For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
As of 12 p.m. ET DJIA 21806.92 g 0.82%
What’s
News
Business & Finance
G reat Wall Motor’s
push to go global is be-
ing spurred by tricky reali-
ties closer to home, where
it faces sliding profits,
thorny government regula-
tion and red-hot competi-
tion in its core segment. A1
 Lego said sales slowed
by 5% in the first half, its
first revenue decline in 13
years and triggering plans
for 1,400 job cuts. A1
 United Technologies
agreed to buy airplane-parts
maker Rockwell Collins for
$23 billion, in the biggest-
ever aerospace deal. B1
 Citigroup created a sep-
arate services group within
its investment-banking cov-
erage of the industrials sec-
tor and named two global
co-heads to oversee it. B6
 “Angry Birds” maker
Rovio Entertainment plans
to list shares with the Nas-
daq Helsinki affiliate. B1
 Schneider Electric has
agreed to take control of
British engineering soft-
ware provider Aveva. B3
 Facebook’s WhatsApp
will eventually charge com-
panies to use some future
features in the two free
business tools it started
testing this summer. B4
 Germany’s Merck put its
consumer-health unit on the
block to focus its health-
care activities on develop-
ing prescription drugs. B5
 Publisher Tronc ac-
quired the Daily News, a
nearly century-old New
York City tabloid. B3
World-Wide
 Congress returns from
its summer break and will
have to grapple with keep-
ing the federal govern-
ment open, paying U.S.
creditors and passing a
hurricane-aid bill. A1
 Pyongyang’s recent
string of missile and nu-
clear tests has brought the
U.S. closer to its allies in
Tokyo and Seoul. A1
 The Trump administra-
tion is ending DACA and
gave Congress until March
5 to pass legislation to re-
place it. A6
 Putin warned that any
delivery of weapons by the
Trump administration to
Ukraine’s government could
inflame hostilities. A3
 Insurers face a deadline
to file 2018 prices for
health insurance sold
through ACA. A7
 Syria pushed Islamic
State out of Deir Ezzour,
the extremist group’s most
important remaining
stronghold. A4
 Trump’s warning that
the U.S. may halt trade with
countries doing business
with North Korea was seen
as a direct shot at China. A4
 Venezuela’s humanitar-
ian crisis looms large as
Pope Francis arrives in Co-
lombia. A5
 Hurricane Irma grew
into a Category 5 storm,
taking aim at the northern
Leeward Islands and po-
tentially the U.S. by the
weekend. A5
CONTENTS
Business News...... B3
Crossword.............. A12
Heard on Street... B10
Life & Arts......... A9,12
Management.......... B5
Markets................... B10
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WEDNESDAY, SEPTEMBER 6, 2017 ~ VOL. XLII NO. 4 WSJ.com ASIA EDITION
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U.S. Is Ending Its Safe-Harbor Program for Immigrants
Congress
Returns
To Tense
Session
BY MICHAEL C. BENDER
AND KRISTINA PETERSON
WASHINGTON—Congress
returned from its summer
break and, in a test of the un-
easy alliance between Presi-
dent Donald Trump and Sen-
ate Republicans, now will have
to grapple with keeping the
federal government open, pay-
ing U.S. creditors and passing
a hurricane-aid bill.
The list is long, and the
time is short. The Trump ad-
ministration is asking for ap-
ALEX WONG/GETTY IMAGES
proval of $7.85 billion to begin
paying for the recovery from
Hurricane Harvey, with a
House vote scheduled for
Wednesday. Congress also
must keep the government
running after current funding
ROLLBACK: Attorney General Jeff Sessions unveiled the shift, saying President Barack Obama overstepped his authority in creating the expires by Oct. 1, as well as
DACA program, which protects undocumented immigrants who entered the U.S. as children from deportation. A6 raise the U.S. borrowing limit
or risk defaulting on the na-
tion’s debt.
Lego Plans 1,400 Job Cuts
Adding to the tension, the
House and Senate are in ses-
sion at the same time for just
12 days in September, and Mr.
Trump and Senate Majority
Leader Mitch McConnell ha-
First-half sales fell 5% push in large but mature mar- gen Vig Knudstorp. Lego Mr. Knudstorp said the ven’t met in weeks.
kets like the U.S. failed to trig- Brand oversees the Kirk Kris- company needed to slim down The president invited the
in a more-digital toy ger growth. Like rival Mattel tiansen family’s 75% stake in to adapt to what he described Kentucky Republican and
market; company to Inc., the privately held com- Lego, as well as interests in as a new normal of slower other GOP leaders to Bedmin-
pany is grappling with compe- Legoland theme parks and an growth. He said Lego was ster, N.J., during his working
simplify its structure tition from smartphone apps education business. structured for the double-digit vacation last month, but they
and videogames. While it has The disappointing first sales growth it enjoyed for were unable to coordinate
BY SAABIRA CHAUDHURI been modernizing its toys for half is the latest setback amid much of the past decade. schedules, according to people
the digital age—including roll- a bumpy corporate restruc- The structure is now exces- familiar with the planning.
Lego A/S said first-half ing out programmable ro- turing at Lego aimed at cop- sively complex, he told jour- Mr. Trump over the August
sales of its plastic toy bricks bots—demand for its iconic ing with the rapid shift in toy nalists Tuesday. That makes it recess repeatedly criticized
slowed sharply, marking its brick toy sets has eased. buyers’ tastes. The effort in- tough to implement marketing Republican lawmakers over
first revenue decline in 13 “We are simply not execut- cluded the surprise decision strategies and to react to new Twitter, blaming them for the
years and prompting plans for ing well enough on our activi- last month to replace the trends. In an interview, he failure to repeal the health-
1,400 job cuts. ties across the business, on company’s current chief exec- said a new product currently care law. His tweets under-
The Danish toy maker said product development, mar- utive—who has been in the goes through 20 different scored the party’s inability to
sales fell 5% from last year’s keting, sales,” said Lego position for just a little over teams on average before being pass major legislation, despite
first half after a big marketing Brand Group Chairman Jør- eight months. Please see LEGO page A2 Please see TRUMP page A6
First Class
U.S. Says Crisis in Korea
The planned acquisition of Rockwell Collins by United Technologies
would be the fourth-largest deal so far this year. B1
Has Brought Allies Closer
Value,
Acquirer Target Announced excluding debt
Johnson & Johnson Actelion Jan. 26 $31.4 billion
24.4
Essilor International Luxottica Group Jan. 16 BY JONATHAN CHENG warnings that North Korea ap- rea’s sixth and most powerful
pears to be planning to test- nuclear test, U.S. President
Becton Dickinson C.R. Bard April 23 23.7 SEOUL—Pyongyang’s recent launch another intercontinen- Donald Trump took to Twitter
string of missile and nuclear tal ballistic missile. to criticize South Korea’s gov-
United Technologies Rockwell Collins Sept. 4 23 tests has brought the U.S. The rapid advance in North ernment for what he called its
closer to its allies in Tokyo Korea’s military capabilities “talk of appeasement with
Atlantia Abertis May 15 17.9
and Seoul, rather than divid- has exposed differences be- North Korea.”
Sources: Dealogic; the companies THE WALL STREET JOURNAL. ing them as North Korean tween Seoul’s more dovish ap- The tweet, which appeared
leader Kim Jong Un had proach and Washington’s to be a reference to South Ko-
hoped, a top U.S. naval com- harder-line strategy on Pyong- rean President Moon Jae-in’s
mander said. yang, and also raised ques- repeated calls for dialogue
The remarks from Adm. tions in Tokyo and Seoul about with Mr. Kim, preceded a
Polly Want a Xanax? Neurotic
Scott Swift, commander of the the U.S.’s commitment to de- phone call between Messrs.
U.S. Pacific Fleet, come amid fending its allies in the event Trump and Moon late Monday
Parrots Can Drive Owners Crazy
signs of friction between the of a conflict with North Korea. in Seoul.
U.S. and South Korea, and On Sunday, after North Ko- Please see ASIA page A4
i i i
‘They scream, bite and are messy,’ but are
the most popular pets after cats and dogs
INSIDE
BY CLARE ANSBERRY ers are advised to include
them in their wills.
Anyone thinking of adopt- Bird lovers do their best to
ing Scooter should know a few inform potential owners of
things about him first. what they are getting into and
He is a bully and he bites. help them deal with problem
When he’s bored or anxious, behavior. Barbara Heidenreich,
he plucks out his feathers. the Austin, Texas, author of
Arrr! It turns out that par- The Parrot Problem Solver and
rots—the most popular pets owner of Good Bird Inc., offers
behind dogs and cats—aren’t webinars, workshops and vid-
always man’s eos that discuss
best friend. parrots’ phobias,
All of which
makes Dawn
potty training
and petting
HOMECOMING EUROPEAN BIG LOVE
Martine’s job ex- preferences. TIPS FOR EXPAT MALLS TAKE ON FOR TINY
tra tough. She
runs the Parrot
A
sional
profes-
parrot
WORKERS THE WEB CAR
Education Adop- trainer, zoo con-
tion, Rehoming sultant, and past MANAGEMENT, B5 PROPERTY REPORT, B9 LIFE & ARTS, A9
League, or Pearl, president of the
Opinion.............. A10-11 a nonprofit res- I n te r n a t i o n a l
Jeep’s Suitor Hit China Potholes
Property Report... B9
Streetwise................. B1
cue organization Charlie, a Association of
Technology............... B4 that does its best blue-and-gold macaw Avian Trainers
U.S. News............. A6-7 to find new and Educators,
Weather................... A12 homes for unwanted birds, in- Ms. Heidenreich assisted au- BY TREFOR MOSS that foreign expansion could aging director of equity re-
World News........ A2-5
cluding Scooter. thorities in New Zealand, soon be the best way to in- search at Macquarie Capital
“They scream, bite and are where a very rare kakapo par- SHANGHAI—Great Wall crease profit amid mounting Securities. Like other analysts,
messy,” says Ms. Martine, who rot named Sirocco was cap- Motor Co.’s push to go global domestic pressures. she says Great Wall’s strong fi-
has 12 parrots, including two tured on a YouTube video at- by acquiring Jeep is being Acquiring Jeep wouldn’t nancials make it a credible
Moluccan cockatoos, the loud- tacking a sanctuary visitor and spurred by some tricky reali- only give Great Wall a world- suitor for Jeep despite its rela-
est parrot on Earth, whose trying to mate with his head. ties closer to home, where the leading brand, but it would tively small size.
piercing scream can he heard Using positive reinforcement, Chinese auto maker faces slid- also provide instant access to There is less consensus on
up to 5 miles away. “My Ms. Heidenreich redirected Si- ing profit, thorny government foreign markets, including the whether Great Wall could se-
daughter asked why I couldn’t rocco’s affections to a Croc regulation, and red-hot com- U.S., where the Chinese auto cure Jeep without agreeing to
rescue fish instead.” shoe instead. petition in its core segment. maker has little or no pres- buy all of its parent, Fiat Chrys-
Fish might be less of a Pittsburgh-based Pearl, As the once-freewheeling ence, and with it new avenues ler Automobiles NV, as some
commitment. Unlike goldfish, which doesn’t have a sanctu- China market becomes more for growth. say the latter might insist. That
parrots live up to about 60 ary and relies on volunteers, competitive and growth slows, “An overseas acquisition would dwarf any deal previ-
years. There are reports has taken in 60 birds, placed Great Wall is signaling would be very helpful to Great ously attempted by a Chinese
of parrot centenarians. Own- Please see PARROT page A8 through its acquisition plans Wall,” said Janet Lewis, man- Please see JEEP page A2
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A2 | Wednesday, September 6, 2017
Why Xi Refuses to Go Ballistic on North Korea
CHINA’S WORLD
By Andrew Browne
SHANGHAI—At a moment
when Xi Jinping desperately
craves stability, Northeast
Asia is in turmoil.
The escalating nuclear cri-
sis on the Korean Peninsula
presents Mr. Xi with an
acute challenge just weeks
ahead of a Communist Party
Congress expected to return
him to power
for another
five-year
term.
Kim Jong
Un is playing
him, as he
does U.S. President Donald
Trump, by ignoring admon-
ishments and warnings from
Beijing and Washington
alike.
The North Korean dictator
set off his country’s most
powerful nuclear explosion
yet over the weekend. The
timing could hardly have
been worse for Mr. Xi, who
was preparing to lead a Chi-
nese-hosted summit of major
emerging economies.
The summit was intended
to bolster Mr. Xi’s interna-
tional standing ahead of the
pageantry of next month’s
RINGO CHIU/ZUMA PRESS
A marketing push in the U.S. failed to deliver growth.
LEGO
Continued from Page One
ready for global launch. He
said the organizational heft
also made it difficult to con-
nect with retailers.
“The car has gone off road
and landed in a ditch and now
we have to pull it out and get
it back up to speed again,” he
said.
Mr. Knudstorp, who served
as CEO from 2004 until the
end of 2016, acknowledged his
share of the blame for the re-
cent trouble. A former kinder-
garten teacher and McKinsey
consultant, Mr. Knudstorp was
Lego Brand’s
chairman said the
company is
excessively complex.
the first person outside Lego’s
controlling family to lead the
company. He took over after
Lego sales had slowed sharply
and heavy debt threatened
bankruptcy.
He refocused the company
on its brick sets, and scaled
back on the array of watches,
clothing, dolls and other mer-
chandise the company had
rolled out.
Initially, he also cut jobs,
outsourced manufacturing and
simplified the company’s man-
agement structure.
He subsequently boosted
staff to keep up with resur-
gent demand—and the expec-
tation it would continue to
boom. Between 2012 and 2016,
Lego added 7,000 new employ-
ees.
“This investment has not
materialized into a good har-
vest,” he said.
To pivot this time around,
he said Lego will cut about 8%
of its 18,200 workforce by the
end of the year. Between 450
Congress. Instead, Mr. Kim
made a mockery of the Chi-
nese strongman by exposing
Beijing’s inability to rein in its
neighbor’s nuclear ambitions.
If Mr. Kim is calculating
that Mr. Xi won’t risk precip-
itous action against him
ahead of the 19th Party Con-
gress, he’s likely correct.
North Korea has become a
wild card for Mr. Xi, and it
grates on the Chinese leader
to be toyed with, no less
than it angers Mr. Trump.
B
ut this is a critical mo-
ment of leadership
transition for Mr. Xi,
and Mr. Kim knows it. The
Chinese president seeks ele-
vation to the pantheon of
Chinese Communist greats
along with Deng and Mao.
Some speculate Mr. Xi wants
a setup that would enable
him to extend his tenure be-
yond five years.
Any missteps ahead of the
Congress could open Mr. Xi
to attack from the many ene-
mies he’s made and derail
his legacy.
There is plenty more the
Chinese president could do
to punish Pyongyang and put
Mr. Kim in his place, from
expelling North Korean
workers to cutting off the
country’s oil and food life-
lines.
However, the dangers of
reacting forcefully at this
moment are too great for
Mr. Xi.
From his perspective, the
most obvious peril is squeez-
and 600 of the job losses will
come from its headquarters in
Billund.
The company will also sim-
plify its management struc-
ture and reporting lines.
Lego’s recent travails are in
contrast to its go-go growth
around the world earlier this
decade. Sales were bolstered
by a bevy of movie-themed toy
sets and licensing revenue tied
to two popular Lego films, as
well as strong sales in mature
markets like the U.S. and Eu-
rope and in new markets like
China.
Riding that wave, Lego has
challenged Barbie maker Mat-
tel for the title of world’s larg-
est toy maker by sales.
Despite that run, Lego’s
revenue growth has been
slowing since 2015, after de-
mand for its bricks slowed. On
Tuesday, the toy maker said
revenue for the six months to
June 30 fell to 14.9 billion
Danish kroner ($2.38 billion)
from 15.7 billion kroner a year
earlier.
The results present a big
challenge for incoming CEO
Niels B. Christiansen, who
Lego last month appointed to
the top job. Mr. Christiansen,
51 years old, is the former
boss of the Danish industrial
group Danfoss A/S. He will
succeed current Chief Execu-
tive Bali Padda next month.
During his nine years head-
ing Danfoss, Mr. Christiansen
is credited with making opera-
tions more efficient and agile,
investing in research and de-
velopment and digital capabil-
ities, and boosting sales or-
ganically and through
acquisitions.
(Mr. Christiansen isn’t re-
lated to Lego’s controlling
Kristiansen family.)
Lego traces its roots to
1932 when a Danish carpenter
began making wooden toys in
his workshop in Billund. The
company remains in family
hands, with a 75% stake cur-
rently controlled by Kjeld Kirk
Kristiansen, a grandchild of
the founder.
WORLD NEWS
ing North Korea so hard it
eventually collapses, spilling
desperate refugees across
the border into an area of
China with a large and po-
tentially restless ethnic Ko-
rean population.
Worse, such a scenario,
likely bringing down the
Pyongyang regime, would be
precisely the outcome that
Washington seeks. It could
bring U.S. and South Korean
troops up to the border,
where they would command
the gateway to China’s in-
dustrial heartland and routes
to the capital.
Thus, Mr. Xi would be sur-
rendering the impressive
gains he has made in his
first term in a geopolitical
contest with the U.S. for in-
fluence in East Asia.
Bending to U.S. pressure
on North Korea is politically
unacceptable. Mr. Xi’s “China
Dream,” after all, is about re-
storing Chinese pride after a
century of foreign humilia-
tions.
There are even perverse
benefits to Beijing from Mr.
Kim’s nuclear brinkmanship:
It keeps the U.S. military
pinned down in Northeast
Asia, and to the extent that
it casts doubt on Washing-
ton’s resolve to defend South
Korea and Japan—would Mr.
Trump risk San Francisco for
Seoul or Tokyo?—it drives a
wedge between the U.S. and
its two key Asian allies.
Furthermore, letting
North Korea go would give
encouragement to political
JEEP
Continued from Page One
auto maker.
Great Wall said in late Au-
gust that it is considering a
possible acquisition of Jeep,
and possibly all of Fiat Chrys-
ler. It declined to comment for
this article.
Based in China’s Hebei
province, Great Wall is still a
minnow by global standards.
The world’s biggest car com-
panies—General Motors Co.,
Toyota Motor Corp. and Volks-
wagen AG—each produced 10
times as many vehicles as
Great Wall last year.
China’s top producer,
Shanghai Automotive Industry
Corp., also eclipsed its local ri-
val, building 6.5 million cars,
though most of those were
copies of foreign autos built
via joint ventures with GM and
Volkswagen.
Unlike state-run auto mak-
ers such as Shanghai Auto,
Great Wall has focused solely
on building its own brand.
Founded in 1984 as a pickup
and later sedan maker, it has
transformed itself over the past
few years into a sport-utility-
vehicle specialist. The com-
pany’s Haval marque accounted
for 87% of the company’s 2016
unit sales, up from 25% in 2009.
In recent years Great Wall
also began focusing on the
China market. Exports last
year were just 1.5% of total
sales, down from 43% a decade
earlier, when the company ex-
ported in relatively small vol-
umes to developing markets
such as Africa and the Middle
East.
Ms. Lewis said the China
market was growing quickly at
the time that local auto makers
could afford to disregard ex-
ports, and the popularity of
SUVs has soared in China over
the past few years. Moreover,
Great Wall spotted the trend
early, establishing itself as the
country’s top SUV maker.
Last year, Great Wall’s sales
topped one million cars for the
first time. In a country where
most domestic auto brands
struggle to make money, the
Profit Engine
Great Wall has been one of China's most profitable auto makers,
but profits have slipped in 2017.
Revenue
In billions of yuan
100
Full
80 1H year
60
40
20
0 0
2007 ’10 ’15
Note: 10 billion yuan = $1.51 billion
Source: Great Wall Motor
Xi Jinping wants stability for a Communist Party Congress.
forces in China that Mr. Xi
spent his first term ruth-
lessly crushing—dissidents,
human-rights activists and
others who might read in
Mr. Kim’s demise a message
about the vulnerabilities of
their own socialist leaders.
The party’s prestige is on
the line. Among the People’s
Liberation Army, in particu-
lar, North Korea still evokes
a revolutionary nostalgia;
Mao’s son died in the
1950-53 Korean War, in
which Chinese forces fought
the Americans to a stand-
still, a proud boast to this
Great Wall’s Haval SUV slipped to fourth among the top Chinese brands in the first half of 2017.
company reported a record $1.6
billion profit on $15 billion in
sales. But that was likely the
high-water mark in terms of
China auto-sector growth: Car
sales increased 16%, but are un-
likely to top 5% growth from
2017 onward, officials predict,
as the market enters a “new
normal” of slow expansion.
For Great Wall, this year’s
slowdown coincided with
much stiffer competition in
the SUV market from foreign
and domestic rivals, resulting
in flat unit sales in the first
half of 2017, and halved prof-
its. Haval slipped to No. 4
among the top-selling Chinese
auto brands, according to re-
searcher LMC Automotive,
having been second previously.
The company has fought
back by launching a new pre-
mium brand called Wey in
April designed to boost profit-
ability, and unveiling a second
generation of its flagship H6
SUV, which accounted for 54%
of all Great Wall sales last
year. It remains China’s best-
selling SUV, but its lead has
been eroded by an increas-
ingly strong lineup of rivals.
With China market satura-
tion on the horizon, Great
Net profit
In billions of yuan
10
Full
8 1H year
6 but its sedans aren’t popular:
4
2 By email: service@wsj-asia.com
’17 2007 ’10 ’15 ’17
THE WALL STREET JOURNAL.
THE WALL STREET JOURNAL.
ratcheting up tensions with
U.S. friends and allies—
Japan, Vietnam, the Philip-
pines—then abruptly de-es-
calating. By switching on and
off the threat of force, Mr. Xi
enhanced Beijing’s position
in the region. His strategy at
times has made the U.S. look
weak, while burnishing his
standing back home with an
audience appreciative of
China’s ascendance.
FRED DUFOUR/AGENCE FRANCE-PRESSE/GETTY IMAGES
H
owever, in the count-
down to the 19th
Party Congress, Mr.
Xi requires stability more
than adventure to safeguard
the legacy he’s built and se-
cure his future dominance.
He has taken regional flash-
points off the boil, most re-
cently standing down in a
territorial dispute that
brought Chinese and Indian
troops face-to-face in Bhu-
tan. At the same time, he’s
tamed disruptive forces
day. threatening the domestic
The upshot is that Mr. Xi, economy and subdued politi-
on the brink of his greatest cal foes.
political triumph, looks im- Now, Mr. Kim threatens to
potent in the face of Mr. unleash chaos on China’s
Kim’s increasingly audacious doorstep.
provocations. The weekend’s The crisis calls for Chi-
suspected thermonuclear nese action; as ever, the road
blast just 50 miles from the to Pyongyang runs through
border rattled windows on Beijing. The irony is that the
the Chinese side and raised most activist Chinese leader
official alarms about nuclear on the global stage since
contamination. Mao is paralyzed by domes-
During his first five years tic politics at a moment
in office, President Xi proved when his intervention is ur-
to be a master of control. gently required. Mr. Xi risks
His Asia policy has fol- a coronation with the region
lowed a pattern: swiftly in flames.
GREG BAKER/AGENCE FRANCE-PRESSE/GETTY IMAGES
Wall and other domestic auto
makers must start giving for-
It sold only 6,000 in the first
half of 2017. The company
eign markets newfound atten- would need to build about
tion, said Yale Zhang, manag- 40,000 C30s next year to sat-
ing director of consulting firm isfy the quota.
Automotive Foresight. A for- In that context, the recent
eign acquisition, like Great decision to buy 25% of Hebei
Wall’s pitch for Jeep, would be Yogomo Motors Co., an elec-
the quickest way. tric-car maker based in Great
Of more immediate con- Wall’s home province, looks
cern, however, are new gov- like a smart play, according to
ernment regulations requiring Ms. Lewis.
auto makers to start building That partnership could help
electric cars, and imposing Great Wall to skirt the regula-
tough efficiency standards on tory dangers, leaving it to fo-
gasoline models. cus on more important mat-
That is a headache when ters: rebooting its SUV profit,
your specialty is gas-guzzling and landing Jeep.
SUVs.
“If you have a high sales THE WALL STREET JOURNAL.
share of big vehicles, it’s going Dow Jones Publishing Company (Asia)
to be tough for you to meet 25/F, Central Plaza, 18 Harbour Road,
the standard,” said He Hui of
Hong Kong
Tel: 852 2573 7121 Fax 852 2834 5291
the International Council on
Andrew Dowell, Asia Editor
Clean Transportation.
Beijing requires auto mak-
Troy McCullough, Senior News Editor, Asia
Darren Everson, International Editions Editor
ers to achieve a fleet fuel-effi- Hugo Restall, Editorial Page Editor
ciency standard of 5 liters per Mark Rogers, Advertising Sales
100 kilometers—equivalent to Jacky Lo, Circulation Sales
2.1 gallons per 100 miles—by Toby Doman, Communications
Simon Wan, Technology
2020. The H6 burns twice that
much gas. Jonathan Wright,
Global Managing Director & Publisher
Great Wall failed to meet the
Advertising through Dow Jones Advertising
government’s less-stringent Sales: Hong Kong: 852-2831 2504; Singapore:
fuel-efficiency requirements in 65-6415 4300; Tokyo: 81-3 6269-2701;
2016, official documents show. Frankfurt: 49 69 29725390; London: 44 207
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THE WALL STREET JOURNAL.
Putin Warns U.S. Against Arming Ukraine
Russian leader says
delivery could inflame
hostilities, expand
the conflict zone
BY JAMES MARSON
MOSCOW—President Vladi-
mir Putin said that any deliv-
ery of weapons by the Trump
administration to Ukraine’s
government could inflame hos-
tilities and cause Russia-sup-
ported separatists to expand
the theater of conflict.
The comments on Tuesday
are the Kremlin’s starkest
warning yet about the poten-
tial consequences of any deliv-
eries, and underscore the di-
lemma the White House faces
as it considers sending weap-
ons.
Kiev has fought a three-
Russia Unveils Controversial Statues ECB Signal on Ending
BY THOMAS GROVE
MOSCOW—As Confederate
statues come down in the U.S.,
Russia is resurrecting figures
from its own thorny past.
Soviet statues tumbled pre-
cipitously during the breakup
of the U.S.S.R. But under Pres-
ident Vladimir Putin and his
project to restore Russia’s sta-
tus as a great power, monu-
ments to the often painful So-
viet and monarchic history
have been rising again.
On Tuesday, city leaders in
Kirov, 500 hundreds of miles
east of Moscow, unveiled a
statue of Felix Dzerzhinsky, a
Bolshevik revolutionary and
the founder of the Cheka, the
dreaded Soviet secret police,
later known as the KGB.
In Mr. Putin’s Russia, mem-
ory is selective. Backers see
the statue as a tribute to a
man who helped build a formi-
dable intelligence service. But
it has angered the descendants
of those persecuted: Dzerzhin-
sky oversaw the Red Terror,
the execution of hundreds of
thousands of citizens during
Russia’s 1917-1922 Civil War,
often without trial.
“Anyone who has experi-
enced this dark chapter of our
country’s history can’t be in-
different about someone who
created the Cheka,” said Ari-
adna Kozina, an activist who
was raised on her father’s sto-
ries of serving in a prison
camp. “The U.S. may be pull-
ing down its statues, but this
is the glorification of all the
wrong parts of the past."
While embracing the Soviet
era, Mr. Putin and others have
adopted a sometimes ambiva-
lent approach to figures like
dictator Joseph Stalin, ac-
knowledging their crimes but
leaving room to honor them.
The Russian leader argued in
the case of a massive Dzerzhin-
sky statue brought down in
Moscow that maintaining such
monuments was “about respect
for every period of our history.”
The country has found
space in exile for some of
Merkel Dials Down Tone on Ending Turkey’s EU Bid
BY ANDREA THOMAS
BERLIN—German Chancel-
lor Angela Merkel said Euro-
pean Union leaders should de-
cide whether to suspend or
end membership talks with
Turkey at its summit next
month, backtracking from her
call to end accession talks.
Speaking to the lower house
of parliament in the final de-
bate ahead of the Sept. 24 gen-
eral election, Ms. Merkel said
the bloc’s leaders should de-
bate on the issue at the EU
summit next month, as any
public disagreement would
bolster Turkish President Re-
cep Tayyip Erdogan amid con-
cerns in Europe over Turkey’s
crackdown on political dissent.
“Relations with Turkey are
of great importance. I will
therefore advocate for us to
adopt decisive actions but that
we act jointly and talk with our
European partners,” said Ms.
Merkel, who polls predict to be
the front-runner with a 13-per-
centage-point lead over her ri-
val Social Democrats—cur-
rently junior coalition partner
in the government.
“Nothing would be more as-
tonishing than if we in Europe
publicly fall out over how to
year war against a separatist
movement in eastern Ukraine
that Russian and Western offi-
cials say is fomented and di-
rected by Moscow and sup-
ported by direct Russian
military interventions. Russia
says the separatists are inde-
pendent actors and denies its
military supports them.
“If American weapons reach
the conflict zone, it’s hard to
say how the declared republics
will react,” Mr. Putin told re-
porters on a visit to China.
“Perhaps they [the separat-
ists] will send the weapons
they have to other zones of
the conflict, which is sensitive
to those who are causing
problems for them.”
The Pentagon and U.S. State
Department have drawn up
plans to supply Ukraine with
antitank missile and other
weaponry and are seeking ap-
A refurbished statue of the founder of the KGB’s dreaded
precursor, Felix Dzerzhinsky, stands in Moscow’s Muzeon Park.
them. The refurbished Dzer-
zhinsky statue, known as “Iron
Felix,” as well as statues of
Stalin and Vladimir Lenin, the
Soviet Union’s founder, are in
a park along the Moscow
River, once known as the Park
of the Fallen Heroes.
Russia’s new monuments
often serve as signals as offi-
cials shape the country’s view
of itself as self-reliant, tradi-
tional and anti-Western. Sta-
lin, despite his role in terrors
that killed millions, has seen
his star rise with several new
statues in the past few years.
A 50-foot statue of Prince
Vladimir, the 10th-century
monarch credited with bring-
ing Christianity to Russia, was
erected across from the Krem-
lin last year. At the opening
ceremony, Mr. Putin praised
the prince’s embrace of tradi-
tional values.
Likewise, in 2012, when Mr.
Putin’s government was flirt-
ing with the idea of economic
deal with Turkey in plain sight
of President Erdogan. This
would dramatically weaken the
European position and I can
only advise against this.”
Ms. Merkel’s challenger
from the center-left Social
Democrats, Martin Schulz, in a
television debate with the
chancellor on Sunday said he
would end accession talks with
Turkey if he became chancellor.
Ms. Merkel was first more
careful in her response to the
surprise announcement. But to-
ward the end of the debate she
said she was also in favor of
ending the membership talks,
which her conservative parties
hadn’t supported when they
were taken up in 2005.
The comments prompted
European Commission spokes-
man Margaritis Schinas to
stress that such a decision
wasn’t for Germany alone but
for member states to take.
“We are very concerned with
the developments as they’re
unfolding,” he said Monday.
Mr. Erdogan’s spokesman
also criticized the Germans’
comments.
“It is not a coincidence that
our President Erdogan and
Turkey were central to yester-
day’s debate between Merkel
WORLD NEWS
proval from the White House,
according to U.S. officials.
The front lines of the con-
flict, which has cost some
10,000 lives, have been largely
set in place by two peace
agreements, although fighting
continues at a handful of hot
spots. Little progress has been
made on the political parts of
the agreements, which envision
the reintegration of the break-
away territories into Ukraine.
The U.S. has backed Ukraine
with financial support and
some equipment, such as
short-range radar and night-vi-
sion goggles. But the Obama
administration didn’t send President Vladimir Putin at a news briefing in Xiamen, China.
weapons amid opposition from
European leaders nervous deaths. Ukrainian officials say
about deepening the conflict. that deliveries would deter
Mr. Putin said Tuesday that Russia from any attempts to
any weapons deliveries advance further.
wouldn’t change the situation, Relations between Russia
and would only cause more and the U.S. have deteriorated
repressed,” said Mr. Magdeyev,
whose uncle was shot in the
Siberian city of Irkutsk in 1937.
“We remember history differ-
ently than the way it is taught
in propaganda.”
Kremlin spokesman Dmitry
Peskov said he was unaware of
any response to Mr.
Magdeyev’s request.
Local activists say more
than 1,300 residents of Kirov
have some personal or family
connection to the mass mur-
ders carried out under Commu-
nist rule, either in the repres-
DAVID MONTELEONE FOR THE WALL STREET JOURNAL
sions overseen by Dzerzhinsky
or in Stalin’s Great Terror, a
wave of arrests and executions
carried out by the Soviet secret
police in the late 1930s.
Restoring Dzerzhinsky to a
place of honor reminds Mr.
Magdeyev of the whitewashing
of history by Soviet textbooks.
One local woman, who said her
father was killed by secret po-
lice in 1937 justified her sup-
port for the statue by pointing
to the Soviet narrative that
emphasizes Dzerzhinsky’s
work on behalf of orphans.
Like Confederate generals,
modernization, Moscow au- the figure of Dzerzhinsky has
thorities erected a statue of been a stand-in for larger con-
Russian imperial reformer Py- flicts in Russian history. “Iron
otr Stolypin, who advocated Felix” once stood in what is
land and market reforms for now Moscow’s Lubyanka
Russia’s peasants. Square, across from the KGB
Under Mr. Putin, Russia’s headquarters.
security service, now known It was removed and defaced
as the FSB, has grown more after a failed putsch by Com-
powerful, placing more focus munist hard-liners that led to
on figures like Dzerzhinsky. the collapse of the Soviet
In Kirov, backers of the Union in 1991. Since then, Rus-
statue praised him as an influ- sia’s Communist Party, the
ential figure who deserved to country’s second most popu-
be honored, despite his infamy. lar, has been pushing to re-
“Dzerzhinsky established all store it to its former place.
of this and the code of the Monuments to Soviet sol-
Chekist has remained,” Vladimir diers of World War II have
Zhuravlev, a member of Kirov’s also been defaced in Eastern
city council, told local media. European countries.
But memories of repression But in Russia, many favor
still touch a nerve. In June, the restoration of Soviet era
Mansur Magdeyev, chairman statues, pollsters say. “It’s a
of an organization for victims result of the Putin policy,” said
of Soviet repression, said he Lev Gudkov, the head of Le-
wrote to Mr. Putin, asking him vada Center, Russia’s top inde-
to halt the erection of the pendent pollster. “People want
statue, but received no reply. to reconnect to the idea of
“We are the children of the Russia as a great power.”
Chancellor Angela Merkel confers with Defense Minister Ursula von der Leyen in parliament.
and Schulz,” spokesman İbra- Strained relations between
him Kalın tweeted on Monday. Germany and Turkey feature
“Attacking Erdogan-Turkey, in high in the election campaign.
a fashion disregarding Ger- Recent arrests of German citi-
many and Europe’s main and zens for what Berlin says are
immediate problems, is a re- political reasons have angered
flection of the narrowing hori- the German government, which
zons in Europe.” reacted by issuing a travel ad-
Wednesday, September 6, 2017 | A3
mats, the Russian president
METZEL MIKHAEIL/TASS/ZUMA PRESSMETZEL MIKHAIL/ZUMA PRESS
said that the Kremlin could re-
quire the U.S. to reduce fur-
ther the number of diplomats
in Russia from 455 to 300,
which he said was equivalent
to the number of diplomats
that Russia has accredited in
the U.S., not including those at
the United Nations.
“But we won’t do it yet,” he
said. “We’ll see how the situa-
tion develops.”
Asked whether he was dis-
appointed with President Don-
ald Trump, whose administra-
tion has maintained a hawkish
line on Russia despite Mr.
Trump’s call for better ties
during the election campaign,
rapidly after the U.S. imposed Mr. Putin responded that the
sanctions against Moscow for question was naive. “He’s not
seizing Ukraine’s Crimea pen- my bride, and I’m not his
insula in 2014. bride, his groom. We are
After a recent round of tit- statesmen. Each country has
for-tat expulsions of diplo- its interests,” he said.
Stimulus Is Expected
BY TOM FAIRLESS years ago of the Federal Re-
serve, which triggered a sharp
FRANKFURT—The Euro- rise in U.S. government bond
pean Central Bank is walking a yields when it announced its
tightrope as it prepares for its own withdrawal from QE.
most momentous decision in Even before the ECB has
years: How to wind down its clearly signaled its intentions,
giant bond-buying program the euro has been surging, ris-
without derailing the euro- ing more than 12% against the
zone’s economic recovery. dollar over the past five
With the region’s economy months. A strong euro compli-
finally showing some vigor af- cates the ECB’s job because it
ter years of painfully slow makes the region’s exports
growth and political tensions more expensive in world mar-
there fading, ECB Presi- kets and reduces the price of
dent Mario Draghi is expected imports, weighing on eco-
to signal as soon as Thurs- nomic growth and inflation.
day’s policy meeting that the ECB officials “have really
bank will start winding down been wrong-footed” by the
its €2.3-trillion ($2.7-trillion) euro’s recent rise, said Martin
stimulus program, known as Lück, chief German strategist
quantitative easing or QE. at BlackRock in Frankfurt.
It isn’t entirely clear yet
whether Mr. Draghi will send
that message on Thursday or
do so in October. Either way,
European Central
ECB officials have indicated Bank officials have
that the QE program would
continue for another few
indicated QE would
months and be phased out by end by mid-2018.
the middle of 2018.
Investors are on edge,
ready to unload eurozone gov-
ernment bonds and buy the Another headache is the
euro currency as soon as the Fed, which holds its own pol-
central bank clearly signals icy meeting in two weeks. The
the retreat is coming. euro’s rise against the dollar
ECB officials have given no partly reflects investors’ belief
fresh policy signals since late that the Fed won’t raise inter-
June, when Mr. Draghi roiled est rates as aggressively as
financial markets by suggest- they once thought. U.S. infla-
ing in Sintra, Portugal, that tion has softened unexpect-
QE’s days might be numbered, edly, and President Donald
noting that less stimulus Trump seems less likely to
would be needed as the econ- push through bold spending
omy accelerates. plans that might require
The ECB’s stimulus policy tighter monetary policy.
“does not fit at the moment The ECB “clearly expected
with the state of the economy,” the new U.S. government to do
said Claudia Broyer, an econo- more in terms of economic ex-
mist with Allianz in Frankfurt. pansion, which would have
She expects QE, running at €60 made the exchange rate less of
billion a month, to come to an a worry,” said Mr. Lück.
end by the middle of next year. Eurozone inflation remains
The hypersensitivity of fi- weak. It rose to 1.5% in August
nancial markets is making ECB from 1.3% the previous month,
officials cautious, however, but is unlikely to move much
and could delay their exit higher over the next two
plans. They are eager to avoid years, echoing weakness in the
repeating the policy error four U.S. and Japan.
urgently needed.
But she also warned a mili-
tary reaction from the West
would be the wrong response.
“There can only be a peaceful
and diplomatic solution for
which we, however, have to
make every possible effort,”
she said.
European foreign ministers
at their meeting this week are
expected to discuss additional
JOHN MACDOUGALL/AGENCE FRANCE-PRESSE/GETTY IMAGES
sanctions against Pyongyang,
a move that U.S. President
Donald Trump supported dur-
ing a phone call with Ms.
Merkel on Monday. “Europe
has an important voice in the
world and it must use this
voice,” she said.
U.S. Ambassador to the U.N.
Nikki Haley on Monday called
for “the strongest possible
measures” against North Ko-
rea at an emergency meeting
of the United Nations Security
Council.
Divisions remain on how to
respond to North Korea’s prov-
visory for the country and ocations, with the U.S., France,
threatening cuts in aid. Germany, the U.K., Japan and
During the lower-house de- South Korea calling for sanc-
bate, Ms. Merkel also called tions while China and Russia
North Korea’s nuclear tests a are emphasizing direct talks.
“flagrant breach of interna- —Emre Peker in Brussels and
tional conventions” and said Erdem Aydin in Istanbul
additional sanctions would be contributed to this article.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A4 | Wednesday, September 6, 2017
Syria Presses ISIS in Remaining Outpost
Race to retake Deir
Ezzour pits Damascus
and its allies against
the U.S.-led coalition
The Syrian army broke Is-
lamic State’s three-year siege
of the eastern city of Deir Ez-
zour on Tuesday, state media
said, laying the groundwork
for a battle to retake the ex-
tremist group’s most impor-
tant remaining stronghold
and the lucrative oil fields it
controls there.
By Maria Abi-Habib
in Beirut and Nour
Alakraa in Berlin
The regime overcame
fierce resistance by Islamic
State to make the significant
advance, opposition activists
said. Syrian military units
moved in from the western
side of Deir Ezzour province
and linked up with another
brigade inside one of two gov-
ernment-held enclaves inside
the provincial capital. The
second enclave remains be-
sieged.
“Army units, which have
been advancing from the west
side of [Deir Ezzour] prov-
ince, have met with the garri-
son of the 137th Regiment
this afternoon, breaking the
siege imposed on the city for
more than three years,” re-
Cambodia
Charges
Opposition
Leader
Associated Press
PHNOM PENH, Cambodia—
Cambodia’s opposition leader
was formally charged with
treason for allegedly conspir-
ing with the U.S. to topple the
government and he could face
up to 30 years in prison if con-
victed.
Kem Sokha had been ex-
pected to lead his Cambodia
National Rescue Party in next
year’s election in a strong chal-
lenge against the ruling Cam-
bodian People’s Party of Prime
Minister Hun Sen, who has held
power for three decades. The
opposition party has denied the
treason allegation, saying the
charge is politically motivated.
Kem Sokha’s Sunday arrest
came as a media crackdown
was getting under way. Some
radio stations, among the few
mass media to carry voices
critical of the government,
were shut down for alleged
regulatory breaches and the
English-language Cambodia
Daily, also independent of the
government, was forced out of
business after being presented
with a huge but disputed tax
bill.
Phnom Penh Municipal
Court spokesman Ly Sophana
said Tuesday that Mr. Kem
Sokha was charged following a
thorough investigation, includ-
ing interrogation and exami-
nation of the evidence. The
crime is punishable by 15 to
30 years in prison.
A statement issued by the
court said Mr. Kem Sokha se-
cretly conspired with a foreign
country to carry out an act
harmful to the social order,
which could cause unrest. It
said he had been carrying out
his plan since 1993 to topple
the government.
Speaking to 4,000 Cambo-
dian garment factory workers
on Sunday, Mr. Hun Sen said
Mr. Kem Sokha had colluded
with the U.S. and warned the
opposition party it could be
dissolved if it defended him.
He provided no proof for his
claim.
The government appeared
to have based part of its claim
against Mr. Kem Sokha on a
video clip that showed the op-
position leader giving a speech
in which he described a grass-
roots political strategy to chal-
lenge Mr. Hun Sen with U.S.
support.
The clip, which was re-
leased by the government Sun-
day, was published on YouTube
by the Australia-based Cambo-
dia Broadcasting Network in
2013. In it, Mr. Kem Sokha says
the U.S. hired university pro-
fessors and experts in America
and Canada “to advise me on
[a] strategy to change the
leadership” in Cambodia.
Syrian troops and pro-government fighters stand outside the city of Deir Ezzour, the most important remaining ISIS stronghold.
ported the state-controlled
Syrian Arab News Agency or
SANA.
As Islamic State’s hold over
Syria dwindles, there is a race
to retake Deir Ezzour, pitting
the Syrian military and its al-
lies against the U.S.-led coali-
tion and the ground force it
backs—the Syrian Democratic
Trump’s Threat Puts China Trade at Risk
BY KATE DAVIDSON
WASHINGTON—President
Donald Trump’s stern warning
that the U.S. may halt trade
with countries doing business
with North Korea was seen as a
direct shot at China, the re-
gime’s biggest trading partner.
But China is America’s larg-
est single trading partner as
well, highlighting how difficult
it would be for the Trump ad-
ministration to follow through
on its threat.
North Korea sent 83% of its
exports, valued at about $2.34
billion, to China in 2015, con-
sisting of such items as coal
briquettes, according to data
compiled by MIT’s Observa-
tory of Economic Complexity.
Going the other way, China
was the source of about 85%
of North Korea’s imports, such
as refined petroleum, syn-
thetic fabric, delivery trucks,
soybean oil and broadcasting
equipment, the data show.
China’s goods-and-services
trade with the U.S., mean-
while, totaled nearly $650 bil-
lion in 2016, figures from the
U.S. Trade Representative’s of-
fice show.
China produced more than
one-fifth of the total goods the
U.S. imports, from cellphones
and computers to furniture
and footwear.
After Canada and Mexico,
China is the U.S.’s third-largest
goods-export market, which to-
taled nearly $170 billion in 2016.
Top American exports to China
include planes and helicopters.
Because the trade volume is
so heavy, some analysts say
ASIA
Continued from Page One
On Tuesday, North Korea is-
sued a defiant response to the
U.S.’s attempts to impose new
sanctions for its latest nuclear
test, saying it wasn’t cowed by
the Trump administration’s
warnings and hinting at an un-
specified “counteroffensive.”
A statement attributed to a
spokesman for North Korea’s
Ministry of Foreign Affairs
said Mr. Trump’s warnings last
month of “fire and fury”
showed that it was the U.S.
that was “begging for war”—
not North Korea, as U.S. am-
bassador to the United Nations
Nikki Haley said Monday dur-
ing an emergency Security
Council meeting.
Following a summit of lead-
ers of emerging economies in
China on Tuesday, Russian
President Vladimir Putin said
resolving the tensions over
North Korea will require that
all the parties engage in dia-
logue and warned that contin-
ued talk of a military solution
could result in a catastrophe.
North Koreans, he said, “will
eat grass but they will never
abandon their nuclear pro-
gram.”
Prominent members of
HK JP KO ML SI
WORLD NEWS
Forces. Whoever assumes
control over the province’s oil
fields will have one of the big-
gest bargaining chips as
Syria’s war, in its seventh
year, winds down.
The U.S. hopes to both cap-
ture Islamic State leaders and
intelligence in the province to
unravel the extremist group’s
The U.S. wants to punish the regime headed by Kim Jong Un, center, by targeting its trade partners.
severely restricting trade with
China would be nearly impos-
sible to implement without
wreaking havoc on the U.S.
economy, leading some ana-
lysts to dismiss the threat as
not credible.
“We think there is little
prospect of Trump carrying out
his threat to ‘stop all trade with
any country doing business
with North Korea,’ given that
the U.S. imported $479 billion
of goods and services from
China last year,” Capital Eco-
nomics analyst Andrew Ken-
ningham said in a note Monday.
At the same time, Mr. Trump
has made trade a focus of his
administration, saying the U.S.
trade deficits with China and
other countries are the result of
unfair trade deals that also hurt
three major South Korean op-
position parties, and some
fringe politicians in Japan,
have called for their respec-
tive countries to consider de-
veloping their own nuclear
weapons—for years, a taboo
idea—amid questions about
whether the U.S. would be
willing to protect Seoul or To-
kyo as North Korea hones its
ability to threaten the U.S.
homeland.
Those concerns, Adm. Swift
said Tuesday, were unfounded.
While acknowledging an array
of voices in South Korea and
Japan, he said that the U.S.
military was working more
closely than ever before with
its South Korean and Japanese
counterparts.
“It’s very difficult to under-
stand exactly what Kim Jong
Un is trying to achieve, but if
he’s trying to separate the alli-
ances and the allegiances that
we have in the region, from
where I sit, it’s having the op-
posite effect,” Adm. Swift said.
“From a military-to-military
perspective, I don’t see any
change in the personal and
professional relationship.”
He said that his trip to
Seoul, while previously sched-
uled, was meant to demon-
strate to Pyongyang that the
U.S. relationship with South
Korea “will not be shaken.”
IN UK FR MN PR
networks and glean informa-
tion about any plans for fu-
ture attacks in the West.
The advances in Deir Ez-
zour are a boon to the Damas-
cus regime, which the opposi-
tion and its international
supporters have accused of
failing to battle Islamic State
in the past and focusing in-
American factories and workers.
What exactly could be af-
fected by a move to restrict
Chinese trade? In 2015, 63% of
the computers the U.S. im-
ported came from China, along
with 29% of imported tele-
phones, 49% of furniture im-
ports, 73% of broadcasting
equipment, 53% of leather foot-
wear, 79% of mattresses and
39% of knit sweaters, just to
name a few categories of goods,
according to MIT’s OEC project.
In terms of exports, China re-
ceived 26% of all planes and he-
licopters the U.S. exported that
year, as well as 55% of soybean
exports and 18% of auto exports.
If those imports were sud-
denly cut off or severely re-
stricted, businesses would have
to scramble to find alternative
South Korean Defense Minister Song Young-moo met Adm. Scott Swift in Seoul on Tuesday.
Asked about Mr. Trump’s
apparent criticism of his South
Korean counterpart, Adm.
Swift said he had no insights
into the policy conversations
in Washington, but said that
there was “complete lockstep”
between the two countries’
militaries.
Since North Korea’s nuclear
test on Sunday, an increasing
number of South Korean oppo-
sition lawmakers have called
on the Seoul government to
reintroduce U.S. tactical nu-
clear weapons that were with-
drawn from the peninsula in
1991.
* THE WALL STREET JOURNAL.
province, some 30 miles away
from the site of the govern-
ment’s latest advance. Islamic
State has ushered its leader-
ship and most valued equip-
ment to Mayadeen—including
military gear and prisoners—
as it has been dislodged from
cities in Syria and Iraq, such
as Raqqa and Mosul, over the
past year.
Mayadeen also sits near
Syria’s most important oil
fields, which Islamic State
controls and uses to fund its
operations.
The government’s gains
could still be reversed. The
regime military base in the
first enclave is still sur-
rounded on three sides by Is-
lamic State fighters and the
second government enclave in
the city is still fully sur-
rounded by Islamic State.
SANA/ASSOCIATED PRESS
The Syrian military now
must connect up the barracks
and surrounding neighbor-
hoods it controls in the west-
ern enclave with neighbor-
hoods in the second enclave
near the city’s airport less
than a mile away to the east.
stead on fighting rebels. The siege of Deir Ezzour
But as the weakened rebels has put some 93,000 civilians
increasingly become nonac- trapped in the city’s govern-
tors in the conflict, the re- ment enclaves at risk of star-
gime has been thrust into vation as food supplies ran
greater confrontation with Is- low, according to the United
lamic State. Nations. High-altitude air-
The gains bring the Syrian drops supplied everything
army closer to the key city of from foods to basic medical
Mayadeen in Deir Ezzour supplies.
clear intentions,” she said.
China has ramped up its
trade with North Korea, which
increased 6% last year and
now accounts for about 93% of
North Korea’s overall trade,
according to an annual report
from the Korean Trade-Invest-
ment Promotion Agency.
North Korea’s other top trad-
ing partners include Russia,
KCNA/AGENCE FRANCE-PRESSE/GETTY IMAGES
Thailand, Philippines, Pakistan
and India, which is the U.S.’s
ninth-biggest trade partner.
More likely, and more feasi-
ble, than cutting off trade with
such countries are new unilat-
eral sanctions on firms and indi-
viduals in other countries the
U.S. determines are helping
North Korea’s weapons pro-
gram, Eurasia Group analysts
Scott Seaman and Evan Me-
deiros said in a note on Monday.
“More Chinese firms will be
suppliers, and could face in the crosshairs, especially if
higher costs as well. American Washington perceives Beijing
exporters and multinational as not responding forcefully
corporations—such as farmers, enough to North Korea,” they
aerospace companies, car mak- wrote, but said the U.S. will
ers and Hollywood movie stu- still be reluctant to sanction
dios—could be shut out of one large Chinese banks given the
of the world’s biggest markets. risks of a strong negative re-
At an emergency meeting of action from Beijing.
the United Nations Security China, in response, could
Council on Monday, U.S. Ambas- move to reduce its crude oil
sador to the United Nations exports to North Korea for a
Nikki Haley doubled down on limited time and support U.S.-
the administration’s warning led efforts for tighter sanc-
that economic consequences tions on Pyongyang.
were on the table as it weighs Such moves would follow a
how to respond to Pyongyang’s series of efforts from the Trump
escalated nuclear threats. administration to increase trade
“We will look at every pressure on China, including di-
country that does business recting aides to explore the
with North Korea as a country prospect of sanctioning Beijing
that is giving aid to their reck- for the “unfair” acquisition of
lessness and dangerous nu- American intellectual property.
YONHAP NEWS/NEWSCOM/ZUMA PRESS
Defense Minister Song though he said that U.S. naval
Young-moo said Monday the forces could project power no
redeployment of U.S. tactical matter where they were in the
nuclear weapons was one of region.
several possible responses to He also said that the U.S.
North Korea’s nuclear threats, government would continue to
though it wasn’t the policy of consult with the South Korean
the Moon administration. government before taking any
On Tuesday, South Korean military action. “There is no
Foreign Minister Kang Kyung- daylight” between the two
wha told lawmakers during a sides, Adm. Swift said.
hearing: “The government has Last month, Mr. Moon said
never considered this.” in a speech that the U.S. would
Adm. Swift said the U.S. need Seoul’s consent for any
was open to sending more military action on the Korean
strategic assets to the Korean Peninsula.
Peninsula, including the de- —Kwanwoo Jun and Eva
ployment of aircraft carriers, Dou contributed.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Black crosses adorned with Venezuelan flags and the names of those killed in antigovernment protests are held in St. Peter's Square. Bottom, Mr. Maduro holds a cross given to him by Pope Francis.
Venezuela Looms as Pope Visits Region
Bishops, activists urge
Pope Francis to
chastise Maduro when
he visits Colombia
Heilyn Rojas, a 21-year-old
Venezuelan student, left her
country last year, tired of the
crime and food shortages
back home. She fled to neigh-
boring Colombia in search of
a better life.
By Anatoly Kurmanaev
in Caracas, Venezuela,
and Francis X. Rocca
in Vatican City
Now, on the eve of Pope
Francis’ five-day visit to Co-
lombia, she stands among
many Venezuelans, including
bishops and opposition lead-
ers, who hope the pontiff will
chastise Venezuelan President
Nicolás Maduro for his role in
the nation’s economic collapse
and its deep political strife.
She wishes Pope Francis
“would care more about help-
ing Venezuela, so that we
could go back, work and live
Irma Threatens
The Caribbean
BY ARIAN CAMPO-FLORES
Hurricane Irma grew into
a Category 5 storm as it
churned through the Carib-
bean, taking aim at the
northern Leeward Islands
and potentially the continen-
tal U.S. by the weekend.
The National Hurricane
Center called Irma, whose
maximum sustained winds
increased to 180 miles an
hour, “potentially cata-
strophic.” Irma is the stron-
gest hurricane ever recorded
in the Atlantic basin outside
the Caribbean Sea and the
Gulf of Mexico, the hurricane
center said.
The storm’s center was
about 225 miles east of Anti-
gua and on track to pass
over or near a string of is-
lands, including St. Kitts and
Nevis, by Tuesday night or
Wednesday morning.
A hurricane warning cov-
ered an area stretching from
the island of Montserrat to
the U.S. territory of Puerto
Rico. Forecasters said Irma is
expected to remain a power-
ful Category 4 or 5 hurricane
during the next few days.
AGENCE FRANCE-PRESSE/GETTY IMAGES
A satellite image shows Hurricane Irma on Tuesday.
well, instead of dying of hun-
ger,” Ms. Rojas said.
Venezuela—whose economy
has shrunk by a third since
2013, sparking a humanitarian
crisis—looms large as Pope
Francis arrives on Wednesday
in neighboring Colombia,
where tens of thousands of
Venezuelan migrants have fled.
Top Venezuelan bishops
plan to greet the pope in Co-
lombia, hoping to convey in
person the gravity of the
country’s situation.
In a letter published last
week, the leader of Venezuela’s
opposition-controlled congress
urged the pope to demand that
Mr. Maduro allow humanitar-
ian aid, release political prison-
ers and respect human rights.
“Every day that passes costs
another life,” wrote Speaker
Julio Borges. “We can’t wait.”
Vatican intervention in inter-
national political conflicts is
rare. Pope John Paul II, who was
Polish, was credited with help-
ing to mobilize Poland’s Solidar-
ity movement and give momen-
tum to the fall of communism in
Central and Eastern Europe.
Pope Francis, an Argentine
Puerto Rico Gov. Ricardo
Rosselló declared a state of
emergency and activated the
National Guard on Monday.
In Florida, which faces the
possibility of a direct strike
from the storm, Gov. Rick
Scott on Monday declared a
state of emergency in all of
the state’s 67 counties.
“Hurricane Irma is a ma-
jor and life-threatening
storm,” he said in a news re-
lease. “I urge all Floridians
to remain vigilant.”
Across the northern Lee-
ward Islands, the U.S. and
British Virgin Islands and
Puerto Rico, Irma is expected
to dump 8 inches to 12
inches, with isolated in-
stances of 18 inches, accord-
ing to the National Hurricane
Center. The rainfall could
trigger life-threatening flash
floods and mudslides.
The northern Leeward Is-
lands face a potential storm
surge of 7 feet to 11 feet, as
well as large, destructive
waves, forecasters said.
The northern coast of
Puerto Rico could experience
a storm surge of 2 feet to 4
feet.
WORLD NEWS
who takes a keen interest in
Latin American affairs and has
issued forceful calls for lead-
ers to respect human rights,
helped broker the December
2014 rapprochement between
the U.S. and Cuba.
But a Vatican spokesman
played down the likelihood
that the pope would speak
publicly about Venezuela dur-
ing his trip to Colombia. That
trip is likely to emphasize rec-
onciliation and human rights
after that country’s recently
ended civil war.
Many Venezuelans are an-
gry over the Vatican’s failed
attempt to broker a truce be-
tween the opposition and Mr.
Maduro’s envoys during talks
late last year. The talks broke
down after his government
failed to implement its prom-
ises. Just over half of Venezu-
elans believe the church is
working to solve the country’s
problems, down from 62% be-
fore the talks, according to a
June poll from Caracas-based
Consultores 21.
The opposition and some
clergy blamed the Vatican for
allowing Mr. Maduro to stall
MYANMAR
U.N. Says 123,000
Rohingya Have Fled
A massive influx of Rohingya
refugees fleeing recent violence in
Myanmar has pushed aid services
in Bangladesh to the brink, with
established camps already be-
yond capacity, aid workers said.
The U.N. refugee agency said
123,000 refugees have fled
western Myanmar since Aug. 25.
The agency is pleading for as-
sistance, saying it needs more
land so it can set up new camps
to accommodate refugees arriv-
ing hungry, traumatized and in
need of medical assistance.
A Rohingya Muslim whom
the Associated Press reached by
telephone said she and thou-
sands of fellow villagers driven
from their homes by the vio-
lence in Myanmar are stuck
along the coast, hoping to flee
to Bangladesh by boat.
The military has said nearly
400 people, most of them insur-
gents, have died in clashes. Se-
curity forces responded to the
attacks with days of “clearance
operations” the government says
were aimed at rooting out insur-
gents it accuses of setting fire
to Rohingya villages.
—Associated Press
EUROPE
Eurozone Growth
Seen Easing Slightly
The eurozone economy ap-
pears to be slowing slightly, al-
though it remains on course for
its strongest year since 2010,
business surveys indicate.
The currency area has been
one of the positive surprises for
the global economy this year, as
it outpaced the U.S. in the first
quarter and accelerated further
in the three months to June.
However, an early indicator of
activity points to a modest eas-
ing of growth in the third quar-
ter, which ends this month.
Wednesday, September 6, 2017 | A5
the risks involved in the nego-
tiations, but believed the deep-
ening strife in Venezuela justi-
fied its attempt to help.
“It was the government
that broke [the rules], not the
Vatican,” Cardinal Jorge Urosa
of Caracas, who has taken a
lead role in the standoff, told
CARLOS BECERRA/BLOOMBERG NEWS
the Journal.
Since then, Venezuela’s Cath-
olic hierarchy, one of the coun-
try’s few remaining indepen-
dent institutions, has stepped
up its public criticism of Mr.
Maduro, calling on his govern-
ment to restore an independent
legislature and halt the killing
and imprisonment of protesters
for time, thus dissipating pro- and opposition leaders.
tests and ultimately tightening The bishops denounced a
his grip on the country. July vote—widely condemned
“The Vatican’s diplomacy as rigged—to approve a new,
sinned with naiveté. They handpicked assembly that is
came unprepared,” said the sidelining the opposition-con-
Rev. Francisco Virtuoso, rector trolled legislature and plans to
of Caracas’s Andrés Bello Cath- grant Mr. Maduro greater
olic University and a promi- powers. During the vote, the
nent critic of Mr. Maduro’s bishops’ conference tweeted a
government. “The government prayer to the Virgin Mary to
exploited this to the full.” “free our country from the
A senior Vatican official told clutches of communism and
The Wall Street Journal that socialism.”
the Vatican had been aware of Mr. Maduro accuses the lo-
WORLD WATCH
A Rohingya child is carried through rice fields after his family crossed the border into Bangladesh.
Data firm IHS Markit on alleged election finance violations.
Tuesday said its composite pur- The motion from prosecutors
chasing managers index for the will now go to the country’s Con-
eurozone was unchanged at 55.7 gress, where it requires a two-
in August. That was below the thirds vote to allow the president
preliminary estimate of 55.8, and to be prosecuted. Congress must
the average reading for the sec- vote on installing a commission
ond quarter. A reading above 50 to begin investigating the
signals an increase in activity, charges by early next week.
while a reading below signals a The court’s 11-2 vote also ap-
decline. proved stripping the immunity of
Figures on retail sales for officials from the country’s two
July released Tuesday by the leading political parties, who also
European Union’s statistics office stand accused of illicit campaign
also point to a moderation of funding.
growth. Sales were down 0.3% Mr. Morales and the other ac-
from June, having risen in each cused politicians say they are in-
month since the start of the nocent.
year. “I have always defended the
—Paul Hannon rule of law, judicial norms and the
independence of powers,” Mr.
GUATEMALA Morales said in a statement after
Monday’s ruling.
Another Top Court The ruling marks the latest
Rules Against Morales chapter in a gathering political
crisis fueled by investigations of
Guatemala’s Supreme Court Mr. Morales’s campaign and fraud
approved a petition from the at- charges against members of his
torney general’s office to strip family. Guatemalan prosecutors
immunity from President Jimmy are conducting the probes with
Morales, bringing the leader one the aid of the International Com-
step closer to a potential trial for mission Against Impunity in Gua-
ANDREW MEDICHINI/ASSOCIATED PRESS
cal church hierarchy of joining
the political opposition to top-
ple his government and claims
the pope supports him, dis-
agreeing with critics including
Vatican Secretary of State Car-
dinal Pietro Parolin.
Critics have suggested the
pope, who has appeared pub-
licly with some of Mr. Ma-
duro’s left-wing allies such as
Bolivian President Evo Mo-
rales and shares some of their
political views, might be hold-
ing back out of ideological
sympathy.
“I’m a Catholic, but I think
that seeing the pope doing
these sorts of things pushes
me away from the church,”
said Rocksaneth Aguilar, a
Venezuelan advertising agent
who moved to Colombia last
year. “The pope is a commu-
nist at heart who doesn’t want
to get involved in Venezuela.”
A Vatican spokesman de-
clined to comment on why the
pope hasn’t openly criticized
Mr. Maduro.
—Lorena Bornacelli in San
Cristobál and Mariana
Martínez in Caracas
contributed to this article.
BERNAT ARMANGUE/ASSOCIATED PRESS
temala, or Cicig.
Created a decade ago by
agreement between the United
Nations and Guatemala’s govern-
ment, the Cicig supports local
prosecutors’ investigation of the
country’s endemic corruption and
organized crime networks. It has
jailed numerous top politicians
and enjoys broad support within
Guatemala.
In recent weeks, Mr. Morales
tried to have the head of the
Cicig, Colombian prosecutor Iván
Velásquez, kicked out of the
country, sparking an outcry. The
move came only days after the
Cicig and Guatemala’s attorney
general, Thelma Aldana, submit-
ted the petition to the Supreme
Court to have Mr. Morales’s im-
munity stripped.
Mr. Morales’s attempt to kick
out Mr. Velásquez caused an in-
ternational outcry. The U.S. gov-
ernment, the U.N., and several
human-rights groups all came out
in support of the Colombian pros-
ecutor. A Guatemalan court, the
constitutional court, reversed Mr.
Morales’s order.
—Dudley Althaus
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A6 | Wednesday, September 6, 2017
President Rescinds ‘Dreamers’ Program
Trump orders end of
protections for young
immigrants; Congress
‘do your job,’ he tweets
BY LAURA MECKLER
WASHINGTON—President
Donald Trump’s administra-
tion said Tuesday it was end-
ing a five-year-old program
that protects undocumented
immigrants who entered the
U.S. as children from deporta-
tion and gave Congress until
March 5 to pass legislation to
replace it.
Attorney General Jeff Ses-
sions announced the policy
shift, reiterating his long-held
belief that former President
Barack Obama, a Democrat,
had overstepped his executive
authority in creating the De-
ferred Action for Childhood
Arrivals program in the first
place.
“The policy was imple-
mented unilaterally to great
controversy and legal concern
after Congress rejected legis-
Canceled Deal for FBI Headquarters Stirs Confusion
BY ALEXA CORSE
The sudden July decision to
cancel a multimillion-dollar
search for a new Federal Bu-
reau of Investigation head-
quarters has baffled lawmak-
ers and raised doubts among
developers about seeking gov-
ernment business.
The FBI has sought for
more than a decade to move
from the old J. Edgar Hoover
Building and build a new,
more secure headquarters in
the Washington suburbs. Offi-
cials seemed poised to pick a
developer when the General
Services Administration,
which oversees federal real
estate, said in July that it de-
cided in consultation with the
FBI to cancel the search.
The GSA said it pulled the
plug because of a shortfall in
funds Congress had appropri-
ated for the project, but others
who followed the project have
raised doubts. “I personally
don’t think we know the real
reason why they terminated
that contract because the ex-
planations don’t really add up,”
Maryland Democratic Sen. Ben
Cardin said in an interview.
The GSA and the FBI had
requested $1.4 billion in funds
for the project in the 2017
budget, said Michael Gelber
last month, then acting com-
missioner of GSA’s Public
Buildings Service. Congress
set aside $523 million in May,
leaving a shortfall of $882 mil-
lion, Mr. Gelber said at a hear-
ing by the Senate Committee
on Environment and Public
Works on Aug. 2. Mr. Cardin,
whose state was a potential
home to the new FBI head-
quarters, said at the Senate
hearing that a congressional
appropriations committee had
pledged to address the funding
TRUMP
Continued from Page One
controlling both chambers and
the White House for the first
time since 2007.
Both House and Senate Re-
publicans said Mr. Trump’s at-
tacks on his own party won’t
help them quickly pass high-
stakes bills that already face
little room for error.
“It’s a little unhealthy, quite
honestly,” Rep. Kevin Cramer
(R., N.D.), a longtime Trump
supporter, said, pointing out
the party’s slim 52-48 major-
ity in the Senate. He particu-
larly questioned Mr. Trump’s
attacks on Republican Sens.
Jeff Flake and John McCain at
an August rally in Phoenix.
“You have a small margin,
and punching two of them in
the nose in their home state
makes it pretty difficult” to
pass a Republican agenda in
the Senate, Mr. Cramer said.
Among the pressing issues
are funding for the children’s
health insurance and a federal
flood insurance program,
which both expire Sept. 30.
Looking ahead, the presi-
dent is expected to give Con-
gress a six-month deadline to
pass legislation to replace a
program that shields from de-
portation immigrants brought
to the U.S. as children. And
lative proposals to extend
similar benefits,” Mr. Sessions
said. “In other words, the ex-
ecutive branch, through
DACA, deliberately sought to
achieve what the legislative
branch specifically refused to
authorize.”
Permits given under the
program are good for two
years, and the protections will
remain in force until they ex-
pire, officials said. Current
participants whose permits
expire before March 5, 2018,
will be able to renew their
status if they file applications
by Oct. 5.
But if Congress fails to act
before then, people, called
Dreamers, who are now in the
program will begin to see
their permits expire beginning
in March, meaning they will
no longer be able to legally
work and they will be eligible
for deportation. Officials said
no new applications filed after
Tuesday would be processed.
Mr. Trump, a Republican,
signaled that he hopes Con-
gress will replace the pro-
gram, which was created by
The FBI has sought for years to move from the J. Edgar Hoover Building, above, to a new location in the Washington suburbs.
shortfall in coming years.
A GSA spokesman said in a
statement that “moving for-
ward with this procurement
absent full funding puts the
Government at risk for cost
escalations and further deval-
uation of the J. Edgar Hoover
Building.” The FBI and GSA
jointly decided to cancel the
project, Richard Haley, assis-
tant director of the FBI’s Fi-
nance Division, said at the
Senate hearing.
The GSA had proposed to
pay for the new headquarters
in part by swapping the Hoo-
ver building with a contractor
chosen for the job. The con-
tractor would redevelop the
prized site on Washington’s
Mr. Trump’s top advisers have
promised to deliver a bill
overhauling the tax code by
mid-November, said a person
familiar with the discussion.
Many lawmakers expect at
least some of the Harvey aid
to be added to a measure rais-
ing the debt limit, which is a
difficult vote for many Repub-
lican lawmakers. While hurri-
cane aid is broadly supported,
some influential conservatives
have raised concerns about
pairing it with the debt limit.
“Our obligation is to assist
those impacted by this great
flood, but it’s past time the
swamp waters in DC begin re-
ceding as well,” Rep. Mark
Walker (R., N.C.), chairman of
the Republican Study Commit-
tee, a group of more than 150
House Republicans, said in a
statement Monday.
Democrats have said they
want to find a bipartisan path
on both issues.
“Providing aid in the wake
of Harvey and raising the debt
ceiling are both important is-
sues and Democrats want to
work to do both,” Senate Mi-
nority Leader Chuck Schumer
(D., N.Y.) and House Minority
Leader Nancy Pelosi (D., Calif.)
said in a joint statement.
The relationship between
the White House and congres-
sional Republicans began to
fray before the August recess,
as the Senate struggled to
U.S. NEWS
A man, left, applying for DACA employment renewal in California.
Mr. Obama using executive au-
thority, with one crafted by
lawmakers. “Congress, get
ready to do your job - DACA!”
he tweeted Tuesday morning,
ahead of the announcement.
But lawmakers have strug-
gled to pass immigration leg-
islation for many years and,
Pennsylvania Avenue af-
ter building a new FBI campus
in suburban Washington.
Several teams of develop-
ers—which included such large
developers as Silverstein Prop-
erties, Vornado Realty Trust
and Lerner Enterprises—had
spent millions of dollars pre-
paring bids, estimated people
familiar with the project.
The cancellation of one of
the biggest government proj-
ects in recent years has left
some warning about long-term
damage. “It probably makes
people think twice before bid-
ding on another large, compli-
cated project,” said Garth
Beall, manager at Renard De-
velopment, which had secured
Lawmaker Picked
To Lead NASA
Republican Rep. Jim Briden-
stine, named as President Don-
ald Trump’s choice to head the
National Aeronautics and
Space Administration, faces
tough policy, personnel and po-
litical challenges repositioning
the agency in an era of boom-
ing commercial space ventures.
The decision Friday to nom-
inate the former Navy aviator
and three-term Oklahoma law-
maker, a move that had been
expected, comes amid lingering
uncertainties surrounding the
White House’s broad space
goals. A space-policy council,
headed by Vice President Mike
Pence, is just getting organized
to provide direction for the
Pentagon, NASA and other
agencies.
Mr. Bridenstine, a strong
supporter of private space en-
deavors such as minerals min-
ing on the moon, has encour-
aged use of the council to
overhaul the health-care law.
Mr. McConnell, a fastidious,
30-year veteran of the Senate,
often prepared note cards with
points he wanted to make dur-
ing phone calls with the presi-
dent. Mr. Trump was more ca-
THE WALL STREET JOURNAL.
Department of Homeland Se- Trump’s administration has
curity, which administers the approved tens of thousands of
program, also pointed to Mr. new applications and renewals
Sessions’ conclusion that the since taking office.
program was unconstitutional. Rather, its demise came in
In a letter to DHS Acting response to the threat of liti-
Secretary Elaine Duke sent gation by 10 conservative
Monday, Mr. Sessions argued states, led by Texas Attorney
that the program had been General Ken Paxton.
created without proper au- Mr. Paxton, a Republican,
thority and after “Congress’ warned in June that if Mr.
repeated rejection of proposed Trump didn’t kill the program
PATRICK T. FALLON/BLOOMBERG NEWS
legislation that would have on his own by Tuesday, the
accomplished a similar re- states would take the matter
sult.” to court. Specifically, they
“Such an open-ended cir- said they would seek to
cumvention of immigration amend a lawsuit filed in 2014
laws was an unconstitutional that successfully challenged
exercise of authority by the Mr. Obama’s effort to expand
executive branch,” he wrote. the program to cover parents
Mr. Trump’s decision repre- of U.S. citizens and others.
sented a victory for conserva- Many legal experts, includ-
tives who have long argued ing some who support the
against the program, both be- program, predicted that a con-
while these young people en- cause they saw it as an over- servative judge would agree
joy considerable support, reach of executive authority with the states that the pro-
passing protections into law and because it offers what gram was unconstitutional.
will be a heavy lift. they consider amnesty to ille- In announcing the pro-
The president left the offi- gal immigrants. gram’s end, officials said they
cial announcement to Mr. Ses- Mr. Sessions and his allies preferred to have it “wind
sions, a longtime opponent of were unable to persuade Mr. down” in an “orderly fashion,”
the program, who had argued Trump to kill the program at rather than have it struck
internally for its demise. The the outset of his term, and Mr. down by the courts.
options to procure a new
headquarters, Mr. Gelber said
at the recent Senate hear-
ing. Sen. John Barrasso (R.,
WY.), said the Senate Commit-
tee on Environment and Public
Works, which he heads, would
likely hold another hearing be-
fore the end of the year.
The GSA has spent approxi-
mately $20 million on the
project, Mr. Gelber said.
Because the FBI’s current
headquarters isn’t big enough
to house all employees, the
GSA currently uses costly
short-term leases for some FBI
headquarters employees, scat-
tered in about a dozen Wash-
JIM LO SCALZO/EUROPEAN PRESSPHOTO AGENCY
ington-area locations. The
government could save tens of
millions in annual lease pay-
ments by moving the FBI to a
larger headquarters, Mr. Haley
said at the Senate hearing.
Meantime, the headquarters
building is in such bad condi-
tion that netting hangs along
the facade so that falling con-
crete chunks don’t hit pass-
ersby on the sidewalk.
One former federal official
who worked on the project
the right to acquire and de- Mr. Trump has known Larry said the administration may
velop a potential site for the Silverstein, chairman of Silver- have decided that scrapping
project. Mr. Beall said the firm stein Properties, for years. the existing plan could be a
had spent over $5 million and “I think developers will re- way to buy time as the new
approximately seven years try- main interested, but they’re Trump administration takes
ing to attract the FBI to certainly going to be more stock of its responsibilities at
Greenbelt, Md. suspicious knowing what hap- the GSA.
President Donald Trump pened in the past,” said Sen. But local officials involved
has ties to some New York de- Cardin. His state of Maryland in the process say they remain
velopers involved in the is home to two of the three unclear what happened—and
search. The president named proposed sites for the new, ap- what happens now. Jeff
Steven Roth, chairman and proximately 11,000-employee McKay, supervisor of Fairfax
chief executive of Vornado, to headquarters, in Greenbelt and County, where the Virginia site
the recently disbanded Presi- Landover. The third option is located, said: “I have no ex-
dent’s Advisory Council on In- was in Springfield, in subur- planation for why, out of no-
frastructure. The Trump Or- ban Virginia. where, you just pull the plug.”
ganization holds 30% stakes in For now, the GSA is work- He added, “I think it damages
two office buildings controlled ing with the FBI to meet the GSA’s future ability to work
by Vornado: at 1290 Sixth Ave- bureau’s short-term needs for with the private sector.”
nue in Manhattan and 555 Cal- leased spaces around Wash- —Ted Mann
ifornia Street in San Francisco. ington and to evaluate other contributed to this article.
with their discussions.
As it became clear Mr.
McConnell couldn’t summon
enough Republican votes to
“I do not think this strategy
will further his ability to build
the legislative consensus he
needs to address major issues
repeal the Affordable Care Act, like tax reform and infrastruc-
SUE OGROCKI/ASSOCIATED PRESS
the Senate majority leader ture,” said former Sen. Kelly
stopped responding to the Ayotte (R., N.H.). “When it
president’s chitchat, the peo- comes to counting individual
ple familiar said. votes, it would be better for
“Mitch?” the president said the president to work coopera-
when Mr. McConnell fell silent tively with them and the mem-
in one call. “Are you there?” bers of his party.”
Mr. McConnell waited a The most significant bill
beat, then responded. “Yes, written and passed by Con-
better coordinate military and Mr. President. Back to the gress this year imposed sanc-
civilian space programs. But bill,” according to those famil- tions on Russia—despite con-
the result, according to indus- iar with the talks. cerns raised by the White
try officials and former NASA The repeal measure failed House.
managers, could restrict his op- by one vote, raising the stakes Some lawmakers worry
tions in running the agency. on the performance of law- about diminished prospects
Mr. Bridenstine has sup- makers who return this month for their re-election if the
ported greater emphasis on to significant fiscal matters. much sought-after tax over-
tracking orbital debris as vari- “If they don’t get some- haul meets the same fate as
ous companies contemplate thing done that is substantial,” the failed health-care bill.
launching unprecedented num- former Sen. Judd Gregg said “If we can’t even do that,
bers of low-earth-orbit satel- of fellow Republicans, “they then nothing will get done be-
lites. He also has advocated are going to have a horrific ex- fore 2018,” said Rep. Tom
the importance of using NASA perience in the next election.” Rooney (R., Fla.)
missions to the moon as step- Many Republicans who The U.S. Chamber of Com-
pingstones to developing a faced constituents during the merce, the business lobby
host of technologies required August recess found many group, is already preparing an
for deep-space probes. who sided with Mr. Trump and ad campaign aimed at pressur-
—Andy Pasztor faulted party leaders for keep- ing mostly House Republicans
ing the president from enact- to move on a tax rewrite.
ing his agenda. Mr. Trump’s tactics could
sual, starting conversations While Mr. Trump’s attacks have an impact, said former
with several minutes of chat- on lawmakers may have reso- Rep. Mickey Edwards (R.,
ter about the day’s headlines nated with some voters, they Okla.), if the president’s sup-
or what he had seen on TV, are unlikely to help lawmakers porters pressure Republicans
the kind of banter he used as a deliver results, especially in to support his agenda.
businessman with VIPs, ac- the Senate, current and former —Janet Hook contributed to
cording to people familiar Republican officials said. this article.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
SCOTT G WINTERTON/THE DESERET NEWS/ASSOCIATED PRESS
Interior Secretary Ryan Zinke, shown in Utah in May, has angered proponents of conservation, who have called him a tool of industry.
Trump’s Man in the West
BY JIM CARLTON
ASHLAND, Ore.—On a dirt
road high on a mountain near
here, the interior secretary un-
folded his 6-foot-2-inch frame
out of a black Suburban one
morning recently and started
shaking hands with a group of
ranchers in cowboy hats.
“The president has made it
clear—I work for you,”
Ryan Zinke told the ranchers,
who had gathered to tell him
their grazing operations would
be hurt by a recent expansion
of Cascade-Siskiyou National
Monument.
The appearance by a top
federal official was well-re-
ceived. “No one has come out
here before,” said rancher Jer-
emy Kennedy. “We finally have
a voice.”
Mr. Zinke’s July 15 visit was
part of a fact-finding trip the
secretary has undertaken since
President Donald Trump di-
rected him in May to review 22
land monuments and five
ocean preserves—most created
or expanded under Presidents
Bill Clinton and Barack
Obama—for possible downsiz-
ing or elimination.
On Aug. 24, Mr. Zinke sent
the president his recommenda-
tions in a report that hasn’t
yet been made public. Mr.
Zinke suggested several monu-
Deadline Looms for Health Insurers to File Rates
BY ANNA WILDE MATHEWS
A deadline for insurers to
file 2018 prices for health in-
surance sold through Afford-
able Care Act exchanges ar-
rived Tuesday, but state
regulators were still struggling
to make decisions about pric-
ing and coverage amid uncer-
tainty in federal health policy.
The upshot is confusion in
what is typically an orderly,
regimented regulatory process
for reviewing insurance offer-
ings that will go on sale to
consumers on Nov. 1.
States are taking different
approaches, based on their
best guesses about what Con-
gress and President Donald
Trump’s administration might
do regarding the health-law
marketplaces, though several
state regulators said in inter-
TEXAS
FEMA Backs Loans
To Help After Storm
Texas cities are getting some
help to focus on reconstruction
after Hurricane Harvey, subse-
quently downgraded to a tropical
storm, brought floods and dam-
aged homes across the region.
The Federal Emergency Man-
agement Agency approved loans
to help keep struggling cities op-
erating after the storms.
Texas Gov. Greg Abbott an-
nounced the approval on Twitter,
saying the loans are critical to
providing services in some com-
munities. It is an early step in a
cleanup effort that is beginning
with people leaving emergency
shelters.
More than 50,000 people are
in government-paid hotels.
FEMA officials also are weighing
ments would face potential
downsizing, after saying in a
statement that he would “pro-
vide a much-needed change for
the local communities who
border and rely on these lands
for hunting and fishing, eco-
nomic development, tradi-
tional uses, and recreation.”
Mr. Zinke, 54 years old, a
former Navy SEAL commander
who joined the Trump cabinet
after serving as a GOP con-
gressman from Montana, said
he wants to tip the balance of
who gets heard on land-use
decisions more in favor of ru-
ral people whose jobs often are
affected by the decisions.
“The president directed me
to give America a voice, [and]
a lot of the anger has been that
they haven’t had a voice,” the
secretary said in an interview.
But Mr. Zinke has infuriated
environmentalists and other
proponents of more conserva-
tion, who call him a tool of in-
dustry. They say his other ac-
tions to expand drilling on
public lands and in offshore
waters from Alaska to the Gulf
of Mexico are payback to back-
ers of his congressional cam-
paign, which have included oil
and gas companies. They also
accuse him of stacking the In-
terior Department with indus-
try executives and lobbyists.
“If you look at the decisions
views that they are leaning to-
ward approving hefty rate in-
creases.
According to actuarial firm
Milliman Inc., at least 32
32
states requesting different
premiums for various scenarios
states have requested that in-
surers prepare alternative pre-
miums for different scenarios.
Most of those states are
still holding off on a final deci-
sion on which rates to choose.
“The uncertainty makes it
very difficult to navigate, and
it’s not going away,” said Eric
other options, like mobile homes.
The storm is blamed for at
least 60 deaths in 11 counties.
Harris County, which is home to
Houston and saw the worst
flooding during the storm, re-
ported 30 confirmed deaths as
of Monday evening.
—Associated Press
ECONOMY
Aircraft-Order Drop
Weighs on Factories
Orders at U.S. factories de-
clined sharply in July, driven by a
drop in aircraft orders.
Orders for manufactured
goods fell 3.3% to a seasonally
adjusted $466.4 billion in July,
marking the steepest drop since
August 2014, the Commerce De-
partment said Tuesday.
Economists surveyed by The
Wall Street Journal predicted or-
U.S. NEWS
he has made, they have been
for single use,” said Chris Sae-
ger, executive director of the
Western Values Project, a con-
servation group based in
Mr. Zinke’s hometown of
Whitefish, Mont. “He is open-
ing more land for oil and gas
development.”
The secretary said his goal
is to manage public lands un-
der the principle of multiple
uses including industry, as he
said was put forth by Gifford
The secretary said his
goal is to manage
public lands under
multiple uses.
Pinchot, who was appointed
the first chief of the U.S. For-
est Service in 1905. Mr. Zinke
said his meetings with ranch-
ers, loggers and others who
make their living off the land
are intended to include a
group he says has been ig-
nored by federal policy makers
in recent decades.
He added that he meets
with all sides on various is-
sues, including environmental-
ists. “Everyone we meet,
there’s more in common than
A. Cioppa, superintendent of
the Maine Bureau of Insurance.
Insurer Anthem Inc. has
said it would stop offering ex-
change plans under Obama-
care, as the law is known, in
Maine next year if the federal
government stops payments
known as cost-sharing reduc-
tion subsidies.
Those payments, which Mr.
Trump, a Republican, has
threatened to halt, reimburse
insurers for money they ad-
vance to reduce health-care
costs for low-income ACA en-
rollees.
A White House spokesman
said the president “is working
with his staff and his cabinet
to consider the issues raised
by” these payments.
Anthem, which already has
announced retreats from sev-
eral exchanges, declined to
U.S. WATCH
A pedestrian in Missoula, Mont., fending off wildfire smoke.
ders would fall 3.2%.
Orders in June were revised
to a 3.2% increase from an initial
estimate of a 3% increase.
Excluding transportation, or-
ders were up 0.5% and have in-
Wednesday, September 6, 2017 | A7
Canada Is Taking
Tough Nafta Line
MEXICO CITY—The latest
challenge to renegotiating the
North American Free Trade
Agreement is coming from an
unexpected direction: Canada.
By William
Mauldin, Paul Vieira
and Dudley Althaus
For months, President Don-
ald Trump has pointed the fin-
ger at Mexico as the source of
U.S. trade deficits in North
America, and U.S. officials are
pushing for new provisions in
the 23-year-old trade pact that
would make it harder for Mex-
ican manufacturers to send
goods to the U.S. duty free.
But in the second round of
talks for overhauling Nafta,
running through Tuesday in
Mexico City, it is Canada that
appears to be giving the U.S.
the most difficulty at the ne-
gotiating table, according to
people familiar with the nego-
tiations.
The soft-spoken neighbor
to the north has avoided sling-
ing rhetorical barbs or politi-
cal warnings at its partners, in
contrast to the tweets of Mr.
differences,” he said. Trump or public comments of
At 112,000 acres, the Cas- President Enrique Peña Nieto
cade-Siskiyou National Monu- of Mexico.
ment is far smaller than some But Ottawa has introduced
others, but no less divisive, as new provisions on labor and
Mr. Zinke found on his visit the environment that may
here in late July. Mr. Clinton struggle to gain traction in
designated 52,000 acres as a Washington, and the Canadian
national monument in 2000. An negotiators have balked at
additional 13,000 acres were supporting some less-contro-
added in recent years through versial language that they
private land acquisitions. agreed to in Trans-Pacific
In the week before he left Partnership, the unratified 12-
office, Mr. Obama added 47,000 nation trade deal that Mr.
acres to the refuge—extending Trump exited in January, the
it into part of Northern Cali- people say.
fornia—after environmentalists Canada’s tough stance is
lobbied for wider protection in seen partly as a defensive
an area they say is vulnerable strategy to notch some wins in
to impacts from climate case it needs to agree to tough
change, among other things.
Loggers and ranchers cried
foul, saying the expanded
monument would limit their
operations. Before meeting
with anyone, the interior sec-
retary opted to do what he of-
ten does—explore on foot.
Along the way, he greeted
hikers by saying “Hi, I’m Ryan”
and offering his hand. Ex-
changes were mostly amiable,
except this one: “I know your
boss is not a fan of the envi-
ronment, or a fan of the
planet,” Dan Roper, a 34-year-
old local environmental activ-
ist, said to Mr. Zinke at the
end of the trail. Mr. Zinke shot
back, “Who said that?” Canadian Foreign Minister Chrystia Freeland
comment. West Virginia and Delaware.
After federal officials “There has to be a clear set of
pushed back an earlier dead- rules for 2018 for us to partic-
line, insurers are supposed to ipate.”
submit their rate filings for Other big insurers, includ-
2018 exchange plans to state ing Molina Healthcare Inc.,
and federal regulators by have said they are still consid-
Tuesday. ering leaving more exchanges.
Regulators then have until Health Care Service Corp., a
Sept. 20 to complete their re- major exchange insurer, said
views and approve rates. In- in a statement it has filed pro-
surers are due to sign final posed rates in all of the states
federal contracts to offer plans it is serving that account for
by Sept. 27. the uncertainty around the
Some insurers said they are cost-sharing payments, but it
moving forward with plans to “will make final decisions in
participate in the 2018 mar- late September” about the
ketplaces but holding off on fi- scope of its offerings.
nal decisions until the late- A Senate committee is set
September cutoff. to begin hearings Wednesday
“We’re keeping our options on legislation intended to sta-
open,” said David Holmberg, bilize the exchanges created
chief executive of Highmark under the 2010 law, which will
Health, which sells exchange be tough to pass in time to af-
coverage in Pennsylvania, fect the 2018 marketplaces.
and drugs, increased 0.4% to
$237.4 billion.
—Sarah Chaney
WESTERN WILDFIRES
Weather a Hindrance
As Parks Threatened
PATRICK RECORD/ASSOCIATED PRESS
Firefighters across the West
struggled with wind-driven
flames, heat and dry conditions
as wildfires bore down on two
popular national parks.
The dozens of fires burning
across the Western U.S. and
Canada have blanketed the air
with choking smoke from Ore-
gon, where ash fell on the town
of Cascade Locks, to Colorado,
creased for two consecutive where health officials issued an
months. Excluding defense, an- air-quality advisory.
other volatile category, orders A 14-square-mile fire in Mon-
fell 3.7%. tana’s Glacier National Park
Orders for nondurable goods, emptied its busiest tourist spot
which include products like fuel as wind gusts drove the flames
requests made by the Trump
administration in Nafta, in-
cluding removing a dispute-
resolution system that allows
one Nafta country to challenge
another’s tariffs. The country
is also in parallel talks with
the U.S. on softwood lumber,
and officials in Ottawa are ea-
ger to defend their system for
supporting dairy farmers, crit-
icized by U.S. lawmakers from
dairy states.
“We are just defending our
interests,” Canada’s chief ne-
gotiator, Steve Verheul, said at
the talks late Sunday.
But the country’s approach
may prove difficult for the
U.S. and Mexico, which are
seeking to wrap up talks as
early as December or January,
ahead of election seasons that
have a potential to sour trade
talks among the three coun-
tries.
Besides Canada, Mexico is
also sending a tough political
message: It won’t accept U.S.
trade proposals or govern-
ment policy that hurts the
country’s interests. “I’ve said
it and I will reiterate it: We
won’t accept anything that af-
fects our dignity as a country,”
Mr. Peña Nieto said on Satur-
day.
Mexican Foreign Minister
Luis Videgaray said last week
he will halt negotiations if Mr.
Trump starts the process of
pulling out of Nafta. Mexican
officials have also said pri-
vately that they won’t discuss
proposals that include tariffs
or quotas as well as anything
that restricts trade above and
beyond the rules both coun-
tries already face in the World
Trade Organization.
“No Nafta is better than a
bad Nafta,” one person close
to the Mexican government
said.
AARON P. BERNSTEIN/REUTERS
Any bill is likely to include
funding for cost-sharing pay-
ments.
The Congressional Budget
Office estimates that if the
payments end, insurers would
decline to offer exchange plans
in regions representing about
5% of the U.S. population next
year and would raise premi-
ums on average about 20% on
the middle-tier “silver” plans.
The cost-sharing subsidies are
tied to silver plans.
Maryland’s insurance com-
missioner, Al Redmer Jr., re-
cently approved steep rate in-
creases.
But the rates didn’t include
an extra bump for the poten-
tial loss of the federal cost-
sharing payments, Mr. Redmer
said. “The law is the law, and
we have to assume it won’t
change,” he said.
toward the doorstep of an iconic
lodge. Lake McDonald Lodge, a
103-year-old hotel, sits on a lake
as the famed Going-to-the-Sun-
Road begins its climb up the
Continental Divide. Fire crews
got bad news Monday: The wind
had shifted and gusts were driv-
ing the fire down the mountain-
side toward the lake’s shores.
Outside California’s Yosemite
National Park, a wind-fueled fire
made its way deeper into a
grove of 2,700-year-old giant se-
quoia trees. Officials said the fire
had gone through about half the
grove but hadn’t killed any trees.
Elsewhere in Northern Califor-
nia, a fire destroyed 72 homes
and forced the evacuation of
about 2,000 people from their
houses. The fire has burned 14
square miles in the community
of Helena about 150 miles south
of the Oregon line.
—Associated Press
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A8 | Wednesday, September 6, 2017 THE WALL STREET JOURNAL.

SPORTS
U.S. OPEN
Yasiel Puig, right,

Sharapova celebrates a walk-off

hit with teammates

Rethinks Her
Chris Taylor, left, and
Clayton Kershaw.

Exit Strategy
BY TOM PERROTTA

In 2016, before the results of a

drug test banned her from tennis,
Maria Sharapova thought about
the end of her career. She would
play until the U.S. Open of 2017
and then walk away at age 30, her
playing days complete no matter
the results on court.
These days retirement isn’t in
her mind. After a 15-month sus-
pension she’s competing again
and, at the U.S. Open, played bet-
ter than anyone expected. Her loss
on Sunday put her out of the tour-
nament after four rounds, but
leaves her hopeful for the immedi-
ate future.
“It’s been a really great ride in
the last week,” Sharapova said.
Next for Sharapova: She’s going

MARK J. TERRILL/ASSOCIATED PRESS

to promote her autobiography in
various spots next week, including
New York, Cleveland and Los An-
geles. The book reveals that
Sharapova had planned to retire
from tennis as soon as this year.
Now, though, she plans on going
as long as possible. The book cites
her 15-month suspension as a big
part of the reason.
Sharapova, who tested positive
for meldonium, a cardiac supple-
ment, said Sunday that her time
away from the game changed her
view.
“When I was in my middle 20s,
I didn’t think that my body would
be ready to compete at such a
level,” she said. “And I just got a
completely new appreciation of
what the body can do at 30 years
old, or past 30 years old.”
Sharapova’s representative team
claims she has lost little, in terms
of income, with her sponsorships.
One watch company, Tag Heuer,
declined to renew its deal when it
ended. Most sponsors—including
Nike, Evian and Porsche—have
kept their contracts with her.
As for her support, in tennis
there’s a mixture between those
who have no complaints, and oth-
ers who are still cynical about her
suspension. Caroline Wozniacki, a
former No. 1, lashed out about
Sharapova’s treatment at the Open
considering she wasn’t ranked
high enough for direct entry into
the main draw.
“Someone who comes back from
a drugs sentence and, you know,
performance-enhancing drugs, and
all of a sudden gets to play every
single match on center court, I be-
lieve is a questionable thing to
do,” Wozniacki said. “It doesn’t set
a good example.”
Sharapova brushed that idea
aside in her response.
“I don’t make the schedule,” she
said. “I’m a pretty big competitor.
If you put me out in the parking
lot of Queens in New York City, I’m
happy to play there. That’s not
what matters to me.”
GEOFF BURKE/REUTERS
Can the Dodgers Be Great?
BY JARED DIAMOND
As the Los Angeles Dodgers
enter the home stretch of their
quest for the winningest cam-
paign in baseball history, Jeff Nel-
son understands their situation
perhaps better than anybody on
the planet. A standout reliever
from 1992 through 2006, Nelson
pitched for two of the most domi-
nant teams of his or any other
generation: the 1998 New York
Yankees and the 2001 Seattle
Mariners.
The former finished with 114
regular-season victories and
blitzed the competition in the
playoffs en route to a World Se-
ries sweep, earning the reputation
as one of the greatest collection
of players ever assembled. The
latter fared even better from April
through September, matching the
1906 Chicago Cubs’ all-time re-
cord with 116 wins.
But conversations about the
best teams on baseball ever rarely
include the ’01 Mariners, unless to
lament—or mock—what happened
next.
The Mariners failed in October
that year, losing in the American
League Championship Series to
the Yankees with a defeat that
forever sent them to the waste-
basket of disappointments and
missed opportunities. They blew a
late-inning lead in Game 4, a con-
test in which Nelson threw 1 2/3
scoreless innings. That night, so
sure of the series’ eventual out-
come, Nelson recalls staying out
until 6 a.m.
“You can say I played on a
team that won 116 games,” Nelson
said in a recent interview. “But
we didn’t finish it off. We didn’t
MLB
Regardless of how this next
month unfurls, whether the Dodg-
ers beat Seattle’s performance or
not, they will head into the post-
season facing only two possible
paths: Either win the World Se-
ries and polish off a season for
the ages, or fall short and watch
it all go for naught.
It might sound unfair, but the
2001 Mariners know the feeling
well, and it continues to haunt
them 16 years later.
Paul Abbott, a Seattle starter
who went 17-4 that season, said
that he tries to keep a positive
outlook and remember that the
Mariners “were a part of history”
and “did something that was
pretty special.” Ultimately, how-
ever, Abbott admits that he can’t
escape the fact that “it still stings
that we’re not going to be talked
about as one of the best teams
because we didn’t win the World
Series.”
In other words: Hey, Dodgers—
no pressure.
“If you’re going to be one of
the greatest teams of all-time, you
probably have to win it all,” said
Ed Sprague, a utility man for the
’01 Mariners who now works in
the Oakland Athletics organiza-
tion.
In other sports, regular-season
excellence tends to correlate with
titles. The team with the best
overall record has won half the
championships since the NBA
moved to its current playoff for-
mat in 1984. The top regular-sea-
son team has won 49% of the Su-
per Bowls since the NFL-AFL
merger in 1970.
The 2007 New England Patriots
and 2015-16 Golden State War-
riors feel like such choke jobs be-
cause teams that good rarely fal-
once described the postseason as
a “gauntlet of randomness.”
The numbers support that
view: The team with the best reg-
ular-season record has won the
World Series less than 23% of the
time since the introduction of the
wild card in 1995.
Three of the six teams ever to
reach 110 wins went home with-
out a ring, including the 2001
Mariners.
“In a short series, anything can
happen,” said Edgar Martinez, the
longtime Mariners’ designated
hitter who now works as the
team’s hitting coach.
“In baseball, you just never
know. I don’t see [the ’01 loss] as
a failure.”
The 2001 Mariners won
116 games but are rarely
mentioned as one of
baseball’s great teams.
Players say that in the playoffs,
the hottest team usually wins, not
necessarily the best, and momen-
tum can change at a moment’s no-
tice. The Mariners went 20-7 in
September and early October be-
fore heading into the playoffs,
only to struggle in a five-game se-
ries against the Cleveland Indians
before running into the Yankees.
Looking back now, the Mari-
ners say they don’t know what
they would change about how
they approached the playoffs. The
team just ran into the wrong op-
ponent at the wrong time.
“There’s not anything you can
do to prepare for going into the
that we could do.”
When the playoffs begin, the
Dodgers will face loads of pres-
sure and expectations, almost cer-
tainly dealing with more intense
scrutiny than the Mariners en-
countered.
They play in the nation’s sec-
ond-largest media market and ha-
ven’t won a championship since
1988. They have the highest pay-
roll in the major leagues and have
claimed four straight division
crowns—with a fifth on its way—
without winning a single pennant.
Clayton Kershaw, the best pitcher
in the sport, has posted a 4.55
ERA in 18 playoff appearances, a
fact that will no doubt come up a
few times this October.
But Nelson says the added
pressure could wind up helping
the Dodgers. He pointed to his
time in 1998 with the Yankees, a
franchise that subscribes to a
“championship-or-bust” mentality
and had an owner in George
Steinbrenner who made it abun-
dantly clear that 114 wins didn’t
matter without a championship.
With the Mariners, a team that
has never made the World Series,
Nelson said he didn’t always feel
that.
“It was a huge difference be-
cause of two different cities,” Nel-
son said. “In New York, we had to
keep the pedal to the metal be-
cause of pressures from the out-
side.”
For now, the Mariners players
say the Dodgers should just re-
mained focus on winning in Sep-
tember in an effort to go into the
playoffs feeling confident. That
hasn’t been happening lately: Los
Angeles entered Monday’s action
having lost eight of its last nine
games, its worst stretch of the

Sharapova has no plans to retire.
win the World Series, so what
does it matter?”
Consider Nelson’s experience a
word of warning for the 2017
Dodgers, a powerhouse looking to
become the first team since those
Mariners to top the 110-win mark.
ter.
It doesn’t work that way in
baseball, which features a playoff
structure that declares a victor by
distilling a 162-game marathon
into a month-long sprint. Billy
Beane, the longtime A’s executive,
postseason other than, hopefully
you’re playing well,” said Mark
McLemore, who hit .286 in 409
at-bats for that team
“That’s it. There’s not a differ-
ent mindset that we could have
taken. There was nothing more
season.
The Mariners wouldn’t mind if
the Dodgers even lose few more
before October. They may not
have won the World Series, but
they did win 116 games—a record
they would like to keep.

FROM PAGE ONE

PARROT cords, paper and curtains.

Continued from Page One
40 of them and has 18 avail-
able for adoption, according to
board member Laura Fick-
ley. Most are from owners who
are no longer willing or able
to care for them. Pearl relies
on its website and informa-
tional booths at local pet
shops, sometimes bringing
well-behaved ambassador
parrots.
They need a minimum of 10
to 12 hours of sleep each day.
Sleep-deprived parrots can be
mean. So can a cramped par-
rot. A green wing macaw, with
a wingspan of 47 inches, needs
a cage the size of a queen
mattress.
Potential adopters must fill
out applications and take basic
care classes. They are told not
to smoke in front of their
birds or burn scented candles
because birds are very sensi-
tive to air quality. Cooking in
eat seeds because that is what
people put in their outside
bird feeders. Indoor birds
don’t get as much exercise and
of baggage,” he says, and she
screamed a lot.
Ms. Martine has been work-
ing with Charlie, a blue-and-
can get fat from seeds, putting gold macaw, who sent two
stress on their hollow bones previous owners to the emer-
and leading to potential dam- gency room, one with a piece
age to kidneys and livers. of his earlobe missing and the
Some people feed birds Cheer- other who lost part of her
ios and Doritos and peanut tongue after trying to kiss
butter crackers. That’s a no- Charlie through the bars of his
no. cage. She makes a point of in-
Edward Moats chops fresh cluding him in her routine,
vegetables and bakes whole- trying to socialize him. She
grain bird bread for his nine took him to a parade on a
birds. He bred birds for 27 leash. He loves noise and fire-
LAURA FICKLEY
lenging as parrots are, they
are also loving and smart. She
got her first bird, a little cock-
atiel, when she was 14. “It sat
at the pet store for three
years. I begged my dad to get
it for me.”
She named the parrot
Lunch because she also had a
cat that spent a lot of time
staring at the bird. Ms. Mar-
tine taught Lunch to whistle.
Lunch also learned to sing the
theme to the TV show “Fan-
tasy Island.”
She taught another bird,

Volunteers talk about what
parrots are like, explaining
why they are naturally messy
and destructive. In the rain
forest, they chew on nuts and
seeds and fling them.
In homes, they’ve been
known to break out of their
cage by removing the bolt and
peck off the computer keys on
a keyboard and drop them on
the floor. They shred wood, in-
cluding picture frames and
furniture, and chew electrical
Teflon pans is discouraged, as
is Febreze air freshener. Their
homes are inspected to iden-
tify potential hazards, such as
ceiling fans, and to make sure
interested owners aren’t
hoarders. Pearl once helped
rescue 160 cockatiels from one
home.
Advanced behavior classes
are required for anyone adopt-
ing larger parrots. Nutrition
101 is advised. Many people
think birds are supposed to
years, inspired by his grand-
mother, Myrtle, who lived on a
farm and bred canaries. He
stopped breeding birds two
years ago, realizing he was
contributing to the overpopu-
lation of unwanted birds and
is now on the Pearl board.
A certified avian specialist,
he takes in special-needs par-
rots, including those who are
blind and amputees, or have
severe behavior problems. Par-
rots can develop phobias, re-
Scooter, a lesser sulphur-
crested cockatoo.
fusing to leave their cage, and
suffer panic attacks, and other
mental-health problems due to
unstable home life.
Lucy, one of his parrots,
had been through several fos-
ter homes. “She carried a lot
works.
“We take them every-
where,” she says of the family
birds. Caesar, an umbrella
cockatoo, is especially social.
Ms. Martine’s husband brings
him along to Planet Fitness
and the grocery store, places
that wouldn’t usually allow
pets. He has never been ques-
tioned. “They just assume he’s
an emotional-support bird,”
she says.
Ms. Martine says as chal-
who had a piercing scream,
to quack instead. “He would
scream, I would quack. He
would scream, scream, scream.
I would quack, quack, quack.
Finally he quacked,” explains
Ms. Martine.
She is still working
with Scooter, a lesser sulphur-
crested cockatoo whose owner
could no longer take care
of him. “I’m trying to teach
him to be a nice bird,” she
says.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, September 6, 2017 | A9

LIFE&ARTS
ART

Videogames Take On a Life

Ian Cheng blends art and artificial intelligence in his first solo show at New York City’s MoMA PS1
BY KELLY CROW

WHAT IF A VIDEOGAME could

play itself? New York artist—and
cognitive scientist—Ian Cheng has
riddled out an answer that is win-
ning over researchers and art lov-
ers alike.
Mr. Cheng, whose first museum
solo show, “Ian Cheng: Emissar-
ies,” is on view at New York’s
MoMA PS1 through Sept. 24, has
spent the past three years devel-
oping software that simulates ani-
mated games—with backdrops
that include an ancient village
nestled against a rumbling vol-
cano, a teeming wildflower field
and a spare, sandy atoll. The key
distinction is that he has popu-
lated his scenes with foliage and
figures who twitch and fight and
feed each other in real time with
no predetermined outcomes, an
endless unspooling of artificial in-
telligence in beta mode.
At one point during the volcano
simulation, Mr. Cheng said that he
watched a group of villagers gang
up on an outlier, kill him, drag his
body into the center of town and
urinate on him. “There was no al-
gorithm for that,” he said. “It was
horrifying, but it felt like a revela-
tion since they had
not been told to do A scene from Ian Cheng’s ‘Emissary Forks at Perfection,’ above. The exhibit, below, is on through Sept. 24. And the
anything like that.” In artist, left.

CLOCKWISE FROM TOP: IAN CHENG/PILAR CORRIAS/STANDARD (OSLO); IAN CHENG/MOMA PS1; PRESLEY ANN/PMC
another simulation, he
watched a pack of
dogs encircle a man
and repeatedly lick
him, a man’s-best-
friend response that
was also unscripted.
The Museum of
Modern Art said it
was so impressed by
Mr. Cheng’s work that
it bought the trio of
his simulations before
the last one was even
finished. Major collec-
tors of video art like
Dusseldorf’s Julia Sto-
schek have also
bought early editions.
New York’s Gladstone
Gallery added the art-
ist to its roster on
Tuesday.
Starting Sept. 22,
Pittsburgh’s Carnegie
Museum of Art will
show his latest simula-
tion, “Emissary Sun-
sets The Self.” In a
fresh twist, curator
Eric Crosby said that the Carnegie stead, his programming allows Lucas’s visual-effects and anima- volcano, a shaman-leader who is them,” he said.
gallery’s overhead lights will be characters to convulse and collide tion studio, Industrial Light & coded to ignore it and the sha- Peter Eleey, chief curator at
synced to match the day-or-night in mutations that look like soft- Magic. Instead of fawning over man’s daughter who is tasked MoMA PS1, said the work also
scenario unfolding on the piece’s ware glitches. In the lush-garden “Star Wars” characters, he gravi- with alerting her father to the im- raises intriguing questions for
13-foot-long LED screen. game, he once watched an old- tated to the company’s research pending eruption—but who often museums or collectors who want
“A lot of artists are working in fashioned red telephone glom and development division, where gets distracted by fellow villagers to store or study Mr. Cheng’s
response to a digital landscape, onto a nearby palm tree, a combi- he said researchers were toying offering her food or a place to work for the long term.
but he’s innovating in that space,” nation he calls a “self-made sculp- with new ways to simulate natural sleep or whatever daily-ritual the Since his pieces operate like a
Mr. Crosby said. “He’s invented an ture.” phenomenons like whirlpools. others want to enact in the mo- computer program instead of a
entirely new art form with its own Growing up in Los Angeles as Later, after art school at Co- ment. Mr. Cheng said he relished film, there is nothing to archive—
rules and norms.” the son of graphic designers, the lumbia in New York and jobs with the godlike control he initially had only software to start up or up-
Fans of HBO’s rebelling-robots 33-year-old artist said he always established artists like Paul Chan over these characters and the sur- date as the artist sees fit.
show “Westworld” will relate to wanted to work within the nexus and Pierre Huyghe, he began ex- prising pride he felt once he let “At night, we turn the projec-
the anything-goes uncertainty of cognitive science and art. He perimenting, creating the volcano randomness intervene. tors off, but the piece itself keeps
that pervades Mr. Cheng’s works, earned a dual degree at the Uni- scenario in early 2015. The only “Art is my way of playing with running,” Mr. Eleey said. “When
but the artist said he isn’t striving versity of California at Berkeley narrative direction he gave was to people’s nervous systems, to se- we come in each morning, the Pe-
for a hyper-realistic setting. In- and worked afterward at George create a trembling threat in the duce them but also unsettle trie dish is transformed.”

MY RIDE | By A.J. Baime

BIG LOVE FOR A TINY, TINY CAR

Ralph Hough, 74, the deputy mayor of
Oro-Medonte, Ontario, on his microcars, as
told to A.J. Baime.
The week before I married my wife Wendy
in 1962, we bought our first microcar, a Mes-
serschmitt. We lived in England at the time
and we went on our honeymoon in this car.
Later we toured Europe in it, and in 1964
visited the Messerschmitt factory in Regens-
burg, Germany, right around the time the
company stopped producing these vehicles.
Back then, microcars were called bubble
cars, and they were quite popular, most no-
tably the Messerschmitt (like ours) and the
BMW Isetta. These vehicles first appeared in
our 55th wedding anniversary. We collect
these cars because of the sentimentality, be-
cause we had such memorable adventures in
them when we were young.
The red car you see pictured here is a
three-wheeled 1955 Messerschmitt KR175. It
has a 175-cc motor that is bolted right to the
car’s frame with no rubber engine mounts,
so the vehicle is a real boneshaker. It is kind
of a hybrid between a car and a scooter, in
that it has handlebars and a motorcycle-
style gear shifter, plus carlike foot pedals. It
cruises comfortably at about 50 mph. At a
constant speed of 30 mph, it could probably
get close to 100 miles a gallon.
JENNIFER ROBERTS FOR THE WALL STREET JOURNAL

the early 1950s, not long after World War II,
when resources like steel and fuel were
scarce. (Messerschmitt built fleets of Ger-
man military planes during the war.) Bubble
cars made sense. They were efficient, did
not use a lot of raw materials, and unlike
scooters, protected riders from the weather.
Today, we have six Messerschmitts and
one BMW Isetta, and we host a festival on
our property called Micro North every June.
We get 40 to 50 oddball cars from all over
the northern States and Canada. This year’s
party was extra special because it was the
25th year. It also marked the 55th year since
my wife and I bought our first microcar, and
I bought this Messerschmitt from an
owner in Montreal approximately 20 years
ago, and it was a real basket case. I used
parts from five other Messerschmitts in the
restoration. I have no idea how much the ve-
hicle cost because I have purposely avoided
adding up the bills.
My wife and I have had wonderful adven-
tures in microcars with other microcar fans.
We like to do our part to keep these vehicles
on the road so future generations can enjoy
them too.
Contact A.J. Baime at Ralph and Wendy Hough in their Messerschmitt in Ontario, more than a half-century after they
Facebook.com/ajbaime. took their first Messerschmitt on their honeymoon.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A10 | Wednesday, September 6, 2017 THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK
Does Trump Want
A Missed Warning on the McCain? A Nuclear Japan?
T
he U.S. Navy has found and identified 10 This is great for deterrence.
sailors who died last month when a But this requires a rapid tempo of opera- By Walter Russell Mead ing the nuclearization of Japan and

A
others by providing them reliable pro-
guided-missile destroyer crashed into a tions. GAO found that ships home-ported in the
s the North Korean nuclear crisis tection under the U.S. nuclear and con-
tanker in the Pacific, and one U.S. spent 69 days a year de- continues to deepen, the stakes ventional umbrella.
service member hadn’t A 2015 report highlights ployed under way, on average, are slowly becoming clearer. This Others, who may include President
reached his 21st birthday. An the stress on ships and between 2004 and 2012. Ships isn’t only about the threat Pyongyang Trump, might see the nuclearization of
investigation continues, based overseas in places like poses to its neighbors or even to the East Asia not as a defeat, but as a vic-
though a 2015 report that re- crews based abroad. Spain or Japan spent 111 days U.S. mainland. Kim Jong Un is chal- tory for U.S. foreign policy. China’s
ceived little attention com- under way. U.S.-based ships lenging the foundations of the Ameri- geopolitical ambitions would be con-
pounds questions about are supposed to spend about can position in East Asia. In the pro- tained by a nuclear Japan, South Korea
whether the military has the resources to equip 40% of their 27-month cycle deployed or avail- cess he has exposed a deep divide in and maybe Taiwan. Washington could
sailors for war. able, with the rest in maintenance or training. American thinking, laying bare the remove troops from Korea and cut the
The USS John S. McCain’s collision happened Japan-based cruisers and destroyers, on the hard choices Washington may soon be defense budget, while letting allies pay
forced to make. the costs of containing China.
in a busy shipping lane near Singapore, and sev- other hand, are slated to spend 67% of their two
Close observers have long under- The alternative is a status quo in
eral theories have been offered. One is a cyber year cycle deployed or ready to go, and only stood that North Korea’s belligerence which the U.S. pays most of the bills to
attack, though there is no obvious evidence so 33% in maintenance. The accruing deferred and nuclear buildup are pushing defend the Pacific against China, risks
far. A Chinese newspaper pounced to suggest maintenance, the report notes, could shorten Japan toward fielding its own nuclear war with countries like North Korea
that it’s unsafe for the Navy to operate in the a ship’s life, even as the Navy has too few ships. weapons. No nonnuclear power in the and must further “bribe” its allies by
area, and how convenient for Beijing’s pur- Unlike U.S.-based ships, the planning cycle world is nearer to a nuclear capacity promoting purportedly job-destroying
poses. The Navy has released few details but re- for ships based in Japan also does “not include than Japan. cheap imports from countries like
lieved the commander of the Seventh Fleet, Vice a dedicated training period” that allows crews Many analysts believe it would take South Korea. This option doesn’t seem
Admiral Joseph Aucoin, who was scheduled to to hone their skills for competency at sea. The Tokyo only months to go from deciding all that attractive to Mr. Trump’s
step down within weeks. quick turnarounds create what GAO calls a to nuclearize to having the weapons. In “America First” voters.
the ensuing chaos, it’s likely that South
The McCain incident follows a fatal crash “train on the margins” approach. This means
Korea and Taiwan would follow suit,
earlier this summer involving the USS Fitzger- “crews train while under way” or sometimes in with at least Taiwan receiving quiet It might please the ‘America
ald, which cost seven lives and the ship’s com- the few days in between. help from Japan.
manding and executive officers their posts. A It isn’t clear what the Navy has done since Elite Japanese opinion is perceptibly
First’ crowd. But retreat
ship careened into a South Korean fishing boat the report’s findings, and the point is not to shifting in favor of the nuclear option. from Asia won’t bring peace.
in May. The USS Antietam somehow ran blame the dysfunction entirely on the service. Conservative nationalists there have
aground in Tokyo Bay in January; the Navy fired Funding and priorities are dictated by 535 poli- long believed that a nuclear arsenal
the commanding officer in that incident, too. ticians in Congress. The military has been sub- would allow Japan to resume its place Yet standing aside in East Asia would
The common denominator is the Pacific, and ject to erratic budgets that make building new as an independent great power, freed also represent a clean break with Amer-
many ships in the Seventh Fleet region are “for- ships or other large projects difficult and more at last from its post-1945 dependence ican strategic thought after World War
ward deployed.” The McCain, Fitzgerald and costly. Many of the politicians who complain on the U.S. II. For decades the U.S. has guaranteed
The Japanese public has been deeply the status quo in places like East Asia
Antietam are all home-ported in Japan. about misspent money at the Pentagon have
skeptical, but North Korean threats and while providing “international public
The question is how so many events could created a much more expensive mess. missile overflights—combined with goods” like the sea power that has kept
unfold in a year in one command, and a 2015 The armed forces have an honorable tradi- doubts about American commitment the oceans open to all.
Government Accountability Office report now tion of relieving top brass after a failure, and and reliability—are leading more people Americans have kept the peace at a
regrettably looks prescient. The report de- more government institutions could benefit to think the unthinkable. sustainable cost. It’s no longer clear
scribes how ships home-ported abroad have from such accountability. As for President The effort to get China to put its that U.S. public opinion supports this
weathered particularly tough deterioration in Trump and Congress, perhaps this autumn they weight behind stopping North Korea is long-term strategy; neither Trump Re-
recent years, while budgets have tightened and can take a break from feuding about a border predicated on these assumptions. The publicans nor Bernie Sanders Democrats
the size of the force has decreased. The Navy wall—and pass a more stable appropriations theory is that China’s interest in seem to think in these terms.
relies on an overseas presence that allows ships bill to give American sailors the equipment and blocking Japanese and Taiwanese nu- But American retreat in the Pacific
to show up anywhere within days or even hours. training they need for their crucial missions. clearization is great enough to enlist would more likely lead to arms races
Beijing in an all-out campaign to stop and military confrontation than to
Pyongyang. peaceful development. Beijing’s ambi-

The Free-Speech Battles of Berkeley Logical as the concept may be, it is a

hard sell. Although some Chinese ex-
tions in the South China Sea threaten
the security of trade routes on which

F
perts understand that the U.S. presence Japan depends. North Korea’s drive
all semester in America has begun, and Meanwhile, Ms. Christ is schooling the in Asia advances their interests, others for bigger bombs, and the interconti-
the University of California at Berkeley mayor on the First Amendment. The chancellor are so buoyed by China’s economic nental missiles to deliver them, would
is back at the epicenter of the free-speech believes allowing the speeches to continue as growth and dismissive of Japan that only continue.
wars. Last weekend saw 13 ar- scheduled is the university’s they would rather focus on reducing The North Korean crisis presents the
rests as Antifa activists blood- The mayor pressures the legal obligation and spokes- American power in the region. U.S. with two deeply undesirable alter-
ied their outnumbered foes in man Dan Mogulof told us she Neither the U.S. nor China should natives. On the one hand, Washington
the city streets, and conserva-
university to cancel is prepared to spend hun- look to Russia, which benefits from can abandon seven decades of national
controversial speakers. dreds of thousands of dollars the North Korean crisis, for much help strategy and risk growing instability in
tive journalist Ben Shapiro, checking the Kim regime. Moscow Asia; on the other, it can risk an ugly
former White House aide Steve on security to protect speak- wouldn’t greatly mind a nuclear and dangerous war with a vicious and
Bannon and alt-right parvenu ers and attendees. Japan, whose rise would reduce Amer- unprincipled opponent.
Milo Yiannopoulos are scheduled or have been Ms. Christ is off to a good start, but the pres- ican influence, promote a more “mul- The Trump administration is
invited to speak on campus this month. Stage sure to capitulate will increase as the semester tipolar” international system and trapped in a strategic dilemma with no
set, Chekhov’s gun on the table. goes on. In the student newspaper recently, check China. easy escape. The allegedly crazy Kim
The university’s new chancellor, Carol T. Berkeley resident Sarah Cordette accused the In this scenario Russia’s influence in regime has managed to put the U.S. in
Christ, has vowed to restore free speech on cam- chancellor of “giving institutional support to Asia would increase, with China and a tight corner. We must hope that Mr.
pus, saying in August that it was “critical for the white supremacists” and exposing students to Japan competing for its favor. Trump’s White House can succeed
Berkeley community to protect this right.” Resil- “mental and emotional damage.” You can imag- The Trump administration appears where so many of its predecessors
divided. Some analysts, almost cer- have failed badly.
ience is “the surest form of safe space,” she told ine what the faculty is saying.
tainly including all of the top White
students, and “we would be providing you less of Past administrators were so intimidated by House advisers, believe America’s in- Mr. Mead is a fellow at the Hudson
an education” if “we tried protect you from ideas student protesters that the university installed terests are best served by maintaining Institute and a professor of foreign af-
that you may find wrong, even noxious.” a $9,000 emergency exit in the chancellor’s office, the status quo in the Pacific—prevent- fairs at Bard College.
Yet Berkeley Mayor Jesse Arreguin has al- which soon became known as an “escape hatch.”
ready asked the university to cancel controver- And when Mr. Yiannopoulos tried to speak on
sial speakers. He said last week the city must be campus last February, Antifa activists threw Mo-
LETTERS TO THE EDITOR
“very careful that while protecting people’s free- lotov cocktails, used commercial-grade fireworks
speech rights, we are not putting our citizens in as grenades, shattered windows and set fires, FGM Is Abuse, ‘Culturally Sensitive’ or Not
a potentially dangerous situation and costing causing about $100,000 in damage.
the city hundreds of thousands of dollars fixing A mayor like Mr. Arreguin has a duty to main- Kristina Arriaga has her facts female genital mutilation” (FGM) and
wrong (“Cutting Young Girls Isn’t Re- argued that if the symbolic pinprick
the windows of businesses.” tain public order, and no doubt his job would be
ligious Freedom,” op-ed, Aug 28). is adopted “it will help protect young
Mr. Arreguin also suggested that conserva- easier if no one controversial ever spoke at Neither I (nor Mayer Morganroth) girls and it will help protect religious
tive speakers were “just a target” for radical ac- Berkeley. But a democracy needs the free ex- are representing the doctor in the rights.” You wouldn’t know that read-
tivists “to come out and commit mayhem on the change of ideas, and universities abandon a so- Michigan case. I am consulting with ing the op-ed.
Berkeley campus and have that potentially spill cial duty if they aren’t venues for that exchange. the religious group in an effort to The symbolic pinprick is modeled
out on the street.” Yet the risk comes not from Mr. Arreguin should be standing in support of strike the proper constitutional bal- on the Jewish tradition when a non-
the peaceful speakers but from masked and Ms. Christ rather than caving in to the violence ance between religious freedom and Jewish child has been secularly cir-
armed censors. of the radical left. the rights of children. cumcised and then converts to Juda-
Ms. Arriaga purports to quote an in- ism. The pinprick itself, like
terview in which she says I advocated cosmetic ear piercing, has no medi-
Navigating ObamaCare the “pricking [of] the girls’ clitoris.” I
have never advocated a pricking of the
cal benefits or harm. But it is less
intrusive than procedures practiced

O
clitoris, but rather a benign, sterilized, by some groups, while protecting
ne of the more evidence-free claims on care Part D and Medicare Advantage, HHS has symbolic pinprick in the hood covering the constitutional right of its reli-
the left is that the Affordable Care Act noted. The money will be directed to targeted the clitoris, which is much like the gious practitioners.
worked brilliantly before Republicans campaigns such as emails and texts. foreskin of the penis. ALAN M. DERSHOWITZ
tried to dismantle it. Witness Critics accuse the Trump This is what I said in the inter- Cambridge, Mass.
the claim last week that the The administration tries Administration of trying to view: “I am categorically opposed to
Trump Administration is try- to cut back on advisers sabotage the exchanges, and While federal law bans FGM, only
ing to tank the law’s ex- it’s amusing to imagine that 25 U.S. states specifically outlaw the
changes, which are struggling who do little advising. the problem with ObamaCare Googlers: How Free Do You procedure, making local prosecution
from lack of consumer choice is that not enough people have Feel to Express Your Views? difficult. Ohio doesn’t statutorily for-
bid FGM. The Ohio Public Safety De-
and affordability, not from a heard about it. Navigators will
Regarding the Aug. 22 letter from partment instead published “A Guide
lack of government marketing. receive funding based on enrollment goals; a Scott Williams, which states that to Somali Culture” for first respond-
Health and Human Services announced grantee that enrolled 50% of projections will re- James Damore’s “most dishonest claim ers and law enforcement to achieve
Thursday that the agency will alter the funding ceive 50% of last year’s funding. More than $36 is that his views were suppressed”: the “cooperation, understanding, mutual
structure for ObamaCare “navigators.” These million will be paid out. So those who are compe- writer’s rationale for this absurd state- respect, and harmony” with Colum-
are the community outfits the Obama Adminis- tently enrolling people will still receive funding, ment is that Mr. Damore’s letter was bus’s Somali immigrants. The guide
tration paid to steer folks through the Affordable and why pay those who aren’t? freely circulated at Google and he devotes more than four pages to the
Care Act’s subsidies and penalties. Last year the Last year’s marketing blitz—double the $50 wasn’t forced to delete it. Somali-Muslim cultural-religious
Obama Administration handed out $62.5 million million spent in 2015—produced no bump in en- This is a perfect example of mud- practice of FGM.
in grants for open enrollment for 2017, and the rollment, so classify as bogus the complaint that dled leftist thinking. Did the writer Instead of criminalizing FGM to
period arrives again in November. such moves “will create chaos in the health mar- miss the part where Google fired the protect little girls, the American Civil
guy? What message does that send, I Liberties Union prefers culturally
The Trump Administration will tie grants to ketplaces,” as Democratic Leader Nancy Pelosi
wonder, to anyone else at Google sensitive outreach to the Somali com-
performance, and this is a classic government claimed in a statement last week. Individuals thinking of expressing a different munity. Would society permit such
jobs program. One grantee took in $200,000 to who want to sign up for ObamaCare can find point of view? blatant child abuse from non-Muslim
enroll a grand total of one person. The top 10 Healthcare.gov easily enough, and the website Let’s see: “Should I freely express parents? Why do Muslims get a pass?
most expensive navigators collected $2.77 mil- lists a number for staffed call centers. my opinions and ideas which, if they We need to make it clear to new im-
lion to sign up 314 people, and it would have Another false contention is that this won’t don’t happen to reflect my company’s migrants that Americans do not tol-
been much cheaper to offer to pay all of their save taxpayer money because much of the fund- liberal party line, will most likely cost erate child abuse in the form of FGM.
premiums for a year. ing comes from fees on insurers, as if that isn’t me my job—or should I just keep my KRISTINE M. SEVERYN, PH.D., R.PH.
All told, the navigators last year enrolled a tax passed onto consumers and individuals that mouth shut?” Dayton, Ohio
about 81,000 people, less than 1% of the total. In will end up in larger taxpayer subsidies. If that’s not suppression, I don’t
know what is.
fairness to the navigators, it would be tough to HHS is in the unenviable position of having Letters intended for publication should
ESTELLE SHAY be addressed to: The Editor, 1211 Avenue
sell any product that millions of people are pay- to manage a broken law that the GOP failed to Riverside, Calif. of the Americas, New York, NY 10036,
ing fines to avoid buying. repeal, and the agency has an obligation to direct or emailed to wsj.ltrs@wsj.com. Please
HHS will reduce funding for enrollment ad- resources to their best use. There are more ur- The brilliant Mr. Damore should include your city and state. All letters
vertising—television ads, for example—to $10 gent health-care priorities than informing the have realized that (X + X) > (X + Y). are subject to editing, and unpublished
million from $100 million last cycle. The new public about insurance that Americans know is DAVID J. GROSS letters can be neither acknowledged nor
returned.
budget is about the figure for promoting Medi- available but may not want or can’t afford. St. Augustine, Fla.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL.
Tax Consumption Through a VAT, and Voilà
By John H. Cochrane
S
oon the Trump administra-
tion and congressional lead-
ers will unveil their tax-re-
form proposal. Reports
indicate the proposal will
include some reductions in corporate
and personal rates and the end of
some tax deductions. But true reform
is likely to be stymied by the usual
interests, by those who see the tax
code primarily as a way to transfer
income to or from favored or disfa-
vored groups, and by politicians who
dole out deductions, exemptions and
subsidies to supporters.
If the administration and
Congress drop the income
tax, it won’t be difficult
to achieve 3% growth.
So if the process stays its normal
course, don’t expect the complex
and dysfunctional U.S. tax code to
change much. But if America’s lead-
ers were to attempt a really funda-
mental reform, they could break the
political logjam. Changes must be
simple, understandable and attrac-
tive to voters. And only fundamental
reform paired with deregulation can
hope to raise economic growth to
3% or more.
The best way to do this is to elimi-
nate entirely the personal- and cor-
porate-income tax, estate tax and all
other federal taxes, and to implement
instead a national value-added tax—
essentially a national sales tax.
Don’t try telling Bob
Funk the American
Dream is dead. Or
selling him on the
gloomy tropes that
wages for working
Americans are
MAIN
doomed to stagnate
STREET
forever, that upward
By William
mobility for the Or-
McGurn
dinary Joe is a thing
of the past, that the
two-thirds of the population lacking
a bachelor’s degree are condemned to
the fringes of American prosperity,
and so on.
Over breakfast at Manhattan’s
Warwick Hotel, his cowboy hat on the
seat beside him, the man from Okla-
homa makes clear he buys none of it.
“My boss told me 50 years ago
there’s a person for every job and a
job for every person,” he says.
“That’s still true.”
Formally, Mr. Funk is chairman,
CEO and founder of Express Employ-
ment Professionals, one of the na-
tion’s largest job agencies. Informally,
he sees himself as a man who makes
a living by giving people hope—that
is, by matching workers looking for
Reports That ‘Privacy Is Dead’ Have Been Greatly Exaggerated
By Lawrence Cappello
N
ews broke last month that the
Justice Department had de-
manded DreamHost, a Los An-
geles tech company, turn over infor-
mation on more than a million visitors
to a website that coordinated anti-
Trump protests—some of which
turned violent.
Although the feds had a search
warrant signed by a District of Colum-
bia Superior Court judge, DreamHost
refused to comply, arguing that the
order raised First Amendment ques-
tions and could have a chilling effect
on political expression.
Immediately the Justice Depart-
ment felt pressure from its right and
left flanks. Fox News libertarian An-
drew Napolitano noted there are
“very serious constitutional prob-
lems” with the order. His sentiments
were startlingly similar to those of
anti-Trump outlets like CNN and the
Huffington Post.
Two days before DreamHost’s chal-
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Rupert Murdoch
Executive Chairman, News Corp
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Much of the current tax mess re-
sults from taxing income. Once the
government taxes income, it must tax
corporate income or people would in-
corporate to avoid paying taxes.
Yet the right corporate-tax rate is
zero. Every cent of corporate tax
comes from people via higher prices,
lower wages or lower payments to
shareholders. And a corporate tax
produces an army of lawyers and lob-
byists demanding exemptions.
An income tax also leads to taxes
on capital income. Capital-income
taxes discourage saving and invest-
ment. But the government is forced
to tax capital income because other-
wise people can hide wages by get-
ting paid in stock options or “car-
ried interest.”
The estate tax can take close to
half a marginal dollar of wealth. This
creates a strong incentive to blow
the family money on a round-the-
world cruise, to spend lavishly on
lawyers or to invest inefficiently to
avoid the tax.
The U.S. tax code tries to limit this
damage with a welter of complex
shelters: 401(k), 526(b), IRA, HSA,
deductions for corporate investment,
and complex real-estate and estate-
tax shelters.
Taxing something and then offer-
ing complex shelters is a sure sign of
pathology. But by taxing cars, houses
and boats when people or companies
buy them, all this complexity can be
thrown out. With a VAT, money com-
ing from every source—wages, divi-
dends, capital gains, inheritances,
stock options and carried interest—is
taxed when it’s spent.
A reformed tax code should in-
volve no deductions—including the
Bring Back the American Work Ethic
good jobs with employers looking for
good workers.
Along the way he also served as
chairman of the Kansas City Federal
Reserve Bank.
By and large the employers he
works with are small and medium-size
companies with fewer than 250 em-
ployees. Most of the jobs Express fills
are temporary positions in offices or
light industry. Since he started the
firm in 1983, he says, he’s helped find
jobs for 6.5 million people.
But Mr. Funk points out that 62%
of the “temporary” workers he places
end up being hired to stay on full-
time. “Try before you buy,” he calls
it—and says that goes for the worker
too. “It’s the greatest feeling in the
world to help someone who wants to
work find a good job,” he says.
This experience gives Mr. Funk
some definite—and timely—notions
about getting ahead in today’s Amer-
ica. Like everyone else, he talks about
education and skills. But what he
means by these words may be a little
different from how they are used in
the Harvard Business Review.
Start with skills. Hard skills and
experience, he says, are only half the
lenge to the warrant was to be heard
in court, the Justice Department an-
nounced it would seek a significantly
scaled-back warrant. According to the
government’s lawyers, the department
initially was unaware of “the extent of
visitor data” it was requesting, and
had “no interest in records relating to
the 1.3 million IP addresses.”
Chief Judge Robert E. Morin ap-
proved the new warrant on Aug.
24, but also added extra privacy
“protections.”
The government must now submit
an amended report on what data it’s
collecting and explain how it will pro-
tect the identities of “innocent visi-
tors” to the website. All IP addresses
will be excluded, and any data deemed
irrelevant to the case will be sealed by
the court and inaccessible to any
other government agency.
Some privacy advocates are still
grumbling, but DreamHost published
a blog post after the hearing in which
it praised the decision as a “clear vic-
tory” for user rights.
Robert Thomson
Chief Executive Officer, News Corp
William Lewis
Chief Executive Officer and Publisher
DOW JONES MANAGEMENT:
Mark Musgrave, Chief People Officer;
Edward Roussel, Innovation & Communications;
Anna Sedgley, Chief Operating Officer & CFO;
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OPERATING EXECUTIVES:
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Jason P. Conti, General Counsel;
Frank Filippo, Print Products & Services;
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Jonathan Wright, International
DJ Media Group:
Almar Latour, Publisher;
Kenneth Breen, Commercial
Professional Information Business:
Christopher Lloyd, Head;
Ingrid Verschuren, Deputy Head
OPINION
holy trinity of mortgage interest,
employer-provided health insurance
and charitable deductions. The in-
terest groups for each of these de-
ductions are strong. But if the gov-
ernment doesn’t tax income in the
first place, these deductions vanish
without a fight.
In these and other ways, if Con-
gress and the president drop the in-
come tax in favor of a VAT, or another
simple consumption tax, they can
break the political logjam and achieve
a dramatic pro-growth reform.
It is essential that the VAT be
uniform, and it is best to carve that
in stone at the outset. Trying to
transfer income or subsidize people
and businesses by charging differ-
ent rates for different goods or or-
ganizations will again muck up the
tax system. And it is essential that
the VAT replace rather than add to
equation, and not the important half.
He shares a small brochure his com-
pany puts out summarizing a recent
survey of employers. “So many peo-
ple do not realize how important the
soft skills are to unlocking job oppor-
tunity,” he says.
‘There’s a person for every
job and a job for every
person,’ says Bob Funk.
In order, the survey found the top
five traits employers look for are as
follows: attitude, work ethic/integ-
rity, communication, culture fit, criti-
cal thinking.
Drugs are a huge problem today,
with many would-be employees put-
ting themselves out of the running
when they fail drug tests. A certi-
fied truck driver can start at
$55,000 to $60,000 a year, for ex-
ample, but no one’s going to hire
you if you do drugs.
If all this sounds old-fashioned, it
is—and Mr. Funk isn’t ashamed of it.
So many people, he says, are unfamil-
The U.S. Constitution’s First
Amendment gets a small win, and pri-
vacy maintains a pulse in the digital
age. This revised order strikes a
much-improved balance between pri-
vacy rights and the interests of the
Justice Department. Episodes like
these can be useful reminders that the
relationship between privacy and free
speech has a rich heritage in Amer-
ica’s political history.
In 1956 Alabama’s attorney general
pressed a state court judge to make
public all of the National Association
for the Advancement of Colored Peo-
ple’s membership lists and employee
rosters—complete with home ad-
dresses. The NAACP appealed to the
U.S. Supreme Court. In NAACP v. Ala-
bama (1958), Justice John Marshall
Harlan II proclaimed a unanimous court
had “recognized the vital relationship
between the freedom to associate and
privacy in one’s associations.”
The ruling’s core tenets were up-
held two years later in Bates v. City of
Little Rock, when Arkansas tried the
same membership-list tactic. The Ala-
bama opinion continued to be cited in
the 1960s, when the high court offi-
Notable & Quotable: Dogs
From the abstract of “I Walk My
Dog Because It Makes Me Happy: A
Qualitative Study to Understand Why
Dogs Motivate Walking and Im-
proved Health,” published by the In-
ternational Journal of Environmental
Research and Public Health, Aug. 19:
The strength of the dog-owner re-
lationship is known to be correlated
with dog walking, and this qualita-
tive study investigates why. Twenty-
six interviews were combined with
autoethnography of dog walking ex-
periences. Dog walking was con-
structed as “for the dog,” however,
owners represented their dog’s needs
in a way which aligned with their
Wednesday, September 6, 2017 | A11
CHAD CROWE
the current tax system, as it does
in Europe.
What about progressivity? It is
easy to make a value-added tax pro-
gressive: In place of current exemp-
tions, send everyone a $10,000 check.
Or people could receive a refund ac-
cording to how much they spend,
similar to income-tax refunds. Tax-
payers could get a full refund for the
first $10,000, half for the next
$10,000, and so forth.
Electronic record-keeping makes
this straightforward—it’s just a big
debit- or credit-card reward—and
everyone would have an incentive
to report purchases rather than to
hide income.
But the chaos in U.S. income redis-
tribution is as great as the anarchy in
the tax code. Tax discussions fall
apart because the redistributive in-
fluence of each change is assessed in
iar with the fundamentals of work,
from knowing how to dress and
showing up on time to taking direc-
tion from a boss. At a time when em-
ployers are complaining they can’t
find the people they need, Mr. Funk
says being honest and having the
right attitude will help you stand out
from the pack.
Nor does Mr. Funk look down his
nose at so-called McJobs: “Those low-
paying, entry-level jobs,” he says, “are
good training for the soft skills you
need for upward mobility.” It’s also
far better than falling into the trap in
which people end up losing their ap-
petite for work because they become
too comfortable with government
benefits meant to be temporary.
And while education is vital, Mr.
Funk says the most important thing
for most people is the ability to be
trained—which starts with basic
competence in reading, writing and
arithmetic. Mr. Funk also says insti-
tutions such as Oklahoma’s Career-
Tech, which works with local employ-
ers to train people for jobs that
actually exist in their communities,
are probably a better investment for
many people than college.
cially recognized a constitutional
right to privacy for the first time in
American history.
As for the DreamHost controversy:
The tens of thousands of protesters
who took to the streets on Inaugura-
tion Day aren’t entitled to absolute
A Washington, D.C.,
judge strikes the balance
in an investigation of
riots on Inauguration Day.
privacy. Any argument to that end
would be ludicrous. More than 200
were arrested on charges of rioting,
and the Justice Department has the
authority to gather evidence in the in-
terest of pursuing their convictions in
a court of law. Those who choose to
express their political views in a pub-
lic setting forfeit certain reasonable
expectations of anonymity—especially
if they are violent.
But that wasn’t the issue here.
Americans express their political be-
own. . . . Owners reported deriving
positive outcomes from dog walking,
most notably, feelings of “happiness,”
but these were “contingent” on the
perception that their dogs were en-
joying the experience. . . . Perceptions
and beliefs of owners about dog
walking were continually negotiated,
depending on how the needs of the
owner and dog were constructed at
that time. Complex social interac-
tions with the “significant other” of
a pet can strongly motivate human
health behaviour. Potential interven-
tions to promote dog walking need to
account for this complexity and the
effect of the dog-owner relationship
on owner mental wellbeing.
isolation. By measuring how the tax
and transfer system work together,
politicians could get better taxes and
more effective redistribution.
The U.S. also needs an integrated
social-insurance program: Send
checks to needy people, yes, but also
monitor the amount they get from all
government sources, including col-
lege financial aid, health insurance,
energy assistance, Medicare, Medic-
aid, Social Security, unemployment
insurance, food stamps, farm pro-
grams, housing and so on.
Even without reforming the pro-
grams, it’s necessary at least to mea-
sure their total effect to calibrate ac-
curately any tax-based redistribution.
What about the tax rate? Well, if
the federal government is going to
spend 20% of gross domestic product,
the VAT will sooner or later have to
be about 20%. Tax reform is stymied
because politicians mix arguments
over the rates with arguments over
the structure of taxes. This is a mis-
take. They should first agree to fix the
structure of the tax code, and later ar-
gue about rates—and the spending
those rates must support.
Is all of this unrealistic? No.
Sometimes when little steps are im-
possible, big jumps are feasible. It is
unrealistic to think that tweaks to
the current system will produce a big
change from the status quo.
Now is the time. If American de-
mocracy cannot fix this tax code,
economic stagnation and debt crisis
or massive spending cuts await.
Mr. Cochrane is a senior fellow at
Stanford University’s Hoover Institu-
tion and an adjunct scholar at the
Cato Institute.
As for Washington, instead of re-
writing trade deals or pushing in-
creases in the minimum wage, Mr.
Funk says a real pro-worker agenda
would focus on relieving the bur-
dens on employers from laws like
Dodd-Frank and ObamaCare, which
fall heavy on the small and medium-
size companies he works with: “If
we could clear some of these bur-
dens out of the way, I believe busi-
nesses would bust open and create
many more jobs.”
Plainly the path to the middle
class for Americans lacking college
degrees has changed. No one today
can expect to start in, say, a Chrys-
ler factory at 18 and remain till 65
with steady pay raises along the
way.
But Mr. Funk insists good jobs are
out there, though people may have to
knock on a few more doors to find
the right one.
“I’ve helped a lot of people find
jobs in my life,” he says. “And I’ve
learned that if you are honest, have
a strong work ethic, and stay off
drugs, there’s a great future for you
out there.”
Write to mcgurn@wsj.com.
liefs in a variety of ways. Some
make financial contributions to or-
ganizations they support. Some at-
tend private gatherings. Some are
still honing their opinions and
choose to stay informed by visiting
a website or two.
The Justice Department’s original
demand obliterated those distinctions.
It demonstrated an unnerving igno-
rance of the fundamental relationship
between privacy and free expression.
Judge Morin has signaled that he
intends to play an active role in super-
vising how the evidence is used, and
the Justice Department investigation
will no doubt move slowly. DreamHost
has turned over the requested data,
but investigators can’t begin mining
them until the company decides if it
wants to file an appeal.
Alan Westin, perhaps the most in-
fluential privacy scholar of the 20th
century, admitted in a 2003 interview
that while he appreciates the role of
privacy advocates who push for a “to-
tal privacy solution,” he would “never
want to live under their regimes.”
The goal, for reasonable minds at
least, is balance. The competing val-
ues of privacy and law enforcement,
in the end, “need to be brought into
some kind of harmony.” That all par-
ties involved in the DreamHost case
are debating that balance is a step in
the right direction.
Faced with the latest news about a
political hacking scandal or a corpo-
rate-data breach, many Americans
have developed a troubling tendency
to shrug their shoulders and remark
knowingly that “privacy is dead.” The
DreamHost fight shows it’s still alive,
and the fight for it can foster a search
for reasonable solutions. It also pro-
vides a rare opportunity, in these po-
larizing times, for left and right to
come together.
Mr. Cappello, a visiting professor
of history at CUNY Queens College, is
a lecturer for Thinkolio, a public-
lecture series in New York.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A12 | Wednesday, September 6, 2017 THE WALL STREET JOURNAL.

LIFE & ARTS

TELEVISION REVIEW | By John Anderson

Performer in Chief
WHAT KIND OF CRAZY ’80s
flashback would feature Lyn
Nofziger, David Gergen and Mr.
T? That would be “The Reagan
Show,” which takes a provocative
and amusing look at President
Ronald Reagan’s use of television
to sell economic plans, missile
treaties and, mostly, himself. The
Reagan White House, we’re told,
created five times as much foot-
age as the five previous adminis-
trations (shot by the U.S. Naval
Photographic Unit). Which makes
a certain amount of sense given
that the leading role on what was
called “White House TV” was be-
ing played by a leading man.
Directed by Sierra Pettengill

FROM TOP: THE RONALD REAGAN PRESIDENTIAL LIBRARY; MIKE SARGENT/AFP/GETTY IMAGES
and Pacho Velez, “The Reagan
Show” is what you could call a
kinder, gentler assessment of a
president whose use of media
was thoroughly calculating—
though one would have to go
back to Eisenhower
to find a Commander
in Chief who didn’t
spin his television
coverage as much as
possible. The not-so-
hidden subtext, of
course, is the im-
plied contrast be-
tween Reagan’s rela-
tively benign
cultivation/manipula-
tion of the medium
and the kind used by
the current occupant
of the White House.
When we watch our
40th president
promise to “make President Reagan receiving a Thanksgiving turkey in 1983, above; Mikhail Gorbachev with President Reagan in 1987, left
America great
again,” the effect is pans, following an address in- horseback, the Thanksgiving tur- actor had helped him in the
more than a little tended for Soviet audiences. (The key who tries to make a pre-par- White House. Reagan smiles
unnerving—some- charisma war he waged with the don getaway. Then there’s Rea- warmly. “There have been times
thing like reverse Soviet leader during their on-off gan’s repeated massacre of John in this office,” he says, “when
déjà vu. arms negotiations constitutes a Sununu’s name while making a I’ve wondered how you could do
Created entirely large and fascinating part of the campaign spot for the then-gu- the job if you hadn’t been an ac-
out of archival foot- program.) And the true Reagan bernatorial candidate. tor.” It’s far from a warm and
age, “The Reagan Show” features gan, former Hollywood actor, al- seems to shine through in those One of the more disorienting fuzzy thing to say. But as “The
no voiceover and only the occa- ways seems to be performing moments that were edited out of moments involves an admission Reagan Show” repeatedly reveals,
sional subtitle, augmented with when a camera is rolling, he’s the official “WHTV” segments— Reagan makes during his farewell it’s all about the delivery.
news clips and snatches of inter- less guarded after the official the jokes that don’t work, Nancy interview with David Brinkley on
views with such bygone news “moment” is concluded. “Take Reagan’s horrified reaction at Dec. 21, 1988. Brinkley asks the The Reagan Show
stars as David Frost. While Rea- that, Mr. Gorbachev,” he dead- having to do a photo-op on president whether his years as an Aired Monday, 9 p.m. EDT, CNN

Weather The WSJ Daily Crossword | Edited by Mike Shenk

Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.
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-10 Hepburn’s acting
12 13 14
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-5 gamut, according
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43 44 45 46 47 bestie
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52 53 54 55 56 57 7 “Beetle Bailey” 41 Goes downhill
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58 59 60 61 62 44 Big house
Rain 8 Tree exudation
63 64 65 66 67 68 46 TV premiere of
T-storms 9 High school Oct. 11, 1975
69 70 dept.
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71 72 10 Golf’s “Big Easy” member
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Melbourne
Ice SAND BOX | By Jim Page 12 With 32-Down, 53 Franklin’s belief
it’s used in a
Global Forecasts City Hi
Today
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Hi Lo W City Hi
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Tomorrow
Hi Lo W
Across 31 Park place? 52 Recited
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Havana 32 23 pc 32 24 pc Philadelphia 21 15 r 23 14 pc 35 With 45-Across, 57 See 17-Down
Today Tomorrow 9 See 1-Across hurricane-prone 58 “Starpeace” 17 With 57-Down,
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City Hi Lo W Hi Lo W Honolulu 30 23 pc 31 24 s Pittsburgh 21 10 pc 19 10 pc area, and a clue artist drift 60 Resort near Park
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Amsterdam 18 12 c 18 13 pc Houston 30 16 pc 29 17 s Port-au-Prince 35 24 pc 31 24 r to this puzzle’s 20 Record City
Anchorage 15 9 r 15 9 c Istanbul 25 18 r 27 19 s Portland, Ore. 31 18 s 27 17 t 13 Blockhead 59 Potpie
edges veggies 61 Pass over
Athens 29 21 s 29 21 s Jakarta 32 25 c 33 25 c Rio de Janeiro 28 19 s 27 19 s 23 DDE’s 1942
Atlanta 23 13 t 24 14 s Johannesburg 26 10 s 27 13 s Riyadh 42 23 s 41 26 s 15 Tubes in a 37 Like some command 64 Dernier ___
Baghdad 46 28 s 44 27 s Kansas City 22 10 s 24 14 s Rome 26 20 pc 26 17 t studio 62 Tibia’s place
communities
Baltimore 21 14 r 23 13 pc Las Vegas 38 26 pc 38 25 s Salt Lake City 36 20 s 35 20 s 63 Drug 24 Soundly defeat 65 Above, in odes
Bangkok 33 27 t 34 27 t Lima 20 16 pc 20 15 s San Diego 27 20 pc 26 21 pc 16 Town on 38 Pizza chain,
Beijing 32 16 s 33 17 s London 18 10 pc 20 13 pc San Francisco 25 18 pc 23 17 pc Long Island’s trafficker 26 Decline 67 Extraction target
Berlin 21 11 t 18 11 pc Los Angeles 30 19 pc 29 19 pc San Juan 30 26 r 30 27 r
informally
southern shore 66 1994 Italian 27 Way around 68 Disco guy on
Bogota 21 8 pc 20 9 r Madrid 33 16 s 31 14 s Santiago 18 5 s 18 5 pc 40 Phony
Boise 37 19 s 33 19 s Manila 32 25 t 34 26 t Santo Domingo 33 25 pc 30 26 r 18 Cherokee film nominated London “The Simpsons”
Boston 24 18 r 23 14 r Melbourne 13 8 sh 15 6 sh Sao Paulo 25 15 s 26 14 pc Landing State 42 It’s brought to for the Best
Brussels 18 11 c 18 13 pc Mexico City 20 14 t 19 13 pc Seattle 29 17 pc 25 17 pc
Pk. location order Picture Oscar Previous Puzzle’s Solution
Buenos Aires 18 11 pc 19 10 pc Miami 33 26 t 33 27 t Seoul 23 19 r 27 20 pc G U S T AM E N C A S A
Cairo 34 23 s 33 23 s Milan 29 17 pc 29 17 pc Shanghai 33 23 r 28 23 r 19 It makes the bed 43 Barbershop item 69 Foal’s father O S A H M I R E S O X E N
Calgary 29 10 s 31 13 s Minneapolis 19 10 pc 23 12 pc Singapore 31 26 t 31 26 t L E R E S L I C E N E A T
45 See 35-Across 70 Go back to F R G O S T I C K E R S
Caracas 32 25 pc 32 25 pc Monterrey 29 19 pc 29 15 t Stockholm 16 6 pc 15 6 pc 21 “Boola Boola”
Charlotte 23 13 t 24 12 s Montreal 21 13 c 20 11 sh Sydney 20 11 s 20 10 s square one A L E E S A U N A
singer 47 “The Racer’s A B S O L U T E R U L E R S
Chicago 19 11 pc 20 11 pc Moscow 17 11 c 17 10 pc Taipei 35 25 pc 34 26 c 71 With 72-Across, B L A S T O N E L A M P
Dallas 30 17 s 30 18 s Mumbai 31 26 c 31 25 pc Tehran 35 23 s 36 24 s 22 Hung in there Edge” O F N O K I T E D B R I O
Denver 27 12 s 30 13 s Nashville 23 11 s 24 12 s Tel Aviv 30 22 s 30 23 s roll to one side, N R A S A N E S L E E T
Detroit 20 10 pc 19 10 sh New Delhi 34 26 pc 34 26 t Tokyo 26 23 r 29 22 sh 25 Hole in the head 48 Shaman, e.g. e.g. G E N E T I C MA R K E R S
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Dubai 41 32 s 41 32 s New Orleans 29 20 t 29 20 s Toronto 20 9 pc 18 9 sh S P E L L B I N D E R S
Dublin 17 11 pc 16 10 r New York City 21 16 r 22 16 sh Vancouver 28 17 s 23 14 c 28 Valued strings 50 Jellyfish delivery 72 See 71-Across D E L I R O I L S S A I L
Edinburgh 16 9 pc 15 9 r Omaha 22 9 s 26 14 s Washington, D.C. 21 15 r 24 15 pc A G O G S P R E E I S L E
Solve this puzzle online and discuss it at WSJ.com/Puzzles.
s

Frankfurt 21 9 pc 19 11 pc Orlando 32 23 t 31 24 t Zurich 22 9 t 19 8 pc D OWN E A R S N E E D

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 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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BUSINESS & FINANCE
© 2017 Dow Jones & Company. All Rights Reserved.
Yen vs. Dollar 108.7770 g 0.86%
Big Aerospace Deal Is Set
United Technologies
to acquire Rockwell
for $23 billion; merger
will reshape market
Industrial conglomerate
United Technologies Corp.
reached a deal to buy airplane-
parts maker Rockwell Collins
Inc. for $23 billion, in the big-
gest aerospace deal in history.
By David Benoit,
Dana Mattioli
and Thomas Gryta
Both companies’ boards
have approved a deal in which
United Technologies will pay
$140 a share in cash and stock,
the companies said late Mon-
IMAGO/ZUMA PRESS
Verizon Up credits can be used to see Lady Gaga perform. Program participants must grant Verizon access to web-browsing histories.
Verizon Wants to Get Personal
Wireless carrier to offer credits for movies and concerts, but asks to see browsing data in return
BY RYAN KNUTSON
A new Verizon Communi-
cations Inc. rewards program,
Verizon Up, provides credits
that wireless subscribers can
use for concert tickets, movie
premieres and phone up-
grades.
But it comes with a catch:
Customers must give the car-
rier access to their web-
browsing history, app usage
and location data, which Veri-
zon says it uses to personalize
the rewards and deliver tar-
geted advertising as its cus-
tomers browse the web.
The trade-off is part of Ver-
Decade After Crisis,
‘Black Swans’ Clipped
BY JON SINDREU
AND LAURENCE FLETCHER
In the wake of the global fi-
nancial crisis, fear of such
“black swan” events drove
some investors into hedge
funds that offered protection
should markets plunge. But
the swans have yet to return,
and such strategies have fallen
out of favor.
The patience of many inves-
tors has run out after losing
money during the intervening
years of mainly benign market
conditions. According to data
by CBOE Eurekahedge, those
who invested in these tail-risk
funds—those designed to steer
clear of sudden slumps—when
their performance peaked in
September 2011 would have by
now lost 55% of their money.
Some big names in asset
management have been hit,
leaving only a handful of funds
that promise outsize returns
should markets go into a tail-
spin.
Those left say that a decade
after the financial crisis be-
TECHNOLOGY: FACEBOOK TEES UP WHATSAPP TO MAKE MONEY B4
Hang Seng 27741.35 À 0.004%
day. Rockwell investors will
get $93.33 a share in cash and
the remaining $46.67 in United
Technologies stock.
The price is an 18% pre-
mium to where Rockwell
traded before word of a poten-
tial deal first surfaced early
last month, and 30% above
where the stock ended in July.
The deal would be the big-
gest aerospace deal ever, fol-
lowed by United Technologies’
2012 acquisition of Goodrich
Corp. for about $16.5 billion,
according to Dealogic.
The transaction promises
to reshape the market for
aerospace parts and could be
a harbinger of a breakup of
United Technologies in the
years following integration,
according to people familiar
izon’s effort to build a digital
advertising business to com-
pete with web giants Face-
book Inc. and Alphabet Inc.’s
Google, which often already
possess much of the same cus-
tomer information.
Even though the U.S. Con-
gress earlier this year disman-
tled tough privacy regulations
on telecommunications pro-
viders, Verizon still wants cus-
tomers to opt in to its most
comprehensive advertising
program, called Verizon Se-
lects. Data collected under the
program is shared with Oath,
the digital-media unit Verizon
created when it bought AOL
HANNIBAL HANSCHKE/REUTERS
gan, people have forgotten its
lessons just as market risks
are building. Market volatility
is near record lows and stock
markets remain resilient, but
entering September, typically
the weakest month of the year
for the U.S. stock market,
many investors and traders
are looking over their shoul-
ders.
The term black swan was
popularized by writer and ac-
ademic Nassim Nicholas Taleb
to describe extreme events
that are difficult to predict
and more likely to happen
than forecast.
Historically high stock valu-
ations, increased consumer le-
verage and extraordinary cen-
tral-bank stimulus are among
the factors that some money
managers believe make a
black-swan event more likely
than at any time since the fi-
nancial crisis, which sent
stock, credit and commodity
markets plummeting.
However, critics point to
evidence suggesting that buy-
Please see FUND page B2
THE WALL STREET JOURNAL.
Gold 1335.30 À 0.82%
with the company’s plans.
Rockwell is expected to give
United Technologies a larger
presence, and more leverage,
in its business supplying Boe-
ing Co. and Airbus SE as the
aerospace industry ramps up
for a new generation of jets.
Those new jet plans are likely
to be worth decades of busi-
ness for the component mak-
ers such as United Technolo-
gies and Rockwell.
Farmington, Conn.-based
United Technologies already
owns one of the world’s big-
gest makers of jet engines,
Pratt & Whitney, and an aero-
space division that also makes
parts such as wheels and land-
ing gear.
Rockwell specializes in
cockpit displays and communi-
and Yahoo.
Since access to data from
customers could make it eas-
ier to tailor ads to their liking,
Verizon hopes the information
will help it gain advertising
revenue to offset sluggish
growth in its cellular business.
While it added more than
600,000 wireless subscribers
in the latest quarter, the gains
came during a period of in-
tense competition that forced
it to revive unlimited-data of-
ferings and sacrifice the reve-
nue it generated from pricier
plans and overage fees.
Verizon’s core wireless
business generated $89 billion
INSIDE
CEO
PRESCRIBES
STABILITY
BUSINESS NEWS, B2
GOLD PRICES
CLIMB AS
TENSIONS RISE
MARKETS, B6
WTI crude 48.84 À 3.28% 10-Year JGB yield 0.003%
cations systems for passenger
jets and the military. In April,
the Cedar Rapids, Iowa, com-
pany closed its roughly $6 bil-
lion acquisition of B/E Aero-
space Inc., a maker of plane
seats and interiors.
United Technologies Chief
Executive Greg Hayes will re-
main as CEO of the combined
company, and Rockwell chief
Kelly Ortberg will run a new
business known as Collins
Aerospace that will combine
the parts businesses, the com-
panies said.
The increased focus on
aerospace for United Technol-
ogies could trigger further
portfolio changes, the people
said. The company also makes
Carrier air conditioners and
Please see DEAL page B2
in revenue in 2016—a 2.7%
drop from 2015. Meanwhile, its
digital advertising unit brings
in roughly $7 billion a year.
Verizon has about 4% of the
U.S. digital advertising market
this year, compared with 41%
for Google and 20% for Face-
book, according to eMarketer.
Wireless competitor AT&T
Inc. faces similar challenges as
it also tries building an ad-tar-
geting program around its new
video services.
Verizon—the U.S.’s largest
carrier, with more than 114
million subscribers—has been
experimenting with targeted-
Please see DATA page B4
STREETWISE | By James Mackintosh
Stagnant Pay Poses Risk in Europe
The biggest
puzzle in eco-
nomics right
now is the ap-
parent break-
down in the
inverse relationship between
unemployment and inflation
set out in a famous curve by
New Zealand economist and
sometime crocodile hunter
A.W. Phillips.
In Japan, Germany and
the U.S., unemployment has
dropped below what econo-
mists think is a sustainable
level, yet few signs suggest
that workers are responding
in the usual way and de-
manding higher wages.
In the U.S., limp pay
growth gives the Federal Re-
serve a reason to delay inter-
est-rate increases. But in Eu-
rope, it is a more serious
problem, and it exacerbates
the political tensions that
pose the biggest threat to
the survival of the eurozone.
The Continent’s most
troubled countries have un-
dergone years of pain to
Wednesday, September 6, 2017 | B1
10-Year Treasury yield 2.084%
CHRIS RATCLIFFE/BLOOMBERG NEWS
Rovio introduced the ‘Angry Birds’ mobile game in 2009.
‘Angry Birds’ Firm
Hatches IPO Plan
BY DAVID GAUTHIER-VILLARS more than $10 billion.
But fickle players have
Rovio Entertainment Oy, caused some hit mobile games
the Finnish company behind to collapse in the charts, mak-
the “Angry Birds” mobile ing their publishers a hard sell
game and film franchise, plans to individual investors.
to list shares on the stock When Activision Blizzard
market—a litmus test for an Inc. bought King Digital Enter-
industry known for its erratic tainment PLC last year, the
performance. maker of Candy Crush was
Shareholders hope the ini- straining to repeat the success
tial public offering in Helsinki of its blockbuster series, and
will value Rovio at a premium the $18-a-share offer was well
to rivals and give it a price tag below the company’s IPO price
of about €2 billion, or roughly of $22.50.
$2.38 billion, people familiar Rovio itself has been on a
with the matter said. roller coaster in recent years,
The company said in a writ- going through several cost-
ten statement Monday that its cutting rounds and manage-
planned IPO would involve a ment changes.
share issue of €30 million, as The company could have a
well as the sale of existing steadier trajectory on the
shares by majority owner Kaj stock market because it has
Hed, the uncle of Rovio co- diversified revenue streams
founder Niklas Hed, and other thanks to the film franchise,
shareholders. analysts said. The company
Mr. Hed, who owns about has also made good progress
70% of Rovio, intends to re- in harnessing new formats
main majority shareholder af- that allow players to download
ter the IPO, the people familiar games free and buy virtual
with the matter said. In 2011, goods that help them advance
when “Angry Birds” mobile to new skill levels, they said.
games were among the most “In addition to leveraging
popular world-wide, Rovio en- the success of the Angry Birds
visioned listing its shares on movie and related merchan-
the Nasdaq Stock Market in dise and games sales, Rovio
New York. This time, the elder has also invested heavily in
Mr. Hed has opted for Nas- improving the monetization of
daq’s affiliate in Finland be- its content through paid ser-
cause he is eager to keep the vices and also advertising,”
company rooted in the Nor- said Jack Kent, an analyst with
dics, one of the people said. the IHS Markit consultancy.
Rovio didn’t respond to a In the first six months of
request for comment. the year, the company has said
Rovio said in its statement its revenue shot up 94% to
that the planned listing would €152.6 million. Earnings before
enable the company to pursue interest, taxes, depreciation
its growth strategy, including and amortization rose to €39.9
through acquisitions, and gain million from €11 million a year
more flexibility to remunerate earlier.
its employees. Founded in Espoo, near Hel-
Mobile games account for sinki, in 2003, Rovio surged in
about one-third of the larger 2009 with the launch of “An-
videogame sector—which gen- gry Birds.” By 2011, the game
erated roughly $100 billion in was widespread.
revenue last year. But then the industry
Tech giants have been ea- shifted. Rovio used to charge
ger to take control of money- people a dollar or two to
spinners capable of producing download each game, but com-
hit titles with hundreds of mil- petitors shifted to the “free-
lions of regular users. Tencent mium” model, in which the
Holdings Ltd.’s deal last year games are free to play but up-
for Supercell Oy valued the grades cost money.
Finnish mobile-game maker —Razak Musah Baba
and its staff of about 200 at contributed to this article.
Labor's Lost Love
Eurozone countries have started to regain lost competitiveness
relative to Germany by increasing productivity and offering smaller
wage rises, but have a long way to go.
Change since first-quarter 1999 in competitive costs*
Falling costs mean an economy is more competitive.
20%
MORE COMPETITIVE LESS COMPETITIVE
10
0
Italy
France
–10 Spain
–20 Germany
1999 ’00 ’10
*European Central Bank measure of exchange rate adjusted for unit labor costs
Source: ECB THE WALL STREET JOURNAL.
shrink their way back to eco- temporary cyclical rebound
nomic health. Cutting con-
sumption and imports
means becoming more com-
petitive against Germany.
worked, after a fashion, but A gulf opened up between
to get anything more than a Please see STREET page B2
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B2 | Wednesday, September 6, 2017
INDEX TO BUSINESSES
These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.
A
Activision Blizzard......B1
Alphabet ................ B1,B6
Apple....................B4,B10
AQR Capital
Management.............B2
AT&T............................B1
Aveva Group ............... B3
AXA.............................B2
B J
Bayer.........................B10
C L
Capula Investment
Management.............B2
Citigroup......................B6
F United Technologies...B1
Facebook...........B1,B4,B6
Fiat Chrysler
Automobiles.............A1
First Trust
INDEX TO PEOPLE
A Gurría, Angel...............B1
Agarwal, Gaurav.........B4
Aronson, David ........... B7
B-C
Bhansali, Vineer ......... B2
Christiansen, Niels B. A2
D K
Dearborn, Justin.........B3
DiBattiste, Pete........B10
Ducrozet, Frederik......B1
G Lewis, Janet ............... A1
Gertler, Eric.................B3
SCOTT OLSON/GETTY IMAGES
The Volatility Index pit at the Chicago Board Options Exchange.
FUND
Continued from page B1
ing insurance is always a los-
ing strategy in financial mar-
kets.
As the crisis peaked in
2008, Universa Investments
LP made returns of above
100% for its clients.
Nine years later, “I don’t
see anyone out there doing
what I do,” said founder Mark
Spitznagel, who defined what
he does as “sort of like gold on
steroids.”
There is no set definition
for how far markets must fall
before the drop can be labeled
as a black-swan event.
Funds like Mr. Spitznagel’s,
which Mr. Taleb advises,
mainly use put options to pro-
tect against significant moves
lower. A put is an option to
sell a security at a particular
price, usually within a limited
period, so they benefit when
the security’s price drops be-
low that “strike” price. Inves-
tors can buy cheap out-of-the-
money options with a strike
price way below where the se-
curity currently trades.
Tail-risk funds also invest
in gold and other assets per-
ceived as safe that usually
rally when other markets col-
lapse.
But recently, markets have
mainly climbed as central
banks continue to flood them
with funds and the global
economy expands. The CBOE
Volatility Index, known as Wall
Street’s “fear gauge,” fell to
its lowest intraday level
ever in July and remains near
historic lows. The S&P 500 has
been on a smooth road higher
since early 2009, while the
bull run in bonds continues
unabated.
Those results have hit these
investors hard. Tail-risk funds
are down 6.3% this year
through July, according to
data group eVestment, and
have lost money in four of the
five preceding years.
London hedge fund Man
Group PLC launched the AHL
Tail Protect Fund in 2009 and
has lost 45% since then, ac-
cording to Man Group. Capula
Investment Management
LLP’s Tail Risk Fund, one of
the biggest in the sector with
$3.7 billion under manage-
ment, is down 6.7% this year,
International.............B6
First Trust US Equity
Opportunities............B6
Fitbit..........................B10
G
International.............B6
Rockwell Collins..........B1
Rovio Entertainment..B1
S
Samsung Electronics B10
Garmin.......................B10 Schneider Electric.......B3
General Motors...........A2 Snap.............................B6
Goodrich......................B1 Supercell......................B1
Great Wall Motors.....A1 T
Tencent Holdings........B1
Johnson & Johnson..B10 tronc............................B3
U
LongTail Alpha............B2 UBS Group...................B6
M Unibail-Rodamco.........B9
Unigestion...................B2
MSCI............................B6
P Universa Investments B1
Pratt & Whitney.........B1 V
R Verizon
Renaissance Communications......B1
Moffett, Craig.............B4
H O
Hayes, Greg.................B1 Ortberg, Kelly ............. B1
Hed, Niklas..................B1 S some lowering their outlook
I Scotti, Diego...............B4
Idema, Matt................B4 Spitznagel, Mark ........ B2
W closing price before the deal
Kent, Jack ................... B1 Weber, Christophe......B2
L-M Z said Takeda was following a
Levin, Adam................B4 Zhang, Yale.................A2
Zuckerberg, Mark ....... B4
Mahoney, Tim.............B2 Zuckerman, Mortimer B3
according to an investor letter
reviewed by The Wall Street
Journal. The fund made 11% in
2011 but lost 14% the following
year and ran up further losses
in three of the four years fol-
lowing. Representatives of
Man Group and Capula de-
clined to comment.
Many others have given up.
AXA Investment Managers
wound down its tail-risk fund
several years ago.
While there are still inflows
into these funds, according to
eVestment, many of those left
in the game have changed the
meaning of what they consider
a “tail risk.” Rather than fo-
cusing on black-swan events,
they now offer cheaper insur-
ance against less extreme—but
more common—stock selloffs.
Swiss wealth manager Uni-
gestion SA shut down a tail-
risk-focused fund in 2010 but
now runs a strategy to protect
against bumpy days in the
market. Recently, Unigestion
bought the Japanese yen and
sold the Korean won, a cur-
rency pair that would move
apart considerably if the mar-
ket becomes more fearful.
“The protection will be less
significant,” Unigestion’s head
of cross asset solutions,
Jérôme Teiletche, said. “But
the cost will be less significant
as well.”
It costs money to roll over
put options, and if they aren’t
being triggered, they aren’t
earning anything back.
Protecting against volatility
can provide returns if timed
properly, but over the long
term it is a losing strategy, ac-
cording to a raft of academic
papers and market analysis. It
is similar to taking an insur-
ance policy on your car or
home. On average, it is the in-
sured, rather than the insurer,
that loses money.
AQR Capital Management
LLC calculates that black-swan
events need to happen, on av-
erage, at least once every de-
cade for tail-risk strategies to
break even. The fund defines
such an event as a 20% drop in
the S&P 500 in one day.
But the last time the stock
market suffered such a plunge
was 27 years ago, on Black
Monday, Oct. 19, 1987.
Mr. Spitznagel said the
problem is that most funds
just aren’t bold enough to lose
a lot of money when markets
are calm.
Takeda Soothes Debt Fears
CEO says drugmaker
will show discipline
in its spending after
recent big acquisition
BY PREETIKA RANA
TOKYO—Takeda Pharma-
ceutical Co. Chief Executive
Christophe Weber said an-
other multibillion-dollar ac-
quisition was unlikely soon, al-
laying fears Japan’s largest
drugmaker was building up
too much debt after paying
nearly $5 billion for a U.S.
company in January.
The deal for Ariad Pharma-
ceuticals, Mr. Weber’s first
major acquisition since taking
the reins at Takeda three
years ago, drew concern from
credit-ratings firms, with
for Takeda debt. Takeda paid a
75% premium over Ariad’s
was announced.
In an interview, Mr. Weber
disciplined approach and the
rewards of the Ariad purchase
outweighed the risks. In April,
Ariad won regulatory approval
in the U.S. for a lung-cancer
therapy that Takeda says
could generate as much as $1
billion in sales a year.
After borrowing money to
buy Ariad, Takeda’s gross debt
as of March 31 stood at nearly
four times the company’s
earnings before interest, tax,
depreciation and amortization,
or Ebitda. That ratio was up
from two times a year earlier.
Banks use the ratio to assess a
company’s ability to service its
debt. The higher the ratio, the
lower the chance lenders ad-
STREET
Continued from page B1
the competitiveness of Ger-
many and the weaker euro
states, where wages soared in
the precrisis years even as
German unions reined in pay
demands. The gap has only
been partially closed since, by
raising wages—adjusted for
productivity and known as
unit labor costs—by less than
Germany did. But German
wage growth has been weak
since labor reforms of the
early 2000s, putting a lid on
what workers elsewhere in the
eurozone can receive.
Central banks in Japan and
the U.S. can afford to wait and
see, keeping monetary policy
loose in the hope that as un-
employment drops, workers
eventually will demand more
pay. The politics of the euro-
zone, unfortunately, make that
a dangerous option.
For one thing, if the Euro-
pean Central Bank continues
its €60-billion-a-month ($71
billion) quantitative easing, it
would run out of German
bonds to buy in the middle of
next year. Changing the rules
DEAL
Continued from page B1
Otis elevators and is open to
reviewing whether to break up
in the coming years after the
company pares its debt levels
and squeezes out some $500
million in expected cost sav-
ings, the people said. There
isn’t a decision on whether any
split will happen, they cau-
tioned.
The cost savings are ex-
pected to come from eliminat-
ing the expenses of being a
public company for Rockwell
and duplicative sales expenses,
but aren’t expected to mean
significant workforce cuts, the
people said.
Mr. Hayes has proven will-
ing to make large changes in
the past. He took over as CEO
in November 2014 and by July
2015 had reached a deal to sell
the company’s Sikorsky heli-
copter division.
Several Wall Street analysts
have said the deal makes more
sense if it provides a path to
splintering the conglomerate.
Last year, United Technolo-
gies’ aerospace and jet-engine
businesses had about $29.4
billion in revenue, while its
other businesses brought in
about $28.7 billion.
Rockwell Collins had sales
of about $5.3 billion in the fis-
cal year ended in September.
B/E Aerospace added another
$2.9 billion.
As reports of the merger
BUSINESS & FINANCE
CEO Christophe Weber says Takeda doesn’t want to become ‘overstretched’ after its Ariad purchase.
vance loans, constraining the
company’s ability to borrow
cash. “We don’t want to be
overstretched. We want to be
between two to three times
Ebitda,” Mr. Weber said.
While Takeda will continue
to closely monitor promising
startups, Mr. Weber said to in-
vestors: “Don’t expect an an-
nouncement very often. We
are very risk-aware.”
Takeda is faced with a
shrinking pool of patent-pro-
tected products, much like its
Western counterparts. Actos,
the company’s blockbuster di-
abetes drug, lost patent pro-
tection in 2012. Acid-reflux
medication Dexilant is ex-
pected to lose exclusivity in
2020, paving the way for less-
costly generic copies.
The company has forged
more than 50 partnerships in
the past three years, and on
to buy more Italian and fewer
German bonds would make
Germans even more antago-
nistic toward the Frankfurt-
based ECB.
For another, workers de-
nied pay increases aren’t
likely to be happy or to stick
to voting for the establish-
ment. In Italy, the populist 5
Star Movement is running
equal with the governing
Democratic Party, and Spain
has a minority government af-
ter the rise of the far left.
“The central bank is in a
very challenging situation,”
said Jean-Claude Trichet, Ma-
rio Draghi’s predecessor as
head of the ECB. “Most of the
other member states must re-
establish their own relative
competitive position within
the euro area, which means
they must have their own unit
labor costs and national infla-
tion less dynamic [lower] than
Germany’s. So German infla-
tion is a de facto cap for other
countries.”
For now, the ECB is helped
by the cyclical pickup in the
economy, which has been
growing at the same pace as
the U.S. over the past year.
But it wants growth to be bal-
anced, so there is no repeat of
A Rockwell plant. United Technologies is buying the company.
talks became public, financial
analysts have said they don’t
expect significant antitrust is-
sues, given that United Tech-
nologies and Rockwell make
different airplane parts.
Aside from regulators, the
companies may have to sell the
deal to their customers, where
there has been tension already.
Pratt & Whitney has strug-
gled with production and the
reliability of its new geared-
turbofan jet engine that pow-
ers Airbus A320neo single-
aisle planes. Airbus plane
deliveries this year are run-
ning behind because of a
dearth of engines.
Monday it said it would join a
Japanese biotechnology
startup to co-develop a cancer
therapy of the type known as
CAR-T, which involves modify-
ing patients’ immune cells so
they are programmed to at-
tack tumors. Novartis AG last
week won approval for the
world’s first CAR-T therapy.
Despite the patent expira-
tions, Mr. Weber said Takeda
was poised for solid growth
over the next few years on the
back of recently introduced
products including Ninlaro, a
multiple myeloma treatment
poised to become the com-
pany’s best-selling cancer
product. The drug came from
Takeda’s $8.8 billion acquisi-
tion of Millennium Pharma-
ceuticals Inc. in 2008. Takeda
later spent $14 billion to buy
Switzerland’s Nycomed A/S.
A former GlaxoSmithKline
Wage Control
Weaker eurozone economies
have restrained pay since the
global financial crisis, following
years of generosity.
Change in private-sector hourly
earnings
40%
2000-2008
2009-2017
30
20
10
0 the models used by central
Germany France Italy
Source: Federal Reserve Bank of St. Louis
THE WALL STREET JOURNAL.
the last crisis.
And many economists think
it is just a matter of time be-
fore wages take off.
Angel Gurría, secretary-
general of the Organization for
Economic Cooperation and De-
velopment, says the Phillips
curve isn’t broken. “It’s taking
a little longer to react in a
predictable way,” he said at
the Ambrosetti Forum in Italy
over the weekend, but even in
Regarding a potential Rock-
well deal, an Airbus spokes-
man recently said the airplane
maker hoped “that any poten-
tial M&A would not distract
[United Technologies] from
their top operational priority.”
United Technologies offi-
cials have said they expect the
problems to be resolved this
year and were expecting to
meet engine delivery commit-
ments.
While United Technologies
has long eyed Rockwell, talks
first began between the CEOs
in May, according to some of
the people familiar with the
matter. While the companies
THE WALL STREET JOURNAL.
TOMOHIRO OHSUMI/BLOOMBERG NEWS
PLC executive, Mr. Weber is
the first non-Japanese CEO at
236-year-old Takeda and one
of the few foreigners leading a
large Japanese company.
Mr. Weber has shed non-
core businesses, and reduced
Takeda’s focus to a small
group of diseases. The com-
pany consolidated research
into two main sites—in Boston
and Shonan, south of Tokyo—
and said it expected annual
savings of $164 million once
the restructuring concludes
next year. Its stock price has
risen 26% over the past year.
Mr. Weber said he was con-
ducting town halls and lunches
to better understand employee
concerns. “We have passed
this phase of huge uncer-
tainty,” he said. “Now it’s time
for us to stabilize.”
—Chieko Tsuneoka
contributed to this article.
Japan he detects localized in-
creases in wages in areas with
labor shortages.
Plenty of reasons are ad-
vanced for the failure of wages
to grow more strongly as un-
employment has plummeted:
workers more worried about
their jobs than their pay fol-
lowing recession; expectations
of low inflation; globalization;
immigration; and, in the U.S.,
hidden unemployment in the
form of workers who have
given up looking for work.
It is possible that Germany,
the U.S. and Japan will all find
that the mystery of missing
wages was merely a delay, and
Spain
banks will start working again
as tight labor markets lead to
accelerating wage gains.
But if those pay increases
don’t materialize, it will be
still harder for the eurozone
establishment to prevent pop-
ulist resentment from bub-
bling up in the region’s weaker
economies. Those include It-
aly, one of the world’s biggest
bond markets. What looks like
abstruse economic theory will
rapidly turn into hard finan-
cial fact if Italy’s elections go
the wrong way and its bond
market sours.
don’t see major hurdles to
closing the deal, they don’t ex-
pect the airplane makers to be
happy with the combination
and plan to start making their
case for why it would be bene-
ficial, the people said.
Boeing and Airbus have also
been nudging their way into
the aftermarket business to
capture some of the profit
from selling and servicing
parts—putting them on a colli-
sion course with suppliers
such as United Technologies.
United Technologies’ Mr.
DANIEL ACKER/BLOOMBERG NEWS
Hayes has warned that such
intrusions could disrupt the
business model for jet engines
and lead to high prices for
equipment if aftermarket ser-
vices are no longer guaran-
teed.
After trying to buy United
Technologies last year, Honey-
well International Inc. is re-
viewing whether to break off
its aerospace division, the rival
industrial giant’s largest. Ac-
tivist Third Point LLC has
made a public push for a
spinoff.
In Europe, engine maker
and Pratt & Whitney rival
Rolls-Royce Holdings PLC has
activist ValueAct Capital Man-
agement LP on its board.
Tim Mahoney, president
and CEO of Honeywell Aero-
space, said last month that a
combination of United Tech-
nologies and Rockwell Collins
would “change the competitive
landscape.”
—Robert Wall contributed to
this article.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, September 6, 2017 | B3

BUSINESS NEWS

New York Tabloid

Is Sold to Tronc
BY LUKAS I. ALPERT
Tronc Inc. has acquired the
Daily News, the nearly cen-
tury-old New York City tab-
loid, giving the publisher of
the Los Angeles Times and
Chicago Tribune a presence in
the three largest cities in the
U.S.
No cash will change hands
in the deal, but Tronc has
agreed to assume all operating
costs, debt and pension liabili-
ties for the gritty urban daily
that was once the country’s
largest circulating newspaper
but has faded in recent years
as readers and advertisers
AMIT DAVE/REUTERS
in additional cost savings for
Tronc.
The deal marks a homecom-
ing of sorts for the News,
which had previously been
owned by Tribune Co., an ear-
lier incarnation of what is now
Tronc.
Tribune Co. sold the Daily
News in 1991 and the newspa-
per was acquired two years
later out of bankruptcy by
real-estate tycoon Mortimer
Zuckerman, owner of Boston
Properties.
In 2015, Mr. Zuckerman put
the paper up for sale but later
pulled it off the market when
a suitable buyer couldn’t be

have shifted online. found.

“As part of the Tronc port-
folio, the New York Daily News
will provide us with another
strategic platform for growing
A Schneider operation in Gujarat, India. With its latest deal, the company is adding to in-house capability as automation spreads. our digital business, expanding
our reach and broadening our
“Mort has always believed
in investing in quality journal-
ism. He profoundly cherished
the Daily News as the home-
town newspaper of the great-
est city in the world,” Eric

Industrial Software Melded

France’s Schneider to
roll assets into Aveva
in exchange for 60%
of combined company
BY BEN DUMMETT
AND NICK KOSTOV
France’s Schneider Electric
SE has agreed to take control
of British engineering soft-
ware provider Aveva Group
PLC, the latest move by an in-
dustrial giant toward writing
the software that will run the
factories and machines of the
future.
Under the deal, announced
in a joint statement Tuesday,
shareholders following the
deal’s completion.
Fearing disruption from
tech startups and Silicon Val-
ley giants, the companies are
combining their software op-
erations to add heft as manu-
facturing adopts more auto-
mation. Other companies,
including General Electric Co.
and Robert Bosch GmbH, have
been have been working on
digitizing their own manufac-
turing processes, and develop-
ing software platforms and au-
tomation tools to sell to other
industrial players.
Schneider has already tar-
geted U.K. software companies
in the past to bolster its in-
dustrial-software business. In
“Through increased scale
and complementary footprint
the transaction will generate
synergies that will benefit cus-
tomers and shareholders
alike,” said Jean-Pascal Tri-
coire, Schneider’s chief execu-
tive.
The planned transaction is
similar to the structure of the
companies’ previous attempt
to merge their industrial-soft-
ware businesses in July 2015.
Then, Schneider had agreed to
combine its software assets
with those of Aveva and pay
£550 million in exchange for a
53.5% stake in the enlarged
group. However, the deal col-
lapsed after the two sides
couldn’t agree on final terms.
services for advertisers and Gertler, Mr. Zuckerman’s
marketers,” Tronc Chief Exec- nephew, who had recently
utive Justin Dearborn said in a served as the paper’s co-chair-
statement. man and publisher, said in a
As part of the deal, Tronc memo to staff Monday.
across 30 countries. Its other will acquire the News’s print- With splashy photos and
main markets include power, ing press in Jersey City, N.J., screaming headlines, the Daily
petrochemical and chemicals. and 49.9% of the 25-acre par- News has long had a promi-
The deal comes at a time cel of land on which it sits. nent place in New York’s me-
when Aveva is trying to reduce A person familiar with the dia scene with its mix of polit-
it reliance on the slowing oil- matter said the deal will result ical, celebrity and sports news,
and-gas and marine markets. in publications like the Hart- famed for front-page headlines
For the year ended March 31, ford Courant and Morning Call like “Ford to City: Drop Dead”
Aveva boosted revenue by 7% of Allentown, Pa., being and its historic coverage of the
to £215.8 million from the printed at the plant, resulting “Son of Sam” killings.
prior year, benefiting in part
from currency moves. Dis-
counting that, revenue was
down 3.8%.
Schneider’s software is
used to help manage manufac-
turing processes, design tools
and train plant crews. It ser-
vices industries ranging from
transportation to its largest
market of food and beverages

Schneider will fold its soft-
ware assets into Aveva’s oper-
ations and pay the U.K. com-
pany more than £550 million
($710.4 million) in exchange
for a 60% stake in the com-
bined entity, in a so-called re-
verse takeover. Aveva would
also distribute £100 million to
2013, it agreed to acquire In-
vensys PLC for £3.31 billion to
better compete against rivals
such as Siemens AG, Mitsubi-
shi Electric Corp. and Rock-
well Automation Inc. The com-
bination would offer it
opportunities to cut costs and
access new customers.
Spun out of the University
of Cambridge in 1967, Aveva
provides engineering software
to owners, operators and engi-
neering contractors that oper-
ate in the power, oil-and-gas,
marine and paper and pulp
sectors, among others. It em-
ploys more than 1,700 people
BRENDAN MCDERMID/REUTERS
and pharmaceuticals, which
generates about 16% of the
company’s annual software
revenue.
The combination will give
Aveva greater access to the
U.S. market, where Schneider’s
software business generates
almost half of its annual sales. The owner of the Los Angeles Times adds the Daily News.

Two More Law Firms Set BOUYGUES

FIRST-HALF 2017

Merger, Extending Trend RESULTS

BY SARA RANDAZZO
As law firms feel continued
pressure to expand or risk
perishing, another tie-up of
midsize law firms is coming
together.
Chicago-based Arnstein &
Lehr LLP is merging with East
Coast firm Saul Ewing LLP,
the two firms announced
Tuesday, to form a more than
400-attorney partnership with
strengths in bankruptcy, litiga-
tion, finance and real estate.
The deal is one of the larg-
est in the legal industry this
year. In June, 250-lawyer New
York-based firm Chadbourne &
Parke LLP combined with in-
ternational firm Norton Rose
Fulbright. Also, 530-attorney
U.S. firm Womble Carlyle is
set to merge with slightly
larger U.K. firm Bond Dickin-
son in the fourth quarter.
In the face of stagnant de-
mand for legal services, many
firms have turned to mergers
to boost market share and
stay competitive. There were
52 combinations announced in
the U.S. in the first half of the
year, according to legal con-
sultancy Altman Weil, topping
previous midyear highs. Many
of the deals this year have in-
cluded one international firm,
and the majority involves ac-
SAUL EWING ARNSTEIN & LEHR
quisitions of firms with 20 or
fewer attorneys.
The latest deal is purely do-
mestic. Arnstein & Lehr brings
offices in Illinois and Florida,
joining with 11 Saul Ewing of-
fices predominantly in the
Northeast. The new firm will
be branded as Saul Ewing Arn-
stein & Lehr.
Some of the firms’ clients
Talks took six months
and were expedited by
what the firms call a
shared culture.
include advisory firm Willis
Towers Watson, engineering
firm Thornton Tomasetti and
commercial-real-estate com-
pany ShopCore Properties.
The merger results from six
months of talks between the
firms’ leaders, which started
after the two were introduced
through a law-firm consultant
a year ago.
Saul Ewing managing part-
ner Barry Levin, who will lead
the combined firm, said mar-
ket forces have made it in-
creasingly necessary to have a
bigger footprint. Ten years
ago, he said, having 275 law-
yers “was right in the bull’s-
eye of the definition of a mid-
size law firm,” but today it
hardly qualifies as such.
A shared culture between
the firms helped make the
deal attractive, which “sounds
corny, but it’s true,” said Jeff
Shapiro, who was chairman of
Arnstein & Lehr until the deal.
“I’ve seen too many firms
merge, then essentially un-
merge if they didn’t fit.”
Founded in 1893, Arnstein &
Lehr has long specialized in
business, litigation, local gov-
ernment, tax-and-estate plan-
ning, and real estate.
The firm also has expertise
on advising players in the
EB-5 visa program, which
awards visas to wealthy for-
eigners who invest in qualified
U.S. projects.
Saul Ewing, which brings
262 attorneys and a similar
number of staff to the combi-
nation, focuses on the energy,
insurance, higher-education
and life-sciences sectors. The
firm represents more than 100
colleges and universities.
Demand for large law firms’
services was up 1.4% in the
first half of the year, according
to a survey from Wells Fargo
Private Bank’s Legal Specialty
Group.
SHARP IMPROVEMENT
IN GROUP
PROFITABILITY
• BACKLOG FOR THE CONSTRUCTION CONSOLIDATED
BUSINESSES AT A RECORD LEVEL KEY FIGURES
• GROWTH IN COMMERCIAL AND FINANCIAL
SALES
RESULTS AT BOUYGUES TELECOM
€m
• OUTLOOK FOR  CONFIRMED
There was a sharp improvement in Group profitability in the
first half of 2017. 15,162 +3%
The current operating margin increased, driven by good
performances at Bouygues Telecom and TF1. Net profit
attributable to the Group also improved. Excluding
exceptional items, it was up €171 million. CURRENT
Furthermore, commercial momentum continued in all the OPERATING PROFIT
Group’s business activities. €m
- The backlog in the construction businesses reached a
record €31.2 billion at end-June 2017, up 5% year-on-year.
On August 31, 2017, Colas announced the signature of an 385 +€179m
agreement to acquire the Miller and McAsphalt group,
a major road construction player in Ontario and a leader
in bitumen distribution in Canada. This acquisition will
enable Colas Canada to expand its geographical coverage NET PROFIT
by increasing its presence in Ontario and considerably
ATTRIBUTABLE
increasing its bitumen storage and distribution capacity
across Canada. TO THE GROUP
- Bouygues Telecom had 13.6 million mobile customers €m
at end-June 2017, representing 645,000 new adds
since end-December 2016. In addition, 133,000 new
fixed customers joined Bouygues Telecom in the first
240 +€268m
half of 2017, taking the total number of customers to
3.2 million. FTTH contributed close to two-thirds of net
growth in the second quarter of 2017.
NET DEBT1
OUTLOOK
First-half results confirmed the target of an improvement in €m
Group profitability in 2017:
- The current operating margin in the construction
businesses should continue to improve.
4,265 -€89m
- Bouygues Telecom expects to reach an EBITDA margin
slightly above 25%. Furthermore, the rate of transfer of
towers to Cellnex will speed up in the second half of 2017 (1) At June 30, 2017
(around €220 million of non-current income related to
Cellnex expected in 2017).
For 2018 and beyond:
- TF1 expects to hold the annual average cost of programs a
for its five freeview channels at €980 million over the
2017–2019 period and achieve €25–30 million of recurrent
savings b. TF1 should also improve its profitability, with a
double-digit current operating margin target in 2019.
- Bouygues Telecom confirms its target of €300 million in

free cash flow in three years’ time.

(a) Excluding sporting events (b) Excluding cost of programs

Consult the full press release and results presentation on bouygues.com

Investor Relations: investors@bouygues.com
@GroupeBouygues

Photo credits: Augustin Détienne/Capa Pictures. Architect: RPBW

Saul Ewing managing partner Barry Levin, left, with Arnstein & Lehr Chairman Jeff Shapiro
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B4 | Wednesday, September 6, 2017 THE WALL STREET JOURNAL.

TECHNOLOGY WSJ.com/Tech

Facebook Aims to Reap WhatsApp Fees

Instead of running other sign of Facebook’s inten-
tion to cash in on messaging as
ads, messaging it grapples with a slowdown in
service would charge revenue growth from its core
service, news feed.
businesses for use Facebook owns two of the
world’s most popular messag-
BY DEEPA SEETHARAMAN ing apps, WhatsApp and Face-
book Messenger, and Chief Ex-
Facebook Inc. is getting ecutive Mark Zuckerberg
ready to earn back some of the predicts that messaging could
$22 billion it spent to buy the yield dividends for the company
messaging service WhatsApp within five years.
three years ago. In July, Facebook started
WhatsApp will eventually showing advertisements inside
charge companies to use some Messenger, sandwiched be-
features in the two free busi- tween users’ conversations
ness tools it started testing this when they open the app. The
summer, WhatsApp’s chief op- strategy is similar to how Face-
erating officer, Matt Idema, said book monetizes the news feed
in an interview. and Instagram, the photo- and
Facebook generated $19.38 per
user in the U.S. and Canada but
only $2.13 per user in Asia. In-
dia is WhatsApp’s largest mar-
ket, with 200 million monthly
active users out of 1.3 billion
globally.
One business taking part in
WhatsApp’s commercial project
is Indian health-care startup
1mg, which sells prescription
medications online. The Gurg-
aon-based company began
working with WhatsApp to talk
to users after they have submit-
ted orders, co-founder Gaurav
Agarwal said.
If an order sent to 1mg lacks
necessary details, like documen-
tation of a prescription, 1mg
staff can send customers a mes-

The new tools, which help
businesses from local bakeries
to global airlines talk to cus-
tomers over the app, reflect a
different approach to monetiza-
tion compared with other Face-
book products, which rely on
advertising.
“We want to put a basic foun-
dation in place to allow people
to message businesses and for
them to get the responses that
they want,” Mr. Idema said. “We
do intend on charging busi-
nesses in the future.”
The free WhatsApp Business
WhatsApp is testing a way for small businesses to field customer questions or send them updates.
app allows small businesses to
field customer questions or
send them updates. Larger com-
panies can do the same with an-
other free tool that lets them
plug directly into the WhatsApp
platform. WhatsApp is also roll-
ing out verified profiles for
businesses so its one billion
daily users can distinguish be-
tween a person and a business.
Companies in Brazil, Europe,
India and Indonesia are testing
the free services, including KLM
Royal Dutch Airlines. Users
must “opt in” to be contacted
by a business, a WhatsApp
spokeswoman said.
IMAGO/ZUMA PRESS
Mr. Idema declined to de-
scribe the paid features or say
when they would make their
debut. “We don’t have the de-
tails of monetization figured
out,” he said.
The business tools being
tested, expected to be detailed
in a blog post Tuesday, are an-
video-sharing app it bought for
$1 billion in 2012.
Mr. Idema didn’t rule out
that WhatsApp could show ads
to users at some point but said
the focus was now on connect-
ing businesses and users. Last
year, WhatsApp started sharing
its user data with Facebook, a
step to improve Facebook’s ad
targeting and friend sugges-
tions.
Regions where WhatsApp is
popular haven’t been as lucra-
tive for Facebook’s advertising
business. In the second quarter,
sage via WhatsApp’s tool for
larger companies, asking them
to provide an image of the doc-
ument. Chats from the company
appear on customers’ phones as
coming from WhatsApp verified
users.
“It’s much easier than
through SMS or our app,” said
Mr. Agarwal, referring to send-
ing text messages or alerts. He
said 1mg’s fulfillment rate for
such orders has nearly doubled
since implementing the pilot.
—Newley Purnell
contributed to this article.

DATA websites they visit, what apps

Continued from page B1
advertising programs for at
least five years. Verizon Up,
launched in August, is the lat-
and features they use and
their location.
The disclaimer quickly drew
criticism: Adam Levin, a con-
sumer advocate and founder
of data-security firm Cyber-
Scout, warned in a column on
League game between the Bal-
timore Ravens and Buffalo
Bills.
Google, Facebook and other
internet firms possess similar
data about their users and dis-
close it in their privacy poli-
cies. But Verizon must walk a
customers to opt out of data-
sharing after they have signed
up for Verizon Up, but the
company can keep the data for
three years.
Mr. Scotti said he hopes
customers will appreciate the
upfront disclosures and that

RICHARD B. LEVINE/LEVINE ROBERTS/NEWSCOM/ZUMA PRESS

est incarnation of its rewards
program. Verizon doesn’t say
how many people have en-
rolled in Up or Selects.
For every $300 customers
spend on their Verizon bills,
they receive one Up credit,
which can be used for rewards
such as Uber rides, four free
months of Apple Music or
chances to win tickets to see
performers such as Lady Gaga.
Verizon makes it clear dur-
ing the sign-up process what
data consumers are giving up:
information about their demo-
graphics and interests, what
HuffPost that the “hidden cost
of Verizon’s ‘free’ rewards pro-
gram is your data.” In an in-
terview, he asked: “When you
think about it, do you really
want somebody to know that
much about your life?”
Deli Meeks, a 26-year-old
forklift operator in Atlanta,
said he doesn’t mind Verizon
accessing his data. A lot of
companies track information,
and it helps make advertising
more useful, he said.
Mr. Meeks used his first re-
ward to secure two tickets to a
preseason National Football
more delicate line.
Telecom companies are re-
quired by federal law to take
precautions when it comes to
customer data.
“Some of our competitors,
they have exactly the same
thing, it’s just buried in the
terms and conditions of the
service,” Diego Scotti, Veri-
zon’s chief marketing officer,
said of the information tech
companies collect. “We are not
hiding anything.”
Google and Facebook de-
clined to comment.
Verizon’s program allows
the rewards program will
make Verizon customers more
loyal.
But the extra precaution
might stifle Verizon’s ability to
expand the program, said
Craig Moffett, an analyst at
MoffettNathanson LLC. “This
just highlights how thorny pri-
vacy issues can be for telecom
operators,” he said. “If they
are going to be held to a
higher standard than Google
and Facebook, either by stat-
ute or simply by convention,
then it will be very hard for
them to effectively compete.” Verizon makes it clear what data consumers are giving up.

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THE WALL STREET JOURNAL.
WORKAROUNDS
When It’s OK to Be
A Workaholic
For those who love what
they do, being a workaholic isn’t
all that unhealthy, new research
suggests.
Workaholism by its very
name suggests detriment to
one’s physical and mental health,
and the American psychologist
Wayne Oates, who coined the
term nearly 50 years ago, lik-
ened it to substance abuse. Yet
research on workaholism has
been inconclusive so far, in part
because it is hard to distinguish
the consequences of merely
working long hours from actual
work addiction.
A study published in the cur-
rent issue of Academy of Man-
agement Discoveries not only
finds health differences among
people who work long hours and
those who compulsively work to
excess. Researchers also found
differences between workaholics
who enjoyed their work and
those who didn’t.
In the study, employees at an
international financial-consulting
firm were asked to fill out ques-
tionnaires on their work hours,
relationships at home and work,
as well as their sense of well-
being and any stress-related
complaints, such as trouble
sleeping or headaches.
They also had to score such
statements as “It is hard for me
to relax when I am not working
on something” and “At my job, I
feel strong and vigorous.” After-
Workaholism by its
very name suggests
detriment to one’s
physical health.
ward, 763 employees took part
in medical screenings for risk
factors for more serious prob-
lems, such as heart disease and
diabetes.
Researchers found no indica-
tion that simply working long
hours led to stress-related ail-
ments or more serious risk fac-
tors, such as high blood pres-
sure.
And while the results showed
a link between workaholism and
stress-related physical com-
plaints, only workaholics who
described themselves as unen-
gaged or feeling trapped in their
work appeared at risk for more
serious health disorders.
“That’s where the real sur-
prise came up for us,” said Lieke
ten Brummelhuis, an assistant
professor at Simon Fraser Uni-
versity’s Beedie School of Busi-
ness near Vancouver and one of
the study’s authors. “Engage-
ment is the key.”
Prof. ten Brummelhuis and
her co-authors speculate that
job-loving workaholics appeared
healthier because they tended to
avail themselves of support on
the job and at home when they
needed it.
The lesson for employers, she
said, is that they may be better
off finding ways to help employ-
ees feel enthusiastic about their
jobs rather than encouraging
them to stay connected to work
round the clock.
As for workaholics, they
should ask themselves why they
work so hard. “If it is out of love
for the job, go for it,” she says.
“If not, alarm bells need to
sound.”
—Vanessa Fuhrmans
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the Start with WSJ+
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Wednesday, September 6, 2017 | B5
MANAGEMENT
Sent Abroad? Plan Your Return Now
A hard landing can await an expatriate manager headed home; some firms help soften the re-entry
BY JOANN S. LUBLIN soft Corp. vice president and
onetime expatriate, says he
Taking an overseas as- worked hard to keep his U.S.
signment can vault your network strong while run-
management career into the ning its India unit for nearly
next level and test your three years. During his busi-
skills in unfamiliar territory. ness trips to the U.S., Mr.
But coming home can be the Akerkar stayed an extra day
hardest part. to meet with important col-
Companies typically pro- leagues and discuss what he
vide expatriates with local was learning abroad. He re-
housing subsidies, cross-cul- turned to the U.S. in 2013.
tural training and other Other U.S. executives dis-
perks. Few employers, patched abroad get assigned
though, ad- a high-level colleague to
YOUR dress what champion their careers back
EXECUTIVE happens when at headquarters. Otherwise,
CAREER that expat is “assimilating into the assign-
ready to re- ment country is easier than
turn—a fact repatriating to the home
that partly explains why one- country,” says Peter Clarke, a
quarter of returning execu- global managing partner at
tives jump ship within two PricewaterhouseCoopers LLP
years, recruiters and re- who has sponsored some of
searchers estimate. its expats.
ANNIE TRITT FOR THE WALL STREET JOURNAL
Employees who have suc- Mr. Clarke advocated for
cessfully made the return Felix Mwamba when the U.S.
trip credit advance planning, expatriate wanted to leave
disciplined networking and Paris for PwC’s Boston office
sponsors back home. To bet- in 2013. “He made sure there
ter manage the transition, was support from the leader-
some companies work to ship to take another partner
plan managers’ return roles in this market,” recalls Mr.
even before they leave. But Mwamba.
some experts warn it’s still A pair of home-country
largely up to the individual. sponsors boosted prospects
“So much depends on the for Amit Sood, now head of
executive in question taking product and technology for a
ownership for their repatria- unit of Asurion LLC, a pro-
tion,” says Daniel R. Smith, a ‘You’re basically a new employee again.’ vider of insurance and sup-
managing director of recruit- port for 300 million phones,
ers Raines International Inc. electronics and appliances.
Cosmetics giant L’Oréal Jacob Bonk, a human-resources executive for L’Oréal in New York Mr. Sood says he worried
SA invites repatriated U.S. about repatriation when
staffers to go through orien- Tennessee-based Asurion
tation and integration pro- face-to-face with 50 col- lously discover the answer adviser to help keep their ca- asked the California middle
grams as if they were brand- leagues. just before your return are reers on track while abroad. manager to relocate to Hong
new hires. The idea is “to Both companies and indi- not good,” he says. Despite such assistance, Kong in 2013. Before his de-
feel reintegrated into the viduals are advised to give To ensure that Monsanto the company doesn’t guaran- parture, a prior boss and a
company,” says Jacob Bonk, extra thought to their return Co. will benefit from skills tee specific jobs following senior vice president prom-
a human-resources executive roles before they fly over- developed abroad, the seed international assignments, ised to try to find him a suit-
for its U.S. unit in New York. seas. “Begin with the end in and pesticide maker identi- says Andrew Walker, Ernst & able Asurion role upon his
Upon returning from four mind,” says Stewart Black, a fies potential return posi- Young’s global mobility return.
years in China, Mr. Bonk professor of management tions before people move leader. The sponsors arranged
went through the first-day practice at Insead business overseas, according to When British drugmaker video chats with executives,
orientation last year along- school and veteran expatri- Bridget Walsh, a global tal- GlaxoSmithKline PLC hired kept an eye out for relevant
side about 25 new staff- ate researcher. ent mobility manager. Marc Speichert in January as openings ahead of official
ers. Joining the new hires For instance, Mr. Black Monsanto says its ap- global chief digital officer, announcements and “gave
felt “a bit funny,” Mr. Bonk suggests finding out which proach has lowered attrition; working in Warren, N.J., in- personal recommendations
recalls, but after living out- leadership skills your em- some 7% of repatriates leave terviewers told him to ex- on my behalf,” Mr. Sood rec-
side the U.S. for so long, ployer wants you to develop within two years, down from pect a three-year foreign as- ollects. “They really wanted
“you’re basically a new em- during a foreign stint. “If approximately 13.5% a de- signment and described to make expatriate assign-
ployee again.” your company does not know cade ago, according to the possible opportunities after ments work.”
Mr. Bonk’s new boss also how they will utilize you or company. his subsequent return to the Asurion brought Mr. Sood
urged him to spend time re- your hard-won international Ernst & Young LLP gives U.S. He will relocate to the back to the U.S. in 2015—and
building his U.S. network; in experience before you leave, departing expats a 10-page U.K. in 2018. promoted him into his first
his first month back, he met the odds they will miracu- survival guide and a mobility Sanket Akerkar, a Micro- executive role.
BUSINESS WATCH
JBS “The result of this could be Merck is considering options for and generated sales of €860 made drugs—to Fresenius SE in
the total loss of benefits,” Mr. its consumer-health operations, million in 2016 from a portfolio a deal worth up to €670 million.
Owners’ Plea Bargain Janot said. including a full or partial sale, or of 10 core brands that serve Merck’s other operations,
Comes Under Review In an emailed statement, J&F strategic partnership, the com- more than 40 markets. Citi ana- which sell laboratory supplies
said it acted in good faith. pany said. A final decision hasn’t lyst Peter Verdult estimated it and high-tech materials for
Brazilian Attorney General “The precipitated interpreta- been made. could fetch a price of €1.8 billion items like smartphone screens,
Rodrigo Janot said Monday that tion given to the material turned The move is a bet on Merck’s to €2.7 billion from a full sale. could cushion the company from
the owners of meatpacking gi- in by the [J&F] executives growing pipeline of prescription Drugmakers face pressure to the ups and downs of develop-
ant JBS SA may have omitted themselves to the attorney gen- drugs for diseases like cancer scale up consumer-health busi- ing new drugs. It has bulked up
evidence in a plea bargain they eral’s office will be quickly clari- and multiple sclerosis. Merck has nesses amid a wave of consoli- both businesses through acquisi-
signed earlier this year with au- fied,” the company said. struggled to launch lucrative dation in the segment. In 2015, tions in recent years.
thorities. —Paul Kiernan new drugs in recent years, GlaxoSmithKline PLC and Novar- “We view this as a sensible
Prosecutors are reviewing a though it has confidence in its tis AG pooled their consumer- capital-allocation decision, re-
recording in which two unspeci- MERCK current development pipeline, health businesses into a Glaxo- flecting both increasing confi-
fied witnesses referenced “very forecasting new drugs could controlled joint venture. France’s dence in the pharma pipeline
grave” misconduct involving fed- Drugmaker Weighs generate more than €2 billion, or Sanofi SA swallowed Boehringer and prioritization of investment
eral prosecutors and the Su- Sale of Health Unit over $2.38 billion, in annual reve- Ingelheim GmbH’s consumer- elsewhere across group,” said
preme Court, Mr. Janot said in a nue by 2022. health unit last year. Mr. Verdult in a note to clients.
televised news conference. The Merck KGaA put its con- “We have continued to trans- A sale of the consumer- Merck said proceeds from
alleged misconduct wasn’t in- sumer-health unit on the block form Merck…over the last years health unit would focus Merck’s any transaction would be used
cluded in a $3.3 billion settle- Tuesday in a move that will fo- into a leading science and tech- health-care arm purely on pre- to help meet its financial tar-
ment signed by JBS’s parent cus its health-care activities on nology company,” Chief Execu- scription medicines. Earlier this gets.
company, J&F Investimentos, in the riskier business of develop- tive Stefan Oschmann said. year, Merck sold its biosimilars The company isn’t affiliated
which executives Joesley and ing prescription medicines. Merck’s consumer-health unit business—which developed ge- with U.S.-based Merck & Co.
Wesley Batista avoided jail time. Darmstadt, Germany-based makes over-the-counter drugs neric versions of biologically —Denise Roland
© 2017 Dow Jones & Co. Inc. All rights reserved. 6DJ5549
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B6 | Wednesday, September 6, 2017 THE WALL STREET JOURNAL.

FINANCE & MARKETS

Citigroup
Creates a
Services
Division
BY BEN DUMMETT

Citigroup Inc. has created a

separate services group within
its investment-banking cover-
age of the industrials sector
and appointed two global co-
heads to oversee the new divi-
sion amid a flurry of deal-
making in the payments-
processing sector in Europe
and the U.S.
Jean-Baptiste Petard is ex-
pected to join Citi in Decem-
ber as global co-head of the
independent services division,
according to a memo announc-
ing the new structure.
A seasoned investment
banker, Mr. Petard was most
recently at UBS Group AG,
where he oversaw the Swiss
bank’s investment-banking op-
LUCAS JACKSON/REUTERS

erations for business services,

transportation and logistics in
Europe, the Middle East and
Africa. At Citi, he will be
based in London, focusing on
clients in the business and
Food-delivery firm Blue Apron had a high-profile initial public offering in June on the New York Stock Exchange. payment services sectors in
EMEA.

Why Index Funds Stay Out of IPOs

Some experts think
the limited presence
of new listings in ETFs
could change
BY ARI I. WEINBERG
Index funds have made
their presence felt in a big
way in every corner of the
stock market except one: ini-
tial public offerings.
What would it take to
change that?
Only a limited number of
index funds and exchange-
traded funds have moved to
quickly include certain shares
just after their IPOs—largely
depending on the size and
availability of the offering and
the size of the company.
By design, however, the
freight train of assets that is
still moving into index funds
tends not to find its way into
shares offered in IPOs. This is
because, as their name im-
plies, these types of funds are
built to track indexes, and in-
dexes themselves generally do
not include shares of IPOs on
day one. Stocks found in in-
dexes must fit established cri-
teria for inclusion based on
metrics such as public float,
geography, market cap, indus-
try, valuation and dividends.
IPOs, meanwhile, by their
nature, involve companies that
have no trading histories and
that tend to offer investors
much less information com-
pared with more-established
publicly traded companies.
Index firm MSCI Inc., for
example, generally requires at
least three or four months of
trading before a new stock can
be considered for an existing
or new index. There are excep-
tions. Large stocks, based on
relative market cap within a
specific segment, for example,
can be included in an MSCI in-
dex as soon as 10 days after an
IPO, with an announcement
about the pending inclusion
made on day one of the stock’s
initial offering if the company
is expected to meet market-
cap and trading requirements.
CRSP U.S. Equity Indexes,
used by many Vanguard index
funds and ETFs, publishes sim-
ilar criteria for both standard
inclusion and for “Fast Track”
inclusion of IPO shares, as do
S&P Dow Jones Indices and
FTSE Russell, among others.
Index methodologies usually
include an annual or semian-
nual “reconstitution,” wherein
eligible stocks are swapped in
(or out) based on published
criteria. IPOs, including splits
and spinoffs, can be special
cases for quicker inclusion.
The existence of such index
rules, however, hasn’t barred
all index-fund managers from
the new-issue market. For ex-
ample, some index funds can
participate in IPOs or buy a
stock before it enters the in-
dex, should the manager deem
it necessary for tracking.
Again, that would really only
be the case for large, liquid
IPOs, including spinoffs.
Recently, a possible sticking
point for more inclusion of
IPOs in index funds emerged.
In the IPO of Snapchat parent
Snap Inc., the shares had no
voting rights. While a handful
of public companies have dual-
class shares that award super-
voting to insiders—such as Al-
phabet, Facebook and several
family-controlled media com-
panies—Snap’s IPO was the
first to offer no voting shares
to the public.
Exchange-traded
funds designed to
invest in IPOs have
had a mixed record.
After consultation with cli-
ents, index firms S&P Dow
Jones Indices and FTSE Russell
said this summer that they
would limit inclusion of com-
panies with dual-class shares
in their indexes. MSCI’s consul-
tation closed on Aug. 31. In
January, a coalition of major
investors, including index-fund
giants BlackRock and State
Street Global Advisors, called
for a ban on dual-class stock.
So far, major players di-
rectly involved in the IPO mar-
Mr. Petard will share global
co-head duties for the new
services division with Citi vet-
eran Chad Hoeft, who will con-
tinue his coverage focus on
ket, including startups, invest- torrent of money to a stock the security, facilities-manage-
ment professionals and that doesn’t have the liquidity ment and travel-services sec-
regulators, aren’t pushing for or capacity to support it. tors.
IPO shares to be included in The $14.4 million Renais- Mr. Hoeft joined Citi in
index funds from day one, in sance IPO ETF (IPO), which 1998, and has spearheaded
part because there is less IPO can hold IPO shares as soon as Citi’s coverage of the services
activity in general these days. five trading days after listing sector in North America for
In addition, startups have and until their 500th trading the past several years.
many other attractive options day, has experienced $19.2 mil- He remains based in New
for attracting investment these lion in outflows since its late York.
days. Some argue that for com- 2013 launch. The performance Mr. Petard’s appointment
pany founders and early inves- demonstrates the challenge of and his base in London under-
tors, the benefits of being a investing in IPOs. It has under- score the potential of lucrative
public company have receded performed the Mid-Cap advisory work for investment
in comparison with the massive Growth category on a three- banks amid a consolidation of
increase of the private capital year annualized basis (a return the payments sector that is
markets, including venture cap- of 4.7% compared with 6.9%), under pressure to cut costs
ital, private equity, sovereign but is up 26.8% this year com- and invest in new technologies
wealth and family offices. pared with 13.7% for the cate- to address the rise of mobile
Some market professionals gory, says Morningstar. It has payments.
believe the limited presence of a 0.6% expense ratio. In one of the more recent
IPOs in ETFs could change. For The $860 million First high-profile cross-border
instance, more index funds Trust US Equity Opportuni- deals, Vantic Inc., a big Ohio-
could decide to buy IPOs ties ETF (FPX) tracks the based payments company, last
sooner than their current IPOX 100 index of the largest month agreed to acquire U.K.
rules allow, or index providers new offerings over their first payments processor Worldpay
could systematize a process 1,000 trading days. According Group PLC for £8 billion ($10.4
for both broad-based and sec- to Morningstar, the 11-year-old billion) in cash and stock.
tor index funds to participate fund has outperformed Large- In another deal last month,
at the onset of a new issue. Cap Growth over the past 10 buyout firms Blackstone Group
ETFs designed to invest in years annualized, 11.1% com- LP and CVC Capital Partners
IPOs have had a mixed record. pared with 7.9%, but has un- struck a deal to acquire Pay-
These rules-based funds aren’t derperformed in 2017, 14.1% safe Group PLC, another on-
as strict on index inclusion for compared with 18.2%. line-payments processor based
new issues as the institutional Both managers also offer in the U.K.
index firms—MSCI, FTSE Rus- IPO ETFs for non-U.S. securi- Mr. Petard will report to
sell, S&P Dow Jones and ties. First Trust International Manuel Falco, who oversees
CRSP—which are mindful of IPO ETF (FPXI) has just $20.6 corporate and investment
the trillions of dollars of in- million in assets and Renais- banking for EMEA, and Wes
vestor money that tracks their sance International IPO ETF Walraven, Citi’s London-based
indexes or uses them as (IPOS) has $2.3 million. global co-head of industrials
benchmarks. Including an IPO Mr. Weinberg is a writer investment banking.
on the first day of a listing, or in Connecticut. He can be Mr. Hoeft will continue to
very soon after, could push a reached at reports@wsj.com. report to Mr. Walraven.

Gold Shines as Tensions Rise Advertisement INTERNATIONAL INVESTMENT FUNDS

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BY AMRITH RAMKUMAR
NAV —%RETURN—
FUND NAME GF AT LB DATE CR NAV YTD 12-MO 2-YR
Gold prices continued to
VP Classic-B Units AS EQ HKG 09/04 USD 154.43 34.8 25.9 18.7
rise, as the latest U.S. re- VP Classic-C Units AS EQ HKG 09/04 USD 19.39 34.2 25.2 18.5
VP Classic-C Units AUD H AS EQ HKG 09/04 AUD 15.88 33.0 24.4 18.7
sponse to a North Korea nu- VP Classic-C Units CAD H AS EQ HKG 09/04 CAD 15.49 33.8 24.5 18.3
clear test and comments from VP Classic-C Units HKD H
VP Classic-C Units NZD H
AS
AS
EQ HKG
EQ HKG
09/04 HKD
09/04 NZD
13.25
15.99
34.5
32.6
26.0
24.7
NS
18.6
Data as shown is for information purposes only. No offer is being made by
a Federal Reserve official urg- Morningstar, Ltd. or this publication. Funds shown aren’t registered with the VP Classic-C Units RMB AS EQ HKG 09/04 CNH 12.48 19.8 18.6 NS
U.S. Securities and Exchange Commission and aren’t available for sale to United VP Classic-C Units RMB H AS EQ HKG 09/04 CNH 13.31 38.5 30.4 NS
ing caution on raising rates States citizens and/or residents except as noted. Prices are in local currencies. VP Multi-Asset Fund Cls A HKD OT OT HKG 09/04 HKD 10.74 11.6 7.8 NS
pushed investors toward the All performance figures are calculated using the most recent prices available. VP Multi-Asset Fund Cls A USD OT OT HKG 09/04 USD 10.80 10.5 6.8 NS
VP Taiwan Fund AS EQ CYM 09/04 USD 20.48 22.3 21.2 21.5
haven asset. NAV —%RETURN—
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was up 0.9% at $1,342 a troy n Chartered Asset Management Pte Ltd - Tel No: 65-6835-8866 please contact: Freda Fung tel: +852 2831
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on the Comex division of the
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EDGAR SU/REUTERS

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China A-Share Fund Cls A AUD H OT
China A-Share Fund Cls A AUD UnH OT
China A-Share Fund Cls A CAD H OT
OT HKG
OT HKG
OT HKG
09/04 AUD
09/04 AUD
09/04 CAD
13.71
12.67
12.61
16.3
15.9
15.5
15.4
15.8
14.0
10.6
6.2
9.0
LIST YOUR
China A-Share Fund Cls A EUR H OT OT HKG 09/04 EUR 13.22 15.1 13.2 8.5
investors have become skepti- China A-Share Fund Cls A EUR UnH OT OT HKG 09/04 EUR 12.90 11.9 14.0 NS

cal that the Fed will raise

rates one more time this year Gold prices have climbed to their highest level in almost a year.
China A-Share Fund Cls A GBP H OT
China A-Share Fund Cls A GBP UnH OT
China A-Share Fund Cls A HKD H OT
China A-Share Fund Cls A HKD UnH OT
OT HKG
OT HKG
OT HKG
OT HKG
09/04 GBP
09/04 GBP
09/04 HKD
09/04 HKD
13.22
15.96
13.44
14.17
14.8
19.1
15.2
27.1
13.1
24.1
13.8
21.5
10.3
22.0
8.9
12.7
FUNDS
amid sluggish inflation. China A-Share Fund Cls A NZD H OT
China A-Share Fund Cls A NZD UnH OT
OT HKG
OT HKG
09/04 NZD
09/04 NZD
13.51
12.14
16.5
21.9
15.8
22.3
10.8
6.0
On Tuesday, President Don- ing times of geopolitical un- korn, senior market strategist China A-Share Fund Cls A RMB (CNH) OT OT HKG 09/04 CNH 14.85 18.4 18.1 12.7
China A-Share Fund Cls A USD OT OT HKG 09/04 USD 14.04 26.1 20.7 12.0
ald Trump tweeted that he is certainty. at RJO Futures. China A-Share Fund Cls A USD H OT OT HKG 09/04 USD 13.45 15.7 14.6 9.4
China Greenchip-A Units AS EQ CYM 09/04 HKD 66.29 30.3 24.8 16.2
allowing Japan and South Ko- Also on Tuesday, Fed gover- A weaker dollar also sup- China Greenchip-A Units AUD H AS EQ CYM 09/04 AUD 11.25 31.0 25.7 17.0
rea to buy “a substantially in- nor Lael Brainard said in a ported gold prices, as the dol- China Greenchip-A Units CAD H AS
China Greenchip-A Units NZD H AS
EQ CYM
EQ CYM
09/04 CAD
09/04 NZD
10.95
11.52
31.0
30.6
25.1
25.8
16.1
17.4
creased amount” of military speech that the U.S. central lar-denominated metal be- China Greenchip-A Units USD AS EQ CYM 09/04 USD 10.92 29.7 24.2 15.9
China Greenchip-A2 QDIs Units AS EQ CYM 09/04 HKD 11.94 29.9 24.4 16.0
equipment from the U.S. That bank should be cautious about comes cheaper to foreign GC Hi Yield Inc - Cls A MDIs GBP H OT OT CYM 09/04 GBP 9.57 6.3 9.8 12.8
came after South Korea raising short-term interest buyers when the U.S. currency GC Hi Yield Inc-Cls A MDIs AUD H OT
GC Hi Yield Inc-Cls A MDIs CAD H OT
OT CYM
OT CYM
09/04 AUD
09/04 CAD
9.15
9.23
7.6
6.8
11.8
10.7
14.8
13.4 In print & online. Contact:
warned Monday that North rates further until policy mak- falls. The WSJ Dollar Index, GC Hi Yield Inc-Cls A MDIs NZD H OT OT CYM 09/04 NZD 9.51 7.9 12.3 15.4
GC Hi Yield Inc-Cls P HKD Acc sh OT OT CYM 09/04 HKD 15.26 8.2 12.1 14.3
Korea appears to be preparing ers are confident of overcom- which tracks the dollar against GC Hi Yield Inc-Cls P HKD MDIs sh OT OT CYM 09/04 HKD 9.23 8.2 12.2 14.3
GC Hi Yield Inc-Cls P MDIs SGD H OT OT CYM 09/04 SGD 10.06 6.8 10.5 13.8
to test another intercontinen- ing the “persistent failure” to 16 other currencies, was down GC Hi Yield Inc-Cls P USD Acc sh OT OT CYM 09/04 USD 15.24 7.2 11.2 13.7
tal ballistic missile and U.S. reach 2% inflation. The com- 0.5% early Tuesday afternoon. GC Hi Yield Inc-Cls P USD MDIs sh OT OT CYM 09/04 USD 9.21 7.3 11.1 13.8 wsja.advertising@dowjones.com
GC Hi Yield Inc-ClsA MDIs EUR H OT OT CYM 09/04 EUR 10.00 5.8 9.1 12.1
ambassador to the U.N. Nikki ments supported gold prices Among base metals, copper Hi-Div Stk Cls A RMB H Acc OT OT HKG 09/04 CNH 12.46 24.6 20.7 16.0
Hi-Div Stk Cls A RMB UnH Acc OT OT HKG 09/04 CNH 14.13 15.3 15.4 13.5
Haley called for “the strongest by adding to existing doubts for December delivery was re- Hi-Div Stk Cls A1 OT OT HKG 09/04 USD 87.91 22.6 17.6 13.2
possible measures” against about the Fed raising rates for cently up 1.2% at $3.1555 a Hi-Div Stk Cls A2 AUD H MDIs OT
Hi-Div Stk Cls A2 CAD H MDIs OT
OT HKG
OT HKG
09/04 AUD
09/04 CAD
10.18
10.33
21.6
21.2
16.8
15.8
13.0
11.8
North Korea. a third time in 2017. Gold of- pound. Global economic Hi-Div Stk Cls A2 GBP H MDIs OT OT HKG 09/04 GBP 9.85 23.2 17.6 12.4
Hi-Div Stk Cls A2 HKD MDIs OT OT HKG 09/04 HKD 10.81 23.6 18.5 13.7
North Korea said it con- ten struggles to compete with growth has pushed prices for Hi-Div Stk Cls A2 MDIs OT OT HKG 09/04 USD 11.70 21.9 16.8 12.8
Hi-Div Stk Cls A2 NZD H MDIs OT OT HKG 09/04 NZD 10.42 21.8 17.9 13.5
ducted a sixth and signifi- yield-bearing assets like Trea- the industrial metal to three- Hi-Div Stk Cls A2 RMB H MDIs OT OT HKG 09/04 CNH 10.34 26.0 21.3 16.6
cantly larger nuclear test on surys when borrowing costs year highs, and strong manu- Hi-Div Stk Cls A2 RMB UnH MDIs OT
Hi-Div Stk Cls A2 SGD H MDIs OT
OT HKG
OT HKG
09/04 CNH
09/04 SGD
10.20
11.31
15.7
NS
15.6
NS
14.3
NS
Sunday. The tensions have rise. facturing data out of China— Intel-China Converg Fund-A AUD H AS EQ CYM 09/04 AUD 11.12 26.4 19.1 NS
Intel-China Converg Fund-A CAD H AS EQ CYM 09/04 CAD 12.00 18.0 13.6 NS
supported gold in recent ses- “It’s a perfect environment the world’s largest copper Intel-China Converg Fund-A NZD H AS EQ CYM 09/04 NZD 12.45 21.3 17.5 NS
sions because many investors right now for gold to see some consumer—last week has also Intel-China Converg Fund-A Units AS
Intel-Chinese Mainland Foc Fund AS
EQ CYM
EQ CYM
09/04 USD
09/04 USD
168.71
53.09
26.4
43.3
20.6
38.8
11.6
20.5
favor the precious metal dur- higher levels,” said Bob Haber- buoyed the metal. VP Classic-A Units AS EQ HKG 09/04 USD 344.30 35.3 26.5 19.3
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
The Myth of Stock-Market Tops
BY MARK HULBERT
Many investors are trying to
pinpoint the exact day on which
the bull market eventually
reaches its top. My advice to
them: Stop.
I say that not because it is dif-
ficult to predict when the stock
market changes direction—though
that is true, too. But there’s an
additional reason: Stock-market
tops typically are a gradual roll-
ing-over by the market rather
than a sharp trend reversal. Some
market averages will hit their
peak months before or after oth-
ers, and individual sectors can be-
have differently than the market
as a whole.
In other words, the top doesn’t
occur on just one single day, or
even in one week or one month.
Even if you successfully predict
the precise day, or week or
month, on which a particular mar-
ket average hits its top, you can
still lose money—or leave a lot of
it on the table—because other
market averages and sectors
likely aren’t at their peaks.
A gradual process
This is an important insight not
just for market historians. With the
stock market up more than 300%
from its March 2009 lows, and with
the economy in its ninth year of re-
covery from the latest recession,
many investors worry that a bear
market is overdue.
Rather than anxiously trying to
determine the exact day when to
shift out of stocks, they should in-
stead view market tops as a gradual
process in which equity exposure is
slowly and deliberately reduced
over time.
Take the 2007 bull-market top.
The most widely followed market
benchmarks, such as the Dow Jones
Industrial Average and the S&P 500
index, hit their highs on Oct. 9 of
that year, and that is the date that
most market timers record as the
“top” of the 2002-07 bull market.
Yet the Russell 2000 index, a widely
used proxy for the small-cap sector,
registered its top on July 13, three
months prior. The Dow Jones Utility
Average topped out even earlier, on
May 21. And some sectors began
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their bear markets even longer be-
fore; the SPDR S&P Regional Bank-
ing ETF, for example, hit its bull-
market high in December 2006.
What this means: Pinpointing
that Oct. 9 top wouldn’t have been
very helpful unless you were in-
vesting in the S&P 500. In the
event you were investing in the av-
erage small-cap, utility or regional
bank, among others, you would
have lost money if you had waited
until Oct. 9 to sell.
Perhaps the most spectacular
example of a divergence at a mar-
ket top, however, came when the
internet bubble burst. Though the
S&P 500 topped out on March 24,
2000, and didn’t hit bottom until
October 2002, the average small-
cap value stock actually rose dur-
ing that bear market, according to
data from University of Chicago
professor Eugene Fama and Dart-
mouth professor Ken French. So
small-cap value investors left a lot
of money on the table by going to
cash during the 2000-2002 bear
market.
Divergences this stark and
spread out aren’t unusual at mar-
ket tops, according to David Aron-
Wednesday, September 6, 2017 | B7
ANDREW BANNECKER
son, a former finance professor at
Multiple Peaks Baruch College and now president
When several market averages/ of Hood River Associates, a re-
sectors hit their bull-market highs in search firm that uses machine
what was considered the learning to enhance stock-market
October 2007 market top trading systems. “The process of
topping out can take a really long
S&P 500 period of time, evolving over a
Oct. 9, 2007 year or more,” he told me in an
interview.
Take the end of the bull market
DJIA in the early 1970s, for example.
Oct. 9, 2007 Though the S&P 500 didn’t hit its
high until January 1973, major di-
Dow Jones vergences “started to manifest as
Transportation Average early as the spring of 1971,”
nearly two years prior, he says.
July 19, 2007
In contrast, Mr. Aronson adds,
“market bottoms tend to be
Russell 2000 index sharper.” The bottom at the end
July 13, 2007 of the 2007-09 bear market is a
good case in point: Virtually all
major averages hit their bear-
Dow Jones Utility Average
market lows on March 9, 2009.
May 21, 2007 Most individual sectors did so
also, and those that didn’t mostly
SPDR S&P Regional hit their bottoms only a few days
Banking ETF before or after.
Dec. 29, 2006 As Mr. Aronson argues in a
just-published book, “bottoms are
Sources: HulbertRatings.com easier to identify, in real time,
THE WALL STREET JOURNAL. than tops.”
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The narrow focus
Instead of trying to pinpoint the
day of a particular market’s aver-
age top, therefore, you might want
to focus on the prospects for the
individual stocks or mutual funds
that you own. Bragging rights for
calling the top of this or that mar-
ket benchmark mean little if your
stocks or funds start declining
months before that top.
One helpful focus would be on
internal market divergences be-
tween different sectors of the mar-
ket. A healthy market is one in
which most stocks are participat-
ing. As divergences emerge and
become more pronounced, odds in-
crease that the stocks you own
may suffer even if the major mar-
ket averages such as the Dow and
S&P continue rising.
By the same token, you need to
be alert to the possibility that
your individual stocks will con-
tinue to rise even if the major av-
erages begin a major decline.
It’s worth noting in this regard
that some potentially worrisome di-
vergences have materialized in re-
cent months, according to Hayes
Martin, president of Market Ex-
tremes, an investment consulting
firm that focuses on market turning
points. In an email to me, he pointed
out that there have been some sig-
nificant divergences among groups
that historically have been reliable
“coal-mine canaries,” such as small
banks, which peaked on March 1,
and smaller-cap stocks, which have
been “battered” since late July. This
suggests to him that we are proba-
bly in a long-term topping process.
Mr. Aronson agrees, though he
says it’s unclear from his work
whether the coming top will pre-
cede a major bear market or some-
thing of more intermediate-term
significance. Regardless, these di-
vergences suggest that risk is ele-
vated. We may want to focus more
on which stocks or funds we would
want to sell to reduce our equity
exposure rather than what we’d
buy to increase it.
Mr. Hulbert is the founder of the
Hulbert Financial Digest and a se-
nior columnist for MarketWatch. He
can be reached at re-
ports@wsj.com.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B8 | Wednesday, September 6, 2017 THE WALL STREET JOURNAL.

MARKETS DIGEST
Nikkei 225 Index STOXX 600 Index S&P 500 Index Data as of 12 p.m. New York time
Last Year ago
19385.81 t 122.44, or 0.63% Year-to-date s 1.42% 373.71 t 0.47, or 0.13% Year-to-date s 3.40% 2459.42 t 17.13, or 0.69% Trailing P/E ratio 23.86 24.71
High, low, open and close for each 52-wk high/low 20230.41 16251.54 High, low, open and close for each 52-wk high/low 396.45 328.80 High, low, open and close for each P/E estimate * 18.85 18.57
trading day of the past three months. All-time high 38915.87 12/29/89 trading day of the past three months. All-time high 414.06 4/15/15 trading day of the past three months. Dividend yield 2.00 2.11
All-time high: 2480.91, 08/07/17

Weekly P/E data based on as-reported earnings from Birinyi Associates Inc.

20500 395 2500

65-day moving average

20000 390 2475

19500 385 2450

65-day moving average

19000 380 2425
Session high
DOWN UP
18500 375 2400
t

Session open Close

65-day moving average
Close Open
t

18000 370 2375

Session low
Bars measure the point change from session's open
17500 365 2350
June July Aug. June July Aug. June July Aug.

International Stock Indexes Data as of 12 p.m. New York time Global government bonds
Latest 52-Week Range YTD Latest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-year
Region/Country Index Close NetChg % chg Low Close High % chg and 10-year government bonds around the world. Data as of 12 p.m. ET
World The Global Dow 2836.60 –12.19 –0.43 2386.93 • 2881.15 12.2 Country/ Spread Over Treasurys, in basis points Yield
MSCI EAFE 1932.42 0.03 0.002 1471.88 • 1956.39 12.6 Coupon Maturity, in years Yield Latest Previous Month Ago Year ago Previous Month ago Year ago
MSCI EM USD 1084.59 1.25 0.12 691.21 • 1087.78 36.6 2.750 Australia 2 1.890 59.2 49.8 43.8 70.6 1.844 1.785 1.500
2.750 10 2.683 59.8 46.8 36.6 29.8 2.635 2.631 1.904
Americas DJ Americas 593.29 –4.03 –0.67 503.44 • 599.20 9.8
3.000 Belgium 2 -188.7 -187.6 -139.2 -0.574 -0.529 -0.599
-0.589 -192.0
Brazil Sao Paulo Bovespa 72208.63 79.80 0.11 56459.11 • 73179.53 19.9
0.800 10 0.647 -143.9 -148.7 -150.0 -142.1 0.680 0.765 0.185
Canada S&P/TSX Comp 15073.53 –118.07 –0.78 14319.11 • 15943.09 –1.4
0.000 France 2 -0.540 -183.8 -187.5 -182.0 -138.6 -0.529 -0.473 -0.592
Mexico IPC All-Share 50559.86 –265.91 –0.52 43998.98 • 51772.37 10.8
1.000 10 0.647 -143.9 -148.4 -150.7 -142.7 0.683 0.758 0.179
Chile Santiago IPSA 3897.16 –13.44 –0.34 3120.87 • 3945.90 20.9
0.000 Germany 2 -0.782 -208.0 -209.8 -202.9 -143.4 -0.752 -0.682 -0.640
U.S. DJIA 21806.92 –180.64 –0.82 17883.56 • 22179.11 10.3
0.500 10 0.341 -174.5 -180.1 -179.5 -165.2 0.367 0.471 -0.046
Nasdaq Composite 6378.95 –56.38 –0.88 5034.41 • 6460.84 18.5
0.050 Italy 2 -0.101 -139.9 -143.4 -136.2 -87.2 -0.088 -0.015 -0.078
S&P 500 2459.42 –17.13 –0.69 2083.79 • 2490.87 9.9
2.200 10 1.994 -9.1 -12.9 -24.5 -45.2 2.038 2.021 1.154
CBOE Volatility 12.39 2.26 22.31 8.84 • 23.01 –11.8
0.100 Japan 2 -0.153 -145.1 -150.4 -146.0 -98.3 -0.158 -0.113 -0.189
EMEA Stoxx Europe 600 373.71 –0.47 –0.13 327.02 • 396.55 3.4 0.100 10 0.003 -208.3 -217.0 -220.2 -162.5 -0.003 0.064 -0.019
Stoxx Europe 50 3036.18 –6.07 –0.20 2720.66 • 3279.71 0.9 4.000 Netherlands 2 -0.711 -200.9 -205.1 -198.2 -140.2 -0.705 -0.635 -0.608
France CAC 40 5086.56 –17.41 –0.34 4310.88 • 5442.10 4.6 0.750 10 0.472 -161.4 -166.8 -167.4 -154.7 0.499 0.592 0.059
Germany DAX 12123.71 21.50 0.18 10174.92 • 12951.54 5.6 4.750 Portugal 2 -0.057 -135.5 -137.9 -131.3 -30.0 -0.033 0.034 0.494
Greece ATG 812.85 3.97 0.49 548.72 • 859.78 26.3 4.125 10 2.811 72.6 64.7 57.7 143.5 2.814 2.843 3.041
Israel Tel Aviv 1392.31 1.76 0.13 1346.71 • 1490.23 –5.3 2.750 Spain 2 -0.362 -166.0 -171.6 -167.3 -94.8 -0.370 -0.326 -0.154
Italy FTSE MIB 21737.69 –52.93 –0.24 15923.11 • 22065.42 13.0 1.450 10 1.530 -55.6 -61.4 -80.0 -60.5 1.554 1.466 1.001
Netherlands AEX 515.46 –0.81 –0.16 436.28 • 537.84 6.7 4.250 Sweden 2 -0.673 -197.1 -200.9 -201.3 -142.2 -0.663 -0.666 -0.629
Russia RTS Index 1100.83 9.00 0.82 953.12 • 1196.99 –4.5 1.000 10 0.611 -147.4 -153.0 -157.9 -146.4 0.638 0.687 0.142
Spain IBEX 35 10179.80 –63.40 –0.62 8512.40 • 11184.40 8.9 1.750 U.K. 2 0.190 -110.9 -116.9 -109.2 -65.3 0.177 0.255 0.140
Switzerland Swiss Market 8869.56 5.10 0.06 7585.56 • 9198.45 7.9 4.250 10 1.017 -106.8 -110.7 -108.9 -98.5 1.060 1.177 0.621
South Africa Johannesburg All Share 56144.80 –168.05 –0.30 48935.90 • 56896.89 10.8 1.250 U.S. 2 1.298 ... ... ... ... 1.346 1.347 0.794
Turkey BIST 100 108872.99 –1137.50 –1.03 71792.96 •110530.75 39.3 2.250 10 2.086 ... ... ... ... 2.167 2.266 1.606
U.K. FTSE 100 7372.92 –38.55 –0.52 6654.48 • 7598.99 3.2
Asia-Pacific Commodities Prices of futures contracts with the most open interest 12 p.m. New York time
Australia S&P/ASX 200 5706.20 4.20 0.07 5156.60 • 5956.50 0.7 EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.; MDEX: Bursa Malaysia
China Shanghai Composite 3384.32 4.73 0.14 2980.43 • 3384.32 9.0 Derivatives Berhad; TCE: Tokyo Commodity Exchange; COMEX: Commodity Exchange; LME: London Metal Exchange;
NYMEX: New York Mercantile Exchange; ICE-EU: ICE Futures Europe. *Data as of 9/4/2017
Hong Kong Hang Seng 27741.35 1.09 0.004 21574.76 • 28094.61 26.1 One-Day Change Year Year
India S&P BSE Sensex 31809.55 107.30 0.34 25765.14 • 32575.17 19.5 Commodity Exchange Last price Net Percentage high low
360.00 4.75 1.34% 417.25 344.25
Indonesia Jakarta Composite 5829.98 16.24 0.28 5027.70 • 5915.36 10.1 Corn (cents/bu.) CBOT
Soybeans (cents/bu.) 972.50 23.00 2.42 1,047.00 907.00
Japan Nikkei Stock Avg 19385.81 –122.44 –0.63 16251.54 • 20230.41 1.4
Wheat (cents/bu.)
CBOT
CBOT 445.75 7.00 1.60 592.25 422.50
Malaysia Kuala Lumpur Composite 1769.63 –3.53 –0.20 1616.64 • 1792.35 7.8
Live cattle (cents/lb.) CME 105.000 -0.150 -0.14% 122.850 99.125
New Zealand S&P/NZX 50 7777.40 –30.82 –0.39 6664.21 • 7879.46 13.0
Cocoa ($/ton) ICE-US 1,948 1 0.05 2,301 1,794
Philippines PSEi 8049.35 14.15 0.18 6563.67 • 8072.75 17.7
Coffee (cents/lb.) ICE-US 127.85 -1.20 -0.93 166.75 119.10
Singapore Straits Times 3251.26 20.29 0.63 2787.27 • 3354.71 12.9
Sugar (cents/lb.) ICE-US 14.07 0.32 2.33 20.50 12.74
South Korea Kospi 2326.62 –3.03 –0.13 1958.38 • 2451.53 14.8
Cotton (cents/lb.) ICE-US 74.72 2.84 3.95 75.72 66.15
Taiwan Weighted 10617.84 47.97 0.45 8902.30 • 10617.84 14.7 Robusta coffee ($/ton) ICE-EU 1974.00 -47.00 -2.33 2,272.00 1,892.00
Thailand SET 1620.42 1.31 0.08 1406.18 • 1620.42 5.0
Copper ($/lb.) COMEX 3.1465 0.0285 0.91 3.1785 2.5025
Gold ($/troy oz.) COMEX 1341.10 10.70 0.80 1,345.50 1,160.80
Silver ($/troy oz.) COMEX 18.005 0.189 1.06 18.875 14.440
Currencies London close on Sept. 5 Aluminum ($/mt)* LME 2,120.00 -14.00 -0.66 2,134.00 1,688.50
Tin ($/mt)* LME 20,750.00 -50.00 -0.24 21,225.00 18,760.00
Yen, euro vs. dollar; dollar vs. major U.S. trading partners US$vs,
Tue YTDchg Copper ($/mt)* LME 6,905.00 93.00 1.37 6,905.00 5,491.00
Country/currency in US$ per US$ (%) Lead ($/mt)* LME 2,390.00 7.00 0.29 2,481.00 2,022.00
10% Europe Zinc ($/mt)* LME 3,190.00 37.50 1.19 3,190.00 2,450.50
0.6090 1.6421 –11.6 12,195.00 115.00 12,195.00 8,780.00
s
Euro Bulgaria lev Nickel ($/mt)* LME 0.95
s WSJ Dollar index Croatia kuna 0.1607 6.224 –13.2 Rubber (Y.01/ton) TCE 228.60 0.70 0.31 n.a. n.a.
0
Euro zone euro 1.1919 0.8390 –11.7
Czech Rep. koruna-b 0.0457 21.899 –14.7 Palm oil (MYR/mt) MDEX 2768.00 62.00 2.29 2950.00 2380.00
–10 s Denmark krone 0.1602 6.2417 –11.7 Crude oil ($/bbl.) NYMEX 48.82 1.53 3.24 58.34 42.52
Yen Hungary forint 0.003894 256.78 –12.7 NY Harbor ULSD ($/gal.) NYMEX 1.7488 0.0020 0.11 1.8138 1.3814
Iceland krona 0.009447 105.85 –6.3 RBOB gasoline ($/gal.) NYMEX 1.6930 -0.0549 -3.14 1.7832 1.2902
–20 Norway krone 0.1286 7.7757 –10.0
0.2812 3.5563 –15.1
Natural gas ($/mmBtu) NYMEX 2.974 -0.096 -3.13 3.5660 2.7990
2016 2017 Poland zloty
Russia ruble-d 0.01741 57.441 –6.2 Brent crude ($/bbl.) ICE-EU 53.54 1.20 2.29 60.08 45.19
US$vs, US$vs,
YTDchg YTDchg Sweden krona 0.1256 7.9646 –12.5 Gas oil ($/ton) ICE-EU 514.75 11.50 2.29 534.00 408.25
Tue Tue
Country/currency in US$ per US$ (%) Country/currency in US$ per US$ (%) Switzerland franc 1.0460 0.9560 –6.2
Turkey lira 0.2913 3.4334 –2.6 Sources: SIX Financial Information; WSJ Market Data Group
Americas Hong Kong dollar 0.1278 7.8256 0.9
Ukraine hryvnia 0.0385 25.9500 –4.2
Argentina peso-a 0.0580 17.2550 8.7
India rupee
Indonesia rupiah
0.0156
0.0000750
64.0750
13329
–5.7
–1.4
U.K. pound 1.3026 0.7677 –5.2 Cross rates London close on Sep 5
Brazil real 0.3201 3.1239 –4.0 Middle East/Africa
Japan yen 0.009193 108.78 –7.0
Canada dollar 0.8092 1.2359 –8.1 USD GBP CHF JPY HKD EUR CDN AUD
Kazakhstan tenge 0.002938 340.40 2.0 Bahrain dinar 2.6521 0.3771 –0.03
Chile peso 0.001607 622.40 –7.1 Australia 1.2486 1.6266 1.3060 0.0115 0.1595 1.4881 1.0101 ...
Macau pataca 0.1240 8.0660 1.9 Egypt pound-a 0.0567 17.6473 –2.7
Colombia peso 0.0003425 2919.81 –2.7 Canada 1.2359 1.6100 1.2927 0.0114 0.1579 1.4727 ... 0.9899
Malaysia ringgit-c 0.2347 4.2600 –5.0 Israel shekel 0.2804 3.5667 –7.3
Ecuador US dollar-f 1 1 unch
New Zealand dollar 0.7254 1.3785 –4.5 Kuwait dinar 3.3181 0.3014 –1.4 Euro 0.8390 1.0931 0.8776 0.0077 0.1072 ... 0.6789 0.6720
Mexico peso-a 0.0560 17.8701 –13.8
Pakistan rupee 0.0095 105.190 0.8 Oman sul rial 2.5970 0.3851 0.02 Hong Kong 7.8256 10.1943 8.1857 0.0719 ... 9.3261 6.3321 6.2683
Peru sol 0.3090 3.2360 –3.5
Philippines peso 0.0196 51.054 2.9 Qatar rial 0.2711 3.688 1.32 Japan 108.7770 141.7100 113.7400 ... 13.9000 129.6300 88.0200 87.1100
Uruguay peso-e 0.0347 28.820 –1.8
Singapore dollar 0.7396 1.3520 –6.6 Saudi Arabia riyal 0.2666 3.7504 –0.01 0.9560 1.2455 ... 0.0088 0.1222 1.1395 0.7736 0.7657
Venezuela bolivar 0.099211 10.08 0.8 Switzerland
South Korea won 0.0008842 1130.94 –6.4 South Africa rand 0.0775 12.9052 –5.8
U.K. 0.7677 ... 0.8029 0.0071 0.0981 0.9148 0.6210 0.6148
Asia-Pacific Sri Lanka rupee 0.0065591 152.46 2.7 Close Net Chg % Chg YTD % Chg
0.8009 1.2486 –10.1 Taiwan dollar 0.03326 30.070 –7.3 U.S. ... 1.3026 1.0460 0.0092 0.1278 1.1919 0.8092 0.8009
Australia dollar WSJ Dollar Index 85.26 –0.39 –0.45 –8.26
China yuan 0.1529 6.5388 –5.8 Thailand baht 0.03018 33.140 –7.5 Sources: Tullett Prebon, WSJ Market Data Group Source: Tullett Prebon

Key Rates Top Stock Listings 12 p.m. New York time

Latest 52 wks ago % YTD% % YTD% % YTD%
Libor Cur Stock Sym Last Chg Chg Cur Stock Sym Last Chg Chg Cur Stock Sym Last Chg Chg Asia Titans 50
One month 1.23111% 0.51656% ¥ TakedaPharm 4502 5988.00 0.12 23.85 CHF RocheHldgctf ROG 242.30 -0.16 4.17 Last: 165.28 s 0.84, or 0.51% YTD s 17.2%
Three month 1.31722 0.84067 Asia Titans HK$ TencentHoldings 0700 321.80 -0.06 69.64 £ RoyDtchShell A RDSA 2130.50 0.35 -4.99
Six month 1.45500 1.25006 HK$ AIAGroup 1299 60.20 -0.66 37.60 ¥ TokioMarineHldg 8766 4328.00 -0.55 -9.76 € SAP SAP 88.21 0.38 6.52 High 170
One year 1.71456 1.56133 81.94 -0.13 6.55
¥ AstellasPharma 4503 1386.00 -0.04 -14.63 ¥ ToyotaMtr 7203 6219.00 0.81 -9.58 € Sanofi SAN Close 165
Euro Libor AU$ AustNZBk ANZ 29.35 -0.17 -3.52 AU$ Wesfarmers WES 42.45 0.35 0.74 € SchneiderElectric SU 69.07 0.26 4.48 Low 160
One month -0.40071% -0.37400% AU$ BHP BHP 27.62 0.51 10.22 AU$ WestpacBanking WBC 31.29 0.19 -4.02 € Siemens SIE 112.30 0.94 -3.85 t
Three month -0.37329 -0.32400 HK$ BankofChina 3988 4.05 0.25 17.73 AU$ Woolworths WOW 25.85 0.43 7.26 € Telefonica TEF 8.90 -0.60 0.90 50–day 155
Six month -0.30771 -0.20614 HK$ CKHutchison 0001 100.40 -0.20 14.22 € Total FP 43.89 0.39 -8.10 moving average 150
One year -0.21029 -0.07643 HK$ CNOOC 0883 9.44 0.43 -2.68 Stoxx 50 CHF UBSGroup UBSG 15.51 -1.21 -2.76
145
Euribor AU$ CSL CSL 130.88 0.32 30.35 € Unilever UNA 49.98 -0.02 27.78
CHF ABB ABBN 22.61 0.71 5.26
One month -0.37200% -0.37200% ¥ Canon 7751 3766.00 -0.74 14.29 £ Unilever ULVR 4470.50 -0.67 35.78 9 16 23 30 7 14 21 28 4 11 18 25 1
€ ASMLHolding ASML 130.85 0.19 22.69
Three month -0.32900 -0.30300 ¥ CentralJapanRwy 9022 18560 -0.05 -3.48 € Vinci DG 78.50 -0.19 21.33 June July Aug.
€ AXA CS 24.07 -1.13 0.38
Six month -0.27400 -0.19700 HK$ ChinaConstructnBk 0939 6.79 0.74 13.74 £ VodafoneGroup VOD 216.30 -0.76 8.23
€ AirLiquide AI 102.35 -0.34 -3.12
One year -0.16100 -0.05400 HK$ ChinaLifeInsurance 2628 24.60 ... 21.78 CHF ZurichInsurance ZURN 282.50 -0.88 0.75
178.85
Yen Libor HK$ ChinaMobile 0941 82.00 0.18 -0.24
€
€
Allianz
AB InBev
ALV
ABI 99.82
-0.94
0.54
13.92
-0.73 DJIA Stoxx 50
One month -0.04264% -0.05814% HK$ ChinaPetro&Chem 0386 6.02 -0.17 9.45 £ AstraZeneca AZN 4573.50 -0.17 3.06 Last: 3036.18 t 6.07, or 0.20% YTD s 0.9%
Three month -0.03093 -0.02850 AU$ CmwlthBkAust CBA 74.59 0.24 -9.49 € BASF BAS 82.67 0.52 -6.39
$ AmericanExpress AXP 85.41 -0.85 15.29
Six month -0.00707 -0.00164 ¥ EastJapanRailway 9020 9940.00 -0.70 -1.58 € BNP Paribas BNP 62.68 -1.88 3.52
$ Apple AAPL 163.11 -0.57 40.83 3275
One year 0.11086 0.09329 ¥ Fanuc 6954 21015 -0.78 6.06 £ BT Group BT.A 287.70 -0.78 -21.59
$ Boeing BA 237.99 -0.97 52.87
$ Caterpillar CAT 118.89 0.51 28.19 3200
Offer Bid ¥ Hitachi 6501 736.60 -0.73 16.55 € BancoBilVizAr BBVA 7.24 -1.75 14.04
TW$ Hon Hai Precisn 2317 116.50 ... 38.36 $ Chevron CVX 109.47 0.65 -6.99 3125
Eurodollars € BancoSantander SAN 5.35 -1.67 7.86
¥ HondaMotor 7267 3057.00 0.23 -10.48 $ CiscoSystems CSCO 31.75 -1.72 5.05
One month 1.3300% 1.2300% £ Barclays BARC 187.90 -1.21 -15.91 3050
KRW HyundaiMtr 005380 138000 -1.43 -5.48 $ Coca-Cola KO 45.80 0.04 10.47
Three month 1.3700 1.2700 € Bayer BAYN 107.40 -0.32 8.34
2975
HK$ Ind&Comml 1398 5.80 0.52 24.73 $ Disney DIS 102.06 0.56 -2.07
Six month 1.5700 1.4700 £ BP BP. 446.70 0.06 -12.34
$ DowDuPont DWDP 66.35 -1.24 ...
One year 1.8200 1.7200 ¥ JapanTobacco 2914 3706.00 -0.75 -3.59 £ BritishAmTob BATS 4776.50 -0.67 3.35 2900
¥ KDDI 2924.00 -0.09 -1.20
$ ExxonMobil XOM 77.20 0.82 -14.47
Latest 52 wks ago 9433 € Daimler DAI 62.42 0.94 -11.74 $ GeneralElec GE 24.89 -0.97 -21.22 9 16 23 30 7 14 21 28 4 11 18 25 1
¥ Mitsubishi 8058 2520.50 0.46 1.22 € DeutscheTelekom DTE 15.00 -0.60 -7.37 June July Aug.
Prime rates $ GoldmanSachs GS 219.04 -3.03 -8.52
¥ MitsubishiElectric 6503 1632.00 -0.94 0.15 £ Diageo DGE 2577.50 -0.19 22.16
U.S. 4.25% 3.50% $ HomeDepot HD 153.51 1.81 14.49
¥ MitsubishiUFJFin 8306 667.10 -0.09 -7.37 € ENI ENI 13.39 0.45 -13.45
Canada 2.95 2.70 $ Intel INTC 35.27 0.50 -2.77
1634.00 0.31 1.68 1513.50
Japan
Hong Kong
1.475
5.00
1.475
5.00
¥
¥
Mitsui
Mizuho Fin
8031
8411 187.60 -0.27 -10.58
£
£
GlaxoSmithKline
Glencore
GSK
GLEN 363.00
-0.13
-1.12
-3.10
30.88
$
$
IBM
JPMorganChase
IBM
JPM
143.33
89.56
-0.52
-2.33
-13.65
3.79
Dow Jones Industrial Average P/E: 20
¥ NTTDoCoMo 9437 2508.00 -0.16 -5.82 £ HSBC Hldgs HSBA 734.10 -1.46 11.75 $ J&J JNJ 130.27 -0.58 13.07 Last: 21806.92 t 180.64, or 0.82% YTD s 10.3%
Policy rates
ECB 0.00% 0.00%
AU$ NatAustBnk NAB 30.35 0.30 -1.04 € INGGroep INGA 14.65 -1.35 9.61 $ McDonalds MCD 159.07 -0.46 30.69
Britain 0.25 0.25
¥ NipponTeleg 9432 5241.00 -0.49 6.70 £ ImperialBrands IMB 3200.00 -0.40 -9.67 $ Merck MRK 63.71 -0.19 8.21 22500
Switzerland 0.50 0.50
¥ NissanMotor 7201 1092.50 0.05 -7.06 € IntesaSanpaolo ISP 2.82 -0.71 16.08 $ Microsoft MSFT 73.68 -0.35 18.57
¥ Panasonic 6752 1448.50 0.77 21.77 € LVMHMoetHennessy MC 217.80 -1.43 20.07 $ Nike NKE 53.15 -0.39 4.56
22000
Australia 1.50 1.50
HK$ PingAnInsofChina 2318 61.75 0.41 59.15 £ LloydsBankingGroup LLOY 63.10 -0.47 0.94 $ Pfizer PFE 33.81 -0.44 4.09
U.S. discount 1.75 1.00 21500
Fed-funds target 1.00-1.25 0.25-0.50
$ RelianceIndsGDR RIGD 50.50 0.60 60.06 € LOreal OR 176.85 -0.25 1.99 $ Procter&Gamble PG 92.26 -0.29 9.73
Call money 3.00 2.25
KRW SamsungElectronics 005930 2338000 1.56 29.74 £ NationalGrid NG. 969.70 0.10 -6.59 $ 3M MMM 201.41 -1.06 12.79 21000
¥ Seven&I Hldgs 3382 4267.00 -0.47 -4.18 CHF Nestle NESN 80.95 0.87 10.81 $ Travelers TRV 117.35 -2.13 -4.14
Overnight repurchase rates 20500
U.S. 1.13% 0.49%
¥ SoftBankGroup 9984 8620.00 -1.70 11.01 CHF Novartis NOVN 80.10 0.06 8.10 $ UnitedTech UTX 113.15 -4.05 3.22
Euro zone n.a. n.a.
¥ Sony 6758 4310.00 -1.44 31.60 DKK NovoNordiskB NOVO-B 295.80 -0.40 16.14 $ UnitedHealth UNH 200.14 0.20 25.06 9 16 23 30 7 14 21 28 4 11 18 25 1
¥ Sumitomo Mitsui 8316 4068.00 -0.17 -8.79 £ Prudential PRU 1775.50 -0.73 9.09 $ Visa V 103.21 -0.66 32.29 June July Aug.
Sources: WSJ Market Data Group, SIX HK$ SunHngKaiPrp 0016 128.50 -0.08 31.12 £ ReckittBenckiser RB. 7092.00 -2.72 2.99 $ Verizon VZ 47.51 -0.86 -11.00 Note: Price-to-earnings ratios are for trailing 12 months
Financial Information, Tullett TW$ TaiwanSemiMfg 2330 218.00 0.23 20.11 £ RioTinto RIO 3695.50 -1.07 17.00 $ Wal-Mart WMT 79.37 1.27 14.83 Sources: WSJ Market Data Group; Birinyi Associates
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
European Mall Operators Are Upbeat
Demographics, design
and relative scarcity
have helped Continent
weather downturns
BY ESTHER FUNG
As in the U.S., the retail
world in Europe has been
turned upside down by the
brave new world of shopping
that enables you to buy practi-
cally anything while sitting in
your pajamas at the computer
or waiting in line with your
phone.
But the pain to European
retail landlords has been less
severe.
Shares of listed European
retail real-estate companies
have fallen but not as far as
their U.S. counterparts. Values
of European malls and shop-
ping centers continue to rise
in some European markets
while they are falling through-
out the U.S.
The U.S. landscape is pock-
marked in many regions by
empty and near-empty shop-
ping centers. In Europe, there
are fewer such “dead malls,”
analysts say.
“Europe is not the U.S.A.,”
said Paris-based commercial-
property company Unibail-Ro-
damco SE, in a first-half earn-
ings-presentation in July.
Why not?
The main reason that ana-
lysts cite is that Europe didn’t
experience the retail-develop-
ment boom that the U.S. did in
the 30 years leading up to the
2008 crash.
In the U.S., there are 24
square feet of retail space for
every man, woman and child
in the country compared with
five square feet in the U.K.,
four in France, and three in
Spain and Italy, according to
data from the International
Council of Shopping Centers.
“It’s a completely different
scale,” said David Ironside,
chief investment officer of La-
Salle Investment Manage-
ment’s continental European
business. LaSalle’s private-eq-
uity group owns 242 retail as-
sets in U.K. and continental
Europe. “You don’t get into a
distressed zone that quickly in
Europe.”
But there are other reasons
besides moderate supply that
explain why European land-
lords have been more shel-
tered from the retail storm.
These reasons are now being
studied closely by retail inves-
tors, developers and lenders
as they look for opportunities
Big Landlord Pushes a Clicks-and-Bricks Strategy
BY PETER GRANT
At Unibail-Rodamco SE,
Europe’s largest listed com-
mercial-property owner, au-
tumn is the season for thin-
ning its shopping-center herd.
Every October and Novem-
ber, senior management at Eu-
rope’s largest mall company
take a tough look at their far-
flung properties to see how
they are fitting into their vi-
sion for bricks-and-mortar
shopping in a world of grow-
ing competition from online
shopping. That vision is all
about concentrating on quality
locations and store design in-
stead of quantity.
“This is when we make the
decisions: They’re big enough,
or let’s grow them or they
don’t meet our requirements
and therefore we put them on
the disposal list,” said Chris-
tophe Cuvillier, Unibail-Ro-
damco’s chief executive, in an
interview with The Wall Street
Journal.
Like other big retail land-
lords in Europe, Unibail is far-
ing better these days than its
embattled U.S. counterparts in
terms of stock-market perfor-
mance. Part of this is due to
structural differences in Eu-
rope, such as the fact that the
U.S. is “over-stored,” with six
times more retail space per
capita than Europe and that
European shopping centers
rely less on department stores
and more on supermarkets.
But European retail land-
lords also are fighting head-
winds with operations like Un-
ibail’s annual cull of weak
performers. The company,
which owns 71 shopping cen-
ters in close to a dozen Euro-
pean countries, has disposed
of more than €3 billion ($3.6
billion) of retail assets in the
past four years, reflecting its
“cut throat” approach to get-
The Arenas shopping center in Barcelona, Spain. Retail-property investors have favored politically stable countries whose economies and populations are still growing.
and risks on both sides of the
Atlantic.
One factor buffering Euro-
pean landlords is mall layout.
Shopping centers in Europe
are typically anchored by a
grocery store, rather than a
department store, which tends
to be the norm in the U.S. Gro-
cery stores bring in a lot of
foot traffic. Department stores
have been among the biggest
victims of online shopping.
U.S. malls and shopping
centers also are being hit
harder by a recent spate of re-
tailer contractions and fail-
ures. Department stores such
as Macy’s, J.C. Penney and
Sears have announced closures
of more than 400 stores
across the U.S. since August
2016, hurting many secondary
malls that are struggling to
find replacement tenants.
Retailers in Europe cur-
rently are healthier, in part
because many of the weaker
ones failed during the finan-
cial upheaval between 2008
and 2009 and between 2011
and 2013, said Hemant Kotak,
analyst at Green Street Advi-
Unibail-Rodamco’s Carré Sénart shopping center in Seine-et-Marne, France. The landlord rotates 10% of its mall tenants yearly.
ting its portfolio right, said
Mike Prew, a Jefferies analyst,
in a report earlier this year.
The company also is fo-
cused on getting its retailer
mix right and rotates at least
10% of its tenants in its shop-
ping centers each year. This
can be expensive in countries
such as France, where tenants
have more rights and often
have to be bought out by land-
lords.
But the cost is worth it, an-
alysts say. “The bigger is bet-
ter streamlined portfolio is
outperforming competitor and
national metrics,” Mr. Prew
wrote. “The eviction costs of
decanting tenants to bring in
superior retailers [are] paying
THE PROPERTY REPORT
sors.
“We had a cleansing pro-
cess in the last downturn and
what survived were the better
concepts and the ones with
the better financial positions,”
said London-based Mr. Kotak.
One of the retailers that
filed for bankruptcy in 2012 is
fashion chain Peacocks, which
was subsequently sold to an-
other retail group that has
since expanded Peacocks’
stores.
Not every European land-
lord is doing better than those
in the U.S. Some top U.S. mall
companies, like Simon Prop-
erty Group and GGP Inc., are
popular with retailers and are
recording rent growth and low
vacancy rates comparable to
the numbers being chalked up
by leading European landlords.
Some trends in Europe
aren’t as promising as in the
U.S. For example, Europe’s
population growth has been
lackluster, which doesn’t bode
well for future increases in re-
tail sales.
Still, investors are keenly
aware of the advantages of Eu-
off.”
To be sure, some investor
caution about European retail
landlords is merited. The full
impact of online retail is far
from clear. For example, a rela-
tively new risk facing Unibail
and other European landlords
is the growing volume of food
being sold online, a threat to
their supermarket tenants.
Europe also faces more po-
litical uncertainty than the
U.S., as demonstrated by the
recent terrorist attack in a
popular Barcelona shopping
district. “The threat of further
terrorist attacks could nega-
tively affect footfall in shop-
ping centers,” said a Morgan
Stanley report on the Euro-
rope. In the 12 months ended
in July, the FSTE NAREIT Eq-
uity Regional Malls Index,
which tracks seven mall REITs
in the U.S., skidded 32%.
During that same period,
the Stoxx Europe Total Market
Retail REITs, which tracks net
returns of seven mall land-
lords in the region, declined a
more-modest 11%.
Sales of U.S. shopping cen-
ters also have fallen sharply.
Volume totaled 670 million
square feet between 2015 and
the end of June this year, ac-
cording to an analysis of deals
in excess of $10 million by
data firm Real Capital Analyt-
ics. By comparison, some 790
million square feet traded
hands between 2012 and 2014,
Real Capital said.
In Europe, deal activity in-
creased to 627 million square
feet in the 18 months ended in
July, up from 559 million
square feet in the previous
period, Real Capital said.
Investors particularly are
hungry for shopping centers in
Germany, Spain, Italy and the
Netherlands, which are politi-
pean property sector published
in August.
But Unibail’s financial re-
sults this year have been solid.
The company’s shopping cen-
ters are about 95% occupied.
Their revenue in the first half
of 2017 was €670 million, up
4.1% from the same period last
year, according to the com-
pany. Unibail’s retail tenants
saw sales growth of 2.7% this
year through May, more than
double the rise of national
sales indexes in the countries
where the company’s centers
are located.
Unibail also has tried to
stay in front of changes in the
retail and technologies sector.
It hosted the first Apple store
Wednesday, September 6, 2017 | B9
PAU BARRENA/BLOOMBERG NEWS
cally stable and whose econo- shopping centers in the top
mies are still growing. three to five cities in each
In March, U.K.-based Intu country in the eurozone where
Properties PLC acquired Xan- the population is growing and
adu shopping center in Madrid in areas connected to public
and its management company transportation. “We don’t like
for €530 million ($630 mil- suburban retail,” Mr. Jestin
lion). said.
Klépierre SA, the second- Supply has been kept in
largest pan-European REIT check in Europe partly be-
and the largest to specialize in cause city planners have pro-
shopping centers, acquired a tected downtown shopping ar-
shopping mall in Spain’s Mucia eas from suburban
area for €233 million, and is competition. In many places,
redeveloping Hoog Catharijne, people prefer to take public
a mall in Utrecht, the Nether- transportation, bike or walk,
lands. In April, Klépierre weakening demand for malls
opened 16,000 square meters with large parking lots.
(172,250 square feet) of new The one exception in Eu-
shops and restaurants in Hoog rope that faces a cloudier out-
Catharijne and is scheduled to look is the U.K., which has
deliver more space in subse- more online shopping than
quent phases in November, countries on the Continent
March and 2019. and faces uncertainties from
“We will continue to buy Brexit. A weakening pound
shopping centers in big cities that has yet to fully flow
and get rid of the ones in through to consumers could
small cities where demograph- exacerbate pressures on them,
ics are decreasing,” said Jean- especially if the housing mar-
Marc Jestin, chairman of ket remains lackluster and in-
Klépierre’s executive board, in terest rates rise, said Green
an interview. The France- Street Advisors in a report in
based landlord is looking at August.
the chief executive of FNAC, a
retail unit of PPR Group.
Mr. Cuvillier says he sees a
bright future for what he calls
“experience shopping,” an ac-
tivity that combines shopping
with dining and entertainment.
Online shopping will never
substitute for the social and
consumer experience of visit-
ing a store, especially one that
is well designed, he said.
“The size of your brand on
an iPad or computer is exactly
the size of any other brand,”
he pointed out. “Therefore it’s
very difficult as a brand to dif-
ferentiate yourself because
you’re mixed with everybody
NICOLAS NICOLAS MESSYASZ/SIPA/ASSOCIATED PRESS
else.”
Stores also have other ad-
vantages: Retailers can inter-
act with customers face to face
and get immediate responses
to new products. Consumers
returning items they bought
online are more likely to make
additional purchases, some-
thing they can’t do dropping a
package in the mail, he said.
But the cost of designing,
building and maintaining an
experience store is high. As a
result, retailers are becoming
increasingly selective about lo-
in Continental Europe close to cations, Mr. Cuvillier said.
a decade ago and, more re- That is why Unibail has been
cently, leased space to Tesla jettisoning mediocre proper-
outlets in its shopping centers ties and concentrating on a
in Sweden and France. few locations “where the
Unibail malls have updated brands have to be,” he said.
Wi-Fi and charging stations That is also why Unibail has
and provide retailers a steady an €8.1 billion pipeline of fu-
stream of information on ture projects, including expan-
shopping activities of visitors. sions and renovations of exist-
At the helm of the company ing shopping centers and new
is Mr. Cuvillier, who was ones such as an 80,000-
brought in as chief operating square-meter (861,100-square-
officer six years ago by the foot) mall in Wroclaw, Poland,
company, which took on its that is scheduled to open later
current form in 2007 when this year. It is 97% pre-leased
Unibail Holding SA of France with tenants including Calvin
purchased Rodamco Europe Klein, Tommy Hilfiger and Adi-
NV of Holland. He had been das, according to the company.
one of France’s online-com- “The best retailers want to
merce pioneers particularly as expand,” Mr. Cuvillier said.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B10 | Wednesday, September 6, 2017
U.S. Stocks Fall on Korea Tensions Dollar
FallsasFed
Investors flock to
havens such as U.S.
Treasurys and gold;
Nikkei and Kospi slip
BY MIKE BIRD
AND MICHAEL WURSTHORN
U.S. stocks fell as fresh
threats from North Korea, fol-
lowing the country’s test of its
most powerful nuclear bomb
yet, weighed on major indexes.
The Dow Jones Industrial
Average fell 259 points, or
1.2%, to 21728
EQUITIES around midday.
The S&P 500 de-
clined 1%, while
the Nasdaq Composite shed
1.4%.
Investors moved into haven
assets, sending gold and U.S.
Treasury prices higher. Mean-
while, the CBOE Volatility In-
dex, a measure of expected
swings in the S&P 500, jumped
more than 29%.
ALY SONG/REUTERS
Falling bond yields pres-
sured shares of financial com-
panies in the S&P 500, sending
the sector down 2.1% around
midday and making it the in-
dex’s biggest laggard. Among
the decliners: Goldman Sachs
Group dropped 3.3%, while
Bank of America fell 3.1%.
Investors looked beyond eq-
uities for safety.
U.S. government bonds
strengthened, sending the
yield on the 10-year Treasury
note down to 2.084% by mid-
day, according to Tradeweb,
from 2.157% on Friday. Gold
prices rose 0.8% to $1,335.30 a
troy ounce by midday.
“There is no solid game
plan as to what we can do
with North Korea,” said Larry
Adam, Deutsche Bank Wealth
Management’s chief invest-
ment officer. “People are get-
ting nervous about that.”
The U.S. told the United Na-
Email: heard@wsj.com
Uptick for Smartwatches Ahead
Smartwatches haven’t ex-
actly proved to be must-have
devices yet, but lower prices
and expanded functions may
persuade more consumers to
strap one on.
That will benefit a handful
of companies, including
Samsung Electronics, Fitbit
and Garmin. All three an-
nounced new smartwatch of-
ferings last week for the
coming fall season, many of
which are priced to start in
the range of $200 to $300.
Apple is widely expected to
unveil a new smartwatch at
an event on Sept. 12 that is
able to connect directly to
cellular networks without
needing to be tethered to an
iPhone.
The smartwatch industry
is only a few years old and
has been a niche market so
far. IDC estimates that global
sales of wearable technology
totaled 110.5 million units
over the trailing 12-month
period ended June 30. That
is about 7% of the number of
China’s Big Banks Have Credibility Gap
For China’s big banks,
business is looking better
than it has in years. Inves-
tors shouldn’t be fooled by
the act.
Midyear results for the
likes of ICBC and Bank of
China show China’s regula-
tory crackdown over the past
year has had some success in
whipping banks into shape:
Interest income rose and as-
set quality improved for all
of the so-called Big Four. Un-
der pressure to clean up
their shadow-banking activi-
ties, banks have reined in a
key profit engine, noninter-
est income. Fees and com-
missions from off-balance-
sheet investment and
wealth-management busi-
nesses plummeted in the sec-
ond quarter.
Still, going back to basics
isn’t proving simple. The
four banks are able to earn a
roughly 5% yield on new
loans, while their funding
costs remain lower than
Property and banking stocks rose in Hong Kong on strong earnings from developer China Vanke. Its shares rose 3% in Hong Kong.
tions that North Korea was
“begging for war” and called
for “the strongest possible
measures” against Pyongyang.
North Korea, meanwhile, ap-
pears to be preparing to test
another intercontinental bal-
listic missile, South Korea said
late Monday.
Market reactions to the
continuing tensions between
the U.S. and North Korea have
been relatively muted in re-
cent weeks, but market strate-
gists warn the latest salvo of
threats increase global uncer-
tainty.
Selloffs last month were
short lived, as robust company
earnings and steady economic
HEARD ON THE STREET
Wind Up
Global unit sales of wearable
devices, quarterly
40 million
30
20
10
0 Smartwatch makers prob-
2014 ’15 ’16
Sources: IDC
THE WALL STREET JOURNAL.
smartphones sold in that
time. Furthermore, only a
portion of that is smart-
watches as IDC also counts
fitness bands and other
wearable devices in that mix.
A range of lower prices
and more functions should
raise their appeal. There is
some precedent for that. The
first iPod came along in late
2001, when digital music
players were a nascent busi-
ness. The iPod itself sold
lightly in its first two years
Class Act
Share-price performance
25%
20
15
10
5
0
–5
Jan. Feb. March
Source: WSJ Market Data Group
those of smaller rivals. That
should mean easy profits,
but the big banks’ average
return on assets was just
over 1% in the first half,
partly thanks to high operat-
ing costs, and partly because
of still-high loan-impairment
charges.
Together with declining
MARKETS
data helped both the Dow in-
dustrials and the S&P 500 to
hit their fifth consecutive
month of gains.
“It seems the gravity [of
the situation] has lifted to an-
other level,” said David de
Garis, a senior economist at
National Australia Bank. “This
situation doesn’t look like it is
going to subside.”
The Stoxx Europe 600
closed down 0.1%. South Ko-
rea’s Kospi ended the day
down 0.1%, despite a gain for
index heavyweight Samsung
Electronics.
Japan’s Nikkei Stock Aver-
age closed down 0.6% after a
0.9% fall on Monday, as buying
FINANCIAL ANALYSIS & COMMENTARY
as it started at $399 (about
$550 in today’s dollars) and
only worked with a Mac
computer. Expanding the
compatibility to Windows
and lowering the base price
juiced the business signifi-
cantly; iPod sales exploded
from 939,000 units in fiscal
2003 to 4.4 million the fol-
lowing year.
’17 ably won’t see that kind of
jump so quickly, but most
are moving in the right di-
rection, targeting introduc-
tory prices of $300 or less
while adding more functions.
New devices from both Fitbit
and Garmin add more
health-tracking features as
well as the ability to pay for
transactions.
How each company will
do over the next year re-
mains to be seen, and the
stakes are different for each.
Apple doesn’t report watch
sales, but that business is
expected by analysts to ac-
count for just 2% of the com-
Industrial & Commercial Bank
Bank of China Ltd.
Agricultural Bank
China Construction Bank
April May June July Aug.
THE WALL STREET JOURNAL.
fee income, poor profitability
is harming banks’ capital po-
sitions. With little to add to
retained earnings, bank capi-
tal levels are growing slowly.
Their assets, meanwhile, are
growing fast as they expand
their loan books. The net ef-
fect is that their capital ra-
tios—bank capital divided by
of the yen, a traditional haven
asset, accelerated during Asian
trade.
Hong Kong’s Hang Seng In-
dex and Australia’s S&P/ASX
200 both rose less than 0.1%.
Buying of property and
banking stocks in Hong Kong
was stoked by earnings from
developer China Vanke, which
reported a 47% rise in the
value of new home sales from
a year earlier in January-Au-
gust. Shares in China’s biggest
property developer gained 3%
in Hong Kong.
U.S. crude-oil prices jumped
Tuesday and gasoline prices
slid, as shuttered refineries
and other oil infrastructure
pany’s total revenue for the
fiscal year ending in Septem-
ber, according to FactSet.
Garmin’s high-end Fenix
watches have been among
the strongest parts of its
business of late, but the
company is also diversified
with other businesses such
as navigational gear for
boats and airplanes.
Fitbit, meanwhile, is al-
most entirely dependent on
wearable devices. The Ionic
watch launching in October
will need to play a big role
in helping the company re-
turn to growth following a
year of sales declines.
Fitbit’s stock price had
jumped about 5% since its
announcement through Fri-
day, though the shares are
still about one-fifth what
they were worth before the
company launched its first
smartwatch called the Blaze
in early 2016. That should at
least leave much less value
to burn.
—Dan Gallagher
risk-weighted assets—are de-
clining. Bank of China’s core
equity Tier 1 capital-ade-
quacy ratio fell to 11.8% from
12.3% a year earlier.
More optimistically,
banks’ bad-loan positions
seem to be improving—al-
though again, the good news
is qualified. The improve-
ment is partly a game of
numbers: Total loans have
been growing faster than bad
loans. Moreover, big banks
have found creative ways to
dispose of soured debt. Bank
of China has been securitiz-
ing some of its bad loans,
while others have carried out
debt-for-equity swaps or just
transferred them into off-
balance-sheet entities.
Chinese bank stocks are
up 17% so far this year, and
now trade at 0.9 times book
value on average. Anyone
hoping they can push higher
still should take a closer look
below the surface.
—Anjani Trivedi
THE WALL STREET JOURNAL.
continued to restart in the
wake of Hurricane Harvey.
“The healing from Harvey
has begun for energy mar-
kets,” analysts at TAC Energy
wrote in a client note Tuesday.
U.S. crude futures rose 2.8%
to $48.62 a barrel on the New
York Mercantile Exchange.
Harvey knocked out more
than 20% of U.S. refining ca-
pacity, stoking fears of a na-
tionwide fuel shortage and
causing crude supplies to
build up in storage.
The renewed demand from
refiners is supporting crude
prices, said Ehsan Ul-Haq, di-
rector at consultancy Resource
Economist Ltd.
Pharma Breakthrough
Is Worthy of Attention
A major clinical break-
through at two large pharma-
ceutical companies didn’t get
much attention from Wall
Street. That means opportu-
nity for investors.
Xarelto, the clot-prevention
drug jointly owned by Bayer
AG and Johnson & Johnson,
was shown to significantly cut
the risk of stroke, heart at-
tack, amputation or death for
patients with severe athero-
sclerosis, or blockage in the
arteries. Patients who took
Xarelto in combination with
aspirin experienced a 24% de-
cline in those serious events,
compared with patients who
took just aspirin, the current
standard of care. The trial was
halted early due to Xarelto’s
efficacy.
The data, which were pre-
sented last month at a medi-
cal conference, are “about as
good as it gets,” according to
Dr. Pete DiBattiste, head of
cardiovascular research and
development at Johnson &
Johnson. Yet neither Bayer
nor Johnson & Johnson
shares have rallied since the
data were unveiled.
Xarelto is already a block-
buster—analysts expect $4
billion in sales at Bayer and
$2.4 billion at J&J from the
drug in 2017, according to
FactSet. And the firms will
need regulatory approval to
convert the data into ex-
panded sales, which will take
time. And Wall Street does ex-
OVERHEARD
Returns from assets that
stir the emotions—classic cars,
fine wines, ultra-high-end
homes and the like—have been
mediocre for half a decade
now. Last year a portfolio of
these so-called passion assets
typically held by the superrich
appreciated by just 1.2%, ac-
cording to Coutts, a London-
based private bank.
Since 2006, when Coutts
started tracking the series, the
average annual return has been
5.3%, net of holding costs. But
Signals
Caution
BY CHELSEY DULANEY
The U.S. dollar fell Tuesday
as investors dissected policy
signals from global central
bankers.
The WSJ Dollar Index,
which measures the U.S. cur-
rency against 16 others, was
down 0.4% at 85.28 by midday
in New York.
In a speech Tuesday, U.S.
Federal Reserve governor Lael
Brainard said the U.S. central
bank should be cautious about
raising interest rates amid the
economy’s “persistent failure”
to reach its 2% inflation target.
Central bankers and inves-
tors have been puzzled by the
recent slowdown in U.S. infla-
tion, a potential obstacle to
the Fed’s plans for tightening
policy.
Markets are now pricing in
just a 42% chance that the Fed
will raise rates again this year,
according to CME Group data.
Expectations that U.S. rates
will remain lower, com-
pounded by political turmoil
in Washington, have weighed
on the dollar this year.
“About the only positive
things that can be said for the
U.S. dollar is that its tumble
over the past few months has
been severe,” Scotiabank ana-
lysts said in a research note.
“The U.S. dollar may have to
consolidate or correct before
additional, significant losses
can follow.”
Other Fed officials, includ-
ing Dallas Fed President Rob-
ert Kaplan, are scheduled to
speak this week.
The European Central Bank
and Bank of Canada are also
holding meetings this week.
WSJ.com/Heard
pect significant growth in
Xarelto sales—to about $9 bil-
lion in total by 2020.
Still, there is a strong
chance that Xarelto could sell
better than most expect as
the latest data significantly
expand Xarelto’s market po-
tential. Bayer said on a call
with analysts that as many as
30 million new people may
become eligible for the treat-
ment, and this is a treatment
that goes on indefinitely. The
number of patients could fur-
ther expand when more data
come out next year.
The drug is likely to be es-
pecially profitable because
Bayer and J&J aren’t likely to
need a major investment in
their sales forces to reach the
new patients. And, since
Xarelto would be an add-on to
an existing aspirin regimen,
those new patients won’t need
to switch from another drug.
Meanwhile, Johnson &
Johnson and Bayer trade at 17
and 14 times forward earn-
ings, respectively. Those valu-
ations are in line with recent
history, but analysts expect
earnings growth on the order
of 7% annually for the next
three years for both firms. It
should be possible for both
companies to clear that bar.
Stock markets are mostly
efficient. But every now and
then, a major development
happens without much fan-
fare. Investors should take no-
tice. —Charley Grant
almost all the money was made
before 2012. Classic cars have
fared best—up 14.2% a year on
average—but even these have
lost momentum, with prices
down 10.4% in 2016.
Cumulative returns on these
alternative assets are now lag-
ging behind those on stocks.
This is to be expected: Stocks
come with dividends, whereas
the dividend collectibles pay is
that of a consumer good—the
enjoyment and use provided by
ownership.