots in its network
this year to eight million from one
million.
But while technological ad-
vances have made phone over Wi-
Fi feasible, it still is inferior to typ-
ical wireless service and needs to
use the cellular network as a back-
stop.
If regulators approve the deal,
Comcast would be the countrys
largest Internet broadband sup-
plier, with more than $85 billion in
revenue and more than 32 million
broadband subscribers, almost 16
million more than No. 2 AT&T.
Part of AT&Ts reasoning in
making overtures to DirecTV now
is to get in front of authorities
while they are considering the
Comcast deal, a person familiar
with the matter says.
The fear is that consolidation
resulting from a Comcast deal
would raise the regulatory bar for
subsequent proposals.
Regulators review each deal on
its merits, but the FCC and Justice
Department say they would be
mindful of related developments in
the industry.
Companies say regulators ought
to view the landscape through a
wide-angle lens.
The FCC needs to account for
companies that may enter the busi-
ness down the line, says T-Mobile
Chief Executive John Legere. The
analysis would be much more than
the three or four that are on the
table now, he says. It would be
the adjacent industry and other
types of competition.
And Michael Keeley, an anti-
trust lawyer with Axinn, Veltrop &
Harkrider LLP, says regulators will
have no choice but to consider the
deals collective impact.
Even if they try to review the
deals separately, the common is-
sues will lead the reviews to all run
together, he says.
Gautham Nagesh
and Shalini Ramachandran
contributed to this article.
By Ryan Knutson,
Thomas Gryta
and Brent Kendall
BUSINESS & FINANCE
*Doesnt include satellite broadband services Note: Wireless data are for 1Q 2014, broadband and pay TV data are for 4Q 2013.
Sources: MoffettNathanson (broadband); SNL Kagan (Pay TV); New Street Research (wireless)
Photo: Getty Images
Several possible deals
would transform the
communications and
media markets.
Convergence or
Consolidation?
The Wall Street Journal
COMCAST
AT&T
TIME
WARNER
CABLE
TIME
WARNER
CABLE
VERIZON
COX
23%
18%
13%
10%
6%
DIRECTV
DISH
22%
20%
14% 8%
11%
5%
5%
SPRINT T-MOBILE
34%
28%
15%
Pay TV Wireless Broadband*
MARKET SHARE
OF SELECTED
COMPANIES
13%
TRACFONE
U.S. consumers have a lot on the line. Wireless, pay
TV and broadband Internet service gobble up a big
slice of Americans time and money.
THE HIGH COURT
COMMERCIAL
Record No. 2014/59 COS
IN THE MATTER OF
ACCENTURE PUBLIC LIMITED COMPANY
AND IN THE MATTER OF THE COMPANIES
ACTS 1963 TO 2013
AND IN THE MATTER OFAPROPOSED
REDUCTION OF CAPITALPURSUANT
TO SECTION 72 OF THE COMPANIES ACT
1963
NOTICE IS HEREBY GIVEN that an Order oI the High Court
oI Ireland made on 29 April 2014 (the ~Court Order) cf
the redution oI the share apital oI Aenture Publi Iimited
Company (the ~Company together with the minute approved
by the High Court oI Ireland setting out the redution oI the
Company`s share apital by an amount oI US$10,955,000,000
was registered by the Registrar oI Companies on 29 April 2014
and this notie is given in ompliane with the Court Order.
Dated: 7th May 2014
Signed: ARTHUR COX
Solicitors,
Earlsfort Terrace,
Dublin 2,
Ireland
(Ref: MAMcL/M2C/AC049/005)
Legal Notices
ADVERTISEMENT
PUBLIC NOTICES
8 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
Colleges Dont Buy Happiness
A word to high-school seniors re-
jected by their first choice: A degree
from that shiny, elite college on the
hill may not matter nearly as much
as you think.
A new Gallup survey of 30,000
college graduates of all ages in all
50 states has found that highly se-
lective schools dont produce better
workers or happier people, but in-
spiring professorsno matter where
they teachjust might.
The poll, undertaken this spring,
is part of a growing effort to mea-
sure how well colleges do their jobs.
This survey adds an interesting
twist, because it looked not only at
graduates after college; it tried to
determine what happens during col-
lege that leads to well-being and
workplace engagement later in life.
The poll didnt measure gradu-
ates earnings. Rather, it was rooted
in 30 years of Gallup research that
shows that people who feel happy
and engaged in their jobs are the
most productive. That relatively
small group at the top didnt dispro-
portionately attend the prestigious
schools that Americans have long
believed provided a golden ticket to
success. Instead, they forged mean-
ingful connections with professors
or mentors, and made significant in-
vestments in long-term academic
projects and extracurricular activi-
ties.
It matters very little where you
go; its how you do it that counts,
said Brandon Busteed, executive di-
rector of Gallup Education. Having
a teacher who believes in a student
makes a lifetime of difference.
The poll is the brainchild of for-
mer Indiana Republican Gov. Mitch
Daniels, who became president of
Purdue University in January 2013.
As he prepared for the job, Mr. Dan-
iels said he kept bumping into the
same problem: a lack of bench-
marked data to measure the value of
a college degree. Last spring, during
a trip to Gallups D.C. offices, he
seized on the idea of applying their
engagement and well-being ques-
tions, which had been used in other
contexts, to college graduates. The
index will soon be broken down to
the level of individual schools for
those that have the will, and frankly,
the nerve, Mr. Daniels said.
There is a lot we dont know
about higher education, and there is
a sense its skating on its reputa-
tion, Mr. Daniels said. We needed
to know with more rigor how well
the experience is serving people.
The poll found that just 39% of
college graduates feel engaged at
workmeaning, for instance, that
they enjoyed what they did on a
daily basis and are emotionally and
intellectually connected to their
jobs. And only 11% reported they
were thriving in five different as-
pects of their lives, among which
are financial stability, a strong so-
cial network and a sense of purpose.
That relatively small handful of
graduateswho tend to be more
productivewent to a variety of
colleges, though they were slightly
more likely to go to larger schools
and less likely to have attended for-
profits.
The strongest correlation for
well-being emerged from a series of
questions delving into whether
graduates felt emotionally sup-
ported at school by a professor or
mentor. Those who did were three
times as likely to report they
thrived as adults. Graduates who re-
ported having experiential and
deep learning were twice as likely
to be engaged at work as those who
didnt.
University of Pennsylvania Pro-
fessor Martin Seligman, who has
studied the psychology of happi-
ness, said it was impossible to know
whether the college experiences Gal-
lup asked about were the cause of
later success or simply coincidental
to it.
One hopeful possibility is that if
college were changed to produce
more emotional support, this would
result in much more engagement
later in life, he wrote in an email.
Another, less interesting possibil-
ity is that people engaged at work
who said they were emotionally
supported in college are simply up-
beat to begin with, and that rosy
outlook colors their memories.
Other, less fuzzy correlations
were between debt and entrepre-
neurship. About 26% of graduates
with no undergraduate debt started
their own business, compared with
just 20% of those carrying debt
from $20,000 to $40,000. Nearly
three-quarters of U.S. college gradu-
ates leave school with debt; among
those who do, the average is nearly
$30,000. Graduates with that
amount of debt were one-third as
likely to report they were thriving
as graduates without debt reported.
The surveys most dramatic take-
awaythat graduation from an elite
college provides no discernible ad-
vantage over Podunk Uechoes a
refrain that began getting traction
about a decade ago. Stacy Dale, an
economist at Mathematica, a New
Jersey research firm, co-wrote a pa-
per in 2004 that found that stu-
dents who were accepted to elite
schools, but attended less selective
schools, went on to earn just as
much money as their elite counter-
parts.
Individual traits matter more
than where you went, Ms. Dale
said. Its a lot more important what
you learn later in life than where
you got your undergraduate de-
gree.
BY DOUGLAS BELKIN
Concordia University undergraduate-degree candidates get pumped up as the 2014 graduation ceremony begins in Irvine, Calif., on Saturday.
Z
u
m
a
P
r
e
s
s
U.S. NEWS
U.S. Seeks
Wider Pool
Of Skilled
Employees
Spouses of H-1B visa holders be-
ing sponsored for a green card by
their employers will be allowed to
work in the U.S. as part of a new
initiative by the Obama administra-
tion to attract high-skilled foreign
workers.
Deputy Secretary of Homeland
Security Alejandro Mayorkas and
Commerce Secretary Penny Pritzker
announced Tuesday that the admin-
istration plans this and other revi-
sions to regulations for the H-1B and
other skilled-worker visas.
Mr. Mayorkas said the goal was
twofold: to encourage highly
skilled, specially trained individuals
to remain in the United States and
to maintain competitiveness with
other countries that attract skilled
foreign workers and offer employ-
ment authorization for spouses.
Ms. Pritzker noted that many
U.S. businesses are launched by im-
migrants. She mentioned Andy
Grove, the former CEO of Intel Corp.
who was born in Hungary; Google
Inc. co-founder Sergey Brin, born in
Russia; and Jerry Yang, who co-
founded Yahoo and is from Taiwan.
The rules are expected to go into
effect after a 60-day public-com-
ment period.
Congress allows 85,000 new H-1B
visas to be issued each year, 20,000
of which are reserved for people
with advanced degrees. Under exist-
ing regulations, the Department of
Homeland Security doesnt extend
employment authorization to depen-
dents of H-1B visa holders, who nor-
mally have specialized skills in engi-
neering, programming and other
high-tech fields.
The decision stops short of giv-
ing spouses of all H-1B visa holders
blanket approval to work in the U.S.
Spouses would become eligible only
after the visa holders company has
petitioned for an immigrant visa for
the foreign employee, putting the
employee on track for legal perma-
nent residency. Lawful permanent
residents generally qualify to be-
come U.S. citizens after five years.
Allowing H-1B spouses to work
would be an important change.
Sometimes people arent willing to
come to the U.S. if their spouse
cant work, said Stephen Yale-
Loehr, a professor of immigration
law at Cornell Law School.
Another revision announced
Tuesday will ease requirements for
applicants of an EB-1 work visa, is-
sued to researchers and professors
with extraordinary ability. To qual-
ify, applicants currently must sub-
mit awards, scholarly articles and a
host of evidence to prove their out-
standing recognition in and contri-
bution to a particular field. The new
rule will allow applicants to present
comparable evidence that is accept-
able, the official said. The U.S. is-
sues 40,000 such visas each year.
BY MIRIAM JORDAN
Source: Gallup-Purdue Index Internet survey of 29,560 adults with a bachelors degree or higher, and 1,557 adults with an associates degree, conducted Feb. 4-March 7;
margin of error for bachelors degree or higher: 0.9-1.0 percentage points
Degrees of Satisfaction
A snapshot of the well-being of college graduates at work, by major, in various aspects of their lives and in relation to their school debt
Workplace engagement Percentage of graduates thriving in
at least one domain of well-being
College majors and engagement Share who are thriving by
undergraduate debt level
Actively
disengaged
Not
engaged
49%
Engaged
39%
12%
Purpose
Full-time
employment
Engagement
at work
Social
Physical
Community
Financial
$40,001+
$20,001
$40,000
$10,001
$20,000
$1
$10,000
No debt 14% thriving
11
7
4
2
Science
Business
Social
sciences
Arts and
humanities
63%
61
53
52
38%
37
41
41
54%
49
42
47
35
The Wall Street Journal
Under a newinitiative,
spouses of H-1B visa
holders being sponsored
for a green card will be
able to work in the U.S.
THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 21
For information about listing your funds, please contact: Lauren Berkemeyer tel: +44 20 7572 2102; email: lauren.berkemeyer@dowjones.com
Data as shown is for information purposes only. No offer is being made by Morningstar, Ltd. or this publication. Funds shown arent registered with the U.S. Securities and Exchange Commission and arent available for sale to United States citizens and/or residents
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nCHARTEREDASSETMANAGEMENTPTELTD- TEL NO: 65-6835-8866
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CAM-GTF Limited OT OT MUS 04/30 USD 344894.56 3.8 -15.1 -3.0
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Republikas square 2a, Riga, LV-1522, Latvia
Citadele Eastern Europ Bal EU BD LVA 04/30 EUR 16.26 -1.9 -0.6 3.7
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DJE Real Estate P OT OT LUX 05/06 EUR 4.18 -3.7 -8.5 -7.6
DJE-Absolut P OT OT LUX 05/06 EUR 249.99 -0.8 0.5 7.8
DJE-Alpha Glbl P OT OT LUX 05/06 EUR 180.43 -7.2 -3.2 5.3
DJE-Div&Substanz P OT OT LUX 05/06 EUR 282.58 -0.1 2.1 9.6
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DJE-Renten Glbl P EU BD LUX 05/06 EUR 153.08 2.9 1.9 4.6
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LuxPro-Dragon P AS EQ LUX 07/20 EUR 140.29 -8.8 4.4 7.0
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Antanta Combined Fund EE EQ AND 04/25 USD 192.28 -8.4 -22.4 -20.5
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Tel: + 3861 587 47 77
MP-BALKAN.SI EE EQ SVN 08/12 EUR 19.29 -1.9 -8.4 -10.9
MP-TURKEY.SI OT OT SVN 05/05 EUR 38.78 7.1 -29.9 0.6
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International FundManagers (Ireland) LimitedPH- 353 1 670660Fax - 353 1 6701185
Global Technology OT EQ IRL 05/02 USD 21.58 -5.5 19.1 9.5
Japan Fund USD JP EQ IRL 05/02 USD 20.38 -9.7 -7.0 5.1
Polar Healthcare Class I USD OT EQ IRL 05/02 USD 31.00 9.3 44.5 38.0
Polar Healthcare Class RUSD OT EQ IRL 05/02 USD 30.33 9.0 43.7 37.3
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Tel: +6221 25574883 Fax: +6221 25574893 Website: www.ciptadana-asset.com
Indonesian Grth Fund GL EQ BMU 04/30 USD 168.73 23.8 -14.5 -5.4
nTHENATIONAL INVESTOR
POBox 47435, AbuDhabi, UAEWeb:www.tni.ae
nHERMITAGECAPITAL MANAGEMENTLTD.
Tel: +7501 2583160 www.hermitagefund.com
The Hermitage Fund GL EQ JEY 03/12 USD 963.12 4.5 105.6 -23.2
nHORSEMANCAPITAL MANAGEMENTLTD.
T: +44(0)2078387580, F: +44(0) 2078387590, www.horsemancapital.com
Horseman EurSelLtd EUR EU EQ GBR 04/30 EUR 331.88 -0.8 17.3 19.0
nHSBCTrinkaus Investment Managers SA
E-Mail: funds@hsbctrinkaus.lu
Telephone: 352- 47 18471
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Prosperity Return Fund A JP BD LUX 12/06 JPY 8577.68 -9.3 -8.4 0.3
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Differing Fortunes for UBS and Barclays
damental changes to its investment
bank in the light of the regulatory
changes coming into force and to
concentrate more on its wealth-
management business, said
Shailesh Raikundlia, banking analyst
at Espirito Santo Investment Bank.
With the benefit of hindsight thats
been shown to be the right decision,
especially as regulations have
turned out to be even more onerous
than expected.
At Barclays, Chief Executive Ant-
ony Jenkins is expected Thursday to
announce a major overhaulinclud-
ing deep cuts in the investment
bank and a withdrawal from retail
operations in continental Europe,
steps investors have long been agi-
tating for.
The contrast between Barclays
and UBS mirrors a divide across
much of the European banking sec-
tor. Banks such as BNP Paribas and
Socit Gnrale have gone some
way to rebuilding their capital bases
and coupling a leaner investment
bank with a strong domestic retail
franchise. Shares in both those
banks have outperformed the sector
in the past 12 months. In contrast,
Credit Suisse AG and Royal Bank of
Scotland Group PLC have made less
headway in shrinking their invest-
ment-banking operations. Shares in
both have underperformed their
peers over the past year.
On Tuesday, UBS said net profit
rose nearly 7% to about 1.1 billion
Swiss francs ($1.25 billion) in the
three months ended March 31, com-
pared with 988 million francs a year
earlier. Analysts had forecast a
profit of 838 million francs. Pretax
profit, after adjusting for some pro-
visions, rose 97% to 1.5 billion
francs.
Continued from first page
The bank, Switzerlands biggest,
also said it had made progress re-
vamping its structure to prevent
problems in one area from affecting
others.
Arun Melmane, an analyst at
Canaccord, said the strategy of op-
erating a reduced investment bank
and streamlining operations ap-
peared to be working. I got a sense
of consistency in their numbers,
Mr. Melmane said.
At Barclays, meanwhile, pretax
profit fell 5% to 1.69 billion ($2.86
billion) from 1.79 billion, after ad-
justing for some provisions and
fluctuations in the value of the
banks debt.
A 41% collapse in revenue from
the banks fixed-income, currencies
and commodities, or FICC, division
was particularly surprising, noted
analysts at Oriel Securities. The de-
cline in FICC, which was bigger than
analysts had expected, compared
with roughly 20% declines at rivals,
which have also seen clients pull
back from bond trading because of
persistently low and stable interest
rates.
The focus at Barclays now
switches to what Mr. Jenkins says
Thursday about his plan for the in-
vestment bank. Mr. Jenkins has had
an uneasy relationship with Bar-
clayss investment bank since taking
over the top spot in 2012 from for-
mer CEO Bob Diamond, the divi-
sions main architect. The new CEO
pledged to make Barclays simpler
and turn around what he said had
become an aggressive and self-serv-
ing culture in the unit. But he didnt
make any major changes to the
banks business model in his first
strategic review in February 2013.
Recent weeks have seen the de-
parture of a series of the invest-
ment-banking units senior execu-
tives and deal makersincluding
the banks top executives in the U.S.
and Asiaraising fears among ana-
lysts that clients could take their
business elsewhere if the exodus
continues. Mr. Jenkins has also been
under attack from investors for rais-
ing bonuses at the investment bank
last year despite a fall in revenue
and profit.
At Thursdays strategic update,
analysts expect Barclays to get out
of some types of bond trading and
retreat further from money-losing
retail-banking operations in Europe.
Finance Director Tushar
Morzaria told analysts that part of
the FICC decline reported Tuesday
was from repositioning the busi-
ness, including exiting most com-
modities trading. Mr. Morzaria de-
clined to say what other business
could be culled. Unwanted assets,
including some worth about 54 bil-
lion already marked as noncore,
could be moved into a so-called bad
bank, a person familiar with the
matter said.
Ahead of the strategic update,
Berenberg Bank analysts sounded a
note of caution. We would like to
see Barclays lay out a path to sepa-
rate the Investment Bank, they
wrote, but doubt whether manage-
ment will go as far.
nOTHERFUNDS
For information about these funds, please contact us on Tel: +44(0) 207 842 9694/9633
Medinvest Plc Dublin OT EQ IRL 09/30 USD NS.00 NS 1.3 -4.4
nWINTONCAPITAL MANAGEMENTLTD
Tel: +44(0)2076105350Fax: +44(0)2076105301
Winton Evolution EURCls H GL OT CYM 03/31 EUR 1176.64 0.0 4.9 3.6
Winton Evolution GBP Cls G GL OT CYM 03/31 GBP 1191.46 0.0 5.4 4.0
Winton Evolution USDCls F GL OT CYM 03/31 USD 1500.04 0.1 5.5 3.9
Winton Futures EURCls C GL OT VGB 03/31 EUR 251.18 -0.2 3.2 2.8
Winton Futures GBP Cls D GL OT VGB 03/31 GBP 273.59 -0.1 3.6 3.2
Winton Futures JPY Cls E GL OT VGB 03/31 JPY 17588.25 -0.1 3.7 3.0
Winton Futures USDCls B GL OT VGB 03/31 USD 896.78 -0.1 3.7 3.1
Barclays CEO Antony Jenkins is expected to announce a major overhaul.
B
l
o
o
m
b
e
r
g
N
e
w
s
The contrast between
Barclays and UBS
mirrors a divide across
much of the European
banking sector.
THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 7
U.S. NEWS
Trade Deficit Narrows
As Demand Increases
The U.S. trade gap narrowed in
March as both exports and imports
rose, a sign of strengthening de-
mand at home and overseas that
should bolster the economy.
But the Commerce Department
had assumed a larger narrowing in
the trade deficit when it estimated
last week that U.S. economic output
barely expanded in the first three
months of 2014.
As a result, economists on Tues-
day predicted a revised government
estimate later this month would
show the nations gross domestic
product contracted for the first time
since the first quarter of 2011, in-
stead of growing at a seasonally ad-
justed annual rate of 0.1%.
J.P. Morgan Chase economists
now estimate GDP contracted at a
0.8% pace in the first three months
of 2014.
Macroeconomic Advisers pegged
the decline at 0.6%. Even some of
the more optimistic estimates point
to slight output shrinkage in the
first quarter. Barclays Capital econo-
mists see a 0.2% decline, and BNP
Paribas put the GDP drop at a 0.1%
pace.
Exports were weak at the start
of the quarter and simply didnt re-
cover enough by the end of the
quarter, Capital Economics econo-
mist Paul Ashworth said.
Still, exports rebounded in March
after severe weather disrupted
transportation networks this winter.
Rising imports point to stronger do-
mestic demand, even though they
subtract from the GDP calculation.
The improvement came despite
sluggish or slowing growth in parts
of the world, a sign of resilience in
the global economy.
Its not very good for the first
quarter [GDP estimate], but it does
imply, as does a load of other data,
that the second quarters going to be
much, much better, Mr. Ashworth
said.
In March, U.S. exports rose a sea-
sonally adjusted 2.1% from February
to $193.91 billion, while U.S. imports
rose 1.1% to $234.29 billion, the
Commerce Department said Tues-
day.
The trade deficit shrank 3.6% to
$40.38 billion.
Exports in March were up 5%
from a year earlier, and imports
were up 5.9%.
The U.S. exported more capital
goods and industrial supplies in
March, and imported more con-
sumer goods and food. Exports of
services rose to $58.81 billion, the
highest level on record, and total ex-
ports rose at their fastest monthly
pace since last June.
U.S. petroleum exports rose, and
petroleum imports fell to their low-
est level since December.
Not including petroleum, exports
and imports both hit record highs in
March.
U.S. food exports were almost
flat in March, but dairy and egg ex-
ports rose 20% from the prior
month.
California Dairies Inc., the na-
tions second-largest dairy process-
ing cooperative, sends about 15% of
its production overseas, mostly but-
ter and powdered milk sold to Asia
and the Middle East.
The co-ops exports are up a bit
this year after very significant
growth in 2013, but growth is ta-
pering because of high prices for
U.S. milk, said Chief Executive An-
drei Mikhalevsky.
I would expect there to be very
little growth year on year, just based
on where market conditions and
prices are right now, Mr. Mikha-
levsky said, though demand contin-
ues to be strong all around the
world.
U.S. exports to Canada in March
rose 17% to their highest level on re-
cord, while imports to the U.S. were
up 15.8%, not adjusted seasonally.
Exports to China rose 9.6%, while
Chinese imports to the U.S. were up
1.6%.
U.S. exports to the European
Union rose 17.2%, and imports from
the EU rose 20.1%.
U.S. trade with Russia wasnt de-
railed by growing geopolitical ten-
sions over Ukraine.
Exports to Russia grew 9%, and
imports to the U.S. rose 36%, though
month-to-month figures can be vola-
tile.
A surge in exports helped boost
the U.S. economy in the second half
of 2013.
But after narrowing to $35.17 bil-
lion in November, the trade gap be-
gan to widen in December. It
reached $41.87 billion in February,
its widest level since last September,
before shrinking in March.
The Commerce Department last
week estimated that exports fell at a
7.6% seasonally adjusted annual rate
in the first three months of the year,
and net exports subtracted 0.83 per-
centage point from GDP for the
quarter.
But most economists expect the
U.S. economy will regain momentum
in the second quarter following its
weak winter stretch.
Consumer spending and retail
sales rose in February and March, as
did factory production.
Nonfarm employers added
288,000 jobs in April, according to
the Labor Department.
The Federal Reserve said last
week that growth in economic ac-
tivity has picked up recently, after
having slowed sharply during the
winter in part because of adverse
weather conditions.
Global demand for exported U.S.
ethanol has been strong this year
even as harsh winter weather dis-
rupted production of the corn-based
biofuel, driving up prices, according
to Archer Daniels Midland Co.
We worked every logistical an-
gle and ran our plant hard, deliver-
ing large volumes amid record in-
dustry margins, company President
Juan Luciano told analysts last
week.
Eric Morath contributed
to this article.
BY BEN LEUBSDORF
Tubes of steel stacked at the Port of Tampa in Florida. U.S. exports and imports both rose in March.
B
l
o
o
m
b
e
r
g
N
e
w
s
Climate Change Hits
Economy, Report Says
the report said.
The report will almost certainly
generate pushback from conserva-
tives, with some saying that pro-
posed mitigation measures cost
business too much and will hurt the
nations economic recovery, and oth-
ers saying it exaggerates the prob-
lem altogether.
The Heartland Institute, a con-
servative think tank, said in a state-
ment on its website Sunday that the
report consistently reaches overly
pessimistic conclusions. Its senior
environmental expert, James Taylor,
said in an interview Tuesday morn-
ing, Keep in mind that this is a re-
port produced for and with the
Obama White House.
The report highlights problems
even at the community level. Super-
storm Sandy, which destroyed much
of New Jerseys northern beaches in
2012, and the heat wave in the Mid-
west the same year, are among ex-
amples the administration will use
this week to try to raise concerns
among average Americans about cli-
mate change.
The report also emphasizes ad-
aptationthe notion that society
needs to find ways to prepare for
and adjust to some of the changes.
Every American will find things
that matter to them in this report,
said one of the lead authors, Donald
Wuebbles, a professor of atmo-
spheric science at the University of
Illinois.
The latest climate assessment,
released in 2009, said generally that
climate change is affecting the coun-
try. The new report, Mr. Wuebbles
said, shows how further shifts in
each area could hurt sectors of the
economy such as transportation or
force local populations to move.
The White House campaign to
publicize the report will include
eight television meteorologists.
Americans feel comfortable with
local weather reporters, who can
Continued from first page discuss climate-change warnings
without being politicized, said an
administration official. The presi-
dent will do one-on-one interviews
Tuesday with NBCs Today show
co-anchor Al Roker and Ginger Zee
of ABCs Good Morning America,
said the official.
Several authors said the strong
warnings in the assessment werent
presented to scare people, but to
convey the importance of prepara-
tion and mitigation in, for example,
U.S. ports.
Those concerned about climate
changes applauded the assessment.
The authors show the urgency of
climate change issues in major cities
and small towns across the country,
said Daniel J. Weiss, senior fellow at
the liberal-leaning Center for Ameri-
can Progress. He said the report is
too specific about effects such as
droughts, eroding shore lines and
flooding to be ignored.
The national climate assessment
was mandated by Congress in 1990
as a quadrennial review. Environ-
mental issues havent been among
recent administrations hottest is-
sues. There have only been two
other reports, in 2000 and in 2009.
It doesnt offer specific remedies be-
cause of its limited scope but does
suggest a need for urgency.
The report bolsters tough air and
water pollution limits promoted by
Mr. Obama, administration officials
said. Its release could help buffer
backlash from new regulations re-
stricting carbon emissions from ex-
isting coal-fired power plants,
scheduled to be unveiled at the be-
ginning of June.
Jerry Melilloa scientist at the
Marine Biological Laboratory and
chairman of the advisory commit-
teepointed to a wide range of im-
pacts that are already emerging in
different regions of the nation, in-
cluding: rising sea levels, droughts,
prolonged periods of high tempera-
tures and more episodes of heavy
and sustained precipitation.
Miami, Norfolk, Va., and Ports-
mouth, N.H., were among the most
vulnerable areas to flooding if the
sea level rises, the scientists said.
In terms of the most concerning cli-
mate change-related impacts, near
or at top of the list, said Dr. Melillo,
is sea-level rise along the vast
coastlines of the U.S.
Colleen McCain Nelson
contributed to this article.
Source: U.S. National Climate Assessment The Wall Street Journal
*In constant 2013 dollars
Disaster Hot Spots
Number of billion-dollar* weather-related disasters from 1980 to 2013
Texas
Calif.
Mont.
Ariz.
Nev.
Idaho
Colo.
N.M.
Utah
Ore.
Wyo.
Ill.
Kan.
Iowa
Neb.
S.D.
Fla.
Puerto Rico
Minn.
Okla.
N.D.
Wis.
Ala. Ga.
Mo.
Ark.
La.
N.Y.
Pa.
Ind.
Tenn.
N.C.
Ky.
Mich.
Va.
Miss.
Ohio
S.C.
Maine
W.Va.
Vt.
N.J.
N.H.
Mass.
Conn.
Md.
Del.
R.I.
Alaska
Hawaii
Wash.
1-8 9-16 17-25 26-35 36-44 45-54
President Obama is set to
promote the federal
advisory panels findings
in a series of events
scheduled this week.
22 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
Emerging Markets Long/Short Equity
These funds primarily take long/short positions in emerging market equities. At least
60% of assets are invested in emerging market equities. Ranked on % total return
(dividends reinvested) inEuros for one year ending May 06, 2014
Leading 10Performers
FUND FUND LEGAL %Return in $US **
RATING* NAME FUNDMGM'T CO. CURR. BASE YTD 1-YR 2-YR 5-YR
1 Harmony DMCapital Limited USDCYM 43.90 65.33 57.27 NS
Feeder Fund
3 EFGHermes EFG-Hermes Fin USDBMU 15.80 40.31 27.01 9.19
MEDA Mgmt(Egypt)Ltd
NS EFGHermes EFG-Hermes Fin USDBMU 14.74 37.36 18.11 0.20
Egypt Mgmt(Egypt)Ltd
1 Northwest Northwest USDCYM -8.77 32.48 58.30 51.15
Warrant Fund Ltd USD Investment Management Ltd
2 Violet AppleTree Capital USDCYM 9.43 28.06 9.74 NS
Emerging Markets ltd.
4 Voltan Voltan Capital USDBMU 7.63 22.88 15.54 NS
Frontier Markets (Offshore), Ltd Management
4 Voltan Voltan Capital USDUSA 7.63 22.88 15.54 NS
Frontier Markets Fund(Onshore)LP Management
5 LBNChina+ LBNAdvisers Ltd USDCYM 1.08 22.75 19.93 20.41
Opportunity Fund
3 GLS Global GLS Capital USDUSA 2.93 21.92 4.54 1.01
Opportunities LP Management, LLC
4 AP Asia Ajia Partners USDCYM -3.79 21.85 13.92 16.33
Absolute Return Fund Class A Asset Management Inc.
NOTE: Changes in currency rates will affect performance and rankings. Source: Morningstar, Ltd
KEY: ** 2YRand 5YRperformance is annualized 1 Olivers Yard, 55-71 City Road
NA-not available due to incomplete data; London EC1Y 1HQUnited Kingdom
NS-fund not in existence for entire period www.morningstar.co.uk; Email: mediaservice@morningstar.com
Phone: +44 (0)203 107 0038; Fax: +44 (0)203 107 0001
MARKETS
Fund Scorecard
Euros Surge Adds
To Deflation Worry
Stocks in Europe slipped Tues-
day as the euro surged to its highest
level against the dollar in seven
weeks, adding to concerns about
low inflation.
The inflation-sapping strength in
the euro adds extra complexity to
the European Central Banks policy
meeting this week as the central
bank has previously
noted that the euros as-
cent weighs on prices.
The euro resilience
seems driven by market expecta-
tions of no action by the ECB on
Thursday as well as persistent spec-
ulations of central bank reserve di-
versification into euros, said ana-
lysts at Citigroup.
Stocks fell despite forecast-beat-
ing services-sector data from Italy
and Spain, as investors worried the
lofty euro could help tip the cur-
rency bloc into deflation. Tensions
in Ukraine and more downbeat earn-
ings reports also weighed on equi-
ties.
The Stoxx Europe 600 index de-
clined 0.3% to 336.04, while the
U.Ks FTSE 100 fell 0.4% to 6798.56,
Germanys DAX lost 0.7% to 9467.53
and Frances CAC-40 fell 0.8% to
4428.07.
Sterling hit a more than 4-year
high amid speculation that the Bank
of England could raise interest rates
sooner than expected.
The dollar also fell to a fresh
three-week low against the yen, and
a seven-week low against the Swiss
franc. Analysts observed that many
investors are giving up on the posi-
tive bets on the greenback that were
popular at the start of the year.
The dollar had been expected to
climb in response to signs of resur-
gence in the U.S. economy, but a
mixed bag of data, with weak
growth alongside bright spots in
measures of employment, has left
the currency under pressure.
The euro was trading at $1.3930
late afternoon Tuesday in New York,
up from $1.3875 late Monday, while
the pound was at $1.6982 from
$1.6867. The dollar was buying
101.60 from 102.14 and 0.8740
Swiss franc from 0.8778 franc.
Activity in Spains services sec-
tor grew at the strongest pace since
before the global debt crisis in
April, with the purchasing managers
index rising to 56.5 from 54.0 in
March.
The Italian PMI came in at 51.1,
up from 49.5 in March. For the euro
area as a whole, the composite PMI,
which combines services and manu-
facturing, delivered a reading of 54,
meeting expectations. Meanwhile,
the U.K. services PMI reading also
beat forecasts to hit 58.7, from a
March figure of 57.6.
U.S. stocks also fell, with de-
clines concentrated in smaller high-
growth and consumer Internet
stocks.
The Dow Jones Industrial Aver-
age fell 129.53 points, or 0.8%, to
16401.02, its third loss in four ses-
sions, and left it 1% below the all-
time high of 16580.84 on April 30.
The S&P 500 index lost 16.94
points, or 0.9%, to 1867.72 and the
Nasdaq Composite Index gave up
57.30 points, or 1.4%, to 4080.76.
The Russell 2000 index of small-
capitalization stocks was down 1.3%
in late trade, underscoring the re-
cent relative weakness in higher-
growth stocks.
The yield on the benchmark 10-
year U.S. Treasury note fell 0.016
percentage point to 2.595%.
Among European stocks, Bar-
clays shares dropped 5.2% after a
worse-than-expected fall in fixed-in-
come trading cut the U.K lenders
profit at its investment bank in half.
Aberdeen Asset Management
slid 2.4% after it reported a 12% de-
cline in pretax profit for the first
half, saying investors wariness of
emerging markets reduced the flow
of new business.
In commodities markets, gold fell
70 cents to $1,308.30 a troy ounce
on the Comex division of the New
York Mercantile Exchange. Crude oil
on Nymex rose two cents to $99.50
a barrel.
BY JOSIE COX
AND TOMMY STUBBINGTON
MARKET
REPORT
Some EU Nations Vow
To Tax Trades by 2016
BRUSSELSA group of Euro-
pean Union countries led by France
and Germany pledged Tuesday to
start taxing the trading of shares
and some derivatives by 2016, amid
opposition by countries that are
worried about the taxs economic
impact and its legal grounding.
The group supporting the finan-
cial-transactions tax presented its
latest political agreement at a meet-
ing of finance ministers, saying the
tax should be implemented step by
step. It would start with a levy on
shares and some derivativeswhich
havent yet been specifiedby Janu-
ary 2016. Later, the tax could be ex-
panded to trading of other financial
products.
A final proposal on the first step
of the tax, including what deriva-
tives would be covered, will be
agreed on by the end of the year,
the statement said.
The group of 11 countries is
working from an earlier proposal by
the European Commission, the EUs
executive body. Under that proposal,
which is opposed by some EU coun-
tries, a 0.1% tax would apply to
share and bond trades, and 0.01% to
derivative transactions between fi-
nancial institutions, if at least one
party is located in the EU.
Countries that already have a tax
on financial transactions that ex-
tends to products not covered under
the first step of the proposed new
levy would be able to maintain their
current taxes, in addition to the
new, harmonized levies.
The proposal is ambitious, said
French Finance Minister Michel
Sapin. Previously there were de-
bates without end. Now the deadline
is the end of this year.
German Finance Minister Wolf-
gang Schuble said, Some still have
problems with [taxing] share deriv-
atives, but just taxing shares also
doesnt make sense.
The statement was signed by 10
of the 11 countries participating in a
special EU coordination procedure,
known as enhanced cooperation,
to launch the financial-transactions
tax. An 11th member, Slovenia,
didnt sign the political statement,
following the resignation of its
prime minister and likely early elec-
tions.
Countries that opted not to par-
ticipate in the enhanced coopera-
tion, including the U.K., Denmark
and Sweden, said the tax could have
a negative impact on economic
growth and capital markets. They
questioned the legal basis for the
enhanced-cooperation agreement if
the levys effect extends beyond the
territory of the countries enforcing
it.
This is not a tax on bankers, it
is a tax on jobs, investments, pen-
sioners, said U.K. Chancellor of the
Exchequer George Osborne, who
also voiced concerns about the lack
of detail in the statement and its
potential impact on countries that
opted out.
Theres absolutely nothing on
which derivatives would be included
and absolutely nothing on the po-
tential extraterritorial impact, he
said.
The lack of detail was partly a
result of the inability of the coun-
tries that wish to go forward with
the tax to agree on the details.
The final outcome is a minimum
common denominator in terms of
the positions of the countries, said
Spanish Finance Minister Luis de
Guindos.
Tom Fairless
and Gabriele Steinhauser
contributed to this article.
BY VIKTORIA DENDRINOU
German Finance Minister Wolfgang Schuble and Frances Michel Sapin, shown April 7, support taxing share trades.
E
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SPORTS CLOTHING
Adidas Profit Takes a Hit
Adidas AGs first-quarter net profit
plunged due to weakness at its golf
division and unfavorable currency
effects that will continue to weigh on
full-year results.
Net profit fell 34% to 204 million
($283.2 million), while sales fell 6% to
3.53 billion. Adidas attributed the
decline in sales to continued weakness
in emerging market currencies, a
double-digit sales decrease at
TaylorMade-Adidas Golf, and weakness
in North America.
Strong performances particularly in
the emerging markets and in our own
retail were masked by strategic
changes to how we go to market at
TaylorMade-Adidas Golf as well as
adverse currency effects, Chief
Executive Officer Herbert Hainer said.
Analysts had anticipated a weak
quarter from Adidas because of a
different phasing of World Cup-related
shipments compared with previous
years.
Neetha Mahadevan
AUTOMOTIVE PARTS
Michelin to Close Tire Plant
Tire maker Compagnie Gnrale
des Etablissements Michelin SA said
on Tuesday that it will close its truck
tire plant in Budapest, Hungary, due to
its lack of competitiveness while the
European truck tire market remains
depressed.
The closing is in response to the
adverse trends and aggressive
competition in the European truck tire
market, which remains volatile and
23% down on its historic peak in
2007, the group said.
One the worlds biggest tire makers,
Michelin has been faced with
weakness in some of its core
automobile markets over the past few
years. It has restructured part of its
businesses as it seeks to grab its
share of the pickup in demand that is
expected to begin this year.
The group booked a provision of
39 million ($54.3 million) in its first-
half accounts for the closing of the
plant.
Graldine Amiel
TECHNOLOGY
Tesco to Launch Smartphone
Tesco PLC plans to roll out an own-
brand smartphone using Google Inc.s
Android software, pitching for the
budget end of the market following
the success of its own tablet
computer.
The U.K. retailer will launch the
deviceto be known as the Hudl
Phoneby the end of this year,
according to a spokesman for the
company, who said he believed Tesco
was the first retailer to offer its own
smartphone.
Tesco didnt give any details on
pricing, but the new smartphone will
likely fill a similar position to the Hudl
tablet, which was launched last year
at 119 ($201), toward the bottom of
the market.
Peter Evans
BUSINESS BRIEFS
Online
>>
For more breaking news, go to
WSJ.com/Business and follow
@wsjbusiness on Twitter.
6 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
Hollande Vows to Retain Tax Cuts
French President Franois Hol-
lande said he would forge ahead
with his plans to cut public spend-
ing and grant tax breaks to busi-
ness, acknowledging French people
are angry after he failed to deliver
on pledges to turn around the econ-
omy.
During an hourlong television in-
terview on Tuesday marking the
second anniversary of his election,
Mr. Hollande said he regretted not
moving faster with some measures
and not alerting the French people
to the gravity of Frances problems.
He said France must quickly imple-
ment tax cuts for business, calling
that the only way to boost jobs.
We must go faster still because
[the situation] is unbearable for the
French people, Mr. Hollande said.
He also said he has brought forward
plans to ease the tax burden for the
poorest and will fast-track over-
hauls to cut down on layers of local
government.
The 59-year-old president came
to power in May 2012 at a time of
turmoil in the euro zone. Over the
first two years of a five-year man-
date, financial tensions have abated
and the wider euro currency bloc
has exited recession. But the French
economy has struggled to grow and
unemployment has continued to
rise. Tax increases implemented to
plug holes in public finances have
further angered the French people
while failing to achieve the results
Mr. Hollande had hoped for.
With his own popularity at re-
cord lows early this year and unem-
ployment still rising, the president
switched tack and said he would fo-
cus on spending cuts to fund tax
breaks for businesses to help them
invest and recruit.
But those policies didnt prevent
his Socialist Party from suffering a
stinging defeat in municipal elec-
tions in March. The pro-business
slant has also proved controversial
among Mr. Hollandes own support
base. Plans to cut 50 billion ($69
billion) from the budgets for the
years 2015 to 2017 scraped through
parliament last week with a thin
majority as 41 lawmakers from the
Socialist majority abstained.
A day before the television inter-
view, a survey of 1,004 people by
polling company CSA showed only
20% of French people are confident
Mr. Hollande can effectively deal
with Frances problems. That
marked the lowest score ever for a
French president in CSAs monthly
survey, which has been running
since 1993. I have nothing to lose,
Mr. Hollande said.
Mr. Hollande called on the
French to be patient and not to lose
confidence. Im not a president
who should be regretful, he said.
I am the president who should be
rebounding, responding and react-
ing.
Recent economic forecasts indi-
cate French people still have some
time to wait until a tangible recov-
ery emerges. Unemployment will
reach 10.4% this year and economic
growth will accelerate to only 1.5%
next year, below the governments
forecast of 1.7%, the European Com-
mission said Monday.
BY WILLIAM HOROBIN
French President Franois Hollande, pictured third from left addressing apprentice bakers on Tuesday, vowed to go faster with policies to boost economic growth.
R
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Vatican Cites
Punishments
For Abusers
ROMEThe Vatican disclosed
that it has defrocked hundreds of
priests and punished thousands
more for sexual abuse of children
over the last decade, as it sought to
demonstrate to a United Nations
panel its commitment to tackling a
scandal that has shaken the church.
In comments to the U.N.s Com-
mittee Against Torture, a Vatican
delegation also said it has halted
the practice of protecting clerics
found to have abused children, and
has granted victims financial com-
pensation. In the past, it often
transferred guilty priests to other
parishes, a practice that has drawn
widespread criticism.
Theres no climate of impunity
[within the Catholic Church], theres
total commitment to clean the
house, to work to not have a repeti-
tion of abuses, Archbishop Silvano
Tomasi, the Vaticans chief envoy in
Geneva, told U.N. panel members in
a second day of questioning as part
of the groups process to monitor
the Holy Sees implementation of
the anti-torture treaty.
The archbishop for the first time
provided a clear breakdown of de-
frocking as a result of sexual crimes
against minors. He said the Holy See
laicized a total of 848 priests be-
tween 2004 and 2013 for sexual
abuses, with 2,572 receiving other
punishments, such as accepting a
life of penance and prayers or a ban
on public ministries. He added that
most of the abuses took place be-
tween the 1950s and the 1980s.
The data showed that 43 priests
were defrocked last year, down from
the 70 of 2012; 358 were otherwise
punished in 2013 and 348 in 2012.
The Vatican has decided that any
priest who has been punished for
sexual abuse but hasnt been de-
frocked can have no further contact
with children, said the Vatican offi-
cial in response to questions from
the panel, which is made up of inde-
pendent experts and not representa-
tives of other U.N. states.
Archbishop Tomasi also said that
Holy See policy is to report credi-
ble accusations against a cleric to
the civil authorities of the country
where it took place, while it also
tries to compensate victims. Victims
groups have charged that the Vati-
can hasnt done enough to push
church authorities to report abuse.
Members of Pope Francis newly
appointed Pontifical Commission for
the Protection of Minors, including
Boston Cardinal Sean OMalley, said
over the weekend they hope to in-
troduce a more consolidated prac-
tice of holding bishops or others
with supervisory responsibility ac-
countable for priests who abuse
children under their watch or who
fail to stop them from repeating
their abuses.
In February, a U.N. Committee on
the Rights of the Child criticized the
Vatican for focusing more on shield-
ing members of the clergy than on
protecting victims in its response to
the sexual abuse cases, which the
committee said has numbered in the
tens of thousands.
Tuesdays disclosure of the num-
ber of priests punished didnt sat-
isfy some victims groups. What
parents need are the names and
whereabouts of child-molesting cler-
ics, said David Clohessy, the U.S. di-
rector of the Survivors Network of
those Abused by Priests, or SNAP.
BY LIAM MOLONEY
EUROPE NEWS
Collector Behind Nazi-Looted Trove Dies
BERLINCornelius Gurlitt, the
octogenarian son of one of Adolf
Hitlers major art dealers, died in
his Munich home on Tuesday
morning, leaving the fate of his
roughly 1,400 artworks unclear.
Legal questions now abound
over howand even ifNazi-
looted works in the collection
could be returned to Holocaust
victims and their heirs. It is un-
certain whether the collector, who
was never married and had no
children, left a will. The authority
of a government-appointed task
force assigned to probe the looted
works provenance and coordinate
their return to previous owners
also has been thrown into limbo.
The 81-year-old Mr. Gurlitt
stepped from complete obscurity
into world-wide prominence last
fall after revelations that Bavarian
tax authorities had confiscated in
early 2012 what is regarded as the
largest-ever trove of Nazi-looted
art in private hands.
Mr. Gurlitt died in the presence
of his doctor and caretakers, a few
weeks after requesting that he re-
turn home from a Bavarian hospi-
tal where he had undergone inten-
sive heart surgery, his spokesman
said Tuesday.
The trove includes many unre-
markable works on paper but also
several valuable paintings. One of
those, an Henri Matisse portrait
that Matisse dealers say could
fetch up to $20 million at auction,
is being pursued by the heirs of
the late French art dealer Paul
Rosenberg, including Anne Sin-
clair, a prominent journalist and
ex-wife of former International
Monetary Fund head Dominique
Strauss-Kahn.
That painting and several other
artworks were looted from Holo-
caust victims during World War II.
It is unclear how the works ended
up in the collection of Mr. Gurlitts
father, Hildebrand, a successful
Nazi-era dealer whom Hitler had
tapped to lead his unrealized Fh-
rermuseum in Linz, Austria, after
the war.
Local German officials decision
not to disclose the find for nearly
two years or pressure Mr. Gurlitt
to return any looted artwork to
heirs of their original owners
drew criticism of Germany from
the U.S., France and Israel.
At the time, Bavarian tax au-
thorities justified the decision to
keep the discovery a secret be-
cause of their continuing investi-
gation into Mr. Gurlitts finances.
The Augusburg prosecutors office
in charge of the investigation
didnt answer calls seeking com-
ment.
Although that investigation will
lapse now that Mr. Gurlitt is dead,
fresh hurdles abound, mainly sur-
rounding a simple question: who
has inherited Mr. Gurlitts estate?
Christopher Marinello, a lawyer
for the Rosenberg heirs, says the
family will continue pursuing the
case, but that well have to wait
for the estate process to run its
course.
It is unclear, though, whom Mr.
Marinello should even contact or
who will be handling the estate
process. If an heir to Mr. Gurlitts
estate isnt found, it would be
turned over to the German state.
Given Mr. Gurlitts perpetually
frail state of health, a German
court appointed Munich-based
lawyer Christoph Edel as his legal
guardian late last year. But Mr.
Edels position was voided as
soon as Mr. Gurlitt died, Mr.
Gurlitts spokesman, Stephan
Holzinger, told The Wall Street
Journal.
Mr. Holzinger says he doesnt
even know if Mr. Gurlitt has a will
and that his own contract will
only continue for the next few
days.
The only guy who could give
orders in [the restitution of art]
was Mr. Edel, but now his job has
ended, said Mr. Holzinger. The
job right now is to find out whats
in the willif there is a will.
The lack of certainty about a
finished will may in part be due to
the tensions that have plagued Mr.
Gurlitts own legal team since it
came together earlier this year.
In January, The Journal re-
ported that Mr. Gurlitt was willing
to negotiate the return of works of
art within the collection, but Mr.
Gurlitts lawyer, Hannes Hartung,
was fired soon afterward
Several families, including the
Rosenberg heirs, complained that
Mr. Hartung was unwilling to rule
out a demand for monetary com-
pensation for returning Nazi-
looted art.
Last month tax authorities an-
nounced they would return Mr.
Gurlitts artwork. Through his le-
gal guardian, Mr. Gurlitt re-
sponded to international com-
plaints by giving the government-
appointed task force that had
already been examining the prove-
nance authority to spend a year
researching it and helping arrange
restitution for works that it deter-
mined were looted.
But even that task force is un-
certain now with whom it should
coordinate since Mr. Gurlitt is
dead.
We want to fulfill our duty to
research this work as seriously as
before, said task force spokesman
Matthias Henkel. We are still
working on determining with
whom to speak now.
BY MARY M. LANE
THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 23
Major stockmarket indexes Stock indexes fromaround the world, grouped by region. Showninlocal-currency terms.
PREVIOUS SESSION PERFORMANCE
Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk.
EUROPE Stoxx Europe 600 336.04 -0.85 -0.25% 2.4% 11.7%
Stoxx Europe 50 2959.28 -11.11 -0.37 1.4 7.1
Euro Zone Euro Stoxx 321.00 -1.73 -0.54 2.1 16.2
Euro Stoxx 50 3149.79 -21.50 -0.68 1.3 14.5
Austria ATX 2480.29 -21.75 -0.87 -2.6 2.6
Belgium Bel-20 3089.51 0.45 0.01% 5.7 14.6
Czech Republic PX 1010.58 2.01 0.20 2.2 4.5
Denmark OMXCopenhagen 640.49 -0.67 -0.10 13.2 29.1
Finland OMXHelsinki 7329.40 -12.51 -0.17 -0.1 18.3
France CAC-40 4428.07 -34.62 -0.78 3.1 13.3
Germany DAX 9467.53 -61.97 -0.65 -0.9 16.7
Hungary BUX 17660.38 286.84 1.65 -4.9 -3.9
Ireland ISEQ 4904.38 -22.95 -0.47 8.0 24.5
Italy FTSE MIB 21521.65 -118.31 -0.55 13.5 27.6
Netherlands AEX 396.54 -0.90 -0.23 -1.3 10.9
Norway All-Shares 649.17 1.32 0.20 7.7 22.9
Poland WIG 50873.54 -324.88 -0.63 -0.8 14.2
Portugal PSI 20 7552.34 34.22 0.46 15.1 19.9
Russia RTSI 1172.91 29.47 2.58% -18.7 -19.2
PREVIOUS SESSION PERFORMANCE
Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk.
Spain IBEX35 10481.40 4.40 0.04 5.7 23.3
Sweden OMXStockholm 440.66 -1.13 -0.26% 4.0 16.8
Switzerland SMI 8395.77 -13.30 -0.16 2.4 5.2
Turkey BIST 100 75190.31 429.5 0.57 10.9 -16.2
U.K. FTSE 100 6798.56 -23.86 -0.35 0.7 4.2
ASIA-PACIFIC DJ Asia-Pacific TSM 1432.54 6.31 0.44 -1.1 -1.1
Australia SPX/ASX200 5481.40 19.20 0.35 2.4 6.6
China Shanghai Composite 2028.04 0.68 0.03 -4.2 -9.3
Hong Kong Hang Seng 21976.33 Closed -5.7 -4.1
India S&P BSE Sensex 22508.42 63.30 0.28 6.3 13.2
Japan Nikkei Stock Average 14457.51 Closed -11.3 5.6
Singapore Straits Times 3245.56 3.96 0.12 2.5 -4.1
South Korea Kospi 1959.44 Closed -2.6 -0.3
AMERICAS DJ Americas 472.25 -3.26 -0.69 1.4 14.1
Brazil Bovespa 53967.75 521.58 0.98 4.8 -2.6
Mexico IPC 41468.93 421.05 1.03 -2.9 -1.7
Note: Americas index data are as of 3:00p.m. ET. Sources: SIXFinancial Information; WSJ Market Data Group
Cross rates U.S.-dollar and euro foreign-exchange rates inglobal trading
USD GBP CHF SEK RUB NOK JPY ILS EUR DKK CDN AUD
Australia 1.0684 1.8136 1.2219 0.1642 0.0302 0.1805 0.0105 0.3098 1.4877 0.1993 0.9811 ...
Canada 1.0890 1.8486 1.2455 0.1673 0.0308 0.1840 0.0107 0.3157 1.5164 0.2032 ... 1.0193
Denmark 5.3602 9.0991 6.1306 0.8237 0.1515 0.9056 0.0528 1.5541 7.4640 ... 4.9223 5.0171
Euro 0.7181 1.2191 0.8214 0.1104 0.0203 0.1213 0.0071 0.2082 ... 0.1340 0.6595 0.6722
Israel 3.4491 5.8550 3.9449 0.5300 0.0975 0.5828 0.0340 ... 4.8029 0.6435 3.1673 3.2284
Japan 101.5629 172.4052 116.1604 15.6073 2.8709 17.1596 ... 29.4458 141.4240 18.9475 93.2646 95.0620
Norway 5.9187 10.0471 6.7694 0.9095 0.1673 ... 0.0583 1.7160 8.2417 1.1042 5.4351 5.5399
Russia 35.3763 60.0520 40.4608 5.4363 ... 5.9770 0.3483 10.2565 49.2607 6.5998 32.4858 33.1119
Sweden 6.5074 11.0465 7.4427 ... 0.1839 1.0995 0.0641 1.8867 9.0614 1.2140 5.9757 6.0909
Switzerland 0.8743 1.4842 ... 0.1344 0.0247 0.1477 0.0086 0.2535 1.2175 0.1631 0.8029 0.8184
U.K. 0.5891 ... 0.6738 0.0905 0.0167 0.0995 0.0058 0.1708 0.8203 0.1099 0.5410 0.5514
U.S. ... 1.6975 1.1437 0.1537 0.0283 0.1690 0.0098 0.2899 1.3925 0.1866 0.9183 0.9360
Source: ICAPPlc.
MSCI indexes
Developed and emerging-market regional and country indexes
fromMSCI as of May 06, 2014
Price-to- LOCAL-CURRENCY
Dividend earnings PERFORMANCE
yield ratio MSCI Index Last Daily YTD 52-wk.
2.50% 16 MSCI ACWI* 414.79 -0.02% 1.5% 12.3%
2.50 17 World(DevelopedMarkets) 1,689.77 -0.05 1.7 14.5
2.40 17 Worldex-EMU 205.54 -0.08 1.5 13.1
2.40 18 Worldex-UK 1,700.23 -0.05 1.6 14.5
3.10 16 EAFE 1,939.05 0.11 1.2 10.6
2.70 12 EmergingMarkets (EM) 1,001.01 0.24 -0.2 -3.7
3.20 17 EUROPE 115.01 -0.25 2.6 12.9
3.20 19 EMU 204.31 0.16 3.3 24.6
3.10 18 Europe ex-UK 123.69 -0.31 2.8 15.0
4.00 14 Europe Value 117.57 -0.19 3.6 16.6
2.40 21 Europe Growth 108.28 -0.31 1.6 9.3
2.30 18 Europe Small Cap 272.42 -0.30 4.5 26.2
3.60 6 EMEurope 245.77 -0.65 -10.5 -17.7
3.50 15 UK 2,011.04 0.00 0.9 5.7
3.30 17 Nordic Countries 207.03 -0.54 2.6 11.8
4.20 4 Russia 670.74 -0.72 -15.4 -8.2
3.00 17 SouthAfrica 1,186.69 -0.69 4.3 23.6
3.00 13 ACASIAPACIFICEX-JAPAN 474.52 0.21 1.4 -2.0
2.00 14 Japan 726.17 0.00 -9.8 0.9
3.50 9 China 57.90 -0.64 -8.3 -4.7
1.40 17 India 849.19 -0.18 3.9 11.5
1.10 10 Korea 568.84 0.00 -3.5 1.9
2.70 17 Taiwan 316.24 -0.12 4.5 8.3
1.90 19 USBROADMARKET 2,140.29 -0.16 1.6 18.6
1.50 31 USSmall Cap 3,198.36 0.18 -0.9 21.0
3.30 17 EMLATINAMERICA 3,317.86 -0.14 3.7 -12.1
*Twenty-four developed and 21 emerging markets Source: MSCI
S&PDowJones Indices
Price-to-
Dividend earnings PERFORMANCE(euros) PERFORMANCE(U.S.dollars)
yield* ratio* S&PDowJones Index Last Daily 52-wk. Last Daily 52-wk.
2.41%18.77 Global TSM 3279.51 -0.10% 11.5%
2.84 18.68 Global DOW 1702.27 -0.53% 7.1% 2519.01 -0.14 14.0
2.96 13.84 Global Titans 50 227.62 -0.72 3.9 236.88 -0.32 10.6
3.14 20.24 DevEurope TSM 3524.38 0.16 20.0
2.35 19.55 DevelopedMarkets TSM 3301.67 -0.15 13.4
2.97 13.70 S&PBMI EmgMarkets 255.72 0.47 -5.4
3.32 19.95 S&PEurope 350 1373.49 -0.30 11.3 1718.45 0.00 18.5
3.07 25.24 S&PEuro 1364.83 -0.56 16.1 1730.55 -0.27 23.5
3.70 23.54 Europe Dow 1408.02 -0.34 11.4 2083.47 0.05 18.6
3.72 9.16 BRIC50 369.67 0.30 -12.6 491.09 0.70 -6.9
1.92 20.02 U.S. TSM 19611.83 -0.59 15.7
Kuwait Titans 30 -c 214.68 -0.60 4.4
Price-to-
Dividend earnings PERFORMANCE(euros) PERFORMANCE(U.S.dollars)
yield* ratio* S&PDowJones Index Last Daily 52-wk. Last Daily 52-wk.
TurkeyTitans 20 -c 773.54 0.66% -15.2%
5.14%17.46 Global Select Div 265.37 0.11 13.9
5.50 16.16 Asia/Pacific Select Div 297.10 0.24% -10.4% 354.26 0.63 -4.6
U.S. Select Dividend -d 1299.72 -0.33 16.5
3.14 23.66 S&PGlbNat Resources 2020.85 -0.12 -2.6 2797.67 0.28 3.7
2.09 19.67 Islamic Market 2801.63 -0.16 13.3
2.41 17.14 Islamic Market 100 3076.61 -0.25 14.1
Islamic Turkey -c 4337.58 -0.03 -7.0
3.18 22.68 Sustainability Europe 111.43 -0.32 11.2 170.66 0.07 18.4
3.59 27.72 S&PGlbInfrastructure 1562.12 -0.05 3.8 2458.57 0.34 10.6
2.02 17.02 Luxury 2054.44 -0.46 12.1
DJ-UBSCommodity-p 121.52 0.39 3.8 137.36 0.39 4.0
*Fundamentals are based on data in U.S. dollar. Footnotes: a-in USdollar. b-dividends reinvested. c-in local currency. Note:All data as of 2 p.m.ET. Source: S&PDowJones Indices
GLOBAL MARKETS LINEUP
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Commodities Prices of futures contracts withthe most openinterest
EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.MDEX: Bursa Malaysia
Derivatives Berhad; LIFFE: London International Financial Futures Exchange; COMEX: Commodity Exchange; LME: London Metals Exchange;
NYMEX: NewYork Mercantile Exchange;ICE-EU: ICE Futures Europe. *Data as 5/2/2014.
ONE-DAY CHANGE Year Year
Commodity Exchange Last price Net Percentage high low
Corn (cents/bu.) CBOT 517.75 9.75 1.92% 524.50 421.75
Soybeans (cents/bu.) CBOT 1459.25 -4.00 -0.27% 1,520.50 1,234.00
Wheat (cents/bu.) CBOT 738.75 9.75 1.34 744.00 557.25
Live cattle (cents/lb.) CME 138.200 0.675 0.49 139.950 129.225
Cocoa ($/ton) ICE-US 2,918 -9 -0.31 3,047 2,643
Coffee (cents/lb.) ICE-US 202.50 -2.75 -1.34 219.00 114.65
Sugar (cents/lb.) ICE-US 17.19 -0.28 -1.60 18.57 15.24
Cotton (cents/lb.) ICE-US 94.00 -0.75 -0.79 96.76 82.39
Rapeseed (euro/ton) LIFFE 356.00 -1.00 -0.28 386 343
Cocoa (pounds/ton) LIFFE 1,812 -10 -0.55 1,898 1,670
Robusta coffee ($/ton) LIFFE 2,146 -8 -0.37 2,216 1,565
Copper ($/lb.) COMEX 3.0520 -0.0015 -0.05 3.3970 2.8720
Gold ($/troy oz.) COMEX 1307.90 -1.40 -0.11 1,392.20 1,206.00
Silver ($/troy oz.) COMEX 19.580 0.009 0.05 22.220 18.685
Aluminum($/ton)* LME 1,777.50 -3.50 -0.20 1,886.00 1,686.50
Tin ($/ton)* LME 22,900.00 -150.00 -0.65 23,770.00 21,410.00
Copper ($/ton)* LME 6,666.00 24.00 0.36 7,422.00 6,430.00
Lead ($/ton)* LME 2,082.00 -13.00 -0.62 2,242.00 2,033.00
Zinc ($/ton)* LME 2,012.50 -16.50 -0.81 2,132.50 1,948.00
Nickel ($/ton)* LME 18,230 160 0.89 18,585 13,425
Crude oil ($/bbl.) NYMEX 99.65 0.17 0.17 104.10 90.89
Heating oil ($/gal.) NYMEX 2.8897 -0.0167 -0.57 3.0480 2.8434
RBOBgasoline ($/gal.) NYMEX 2.8861 -0.0231 -0.79 3.0610 2.7629
Natural gas ($/mmBtu) NYMEX 4.817 0.102 2.16 4.9160 3.9100
Brent crude ($/bbl.) ICE-EU 106.57 -0.55 -0.51 110.91 103.60
Gas oil ($/ton) ICE-EU 894.50 -1.25 -0.14 936.50 873.75
Sources: SIX Financial Information; WSJ Market Data Group
Currencies Londonclose onMay 6
Per In
AMERICAS Per euro In euros U.S. dollar U.S. dollars
Argentina peso-a 11.1419 0.0898 8.0015 0.1250
Brazil real 3.1034 0.3222 2.2287 0.4487
Canada dollar 1.5164 0.6595 1.0890 0.9183
Chile peso 785.35 0.001273 564.00 0.001773
Colombia peso 2670.76 0.0003744 1918.00 0.0005214
Ecuador US dollar-f 1.3925 0.7181 1 1
Mexico peso-a 18.1072 0.0552 13.0036 0.0769
Peru sol 3.9010 0.2563 2.8015 0.3570
Uruguay peso-e 32.023 0.0312 22.997 0.0435
U.S. dollar 1.3925 0.7181 1 1
Venezuela bolivar 8.84 0.113094 6.35 0.157480
ASIA-PACIFIC
Australia dollar 1.4877 0.6722 1.0684 0.9360
1-mo. forward 1.4911 0.6707 1.0708 0.9339
3-mos. forward 1.4971 0.6680 1.0751 0.9301
6-mos. forward 1.5068 0.6637 1.0821 0.9241
China yuan 8.6712 0.1153 6.2272 0.1606
Hong Kong dollar 10.7945 0.0926 7.7520 0.1290
India rupee 83.4163 0.0120 59.9050 0.0167
Indonesia rupiah 16045 0.0000623 11523 0.0000868
Japan yen 141.42 0.007071 101.56 0.009846
1-mo. forward 141.40 0.007072 101.54 0.009848
3-mos. forward 141.34 0.007075 101.50 0.009852
6-mos. forward 141.26 0.007079 101.44 0.009858
Malaysia ringgit-c 4.5321 0.2206 3.2547 0.3072
NewZealand dollar 1.5885 0.6295 1.1408 0.8766
Pakistan rupee 137.584 0.0073 98.805 0.0101
Philippines peso 61.555 0.0162 44.206 0.0226
Singapore dollar 1.7369 0.5758 1.2473 0.8017
South Korea won 1434.66 0.0006970 1030.30 0.0009706
Taiwan dollar 41.882 0.02388 30.078 0.03325
Thailand baht 45.052 0.02220 32.354 0.03091
Per In
EUROPE Per euro In euros U.S. dollar U.S. dollars
Euro zone euro 1 1 0.7181 1.3925
1-mo. forward 1.0001 0.9999 0.7182 1.3923
3-mos. forward 1.0002 0.9998 0.7183 1.3922
6-mos. forward 1.0003 0.9997 0.7184 1.3920
Czech Rep. koruna-b 27.426 0.0365 19.696 0.0508
Denmark krone 7.4640 0.1340 5.3602 0.1866
Hungary forint 306.82 0.003259 220.34 0.004538
Norway krone 8.2417 0.1213 5.9187 0.1690
Poland zloty 4.1969 0.2383 3.0140 0.3318
Russia ruble-d 49.261 0.02030 35.376 0.02827
Sweden krona 9.0614 0.1104 6.5074 0.1537
Switzerland franc 1.2175 0.8214 0.8743 1.1437
1-mo. forward 1.2172 0.8216 0.8741 1.1440
3-mos. forward 1.2166 0.8220 0.8737 1.1446
6-mos. forward 1.2155 0.8227 0.8729 1.1456
Turkey lira 2.9116 0.3435 2.0909 0.4783
U.K. pound 0.8203 1.2191 0.5891 1.6975
1-mo. forward 0.8205 1.2188 0.5892 1.6971
3-mos. forward 0.8209 1.2182 0.5895 1.6963
6-mos. forward 0.8216 1.2172 0.5900 1.6949
MIDDLE EAST/AFRICA
Bahrain dinar 0.5249 1.9051 0.3770 2.6528
Egypt pound-a 9.7732 0.1023 7.0186 0.1425
Israel shekel 4.8029 0.2082 3.4491 0.2899
Jordan dinar 0.9859 1.0143 0.7081 1.4123
Kuwait dinar 0.3908 2.5591 0.2806 3.5635
Lebanon pound 2108.14 0.0004744 1513.95 0.0006605
Saudi Arabia riyal 5.2226 0.1915 3.7506 0.2666
South Africa rand 14.6243 0.0684 10.5024 0.0952
United Arab dirham 5.1146 0.1955 3.6731 0.2723
a-floating rate b-financial c-government rate c-commercial
rate d-Russian Central Bank rate.
Source: ICAPPlc.
THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 5
AnnuAl Meeting
June 1617, 2014 WAshington, D.C.
2014 Dow Jones & Company, Inc. All rights reserved. 6C757
For more information, please visit CFONetwork.wsj.com or call + 1 212.416.2300.
2014 MeMbers & Guests
ProuDly suPPorteD by:
this June, The Wall Street Journal CFo network, an invitation-only membership of more than 100 chief fnancial
offcers from the worlds largest companies, will convene again in Washington, D.C., to address key concerns in
fnancial leadership. in interviews led by the Journals senior editors, network members will hear from leading policy
makers, economists and other subject experts on topics including the global economy, the 2014 midterm elections,
regulation, and cybersecurity, among other subjects.
Members will also participate in member-only working group sessions to develop recommendations in critical areas
such as leadership, managing growth, health care, social change, and American manufacturing.
the CFo networks deliberations and recommendations are published shortly after the annual meeting in a special
worldwide report in The Wall Street Journal and on WsJ.com.
David Adams
Aimia inc.
Sean Aggarwal
trulia, inc.
Michael J. Angelakis
Comcast Corporation
Donald J. Ball
VsP global
Daniel N. Bass
Fortress investment group
Kaushik Basu
the World bank
Richard Beckert
CA technologies
Michael Berman
general growth Properties, inc.
Kevin Berryman
international Flavors & Fragrances inc.
Jeremy Bird
270 strategies
Werner Brandt
sAP Ag
Judy L. Brown
Perrigo Company
Todd Buehl
AbC supply Co., inc.
Frank Calderoni
Cisco systems, inc.
Paul Carbone
Dunkin brands, inc.
Andrew Ceresney
u.s. securities and
exchange Commission
Marcia Dall
erie insurance group
George S. Davis
Qualcomm incorporated
Robyn M. Denholm
Juniper networks, inc.
Fredrik Eliasson
CsX Corporation
Joseph J. Euteneuer
sprint nextel Corporation
Nicholas C. Fanandakis
DuPont
Mark Flaherty
sally beauty holdings, inc.
Frank Friedman
Deloitte llP
Jason Furman
White house Council of
economic Advisers
William J. Gerber
tD Ameritrade, inc.
Shantanu Ghosh
genpact limited
Robert Glenning
hackensack university
health network
Patrick Grismer
yuM! brands, inc.
Peter D. Hart
Peter D. hart research Associates
Larry Hilsheimer
scotts Miracle-gro Company
Douglas Holtz-Eakin
American Action Forum
Anthony Hull
realogy Corporation
Robert F. Hull
lowes Companies, inc.
Karen Ignagni
Americas health
insurance Plans (AhiP)
Luc Jobin
Canadian national
railway Company
Hugh F. Johnston
PepsiCo
John M. Jureller
Frontier Communications Corporation
Robert M. Knight, Jr.
union Pacifc Corporation
Jeff Knox
u.s. Department of Justice
Kevin Lenahan
Atlantic health system, inc.
Abraham Mathews
infosys bPo limited
Bill Maw
liquidnet holdings, inc.
Greg Maxwell
Phillips 66
R. Perley McBride
leap Wireless international, inc.
Bill McInturff
Public opinion strategies
Karen McLoughlin
Cognizant technology solutions
Frank Mergenthaler
the interpublic group of Companies, inc.
Roger Millay
towers Watson & Co.
Arthur Minson
time Warner Cable
Michael Monahan
Pitney bowes inc.
James E. Moylan, Jr.
Ciena Corporation
Pete H. Nachtwey
legg Mason, inc.
Indra K. Nooyi
PepsiCo
Bill Oplinger
Alcoa inc.
Aldo J. Pagliari
snap-on incorporated
Kenneth S. Parks
WesCo international, inc.
Kavita Patel
the brookings institution
Frank Perier
Forest laboratories, inc.
James Perry
trinity industries, inc.
Christopher H. Peterson
ralph lauren Corporation
Thomas Piquemal
eDF
Ruth Porat
Morgan stanley
Karan Rai
ADs inc.
Gebhard F. Rainier
hyatt hotels Corporation
Paul Reilly
Arrow electronics, inc.
John Rother
national Coalition on health Care
David Rowland
Accenture
David Schulz
Armstrong World industries, inc.
Thomas Seifert
symantec
Suresh C. Senapaty
Wipro limited
Francis J. Shammo
Verizon Communications inc.
Bob Shanks
Ford Motor Company
Steve Shebik
the Allstate Corporation
J. Donald Sheets
Dow Corning Corporation
Harmit Singh
levi strauss & Co.
Timothy Sloan
Wells Fargo & Company
Sean Stack
Aleris
Ewout Steenbergen
Voya Financial, inc.
John Stephens
At&t, inc.
Christopher J. Swift
the hartford Financial
services group, inc.
Anthony Thomas
Windstream holdings, inc.
Dr. Ralf P. Thomas, Dipl.-Kfm.
siemens Ag
Gregory Thompson
Axiall
Dominique Thormann
renault
Carol B. Tom
the home Depot, inc.
Kenneth R. Trammell
tenneco inc.
Anthony C. Trunzo
Flir systems, inc.
Lori A. Varlas
Central garden & Pet Company
Richard Veldran
the Dun & bradstreet
Corporation
Michael Ventling
ey
Robin L. Washington
gilead sciences, inc.
Dale Williams
tempur sealy
international, inc.
Alexandra Wrage
trACe international
E. Lee Wyatt
Fortune brands home
& security, inc.
Ron Wyden
Chairman, senate Finance Committee
u.s. senator (D., ore.)
David Wyshner
Avis budget group, inc.
24 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
Major players & benchmarks
Credit derivatives
Spreads oncredit derivatives are one way the market rates
creditworthiness. Regions that are treading inroughwaters
cansee spreads swing toward the maximumand vice versa.
Indexes beloware for five-year swaps.
Markit iTraxxIndexes SPREADRANGE, in pct. pts.
Mid-spread, since most recent roll
Index: series/version in pct. pts. Mid-price Coupon Maximum Minimum Average
Europe: 21/1 0.69 101.53% 0.01% 0.81 0.69 0.73
Eur. HighVolatility: 20/1 0.85 100.69 0.01 1.29 0.85 1.08
Europe Crossover: 21/1 2.72 110.40 0.05 3.11 2.70 2.85
Asia ex-JapanIG: 21/1 1.27 98.74 0.01 1.40 1.19 1.26
Japan: 21/1 0.86 100.71 0.01 0.90 0.83 0.85
Note: Data as of May 5
Spreads
Spreads on
ve-year swaps
for corporate
debt; based on
Markit iTraxx
indexes.
In percentage points
3.00
2.00
1.00
0
1
t
Australia
t
Japan
2013
Nov.
2014
Dec. Jan. Feb. Mar. April
Index roll
Source: Markit Group
BehindEurope's deals: Bank revenue rankings, Global (ex US)
Behind every IPO, bond offering, merger deal or syndicated loanis one or more investment banks. Here are
investment banks ranked by year-to-date revenues fromrecent deals.
PERCENTAGEOFTOTAL REVENUE
Revenue, Equity Debt Mergers &
in millions share capital markets capital markets acquisitions Loans
GoldmanSachs $835 6.4% 29% 30% 36% 5%
JPMorgan 784 6.0 28 39 22 11
Deutsche Bank 658 5.0 21 45 20 14
MorganStanley 614 4.7 36 33 23 9
Citi 535 4.1 23 46 20 11
Credit Suisse 531 4.1 29 33 28 10
Bankof America Merrill Lynch 503 3.9 25 36 29 9
Barclays 476 3.6 15 49 20 16
HSBC 454 3.5 19 55 7 19
Source: Dealogic
Tracking
credit
markets &
dealmakers
Dow Jones Industrial Average P/E: 16
LAST: 16401.02 t129.53, or 0.78%
YEAR TO DATE: t175.64, or 1.1%
OVER 52 WEEKS s1,344.82, or 8.9%
Note: Price-to-earnings ratios are for trailing 12 months
17000
16500
16000
15500
15000
14500
7 14 21 28
Feb.
7 14 21 28
Mar.
4 11 17 25
Apr.
2
High
Close
Low
50day
moving average
t
StoxxEurope 50: Tuesday's best andworst...
Previous
close, in STOCKPERFORMANCE
Company Country Industry Volume local currency Previous session YTD 52-week
BGGrp United Kingdom Integrated Oil &Gas 9,857,704 1,266 1.16% -2.4% 10.0%
Tesco United Kingdom Food Retailers &Wholesalers 19,628,316 287.80 0.81 -13.9 -21.7
Glencore Xstrata PLC United Kingdom General Mining 23,041,998 321.00 0.47 2.6 -6.8
Vodafone Group United Kingdom Mobile Telecommunications 69,796,014 223.90 0.45 -8.7 11.7
UBS Switzerland Banks 12,020,621 18.32 0.27 8.3 9.4
Barclays United Kingdom Banks 76,029,546 245.00 -5.22% -9.9 -17.3
AstraZeneca United Kingdom Pharmaceuticals 3,705,878 4,678 -2.71 30.9 40.1
Deutsche Bank Germany Banks 7,939,557 30.53 -2.37 -12.0 -16.6
AXA France Full Line Insurance 9,014,680 17.58 -2.14 -13.0 19.5
Lloyds Banking Group PLC United Kingdom Banks 172,532,031 78.50 -1.41 -0.5 45.2
...Andthe rest of Europe's blue chips
Latest,
in local STOCKPERFORMANCE
Company/Country (Industry) Volume currency Latest YTD 52-week
Zurich Insurance Group 262,657 252.30 0.20% -2.4% -2.9%
Switzerland (Full Line Insurance)
National Grid 6,801,606 840.00 0.18 6.6 1.8
United Kingdom(Multiutilities)
Telefonica S.A. 21,668,839 12.29 0.16 3.8 8.9
Spain (Fixed Line Telecommunications)
Novartis AG 3,308,517 77.05 0.13 8.2 12.1
Switzerland (Pharmaceuticals)
Telefon L.M. Ericsson B 7,354,909 78.75 0.13 0.3 -1.3
Sweden (Telecommunications Equipment)
Diageo 2,101,574 1,827 0.08 -8.7 -7.4
United Kingdom(Distillers &Vintners)
Nestle 2,573,972 67.75 ... 3.8 2.9
Switzerland (Food Products)
GlaxoSmithKline 7,194,441 1,626 -0.09 0.9 -1.3
United Kingdom(Pharmaceuticals)
Reckitt Benckiser Grp 898,340 4,835 -0.10 0.9 4.3
United Kingdom(Nondurable Household Products)
ENI 19,104,313 18.60 -0.11 6.3 1.1
Italy (Integrated Oil &Gas)
Deutsche Telekom 8,902,363 12.25 -0.12 -1.4 36.7
Germany (Mobile Telecommunications)
BP PLC 20,305,556 501.00 -0.14 2.7 6.3
United Kingdom(Integrated Oil &Gas)
INGGroep 11,841,518 10.19 -0.15 0.8 58.7
Netherlands (Life Insurance)
Allianz SE 1,526,007 123.80 -0.16 -5.0 6.2
Germany (Full Line Insurance)
ABB 8,357,634 20.51 -0.19 -12.6 -3.8
Switzerland (Industrial Machinery)
HSBC Hldgs 25,837,931 604.10 -0.26 -8.8 -15.4
United Kingdom(Banks)
Financiere Richemont 889,058 87.20 -0.29 -1.8 12.7
Switzerland (Clothing &Accessories)
Royal Dutch Shell A 3,057,357 2,347 -0.32 8.5 5.6
United Kingdom(Integrated Oil &Gas)
Banco Bilbao Vizcaya Argn 16,872,857 8.80 -0.33 -0.7 21.1
Spain (Banks)
Siemens 2,110,349 93.91 -0.36 -5.4 17.3
Germany (Diversified Industrials)
Latest,
in local STOCKPERFORMANCE
Company/Country (Industry) Volume currency Latest YTD 52-week
Roche Holding Part. Cert. 710,841 252.00 -0.40% 1.1% 8.0%
Switzerland (Pharmaceuticals)
Moet Hennessy Louis Vuitt 489,814 140.00 -0.46 5.6 4.4
France (Clothing &Accessories)
Unilever 2,027,821 2,592 -0.54 4.4 -7.2
United Kingdom(Food Products)
Standard Chartered 3,218,241 1,281 -0.54 -5.8 -22.7
United Kingdom(Banks)
Sanofi SA 1,993,284 77.99 -0.59 1.1 -7.5
France (Pharmaceuticals)
L'Air Liquide 430,975 102.45 -0.63 -0.3 4.9
France (Commodity Chemicals)
Unilever CVA 3,284,399 30.31 -0.64 3.5 -7.1
Netherlands (Food Products)
Banco Santander S.A. 34,857,863 7.11 -0.71 11.5 33.4
Spain (Banks)
Credit Suisse Group AG 9,146,777 27.19 -0.77 -0.3 0.6
Switzerland (Banks)
Anheuser-Busch InBev 1,511,731 76.61 -0.79 -0.8 4.4
Belgium(Brewers)
SAP 3,056,876 56.29 -0.79 -9.7 -9.3
Germany (Software)
Total 4,085,764 50.72 -0.82 13.9 31.9
France (Integrated Oil &Gas)
British American Tobacco 3,395,922 3,367 -0.88 4.0 -7.2
United Kingdom(Tobacco)
Bayer 2,184,427 99.07 -0.93 -2.8 22.1
Germany (Specialty Chemicals)
BHP Billiton 5,467,927 1,912 -0.98 2.3 3.5
United Kingdom(General Mining)
Rio Tinto 3,147,465 3,215 -0.99 -5.7 6.4
United Kingdom(General Mining)
Daimler 3,190,073 65.16 -1.12 3.6 50.3
Germany (Automobiles)
Schneider Electric 930,557 66.92 -1.17 5.6 16.4
France (Electrical Components &Equipment)
BNP Paribas 4,867,266 51.80 -1.26 -8.6 18.0
France (Banks)
BASF 2,956,813 80.21 -1.32 3.5 9.9
Germany (Commodity Chemicals)
Sources: SIX Financial Information
DJIAcomponent stocks
Volume, CHANGE
Stock Symbol in millions Latest Points Percentage
AT&T T 18.2 $35.53 0.23 0.64%
AmExpress AXP 2.4 86.34 1.02 1.17
Boeing BA 3.3 130.99 0.97 0.74
Caterpillar CAT 2.1 103.92 0.60 0.57
Chevron CVX 4.2 125.12 0.24 0.19
CiscoSys CSCO 18.0 22.75 0.20 0.89
CocaCola KO 7.2 40.53 0.23 0.55
Disney DIS 8.3 81.04 0.18 0.22
DuPont DD 2.0 67.24 0.15 0.22
ExxonMobil XOM 6.5 102.72 0.19 0.18
GenElec GE 18.7 26.23 0.34 1.30
GoldmanSachs GS 2.6 154.61 1.74 1.11
HomeDpt HD 5.0 77.42 1.27 1.61
Intel INTC 17.5 26.25 0.08 0.31
IBM IBM 2.4 190.19 1.07 0.56
JPMorgChas JPM 19.5 53.41 0.81 1.50
JohnsJohns JNJ 3.9 99.71 0.29 0.29
McDonalds MCD 2.4 101.02 0.12 0.12
Merck MRK 11.4 57.23 1.40 2.39
Microsoft MSFT 21.7 39.12 0.31 0.80
Nike B NKE 1.8 72.36 0.93 1.27
Pfizer PFE 46.8 29.49 0.47 1.57
ProctGamb PG 3.2 81.22 0.48 0.58
3M MMM 1.8 139.46 1.15 0.82
TravelersCos TRV 1.8 90.07 0.58 0.64
UnitedTech UTX 1.5 116.14 0.68 0.58
UtdHlthGp UNH 3.4 75.30 0.07 0.09
Verizon VZ 10.4 47.45 0.06 0.13
VISAClA V 2.1 205.94 1.19 0.57
WalMart WMT 4.6 78.19 0.43 0.55
Source: WSJ Market Data Group
Credit-default swaps: European companies
At itsmost basic, thepricingof credit-default swapsmeasureshowmuchabuyer hastopaytopurchase-and
howmuch a seller demands to sell-protection fromdefault on an issuer's debt. The snapshot belowgives a
sense whichway the market was moving yesterday.
Showing the biggest improvement...
CHANGE, in basis points
Yesterday Yesterday Five-day 28-day
ageas 89 2 1 7
TEConnectivity 43 1 1 1
Bca Naz del Lavoro 66 1 5 5
Smiths Gp 85 1 1 3
RioTinto 93 1 3 ...
Dixons Retail 176 1 17 2
Lanxess 123 ... 5 13
BASFSchweiz 23 ... ... ...
Next 52 ... 2 3
UPCGermanyHoldCo1 9 ... 1 4
Andthe most deterioration
CHANGE, in basis points
Yesterday Yesterday Five-day 28-day
Unilever 28 ... ... ...
Dexia Cr Loc 182 1 3 10
Rhodia 45 ... ... ...
ACE 29 ... ... 1
Daimler 43 ... 2 1
BcoPopEspanol 156 ... 6 13
RegionSicily 213 1 1 13
Commerzbank 94 ... 5 4
TelecomItalia 187 ... 10 32
Statoil 36 ... ... 2
Source: Markit Group
BLUE CHIPS & BONDS
WSJ.com
>>
Follow the markets throughout the day, with updated
stock quotes, news and commentary at WSJ.com.
Also, receive emails that summarize the days trading in
Europe and Asia. To sign up, go to WSJ.com/Email.
Below, a look at the Dow Jones Stoxx
50, the biggest and best known
companies in Europe, including the U.K.
4 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
EUROPE NEWS
Dissent Emerges in Merkels Party Over Sanctions
BERLINGerman Chancellor An-
gela Merkels efforts to pressure
Russia arent only facing resistant
businesses and skeptical voters. Her
own party is now having misgivings
too.
Ms. Merkel threatened Moscow
with sweeping economic sanctions
after meeting with U.S. President
Barack Obama in Washington on Fri-
day. Yet on Tuesday, the parliamen-
tary leadership of her conservative
parties declined to discipline its for-
eign-policy spokesmanan oppo-
nent of sanctions against Russia
for attending a birthday party
alongside Russian President Vladi-
mir Putin in St. Petersburg last
week.
Another senior conservative law
maker, who criticized a German-led
military-monitoring mission to east-
ern Ukraine after its members and
accompanying Ukrainian officers
were abducted last month, also es-
caped a reprimand from parliamen-
tary leaders at their regular meeting
on Tuesday.
The refusal of Ms. Merkels own
lawmakers to crack down on inter-
nal dissenters despite a media up-
roar over the lawmakers unscripted
encounter with the Russian presi-
dent underlines the fine line the
chancellor is treading as she seeks
to maintain a joint front with the
U.S. and European allies against
Moscow for allegedly fueling unrest
in Ukraine.
Such vocal dissent is reminiscent
of the difficulties Ms. Merkel faced
as head of the previous government
in closing ranks behind her policy to
extend financial support to cash-
strapped euro-zone countries.
Her government is already con-
tending with hefty opposition from
German companies with business in-
terests in Russia. Ms. Merkels call
for economic sanctions against Rus-
sia should Ukraine be unable to hold
its planned presidential election
May 25 came despite lobbying by
the likes of chemical giant BASF SE,
engineering group Siemens AG,
Volkswagen AG and others.
Russias image in Germany has
deteriorated as violence has spiraled
in Ukraine. Even so, a TNS Emnid
poll conducted for the news maga-
zine Focus in late April showed 84%
of respondents calling for a diplo-
matic solution to the conflict in
Ukraine. Only 45% backed further
sanctions against Russia. The con-
servative parties also have histori-
cally stronger ties to German busi-
ness, which has been the most
outspoken constituency in opposing
economic sanctions against Russia.
Yet discomfort of some conser-
vatives about Ms. Merkels rhetoric
on Russia also reflects a popular
analysis of the conflict in Ukraine.
The view I lean towards is that
the EU, driven by the Baltic States
and Poland, drove Putin into a cor-
ner by offering an association
agreement to Kiev without consider-
ation for the diplomatic implica-
tions, said a prominent conserva-
tive with close ties to business. If
you go into your neighbors back-
yard and make noise, then you are
the troublemaker.
However, Wolfgang Bosbach, a
veteran Christian Democrat law-
maker, said: We cannot allow any-
one to drive a wedge between Eu-
rope and the U.S. in this crisis.
Economic interests cannot trump
political necessities.
Mr. Bosbach said Ms. Merkel
forcefully defended her and Mr.
Obamas joint threat of sanctions
against Russia at a closed-door
meeting of her parliamentary group
Tuesday, telling lawmakers the cost
to Russia of its policy in Ukraine
should be raised if Moscow is to
back down.
Anton Troianovski and Andrea
Thomas contributed to this article.
BY BERTRAND BENOIT
Reuters
Russian forces Saturday try to block Tatars from crossing a Crimean border checkpoint to meet with the Tatars leader.
Tatars Face Crackdown
The new authorities in Crimea
have accused Tatar leaders of ex-
tremism and threatened a crack-
down, reinforcing fears of renewed
persecution that led most of the
community to oppose the regions
recent annexation by Russia.
The warning and other recent
moves to clamp down on dissent
signal some of the most significant
challenges to freedom of expression
and movement in Crimea since Mos-
cow took control of it from Ukraine
in March after a secession vote that
was unrecognized by most of the
world.
On Monday, Crimeas chief pros-
ecutor Natalia Poklonskaya said
members of the Crimean Tatars
self-governing council, known as the
Mejlis, were suspected of extremist
activity. She didnt announce any
charges but warned that the council
could be dissolved and banned
across Russia. The threat comes af-
ter the breakaway regions new au-
thorities last month barred a promi-
nent leader of the Muslim group
from returning to Crimea for five
years after he left for meetings in
Kiev.
Ms. Poklonskaya said the accusa-
tion and warning were in response
to an incident Saturday when more
than 1,000 Tatars drove to the Cri-
mean border near the city of Ar-
myansk to protest against the Cri-
mean authorities refusal to allow
Mustafa Dzhemilev, the Crimean Ta-
tar leader, to return home. Crimean
Tatar leaders say that those who
took part in the protest on the bor-
der have also faced scrutiny by law
enforcement.
The Mejlis has hundreds of
branches across Crimea, helping Ta-
tars with education, housing, lan-
guage rights and other grass-roots
matters.
The timing of the warning comes
shortly before Crimean Tatars plan
to commemorate the 70th anniver-
sary of their exile from Crimea to
Central Asia on May 18.
While pressuring Tatar leaders
unhappy with the return to rule
from Moscow, the Kremlin has tried
to win over the masses. Last month,
President Vladimir Putin signed a
law rehabilitating Crimean Tatars
after Stalins repressions and has
promised them other aid.
The 70-year-old Mr. Dzhemilev
spent more than a decade in Soviet
jails for defending the rights of Cri-
mean Tatars. The Kremlin initially
courted him, hoping to persuade
him to support the Russian project
in Crimea. Such support would have
resonated because the Tatars gener-
ally view him as an elder statesman.
But Mr. Dzhemilev rebuffed Rus-
sias entreaties in a phone conversa-
tion with Mr. Putin and later spoke
out forcefully against the annexa-
tion.
Last month, as he left Crimea
headed for Kiev, he said he was told
by the new border authorities that
he wouldnt be allowed to return to
Crimea for five years. When Mr.
Dzhemilev tried to fly from Kiev to
Crimea via Moscow last week in an-
other attempt to return home, the
Russians refused to let him onto the
connecting flight. He flew back to
Kiev and tried to drive to Crimea
but was stopped at the border.
Though the legal basis of the ban
has never been explained, it appears
to have originated with Crimeas
separatist leaders. Those who come
here with bad intentions won't be
allowed to enter, Crimea govern-
ment chief Sergei Aksenov said of
Mr. Dzhemilev recently.
Tatars have been enraged at the
treatment of a man who was a baby
when Stalin kicked his family out of
Crimea and spent most of his life
campaigning for the Tatars right to
return.
That they wouldnt let this man
come home where he has family,
where he has a house is a challenge
thrown to all of us, said Ilmi Um-
erov, head of the local government
in the Bakhchysarai region of Cri-
mea.
Tatars constitute over 10% of
Crimeas population, and their his-
tory here predates the Russians ini-
tial conquest of Crimea from the Ot-
toman Empire in the late 18th
century.
BY PHILIP SHISHKIN
Deadly Fire in Odessa
May Have Been Accident
A horrific fire that killed dozens
in a hulking Odessa building where
pro-Russian protesters had taken
cover was likely sparked by rebels
on the roof who accidentally
dropped Molotov cocktails, accord-
ing to a preliminary investigation by
the government.
The finding is likely to further
anger separatists in eastern Ukraine
who view the new government in
Kiev with deep suspicion. It comes
as authorities said the situation on
the border with Russia has grown
increasingly tense, and France
warned of the prospect of chaos
and civil war if the presidential
election set for later this month is
upended.
The two-month-old government
has been pressing a military offen-
sive in the east to try to quell a pro-
Russian insurgency, but is increas-
ingly losing its grip in the regions of
Luhansk and Donetsk, which both
border Russia. The unrest spread
Friday to the Black Sea port of
Odessa, which was hit by rioting
that led to a fire that claimed 42
lives.
Serhiy Chebotar, Ukraines dep-
uty interior minister, who is now
working in Odessa, said Tuesday
that the fire began on the higher
floors and quickly spread through
the trade-union building, where pro-
Russian protesters had taken refuge
from a mob of pro-Kiev militants.
The fire began from the roof.
There were extremists there, we
found casings and firearms, Mr.
Chebotar said. But something unex-
pected happened; their Molotov
cocktails fell, and ignited the higher
floors of the building.
This version of events is likely to
be contested by grieving relatives of
those who perished in the fire or
died jumping out of windows. Four
others were killed in the rioting.
Pro-Russian activists in Odessa
believe the fire was a deliberate
atrocity committed by Ukrainian na-
tionalists. Russian media have com-
pared the fire to the worst Nazi
crimes against civilians and sug-
gested it was a plot by Kiev.
We are dealing with real geno-
cide, a genocide of Russian and
Ukrainian people in todays 21st cen-
tury, the speaker of the lower house
of Russias parliament, Sergei Nary-
shkin, said of the fire, which he
blamed on riotous radicals, the In-
terfax news agency reported.
Acting President Oleksandr
Turchynov on Tuesday dismissed
the head of the Odessa regional ad-
ministration, having already fired
the chief of the regional police and
much of his senior staff.
The fire occurred after a pro-
Ukraine rally was attacked by pro-
Russian protesters, whose ranks in-
cluded a small group of armed
militants. The fighting escalated be-
fore some people escaped to the
trade-union building, where both
sides threw Molotov cocktails and
the fire began.
Video footage shows some pro-
Ukraine activists helping people
trapped in the burning building es-
cape by leaning scaffolding against
the walls. There were other pro-
Ukraine protesters who were attack-
ing people.
Among the dead was Vadim Pap-
ura, a 17-year-old political-science
student, whose funeral was Tuesday.
He had taken part in the clashes and
sought cover in the trade-union
building, then jumped from the third
floor to escape the flames, according
to his friend Timur Lyubinski.
His body was so disfigured that
friends and family identified him by
the striped pants he was wearing
that day. His open coffin, with his
face reconstructed, sat in front of
the apartment block where he had
once lived, as his parents, friends
and fellow students gathered for the
emotional service.
Ukraine and the West have
blamed Russia for instigating the re-
volt in the east, a charge Moscow
has denied.
The government in Kiev, which
took office after pro-Western pro-
tests toppled President Viktor Yanu-
kovych, is seeking to regain control
in the eastern regionsMr. Yanuk-
ovychs base of support. The presi-
dential election scheduled for May
25 is viewed in the West as key to
bolstering its legitimacy.
If the election isnt held there is
a risk of chaos and civil war; that is
whats at stake, French President
Franois Hollande said in an inter-
view on BFM television and RMC ra-
dio.
Russian Foreign Minister Sergei
Lavrov said that Moscow wouldnt
commit to recognizing the outcome
of the presidential vote.
U.S. President Barack Obama said
last week that Russian attempts to
disrupt the vote could trigger new,
more punitive sanctions against
broad sectors of the Russian econ-
omy.
By Philip Shishkin
in Odessa, Ukraine and
Lukas I. Alpert in Moscow
THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 25
PERSONAL JOURNAL
A Heart-to-Heart With Your Closest Friend
Self-Talk Can Allow People to Give Themselves Objective, Helpful Feedback; Improving the Negative
Do you ever talk to yourself?
Be honest.
Researchers say talking to
yourself, out loud, is more com-
mon than many of us might care
to admit. Psychologists call it self
talk and say how we do it makes
a big difference in both our mood
and our behavior.
Most people engage in self-talk,
experts say, though some do it
louder and
more often than
others. When I
asked, I heard
from people who talk to them-
selves in the basement, in their cu-
bicle at work and at the urinal in
the mens room. One woman turns
the car radio down so she can hear
herself better.
Self-talk is what happens when
you make yourself the target of
your own comments, advice or re-
minders. Experts consider it a sub-
set of thinking. Youre having a
conversation with yourself.
My father talks to himself
pretty much everywhere, including
at the dinner table. He is more in-
terested than anyone else is in
what he has to say, he says. He
taught my two sisters and me to
high-five ourselves when we do
something well.
Sometimes self-talk is auto-
matic. Other times we do it delib-
erately to influence our own be-
havior. What happens with self-
talk is you stimulate your action,
direct your action and evaluate
your action, says Antonis Hatzi-
georgiadis, associate professor at
the University of Thessaly in
Trikala, Greece, who studies self-
talk and the psychology of sports
performance.
Motivational self-talk includes
what we say to psych ourselves
up: Come on! Lets go! You
can do this! Instructional self-talk
walks us through a specific task. If
you are driving, you might tell
yourself to turn right at the next
light, and then you do it. It
sounds simple, but you get the
correct reaction, says Dr. Hatzi-
georgiadis.
Instructional self-talk is helpful
when learning or practicing a new
sport or task, he says. For exam-
ple, a swimmer can remind himself
to keep his elbow high during free-
style. Before giving a speech,
someone might tell herself, Speak
slower and Make eye contact.
It is important to be short, pre-
ciseand consistent. You have to
sustain it, Dr. Hatzigeorgiadis
says. You instruct yourself until it
becomes automatic.
The way you address yourself
matters, too. Research published
in the Journal of Personality and
Social Psychology in February
found people who spoke to them-
selves as another person would
using their own name or the pro-
noun youperformed better
under stress than people who used
the word I.
In one study, University of
Michigan researchers induced
stress in participants by telling
them they had to prepare a speech
to give to a panel of judges about
their qualifications for a dream
job. They were given five minutes
to prepare and told they couldnt
use notes.
Half the participants were in-
structed to work through their
anxiety using the first-person pro-
noun (Why am I nervous?). The
other half were told to address
themselves by name or the pro-
noun you (Why are you ner-
vous?). Afterward, each partici-
pant was asked to estimate how
much shame he or she experienced
right after the speech, and how
much subsequent ruminating they
did.
The results were consistent:
People whose self-talk used their
names or you reported less
shame and ruminated less than
the ones who used I. The judges
found the performances of those
using you to be more confident,
less nervous and more persuasive.
When people think of them-
selves as another person, it al-
lows them to give themselves ob-
jective, helpful feedback, says
Ethan Kross, associate professor of
psychology and director of the
Self-Control and Emotion Labora-
tory at the University of Michigan.
Don Ingraham, a 77-year-old re-
tired chief executive of a chemical
distribution company, has been
talking to himself for more than
70 years. He was a lonely child
his brothers were much older
and invented three imaginary
friends, Bobby Palmer, Bobby En-
gine and Ainsley Oates, with whom
he had regular conversations.
As an adult, Mr. Ingraham com-
pliments himself when he does
something well, such as the level
base he built for an outdoor sink
on the flagstone patio at his Aus-
tin County ranch, in Texas.
Good job! he said to himself.
You took the time to make it
right. Sometimes, he scolds him-
self. He says its his conscience
speaking. While cleaning up tree
branches after an ice storm this
winter, he accidentally jabbed a
sharp stick into his arm. I used
some barnyard words that follow
the word dumb, he says.
Both positive and negative
words can influence us in positive
and negative ways. Say to yourself,
This job interview is going to be
a cakewalk, and you might not
get pumped up enough to ace it.
Conversely, tell yourself, You just
lost that match, you need to focus
harder, and it could spur you to
do better in the future.
With critical self-talk, identify
why you are being negative and
focus on making it better. Dont
say: I bombed that presentation.
Say: That wasnt your best
effort. You need to buckle down
now and try harder.
Kathy Gruver, a 44-year-old al-
ternative-medicine practitioner in
Santa Barbara, Calif., once made
herself cry while talking to herself
about what to say to her then-boy-
friend, who hadnt called when he
said he would.
Since then, she has learned to
speak to herself positively. She re-
peats daily affirmations, coaches
herself on handling difficult clients
and walks through the steps of her
flying-trapeze workout. I think
its healthy to talk to yourself, she
says. Throw your Bluetooth in, so
people think youre on the phone,
and let it all out.
Write to Elizabeth Bernstein at
Elizabeth.Bernstein@wsj.com, or
follow her on Facebook and
Twitter at EBernsteinWSJ.
BY ELIZABETH BERNSTEIN
Howto Improve Your Self Talk
It is perfectly OK to talk to yourself, as long as your words are encouraging and not berating, experts say.
Think of yourself as a life-long best friend who is honest and direct but most of all supportive.
Remind yourself of the desired outcome, so you dont wander ofpoint.
EXAMPLES: This company needs more leaders who are good at
listening. I ama problem-solver I can bring a newperspective here.
BEFORE A FIRST DATE
DURING COMPETITION BEFORE AJOB INTERVIEW
BEFORE PUBLIC SPEAKING
Take a step back and talk to yourself in a calming tone that
is slightly distanced.
EXAMPLES: Relax. You look ne, stop worrying. Remember to listen.
Repeat the specic directions that you knowhelp
you performbetter.
EXAMPLES: Dont rush. Pause for emphasis. Make eye contact.
Build your condence by reminding yourself of
all the positives.
EXAMPLES: You are well prepared. You have the skills.
I
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K
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BONDS: ON
RELATIONSHIPS
THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 3
NEWS
ArmedCiviliansFight VenezuelanUnrest
CARACASAs Venezuelas civil
unrest stretches into a fourth
month, the government has relied
mostly on National Guard troops to
contain protesters. But it also has
another, less formal tool: gangs of
armed, pro-government civilians.
Mobs of civilians on motorcycles
have swarmed antigovernment dem-
onstrations, sometimes firing weap-
ons, sometimes swinging bats, and
have stormed a university and burst
into apartment blocks in search of
adversaries, witnesses and rights
groups said. Created under late Pres-
ident Hugo Chvezs government,
these so-called colectivosor collec-
tivesare the self-appointed guard-
ians of Venezuelas socialist revolu-
tion.
But the recent protests under
President Nicols Maduro have thrust
them into a far more prominent role,
say human-rights groups and opposi-
tion members. Among their concerns
is that the civilian groups, while loyal
to the government, arent explicitly
under its command, and can largely
act as they please.
Jos Pinto, who as head of the
Tupamaro Revolutionary Movement
is one of Venezuelas best-known
colectivo commanders, character-
ized the opposition in the same gen-
eral language used by government
officials: as a fanatical, fascist right
wing intent on seizing power with
the help of the Obama administra-
tion.
Since we know how the empire
acts, Mr. Pinto said in an interview,
referring to the U.S., it forces us to
take measures.
A large man with a raspy bari-
tone, Mr. Pinto, 62 years old, denied
his group was violent, but said the
group favors a tough crackdown on
protesters, whom he called bugs.
I think that the government
needs to use an iron hand against
these [protesters] because we know
they are not students, they are not
housewives. They are gang mem-
bers, criminals, paramilitaries, he
said, speaking in his office a block
from Congress.
To many Venezuelans, groups
like the Tupamaros and other colec-
tivos are similar to Irans Basij para-
military force, a paramilitary orga-
nization deployed to put down
dissent. Without uniforms or other
identifying signsmembers often
wear helmets, dark glasses and
masksthey are tough to identify.
The job of the colectivos is to
generate chaos and panic in the
streets, said Juan Guaid, an oppo-
sition congressman who said colec-
tivos held him at gunpoint while
raiding his political partys offices.
With them around, you have to be
on the lookout for a beating, shoot-
ing, a killing.
Human-rights groups and local
media say that the colectivos may
have had a hand in as many as a
dozen of the 41 deaths in the pro-
tests. The crackdown appears to
have largely worked: The protests
are now far smaller than they were
when they exploded across the
country in February over rampant
crime and a crumbling economy.
But in a country where the oppo-
sition says the judicial system is in
the hands of the presidents office,
no colectivo leaders have been ar-
rested over this years violence. Hu-
man Rights Watch, a New York ad-
vocacy group, on Monday released a
report saying that judges and prose-
cutors in Venezuela have repeatedly
ignored evidence of systematic hu-
man-rights abuses by government
security forces.
The colectivos operate with the
explicit encouragementsometimes
heartily delivered in speechesof
the countrys leaders, including Mr.
Maduro, who recently called on
them to fight fire with fire against
the governments adversaries. We
will not accept campaigns to de-
monize the Venezuelan colectivos,
Mr. Maduro said in one speech. If
there is a conscience someplace, its
in these colectivos.
Underscoring the two mens
close ties, Mr. Maduro gave Mr.
Pinto a high-profile role on the first
day of discussions the government
held in recent weeks with some op-
position leaders to end the unrest.
Known to his followers as El
Gordo, or The Fat Man, Mr. Pinto
has publicly defended the Tupama-
ros, saying the movement is based
on profound love of humanity. He
described his organization as a po-
litical party and community group
that cares for the well-being of the
people in the poor 23rd of January
neighborhood that is Caracass bas-
tion of government support.
The Venezuelan Observatory of
Social Conflict, a Caracas organiza-
tion that studies social unrest here,
said colectivos attacked nearly a
third of the protests staged in March.
And human-rights groups have col-
lected detailed testimony from wit-
nesses and victims nationwide.
Jos Caldern, 56, said he saw
colectivos and National Guard
troops fight the antigovernment
residents of a Caracas neighborhood
as they threw debris down on them
from high-rise apartments. What I
saw was that about 70 members of
the colectivos showed up with guns,
shooting in the air, he said, calling
it a rampage.
Marino Alvarado, head of the
rights group, Provea, which is com-
piling reports on the colectivos, said
the groups have been detaining
people, firing off tear gas, shooting
at protesters and against homes
and with the cooperation of the
states forces.
Tracing their origins to the ur-
ban leftist guerillas of the 1960s,
armed civilian groups faithful to
Venezuelas populist government
grew in power under Mr. Chvez,
who was accused by opposition
leaders of arming civilian groups in
his 14 years in power.
There are now in Venezuela
roughly a dozen major armed civil-
ian groups, with 2,000 to 3,000
members, said Javier Ciurlizza,
Latin America director for the Inter-
national Crisis Group, a Brussels-
based organization that does in-
depth reports on conflicts world-
wide, including here.
Juan Forero
contributed to this article.
BY EZEQUIEL MINAYA
Motorcyclists supporting President Nicols Maduro riding in Caracas during a rally for peace in February. Some Venezuelans accuse such supporters of violence.
R
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Israel Fears Squeeze From Europe Over Settlements
BRUSSELSAs Middle East
peace talks founder, Israeli leaders
are bracing for the European Union
to resume its effort to put an eco-
nomic squeeze on Jewish settle-
ments in the West Bank and other
disputed territories that the EU con-
siders illegal.
The EU had been working on a
guideline that would prevent goods
manufactured in settlements from
carrying a Made in Israel label.
The 28-member bloc also had been
drafting a list of potential legal risks
for European companies doing busi-
ness in the territoriesa list that
might cause some to rethink their
operations.
Such measures were effectively
put on hold when Israeli and Pales-
tinian negotiators began talks last
summer, though EU officials say
work on them has continued. With
the talks now suspended, and the
April 29 deadline for extending them
past, Israeli officials fear the EU will
pick up where it left off.
Were already hearing about
such initiatives, and we understand
that it is in the drawer and waiting
for someone to pull it out, David
Walzer, the Israeli ambassador to
the EU, said in an interview. Am I
worried? Yes. Do I think its some-
thing they will definitely do? I hope
not.
He added, I hope they under-
stand this can be destructive for the
efforts to revive the peace process in
the near future.
Hanan Ashrawi, a prominent Pal-
estinian legislator, said the EU
should resume the labeling push.
Its long overdueit should have
happened decades ago, she said.
EU foreign ministers plan to is-
sue a statement on the Mideast talks
when they meet in Brussels on Mon-
day. Its tone and content are still be-
ing discussed, but one diplomat said
it would call on both sides to rededi-
cate themselves to negotiation and
re-emphasize the benefits of peace.
U.S. Secretary of State John
Kerry took the lead in bringing Is-
raelis and Palestinians together for
the talks, with European leaders
largely on the sidelines. But they
have sought to exert economic lever-
age on Israel through their extensive
financial and trade ties.
Shortly before the talks began,
for instance, the EU announced
guidelines to ensure that no EU
funding would go to organizations
with links to the Israeli settlements,
angering Israel.
With the talks under way, the EU
promised unprecedented economic
benefits for both sides if they
reached a deal. The U.K. and France,
among others, pushed unsuccess-
fully for the EU to spell out specific
benefits, arguing that would in-
crease the EUs ability to influence a
deal.
At the same time, individual
countries, including Britain and Den-
mark, have moved to impose their
own voluntary labeling scheme for
products from the territories.
EU officials have publicly played
down the import of some of these
moves, saying they flow from the
EUs long-standing position that
Jewish settlements in the West
Bank, as well as those in the Golan
Heights and East Jerusalem, are ille-
gal. Israel captured those territories
in the 1967 Middle East war.
As the talks hit turbulence last
week, Catherine Ashton, the EUs
foreign-policy chief, called on both
sides to show restraint. Negotia-
tions are the best way forward,
Baroness Ashton said. The exten-
sive efforts deployed in recent
months must not go to waste.
Israeli officials criticized that
statement, saying the talks stalled
because Fatah, the largest Palestin-
ian faction, announced it was recon-
ciling with Hamas, which the U.S.
and EU label a terrorist group and
which doesn't recognize Israels
right to exist.
The Palestinians say Israel was
simply seeking an excuse to end the
talks. Many figures in the Israeli
government hold views objection-
able to Palestinians, Ms. Ashrawi
said, but that didnt cause Palestin-
ian Mahmoud Abbas to end talks.
BY NAFTALI BENDAVID
26 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
SPORTS
The Draft: Whats Your Teams Strategy?
The NFL draft is a time of lying.
The rumor-laden run-up to the
leagues annual draft has become so
famous for misinformation, in fact,
that Arizona Cardinals coach Bruce
Arians said the greatest smoke
screen now is simply telling the truth
about player evaluations. No one be-
lieves it, Arians said.
But dont let this keep you from
understanding Thursdays draft.
Through a series of interviews with
league executives and data analysis,
the Journal assembled a comprehen-
sive guide to each teams strategy in
the draft.
Arizona Cardinals: Their calling
card has been consistent: Wait for
the later rounds to take low-risk,
high-reward players at skill positions
such as running back, wide receiver
and quarterback.
Atlanta Falcons: Theyre known for
drafting multiple players at the
same spot. They took four defensive
backs and two defensive ends in
2013, and two offensive linemen
with their top two picks in 2012.
Baltimore Ravens: Baltimore loves
to draft from the smallest schools,
such as Joe Flacco (Delaware, 2008).
Since 2009, 17 picks came out of
non-major-conference schools. Alma
maters last season included Harvard
and Elon.
Buffalo Bills: The Bills put their
faith in the combine and in measur-
ables: They loved quarterback E.J.
Manuels huge hands, cornerback
Stephon Gilmores athleticism and a
number of players 40-yard dash
times. No team loves speed more.
Carolina Panthers: General man-
ager Dave Gettleman has only se-
lected five players since arriving in
2013. Three of them (two defensive
tackles and one linebacker) have the
ability to rush the passer. Gettle-
man, who previously worked for the
pass-rush obsessed Giants, said hell
take another one if the talent is
there.
Chicago Bears: GM Phil Emery loves
tall players, having selected wide re-
ceivers Alshon Jeffery and Marquess
Wilson, both above 6-foot-3, as well
as 6-foot-3 safety Brandon Hardin.
Cincinnati Bengals: The Bengals
dont need to watch many college
games. They took a league-high 12
Southeastern Conference players in
the top four rounds since 2008, in-
cluding wideouts A.J. Green and pass
rusher Carlos Dunlap.
Cleveland Browns: New GM Ray
Farmer has hinted that he isnt ob-
sessed with quarterbacks, a wel-
come change from previous regimes
who reached for first-round passers.
The Browns have had bad drafts
lately, and worse, no teams picks
have started more games. That is
why theyve lost.
Dallas Cowboys: Jerry Jones will
sometimes make a splash by trading
up (cornerback Morris Claiborne) or
picking a flashy player (receiver Dez
Bryant), but more often he loves to
fill needs early, then take linebackers
and defensive backs.
Detroit Lions: If there is a risky
player on the board who looks to be
dropping, he likely wont get past De-
troit. In the past few years, the Lions
have taken a player who started play-
ing football at age 21 (Ezekiel Ansah),
one with a torn ACL (Ryan Broyles)
and a string of players with off-the-
field problems.
Denver Broncos: They get Peyton
Manning what he needs: good run-
ning backs and a solid defense. Re-
ceivers, if drafted at all, will come
late.
Green Bay Packers: The Packers
like to use the draft for two things:
protecting franchise quarterback
Aaron Rodgers, and ensuring that
the opposing quarterback is uncom-
fortable. Since 2009, no team has
selected more offensive linemen (9),
and only one has selected more de-
fensive linemen (9).
Houston Texans: Every team says it
picks the best player available, but
Houston lives by it. In the seven
drafts run by GM Rick Smith, the
Texans have taken players at the
same position with back-to-back
picks seven times.
Indianapolis Colts: The Colts want
bulk. Theyve drafted six tight ends
since 2008, a trend that is bound to
continue as offensive coordinator
Pep Hamilton builds his offense.
Jacksonville Jaguars: Second-year
GM Dave Caldwell comes from an
Atlanta franchise that believes in
depth, so look for more cornerbacks
and some pass rushers this year.
Kansas City Chiefs: GM John Dorsey
was a scouting director in Green Bay,
so hes obsessed with getting as many
picks as possible, and with player
measurements. Insiders say hes
known as a savant who wants to
memorize every players hand size.
Miami Dolphins: Coach Joe Philbin
clearly likes to start young players:
Since 2009, Dolphins draft picks
have started 572 times, second-most
in the NFL. The organization has
also (finally) discovered there is
some talent in their home state, tak-
ing six Florida college products in
the past three years.
Minnesota Vikings: A curious
trend: GM Rick Spielman likes to
draft teammates together. UCLA
(2013), Florida State (2013), Penn
State (2013), USC (2012), Arkansas
(2012), Notre Dame (2012) have all
had pairs taken by the Vikes in the
same year.
New England Patriots: Bill Belichick
likes drafting players coached by
friends (Nick Saban at Alabama, Greg
Schiano at Rutgers), but hes better
known for his relentless filling of
needs; even a special-teams role can
be a high pick.
New Orleans Saints: In the past
five drafts, no team has made fewer
picks than the Saints 16. That is no
surprise, given that the window for
aging quarterback Drew Brees to
win big in New Orleans is closing,
meaning there is less emphasis on
young players. When the Saints do
draft? Theyve taken six straight de-
fensive players with their top pick.
New York Giants: Because the Gi-
ants have been a solid veteran group
for so long, there have been fewer
holes requiring need-based picks.
So GM Jerry Reese has been remark-
ably balanced recently. What he
hasnt gotten is starters. Only two
teams have fewer than the Giants
297 starts by players drafted in the
past five years.
New York Jets: Coach Rex Ryan and
the Jets have spent their past five
first-round picks on defensive line-
men and cornerbacks. But oddly,
since 2009, when Ryan took over,
only the Ravens have drafted more
offensive players. So look for de-
fense early and then a bunch of of-
fensive linemen and wideouts.
Oakland Raiders: Lets say, gener-
ously, that the Raiders havent
shown much of a drafting philoso-
phy these past few years (although
the Al Davis era of worshiping speed
seems to have ended). None of the
teams top four draft picks last year
played a full season, one didnt
make the team, and injury-prone top
pick D.J. Hayden played in just eight
games.
Philadelphia Eagles: No team has ac-
quired more picks via trades in the
past decade, but last years draft, un-
der coach Chip Kelly, was positively
boring. His plan is clear: Create the
ultrafast offense he wants with play-
ers on the roster while drafting foun-
dations on the offensive line and de-
fense.
Pittsburgh Steelers: Their vaunted
defense relies more on the scheme.
Their offense, less famous, needs
the elite talent. That is why only
two teams have selected more offen-
sive players in the past decade. The
Steelers love two types: Big Ten al-
ums (15 of them) and offensive line-
men (nine since 2009).
St. Louis Rams: Coach Jeff Fisher is
comfortable moving down in the
drafthe traded the slot that pro-
duced Robert Griffin III in 2012be-
cause he believes there is value in
taking chances on guys later. The
Rams want speed on offense, tough-
ness on defense and, most of all, lots
of picks.
San Diego Chargers: Last year, new
GM Tom Telesco broke a five-year
Chargers streak when he didnt take
a running back. He is attempting to
build a healthy, deep team and avoid
the luxury picks of his predeces-
sor.
San Francisco 49ers: They have been
in win-now mode since Jim Harbaugh
became coach in 2011, so it is no sur-
prise they use the draft to fill needs
and grab immediate starters. This
year: How about a taller receiver to
help beat those Seattle defenders?
Seattle Seahawks: The Seahawks
have conquered the draft, but not
with their psychic abilities. The bril-
liant selections of players like Rich-
ard Sherman and Russell Wilson
were more about quantity. Since
2011, the Seahawks have selected a
league-high 30 players.
Tampa Bay Buccaneers: New GM
Jason Licht got pieces for Lovie
Smiths Cover 2 defense in free
agency, so hell likely go heavy on
offense in his first Bucs draft. Like
his predecessor, Licht was clearly
more concerned with adding veter-
ans in free agency than drafting.
Tennessee Titans: Recently, no team
has embraced defensive linemen like
the Titans. Their plan is usually clear:
glamour positions at the top of the
draft (wide receiver, running back,
quarterback) then defensive players
at the bottom. Only two teams have
taken more defenders in the past de-
cade.
Washington Redskins: Youll have
to wait to see them work their spe-
cialty: The late-round running back.
Washington has taken seven running
backs since 2009, and all were se-
lected after the fourth round.
BY KEVIN CLARK
Clockwise from top: NFL
Commissioner Roger Goodell;
cornerback Richard Sherman of the
Seattle Seahawks, who like to find
value in quantity; former Browns
quarterback Brandon Weeden, a
product of Clevelands weakness for
first-round passers; and receiver A.J.
Green of the Cincinnati Bengals, who
covet speedy SEC products. A
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2 | Wednesday, May 7, 2014
AM IM UK SW FR IT SP TK BR PL IS AE GR
THE WALL STREET JOURNAL.
PAGE TWO
i i i
Business & Finance
n Americas dirty and un-
wanted coal is being em-
braced by the EU as one of
the cleanest energy markets
increased imports of U.S. coal
to 47.2 million tons from 13.6
million tons in 2003. 15
n Fiat Chrysler aims to more
than double sales of its Jeeps
in 2018, make Dodge a niche,
performance-car brand and
boost sales of its premium Alfa
Romeo and Maserati cars. 15
n The rivalry among Audi,
BMW and Mercedes-Benz for
rights to the top-selling pre-
mium car maker increasingly
rests with sales performance
in China as first-quarter re-
sults prove. 17
n Several U.S. telecom deals
under consideration could usher
in an era of consumers getting
new options to be entertained
and communicate wherever and
however they choose, though
the path is perilous. 20
n U.S. regulators filed a civil
lawsuit against a Toronto con-
sultant and four other people
for allegedly making millions of
dollars in profit by manipulat-
ing trading of two Chinese
companies shares. 9
n Hong Kong developers have
resorted to discounts and other
incentives to lure buyers to ex-
pensive new apartments, while
many are rediscovering older
apartment buildings. 18
i i i
World-Wide
n Hollande said he would
forge ahead with his plans to
cut public spending and grant
tax breaks to business, adding
that GEs proposed $17 billion
purchase of Alstoms power di-
vision isnt satisfactory. 6, 16
n The Vatican disclosed that it
has defrocked hundreds of
priests and punished thousands
more for sexual abuse of chil-
dren over the past decade. 6
n A building fire that killed
dozens Friday in Odessa was
likely sparked by rebels on the
roof who accidentally dropped
Molotov cocktails, according to
a preliminary investigation by
Ukraines government. 4
n China is taking a more-cau-
tious approach to Africa after a
series of big loans and invest-
ments in resource deals over
recent years failed to pan out. 9
n Some spouses of foreign
visa holders in the U.S. will be
allowed to work under a new
White House plan to attract
skilled employees. 8
n Three gunmen stormed a
school in Nigerias capital in a
bid to kidnap a small bus full
of children. 10
nA leader of Indias main oppo-
sition partyand, some believe,
the next finance ministersays
in an interview he wants to see
India become an export power-
house like China. 10
Whats News
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G
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Pyongyangs Nuclear Drive
Puts China in a Quandary
handful of crude nuclear bombs. A
report from the think tank 38
North, affiliated with Johns
Hopkins University, says North
Korea conducted at least one
engine test of what is likely a
road-mobile intercontinental
ballistic missile in late March or
early April.
Once Pyongyang manages to
miniaturize a nuclear device to sit
on top of a rocket, half the
planets economy in the Asian
Pacific and more than half of its
people will be at the mercy of Mr.
Kim. One comforting thought is
that North Korea may be years
away from acquiring that
capability. And even if Mr. Kim is
eventually able to deliver a
nuclear bomb accurately, he likely
wont because he knows that his
recalcitrant nation instantly would
be reduced to ashes. In other
words, hell choose regime
survival over suicide.
Still, none of the carrot-and-
stick tactics adopted so far to stop
North Korea have worked.
Over the years, North Korea
and its immediate neighbors,
along with the U.S., have huddled
periodically in six-party talks to
try to find a way around the
impasse. Among other
inducements to get Pyongyang to
change course have been the
prospect of security guarantees,
support to develop a peaceful
nuclear-energy program, and even
the possibility of a U.S.
presidential visit.
But those talks are now on ice.
From Pyongyangs perspective,
nuclear weapons are its ultimate
protection against an attack aimed
at regime change; it has taken to
calling them a treasured sword.
The U.N. has imposed stern
sanctions on North Korea, and the
U.S. applies additional unilateral
ones. Yet sanctions so far have
had only limited impact on a
country that operates on the
outlaw margins of the
international economy, relying for
hard currency on the exports of
arms, narcotics and fake bank
notes.
By comparison, Iran is more
integrated into the global economy
and feels the punishing effects of
sanctions more keenly. Life in
Pyongyang, in fact, may even be
improving. Recent visitors report
more taxis cruising the streets and
well-stocked shops.
If North Korea goes ahead with
a fourth test, as seems inevitable,
more sanctions will follow,
possibly targeting North Korean
financial flows as well as Kim
family money, if it can be
identified. Theres a chance that
Mr. Kim might flinch if his lavish
lifestyle were threatened, and he
could no longer buy the loyalty of
Pyongyangs elites, or fund his
military fantasies.
Of course, its always possible
the regime may collapse. It has to
be assumed that many senior
officials fear for their lives after
the execution of Mr. Jang, which
has exposed cracks in a
government that once appeared
monolithic. But dont count on an
uprising against Mr. Kim, who has
been surprisingly efficient at
consolidating his control over the
military since taking over as
leader after his father, Kim Jong
Il, died in December 2011.
Well have to live with him
whether we like him or not, says
Mr. Chun, the former national-
security adviser, who calls Mr. Kim
more reckless, more ruthless and
more dangerous than his father.
BEIJINGWhile a territorial
dispute threatens to drag China
and Japan into conflict, a separate,
slow-motion crisis building on the
Korean peninsula could further
inflame their
rivalry.
Evidence North
Korea is about to
pull the trigger on
its fourth nuclear
test underlines
that the North is
marching determinedly, one step
at a time, toward the day when it
can target any city in the Asian
Pacificand potentially large
population centers in the U.S.
with nuclear attack.
South Koreas Foreign Minister
Yun Byung-se last month called
the fourth test a potential game-
changer.
True, a fourth test will add
pressure on the U.S. to bolster its
missile defenses in the region
and it could bring South Korea
and Japan closer to contemplating
their own nuclear deterrents,
separate from the U.S.
This is Chinas nightmare: a
nuclear arms race on its doorstep,
and one that adds muscle to its
rival Japan as the two wrangle
over a set of islets in the East
China Sea.
But will Chinas leaders act?
They are looking at North Korea
increasingly as a strategic liability
rather than an asset, says a
senior South Korean Foreign
Ministry official.
Beijing, he says, is alarmed at
North Koreas direction under Kim
Jong Un, a novice dictator with a
short-back-and-sides hairdo who
has shown the world his ruthless
side by executing his own uncle.
Yet it would be a huge leap for
Beijing to actually abandon one of
its few real friends in the world.
No other country has more
influence on North Korean
behavior: Without Chinese food
and oil, the North Korean economy
might collapse. But thats likely
not an outcome Beijing desires,
even though the execution in
December of Jang Song Thaek
robbed Beijing of one of its best
friends in Pyongyang. China still
values North Korea as a buffer
against U.S. forces stationed in
South Korea, and it fears that a
messy implosion of a nuclear-
armed regime could spill chaos
over its borders.
In the end, the demise of a
socialist ally may be too unnerving
a prospect for the Chinese
Communist Party, which frets
about its own mortality.
And those calculations are
what may embolden Pyongyang to
keep going with its nuclear tests.
They know that China will not
go beyond strong rhetoric, says
Chun Yung-woo, a former
national-security adviser to the
South Korean president who was
speaking at the recent Asan
Plenum in Seoul that brings
together some of the worlds top
strategic thinkers on Asia.
North Korea likely possesses a
CHINAS WORLD | By AndrewBrowne
Soldiers applaud Mr. Kim in a photo released Tuesday by a state news agency.
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THE WALL STREET JOURNAL. Wednesday, May 7, 2014 | 27
OFF THE WALL
Stressed Koreans Seek
Serenity in Faux Prisons
People Check In for Meditation With a Penal Theme
I
t is still dark. The chilly air leaks
in at the windowsill. Theres no
clock on the wall. Park Woo-sub
assumes he needs to wait a bit lon-
ger for breakfast to be served
through a slot at the bottom of the
door to his solitary cell.
This is my third time in
prison, says the unshaven 58-
year-old, who looks as if he has
had a sleepless
night.
He is wearing a
regulation blue
uniform with an ID
number on his
chest.
He closes his
eyes and tries to
meditate. It isnt
that there is any-
thing else to do in
the 60-square-foot cell whose only
furnishings are a toilet, a tiny sink
and a table. Many random
thoughts swirl about in his head.
Being confined to a prison can
be suffocating, but it also offers
time to focus solely on me and
spend some quiet time with my-
self, he says.
In his earlier incarcerations, he
was behind bars for participating
in the democratization movement
that swept across South Korea in
the 1980s. This time, he was ad-
mitted voluntarily. He walked into
the cell and locked himself in.
In a country where the social
pressure to do well in school and
to find highly paid jobs is intense,
an industry is attempting to come
up with some extreme relaxation.
In the middle of nowhere on
the outskirts of Hongcheon, 94 ki-
lometers northeast of Seoul, Kwon
Yong-seok runs Prison Inside Me,
a stress-reduction center with a
penal theme. A meditation build-
ing, auditorium and management
center sit on a 2-acre piece of land.
I didnt know how to stop
working back then, said the soft-
spoken 47-year-old Mr. Kwon, look-
ing back on his life as a public
prosecutor on Jeju Island in the
late 1990s. I felt like I was being
swept away against my will, and it
seemed I couldnt control my own
life.
One day, Mr. Kwon asked a
prison governor, who was an old
acquaintance of his, whether he
could spend a week behind bars
for therapeutic reasons. That was
out of the question, he was told.
Besides, he himself felt that a
whole week would be too long a
stay.
Although South Korea is slowly
inching toward a better work-life
balance, with the government and
businesses emphasizing the impor-
tance of taking longer vacations in
a somewhat paradoxical effort to
improve productivity, people still
work notoriously long hours. The
latest available data compiled by
the Organization for Economic Co-
operation and Development show
South Koreans worked the longest
hours among 34 OECD members in
2011, after Mexico, with 2,090
hours a year. The OECD average
was 1,765 hours.
Too much work is a quality-of-
life issue. The country ranked 26th
in the Life Satisfaction category of
the annual Better Life Index for
2013, an OECD measure of how
people evaluate
the quality of their
lives. South Kore-
ans gave their
lives a 4.3 on a
scale of 0 to 10,
lower than the
OECD average of
6.6.
In June last
year, the construc-
tion of the prison-
like spiritual house was completed.
It took a year and cost Mr. Kwon
and his wife Roh Ji-hyang, head of
a theater company, 2 billion won,
or $19 million. Parts of the cost
were covered by donations and
loans from friends and relatives.
Mr. Kwon says the goal of the facil-
ity, which has 28 solitary confine-
ment cells, isnt to make a profit.
On top of private meditation
sessions, paying guests are helped
to reflect on their lives and learn
how to free themselves from what
Mr. Kwon calls the inner prison,
through meditation, spiritual
classes and healing plays in a
group session in the auditorium. A
two-night stay costs 150,000 won
or about $146.
So far, it hasnt been as easy for
the couple to run the place as they
had envisioned. They had to cut
the length of stays to as little as
two days because people arent
willing to, or simply cant, take
time off. Also the facility had to
make another big concession to
modernityallowing guests to
check their smartphones at least
once a day.
People seem nervous without
a phone and simply worry too
much about an emergency, which
seldom happens, said Mr. Kwon.
One recent morning, about 20
people attended a personality
analysis class conducted by a Cath-
olic priest, a session aimed at
helping participants understand
themselves as well as others, one
of the essential elements to find-
ing inner peace, according to Mr.
Kwon.
As soon as a short break
started, people rushed to grab
their phones. Someone might
have called me or left a message,
said Park Seong-ho who quickly
swiped the screen to see whether
any new messages had arrived.
While generally satisfied with
the quality of programs, it would
have been more helpful for self-
control if the facility had been in
poorer shape like in a real prison,
Mr. Park said, it is too clean and
warm to be called a prison.
Life in prison, though physically
constrained, can be free in that
there is less pressure from modern
living. Some of the countrys intel-
lectuals and political dissidents
have said they found inspiration
and peace of mind while serving
time in real prisons.
Former South Korean President
Kim Dae-jung, who was an avid
reader, once famously said, I wish
I could go back to prison, com-
plaining that he lacked time to
read books because of his busy
schedule.
The former president, who won
the Nobel Peace Prize in 2000,
spent six years in prison and
nearly 10 years under house arrest
for his democratization move-
ments. His writings in jail were
later published under the title of
Prison Writings. Another famous
book, Thoughts From Prison by
Shin Young-bok, a political dissi-
dent-turned-professor, became a
classic for its thought-provoking
self-examination.
To be honest, the two-day-
three-night program is too short.
But the reality is people complain
if we make it longer, Mr. Kwon
said. I only wish people could get
a rare chance, even if forcibly, to
reflect on the past and take it
easy.
BY JAEYEON WOO
Hongcheon, South Korea
Online
>>
Watch a video on Prison Inside Me
at WSJ.com/OffTheWall. Park Woo-sub inside his cell at Prison Inside Me, a stress-reduction center.
B
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h
w
a
f
o
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a
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To be honest, the two-
day-three-night program
is too short.
VOL. XXXII NO. 66
WEDNESDAY, MAY 7, 2014
Are You Talking to Yourself?
PERSONAL JOURNAL 25
DJIA 16401.02 g 0.78% Nasdaq 4080.76 g 1.38% Stoxx Eur 600 336.04 g 0.25% FTSE 100 6798.56 g 0.35% DAX 9467.53 g 0.65% CAC 40 4428.07 g 0.78% Euro 1.3925 0.31% Pound 1.6975 0.63%
EUROPE EDITION
WSJ.com
Climate Change Said to Hurt U.S. Economy
Climate change is having a
negative impact on peoples
everyday lives and damaging
the U.S. economy as extreme
weather brings flooding,
droughts and other disasters
to every region in the nation,
a federal advisory committee
has concluded.
The congressionally man-
dated National Climate As-
sessment, produced by more
than 300 experts overseen by
a panel of 60 scientists, con-
cludes that the nation has al-
ready suffered billions of dol-
lars in damages from severe
weather-related disruptions,
which it says will continue to
get worse.
The document, considered
the most comprehensive anal-
ysis of the effects of climate
change on the U.S., was re-
leased by the climate panel af-
ter a final vote by the authors
Tuesday morning. President
Barack Obama is planning to
promote it in a series of
events this week, calling for
action to combat the trend
and using the report to bring
public attention to climate-
change-related problems.
This national climate as-
sessment is the loudest and
clearest alarm bell to date sig-
naling the need to take urgent
action, said John Holdren, as-
sistant to the president for
science and technology, dur-
ing a news-media call on the
report.
The report, by the Federal
National Climate Assessment
and Development Advisory
Committee, details the effects
of climate change on every
state and every sector of the
economy, from rapidly reced-
ing ice in Alaska to heat waves
and coastal flooding in the
Northeast. Rising seas in the
South put major cities such as
Miami at risk, it says.
The report pins much of
the increase in climate change
on human behavior. It says,
however, that it isnt too late
to implement policies to re-
duce greenhouse-gas emis-
sions, and calls on govern-
ments at all levels to find
ways to lower the carbon
emissions, particularly from
energy production.
Over recent decades, cli-
mate science has advanced
significantly. Increased scru-
tiny has led to increased cer-
tainty that we are now seeing
impacts associated with hu-
man-induced climate change,
Please turn to page 7
BY ALICIA MUNDY
$1.75 (C/V) - KES 250 - NAI 375 - 1.70
Children watched an Israeli woman brandish an M16 rifle on Tuesday in the West Bank settlement of Efrat, near Bethlehem, during a
traditional military weapons display to mark the 66th anniversary of the founding of the state of Israel. Related article on page 3
Israelis Celebrate 66th Anniversary of Their State
Agence France-Presse/Getty Images
Merck Deal
With Bayer
Part of Shift
Merck & Co.s agreement to
sell its nonprescription medi-
cine and consumer-product
business to Bayer AG for $14.2
billion is just the latest in a
wave of mergers and acquisi-
tions that is reshaping the
global pharmaceutical industry.
When all the dust settles,
the industry will look differ-
ent in many ways than it did
just a few weeks ago. Many
companies are narrowing
their focus after years of di-
versifying, dropping out of
noncore businesses and bulk-
ing up in sectors where they
believe they have the size and
expertise to generate signifi-
cant sales growth.
If all are completed, the
announced and proposed
deals will leave fewer compet-
itors with larger revenue
streams in each segment of
the drug business, from pre-
scription medicines and vac-
cines to drugs for livestock
and pets. The deals are also
likely to lead to large layoffs,
a prospect that has many em-
ployees worried.
The narrowing of focus
also carries some risks, leav-
ing companies more vulnera-
ble to setbacks in their re-
maining businesses, analysts
and industry officials say.
Companies are being told
by their shareholders to focus
on what they are historically
the best at, said Mark Schoe-
nebaum, a pharmaceutical in-
dustry analyst with ISI Group.
That varies from company to
company. So companies are
buying their strengths and
selling their weaknesses.
The announced and pro-
posed deals include Pfizer
Inc.s more than $106 billion
takeover offer for AstraZen-
eca PLC, which the latter so
far is rejecting. They also in-
clude Valeant Pharmaceutical
Industries Ltd.s nearly $46
billion offer for Allergan Inc.
and more than $20 billion in
agreed deals involving Novar-
tis AG, GlaxoSmithKline PLC
and Eli Lilly & Co.
Bayers agreement with
Merck will give it such brands
as the allergy medicine Clari-
tin and Coppertone sunscreen
to add to its stable of nonpre-
scription products, including
Bayers namesake aspirin and
the Aleve pain reliever. Merck
and Bayers combined nonpre-
scription businesses had total
sales of $7.4 billion in 2013.
Bayer, based in Leverkusen,
Germany, expects the Merck
deal to make it the No. 2 over-
the-counter drug company by
Please turn to page 17
BY PETER LOFTUS
Quick Action Pays Off in Banking
The diverging fortunes of
two top European banks, Bar-
clays PLC and UBS AG, high-
light how some lenders are
reaping rewards for moving
quickly to restructure ailing
businesses, while others are
getting punished for dragging
their feet.
At UBS, first-quarter earn-
ings beat analysts expecta-
tions Tuesday. The banks
shares gained 1.2% By con-
trast, Barclays missed fore-
casts with lackluster figures
weighed down by a collapse
in operating profit at its in-
vestment bank. Barclayss
shares fell 5.2%.
Since the start of the year,
investors have sent UBS stock
up by about 9% while Bar-
clayss has fallen by a similar
amount.
The contrast reflects dif-
ferent approaches at the two
banks since the financial cri-
sis. UBS, laid low by the crisis
in 2008, bit the bullet of a
major revamp. The bank has
undergone years of restruc-
turing that curbed its pres-
ence in investment banking,
particularly in the costly and
relatively high-risk debt-trad-
ing business, and refocused
its efforts on wealth manage-
ment and private banking.
UBS decided to make fun-
Please turn to page 21
By Margot Patrick,
John Letzing
and Joe Ortiz
AstraZeneca chief details its
go-it-alone strategy............... 15
Heard on the Street: Bayer
bets on consumers................ 28
Some EU nations plan to tax
stock trades by 2016............ 22
Inside
With the hryvnia
faring worse than the
ruble, Ukraine needs
a financial lifeline
nowand that would
be a blow to Putin
Opinion......................14
New puzzle over the fate of huge hoard of
Nazi-looted art following the death of
Cornelius Gurlitt in Munich
Europe News........................................................ 6
28 | Wednesday, May 7, 2014 THE WALL STREET JOURNAL.
HEARDON THE STREET
Email: heard@wsj.com FINANCIAL ANALYSIS & COMMENTARY WSJ.com/Heard
The Cost
Behind
Twitters
Nose Dive
Paying employees with
shares may not involve cash.
But as Twitter investors are
learning, it comes at a real
cost.
Shares of the micromes-
saging platform tumbled
Tuesday as a lockup expired
on stock amounting to
roughly two-thirds of its di-
luted share count. Some of
those shares were held by
early Twitter investors. Many
were held by employees who
were granted them to aug-
ment cash salaries.
The lockup expiration was,
for many, the first opportu-
nity to sell, making it a one-
time event. But stock-based
compensation will continue to
weigh on Twitter. And the
load could grow heavier if the
share-price slide continues.
Stock-based-compensa-
tion expense was equal to a
whopping 50% of Twitters
sales in the first quarter. This
figure has been lower for
Twitter in previous quarters,
but it appears to be the new
normal. For 2014, Twitter ex-
pects stock-based-compensa-
tion expense of more than
50% of its projected revenue.
Like tech peers, Twitter
needs stock-based compensa-
tion to lure the best and
brightest engineers and ad
salespeople. Allowing employ-
ees to participate in its mar-
ket performance theoretically
allows the social-media com-
pany to pay them more than it
would have been able to oth-
erwise. It also aligns employ-
ees interests with Twitters.
An added benefit is that
Twitter, like other tech com-
panies, guides investors and
analysts to pro forma earn-
ings figures that exclude
stock-based-compensation
costs. And Wall Street duly
plays along with this charade.
For investors, though, the
costs are real. And with the
stock having fallen 46% since
the beginning of the year,
they may grow. The risk is
that the shares, the companys
compensation currency, con-
tinue to become less valuable.
That could force Twitter to is-
sue even more shares, further
diluting existing shareholders.
And even after Tuesdays
drop, Twitter still doesnt
look particularly cheap. On a
diluted basis, it trades at
about 19 times analyst esti-
mates for 2014 sales. That
compares with less than 14
times for Facebook.
Wall Street analysts may
be willing to look past share-
based-compensation expenses
when evaluating Twitters re-
sults. Savvy investors will do
their own math.
Miriam Gottfried
ECBs Easing Expectation
For the European Central
Bank, it may be better to
travel hopefully than to ar-
riveat least if quantitative
easing is the destination.
The Organization for Eco-
nomic Cooperation and Devel-
opment Tuesday joined the
chorus of calls for ECB action,
recommending an immediate
cut in interest rates to zero
from 0.25% and for the central
bank to be ready to undertake
further nonconventional ac-
tion, such as bond purchases.
But it is worth looking at
what bond markets are doing
already to ease financial con-
ditions in the euro zone.
One aim of any bond-buy-
ing program would be to ease
monetary conditions by driv-
ing down real interest rates.
That would come via both an
increase in inflation expecta-
tions and a fall in nominal
yields thanks to large-scale
purchases.
That might be particularly
helpful for southern European
nations. Nominal yields have
fallen sharply; in Spain and It-
aly, 10-year bonds now yield a
shade less than 3%, closing in
on U.S. 10-year levels of
around 2.6%. But real yields,
crudely measured by subtract-
ing inflation from nominal
bond yields, are high. In Spain,
inflation is just 0.3%, giving an
inflation-adjusted yield of
around 2.7%. That is much
higher than in the precrisis
periodand much higher than
in the U.S.
Still, real yields are falling
thanks to the rally in bond
markets. At the start of 2013,
Spains 10-year real yield was
3.9%; at the height of the crisis
in mid-2012 Madrid faced real
yields of over 4.5%.
Spanish nominal yields
could yet fall further. The
Spanish economy appears to
be benefiting from the steps
undertaken by the govern-
ment. Stronger growth should
help reduce the credit pre-
mium Spain pays to borrow
versus Germany; cheaper bor-
rowing costs should support
growth.
Meanwhile, the ECBs as-
sumption is that euro-zone in-
flation is close to its lowest
point. Markets still are pricing
in a very gradual return over
time to an inflation rate of
around 2%. It is currently at
0.7% for the euro zone.
At least some of the appe-
tite for debt from southern
European nations may be
down to investors who are an-
ticipating more action by the
ECB. But insofar as that drives
real yields lower, the market is
doing the ECBs job for it: it is
loosening policy.
That has echoes of the
ECBs Outright Monetary
Transactions program, which
was designed to buy bonds of
troubled countries in exchange
for economic reforms. Yields
fell without the central bank
spending a cent.
The expectation of ECB ac-
tion may be just as powerful
as the real thing.
Richard Barley
Bayer Buy of Merck Unit Adds Up
It pays to focus. Amid a se-
ries of pharmaceutical deals
aimed at streamlining diverse
portfolios and strengthening
core areas, German pharma-
ceutical company Bayer is
bulking up in consumer health,
shelling out $14.2 billion to
purchase Merck & Co.s busi-
ness in this area.
Shareholders, who sent
Bayers shares down about 1%
Tuesday, were likely rattled by
the price. Bayer is paying 21
times last years earnings be-
fore interest, taxes, deprecia-
tion and amortization. Mercks
business includes brands such
as Coppertone sun cream and
Claritin allergy medication.
Bayer can argue that is a price
worth paying. But the German
companys deal is only one
step in sharpening its priori-
ties.
Bayer had clearly flagged
its intention to bolster its
over-the-counter division. Buy-
ing Mercks business keeps the
company in the No. 2 position
by sales, behind Johnson &
Johnson, after GlaxoSmith-
Kline last month joined forces
with Novartis in consumer
health care. Bayer also gets a
leading position in the U.S.,
the largest market globally,
and improves its standing in
key areas including dermatol-
ogy and cold, allergy and flu.
Sizable consumer busi-
nesses dont come cheap. Deals
such as Reckitt Benckisers
2012 purchase of Schiff Nutri-
tion also attracted valuations
well over 20 times Ebitda.
That Bayer beat Reckitt in the
bidding for Mercks business is
hardly a comfort: The U.K.
consumer-goods company is a
serial acquirer of assets at
toppy prices. But given Bayer
agreed to a side deal with
Merck to collaborate on car-
diovascular drugs, the German
company likely didnt rely on
cash alone to beat its rival.
And despite the alarming
headline figure, Bayers num-
bers seem to work. Cheap fi-
nancing means the deal will
add to its core earnings per
share. Meanwhile, based on
Bayers figures, the business it
is buying has an Ebitda margin
of about 30%. This is boosted
by products like Claritin,
which are still on prescription
in certain markets. That will
boost profitability in Bayers
consumer unit.
Tax benefits may help jus-
tify the price as well. Under
U.S. rules, Bayer will be able to
effectively use the deal to re-
duce its tax bill in coming
years. Knock the net present
value of those benefits off the
deal price, and Bayer would be
paying a multiple in the high
teens, according to people fa-
miliar with the matter. Bayers
target for annual cost savings
of $200 million by 2017
doesnt look ambitious and
would reduce that multiple
further.
Bayer is, however, left with
unfinished business. It argu-
ably still needs to bulk up in
animal health. Meanwhile, its
materials division is highly cy-
clical, less profitable and
slower growing than Bayers
health-care and crop-sciences
units.
Buying Mercks consumer
business is a start. But Bayer
has yet to show it can main-
tain concentration.
Helen Thomas
Health Kick
Breakdown of consumer-health
sales for Bayer including Merck
assets, 2013
Note: Figures dont add up to 100% due
to rounding
Source: the company
The Wall Street Journal
Dermatology
27%
Cold,
allergy,
sinus, u
21%
Nutrition
18%
Analgesics
15%
Gastro-
intestinal
10%
Other
8%
Talk about a case of mis-
taken corporate identity.
Once again, Merck KGaA,
the Germany-based supplier
of products for the pharma-
ceuticals and chemicals sec-
tors, was getting confused
with the other Merck. That
would be Merck & Co., the
U.S.-based pharmaceuticals
and consumer-care concern.
The U.S. company on
Tuesday announced it had
agreed to sell its over-the-
counter medicine and con-
sumer-product division to
Germanys Bayer for $14.2
billion. But that prompted
the German Merck to issue
a news release of its own
clarifying that it will keep
its consumer health busi-
ness. It also noted that it
holds the global rights to
the name and trademark
Merck, except in the U.S.
and Canada.
The confusion arises
from the fact that Merck of
the U.S. is a former subsid-
iary of its German name-
sake.
This isnt the first time
the German Merck has had
to go to pains to point out
the difference. In February,
protesters gathered outside
its London offices, only to
discover that they had the
wrong company. Perhaps it
is time for one of the two
to consider a name change.
OVERHEARD
E&P Stocks Are
Looking Riskier
Something is bubbling up
in the oil patch. And tempting
as it is to stay close in hopes
of seeing a gusher, it might be
time to start backing away.
Exploration-and-produc-
tion stocks have diverged
sharply from oil, notes Matt
Gohd, senior strategist at
WallachBeth Capital. Over the
past five years, the SPDR S&P
Oil & Gas Exploration & Pro-
duction exchange-traded fund
has tended to track the oil
price. Since last September,
though, the ETF has broken
away, rising 18% while oil is
down slightly.
One explanation for this
involves another fuel many
E&P companies produce: nat-
ural gas. After years of low
prices brought about by the
excess supply of the shale
boom, they have risen as a
harsh winter helped run down
inventories.
Front-month gas futures
have risen by one third since
the end of September, with
some spectacular spikes in
the first quarter.
But without a tailwind
from oil, it is hard to justify
this rally on gas alone. With
U.S. oil inventories hovering
around multidecade highs and
Chinas economic growth con-
tinuing to show signs of
weakness, it is hard to see oil
prices rising strongly.
The consensus estimate
for forward cash flow per
share for the ETFs companies
has barely budged since last
summer, and the earnings es-
timate has actually fallen.
Even so, the ETF recently hit
its highest level ever.
Meanwhile, the funds mul-
tiple of forward cash flow is
around 5.5 times, up from 4.5
times at the start of the year
and the highest since the
summer of 2011, when Libyas
civil war had just kicked oil
prices up.
The risk is that E&P inves-
tors are now chasing momen-
tum. That leaves them vulner-
able to sharp corrections, as
happened after similar early-
year rallies in 2011 and 2012.
For this to happen, rather
than very bad news, all you
need is a cessation of good
news, Mr. Gohd says. At that
moment, investors might
quickly refocus on the fact
that oil isnt firing this rally
and run for cover.
Liam Denning
Even amid calls for the ECB to act, bond
markets are helping to ease conditions.
Parting Ways
Spanish 10-year yield and Spanish ination
The Wall Street Journal Source: FactSet
8
2
0
2
4
6
%
10 12 14 02 04 06 08
Yield
Ination
B
l
o
o
m
b
e
r
g
N
e
w
s
Customers browse discounted shirts at a department
store in Madrid, Spain