MONDAY, JULY 31, 2017 ~ VOL. XXXV NO. 126
com EUROPE EDITION
DJIA 21830.31 À 0.15%
What’s
News
Business & Finance
U .S. corporations are
posting some of their
biggest profit and revenue
gains in years despite
gridlock in Washington. A1
 European banks are
stabilizing after years of
crisis, but rock-bottom in-
terest rates continue to
weigh on profitability. A1
 Samsung has surpassed
Intel to become the world’s
largest chip maker by reve-
nue, amid a surge in de-
mand for memory chips. B1
 Cheap egg prices are
pressuring U.S. suppliers and
farmers, who are struggling
to rebound two years after
an avian-flu outbreak. B1
 Activist investors are
challenging plans to break
up DowDuPont, which is set
to be created in August. B1
 Private-equity firms are
blamed by creditor lawyers
for speeding the collapse
of some retail chains. B1
 Exxon and Chevron re-
ported robust earnings, de-
spite lower oil prices and
questions about demand. B3
 Wells Fargo plans to
make refunds to certain
auto-loan customers who
may have been improperly
charged for car insurance. B5
 Beijing accused several
banks of negligence or rules
violations amid its efforts to
stem capital outflows. B7
 Apple removed apps in
China that let users circum-
vent internet filters. B4
 Warner Bros.’ “Dunkirk”
held on to the top box-office
spot, fending off rivals. B3
World-Wide
 The White House is ex-
ploring the option of a
pullout from Afghanistan
amid a deep divide over
deploying more troops. A1
 China unveiled a new,
more mobile ICBM in Xi’s
latest display of military
and political muscle. A3
 Seoul plans to upgrade
its Patriot missile system in
response to North Korea’s
ICBM test-launch Friday. A3
 Trump tweeted a warn-
ing to China over what he
described as Beijing’s inac-
tion on North Korea. A7
 U.S. officials are consid-
ering stepping up sanctions
against Venezuela by tar-
geting its oil industry. A4
 Putin said 755 U.S. dip-
lomats would be forced to
leave Russia in retaliation
for impending U.S. sanc-
tions against Moscow. A3
 Sen. Collins, who helped
block the GOP health-care
bill, said Trump’s threatened
cut in payments to insurers
would hurt the poor. A7
 Some White House aides
said they expected further
administration changes af-
ter Trump’s ouster of Prie-
bus as his chief of staff. A7
 Hackers penetrated a
voting machine used in a
Virginia election to demon-
strate security flaws. A5
 Western U.S. states have
turned their focus toward
potential flooding after wild-
fires increased the risk. A5
 Al-Shabaab fighters am-
bushed an African Union
convoy in Somalia and killed
at least eight soldiers. A3
CONTENTS
Business News...... B3
Crossword.............. A12
Europe File............... A2
Heard on Street.... B8
Keywords................... B1
Life & Arts.... A8-9,12
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U.S. Military (Eur.) $2.20
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China Displays Its Military Might
CHINA DAILY/REUTERS
WARNING TO RIVALS: Beijing unveiled a more mobile intercontinental ballistic missile at a military parade Sunday. The event came amid
escalating military tensions in the region. ‘The world is not peaceful,’ said Chinese President Xi Jinping, who wore combat fatigues. A3
Europe’s Banks Find Footing
Restructuring and
rising fee income have
aided recovery, but
profitability is an issue
LONDON—After years of
crisis Europe’s banks are fi-
nally stabilizing.
On Friday, several of Eu-
rope’s largest lenders reported
solid if uninspiring results, a
welcome change that shows
OPEC HAS A CRIPPLING PROBLEM
Its members can’t stop pumping, months after a landmark deal to cut oil output to force prices up; big budget obligations
OPEC, the once powerful oil car-
tel, is struggling to hold the line in a
make-or-break fight to limit oil pro-
duction, prop up crippling low
prices and prove its relevance.
Why? Its members are addicted
to oil.
Eight months after the Organiza-
tion of the Petroleum Exporting
Countries announced a plan for its
14 members and 10 allied countries
to withhold almost 2% of the world’s
oil every day to boost prices, seven
of the 11 OPEC members that
Trump Administration Weighs
Pullback From Afghanistan
BY DION NISSENBAUM
WASHINGTON—President
Donald Trump’s reservations
about sending more troops to
Afghanistan have triggered a
new exploration of an option
long considered unlikely:
withdrawal.
Unable to agree on a plan
to send up to 3,900 more
American forces to help turn
back Taliban advances in Af-
ghanistan, the White House is
taking a new look at what
would happen if the U.S. de-
cided to scale back its military
presence instead, according to
current and former Trump ad-
INSIDE
Markets...................... B8
Markets Digest..... B6
Opinion.............. A10-11
Technology............... B4
U.S. News.............. A5,7
Weather................... A12
World News....... A2-4
WHO DECIDES
WHAT YOU
WATCH
LIFE & ARTS, A8
STOXX 600 378.34 g 1.04% BRENT 52.52 À 2.00% GOLD 1268.40 À 0.67% EURO 1.1748 À 0.61%
Profits
Overcome
Political
Gridlock
In U.S.
BY THEO FRANCIS
AND THOMAS GRYTA
Washington may be grid-
locked but American corpora-
tions are doing just fine, post-
ing some of the biggest profit
and revenue gains in years.
Earnings at S&P 500 com-
panies are expected to rise 11%
in the second quarter, accord-
ing to data from Thomson
Reuters, following a 15% in-
crease in the first quarter.
The gains are spread across
industries from Wall Street
banks to Detroit’s car factories
to Silicon Valley’s software
labs. Profits declined only in
the utilities sector.
Corporate America’s strong
earnings performance comes
as several measures that were
expected to boost companies’
bottom line—corporate-tax
cuts and increased govern-
ment spending on infrastruc-
ture—have been sidetracked
amid political infighting in
Washington, D.C., which culmi-
the sector’s and margins. contract but still beat ana- nated with the recent failure
grinding restruc- By Max Colchester, European banks lysts’ expectations. Barclays of the health-law bill.
turing is starting Jeannette Neumann still badly lag PLC posted a loss, but that Even as activity inside the
to pay off. and Patricia Kowsmann behind their U.S. came from charges linked to Please see PROFIT page A2
Not long ago, peers in profits its retreat from Africa.
investors fretted about and dividends. “The capital question is
whether European banks had On Friday, UBS Group AG
enough capital to survive and Credit Suisse Group AG
now done,” said Barclays Chief
Executive Jes Staley. “Now the
Putin to Expel
downturns and whether they posted better-than-expected
would be able to level their profits; both have thrown
final thing is earnings.”
European bank shares have
755 Diplomats
mountains of bad loans. Many more effort into their wealth- Please see BANKS page A2 Russia is forcing hundreds
problems remain, but inves- management businesses. of U.S. envoys to leave over
tors now have more-mundane French bank BNP Paribas SA  Heard: European banks suffer pending sanctions, A3
worries, such as profitability saw its second-quarter profit from American envy.............. B8
pledged to cut appear to be produc- members have ramped up govern- prices remain low, said Helima
ing more oil than promised. ment spending to keep populations Croft, the global head of commodity
Crude prices have actually fallen, happy and cover military expenses, strategy at RBC Capital Markets and
by 7.6% to $52.52 a barrel, since the and don’t have a cushion to let oil a longtime watcher of the cartel,
beginning of the revenue slip. Their “the harder it is to make the case to
year—half what the By Benoit Faucon in London, strained budgets the most cash-strapped producers
cartel called a fair Lynn Cook in Houston, can be covered only that they are ‘better together.’ ”
price just three Summer Said in Cairo and through increas- Tensions were laid bare last
years ago and a Georgi Kantchev in St. ingly high prices week in St. Petersburg, where OPEC
level that some say Petersburg per barrel, and if and its non-OPEC allies discussed
is here for the long prices are low they why output was going in the wrong
term. need to produce more. direction.
Previously, low production costs The inability to control output Russia aimed to boost camarade-
meant OPEC members profited even poses a potentially existential threat rie with a visit to the Hermitage
when oil prices fell. These days, to OPEC’s influence. The longer Please see OPEC page A6
Samsung Topples Intel in Chips
Revenue of world's top two chips makers Samsung Intel
$60 billion
ministration officials. There appears to be sup- 50
“It’s a macro question as to port in the administration for
whether the U.S., this adminis- a modest plan to send a few 40
tration, and this president are thousand more U.S. troops to
committed to staying,” one se- Afghanistan, to put more pres- 30
nior administration official sure on Pakistan to crack
said. “It doesn’t work unless down on militant sanctuaries,
we are there for a long time, and to seek help from China, 20
and if we don’t have the appe- India and Pakistan in reaching
tite to be there a long time, we regional peace deals. But there 10
should just leave. It’s an unan- is no consensus, said people
swered question.” involved in the debate, making
0
The exploration is an out- it unlikely that the U.S. would
growth of a deep divide at the send more forces to help the 2008 ’10 ’15 ’17
Estimate
White House, where the presi- Afghan government repel Tali- Note: Samsung figures converted from won (July 26)
dent and his top advisers are ban advances this summer. Sources: S&P Global Market Intelligence (Intel); Nomura (Samsung) THE WALL STREET JOURNAL.
reluctant to send more Ameri- Administration officials face The title of largest chip maker by revenue has changed hands. B1
can troops to Afghanistan a conundrum: They want to
without a clear strategy. Please see AFGHAN page A4
Purple Craze: Lavender Lures Crowds, Baffling Town
i i i
New York farm gets 1,000 weekend visitors who frolic in the crop
BY CORINNE RAMEY was great,” said avoided the crowds.
Anne Murray, presi- The source of this
ADNAN ABIDI/REUTERS
EAST MARION, N.Y.—During dent of the East Mar- particular mass con-
some July weekends the past ion Community Asso- tagion, however,
few years, traffic on the two- ciation. “Now it’s came on so suddenly
lane country road passing kind of a nightmare.” that it left everybody
through the hamlet of East Long Island’s in a state of baffle-
Marion, population 926, has North Fork isn’t im- ment. People had
been backed up for miles. mune to seasonal Lavender bunch gone absolutely loony
A $1,400 Townspeople, unaccus-
tomed to such things, initially
overcrowding. Week-
enders flock here to visit winer-
for lavender.
At a 17-acre farm here, Lav-
IPHONE found tour buses parked in ies in the summer, pick pump- ender by the Bay, more than
ISN’T CRAZY front of their homes and way-
ward picnickers on their
kins in the fall, and saw down 1,000 visitors descend each
Christmas trees in the winter. weekend when the fragrant
lawns. “When it was a quiet East Marion, which lacks flower is in bloom. The farm
KEYWORDS, B1 place that nobody came to, it such attractions, had largely Please see FLOWER page A6
A2 | Monday, July 31, 2017
In EU-Poland Spat, Risks to Bloc’s Unity Loom
EUROPE FILE
BY SIMON NIXON
The current standoff be-
tween the Polish government
and the EU Commission over
the rule of law risks becom-
ing a serious threat to EU
cohesion. The dispute goes
beyond disagreements over
policy to the
nature of the
European
project itself.
The Com-
mission in-
sists that the
EU is above all a “commu-
nity of law”: The rights that
membership confers on its
citizens hinge on EU law be-
ing enforced in all member
states via domestic courts.
This makes the indepen-
dence and impartiality of na-
tional judges a legitimate EU
concern. And the Commis-
sion believes that recent at-
tempts by the Polish govern-
ment to overhaul the
judiciary—including giving
the minister of justice pow-
ers to dismiss current judges
and appoint new ones—is
the culmination of a cam-
paign by Warsaw to bring
the courts under political
control in what one EU offi-
cial calls a “systemic” as-
sault on the rule of law and
democratic values.
BANKS
Continued from Page One
shot up 50% over the past year
as investors bet on lenders
riding a European economic
recovery and a lightening of
regulations.
European fund managers
are still piling into the sector
and see banks in the European
Union as the most underval-
ued stocks, according to a sur-
vey this month by Bank of
America. A newfound opti-
mism has permeated once-
gloomy bank boardrooms.
“I think European banks are
at a turning point,” Frédéric
Oudéa, CEO of France’s Société
Générale SA said recently.
Now the test is whether Eu-
ropean banks can live up to
the hype. The main problem:
Interest rates are still at rock
bottom levels. “After a long,
long deleveraging process we
are entering into a phase
where we can show some
growth” in Spanish loan vol-
ume, Santander CEO José An-
tonio Álvarez told analysts.
But with interest rates so
low, it is hard to make signifi-
cant profits on those loans.
Profits Defy Washington Gridlock
Year-over-year change in S&P 500 earnings
15%
10
5 in mid-July amid other com-
0
0.1
–5
–10
2012 ’13 ’14
Note: Latest quarter includes analyst estimates for some companies
Source: Thomson Reuters
PROFIT
Continued from Page One
Beltway bogged down, the
markets have been on an al-
most nonstop rally since the
election. The S&P 500 is up
16% since early November and
10% this year.
“You could argue that the
stock-market investor overesti-
mated Trump but underesti-
mated earnings,” said Christo-
pher Probyn, chief economist
for State Street Global Advisors.
Several factors are at work,
analysts and economists say. A
weaker dollar has made it eas-
ier to sell U.S.-made goods
overseas and kept borrowing
costs low. U.S. wages have im-
proved enough to help bolster
consumer spending without
raising employer labor costs
T
he crisis has hardly been
defused by President
Andrej Duda’s decision
last week to veto two of the
three proposed laws. The
Commission fears that the rul-
ing Law & Justice party might
try to push through a similar
law again.
Last week, the Commis-
sion set out for the first
time the red lines which it
says, if crossed, would lead
it to launch a formal process
that could lead to Poland be-
ing stripped of its EU voting
rights. In particular, it said
that any move by Warsaw to
dismiss Supreme Court
judges would lead to an im-
mediate launch of this pro-
cess—an unprecedented
move that would pit the
Commission directly against
a national government and
force member states to
choose sides.
Of course, Warsaw sees
things rather differently. Law
& Justice party leader Jaro-
slaw Kaczynski has long in-
sisted that the judiciary, along
with other organs of the Pol-
ish state, had remained bas-
tions of the old Communist-
era elite, which had hung on
to its positions and privileges.
The party believes over-
hauling the judiciary is vital,
not just because it is the only
institution that remains un-
reformed since Communist
times, but because it believes
the self-selecting judiciary is
guilty of dispensing two-tier
justice in which access to jus-
tice for most people is lim-
ited while those with connec-
tions are treated leniently.
The benchmark rate that un-
derpins most Spanish mort-
gage loans, on which rates
typically float, is eventually
expected to rise “but nothing
spectacular,” Mr. Álvarez said.
Currently, it is still slipping. In
other countries, the pain could
be prolonged because custom-
ers have locked in long-term,
low-interest loans; even if
rates do go up it could take
time for banks to see profits.
In Germany, for example, 85%
of mortgages are fixed-rate,
according to Deutsche Bank.
To counter this, lenders
have been slashing costs and
shutting businesses. In Italy
alone, banks are planning to
cut at least 17,500 jobs this
year, according to a trade
union. Barclays has cut 60,000
people from its payroll over
the past year.
Banks have also moved
away from making loans to
selling products not linked to
interest rates, such as insur-
ance or investment advice.
The number of big Euro-
pean banks with noninterest
revenue accounting for over
40% of their operating income
rose to 54 from 49 in the past
year, according to the Euro-
pean Central Bank. Spanish
’15 ’16 ’17
THE WALL STREET JOURNAL.
so much that it dents the bot-
tom line.
Companies also continue to
reap the fruits of their recent
zeal for cutting costs, Mr.
Probyn said. “We underesti-
mated some of the cost-cut-
ting and restructuring that has
gone on within the various in-
dustries; that has permitted
earnings to keep doing well.”
Sales, too, rose in the quar-
ter, by an expected 5%, the sec-
ond-biggest increase in more
than five years, according to
data from Thomson Reuters.
The figures reflect actual re-
sults for about half the S&P
500 index, and analysts’ esti-
mates for those that had yet to
report results as of Friday.
On Friday, the Commerce
Department reported that gross
domestic product rose at a 2.6%
rate in the second quarter, up
from 1.2% in the first quarter.
“We’ve been growing at
WORLD NEWS
People gathered in front of Krakow’s District Court on Wednesday to protest overhauls to the judiciary.
Besides, the party argues
that many democracies, in-
cluding the U.S. and Germany,
hand politicians a key role in
selecting senior judges.
Mr. Duda shares this analy-
sis—and indeed has promised
to come up with his own pro-
posals. The president’s deci-
sion to use his veto shouldn’t
be seen as a victory for the
Commission, said a person fa-
miliar with his thinking. He
believes that the Commission
has overreached by interfer-
ing in a domestic political is-
sue: Under the EU Treaties,
the administration of justice
is a national competence. Nor
does he accept the idea that
national judges are EU
banks CaixaBank SA and Banco
de Sabadell SA beat analysts’
forecasts on Friday as higher
fees helped boost profit. The
sudden jump in bank fee in-
come since the start of the
year “was like someone
flipped a switch,” said Kinner
Lakhani, an analyst at
Deutsche Bank.
European banks moved at a
glacial pace to restructure aft
er the financial crisis, but have
acted faster over the past
year. A handful of teetering
banks in Italy and Spain have
been wound down, merged or
bailed out. In June, Spain’s
struggling Banco Popular Es-
pañol SA was rescued and sold
to Santander.
Earlier this month, the Ital-
ian government took control
of long-troubled Banca Monte
dei Paschi di Siena SpA. Mean-
while big lenders have tapped
shareholders to fund extensive
restructuring. UniCredit SpA,
Deutsche Bank and Credit Su-
isse raised a total of nearly
$30 billion of fresh equity
from shareholders.
Some of the overhauls are
starting to work. On Friday,
Bank of Ireland PLC an-
nounced it will pay its first
dividend since the country
1.5% to 2% in spite of stupidity
and political gridlock because
the American business sector
is powerful and strong and is
going to grow regardless,”
James Dimon, chief executive
officer of J.P. Morgan Chase
& Co. said on an investor call
ments about the need for bi-
partisan policy revamps.
As executives discuss results
with investors and analysts,
events in Washington have
faded into the background. S&P
500 companies that mentioned
Mr. Trump or his administra-
tion during their latest confer-
ence calls are down by a third
compared with three months
ago, according to an analysis
by research firm Sentieo.
The market has also largely
stopped reacting to blow-by-
blow developments in Washing-
ton, despite uncertainty over
the size, shape and timing of
any tax and infrastructure ini-
tiatives, said Quincy Krosby,
chief market strategist with
Prudential Financial Inc.
Corning Inc. CEO Wendell
Weeks, who was at the White
House this month to announce
new U.S. investment and hiring,
told analysts last week that he
still expects Congress to over-
haul the tax code—eventually.
“What I am much less con-
fident about is how the politi-
cal math works in any given
year,” Mr. Weeks said. “So I
think calling timing on that
one is above my pay grade.”
Honeywell International
Inc. CEO Darius Adamczyk
said he hopes lawmakers will
advance plans for revamping
judges: Since EU law is fully
incorporated into Polish law
and Polish courts defer to the
European Court of Justice on
questions of EU law, Mr. Duda
believes the Commission’s
concerns are unwarranted.
Mr. Duda was instead
swayed partly by domestic
political concerns, said the
person familiar with his
thinking: concerns that the
government proposals placed
too much power in the hands
of the minister of justice, who
is also the prosecutor general;
and over the way they were
driven through parliament
without consultation, includ-
ing with Mr. Duda himself,
giving rise to public protests
Finally a European Banking Recovery?
European bank shares
have soared...
Euro Stoxx Bank Index
140
130
120
110
J F M A M J
Sources: WSJ Market Data Group (Euro Stoxx); European Banking Authority (equity)
THE WALL STREET JOURNAL.
was mauled by the financial
crisis. The once-limping Banco
Comercial Português SA an-
nounced it is raising salaries
to precrisis levels after an av-
erage 6% cut since 2014. The
CEO, Nuno Amado, said “it is a
sign of normalization for BCP,
both internally and for the
outside.”
This is feeding back into
the European economy. Bank-
lending volumes have been
gradually recovering since
early 2014. Small and medium-
the tax code as soon as the
current quarter. Still, he isn’t
counting on it.
“I think there’s more uncer-
tainty in that now than maybe
even before, so I can’t let that
sort of rule the business,” Mr.
Adamczyk said.
Even rapid progress on a tax
rewrite or an infrastructure bill
is unlikely to drive profits soon.
“We’re halfway through the
year, and they haven’t done
it,” said Christopher Nassetta,
CEO of Hilton Worldwide
Holdings Inc. “We’re not go-
ing to have enough time for it
to trickle through and really
benefit this year.”
That could make it difficult
for companies to sustain robust
earnings growth, said Omar
CORRECTIONS 
AMPLIFICATIONS
Plug Power Inc. sells fuel
cells that can be used to
power forklifts and other
warehouse vehicles. A Tech-
nology article on Tuesday
about the company’s deal with
Wal-Mart Stores Inc. incor-
rectly said Plug Power sold
fuel-cell powered forklifts.
Elizabeth Baird graduated
from the University of Virginia
in 2004. A Mansion article in
the Friday-Sunday edition
about renovations to the Aus-
tin, Texas, home of country
musician Rob Baird incorrectly
Readers can alert The Wall Street Journal to any errors in news articles by
emailing wsjcontact@wsj.com.
that threatened to spill over
into wider social unrest.
B
ut also influential in
Mr. Duda’s thinking
was a series of private
warnings by Poland’s part-
ners in its “Three Seas Ini-
tiative” that this crisis
risked straining Warsaw’s re-
gional relationships. This
loose alliance of all 12 for-
mer Communist Central and
Eastern European EU mem-
bers is a personal priority of
Mr. Duda, who sees it as a
potentially important new
platform to project Polish
economic and strategic inter-
ests. The alliance’s recent
summit in Warsaw, which
...but profits are still stagnant.
European Banking Authority
weighted average of return on
equity for European banks
10 %
8
6 ECB is reviewing how the
4 rules will start to be phased in
J 2012 ’13 ’14 ’15 ’16
size businesses in the euro-
zone have said there is an in-
crease in the availability of
bank loans over the past six
months, according to a recent
survey by the ECB.
Still, hurdles remain. First,
there are too many banks. ECB
officials have repeatedly said
that the sector needs to con-
solidate, but bank executives
remain wary of doing deals.
Second, €1 trillion ($1.18 tril-
lion) of bad loans continues to
sit on balance sheets. While
Aguilar, chief investment officer
of equities for Charles Schwab
Investment Management.
Companies are reporting
solid cash flow, but capital
spending has been weak until
recently. Uncertainty over tax
policy may exacerbate that re-
luctance to invest, Mr. Aguilar
said. “Tax reform is clearly
what the future may require for
these numbers to continue on
the same pace.”
Evan Greenberg, CEO of
property and casualty insurer
Chubb Ltd., told investors last
week that the U.S. badly needs
a tax-code overhaul and higher
infrastructure spending to re-
main competitive.
“But an awful lot of this re-
quires legislation, and we need
said his sister graduated in
2009.
The Klipsch X12 Neckband
uses two 110-mAh batteries.
An Off Duty article in the Fri-
day-Sunday edition about
neckband headphones incor-
rectly said it uses 1,100-mAh
batteries.
The late artist Richard Ger-
stl’s last name was misspelled
as Gerstle in the Flower
School article and an accom-
panying caption in Off Duty in
the Friday-Sunday edition.
THE WALL STREET JOURNAL.
ARTUR WIDAK/NURPHOTO/ZUMA PRESS
’17
was attended by President
Donald Trump, was a per-
sonal diplomatic triumph.
These interventions by
Poland’s Three Seas partners
could yet prove decisive in
how this saga plays out.
After all, both Warsaw
and the Commission know
that while the Commission
can launch a process to strip
Poland of its EU voting
rights, it will never succeed
because that requires una-
nimity among the 27 mem-
ber states and Hungary has
promised to veto. But as Mr.
Duda tries to steer a course
between satisfying Mr. Kacz-
inski’s demand for a radical
overhaul of the judiciary and
maintaining public order, he
will know that wider Polish
interests are also at stake.
Not much unites the mem-
bers of the Three Seas Initia-
tive but what all of Poland’s
central and eastern partners
agree upon is the strategic
threat to the region’s secu-
rity from Russia—and a con-
viction that one of the most
effective ways to stabilize
Europe’s neighborhood is to
hold out the prospect of EU
membership to Ukraine and
the Western Balkans.
Yet they also know that
any prospect of further east-
ern expansion of the EU is
viewed with deep suspicion in
Northern and Western Eu-
rope, not least because of
concerns over the rule of law.
Nothing would be more cer-
tain to harden that opposition
than the perception that the
EU is powerless even to de-
fend the rule of law in Poland.
the amount of bad loans is
starting to ease, clearing them
could be a slow process, Italy’s
bad loans could take a decade
to work through before coming
in line with wider European
levels, according to an analysis
by Morgan Stanley. And a
crash in shipping lending con-
tinues to pinch German banks.
A restructuring of Deutsche
Bank is far from complete.
Tougher regulations could
also be on the horizon. The
banks model risk.
In January, new accounting
that force European banks to
cover for potential losses on
loans in real time, which is ex-
pected to add billions to their
loan provisions. The global Ba-
sel rules are still being ham-
mered out, which could result
in banks having to change how
they calculate risk. European
bank executives are in the
dark over how onerous those
changes will be.
“It could get worse before
it gets better,” said Filippo
Alloatti, senior credit analyst
at Hermès Investment Man-
agement.
—Giovanni Legorano
contributed to this article
an administration that is fo-
cused, that is working with
Congress,” he said. “And we
need a Congress that comes to-
gether to address these issues
of our country.”
CORRECTIONS 
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China Unveils New, More Mobile ICBM
Military display is latest
effort by Xi to improve
standing as leadership
shuffle looms this fall
BY JEREMY PAGE
BEIJING—China unveiled a
new, more-mobile interconti-
nental ballistic missile at a
parade of advanced weap-
onry and combat troops in
President Xi Jinping’s latest
display of military and politi-
cal muscle.
State television showed at
least 16 DF-31AG missiles in
Sunday’s parade at the Zhu-
rihe combat-training base in
northern China, marking the
90th anniversary of the found-
ing of the force that is now
known as the People’s Libera-
tion Army.
The DF-31AG is mounted on
an all-terrain vehicle so it is
harder to track and can be
fired from multiple locations,
and it could have a longer
range than the older DF-31A,
which was also displayed and
is carried by a vehicle de-
signed mainly for roads, mili-
tary experts say.
Mr. Xi, wearing combat fa-
tigues and a peaked cap, in-
spected the troops from an
open-top military vehicle be-
fore the parade, which fea-
tured tanks, helicopters,
stealth jet fighters and some
12,000 personnel.
“The world is not peace-
ful,” Mr. Xi said in a speech
afterward that invoked his
signature political idea of a
“China Dream” to build the
country into a global eco-
nomic and military power.
In Shift, South Korea Beefs Up Its Missile Defenses
BY JONATHAN CHENG
SEOUL—South Korean Pres-
ident Moon Jae-in was elected
in part on promises to extend
an olive branch to North Korea
and put the brakes on the in-
stallation of a controversial
U.S. missile-defense system.
But less than three months
into office, Mr. Moon has been
forced to rethink that ap-
proach after North Korea test-
launched its first two inter-
continental ballistic missiles.
On Sunday, South Korea’s
defense minister said the
country would upgrade its
Patriot missile system in re-
sponse to North Korea’s sec-
ond ICBM test-launch late
Friday.
That decision came a day
after Mr. Moon said he would
weigh further deployment of
a separate longer-range mis-
sile-defense system, called
Terminal High-Altitude Area
Defense, or Thaad, in South
Korea.
Mr. Moon had suspended
Thaad’s deployment this year
as one of his first acts in of-
PAKISTAN
Transition May Hand
Military More Power
The removal of Nawaz Sharif
as prime minister by the courts
and the takeover of the position
by his younger brother, Shehbaz
Sharif, could hand more power
to Pakistan’s military establish-
ment, political experts said Sun-
day.
Shehbaz Sharif has a history
of being less confrontational
with the armed forces, and he
will be focused on delivering
economic projects ahead of elec-
tions next year, giving even
greater leeway to the military,
experts said.
This could affect the Ameri-
can search for a solution to the
conflict in Afghanistan, as it
blames the Pakistani military for
supporting the Taliban insur-
gency there—an allegation Paki-
stan denies.
Washington is weighing
sending thousands more troops
to Afghanistan and Pakistan’s
help is considered vital to end-
ing America’s longest-running
war.
Shehbaz Sharif will become
prime minister in the coming
weeks, the ruling party said over
the weekend, with a former pe-
troleum minister serving as in-
terim leader.
A special session of Parlia-
ment, where the ruling party en-
Monday, July 31, 2017 | A3
WORLD NEWS
JU ZHENHUA/XINHUA/ZUMA PRESS
A parade was held Sunday at the Zhurihe military base in northern China to mark the founding of what is now known as the People’s Liberation Army 90 years ago.
“Today we are closer than any the region, with North Korea hundreds of billions of dollars designed to overhaul Soviet- boost his political stature
other period in history to the accelerating its nuclear-weap- a year in trade, yet they do modeled command structures ahead of this fall’s 19th Party
goal of the great rejuvenation ons program since January NOTHING for us with North and better prepare the armed Congress, where he is ex-
of the Chinese nation and we through a series of tests, in- Korea, just talk,” Mr. Trump forces for combat at home and pected to try to promote allies
need more than any period in cluding the launch of an inter- wrote in a pair of posts on his abroad if needed. to the top leadership.
history to build a strong peo- continental ballistic missile Twitter account. “We will no The People’s Liberation “By presiding over a land-
ple’s military.” on Friday. longer allow this to continue. Army is training for scenarios mark parade for a party-loyal
Mr. Xi also ordered troops U.S. President Donald China could easily solve this that include a conflict over the PLA growing leaner and
to obey the Communist Party Trump has warned repeatedly problem!” disputed South China Sea and meaner by his orders, Xi
leadership, saying: “Wherever that he is weighing military China’s parade would have a blockade of China’s oil sup- shows that he is large and in
the party points, march there.” action to halt North Korea’s been planned months in ad- plies through the Indian charge in the run-up to the
It is the first time a parade nuclear program, and in recent vance, analysts said, and Ocean. 19th Congress,” said Andrew
has been held to mark the an- weeks has become increas- wasn’t a direct response to Mr. Xi has also sought to Erickson, an expert on China’s
niversary since 1949, accord- ingly critical of China, accus- Pyongyang or Washington, but assert his authority over the military at the U.S. Naval War
ing to state media, and is the ing it of failing to rein in it demonstrated Mr. Xi’s ef- PLA through an anticorrup- College. “Debuting publicly
latest in a series of moves Pyongyang. The U.S. Air Force forts to build a military that tion campaign that ensnared such a powerful, penetrating
that analysts say are designed flew two B-1B bombers over can respond to external chal- several current and retired deterrent weapon as the
to boost Mr. Xi’s political the Korean Peninsula on Sat- lenges—including on the Ko- generals, and by assuming the DF-31AG ICBM seeks to dem-
standing in the run-up to a urday in response to North rean Peninsula. new title of “commander-in- onstrate that China commands
shuffle of the party leadership Korea’s latest missile test. Last year, the Chinese chief” last year. heightened respect abroad
this year. “I am very disappointed in leader launched sweeping mil- In June, he inspected PLA even as it maintains order at
The parade was held amid China. Our foolish past leaders itary reforms—including cut- troops stationed in Hong home—both central compo-
escalating military tensions in have allowed them to make ting 300,000 troops—that are Kong in another move to nents of Xi’s China Dream.”
warned on Saturday that the Moon leads a more-dovish further than 800 kilometers
deployment of further Thaad administration than the con- (about 500 miles), part of an
components “gravely damages servative government in To- effort to stem a regional arms
strategic balance in the region kyo, North Korea’s increasing race.
and harms the national secu- threat to American cities ap- The moves to bolster
rity interests of countries in pears to have tipped the po- South Korea’s military capa-
the area, including China’s.” litical calculus in favor of bilities come even as Mr.
On Sunday, the U.S. Defense seeking more domestic mili- Moon’s administration con-
Department said it had con- tary muscle—particularly as tinues to leave the door open
ducted a successful Thaad concerns rise that the U.S. for more dialogue with North
YONHAP/EUROPEAN PRESSPHOTO AGENCY
missile-interception test over may put defending its terri- Korea.
the Pacific Ocean. tory ahead of the interests of Just days after the North’s
“A medium-range target its allies. first ICBM launch earlier this
ballistic missile (MRBM) was Just hours after North Ko- month, Mr. Moon used a high-
air-launched by a U.S. Air rea’s most-recent launch, at profile speech in Berlin to
Force C-17” on Sunday, a Pen- about 3 a.m. Saturday in propose a meeting with North
tagon news release said. Seoul, Mr. Moon instructed Korean leader Kim Jong
“The Thaad weapon system his top security aide to call Un—a meeting that he said
located at Pacific Spaceport his U.S. counterpart, Lt. Gen. could happen “at any time, at
Complex Alaska in Kodiak, H.R. McMaster, to seek the any place,” if the conditions
Alaska, detected, tracked and revision of an agreement that were right.
A mobile air-defense radar station at a base southwest of Seoul intercepted the target,” it said. caps the size and range of He reached out again to
North Korea’s latest test South Korea’s missiles. The North Korea two weeks ago,
fice on concerns that it had nental U.S.—Mr. Moon’s launch could add momentum U.S. assented to the request proposing reunions of fami-
been pushed through by his pursuit of beefed-up military to Japan’s push for greater to revise the pact, the spokes- lies separated by the Korean
unpopular predecessor with- capacities reflects broader re- missile-defense capabilities of man for South Korea’s presi- War, while also urging North
out proper public consulta- gional concerns about Wash- its own, including a possible dential Blue House said. Korea to work with the South
tion. ington’s commitment to de- Thaad battery or the Aegis Under the bilateral agree- ahead of the Winter Olympics
While Thaad is meant to fending its regional allies as Ashore missile-defense sys- ment with Washington, Seoul next year, which South Korea
defend the Korean Peninsula the U.S. homeland comes un- tem, which would enhance its is blocked from putting pay- will host.
from shorter-range missiles— der threat. ability to defend itself against loads larger than 500 kilo- North Korea hasn’t re-
not an ICBM that would be ca- China, which strongly op- a North Korean attack. grams (about half a ton) on sponded to any of Mr. Moon’s
pable of reaching the conti- poses the Thaad deployment, Even in Seoul, where Mr. any missiles capable of flying invitations.
WORLD WATCH
Putin Says
joys a majority, has been called
for Tuesday. It is expected to
confirm Shahid Khaqan Abbasi
Russia to
as the interim prime minister.
Shehbaz Sharif, 65 years old,
up to now had been the junior
Expel 755
political partner to his brother,
serving as chief minister of Pun-
jab province.
Americans
“Public welfare and the coun- BY THOMAS GROVE
try’s development is our
agenda,” Shehbaz Sharif said MOSCOW—President
Sunday. “We need to take Paki- Vladimir Putin said 755 U.S.
stan forward with strength diplomats would be forced to
through unity, not disorder.” leave Russia by September in
—Saeed Shah retaliation for impending U.S.
sanctions against Moscow.
SOMALIA In an interview with state
television, Mr. Putin said the
Islamist Fighters Kill U.S. diplomatic presence in
FEISAL OMAR/REUTERS
Soldiers in Ambush Russia would be cut by more
than half, following the pas-
Fighters with the al-Sha- sage of new sanctions legisla-
baab extremist group am- tion by Congress that has fur-
bushed an African Union con- ther frayed ties between
voy in southern Somalia and Moscow and Washington.
killed at least eight soldiers on A Somali soldier secured the site of a blast in Mogadishu, the country’s capital, on Sunday. “We had hoped that the
Sunday, a Somali military offi- situation would somehow
cer said. The attack came PHILIPPINES rants to Ozamiz Mayor Reynaldo “We enforce the law to protect change,” Mr. Putin said on
hours after a car bomb in the Parojinog Sr. to search his houses the people who want peace in state television.
capital killed at least five peo- Mayor Tied to Drugs, for the suspected presence of un- this country,” he said. “How can “But judging by every-
ple, most of them civilians, 14 Others Die in Raids licensed firearms when gunmen we enforce the law if ... we’re thing, if it changes, it won’t
shattering a month of relative opened fire on the police, sparking scared of the drug lords? That happen fast,” he said.
calm in Mogadishu. Police in the southern part of clashes that killed the mayor and cannot be, they should be afraid Mr. Putin said slightly
The al Qaeda-linked al-Sha- the country said they fatally shot at least 14 other people, Ozamiz of people who do good for all.” more than 1,000 U.S. diplo-
baab fighters attacked the con- 15 people, including a city mayor police chief Jovie Espenido said. At least five people, including matic and technical staff cur-
voy near Bulo-Marer town in who was among the politicians “He’s a high-value target on ille- Mr. Parojinog’s daughter, who rently work in Russia.
Lower Shabelle region, Col. President Rodrigo Duterte publicly gal drugs,” said Mr. Espenido, who serves as vice mayor of Ozamiz, His remarks offered high-
Muhyadin Yasin said. linked to illegal drugs, in the oversaw the simultaneous, post- were arrested during the raids. level confirmation of a Rus-
The extremist group claimed bloodiest assault of Mr. Duterte’s midnight raids on the mayor’s resi- Mr. Parojinog had denied any links sian move to retaliate against
that the attack killed 39 soldiers. antidrug crackdown. dence and three other houses, to illegal drugs. the U.S. for sanctions it
—Associated Press Officers were to serve war- said at a news conference. —Associated Press passed last week.
A4 | Monday, July 31, 2017
U.S. Targets
Oil Industry
In Venezuela
Government weighs
new sanctions, but
ban on oil imports
is off table for now
BY CHRISTOPHER M. MATTHEWS
AND JOSÉ DE CÓRDOBA
U.S. government officials
are considering stepping up
sanctions against Venezuela
by targeting its vital oil indus-
try, although an embargo
against Venezuelan crude oil
imports into the U.S. is off the
table for now, people familiar
with the deliberations say.
The measures could be an-
nounced as early as Monday,
the people say, after a vote
Sunday pushed by embattled
Venezuelan President Nicolás
Maduro to elect a special as-
sembly that will rewrite the
constitution. Venezuela’s op-
position is boycotting the
vote, fearing the assembly
could dissolve the opposition-
controlled congress or post-
pone elections.
The U.S. Treasury Depart-
ment didn’t immediately re-
spond to a request for com-
ment on the potential
sanctions. The U.S. govern-
ment levied sanctions on 13
high-ranking Venezuelan offi-
cials Wednesday for alleged
corruption, human-rights vio-
lations and undermining de-
mocracy in the South Ameri-
can country. While more
sanctions against other indi-
viduals are also under consid-
eration, on Friday, Vice Presi-
dent Mike Pence vowed
“strong and swift economic ac-
tions” if the vote goes ahead.
The Venezuelan government
has responded defiantly, dis-
missing sanctions and warn-
ings from Washington. Mr. Ma-
duro and his top aides have
insisted the government would
notch a triumph in Sunday’s
vote.
Observers say broader sanc-
tions against Venezuela could
accelerate an economic melt-
Inflation and Poverty Tear at Syria AFGHAN
BY RAJA ABDULRAHIM
After the Syrian government
recently introduced a 2,000-
pound bank note—the largest
denomination it has ever is-
sued—a satirical obituary circu-
lated online for a currency that
has lost 90% of its value over
more than six years of war.
“The Central Bank of Syria
is accepting condolences,” it
announced.
The introduction of the
note, valued at less than $4,
comes as Syria’s economy is in
tatters, grappling with infla-
tion, lost production and pov-
erty that could threaten stabil-
ity even in regime-held areas.
Syria’s consumer-price in-
dex soared more than 500%
between 2010 and 2016, ac-
cording to Syrian economists
and local news reports that
cited the government’s Central
Bureau of Statistics.
Incomes haven’t kept pace.
The average civil servant’s sal-
ary was worth at least $200 a
month before the conflict;
now, even with raises, it is
worth less than $60, because
of the falling currency.
The World Bank estimates
that Syria’s gross domestic
product has fallen by more
than half this decade. The
sharp fall in economic activity
has cost at least two million
people their jobs and about
60% of Syrians are unable to
buy food and essential nonfood
items, according to the Bank.
“It’s going to be a pretty
nightmarish economic situa-
tion for a long time to come,”
said David Butter, an economic
analyst at U.K.-based think
tank Chatham House.
Syria has been divided, in
effect, by the fighting. The re-
gime of President Bashar al-
Assad, antigovernment rebels,
U.S.-backed Kurds and the mil-
itant group Islamic State all
control parts of the country.
But the faltering economy
spans those areas, and the war
has altered consumer behav-
ior. Subsidies for fuel in gov-
ernment-held areas have
down and push the cash-
strapped country to the brink
of default on its debts.
The toughest of possible
sanctions—an embargo on im-
ports of Venezuelan oil—isn’t
on the table right now, these
people said, but could be con-
sidered later. Options being
considered include a ban on
sales of U.S. oil and refined
products to Venezuela, and fi-
nancial restrictions on the
country’s state oil firm, they
said. Those measures are seen
as potentially crippling for the
Venezuelan government with-
out being too disruptive for the
U.S. economy. No final decision
has been made, the people said.
“Even limited new US-im-
posed sanctions or discussions
of broader sanctions could be a
catalyst for Venezuela default-
ing on its upcoming debt pay-
ments,” Barclays said in a recent
note to investors. Venezuela’s
oil industry supplies 95% of the
country’s hard currency.
“The dollars aren’t there to
pay for the food and medicine
Venezuelans need,” said Moisés
Naím, a former trade and econ-
omy minister in Venezuela. He
fears broad economic sanctions
could trigger a humanitarian
crisis.
U.S. refiners, including
Valero Energy Corp., Phillips 66
and Chevron Corp., have lob-
bied strongly against a ban on
Venezuelan oil imports, be-
cause refiners on the U.S. Gulf
Coast rely on Venezuela for
heavier grades of crude oil to
convert into fuel.
Venezuela sells about
750,000 barrels a day to the
U.S., mostly to Gulf Coast re-
finers.
The most likely option, say
the people familiar with U.S.
discussions, is a ban on exports
to Venezuela of refined petro-
leum products and lighter
crude grades that Venezuela
mixes with the heavy crude it
then sells to the U.S. That could
force Venezuela to import light
crude at higher prices from
distant places like Algeria or
The Cost of War
The Syrian economy has suffered during the more than six-year conflict in the country, as
prices have climbed, oil production has fallen and government finances have weakened.
Annual inflation, as measured
by percentage change in Syria's
consumer-price index
100%
80
60
40
20
0 0
2010 ’11 ’12 ’13 ’14 ’15 ’16
Exchange rate, Syrian
pounds per dollar
500
400
300
200
100
0 160%
2010 ’11 ’12 ’13 ’14 ’15
Source: World Bank
plummeted, leading more mid-
dle-class Syrians, even women,
to ride bicycles—rarely seen
before the war. Panhandlers—
many of them children—crowd
the streets.
In some parts of the coun-
try, the marriage dowry, paid
to the bride as a gift, has al-
most disappeared.
“The fabric of society has
been destroyed,” said Jihad
Yazigi, Beirut-based editor of
an economic trade publication,
The Syria Report.
Markets for used goods,
HK JP KO ML SI
WORLD NEWS
Security forces faced off against demonstrators as violent opposition to Sunday’s vote to revise the constitution surged.
Maduro Holds Vote
On New Assembly
Election comes amid protests
as opposition vows boycott
CARACAS, Venezuela—
Wearing the bright red of the
ruling party, President Nicolás
Maduro cast his ballot Sunday
in a controversial national vote
he is holding to elect a potent
new assembly that will redraft
the constitution and, opponents
say, stamp out democracy in
this tumultuous country.
The new constitution will
Nigeria, and deepen its steady
oil output decline, says Fran-
cisco Monaldi, a Venezuela ex-
pert at Rice University.
Another option is to ban
state oil company Petróleos de
Venezuela from using the U.S.
banking system and U.S. cur-
rency, the people say. Rep.
Ileana Ros-Lehtinen, (R., Fla.),
a senior Republican on the
Oil production in
government-controlled areas
400,000 barrels a day
350,000
300,000
250,000
200,000
150,000
100,000
50,000
2010 ’11 ’12 ’13 ’14 ’15 ’16
Gross public debt as a
percentage of GDP
0 10%
20
40
60
80
100
120
140
’16 2010 ’11 ’12 ’13 ’14
which many Syrians once
viewed with a measure of
shame, have prospered.
“There’s no security in Syria
so why buy new if it could all
be destroyed?” said Khalid al-
Najjar, who owns a used-car
dealership in rebel-held terri-
tory in northwest Syria.
The regime banned the use
of foreign currencies in 2013,
but that hasn’t stopped people
from doing business in dollars
because of the volatility of the
Syrian pound. Some landlords
demand rent in dollars. Even
IN UK FR MN PR
permit the government to bring
order to Venezuela, convulsed
by unrest and a devastating
economic crisis, Mr. Maduro
said. “I wanted to be the first to
vote for peace, for sovereignty
and the independence of Vene-
zuela,” the president said.
Mr. Maduro’s adversaries,
who have led four months of
protests that have cost at least
113 lives, say that the assembly
the president wants would lead
to the dissolution of the opposi-
tion-controlled congress and an
end to the few democratic levers
still available to them. Mr. Ma-
duro and other aides have
warned that, with the assembly,
House Foreign Affairs Commit-
tee, urged the Trump adminis-
tration on Sunday to levy
sanctions against Venezuela’s
state oil company and prevent
Mr. Maduro’s government
from being able to tap the U.S.
financial system as an eco-
nomic lifeline.
Such sanctions would stop
U.S. firms from buying Venezu-
Fiscal balance as a
percentage of GDP
30%
20
EXPENDITURES REVENUE
10
0
10
20
30
40
2010 ’11 ’12 ’13 ’14 ’15 ’16
Annual percentage
change in GDP
Non-oil
Overall
0
Oil
–10
–20
–30
–40
–50
–60
–70
–80
’15 2010 ’11 ’12 ’13 ’14
THE WALL STREET JOURNAL.
in the heart of the regime’s se-
curity apparatus, bribes to re-
lease people detained by the
regime are sometimes paid in
U.S. dollars, families who have
paid the bribes said.
Even government support-
ers have voiced concern. Ali
al-Sattouf, a lawmaker from
Aleppo, which the regime re-
captured in December, warned
in June of “the possibility of a
group or groups of citizens in
this area or another protesting
over hunger or fear of hunger,”
pro-regime media reported.
THE WALL STREET JOURNAL.
they would arrest key opponents
and dismiss Attorney General
Luisa Ortega, a former govern-
ment stalwart who recently
broke with the government.
“There is a privileged group
that wants to do away with the
constitution and the country,”
said Julio Borges, president of
the congress.
On Sunday, pro-government
voters gathered at polling sta-
tions where they were asked to
elect 545 delegates for the con-
stituent assembly from some
6,000 handpicked ruling party
officials and allies. The govern-
ment’s state television appara-
tus covered speeches by gov-
elan oil and make it difficult for
any oil trader or firm to do so,
pushing Venezuela into default,
said Russ Dallen, a managing
partner at investment bank Ca-
racas Capital.
The U.S. could also ban U.S.
companies from investing in
Venezuela’s energy sector,
these people said.
U.S. refiners have warned an
Continued from Page One
avoid setting deadlines for
pulling out troops, but they are
wary of embracing an open-
ended commitment that could
pull more U.S. forces back into
a deadly, 16-year-old conflict.
With discussions bogged
down, administration officials
are taking a new look at pull-
ing out most U.S. forces and
focusing on a more limited
counterterrorism strategy that
might allow the U.S. to reduce
its military presence by relying
more on drone strikes and spe-
cial forces to target extremists.
“It is becoming clearer and
clearer to people that those
Deficit
are the options: go forward
with something like the strat-
egy we have developed, or
withdraw,” said the senior ad-
ministration official, referring
to the modest plan.
But the idea is anathema to
U.S. military leaders who have
argued that the U.S. needs to
send more troops to halt Tali-
ban gains on the battlefield.
“At best, that is a very low
minority view,” one senior U.S.
military official said of with-
drawing U.S. troops. “It’s flawed
because it doesn’t address the
primary concerns of getting to
a point where Afghanistan is
able to secure itself.”
In many ways, the Trump
administration finds itself
wrestling with the same issues
that dogged the previous pres-
’15 ’16 ident. Early in his first term,
President Barack Obama ap-
proved a troop surge that
raised the U.S. military pres-
ence in Afghanistan to
100,000. At the time, Vice
President Joe Biden argued for
a limited U.S. military pres-
ence that would rely more on
drone strikes and small num-
bers of special forces meant to
prevent Afghanistan from be-
coming a planning hub for at-
tacks against the U.S.
The Biden idea was rejected
as the U.S. opted to keep advis-
ing and training Afghan forces.
There now are more than
8,400 U.S. troops in Afghani-
stan, where Afghan forces are
MARCO BELLO/REUTERS
ernment officials and
interviewed voters pleased they
were voting for an assembly
that they said would bring calm.
The government is hoping
that millions of voters support
the election and lend the process
more legitimacy than the opposi-
tion, which organized an unau-
thorized referendum on July 16.
Academics that oversaw the vote
said more than 7.5 million voted
against the constituent assembly.
Top Maduro administration aides
have publicly warned state work-
ers that the government will keep
tabs on whether they voted.
—Juan Forero
and Ryan Dube
embargo would be disastrous.
In a letter Thursday to Presi-
dent Donald Trump, the indus-
try’s top trade group said lim-
its on U.S. imports of
Venezuelan crude would desta-
bilize oil markets and drive up
the cost of gasoline for U.S.
consumers.
—Ian Talley
contributed to this article.
struggling to keep the Taliban
from expanding their control.
Defense Secretary Jim Mat-
tis has acknowledged that the
U.S. is “not winning” and had
predicted that the administra-
tion would have a new policy
in place by mid-July. But a
string of high-level meetings
this month has yet to produce
a consensus. Now, it isn’t clear
when the administration will
agree on a way forward.
The indecision has given
more time for skeptics of a
modest increase, like White
House chief strategist Steve
Bannon, to explore unconven-
tional alternatives. One such
proposal offered by former
Blackwater founder Erik Prince
would rely on contractors in-
stead of U.S. troops to work
with Afghan security forces.
Mr. Prince has briefed key
officials at the White House,
Mr. Mattis, Central Intelli-
gence Agency Director Mike
Pompeo and various lawmak-
ers, including Sen. Bob Corker
(R., Tenn.), according to peo-
ple familiar with the meetings.
“I’m all for continuing to try
to come to a conclusion that is
something that will change the
trajectory there,” said Mr.
Corker, chairman of the Senate
Foreign Relations Committee.
White House interest in Mr.
Prince’s plan was piqued by his
Wall Street Journal op-ed in
May that called for creation of
an American viceroy who
would have expansive power to
push reforms in Afghanistan.
The proposal, seen by The
Wall Street Journal, outlines
ways for the U.S. to quickly re-
place most U.S. troops with
contractors who would help
carry out airstrikes and work
side by side with Afghan
forces across the country.
“The goal is to provide a
clear exit lane and provide a
clear end to the longest war in
U.S. history,” Mr. Prince said
in an interview.
So far, Mr. Prince has yet to
generate enough interest
among key officials, who view
his plan with skepticism. The
ideas have been dismissed by
military officials as impracti-
cal, according to administra-
tion officials.
THE WALL STREET JOURNAL.
Voting Machine Flaw Is Exposed
Hacker demonstrates
vulnerability in
election technology
at security conference
BY ROBERT MCMILLAN
AND BYRON TAU
LAS VEGAS—A touch-screen
voting machine used in a 2014
election in Virginia was hacked
in about 100 minutes by ex-
ploiting a Windows XP flaw
that was more than a decade
old as part of a demonstration
on security vulnerabilities in
election technology.
The hacker was Carsten
Schürmann, an associate pro-
fessor with IT University of Co-
penhagen. He was one of the
computer hackers invited to
the Defcon convention in Las
Vegas to test the security and
integrity of common pieces of
voting technology, many of
which were purchased more
than a decade ago and are rap-
idly becoming obsolete.
Within hours of the doors
opening Friday at the Voting
Machine Hacking Village,
hackers penetrated the Win-
Vote voting machine and
gained access to an electronic
poll book, the kind used to
check in voters at thousands
of polling places across the
country. Microsoft Corp.,
which made the Windows XP
operating system, declined to
comment.
They also penetrated the
hardware and firmware of a
kind of touch-screen voting
machine used in hundreds of
jurisdictions across the coun-
try.
Hackers were invited to “do
the things that if you did on
Election Day, they would arrest
you,” said Matt Blaze, a com-
puter science professor at the
University of Pennsylvania and
election security specialist who
helped organize the event.
Fears have mounted among
U.S. officials over the security
of the voting system following
widespread hacking during the
States Bridge Differences
BY KRIS MAHER
A new bridge connecting
Minnesota and Wisconsin is set
to open Wednesday in a rare
win for cooperation in the of-
ten-contentious realm of cross-
border infrastructure.
For years, environmentalists
and others, most notably for-
mer Vice President Walter Mon-
dale, strongly opposed building
a new bridge over the St. Croix
River. The Mississippi River
tributary is protected by the
Wild and Scenic Rivers Act, a
1968 federal law aimed at pre-
serving 12,734 miles of 208 riv-
ers in the U.S.
But after a decadeslong ef-
fort by state officials to build
consensus—preliminary plan-
ning for a new four-lane bridge
in the region began in the late
1960s—many are now welcom-
ing the opening of the St. Croix
Crossing.
The new bridge, which will
replace a nearby two-lane
bridge built in 1931, is expected
to give an economic boost to lo-
cal communities by rerouting
traffic and cutting out the de-
lays and congestion that have
plagued the old crossing.
“There has been so much
pent-up anxiety and emotion.
Now, there is a sense of relief
that it is finally opening,” said
Bill Rubin, executive director of
the St. Croix Economic Develop-
ment Corporation, in St. Croix
County, Wis.
The nearly milelong crossing,
which will connect the towns of
Oak Park Heights, Minn., just
east of the Twin Cities, and St.
Joseph in rural Wisconsin, is
projected to cost $646 million.
Minnesota will spend about
$367 million, which includes
The St. Croix Crossing is scheduled to open Aug. 2.
Monday, July 31, 2017 | A5
U.S. NEWS
After Fires,
Western
that it was used during Fairfax
County, Va.’s, Aug. 19, 2014,
special election. Attempts to
reach Fairfax County after busi-
States Fear
ness hours Friday were unsuc-
cessful. The county’s Office of
Elections overhauled its voting
Flooding
system in 2014, according to a BY DAN FROSCH
post on the county’s website.
The Defcon organizers, with As wildfires have quieted in
a budget of about $20,000, pur- some parts of the U.S., Western
chased about 30 decommis- states have turned their focus
sioned voting machines, includ- toward another problem this
ing the WinVote, from eBay summer: floods.
Inc., several of which had elec- While heavy rainfall in re-
tion results stored in the com- cent weeks was a welcome re-
puters. spite for the typically parched
To hack the WinVote ma- Southwest, it has also caused
chine, Mr. Schürmann used a deadly and in same cases his-
pair of widely used hacking toric flooding in Arizona and
STEVE MARCUS/REUTERS
tools. First, he connected wire- Utah, while portions of New
lessly with the machine, a rect- Mexico have been under a flash
angular keyboardless computer flood watch.
that is a little larger than a lap- As pockets of rain are ex-
top. Then, taking advantage of pected to continue, state emer-
a flaw in the voting machine’s gency officials say they are
Hackers look over real voting machines at the Defcon convention in Las Vegas on Saturday. Windows XP operating system, keeping a close eye on areas
he gained administrative con- scorched by fires in summers
2016 presidential election. ference a witch hunt. lion to state and local govern- trol of the system. Microsoft past, now barren of vegetation
Last month, Jeanette Man- U.S. officials have said that ments to help them replace ag- released a software patch for and prone to flooding. The
fra, the acting deputy under- no evidence has been uncov- ing mechanical voting this issue in 2003, but it hadn’t wildfires increase the dangers
secretary for cybersecurity and ered that systems involved in machines that were widespread been applied to the voting ma- of flash floods due to the now
communications at Department vote casting or counting were at the time. chine, Mr. Schürmann said. exposed, unfettered land that
of Homeland Security, told the hacked, though no audits or By and large, those govern- That allowed him unfettered speeds runoff and water flow.
Senate Intelligence Committee analyses have yet been per- ments bought touch-screen access to the machine and the A flash flood tore through a
that election-related systems formed on the machines used electronic voting machines that ability to manipulate vote re- portion of Salt Lake City on
such as voter registration data- in last year’s presidential elec- started to come into service in sults, he said. During the inter- Wednesday, flooding several
bases in 21 states were targeted tion. But researchers say that advance of the 2004 presiden- view, he remotely shut down schools, a public library and
last year as part of a Russian tampering with touch-screen tial election. But what was once the voting machine, baffling parts of the transit system. The
government campaign of hack- machines, such as the one Mr. state-of-the-art technology is other conference attendees storm was the equivalent of a
ing and disinformation. In that Schürmann hacked, wouldn’t now antiquated. Many voting who hadn’t realized that he had 200-year event, according to
same hearing, former DHS Sec- be detectable. The WinVote systems run on technology that seized control of the system. Laura Briefer, director of the
retary Jeh Johnson said the machine was decertified and is rarely seen by modern con- Activists for more secure Salt Lake City public utilities
hacking, aimed at boosting not used in last year’s election, sumers and which hasn’t seen a voting are advocating paper department, noting that 2.5
President Donald Trump at the Mr. Schürmann said. security update in years. ballots, which are more resis- inches of rain drenched the area
expense of his Democratic rival “All of these touch-screen While there was a great deal tant to remote tampering and in about 40 minutes.
Hillary Clinton, was directed by machines are unauditable,” said of research done into the secu- technology failures and offer a Arizona has been hit particu-
“Vladimir Putin himself.” Harri Hursti, another one of rity of voting machines a de- way to manually recount. While larly hard by flooding this
According to a January re- the event’s organizers and a cade ago, such as California’s many computerized electronic month. On July 15, 10 people
port from U.S. intelligence specialist in the small field of top-to-bottom review of its voting machines now have pa- died after a flash flood swept
agencies, Russia’s tactics in- election technology security. own voting systems, the pace per backups, few states audit through a popular swimming
cluded infiltrating and leaking “You should have paper ballots of research slowed down after the results. hole in the Tonto National For-
information from party com- and there should be an audit 2008, said Mr. Hursti. “My hope is that there will est, about 90 miles north of
mittees and political strate- process.” The WinVote system hacked be momentum for repairing our Phoenix.
gists, and disseminating After the disputed 2000 at Defcon was likely vulnerable broken voting systems,” said Bill Boyd, spokesman for the
through social media and other presidential election, when a to a wireless attack for years, Barbara Simons, president of Arizona Department of Forestry
outlets negative stories about hand recount of Florida’s paper Mr. Schürmann said. WinVote’s Verified Voting, a nonpartisan, and Fire Management, said two
Mrs. Clinton and positive ones ballots produced weeks of un- manufacturer, Advanced Voting nonprofit advocacy group that wildfires that had charred the
about Mr. Trump. Russia has certainty about the outcome Solutions Inc., is no longer in pushes for paper backups and area this year contributed to
denied the report, and Mr. and criticism of the standards business. random audits in voting tech- the flood, as burned terrain al-
Trump has called the investiga- used to count ballots, a new The display on the WinVote nology. “There is a solution, lowed floodwaters to roll down-
tion into Russia’s alleged inter- law awarded more than $3 bil- machine at Defcon indicated and it’s not rocket science.” hill unobstructed.
60% federal funding; Wisconsin ing $350,000 to restart the
is projected to spend about planning process.
$279 million, with 5% coming The St. Croix Crossing has
from federal funds. States can had its share of disputes. The
choose different funding Minnesota Chapter of the Sierra
sources for projects. Club twice sued to block the
At a time of increased atten- project in federal court. The en-
tion on upgrading the nation’s vironmental group argued that
bridges, roads and other infra- making an exception to the
structure, the St. Croix Crossing Wild and Scenic Rivers Act
stands as an example of how to would set a precedent that
avoid the pitfalls that often be- could put other rivers at risk.
set such projects involving mul- Ultimately congressional
tiple states with competing in- lawmakers from Minnesota and
terests. Wisconsin sponsored a bill to
“Bridge projects in particular exempt the project. President
have some of the toughest Barack Obama signed it in 2012,
times moving from blueprint to paving the way for construction
final construction,” said Adie to begin a year later.
Tomer, a fellow at the Brook- “This is going to happen. We
ings Institution who focuses on don’t like it, but that’s a fact,”
infrastructure policy. Mathews Hollinshead, the Si-
Funding challenges across erra Club chapter’s conserva-
states and differing voter prior- tion chair, said of the bridge’s
ities often undermine projects, opening this week.
he said. Despite the opposition, offi-
But it isn’t just bridges. Min- cials in Minnesota and Wiscon-
nesota is fighting with North sin earned the support of 28
Dakota over the location of key citizen and other groups and
parts of a major project to di- leveraged their past coopera-
vert floodwaters from the Red tion on other bridges joining
River of the North, around the two states. In this case,
Fargo. Disagreements between Minnesota took the lead on the
Kentucky and Ohio have long bridge project, which was the
delayed repairs and upgrades to largest in the state’s history and
the 53-year-old Brent Spence required highway work as well.
Bridge, one of about 84,000 U.S. “We work together all the
bridges that the Federal High- time because we have a lot of
way Administration considers border bridges,” said Diana
functionally obsolete. Maas, a spokeswoman for the
Four years ago, Washington
state lawmakers withdrew
Wisconsin Department of
Transportation.
The Finest Hour
funding from a proposal that The new bridge, built using French Skeleton Clock
was being developed in con- a slim design with low towers
junction with Oregon to build a to reduce its visual and environ- Technical brilliance. Exceptional precision. Exquisite artistry.
new bridge connecting Vancou- mental impact, will help ease A horological masterpiece of precision and design, this
ver and Portland, to replace the congestion in Stillwater, Minn., incredible skeleton regulator clock was almost certainly
Columbia River Interstate a popular tourist destination
crafted by Jean-Antoine Lépine, one of the most gifted
Bridge, which first opened in and site of the 1931 Stillwater
1917. In May, Washington Gov. Lift Bridge. French clock makers of his age. Featuring a rare and highly
Jay Inslee signed a bill allocat- Currently, 18,000 vehicles a sophisticated “coupe perdu” or “lost beat” escapement, this
day travel over the two-lane clock is one of the most accurate ever made. Its remarkable
crossing. Raising the bridge for inverted Y frame also sets it apart as one of the most complex
boat traffic causes frequent de-
timepieces of its kind. Circa 1820. 215/8”h. #30-6235
lays, and crash rates on both
sides of the old bridge are
MINNESOTA DEPARTMENT OF TRANSPORTATION
higher than state averages for
similar roads.
Stillwater business owners
see a coming business boom
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and the old bridge is open to
only pedestrians and bicycles. 630 Royal Street, New Orleans, LA • 504-881-1531 • 877-677-2801 • ws@rauantiques.com • rauantiques.com
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of the Wedge & Wheel cheese Backed by our unprecedented 125% Guarantee, we stand behind each and every piece.
shop. “But we’re going to have
a much more positive space
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A6 | Monday, July 31, 2017
OPEC
Continued from Page One
museum and a picturesque
evening cruise on the Neva
River, where ministers donned
matching hoodies bearing the
logo of the city’s soccer team,
FC Zenit.
But during the weekend,
Saudi Arabia’s energy minister,
Khalid al-Falih, and other oil
officials holed up in a hotel
conference room at the Four
Seasons calling other OPEC
ministers—including those in
Iraq and the United Arab
Emirates—demanding to know
why they weren’t cutting pro-
duction as much as promised,
according to people familiar
with the matter.
“Some have underper-
formed. We have talked to
them,” Mr. Falih told report-
ers, adding he didn’t “mince
words.”
Iraq denied it wasn’t meet-
ing targets and said OPEC was
getting bad information.
OPEC has been under pres-
sure from U.S. shale produc-
ers, who since about 2008
have helped to nearly double
U.S. oil production.
The output has stolen mar-
ket share from the cartel’s
members and pushed prices
lower. OPEC’s share of the
global oil market has shrunk
to 40% today from 55% in the
early 1970s, when its embargo
on sales to the West quadru-
pled oil prices in six months.
The dynamic working
against OPEC is that, collec-
tively, its members need the
highest oil prices of any indus-
try player—more than compa-
nies such as Exxon Mobil
Corp., Royal Dutch Shell PLC
and most U.S. shale producers,
according to Goldman Sachs.
For decades, OPEC was the
low-cost producer of oil. Dur-
ing the boom years of 2011
through 2014, OPEC members,
which largely fund national
spending with oil revenue,
could balance their budgets
with oil prices $10 to $40 a
barrel less than most oil com-
panies needed to fund their
spending and pay dividends.
Today, OPEC needs $10 to $20
a barrel more than Big Oil
and U.S. exploration and pro-
duction outfits, the invest-
ment bank said in a report to
clients.
OPEC members once drew
their power from the giant re-
serves of what is known as
“easy oil”—conventional crude
that costs as little as $3 per
barrel to pump. That cost
guaranteed both fat profit
when prices were high and the
ability to hunker down when
the market tanked.
Several years of $100-a-bar-
rel oil prices lasting until 2014
coincided with big military, se-
curity and domestic spending
to pacify restive populations
during the Arab Spring, hold
back the tide of Islamic State
and influence the Syrian civil
war. Those spending obliga-
tions meant OPEC was funda-
mentally unprepared for the
oil-price crash that followed.
The U.A.E. spends only $12
to pump a barrel of oil but
needs oil to sell at $67 to
cover its government expendi-
tures, according to the Inter-
national Monetary Fund. Its
national budget has quadru-
pled to over $114 billion over
the past 15 years.
The social spending helps
regular Emiratis with housing
costs, water bills and cheap
electricity—subsidies that the
U.A.E. government has been
unwilling to significantly cut
for fear of street protests.
FLOWER
Continued from Page One
sells lavender in sachets, es-
sential oils and bath salts. It
sells culinary lavender for use
in baking and tea, and lavender
pillow mist that, according to
the farm’s website, will “trans-
port you to our fields” and
“bring the spa home to you.”
To cope with the crowds
and soothe cranky neighbors,
the farm began charging ad-
mission when the lavender
bloomed ($8 on weekends, $5
during the week), prohibited
tour buses, trucked in portable
toilets (stocked with lavender-
scented wipes) and—at the
town’s request—removed
more than an acre of lavender
this year to add about 100
parking spots. The farm has
made money off admissions,
offset by expenses to accom-
modate visitors.
There is no doubt that lav-
ender-peeping, here and else-
where, has become a bona fide
Producers Under Pressure
OPEC has lost market share as shale drillers expand U.S. output. The cartel members need higher prices per barrel to cover national budgets
swollen with new social, security and military spending.
World oil production
100 million barrels a day
75
50
25
0 0
2008 ’09 ’10 ’11
Break-even prices**
Price per barrel needed by OPEC members to balance national budgets.
0
*3.75 riyal = $1 at the current exchange rate **Figures for Equatorial Guinea not available
Sources: International Energy Agency (production); Saudi Arabian Ministry of Finance (revenue, spending);
Fitch, Highmark Capital, International Monetary Fund (breakevens)
The Persian Gulf country
also has major military com-
mitments, spending about $23
billion a year on defense—
more than conflict-heavy
countries like Israel and Iraq—
as it helps fight wars in Syria
and Yemen.
The U.A.E. is among OPEC’s
worst offenders in pumping
too much oil. It has cut only
about half the amount it
promised, according to the In-
ternational Energy Agency,
which advises governments
and companies about energy
trends.
A U.A.E. official said the
country’s oil production is tied
up in joint ventures with for-
eign oil companies that are
hard to change, making it dif-
ficult to cut output. The coun-
try’s officials have said they
plan to cut more oil produc-
tion and recently announced
limits on their oil exports.
In a move that could put
pressure on the U.A.E., OPEC
and Russia are planning a
meeting of midlevel officials in
Abu Dhabi on Aug. 7, the cartel
said, “to assess how confor-
mity levels can be improved.”
Overall, OPEC on Nov. 30
agreed to cut production by
1.2 million barrels a day, a deal
that took almost a year to ne-
gotiate and raised expecta-
tions for an oil-market rally.
Instead, member exports in
June were 120,000 barrels a
day lower than October, ac-
cording to Kpler, a firm that
OPEC ministers last week in St. Petersburg. Clockwise from bottom left: Kuwait’s Issam Almarzooq,
Secretary General Mohammad Barkindo, Saudi Arabia’s Khalid al-Falih and Russia’s Alexander Novak.
thing. One obvious question
has proven more difficult to
answer: Why?
Serge Rozenbaum, who said
he did nothing to cultivate his
crop’s newfound fan base,
bought Lavender by the Bay in
2002 with one goal—to grow
lavender, and nothing else. He
said he first fell in love with lav-
ender when, as a child, he met a
man on a donkey selling it in a
market in his native Paris.
While driving his golf cart
around his fields this summer,
the 66-year-old pointed to his
beehives (painted lavender),
shipping containers (painted
lavender) and Adirondack
chairs (also lavender). He
plucked sprigs of lavender
from his meticulous fields,
rubbing them between his fin-
gers and describing their “fin-
ish” as if he were a sommelier.
“I’m French,” said Mr.
Rozenbaum, who was wearing
a lavender polo. “I don’t like
mediocrity.”
In France, lavender farms
are a popular tourist attrac-
tion. That, at least to some ex-
IN DEPTH
Other
Russia
Canada
U.S.
OPEC
’12 ’13 ’14 ’15 ’16 ’17
Kuwait Qatar Algeria U.A.E. Ecuador
$49.10 $52.90 $64.70 $67 $79.70
Iran Iraq Gabon
$51.30 $54.30 $66
Friday’s close: $52.63 a barrel
tracks tanker movements to
measure oil exports.
“OPEC will have lot of diffi-
culties to respect its commit-
ments because of budgetary
difficulties faced by some its
member countries,” said Chakib
Khelil, the former oil minister
of OPEC member Algeria.
Ecuador’s oil minister, Car-
los Perez, went on state televi-
sion this month to say the tiny
producer was no longer stick-
ing with its production
pledges, “because of the needs
that the country has.”
Iraq faces a budget squeeze
from its war with Islamic
State. It pledged to cut over
200,000 barrels a day but has
cut less than half that amount
on average through June, ac-
cording to the IEA.
“Completely untrue and
groundless,” Iraq’s Oil Minister
Jabbar al-Luaiby said of the
overproduction accusation.
“Iraq is in full compliance with
the OPEC declaration.”
In Saudi Arabia, which pro-
duces 30% of OPEC’s output,
oil revenue has fallen 60%
since the mid-2014 peak in oil
prices. In that time period
government spending declined
only 18%, according to Gold-
man Sachs.
Instead of cutting spending,
the Saudis have drawn down
$246 billion of their foreign
reserves and issued a $17 bil-
lion sovereign bond.
“We calculate, and a lot of
people we know calculate,
tent, seems to explain why
some of the new arrivals are
making pilgrimages here. “It’s
a substitute for Provence,”
said Johnny Guan, 39 years
old, who was posing for selfies
with his girlfriend.
One aspect of the lavender
craze, according to the farm-
ers and locals, is that the ma-
jority of the new visitors are
of Asian descent. On a recent
day at the farm, many visitors
were born in a swath of Asian
countries: China, Vietnam,
Japan and Korea. Many first-
and second-generation Asian-
Americans, and young Asian
students studying in the U.S.,
also trek to the farm, about
100 miles from New York City.
Some carry parasols and
wear white or purple dresses,
spending hours shooting pho-
tos in the fields. Others bring
young children, or are accom-
panied by small dogs. Almost
everybody comes with a cell-
phone or camera.
Hoang Dinh, 25, who lives
in Manhattan, said he was
lured out to East Marion in
THE WALL STREET JOURNAL.
ment, with output averaging
more than one million barrels
a day less this year compared
with October 2016, helped by
larger-than-agreed cuts by
Saudi government spending vs. revenue Saudi Arabia.
800 billion Saudi riyal* But monthly figures show
output recently has moved
higher, the IEA and other ob-
Spending
600 servers said.
Revenue
OPEC has a long history of
fractious relations among its
400 members, a collection of re-
gimes from the Middle East,
Africa and South America.
200 Even the cartel’s most pow-
erful moment, the 1973 oil em-
bargo, divided the group, with
only its Arab members taking
part in cutting off crude to
2002 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 Western nations that sup-
ported Israel.
In 1986, Saudi Arabia was
so upset about OPEC members
flouting production agree-
Saudi Arabia Venezuela Nigeria
ments that unleashed a flood
$83.80 $117.50 $139
of oil that sank prices long-
term, a period known as the
Libya Angola
$150 “Lost Decade.”
When oil prices began fall-
$71.30 $82
ing in July 2014, then-Saudi
oil minister Ali al-Naimi said
OPEC no longer had the
power—or will—to cut produc-
tion and save the market. U.S.
THE WALL STREET JOURNAL. shale producers were too pow-
erful.
there’s about three more years close to the kingdom’s oil min- But Mr. Naimi said he be-
of this they could deal with, istry. The value of the IPO lieved OPEC members’ still
with regard to drawdowns in could depend in part of the had essential advantages, such
the sovereign funds—and then price of oil, which the Saudis as the ability to produce at ex-
they’ve got a very severe want to rise to $60 a barrel, tremely low cost.
problem,” said Tim Dove, chief the people said. Mr. Naimi was replaced in
executive of Fort Worth-based Mr. Falih denied the cuts May 2016 by Mr. Falih, a West-
Pioneer Natural Resources Co., are designed to lift prices for ern-educated oilman with long
a shale driller. the IPO. experience at Aramco. Mr. Fa-
Saudi officials said they can Saudi and other OPEC offi- lih has said Saudi Arabia and
withstand low prices for lon- cials once believed U.S. shale even OPEC couldn’t make a
ger than any other country. producers needed oil prices of difference by cutting produc-
The Saudis haven’t dialed $80 a barrel or higher to func- tion on its own.
back increases in defense and tion. The U.S. financial system He reached out to Alexan-
infrastructure spending, in- and bankruptcy process der Novak, energy minister in
cluding a $23 billion Riyadh helped ensure that oil fields Russia, where low oil prices
metro system expected to be continued to pump, even were creating a budget crunch
completed in 2019. Defense though more than 250 North for President Vladimir Putin
and security spending jumped American oil drillers and ser- just as he was escalating his
50% between 2010 and 2013, vice companies have gone bust country’s military support of
and defense spending grew during the oil slump, accord- Syrian President Bashar al-
again last year to $50 billion ing to Haynes and Boone, a Assad.
amid involvement in wars in law firm specializing in the “We both had an extended
Yemen and Syria. energy industry. crisis,” Mr. Novak said in an
The kingdom is working on The continued production interview. “We both wanted
plans for an IPO of part of its helped pay down debt while results.”
state-owned oil firm, Saudi companies reorganized. When OPEC’s agreement last year
Arabian Oil Co., known as the producers emerged from with Russia and other big pro-
Aramco. The listing, expected bankruptcy, new owners had ducers gave the cartel a coali-
to be the largest-ever public of- the old debt load wiped clean. tion that controlled about 55%
fering, is expected to fetch tens With a clean slate, plumbing of global oil output, its earlier
of billions of dollars that once expensive shale fields be- level of dominance. Knowing
Crown Prince Mohammed bin came more economical. Other that OPEC members cheated
Salman has said he plans to put companies on the ropes sold on production pledges in the
in a sovereign-wealth fund to to stronger rivals that can past, the cartel created a com-
invest in new industries, with manage the fields more effec- pliance committee to monitor
the goal of reducing the coun- tively or issued new shares to production and scold members
try’s reliance on oil revenue. raise capital. who pumped more.
The impending IPO was the On Friday, big U.S. oil firms In April, Mr. Falih was up-
impetus behind Saudi Arabia’s reported some of their stron- set after reading a news arti-
decision late last year to re- gest quarterly profits since the cle about Iraq pumping over
verse itself and push OPEC to price crash. its limit and stealing market
cut production and raise oil There are signs that OPEC’s share from Saudi Arabia. The
prices, according to people goal of reducing oil in storage, kingdom had been cutting
a proxy for the global oil glut, more than it pledged to make
is slowly starting to happen. up for reported laggards like
U.S. inventories have fallen in Iraq.
14 of the past 16 weeks. “See, they are laughing at
Lower imports into the U.S. us,” Mr. Falih wrote in a
have played a role, with Saudi WhatsApp message to a group
Arabia intentionally lowering of peers, according to people
its shipments. Imports from familiar with the exchange.
Saudi Arabia to the U.S. are at In Iraq, there is a strong
a two-year low, down by about feeling that the country should
a third since January, data- be exempt from cutting pro-
tracking firm ClipperData said duction because of the war
Friday. against Islamic State, said
Russia, the world’s largest Luay al-Khatteeb, an adviser
crude producer but not an to the Iraqi parliament.
OPEC member, has gradually He pointed to an issue of
cut output by about 300,000 lingering resentment in OPEC:
barrels a day since the agree- “The Saudis are only cutting
KOVALEV PETER/TASS/ZUMA PRESS
ment, the IEA said. because they want better
Oil prices have risen over prices for the Aramco IPO,” he
9% since last week’s meeting said, a notion Mr. Falih denied.
in St. Petersburg, when Saudi OPEC members said they
Arabia said it would go fur- are trying now to negotiate a
ther than limiting its produc- way to quit the production
tion by also placing a cap on cuts early next year without
its exports. sending the market into an-
Officially, OPEC said the other downturn.
cartel as a whole is complying —Nathan Hodge
with its production-cut agree- contributed to this article.
part by stories he had heard of
the lavender fields in France.
But he also came with another
mission, he said: “Instagram
bers of visitors to obscure
places—shows that lavender
has indeed become a popular
topic. More than 20 official ac-
been a tourist attraction, or
even particularly beloved. For
Victorians who ascribed mean-
ing to flowers, there was noth-
picture, man!” Photos with counts, not affiliated with the ing romantic about it. “One of
lavender are all over social farm, promote it in Chinese. the things it signified was dis-
media, he said. “If you want to look at lav- trust,” said Diane Miske, for-
A glance at WeChat, the ender you don’t have to go to mer head horticulturist of the
powerful Chinese social net- France!” reads one posting. Robison York State Herb Gar-
work with nearly a billion “New York Long Island’s den at Cornell University’s bo-
monthly active users—and a Provence will satisfy you!” tanic gardens. “They thought a
history of driving huge num- Lavender hasn’t always poisonous snake would hide
under the lavender bushes.”
Some suggest that a source
of the craze is a 2000 roman-
tic film from Hong Kong that
includes a scene shot in a lav-
ender field in France.
For now, East Marion has
PETER J. SMITH FOR THE WALL STREET JOURNAL
reverted to its traditional bu-
colic state. Mr. Rozenbaum
and his family have cut their
crop, which they sell at New
York City farmers markets.
How does he explain the
Long Island lavender craze?
“It’s one of the few essences
that goes straight to your
brain,” he said. “There’s no
filter.”
—Esther Fung
Visitors like taking selfies in fields of lavender on Long Island. contributed to this article.
THE WALL STREET JOURNAL.
Senator
Criticizes
President
On Health
BY THOMAS M. BURTON
Sen. Susan Collins, one of
three Republican senators who
blocked the GOP’s health-care
bill last week, on Sunday said
President Donald Trump’s
threatened cuts in payments to
insurers would be “detrimental”
to America’s poor.
The secretary of health and
human services, meanwhile,
was noncommittal about the
payments and also declined to
say whether the Trump admin-
istration would enforce the por-
tion of the Affordable Care Act
that generally requires individ-
uals to carry health insurance.
At issue are millions of dol-
lars under the Affordable Care
Act that the federal government
pays in order to lower deduct-
ibles and out-of-pocket costs
for the poorest health enrollees.
“It really would be detrimen-
tal to some of the most vulner-
able citizens if those payments
were cut off,” Ms. Collins, of
Maine, said in a CNN interview.
“They’re paid to the insurance
companies, but the people that
they benefit are people who
make between 100% and 250%
CHIP SOMODEVILLA/GETTY IMAGES
Sen. Susan Collins (R., Maine)
of the poverty rate.
“So we’re talking about low-
income Americans who would
be devastated if those pay-
ments were cut off,” she said,
adding that “the threat to cut
off those payments has contrib-
uted to the instability in the in-
surance market.”
Mr. Trump made one of his
most explicit threats to cut off
the payments in a tweet over
the weekend, when he also
floated the idea of cutting off
lawmakers’ own health bene-
fits. “If a new Healthcare Bill is
not approved quickly, BAIL-
OUTS for Insurance Companies
and BAILOUTS for members of
Congress will end very soon!”
Mr. Trump said on Twitter.
The president has made such
threats for months, and the
next set of payments is sched-
uled in three weeks. This issue
is especially critical now be-
cause deadlines for insurers to
decide whether to participate in
health-insurance marketplaces
are also looming. Insurance
companies have been express-
ing their uncertainty about
what to do and about their con-
cerns over the chaotic state of
the insurance-exchange markets
in several states.
These payments are under
legal challenge by Republicans
in the House, who say the
money never was authorized by
Congress. A federal judge has
sided with the House but is al-
lowing the funds to continue
during the litigation.
The Trump administration’s
efforts to kill off the 2010
health-care law came to a
crashing end last week, at least
for now. Various strategies,
ranging from a replacement
plan, to a simple repeal, to
what was termed a “skinny re-
peal,” were tried and failed.
Still, Mr. Trump on Sunday
returned to Twitter and de-
clared, “Don’t give up Republi-
can Senators, the World is
watching: Repeal & replace…”
He also has called for taking
steps to ensure the law doesn’t
work as intended. In February,
he said, “From a purely political
standpoint, the single best
thing we can do is nothing. Let
it implode completely. But it’s
not the right thing to do for the
American people.”
During appearances on Sun-
day talk shows, Tom Price, the
secretary of health and human
services, said “no decision’s
been made” on whether the ad-
ministration would enforce the
ACA’s “individual mandate.”
That mandate is widely consid-
ered essentially to bolster the
nation’s health-insurance mar-
kets, because without it, mostly
only the sick and elderly would
carry insurance, and health cov-
erage would become prohibi-
tively expensive.
THE OUTLOOK | By Kate Davidson
GOP’s Next Task: Raising Debt Limit
Republi-
cans are leav-
ing town for
an August re-
cess after a
failed attempt
to repeal the Affordable Care
Act. When they return
in September, they’ll have
just 12 working days to avert
another big problem.
In a letter to lawmakers
Friday, U.S. Treasury Secre-
tary Steven Mnuchin said the
federal borrowing limit, or
debt ceiling, needed to be
raised by Sept. 29 or the
government risked running
out of money to pay its bills.
The Treasury Department
has been employing cash-
conservation measures since
March, when borrowing hit
the formal ceiling of nearly
$20 trillion. Those measures
are expected to run out in
early to mid-October. When
they do, the government
won’t have money to pay in-
terest on debt, write Social
Security checks or make mil-
lions of other routine pay-
ments, unless it can tap
credit markets for borrow-
ing to raise additional cash.
Missing payments could send
financial markets in a tail-
spin.
Lawmakers have managed
to resolve bitter feuds over
the debt limit before. But
markets are starting to re-
flect angst about Washing-
ton’s ability to navigate a
new showdown given the
challenges Republicans have
had reaching common
ground on issues like health
care. Lawmakers leave town
with no clear strategy for
managing the complex poli-
tics around raising the limit
when they return.
“We just don’t know what
the process is going to look
like this time,” said Goldman
Sachs political economist
Alec Phillips.
This will be the first time
Republicans will control both
chambers of Congress and
the White House while navi-
gating a debt ceiling in-
Donald Trump, left, talked with Xi Jinping in April about addressing North Korea’s weapons programs.
Trump Tweets Warning
To China on North Korea
BY REBECCA BALLHAUS
President Donald Trump on
Saturday signaled his chagrin
at what he described as
China’s inaction on North Ko-
rea’s nuclear and ballistic-mis-
sile ambitions.
“I am very disappointed in
China. Our foolish past leaders
have allowed them to make
hundreds of billions of dollars
a year in trade, yet they do
NOTHING for us with North
Korea, just talk,” Mr. Trump
wrote in a pair of posts on his
Twitter account. “We will no
longer allow this to continue.
China could easily solve this
problem!”
On Friday, North Korea
test-fired a ballistic missile
that experts said put the con-
tinental U.S. in range of a
strike, illustrating rapid ad-
vancements in technology and
intensifying Pyongyang’s
standoff with Washington.
Following the launch, Sec-
retary of State Rex Tillerson
urged world leaders to tighten
United Nations sanctions on
North Korea and singled out
Russia and China for not do-
U.S. NEWS
Treasury Secretary Steven Mnuchin has made clear the
administration wants the debt limit raised.
Debt Ceiling Crises Can Be Costly
Rise in government borrowing costs during debt ceiling spats.
Percentage-point change in average yield of Treasury securities of
all maturities attributable ...
... to a possible Aug. 2, 2011, ... or to a possible Oct. 17, 2013,
debt-ceiling breach ... debt-ceiling breach.
0.08 percentage point
0.06
0.04
0.02
0 0
–0.02
July 18, 2011 Aug. 2
Note: Only trading days are shown. Series start at July 14, 2011 and Sept. 25, 2013.
Source: Cashin, Ferris, Klee and Stevens (2017)
crease. They face resistance
within their own party.
In the past, conservative
Republicans sought to pair
increases in the borrowing
limit with steep spending
cuts. Some argued against
raising the limit at all. This
time the GOP will have to
own the consequences if the
ing enough to contain Pyong-
yang’s nuclear ambitions.
“As the principal economic
enablers of North Korea’s nu-
clear-weapon and ballistic-
missile development program,
China and Russia bear unique
and special responsibility for
this growing threat to re-
gional and global stability,” he
said.
A spokesman for China’s
Foreign Ministry said Beijing
was opposed to any further
North Korean missile launches
and urged all sides to “act
cautiously” to avoid further
inflaming tensions on the pen-
insula.
On Saturday, two U.S.
bombers performed a flyover
of the Korean Peninsula in
what the U.S. Air Force said
was a response to Pyongyang’s
Friday missile test.
Earlier in the year, Mr.
Trump had touted his rela-
tionship with Chinese Presi-
dent Xi Jinping, who visited
Mr. Trump at his Florida re-
sort in April, where the two
agreed to work together to ad-
dress North Korea’s nuclear-
weapon and missile programs.
0.08 percentage point
0.06
0.04
0.02
–0.02
Oct. 1, 2013
THE WALL STREET JOURNAL.
government defaults on debt
or fails to make other pay-
ments.
M
r. Mnuchin has made
clear the adminis-
tration wants to see
the debt limit increased,
with no strings attached.
But GOP leaders will almost
But in June, Mr. Trump sug-
gested the joint effort had
proved unsuccessful.
“While I greatly appreciate
the efforts of President Xi &
China to help with North Ko-
rea, it has not worked out,”
Mr. Trump said in a Twitter
post on June 20. “At least I
know China tried.”
The Trump administration’s
efforts to recast trade ties
with Beijing also suffered a
setback earlier this month
when high-level economic
talks between the two nations
ended without any concrete
agreement or future agenda.
After a full day of bilateral
meetings, the U.S. side issued
a terse statement saying that
“China acknowledged our
shared objective to reduce the
trade deficit which both sides
will work cooperatively to
achieve.”
The statement from Com-
merce Secretary Wilbur Ross
and Treasury Secretary Steven
Mnuchin didn’t provide fur-
ther details on just how much
the two sides could agree on,
or when they would resume
talks.
ZACH GIBSON/BLOOMBERG NEWS
Oct. 17
ALEX BRANDON/ASSOCIATED PRESS
certainly need to rely on
Democratic support to get
any type of increase to the
president’s desk, some-
thing Democrats might be
reluctant to provide without
something in return. They
have been unified in opposi-
tion to Republicans on other
issues.
The path to raising the
debt limit will be the first
major political test for Mr.
Mnuchin, a Washington nov-
ice who has been intensely
focused on the Trump ad-
ministration’s forthcoming
tax overhaul proposal.
It is going to be a tight
squeeze. Treasury’s cash bal-
ance is expected to drop to
near $25 billion in Septem-
ber—a precariously low
level, especially in the event
of some unforeseen shock,
such as a severe natural di-
saster, global crisis or unex-
pected drop in revenue.
Strategic challenges hang
over Mr. Mnuchin’s options.
When President Barack
Obama was in power, some
Republicans challenged the
White House to allow cash to
run down and prioritize
some payments, such as in-
terest on debt, over others,
such as discretionary spend-
ing. That idea could return.
Transcripts from a 2011
meeting of the Federal Re-
serve showed the central
bank, as the Treasury’s fi-
nancial agent, was prepared
to continue making pay-
ments to bondholders, while
potentially delaying other
payments, if Congress failed
to raise the borrowing limit
back then.
Mr. Mnuchin told lawmak-
ers on Capitol Hill this week
he had “no intent” to priori-
tize payments, which would
put him in the uncomfort-
able position of choosing
whether to pay foreign
bondholders ahead of retir-
ees or government workers.
“I think that doesn’t
make sense,” he said. “The
government should honor all
of its obligations and the
Key Aide’s Firing Has
White House on Alert
BY REBECCA BALLHAUS
WASHINGTON—Two hours
after President Donald Trump
tweeted Friday he was replac-
ing Chief of Staff Reince Prie-
bus with his homeland secu-
rity secretary, Mr. Priebus’s
colleagues filed into the White
House’s Roosevelt Room to
watch their former boss film
an exit interview on CNN. The
question on many of their
minds, according to adminis-
tration officials: Who would be
next?
Mr. Priebus’s departure
came a week after Sean
Spicer—who was among the
group watching the CNN inter-
view—resigned in protest as
press secretary over the presi-
dent’s hiring of a new commu-
nications director. The latest
move left West Wing officials
wondering over the weekend
about other changes to come
in a White House coming off
of one of the most turbulent
weeks for any administration
in recent memory.
Several officials, some of
whom had left the building on
Friday when Mr. Trump made
his announcement, said they
expected further shuffling in
coming weeks as new Chief of
Staff John Kelly sets up shop.
Anthony Scaramucci, the
newly installed communica-
tions director, had already
spent the past several days
threatening to fire officials
caught leaking information to
the news media.
The departure of Mr. Prie-
bus, a former chairman of the
Republican National Commit-
tee, also prompted concerns
from some Republicans about
the administration’s relation-
ship with the party, which has
shouldered much of the com-
munications work for the
White House in recent months.
Mr. Scaramucci sought to
ease those concerns on Sun-
day, tweeting that he had spo-
ken to RNC Chairwoman
Ronna Romney McDaniel and
looked forward to “building
[an] even stronger relation-
ship.”
White House officials over
the weekend said they hoped
Monday, July 31, 2017 | A7
debt limit should be raised.”
Complicating matters, the
debt limit isn’t the only fis-
cal fight lawmakers are brac-
ing for when they return
from the August recess.
The showdown will coin-
cide with the end of the fis-
cal year on Sept. 30, and the
prospect of a government
shutdown if Congress fails
to authorize new spending
for 2018. That could make
the debt limit increase more
difficult to address, if law-
makers get bogged down in
a fight over spending.
A
dding to the political
muddle, some lawmak-
ers want to relax
spending caps set into law
six years ago as part of a
compromise reached be-
tween Mr. Obama and con-
gressional Republicans to
end an earlier debt-limit
standoff.
“They’ll put this one big,
nasty bill together that gets
passed with a majority of
Democrats and less than a
majority of Republicans,”
said Rep. Mark Meadows (R.,
N.C.), chairman of the House
Freedom Caucus, a group of
roughly three dozen conser-
vative House Republicans.
The costs from delaying
action on the debt ceiling
are already mounting, Mr.
Mnuchin warned lawmakers
last week.
Two recent debt-limit
fights on Capitol Hill, in 2011
and 2013, raised yields on
Treasury securities ahead of
the expected date of default,
ultimately boosting Trea-
sury’s borrowing costs by
about $260 million in 2011
and $230 million in 2013, ac-
cording to research released
by the Federal Reserve this
year.
“Right now effectively, as
opposed to borrowing in the
market at lower rates, we’re
borrowing and making our
trust funds whole at
slightly higher rates,” Mr.
Mnuchin said. “There is a
real cost to doing that.”
Mr. Kelly, a retired Marine
Corps general, would com-
mand the president’s respect
and attention in a way that
Mr. Priebus appeared unable
to do. “If he says you should
stop, he might actually think
twice about sending that
tweet,” one official said of Mr.
Trump, whose top advisers
have proved unable to curb his
penchant for bombastic social-
media posts.
For many White House
aides, Mr. Priebus’s departure
was sealed after the demise of
the Republican health-care bill
in the Senate early Friday and
when Mr. Priebus declined to
respond to a profanity-riddled
rant by Mr. Scaramucci in an
interview with the New Yorker
on Wednesday in which he
disparaged the chief of staff as
a “paranoid schizophrenic, a
paranoiac.”
Mr. Priebus’s relationships
with the Republican Party’s
top donors—many of whom
had resisted Mr. Trump’s cam-
paign—were instrumental in
Mr. Trump’s fundraising ef-
forts last year and led in part
Several officials said
they expected further
shuffling in coming
weeks.
to his appointment. In the
2016 election, the RNC ran Mr.
Trump’s large-dollar fundrais-
ing operation, helping it raise
more than $100 million in a
joint fundraising vehicle with
the campaign.
But several top Republican
donors said they didn’t expect
Mr. Priebus’s departure to af-
fect the administration’s rela-
tionship with the party com-
mittee. The White House has
also grown in some ways de-
pendent on the RNC’s commu-
nications staff, which has
taken on much of the adminis-
tration’s rapid response and
surrogate efforts.
—Peter Nicholas
contributed to this article.
A8 | Monday, July 31, 2017 THE WALL STREET JOURNAL.

LIFE&ARTS
ANALYSIS | By Ben Fritz

Who Decides What You Watch?

Streaming services such as Netflix and Spotify can steer audiences to particular music, movies and series
BY BEN FRITZ

IN ANCIENT TIMES, when read-

ers bought actual books in out-
posts known as stores, one al-
ways had to be a little skeptical
of the titles stacked on tables by
the front door.
Some were the newest and
most popular reads. Others were
there because publishers had
made deals with the biggest re-
tailers to put their books front
and center, grabbing the atten-
tion of browsers who weren’t
sure what they wanted.
In the on-demand entertain-
ment world, where companies
that began as neutral distribution
platforms have become multi-
headed media giants, we need a
similar dose of skepticism when
we walk in the digital front door.
The first time you use Spotify
or Netflix, the experience is as-
tounding. Want to drive cross-
country to early ’90s hip-hop that
reminds you of middle-school
dances? Feeling blue and want to
bury your sorrows in old episodes
of “Cheers?” They’re just a search
and a click away. (All examples
are hypothetical, of course, based
on people with lower-brow taste
than mine.)
After a while, though, you
don’t always know what you want
to listen to or watch when you
log on. That’s where the content
highlighted by these streaming
services starts to matter and the
behind-the-scenes deals they
strike may influence your choices.
Such deals have given rise to a
debate about “fake artists on
Spotify” reported earlier on the
website Music Business World-
wide. The artists aren’t “fake,”
but rather real, low-profile indi- Some streaming services highlight content that they helped create, such as Netflix’s wrestling comedy, ‘Glow,’ below left, and the crime drama, ‘Ozark,’ below.
viduals who are commissioned to
create certain types of popular
music and sometimes use pseudo-
nyms. Their music, all instrumen-
tal, fills massively popular play-
lists with titles such as “Sleep,”
“Peaceful Piano” and “Yoga and
Meditation.”
As anyone who has used Spo-
tify knows, popular playlists are
often featured when you open the
app, above recommendations
based on what you’ve listened to.
So what’s the problem? Re-
ports in the New York Times and
elsewhere suggest that Spotify
may have special deals with so-
JASON SCHNEIDER (ILLUSTRATION); NETFLIX (2)

called “fake artists,” paying them

less than the standard share of
its revenue that goes to Arcade
Fire or Beyonce for each play.
Thus, Spotify might prefer that
you listen to these tracks rather
than others. Listen to whatever
you want, in other words, but
might we suggest these appetiz-
ing options that carry a better
profit margin for us?
A Spotify spokesman says, “We
have never programmed a playlist
due to cost. Playlists are pro- cent series, movie and stand-up The Next Generation” I’ve been ratings for all those unfunny sit- worry they’ll make less money.
grammed based on how each special Netflix has made, includ- jonesing to rewatch). coms that used to air between But just as it’s important to
track performs and connects with ing “Ozark” and “Glow.” Nothing ever stopped us from “Friends and “Seinfeld.” When know who owns your favorite
listeners.” The more that people watch combing a bookstore for an ob- something that looks reasonably newspaper or who contributes
Spotify isn’t the only digital Netflix originals, of course, the scure poetry anthology and noth- appealing is presented to us, we money to your elected officials,
powerhouse with reasons to steer more the company can control its ing is stopping us today from may not bother to search for some- you should care about what Spo-
users to certain content. own destiny rather than engaging clicking, searching or setting the thing else or wonder why it has the tify and other streaming services
Last time I opened Netflix, I in sometimes-difficult negotia- DVR to record exactly what we marquee spot on the home page. would like you to hear or watch.
had to scroll down two screens to tions to buy content from other want to hear or watch, regardless You probably don’t care about Because it may be the songs and
find my list of the programming I studios and networks. (Don’t of what’s presented to us. “fake artists” on Spotify for the videos that make them more
had indicated I wanted to watch, worry, I scrolled all the way down But humans are fundamentally same reason other recording artists money, not the ones you’re most
skipping past seemingly every re- to find that episode of “Star Trek: lazy, as illustrated by the sky-high and record labels do: Because they likely to enjoy.

PLAYLIST | Linda Fairstein

FIRE, RAIN AND A MUSTANG

Linda Fairstein, 70, is a former
prosecutor in the Manhattan dis-
trict attorney’s office and the au-
thor of 19 crime novels, including
“Deadfall” (Dutton). She spoke
with Marc Myers.
In the spring of 1970, my boy-
friend and I took turns driving my
1965 Mustang convertible from
New York to Charlottesville, Va. I
had gone up to New York to visit
him, and he was accompanying me
back to the University of Virginia,
where I was studying law. James
Taylor’s “FIRE AND RAIN” came
on the radio several times during
our seven-hour trip.
while heading south in the Mustang.
After my boyfriend returned to
New York, I went out and bought
“Sweet Baby James,” the album on
which the song appears. One of my
closest friends at law school was a
guy named Geoff. I adored and ad-
mired him, and we spent a lot of
time talking, studying and hanging
out together.
Two years later, I was working in
the Manhattan district attorney’s of-
fice when a friend from law school
called. She asked if I was alone.
Then she told me that Geoff was
dead, that he had taken his own life.
I went to pieces. I retreated to
my mother’s house in the suburbs
tiful and melancholy acoustic gui-
tar. Then he begins to sing about a
woman named Suzanne and how
her suicide affected him:
“Just yesterday morning, they
let me know you were gone / Su-
zanne, the plans they made put an
end to you…I’ve seen lonely times
when I could not find a friend, /
But I always thought that I’d see
you again.”
I listened often to the song fol- JAMES TAYLOR
lowing Geoff’s death. Over the performing in the
years, I’ve lost other friends to early 1970s.
tragic deaths. Sometimes when I’m
driving near my home on Martha’s
Vineyard, I’ll hear the song on the
radio and cry. But it’s a good cry
EVERETT COLLECTION

I loved “Fire and Rain” the mo-
ment I heard it, especially the
song’s soft sadness. Though the sin-
gle had come out a month or so
earlier, I heard it for the first time
of New York and was inconsolable
for days. I had never lost a friend
to suicide before, and “Fire and
Rain” helped me get through it.
The song opens with JT’s beau-
and cathartic.
“Fire and Rain” lets me remem-
ber the people who left me too
soon and makes me think how
much I miss them.
THE WALL STREET JOURNAL. Monday, July 31, 2017 | A9

LIFE & ARTS

ART REVIEW

Painting the Bible In New Spain

A colossal depiction of Old and New Testament scenes reveals how the European Baroque influenced colonial Mexican art
BY WILLARD SPIEGELMAN

New York
WITH THE EXCEPTION of the
20th-century paintings of Frida
Kahlo and the murals of Rivera,
Orozco and Siqueiros, “Mexican art”
used to mean pre-colonial. Modern-
ist tastes preferred the “primitive,”
especially the pre-Columbian. Histo-
rians, intellectuals and painters ig-
nored or demoted most work from
the post-contact days as manifesta-
tions of Spanish imperialism and
conquest. In the past quarter-cen-
tury, the art of New Spain in the pe-
riod we think of as the Baroque has

CLOCKWISE FROM TOP RIGHT: FORDHAM UNIVERSITY COLLECTION: LA CATEDRAL DE NUESTRA SEÑORA DE LA INMACULADA CONCEPCIÓN, PUEBLA, MEXICO (2)
gained new respect.
As both consequence and proof of
this upward revaluation, consider
the stunning small exhibition “Cris-
tóbal de Villalpando: Mexican Painter
of the Baroque” at the Met Fifth Av-
enue. Villalpando (c. 1649-1714) was
born and probably trained in Mexico
City. Through prints, he knew the
work of major European predeces-
sors, especially Peter Paul Rubens, a
name synonymous with the Baroque.
Most of his art came through reli-
gious commissions.
With 11 pictures, the Met show
gives a North American audience a
sample of New Spain’s greatest
painter at the turn of the 18th cen-
tury. (It was curated by Ronda Kasl,
curator of Latin American Art at the
Met; Jonathan Brown, professor of
fine arts at New York University;
and Clara Bargellini, professor at
the National Autonomous University
of Mexico.) It is actually anything
but small, especially because its
centerpiece is the staggering 14-
by-28-foot oil from Puebla Cathedral
called “Moses and the Brazen Ser-
pent and the Transfiguration of Je-
sus” (1683) on view for the first
time outside Mexico. It occupies the Clockwise from above: Cristóbal de Villalpando’s ‘Moses and the Brazen
atrium of the Met’s Robert Lehman Serpent and the Transfiguration of Jesus’ (1683), ‘The Adoration of the Magi’
Wing, and viewers can see it as no (1683) and ‘The Deluge’ (1689)
one in Mexico has. At home, it
hangs on a chapel wall. You look up them for speaking out against God. ses appears in both halves, clothed
at it. In New York, you see it from Above, we see the Transfiguration of in glistening armor that makes
the floor and, even more stunningly, Jesus, witnessed by the apostles Pe- him, especially at the bottom, into
from the entry to the Lehman wing ter, James and John. something like a Spanish conquis-
above, where you come upon it from The eye wanders up and down, tador, with heavily muscled calves.
a higher angle, virtually head-on. seeing differences, making connec- One could keep looking, but other
Extraordinary in conception and tions. Below, all is crowded dark- pictures beckon from one of the their wearers. estry. God creates Adam; the entire
execution, the two-part picture is ness. Some figures are almost car- Lehman’s anterooms. These demon- The two smallest, most crowded Trinity breathes life into him; Eve is
unprecedented in the history of art. toonish in their agony. At the top, strate their maker’s strengths and pictures are oils on copper from the born; the serpent tempts; Eve eats,
The idea was probably suggested by with only seven figures, all is pu- weaknesses. Villalpando had dy- Ochavo chapel in the Puebla Cathe- then Adam. You know the rest. A
Manuel Fernández de Santa Cruz, rity and light: clouds, luminous namic brushwork but lacked excel- dral. “The Deluge” (1689) is all dark- rising sun is on the upper left, dark-
the bishop of Puebla. The picture clothing, rays of sun. lence in drawing. His art is intense ness broken by lightning flashes. ness on the upper right.
has two halves, two subjects. It com- With its two scenes, the picture and sumptuous, everything we think Noah’s ark is like no boat you’ve Villalpando worked big even
bines scenes from the Old Testa- is divided horizontally but united of as baroque. His people’s faces are ever seen, floating as if through the when working small. Excess in
ment (below) and the New (above): vertically. A torrent of water flows often unprepossessing, doughy and air. In front, a woman on a bull (did miniature: that’s the Baroque, Old
the desert in Numbers, and Mounts from above into the bottom scene. puffy (an ugly, roly-poly little Jesus, Europa and Zeus wander in here?) World and New.
Tabor and Calvary in the Gospels. On high, God the father points to a chinless Virgin Mary). He is more holds a child. Villalpando could
There is separation and continuity Jesus, who points to Moses and committed to the swirling, dynamic powerfully fashion the world’s end. Cristóbal de Villalpando:
between the parts, as in the Old and Elijah, and at whose feet sit the flow of drapery and clouds than to And also its beginning. Villal- Mexican Painter of the Baroque
New Testaments themselves. The three apostles overwhelmed by his finely chiseled, realistic human fea- pando signed “The Deluge” and The Metropolitan Museum, through
scene from Numbers was thought to transfiguration into light. tures. In an “Adoration of the Magi” “Adam and Eve in Paradise” (1689) Oct. 15
prefigure the Transfiguration. Below, Beneath, we see the brazen ser- (1683), the most conventional of the with his name and then “Inventor”
we see Moses and the brazen ser- pent on its pole, an anticipation of pictures, Balthazar has an over-the- to signal his role as a God-like cre- Mr. Spiegelman’s most recent book
pent he brings forth to save those Is- Christ’s cross, pictured above. God top headdress with plumes, and a ator. The second picture compresses is “Senior Moments: Looking Back,
raelites who can be healed from the and Jesus look down; the Old Tes- long pearl pendant earring. The cos- eight episodes from Genesis into a Looking Ahead” (Farrar Straus
plague of deadly snakes visited upon tament figures are looking up. Mo- tumes often get more attention than space as packed as a medieval tap- Giroux).

FILM REVIEW | By Joe Morgenstern

COLD REALITIES OF
GLOBAL WARMING
CONSIDERING the potential for
incandescent polemics, “An Incon-
venient Sequel: Truth to Power” is
relatively restrained. Al Gore para-
phrases Mike Tyson’s deathless
maxim that “everyone has a plan
until they get punched in the
mouth.” That’s by way of noting
how the political climate has
changed with the rise of Donald
Trump, who had previously re-
ferred to climate change as a hoax
and called for Mr. Gore’s Nobel
Peace Prize to be rescinded. Yet
the film doesn’t dwell on the
Trump administration’s hostility to
climate science, and, because of
the production’s release date, it in-
cludes only an end-title mention of
last month’s announcement that
the U.S. would withdraw from the
Paris climate accords. Rather, the
emphasis is on the intensifying im-
pact of global warming caused by
human activity, on heartening signs
of progress in renewable energy,
and on the need for sustaining
hope that brighter days will come.
Eleven years after “An Inconve-
nient Truth” Mr. Gore remains a
prodigy of hope, with energy that
seems endlessly renewable. During
much of the intervening time he
continued to travel the beleaguered
personal failure I’d be lying,” he
says at one point in this new docu-
mentary feature, which was directed
by Bonni Cohen and Jon Shenk.
At another he says: “There came
a time for me when I thought, wow,
we could really lose the struggle.
We need to recruit more people.”
The results of that recruiting effort
provide many of the settings for
“An Inconvenient Sequel”—climate
leadership training sessions where
the former vice president exhorts
eager recruits to action.
Sequels are, by definition, more
of the similar, if not the same, and
this one covers some familiar
ground. It also spends an inordi-
nate amount of time at the 2015 Al Gore in the Philippines, above, and
Paris conference where the climate Greenland, right, in ‘An Inconvenient
agreement was negotiated. But the Sequel: Truth to Power’
world—the physical world—has
changed dramatically since the But the man who was often
first film was released, and “An In- faulted for dispassion during his
convenient Sequel” reflects those long political career unleashes the
changes with startling visuals. In wrath of a country preacher at
Greenland, glaciers have been ex- certain moments here. “What were
ploding from within because of ris- you thinking?” he imagines future
ing temperatures. In Miami, roads generations wondering about us.
and sidewalks have been raised in “Couldn’t you hear what the scien-
response to rising sea levels. Some tists were saying? Couldn’t you
of the videos are so familiar—lash- hear what Mother Nature was
ing storms, widespread floods, rag- screaming at you?” And he brings
ing fires, droughts associated with good news along with the litany of
PARAMOUNT PICTURES

globe with the slide show that be-
came the core content of the first
film, though the campaign against
carbon emissions sometimes
seemed doomed. “If I said there
weren’t times I considered this a
political upheavals and refugee cri-
ses—that the mind glazes over, and
Mr. Gore acknowledges the prob-
lem: “Every night on the evening
news is like a nature walk through
the Book of Revelation.”
tempests and record temps—the
growth of wind and solar power
on exponential curves that were
unimaginable a decade ago. No
more tilting against windmills
when the world is tilting for them.
A10 | Monday, July 31, 2017 THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK
Who Paid for the
The Republican ObamaCare Crack Up ‘Trump Dossier’?
A
fter promising Americans for seven Paul and Mike Lee worked to defeat Majority
years that it would fix the Affordable Leader Mitch McConnell’s compromise draft It has been almost two edged that he makes his career out of op-
weeks since Democrats position research, the same work Fusion
Care Act, the Republican Party failed. to no good end. We cannot recall a similar ef-
received the glorious does. And that he’s often hired by Kremlin-
This is a historic debacle that fort by so many to subject news Senate Judiciary connected Russians to smear opponents.
will echo politically for years. The party had a historic their own party to such an ab- Chairman Chuck Grass- We know that at the exact time Fusion
A divided GOP Senate could chance to act in the ject public humiliation. ley would require Donald was working with the Russians, the firm
not muster a majority even for Mr. Trump in a tweet
a simple bill repealing the indi- public interest. It failed. blamed the three GOP Sena- POTOMAC Trump Jr. and Paul had also hired a former British spy, Chris-
Manafort to explain topher Steele, to dig up dirt on Mr.
WATCH
vidual and employer mandates tors who voted no, but he was By Kimberley
their meeting with Rus- Trump. Mr. Steele compiled his material,
they had long opposed. Nor also an architect of his own sian operators at Trump according to his memos, based on allega-
A. Strassel
were they able to repeal the medical-device tax defeat. Mr. Trump was elected in no small part Tower last year. The left tions from unnamed Kremlin insiders and
that some 70 Senators had gone on record want- on his promise to do big deals like this one. In was salivating at the other Russians. Many of the claims sound
ing to repeal in previous Congresses. the end he couldn’t close. He never tried to sell prospect of watching two Trump insiders eerily similar to the sort of “oppo” Mr.
being grilled about Russian “collusion” Akhmetshin peddled.
The so-called skinny bill that failed in the the policy to the American public, in part be-
under the klieg lights. We know that Mr. Simpson is tight
Senate would have gone to a conference with cause he knows nothing about health care and Yet Democrats now have meekly and with Democrats. His current attorney,
the House, which had signaled its willingness couldn’t bother to learn. noiselessly retreated, agreeing to let Joshua Levy, used to work in Congress as
to work out a compromise. That arduous pro- His chaos theory of White House manage- both men speak to the committee in pri- counsel to Chuck Schumer. We know from
cess is the way the American legislative system ment, on morbid public display last week (see vate. Why would they so suddenly be a Grassley letter that Fusion has in the
works. A strong majority of the GOP caucuses nearby), also means no one on Capitol Hill knows willing to let go of this moment of politi- past sheltered its clients’ true identities
on both chambers supported the effort to repeal who is in charge. As his approval rating sinks be- cal opportunity? by filtering money through law firms or
and replace ObamaCare, but that was undone low 40%, few in politics fear him and increasingly Fusion GPS. That’s the oppo-research shell companies.
by an intransigent and petulant minority. few will step forward to defend him. outfit behind the infamous and discred-
Where to begin in comprehending John Mc- What next? The Senate failure has burned ited “Trump dossier,” ginned up by a for-
Cain’s last-minute defection? Early Friday the reconciliation process available from last mer British spook. Fusion co-founder Democrats don’t want you
Glenn Simpson also was supposed to tes- to know—and that ought
morning Senator McCain turned his thumb year and thus the ability to pass anything with tify at the Grassley hearing, where he
down on the bill, which doomed this long effort. 50 votes. The next reconciliation bill is ear- might have been asked in public to reveal to be a scandal of its own.
Explaining that vote, Mr. McCain said the bill marked for tax reform, if the hapless GOP can who hired him to put together the hit job
“offered no replacement to actually reform our first pass a budget outline. Meanwhile, the on Mr. Trump, which was based largely
health-care system and deliver affordable, qual- ObamaCare exchanges will continue to deterio- on anonymous Russian sources. Turns out Word is Mr. Simpson has made clear
ity health care to our citizens.” This is hard to rate. This means the Trump Administration will Democrats are willing to give up just he will appear for a voluntary committee
credit, because his “no” has left the American face a choice of how much money to spend to about anything—including their Manafort interview only if he isn’t specifically
people with ObamaCare in toto. keep some of them from collapsing. HHS Secre- moment—to protect Mr. Simpson from asked who hired him to dig dirt on Mr.
On Thursday, with three other Senators, Mr. tary Tom Price can give insurers more flexibil- having to answer that question. Trump. Democrats are going to the mat
McCain said he wanted assurances that House ity, but premiums will keep rising while choices What if Washington and the media for him over that demand. Those on the
have had the Russia collusion story back- Judiciary Committee pointedly didn’t sign
Speaker Paul Ryan would negotiate in confer- for consumers decline.
ward? What if it wasn’t the Trump cam- letters in which Mr. Grassley demanded
ence. Mr. Ryan said he would, and the other The Republicans who did so much to kill re- paign playing footsie with the Vladimir that Fusion reveal who hired it.
three voted yes. Senator McCain nonetheless peal and replace will now clamor for bipartisan Putin regime, but Democrats? The more What if it was the Democratic National
chose to cast the decisive vote that broke the action. And it would be nice to think Democrats we learn about Fusion, the more this Committee or Hillary Clinton’s campaign?
GOP promise. would meet Mr. McConnell halfway. But Demo- seems a possibility. What if that money flowed from a politi-
The Arizona Senator’s politics has always cratic leader Chuck Schumer knows he has Re- We know Fusion is a for-hire political cal entity on the left, to a private law
been more personal than ideological. His baf- publicans on the run, and his price for 60 votes outfit, paid to dig up dirt on targets. This firm, to Fusion, to a British spook, and
fling, 11th-hour vote makes us recall Donald will be a costly bailout of ObamaCare, which lib- column first outed Fusion in 2012, detail- then to Russian sources? What if those
Trump’s infamous campaign slight about Mr. eral health-care academics are already propos- ing its efforts to tar a Mitt Romney donor. Kremlin-tied sources already knew about
McCain’s war imprisonment. Whatever his mo- ing. Good luck repealing the law’s mandates and At the time Fusion insisted that the donor this dirt-digging, tipped off by Mr.
tives, the greater shame is that his vote keeps taxes, or deregulating insurance markets. was “a legitimate subject of public re- Akhmetshin? What if they specifically
cords research.” made up claims to dupe Mr. Steele, to
the edifice of ObamaCare in place with all of its Mr. Schumer knows that a “bipartisan” Sen-
Mr. Grassley’s call for testimony has trick him into writing this dossier?
harm to patients, the health-care system and ate insurance bailout will further divide the uncovered more such stories. Thor Hal- Fusion GPS, in an email, said that it
the national fisc. GOP and put the House on the spot if it fails vorssen, a prominent human-rights activ- “did not spread false information about
There were many other contributors to this to go along. With the House majority in jeop- ist, has submitted sworn testimony out- William Browder.” The firm said it is coop-
debacle. The Freedom Caucus dragged out the ardy in 2018, Speaker Ryan could face an ex- lining a Fusion attempt to undercut his erating with Congress and that “the presi-
process in the House, which created time for op- cruciating choice: Attempt to save the seats of investigation of Venezuelan corruption. dent and his allies are desperately trying
position to build. Alaska Senator Lisa Murkowski his party’s moderates by voting with Demo- Mr. Halvorssen claims Fusion “devised to smear Fusion GPS because it investi-
betrayed her many previous votes and public crats to bail out the exchanges, or get blamed smear campaigns, prepared dossiers con- gated Donald Trump’s ties to Russia.”
statements. Two GOP Governors, Ohio’s John Ka- by Democrats and the press for all of Obama- taining false information,” and “carefully If the Russian intention was to sow
sich and Nevada’s Brian Sandoval, grandilo- Care’s ills. placed slanderous news items” to malign chaos in the American political system,
him and his activity. few things could have been more effective
quently assaulted the bill for their own political Republicans will now try to salvage what is
William Browder, a banker who has than that dossier, which ramped up an
gain, which made life difficult for their states’ left of this Congress with tax reform. But the worked to expose Mr. Putin’s crimes, tes- FBI investigation and sparked congressio-
Senators, Rob Portman and Dean Heller. tragedy remains: Republicans in their selfish tified to the Grassley committee on nal probes and a special counsel, deeply
The Senate’s GOP moderates conspired to political and personal interests squandered a Thursday that he was the target of a simi- wounding the president. This is all to Mr.
kill both a historic Medicaid reform and repeal once-in-a-generation chance to show that their lar campaign, saying that Fusion “spread Putin’s benefit, and the question is
of ObamaCare’s myriad taxes. Senators Rand principles can make life better for Americans. false information” about him and his ef- whether Russia engineered it.
forts. Fusion has admitted it was hired by If Special Counsel Robert Mueller,
a law firm representing a Russian com- Democrats and the media really want an-
Reince Priebus Wasn’t the Problem pany called Prevezon.
Prevezon employed one of the Russian
swers about Russian meddling, this is a
far deeper well than the so-far scant case

P
resident Trump announced late Friday on
Twitter—how else?—that he is replacing
White House chief of staff Reince Priebus
with Homeland Security secretary John Kelly. The
decision was probably inevitable given how the
President publicly humiliated Mr. Priebus in recent
days, but this shuffling of the staff furniture won’t
matter unless Mr. Trump accepts that the White
House problem isn’t Mr. Priebus. It’s him.
Presidents get the White House operations
they want, and Mr. Trump has a chaotic mess be-
cause he seems to like it. He likes pitting faction
against faction, as if his advisers are competing
casino operators from his Atlantic City days. But
a presidential Administration is a larger under-
taking than a family business, and the infighting
and competing leaks have created a dysfunc-
tional White House.
Russia Sanctions Breakthrough
Perhaps Mr. Kelly, a retired Marine general,
can impose some order on the staff. But then
that’s what Anthony Scaramucci was supposed
to do for the communications team, only to blow
up in adolescent fashion last week by trashing
Mr. Priebus and others in public. White House
leakers then let it be known that Mr. Trump liked
Mr. Scaramucci’s X-rated rant.
The reason Mr. Priebus wasn’t as effective
as he could have been is because Mr. Trump
wouldn’t listen to him and wouldn’t let him
establish a normal decision-making process.
Mr. Trump has a soft spot for military men so
perhaps he’ll listen more to Mr. Kelly. He’d
better, because on present course his Presi-
dency is careening toward a historic reputa-
tion where names like Jimmy Carter and Rich-
ard Nixon reside.
operators who were at Trump Tower last
year. The other Russian at that meeting,
Rinat Akhmetshin, is a former Soviet coun-
terintelligence officer. He has acknowl-
LETTERS TO THE EDITOR
Electric Cars Help America Depend Less on Oil
Regarding “Electric Cars Are the
Future? Not So Fast” (World News,
July 13): Low oil prices are no excuse
to lose sight of the potential for elec-
tric vehicles to help the U.S. over-
come the influence of petrostates,
OPEC, oil-funded terror, resource
conflicts and the other consequences
of America’s dependence on an
opaque global oil market. This unfree
market undermines America’s inter-
ests, as the actions of states that
don’t share our strategic priorities
can influence the price of a commod-
against Mr. Trump. If they refuse to dive
into the story, we’ll know that the truth
about Russia and the election was never
what they were after.
continue to reorder our national se-
curity priorities.
GEN. CHARLES F. WALD, USAF (RET.)
McLean, Va.
Gen. Wald is a member of Securing
America’s Future Energy.
Weight is what wears out roads
and bridges. Vehicles of equal weight,
whether powered by internal combus-
tion engines (ICEs) or by electric bat-
teries, cause the same wear and tear
on roads and bridges. Gas and diesel-
fuel taxes are an equitable and easy-

T
he U.S. Senate Thursday followed the ity we rely on. Government policies to-administer method of obtaining
The final bill fixes Senate language that
should be enacted to support this na- funds to finance road and bridge
House in voting overwhelmingly for a threatened to undermine U.S. oil and gas com- tional security imperative. maintenance. What metric is to be
much-improved bill imposing sanctions on panies. The bill now counts for sanctions pur- If America is to remain prosperous used to obtain funds from the owners
Russia, Iran and North Korea. poses only those global en- and secure in the 21st century, we of EVs so that they pay their fair
Even before the bill could reach The GOP restrains ergy projects in which Russia must reduce our oil dependence by share? Owners of ICEs pay gas taxes
President Trump’s desk, Vladi- Trump, unlike Democrats has a 33% or greater stake. ensuring fuel diversity. Electric vehi- and are subsidizing the owners of
mir Putin vowed he wouldn’t This change is vital to U.S. cles running on diverse and domestic EVs in this matter. How long will the
tolerate such “insolence.” On on Obama and Iran. firms that work in deepwater fuels like nuclear, natural gas, coal or owners of ICEs tolerate this inequity?
Friday the Russian Foreign Min- oil fields where host countries renewables are our opportunity to When will legislators address the
istry retaliated by closing down require all leaseholders to break oil’s monopoly. fuel-tax issue or, more specifically,
a recreational retreat on the outskirts of Moscow jointly develop such infrastructure as pipelines. Unless we act, 90% of our trans- the lack of taxes from EVs?
portation network will remain oil de- BOB DEVANEY
used by American Embassy staff and ordered the This modest ownership threshold stops Mos-
pendent through 2030, and oil will Dell Rapids, S.D.
U.S. to cut its diplomatic presence. All the more cow from strategically buying leases to force
reason for Mr. Trump to sign. U.S. companies out of projects.
The bill passed with huge, veto-proof majori- The White House announced late Friday that
ties in the House (419-3) and Senate (98-2) in Mr. Trump will sign the bill, despite its restraints
Activist Investors Aren’t All That Democratic
a rare show of bipartisanship. The legislation on executive power. New communications direc- Jeffrey Sonnenfeld offers a solid Morgan Stanley and made it a domi-
raps a broad array of Russian entities as pun- tor Anthony Scaramucci had said before the Sen- contrarian view on the growing ten- nant banker. Morgan Stanley outper-
ishment for U.S. election interference, military ate vote that Mr. Trump might veto the bill. It dency for corporate boards to oust formed the S&P by more than 300%
activity in eastern Ukraine, annexation of Cri- would still become law one way or another— CEOs (“The CEOs Who Didn’t Deserve during Mr. Purcell’s tenure. But in late
mea, support for Bashar Assad in Syria and with the President’s signature or a veto override. the Boot,” op-ed, July 14). But one of 2005 he was ousted because he re-
global cyberattacks. By signing, Mr. Trump will at least share in the his sharpest observations concerns a fused to let Morgan Stanley take huge
disturbing trend that receives too little risk positions, dramatically increase
The bills also levies sanctions on Iran for ter- credit and send a message to Mr. Putin.
notice. An activist investor, who may leverage and get involved in the sub-
rorism funding and its efforts to destabilize the Republicans in Congress deserve credit for represent 4% or less in total company prime mortgage fiasco.
Middle East. As part of a compromise between holding a GOP President to greater scrutiny ownership, nevertheless negotiates to Looking at the market collapse two-
the House and Senate, it also incorporates than Democrats were ever willing to impose on replace a third or more of the total plus years later, Mr. Purcell was a sage
North Korea sanctions, taking aim at Kim Jong Barack Obama. The Congressional liberals who board with his own slate. As corporate unappreciated in his time.
Un’s nuclear program. are now crowing about this executive check boards are increasingly expected to ROGER A. KEATS
The big change is a compromise over how Con- blocked Republicans from oversight over Mr. take on the characteristics of an elected Morgan Stanley Branch Manager
gress holds the Trump Administration to account Obama’s Iranian sanctions. They also let Mr. parliament, this power seems like the (1998-2005)
on implementing these penalties. House Demo- Obama avoid submitting the Iran deal to the opposite of representative democracy. Dripping Springs, Texas
crats wanted the power to introduce legislation Senate as the treaty it was, where it would have RALPH WARD
Editor, Boardroom Insider
to block the President if he removed sanctions—a needed 67 votes. Letters intended for publication should
Riverdale, Mich. be addressed to: The Editor, 1211 Avenue
significant break with traditional House minority We generally support presidential flexibility
of the Americas, New York, NY 10036,
rights. Negotiators instead crafted a deal by on sanctions, but Mr. Trump’s flirtation with Mr. I’m not sure there’s a better exam- or emailed to wsj.ltrs@wsj.com. Please
which any Senator can introduce a resolution of Putin has brought this bill’s limitation on him- ple than Philip J. Purcell, the former include your city and state. All letters
disapproval against the Administration if it lifts self. Russia needs to see that there is a political chairman of Morgan Stanley are subject to editing, and unpublished
sanctions. If that resolution passes the Senate, it consensus in the U.S. that won’t tolerate med- (1997-2005) who engineered Dean letters can be neither acknowledged nor
returned.
is then heard in expedited fashion in the House. dling in U.S. elections. Witter, Discover & Co.’s acquisition of
THE WALL STREET JOURNAL.
Trump Is Woody Allen Without the Humor
DECLARATIONS
By Peggy Noonan
P
resident Trump’s primary
problem as a leader isn’t
that he is impetuous, brash
or naive. It’s not that he is
inexperienced, crude, an
outsider. It is that he is weak and
sniveling. It is that he undermines
himself almost daily by ignoring tra-
ditional norms and forms of Ameri-
can masculinity.
He’s not strong and self-
controlled, not cool and tough, not
low-key and determined; he’s whiny,
weepy and self-pitying. He throws
himself, sobbing, on the body politic.
He’s a drama queen.
Half his tweets show
utter weakness. They are
plaintive, shrill little cries,
usually just after dawn.
It was once said, sarcastically, of
George H.W. Bush that he reminded
everyone of her first husband. Trump
must remind people of their first
wife. Actually his wife, Melania, is
tougher than he is with her stoicism
and grace, her self-discipline and de-
sire to show the world respect by
presenting herself with dignity.
Half the president’s tweets show
utter weakness. They are plaintive,
shrill little cries, usually just after
dawn. “It’s very sad that Republi-
cans, even some that were carried
over the line on my back, do very
little to protect their president.”
The brutes.
Actually they’ve been laboring to
be loyal to him since Inauguration
Day. “The Republicans never dis-
cuss how good their health care bill
With Sharif’s Ouster, Pakistan Takes a Step Backward
By Sadanand Dhume
A
s Pakistan approaches the 70th
anniversary of its founding next
month, it just presented the
world with an oddly familiar sight: a
civilian prime minister dismissed be-
fore the end of his term.
On Friday, the Supreme Court dis-
qualified Prime Minister Nawaz
Sharif from his position for not
meeting the constitutional require-
ment of being sadiq and ameen, Is-
lamic terms that roughly translate as
“truthful” and “trustworthy.” Mr.
Sharif has announced that his youn-
ger brother, Punjab province Chief
Minister Shehbaz Sharif, will be his
successor.
For Nawaz Sharif’s many foes, in-
cluding those in the all-powerful
army and its historical ally, the judi-
ciary, the dismissal represents the
triumph of rule of law over corrup-
tion in public life.
Last year, the so-called Panama
papers—leaked documents that fo-
cused on a shadowy law firm that
provides financial services to some
of the world’s ultrawealthy—re-
vealed that three of Mr. Sharif’s chil-
dren owned offshore assets that the
prime minister hadn’t disclosed on a
wealth statement. These included
apartments in London’s upmarket
Mayfair area.
Mr. Sharif hasn’t been convicted
of corruption. The immediate
grounds for his dismissal lie in not
reporting income he allegedly re-
ceived from a family firm in the
United Arab Emirates. But in popu-
lar perception his dismissal is linked
to the alleged corruption suggested
by the Panama revelations. Mr.
Sharif and his family strongly deny
all such charges.
Despite being cloaked in the rule
of law, Mr. Sharif’s disqualification
marks a setback for Pakistan’s shaky
democracy. A tweet by the country’s
former ambassador to the U.S., Hu-
sain Haqqani, summed up the prob-
lem: “Pakistan stays faithful to its 70-
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is.” True, but neither does Mr.
Trump, who seems unsure of its
content.
In just the past two weeks, of the
press, he complained: “Every story/
opinion, even if should be positive, is
bad!” Journalists produce “highly
slanted & even fraudulent reporting.”
They are “DISTORTING DEMOC-
RACY.” They “fabricate the facts.”
It’s all whimpering accusation and
finger-pointing: Nobody’s nice to me.
Why don’t they appreciate me?
His public brutalizing of Attorney
General Jeff Sessions isn’t strong,
cool and deadly; it’s limp, lame and
blubbery. “Sessions has taken a
VERY weak position on Hillary Clin-
ton crimes,” he tweeted. Talk about
projection.
He told the Journal’s Michael C.
Bender he is disappointed in Mr. Ses-
sions and doesn’t feel any particular
loyalty toward him. “He was a sena-
tor, he looks at 40,000 people and he
probably says, ‘What do I have to
lose?’ And he endorsed me. So it’s
not like a great loyal thing about the
endorsement.”
Actually, Mr. Sessions supported
him early and put his personal credi-
bility on the line. In Politico, John J.
Pitney Jr. of Claremont McKenna
College writes: “Loyalty is about
strength. It is about sticking with a
person, a cause, an idea or a country
even when it is costly, difficult or
unpopular.” A strong man does that.
A weak one would unleash his re-
sentments and derive sadistic plea-
sure from their unleashing.
The way American men used to
like seeing themselves, the template
they most admired, was the strong si-
lent type celebrated in classic
mid-20th century films—Gary Cooper,
Henry Fonda, John Wayne. In time
the style shifted, and we wound up
with the nervous and chattery. More
than a decade ago the producer and
writer David Chase had his Tony So-
prano mourn the disappearance of
the old style: “What they didn’t know
is once they got Gary Cooper in touch
year tradition: No PM ever removed
by voters; only by judges, generals,
bureaucrats or assassins.”
The Supreme Court’s order repre-
sents an aspect of Pakistan that sets
it apart from most of its South
Unlike most countries in
South Asia, the Islamic
republic won’t allow
democracy to take root.
Asian peers. Pakistani elites appear
unwilling to put up with flawed
leaders as the cost of democracy.
Bangladesh, India, Nepal and Sri
Lanka have also had their share of
less-than-perfect leaders. Unlike
Pakistan, they have all allowed vot-
ers to punish poor rulers by turfing
them out, and to reward relatively
good ones with re-election.
The exit of Mr. Sharif, elected
(and dismissed) three times since
1990, also signals a setback for the
long-term U.S. goal of encouraging
civilian supremacy over the military.
No other Pakistani politician has the
heft to claw back power over na-
tional security and foreign policy
from unelected generals who tradi-
tionally call the shots.
As long as the army dominates
Pakistan, claiming a large chunk of
the national budget and ensuring
lavish lifestyles for its officers, the
country will remain unable to make
the investments in health and edu-
cation it needs to catch up with its
peers in Asia. Without civilian
oversight, the army’s deeply in-
grained hostility toward India, sus-
picion of the U.S., fealty toward
China and support for terrorist
proxies in Afghanistan and India
are unlikely to end.
Mr. Sharif’s well-publicized desire
to normalize relations with India
placed him at odds with the army.
Those celebrating his exit most glee-
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OPINION
with his feelings they wouldn’t be
able to shut him up!”
The new style was more like that of
Woody Allen. His characters couldn’t
stop talking about their emotions,
their resentments and needs. They
were self-justifying as they acted out
their cowardice and anger.
But he was a comic. It was funny.
He wasn’t putting it out as a new
template for maleness. Donald
Trump now is like an unfunny
Woody Allen.
Who needs a template for how to
be a man? A lot of boys and young
men, who’ve grown up in a culture
confused about what men are and do.
Who teaches them the real dignity
and meaning of being a man? Mostly
good fathers and teachers.
Luckily Mr. Trump last week ad-
dressed the Boy Scout Jamboree in
West Virginia, where he represented
to them masculinity and the moral
life. “Who the hell wants to speak
about politics when I’m in front of
the Boy Scouts, right?”
But he overcame his natural reti-
cence. We should change how we re-
fer to Washington, he said: “We
ought to change it from the word
‘swamp’ to perhaps ‘cesspool’ or per-
fully include the former military dic-
tator Pervez Musharraf (1999-2008)
and the cricketer-turned-politician
Imran Khan, who is widely regarded
as a potential prime minister more
palatable to the generals in Rawal-
pindi. Many analysts expect Mr.
Khan to be the primary beneficiary
of the Sharif family’s troubles in
elections due next year.
Historical patterns notwithstand-
ing, this was not how things were
meant to turn out in Pakistan. Mr.
Sharif’s election four years ago
marked a hopeful turn for the coun-
try’s democracy. Thanks in large part
to a strong showing in Punjab, the
country’s most populous province,
the Sharifs’ right-of-center Pakistan
Muslim League comfortably ousted
the left-of-center Pakistan Peoples
Al Gore Misses a Few Inconvenient Facts
By Bjorn Lomborg
T
hey say the sequel is always
worse than the original, but Al
Gore’s first film set the bar
pretty low. Eleven years ago, “An In-
convenient Truth” hyped global
warming by relying more on scare
tactics than science. This weekend
Mr. Gore is back with “An Inconve-
nient Sequel: Truth to Power.”
The former vice president has a
poor record. Over the past 11 years Mr.
Gore has suggested that global warm-
ing had caused an increase in torna-
does, that Mount Kilimanjaro’s glacier
would disappear by 2016, and that the
Arctic summers could be ice-free as
soon as 2014. These predictions and
claims all proved wrong.
“An Inconvenient Truth” pro-
moted the frightening narrative that
higher temperatures mean more ex-
treme weather, especially hurri-
canes. The movie poster showed a
hurricane emerging from a smoke-
stack. Mr. Gore appears to double
down on this by declaring, “Storms
get stronger and more destructive.
Watch the water splash off the city.
This is global warming.”
This is misleading. The Intergov-
ernmental Panel on Climate Change—
in its Fifth Assessment Report, pub-
lished in 2013—found “low
confidence” of increased hurricane ac-
tivity to date because of global warm-
ing. Storms are causing more damage,
but primarily because more wealthy
people choose to live on the coast, not
because of rising temperatures.
Even if tropical storms strengthen
by 2100, their relative cost likely will
decrease. In a 2012 article for the
journal Nature Climate Change, re-
searchers showed that hurricane
damage now costs 0.04% of global
gross domestic product. If climate
change makes hurricanes stronger,
absolute costs will double by 2100.
But the world will also be much
wealthier and less vulnerable, so the
total damage is estimated at only
0.02% of global GDP.
CHAD CROWE
haps to the word ‘sewer.’ ” Washing-
ton is not nice to him and is full of
bad people.
“As the Scout Law says, ‘A Scout
is trustworthy, loyal—we could use
some more loyalty, I will tell you
that.” He then told them the appar-
ently tragic story of a man who was
once successful. “And in the end he
failed, and he failed badly.”
Why should he inspire them, show
personal height, weight and dignity,
support America’s frail institutions?
He has needs and wants—he is an-
gry!—which supersede pesky, long-
term objectives. Why put the amor-
phous hopes of the audience ahead
of his own, more urgent needs?
His inability—not his refusal, but
his inability—to embrace the public
and rhetorical role of the presi-
dency consistently and construc-
tively is weak.
“It’s so easy to act presidential
but that’s not gonna get it done,” Mr.
Trump said the other night at a rally
in Youngstown, Ohio.
That is the opposite of the truth.
The truth, six months in, is that he is
not presidential and is not getting it
done. His mad, blubbery petulance
isn’t working for him but against
Party, which is closely associated
with the family of former prime min-
ister Benazir Bhutto.
With the business-friendly Mr.
Sharif in power for the third time,
and his brother in charge of Punjab, it
looked like the civilian government in
Islamabad stood a reasonable chance
of wresting authority from the gener-
als in nearby Rawalpindi.
Four years later those hopes lie
in tatters. Though the army hasn’t
formally seized power, its finger-
prints are all over Mr. Sharif’s dis-
qualification. Of the six-member
team set up after the Panama scan-
dal broke, two investigators were
army officers nominated by military
intelligence agencies. Both the speed
of the inquiry and the judiciary’s
willingness to evict an elected prime
In the new film, Mr. Gore ad-
dresses “the most criticized scene”
of his previous documentary, which
suggested that “the combination of
sea-level rise and storm surge
would flood the 9/11 Memorial site.”
Then viewers are shown footage of
Manhattan taking on water in 2012
after superstorm Sandy, apparently
vindicating Mr. Gore’s claims. Never
mind that what he actually pre-
dicted was flooding caused by melt-
ing ice in Greenland.
Eleven years after his
first climate-change film,
he’s still trying to scare
you into saving the world.
More important is that Mr. Gore’s
prescriptions—for New York and the
globe—won’t work. He claims the an-
swer to warming lies in agreements
to cut carbon that would cost tril-
lions of dollars. That wouldn’t have
stopped Sandy. What New York really
needs is better infrastructure: sea
walls, storm doors for the subway,
porous pavement. These fixes could
cost around $100 million a year, a
bargain compared with the price of
international climate treaties.
Mr. Gore helped negotiate the
first major global agreement on cli-
mate, the Kyoto Protocol. It did noth-
ing to reduce emissions (and there-
fore to rein in temperatures),
according to a March 2017 article in
the Journal of Environmental Eco-
nomics and Management. Un-
daunted, Mr. Gore still endorses the
same solution, and the new docu-
mentary depicts him roaming the
halls of the Paris climate conference.
By 2030 the Paris climate accord
will cost the world up to $2 trillion a
year, mostly in lost economic growth,
according to the best peer-reviewed
energy-economic models. It will re-
main that expensive for the rest of
Monday, July 31, 2017 | A11
him. If he were presidential he’d be
getting it done—building momen-
tum, gaining support. He’d be over
50%, not under 40%. He’d have
health care, and more.
We close with the observation
that it’s all nonstop drama and
queen-for-a-day inside this hothouse
of a White House. Staffers speak in
their common yet somehow colorful
language of their wants, their com-
plaints. The new communications
chief, Anthony Scaramucci, who in
his debut came across as affable and
in control of himself, went on CNN
Thursday to show he’ll fit right in.
He’s surrounded by “nefarious, back-
stabbing” leakers. “The fish stinks
from the head down. But I can tell
you two fish that don’t stink, and
that’s me and the president.”
He’s strong and well connected:
“I’ve got buddies of mine in the FBI”;
“Sean Hannity is one of my closest
friends.” He is constantly with the
president, at dinner, on the phone, in
the sauna snapping towels. I made
that up. “The president and I would
like to tell everybody we have a very,
very good idea of who the leakers
are.” Chief of Staff Reince Priebus
better watch it.
There are people in the White
House who “think it is their job to
save America from this president,
okay?” So they leak. But we know
who they are.
He seemed to think this diarrheic
diatribe was professional, the kind of
thing the big boys do with their me-
dia bros. But he came across as just
another drama queen for this war-
ring, riven, incontinent White House.
As Mr. Scaramucci spoke, the histo-
rian Joshua Zeitz observed wonder-
ingly, on Twitter: “It’s Team of Rivals
but for morons.”
It is. And it stinks from the top.
Meanwhile the whole world is
watching, a world that contains
predators. How could they not be
seeing this weakness, confusion and
chaos and thinking it’s a good time
to cause some trouble?
minister on what amounts to a tech-
nicality suggest at least a green
light from the army.
Even if the army didn’t orches-
trate Mr. Sharif’s ouster, it will be
the major beneficiary. The prime
minister’s departure sends a clear
signal to politicians that they wrestle
with the men in khaki at their own
peril. With no domestic pressure on
the generals to reform, Pakistan will
remain what the Singaporean scholar
Tan Tai Yong calls a garrison state
dominated by the army. For the nu-
clear-armed Islamic republic’s 190
million people, dreams of a stable
democracy will have to wait.
Mr. Dhume is a resident fellow at
the American Enterprise Institute
and a columnist for WSJ.com.
the century. This would make it the
most expensive treaty in history.
And for what? Just ahead of the
Paris conference, the United Nations
Framework Convention on Climate
Change estimated that if every coun-
try fulfills every promised Paris car-
bon cut between 2016 and 2030, car-
bon-dioxide emissions will drop by
only 60 gigatons over that time
frame. To keep the temperature rise
below 2 degrees Celsius, the world
must reduce such emissions nearly
6,000 gigatons over this century, ac-
cording to the IPCC. A “successful”
Paris agreement wouldn’t even come
close to solving the problem.
Mr. Gore argues that the Paris ap-
proach pushes nations and busi-
nesses toward green energy. Per-
haps, but the global economy is far
from ready to replace fossil fuels
with solar and wind. The Interna-
tional Energy Agency, in its 2016
World Energy Outlook, found that
0.6% of the world’s energy is sup-
plied by solar and wind. Even with
the Paris accord fully implemented,
that number would rise only to 3% in
a quarter-century.
In part because of activists like
Mr. Gore, the world remains focused
on subsidizing inefficient, unreliable
technology, rather than investing in
research to push down the price of
green energy.
Real progress in Paris could be
found on the sidelines, where philan-
thropist Bill Gates and others, includ-
ing political leaders, agreed to in-
crease spending on research and
development. This is an important
start, but much more funding is
needed.
Mr. Gore declares in his new film
that “it is right to save humanity.”
No argument here. But is using scare
tactics really the best way to go
about it?
Mr. Lomborg is the president of
the Copenhagen Consensus Center
and the author of “The Skeptical En-
vironmentalist” and “Cool It.”
A12 | Monday, July 31, 2017 THE WALL STREET JOURNAL.

LIFE & ARTS

WHAT’S YOUR WORKOUT? | By Jen Murphy

Leaving Runners in the Dust

A globally competitive race walker smokes rivals on the track; a low-key approach to gear and diet
IF RICHARD LUETTCHAU II wore his shoulders and upper back. Ev-
a Fitbit, it might melt down. As a ery morning he turns on ESPN in
competitive race walker, he clocks his living room and spends 10 to
steps at a faster pace than the av- 15 minutes performing 100 push-
erage adult runs. “The movement ups, 200 sit-ups and a sets of for-
looks like a wonky tango, so it’s ward and lateral raises with 10-
easy to mock,” he says. “But it’s pound dumbbells.
incredibly difficult.”
Mr. Luettchau, a geographic in- The Diet
formation specialist at Mott Mac- Mr. Luettchau is the first to admit
Donald, an engineering consultancy he has terrible eating habits. “I’m
in Iselin, N.J., is a runner at heart. 148 pounds soaking wet and 5 feet,
After a successful high school cross- 10 inches,” he says. “I eat whatever
country career, he went on to race I want, whenever I want.” He aver-
cross-country and track at Stockton ages breakfast three mornings a
University in Galloway, N.J. But he week: apple juice and a bowl of Rice
struggled with injuries. “By sopho- Krispies with 2% milk. He packs a
more year I wasn’t fast enough to lunch of pretzels, Gatorade and a
score at the conference meets,” he turkey sandwich with cheese and
says. “So my coach asked if I mayo on white bread. Mr. Luettchau
wanted to try race walking.” Skepti- avoids whole grain bread. “I think it
cal but wanting to contribute to the tastes like cardboard,” he says. He
team, Mr. Luettchau gave it a try. has pasta for dinner at least twice a
He was a natural. week. “A go-to is poor man’s
“There were some jokes when I chicken parm,” he says. “I dump a
started training, but once I proved box of frozen Perdue chicken nug-
I was good, the teasing ended,” he gets into my pasta and sauce.” He
says. “None of my friends will race has a weakness for brownies.
me. No one wants to get beat by a
walker.” The Gear & Cost
Race walking requires the Mr. Luettchau is a minimalist when
walker to be in contact with the it comes to gear. “I don’t use GPS or

ADRIENNE GRUNWALD FOR THE WALL STREET JOURNAL

ground at all times. Only when the anything fancy,” he says. “I bought
front foot’s heel touches down can my basic Coleman watch for $20 off
the back foot’s toe lift off. And the of Amazon.” He typically goes
race walker’s knee must stay through three to five pairs of sneak-
straight through the leg swing. “It ers a year, at roughly $65 per pair.
sounds easy,” he says. “But it defi- He runs in Asics-Gel Cumulus and
nitely limits your speed. When you race walks in Asics GT-1000s.
run, you can float.” “I look for clearance deals at the
Mr. Luettchau, 32, says he still Richard Luettchau II stretches, right, outlet stores or coupons from re-
prefers running. But he’s interna- and sets his watch, above, before a tailers like Kohl’s and they end up
tionally competitive at race walking, race-walking training session at a being a pretty decent price,” he
so he keeps at it. He was the USA park in Edison, N.J., top. says. He spends $85 to $100 on his
Track & Field national champion in racing sneakers, Asics Gel-DS
the 10,000-meter race walk in 2013 my body,” he says. Mr. Luettchau Racer, but says they last all year.
and qualified for Olympic trials in and his wife live in Bridgewater, N.J. “Clothing is always tough for me,
the 20-kilometer race in 2012 and a pace to turn most runners green used to.” Thursdays he might do since I have longer legs and a short
2016. He will compete July 30 at The Workout with envy. Tuesday he does ¼-mile 200-meter repeats with 30 seconds torso,” he says. “I find myself wear-
the USATF 10,000-meter Race Walk Mr. Luettchau does a 45-minute repeats, with 30 seconds of recov- of recovery, but not as intensely as ing the C9 brand from Target.”
Championships in Manalapan, N.J. workout after work Monday ery, for 3,000 meters. Wednesdays on Tuesdays. Fridays he walks for 20
He race walks January through through Thursday. He alternates he works out at a lighter pace. to 30 minutes for recovery. He goes The Playlist
August and devotes fall to running, race walking at a park and a high “As I’ve gotten older, the rest days long on the weekends, usually walk- “I tried running with music in
racing 5K, 10K and half-marathon school track. Monday he might have become important,” he says. “I ing 75 to 90 minutes, alternating be- ninth grade and realized I changed
distances. “I think alternating both build up to his threshold pace, used to go hard every day, but my tween pavement and dirt trails. my pace based on what beat I was
sports has helped limit injuries in about seven minutes a mile. That’s legs don’t bounce back like they Mr. Luettchau also focuses on listening to, so I stopped,” he says.

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.
-15 1 2 3 4 5 6 7 8 9 10 11 12 3 Veterans Day mo. 33 Shaw with a
-10 clarinet
Riga -5 13 14 15 4 Bonanza finds
0 34 Plus column
Glasgow
Glasg
sgo Moscow
osco 16 17 18 5 Music for entry
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Co
C p h g 5 meditation
10 19 20 36 Harry Potter and
Dublin
D bli 15 6 James Garfield’s Lord Voldemort,
Berlin 21 22 23 24 25 26 middle name
Amsterdam
A t d 20 e.g.
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Warsaw
25 27 28 29 7 Lustful look
London
Lo d
30 37 Caterer’s job
Brussels Frankfurt
k Prague
Pra Kiev
e
35 30 31 32 33 34 8 “Stop! They set 38 Gives an opinion
Munich
h us up!” on, e.g.
Paris
P 35 36 37 38 39
Vienna Warm
Budapest
d p
9 Playbill write-ups 39 Buddy
Geneva 40 41 42
Cold
10 “Sleeper” director 44 Lee or Grant:
Milan Bucharest
h 43 44 45
Stationary Abbr.
11 Quaintly stylish
46 47 48 49 50 51
Showers 12 Quarterback 45 Minions follow
Rome Istanbul
t b 52 53 54 55 Favre them
Madrid
d id Rain
56 57 58 59 60 15 Quick ballroom 46 Far from flavorful
Lisbon
Lisbo
T-storms dance
61 62 63 47 Circle spokes
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64 65 66 Hammer”
Flurries 50 Lowly workers
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Ice HOT STUFF | By Aaron L. Peterson 53 Son of Aphrodite
21 Spa attractions
Global Forecasts City
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Hi Lo W City
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Tomorrow
Hi Lo W
Across 26 Negating word 49 Bus. letter
22 Lusitania sinker
54 Hwys.
s...sunny; pc... partly cloudy; c...cloudy; sh...showers; 1 Church law accompanier 55 Rice Krispies
Geneva 30 20 pc 33 20 t Ottawa 28 13 s 28 17 pc 27 Mistreated
t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice Hanoi 37 29 pc 36 28 pc Paris 26 17 pc 26 16 pc 6 “Thrilla in Manila” 29 Nightmare for a 50 For each 23 Green claymation sound
Havana 31 23 pc 32 23 pc Philadelphia 31 21 s 33 22 s
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City Hi Lo W Hi Lo W Honolulu 30 23 pc 31 24 pc Pittsburgh 29 17 s 29 19 s 9 Fishhook feature 30 Hefty book 28 Mariner’s milieu
Amsterdam 22 14 pc 23 15 pc Houston 34 24 pc 34 25 pc Port-au-Prince 34 23 pc 36 23 pc 52 They’re hot 59 Pack animal
Anchorage 18 13 c 18 13 pc Istanbul 28 23 s 29 24 s Portland, Ore. 32 16 s 36 19 s 13 Love, to Luciano 29 Fair-haired
31 Highway division 56 Find darling 60 “Shiny Happy
Athens 32 24 s 31 24 s Jakarta 33 24 pc 32 24 s Rio de Janeiro 27 18 s 27 19 s
Atlanta 31 19 s 30 21 s Johannesburg 18 6 s 17 7 pc Riyadh 45 28 s 45 29 s 14 Play the ponies 32 Like some straws People” band
Baghdad 46 29 s 48 31 s Kansas City 27 17 pc 28 18 pc Rome 32 20 s 33 22 s
32 Lamb’s lament 57 It’s hot
Baltimore 31 18 s 32 20 s Las Vegas 41 30 s 41 31 pc Salt Lake City 35 21 pc 36 21 s 15 Houston Previous Puzzle’s Solution
footballer until 35 They’re hot 61 Barcelona boys
Bangkok 36 27 pc 34 27 t Lima 21 16 pc 21 16 pc San Diego 25 21 pc 26 22 pc C A R Y R E A C T M E MO
Beijing 32 23 s 30 24 c London 22 13 pc 22 14 pc San Francisco 24 14 pc 25 15 pc 1996 A S H E A L L A H O V A L
40 Pen for porkers 62 Toes tally N A Y S T E A S E R V I C E
Berlin 26 19 t 29 20 t Los Angeles 29 20 pc 31 22 pc San Juan 32 27 pc 32 27 pc A N T I G E N S T E E L Y
Bogota 18 9 c 19 9 r Madrid 35 20 pc 33 19 pc Santiago 18 3 pc 14 1 pc 16 They’re hot 41 Smooth and flat 63 Striker’s demand L A H D I D A H I P O
Boise 38 20 s 39 20 s Manila 31 27 t 32 26 t Santo Domingo 32 24 pc 33 25 pc M I N X O C T A N G L E
18 Nick of “The 42 Lunch for S K I D M A L A Y R O D
Boston 28 19 s 28 20 s Melbourne 15 6 s 15 5 s Sao Paulo 23 14 s 24 15 s 64 Conks out
Brussels 24 15 pc 24 14 pc Mexico City 26 12 pc 26 13 pc Seattle 27 15 s 31 19 s Prince of Tides” aardvarks
I N C R A Y G U N S E L I
L O A E L S I E S E A T
Buenos Aires 15 11 sh 15 10 r Miami 31 26 t 32 28 t Seoul 29 25 t 33 25 pc
19 It’s hot 65 Forerunner of O B L I G A T E G O O N
Cairo 36 25 s 37 26 s Milan 34 23 s 36 23 s Shanghai 35 31 t 36 30 pc 43 Fermented honey 58-Down T A B S O U L F O O D
Calgary 25 13 pc 20 11 c Minneapolis 29 19 pc 30 19 pc Singapore 31 26 pc 31 26 sh drink S E U R A T H I D A L G O
21 Victim of a patio M E A N DM Y G A L B I D E
Caracas 32 26 t 32 26 pc Monterrey 36 23 pc 35 22 pc Stockholm 23 14 pc 24 13 pc
zapper 66 Involuntary jerk O G R E A P A R T E V E R
Charlotte 30 16 s 31 19 s Montreal 26 15 pc 27 18 pc Sydney 18 10 sh 18 10 s 44 Hawn of P A N S N O S E Y D E N S
Chicago 30 19 s 31 20 pc Moscow 24 16 pc 25 15 pc Taipei 33 27 c 36 27 t 24 Shapely leg, in “Private Down
Dallas 34 24 pc 31 23 pc Mumbai 31 27 sh 30 26 sh Tehran 37 25 s 36 24 s The contest answer is BADGE. Each of the five
slang Benjamin” 1 Baseball’s Ripken theme answers begins with a homophone of a
Denver 29 15 t 30 13 t Nashville 32 20 s 32 22 s Tel Aviv 33 26 s 33 26 s
Detroit 31 20 pc 32 20 pc New Delhi 31 26 t 31 27 t Tokyo 31 26 pc 30 23 t musical note (ti for TEA, la for LAH, re for RAY, sol
25 “My country, ___ 46 Victoria’s Secret 2 Bordeaux buddy for SOUL and mi for ME). Converting the notes to
Dubai 42 35 s 43 36 c New Orleans 32 24 pc 32 24 pc Toronto 29 18 t 28 20 t
Dublin 18 10 t 19 12 pc New York City 31 22 s 31 23 s Vancouver 24 15 s 27 18 s
of thee...” buy their letter equivalents (in the fixed-do system,
Edinburgh 17 11 t 17 10 t Omaha 29 18 pc 30 19 pc Washington, D.C. 32 21 s 33 22 s where do is C, re is D, etc.) yields the contest
Solve this puzzle online and discuss it at WSJ.com/Puzzles.
s

Frankfurt 27 20 t 31 20 t Orlando 29 23 t 30 23 t Zurich 29 18 pc 32 19 pc answer.

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© 2017 Dow Jones & Co. Inc. All rights reserved. 6DJ5620

BUSINESS & FINANCE
© 2017 Dow Jones & Company. All Rights Reserved.
Euro vs. Dollar 1.1748 À 0.61%
RICHARD B. LEVINE/LEVINE ROBERTS/NEWSCOM/ZUMA PRESS
The average price that U.S. consumers paid for a dozen eggs last month was $1.33, down 48% from two years ago.
Cheap Eggs Flood U.S. Stores
Poultry farmers and suppliers are struggling to win back customers after an avian-flu outbreak
BY JESSE NEWMAN
AND JACOB BUNGE
A glut of eggs is putting
pressure on suppliers and
farmers who are struggling to
win back business two years
after the worst bout of avian
influenza in U.S. history dev-
astated egg-laying flocks.
Poultry farms in the U.S.
have fully restocked and re-
built egg supplies since the
outbreak but demand hasn’t
kept up. Some buyers who
found alternatives during the
outbreak haven’t returned.
Egg prices are near a decade
low, a situation that cheers
shoppers in grocery aisles but
is spurring losses for industry
giants and farmers alike.
“We do not expect to see
any meaningful improvement
until there is a better balance
of supply and demand,” said
Dolph Baker, the chief execu-
tive of Cal-Maine Foods Inc.,
the largest U.S. egg supplier
by sales. The company last
Monday blamed the egg glut
for its first annual loss in
more than a decade, adding
that the average price of eggs
sold to its customers dropped
42% over the past year.
Large shell eggs, the type
sold at the grocery store, cost
98 cents a dozen at wholesale
in the U.S. Midwest, a 62%
drop over the past two years,
according to market-research
firm Urner Barry. Wholesale
prices reported by the firm
Private-Equity Firms Activists Challenge Plan for DowDuPont
Faulted for Retail Woes
BY LILLIAN RIZZO
The retail industry’s woes
are often blamed on e-com-
merce and an excessive num-
ber of brick-and-mortar stores.
Here’s another potential cul-
prit: private-equity investors.
Some of these investors
took over retailers including
Payless ShoeSource Inc.,
Gymboree Corp., rue21 Inc.,
and True Religion Apparel
Inc. during the last decade.
The deals not only loaded debt
onto the companies, but, in
some instances after the ini-
tial takeovers, the owners had
the companies borrow more
money to pay themselves divi-
dends. Now, creditor lawyers
are investigating whether pri-
vate-equity firms accelerated
the financial collapse of some
of these companies.
In the case of Payless, in-
vestors Golden Gate Capital
and Blum Capital, after a
leveraged buyout in 2012,
over the next two years paid
themselves $350 million in
dividends—in total putting
more than $700 million in
debt on the company. In
TECHNOLOGY: CANADA MAKES A RECRUITING PUSH B4
FTSE 100 7368.37 g 1.00%
Egg Drop
As egg-laying hen populations have rebounded from an historic
avian-influenza outbreak, egg prices have plunged.
U.S. table egg-laying
chicken population
350 million chickens
310M
300
250
200
150
100
50
Major bird flu
outbreak
0 0
2012 ’13 ’14 ’15 ’16 ’17
Sources: USDA (population); Urner Barry (prices)
declined to 10-year lows in
2016 and haven’t averaged
more than $1 a dozen on a
weekly basis all this year. The
average price U.S. consumers
paid for a dozen eggs last
month was $1.33, down 48%
from two years ago, according
to federal data.
“This is historic,” said Brian
Moscogiuri, an analyst who
tracks the egg market for
Urner Barry.
Earlier in the decade, the
egg market enjoyed a strong
run thanks to consumers’
growing appetite for protein
and all-day breakfast offerings
2016, Payless said in court
papers, it had about $2.3 bil-
lion in global net sales, and
nearly $840 million in debt.
Vendors and landlords al-
leged in court papers that the
dividends, along with other
payments to the investors,
left the retailer vulnerable
just as technology and shift-
ing consumer behavior up-
ended the retail industry.
“The depletion of their cof-
fers put the company on a
dangerous path that ulti-
mately led to this instant
bankruptcy filing,” a group of
Payless’s unsecured creditors
said in June court papers.
A spokeswoman for Golden
Gate said that the firm sup-
ported Payless, alongside
Blum, since the company’s
2012 acquisition, through in-
vestments in critical systems
and operational support.
Blum didn’t respond to re-
quests for comment.
Bankruptcy cases are messy
by nature, and creditors—typi-
cally facing losses—are often
determined to minimize them.
In the case of Payless, which
Please see DEBT page B2
THE WALL STREET JOURNAL.
Gold 1268.40 À 0.67%
U.S. wholesale price for a dozen
large white eggs in the Midwest
$3.00 a dozen
2.50
2.00
1.50
$0.98
1.00
0.50
2012 ’13 ’14 ’15 ’16
THE WALL STREET JOURNAL.
at restaurant chains. But bird
flu led to the destruction of 34
million egg-laying hens as it
struck farms in 2015.
The resulting egg shortfalls
and record high prices drove
producers to quickly refill
their barns, bringing the na-
tion’s egg-laying hen popula-
tion to a record high of 319
million in December 2016, ac-
cording to the U.S. Depart-
ment of Agriculture. The U.S.
flock overall has shrunk since
then, but egg production in
June still totaled about 7.5 bil-
lion, close to the monthly re-
cord of eight billion reached
BY DAVID BENOIT
MIDLAND, Mich.—Andrew
Liveris is days away from
what was supposed to be his
crowning achievement: merg-
ing Dow Chemical Co. with
longtime rival DuPont Co.
But instead of celebrating
his legacy, Mr. Liveris is fight-
ing for it. A quartet of well-
known activist investors, in-
cluding Jana Partners LLC
and Trian Fund Management
LP, has lined up to challenge
the plans taking shape to
break apart DowDuPont. The
$150 billion company is set to
be created in August upon the
deal’s close.
The investors’ unrest could
spur an unprecedented, multi-
pronged attack on Mr. Liveris,
who has led Dow Chemical for
13 years and whom the activ-
ists view as a roadblock. An
escalating dispute could fur-
ther complicate the daunting
task of splintering DowDuPont
into three companies within
the 18-month timeline execu-
tives have set.
As the companies review
the exact details of the
breakup, these investors are
concerned the final plan won’t
WTI crude 49.71 À 1.37% German Bund yield 0.544%
late last year.
Demand for U.S. eggs hasn’t
rebounded nearly as quickly.
U.S. egg exports have
picked up this year, but they
remain below levels seen be-
fore the onset of bird flu as
buyers such as Mexico and
Canada import eggs from al-
ternative suppliers or produce
more themselves. According
to the USDA, the U.S. ex-
ported the equivalent of 170
million dozen eggs last year,
or 55% less than the 375 mil-
lion dozen shipped overseas
in 2014.
Some U.S. food makers like
bakeries and other companies
that use egg products also
have been slow to embrace
eggs again. High prices com-
’17 pelled some to reformulate
their recipes, substituting in
ingredients such as soy or
whey protein or simply mak-
ing do with fewer eggs.
Recent bird-flu outbreaks
on farms across Europe and
Asia have given food companies
further cause to stick with egg
alternatives rather than risking
another supply disruption, in-
dustry officials say. Another de-
terrent is the time and expense
of changing their labels back to
include eggs.
Stockpiles of dried eggs, an
egg product used in goods
such as cake mixes, topped 30
million pounds earlier this
year, the highest level in a de-
cade, according to Urner
Barry’s Mr. Moscogiuri.
Andrew Liveris, Dow Chemical’s CEO, is fighting for the deal.
deviate much from the original
one outlined when the deal
was announced in December
2015. Their main complaint:
The materials company ex-
pected to emerge from the
breakup, the new version of
Dow Chemical, looks too much
like the current Dow and
needs to shrink.
Dow shareholder Third
Point LLC has publicly called
for changes to the original
breakup plan. Fellow Dow
Monday, July 31, 2017 | B1
10-Year Treasury yield 2.291%
Samsung
Topples Intel
In Chip Sales
Samsung Electronics Co., dustry analysts expect Samsung
the South Korean technology to maintain at least through the
company best known for its end of this year as a shortage
smartphones and television of memory chips persists.
sets, has taken the title of Samsung, which started
making chips for wristwatches
By Timothy W. Martin in the 1970s, has more re-
in Seoul and cently become a dominant
Ted Greenwald player in two major types of
in San Francisco memory chips: one for data
storage, known as NAND, and
world’s largest chip maker by another, known as DRAM, that
revenue, knocking Intel Corp. gives devices their multitask-
from a perch it held for nearly ing speed by holding data
a quarter-century. needed in the short term.
Samsung’s semiconductor
unit, whose fortunes come
largely from selling memory
chips used in mobile devices,
South Korean firm
delivered second-quarter sales is expected to keep its
of $15.7 billion and operating
profit of $7.1 billion. Intel,
lead this year amid a
which dominates the calculat- memory-chip shortage.
ing engines known as micro-
processors, reported quarterly
revenue of $14.8 billion and
operating profit of $3.8 billion. A surge in demand for mem-
It marks the first quarter in ory has caused prices to soar
which Samsung, for years a dis- over the past year, benefiting
tant No. 2 to Intel in the Samsung. NAND prices rose 50%
roughly $365 billion semicon- and DRAM prices jumped 115%
ductor industry, has topped the on the spot market over the
Santa Clara, Calif.-based chip past year, according to
pioneer in semiconductor sales, DRAMeXchange, which tracks
according to IC Insights Inc., a sales and prices. But some pre-
semiconductor-market re- dict supply will become re-
searcher. It is an advantage in- Please see CHIPS page B4
KEYWORDS | By Christopher Mims
Why an iPhone Priced
At $1,400 Isn’t Crazy
How much Yet there is plenty of evi-
would you pay dence that those who say
for an iPhone? that price is untenable will
This Sep- be eating crow come fall.
tember, Apple The launch of a pricey
will unveil not new iPhone would have big
just the usual two new implications for Apple’s fi-
iPhones, but also an ultra- nancials, and it would bode
deluxe 10th-anniversary well for Apple’s continued
model, according to reports dominance in mobile phones.
from multiple analysts. They Here are five reasons for Ap-
expect this device to include ple to go big, pricewise:
premium features such as an
OLED screen, 3-D imaging
and a retina scanner, and Boosting the Brand
they expect it to command a An ultraexpensive edition
premium price, between of the iPhone makes sense as
$1,000 and $1,400, depend- a shot in the arm for the
ing on whom you ask. whole brand. Apple’s slow
The speculation has met and steady approach to add-
with howls of protest from ing new features and incre-
some Apple watchers. At mentally refining its gadgets
$1,400, it would cost twice has given us a powerful de-
what an entry-level iPhone 7 vice with a thriving ecosys-
does—and nearly twice Please see MIMS page B4
what the potentially compa-
rable Samsung Galaxy S8  Apple removes apps in nod
now costs. to China’s censors................... B4
on whether corporate defend-
ers have regained ground in
arguing that breadth of busi-
ness is needed to ensure sta-
bility and spur innovation and
gains over the long term.
A review of the original
breakup plan—which called for
DowDuPont to be broken up
into three firms focused on
materials, agriculture and spe-
F. CARTER SMITH/BLOOMBERG NEWS
cialty chemicals—was
launched in May and is ex-
pected to be completed before
the deal closes. Dow Chemical
has said Mr. Liveris, 63 years
old, will remain another year
as DowDuPont’s executive
chairman instead of retiring
this year as planned.
“The sole focus should be
on creating the right number
holders Jana and Glenview of spinoff entities and stocking
Capital Management LLC and them with the right assets to
DuPont investor Trian have position each to create maxi-
privately made their own mum long-term shareholder
cases, according to people fa- value, and not on empire-
miliar with the matter. building or ego-massaging by
A war on multiple fronts Mr. Liveris or anyone else,”
would be the clearest test yet Jana founder Barry Rosenstein
of whether activists’ cam- said in an email.
paigns, brought to companies In an interview from his of-
such as General Electric Co. fice, Mr. Liveris called such as-
and Kraft Foods Inc., can keep sumptions “BS.” He said the
slimming down companies. next iteration of Dow Chemical
The outcome could shed light Please see DEAL page B2
 B2 | Monday, July 31, 2017 THE WALL STREET JOURNAL.

INDEX TO BUSINESSES BUSINESS & FINANCE

These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.

A
Amazon.com..........B3,B8
Anadarko Petroleum...B2
Apple...........................B4
B
Barclays.......................A1
Blum Capital...............B1
C Holdings....................A2
Cal-Maine Foods.........B1
Canyon Bridge
Capital Partners ....... B7
Chevron ....................... B3
China Minsheng
Banking....................B7
China Reform
Holdings...................B7
Chubb .......................... A2
CK Hutchison
Holdings...................B2
Comcast.......................B3
Exxon Mobil................B3
F-G
Fulfil.IO........................B4
Golden Gate Capital... B1
Gymboree....................B1
H Real Matters...............B4
Hilton Worldwide
Honeywell
International ........... A2
Hubba..........................B4
I-J
Intel.............................B1
I Squared Capital........B2
Jana Partners ............. B1
J.P. Morgan Chase A2,B5
L
Lattice
Semiconductor..........B7
Pioneer Natural
Resources..................B2
Platterz ....................... B4
Prudential Financial ... A2
R
Shale Gets Investor Scrutiny
BY LYNN COOK
AND ALISON SIDER
Royal Dutch Shell.......B3
rue21 ........................... B1
Some American oil produc-
S
ers might be pumping the
Samsung Electronics..B1
brakes on new drilling, but as
Sony Pictures
Entertainment..........B3 the leading shale players get
Star VPN.....................B4 set to report earnings this
State Street................B5 week, investors will be watch-
Statoil ......................... B3 ing closely to see how much
T the industry is re-
Tesla............................B3 THE ally slowing its
Toshiba........................B2 WEEK ambitious plans
Total ............................ B3 AHEAD for growth.
Trian Fund Investors and an-

MATTHEW BUSCH/BLOOMBERG NEWS

ConocoPhillips.............B2 Lumiata.......................B4
Management ........... B1
Corning...................A2,B2 Lyft..............................B5 alysts are eager to
True Religion Apparel.B1
D M-N hear management teams at Pio-
U-W
Dow Chemical.............B1 Microsoft...............A5,B8 neer Natural Resources Co.,
Uber Technologies ...... B5
DuPont Fabros............ B1 National General EOG Resources Inc. and other
UBS Group .................. A1
E Insurance .................. B5
Wells Fargo.................B5
shale companies detail their
Netflix....................A8,B3 plans for the second half of 2017.
eBay ............................ A5 Western Digital..........B2
EOG Resources ........... B2 P Westinghouse Anadarko Petroleum Corp.
ExpressVPN.................B4 Payless ShoeSource ... B1 Electric.....................B2 and ConocoPhillips already
reported and could serve as

INDEX TO PEOPLE bellwethers for this earnings

season. They lost more than
expected in the second quarter
Machinery used to fracture shale formations at a Royal Dutch Shell site near Mentone, Texas.

A Geithner, Timothy ...... B5
Adamczyk, Darius.......A2
Aguilar, Omar ............. A2
B Sharma, Ray ............... B4
Bezos, Jeff..................B8
Bingham, Ray..............B7
Blaze, Matt.................A5
C-D
Codel, Franklin............B5
Dimon, James.............A2
E-G
Ellison, Megan............B3
Gates, Bill ................... B8
ANDREW HARRER/BLOOMBERG NEWS
Gonnerman, Tobey......B4
Greenberg, Evan.........A2
Guberman, Joel...........B4
H ing. Together, they shaved a
Hammer, Robert.........B5
K-L
Ka-shing, Li.................B2
Krosby, Quincy............A2
Liveris, Andrew...........B1
M-N
Moscogiuri, Brian ....... B1
Musk, Elon..................B3
Nassetta, ChristopherA2
P as crude languished under $50
Probyn, Christopher ... A2 a barrel for most of the pe-
riod, prompting them to an-
S
nounce plans to rein in spend-
Simons, Barbara.........A5
Smith, Gordon.............B5 combined $500 million out of
T their $9.2 billion budgets.
Investors, initially skeptical,
Thomas, Sharoon........B4
came around to the idea of belt
W tightening—when they learned
Weeks, Wendell..........A2
where it was happening. Ana-
Wexler, Trish...............B5 darko’s stock dropped 3% in
Z overnight trade last Monday
Zifkin, Ben .................. B4 after its cuts were announced.
But the stock rallied back
Tuesday morning when Chief
Executive Al Walker and other
executives explained that the
preponderance of cuts would
come from international and
deep-water divisions, not U.S.
shale operations.
In fact, Anadarko is in the
process of restarting 3,000 wells
in Colorado shale country that
shut in the wake of a deadly
home explosion in the spring.
“We’re going to continue to
watch the market, see what oil
prices do, try to pace our
spending this year and next
year,” Mr. Walker said.
ConocoPhillips said it is on
track to end the year with less
than $20 billion in debt, thanks
to extensive oil-and-gas field
sales in Canada and the natural-
gas-rich Barnett Shale near Fort
Worth, Texas. The company is
dialing down spending for the
rest of this year by $200 mil-
lion, but continues to ramp up
in oily areas like the Eagle Ford
shale of South Texas. Conoco
shares rose 6% last week.
While enthusiasm for shale
hasn’t waned, investors are
more wary of companies that
want to increase production at
any cost, said Dan Pickering,
head of the asset-management
arm of investment bank Tudor,
Pickering Holt & Co.
U.S. oil drillers have rede-
ployed more than 240 rigs since
the start of the year, but those
increases are slowing substan-
tially. The second-quarter rig
count was only 23% higher than
the first quarter, and so far in
July it is up just 5% over the
second quarter, according to a
report from RigData.
Even if U.S. energy outfits
take a break from drilling, oil
production is likely to keep
rising. That is because many
producers in the Permian Ba-
sin of West Texas and New
Mexico have hedging contracts
on 65% of their production for
the rest of this year at $50 a
barrel, ensuring they will get
that price even if crude trades
lower, according to a new
analysis from IHS Markit Ltd.
Also, many wells around
Texas have been drilled but not
yet fracked, the so-called com-
pletion stage that unlocks fuel
from the ground. According to
the latest federal estimate, the
number of drilled-but-uncom-
pleted wells is now over
6,000—a backlog that could
take the next 18 months to
work off as wells are hooked up
to pipelines, analyst James
West of Evercore ISI said.
Pioneer, which re-
ports Tuesday, expects to drill
its 1,000th well in the Permian
later this year as it charts a
path to pump one million bar-
rels a day in a decade, up from
a little more than 235,000 bar-
rels a day in 2016.
—Bradley Olson
contributed to this article.

DEBT high-yield bonds were raised

for private-equity-owned retail
borrowers to make dividend
payouts to investors, accord-
Dealing With Debt
Three private-equity-backed retailers in bankruptcy, by the numbers
COMPANY IN BANKRUPTCY
Continued from the prior page ing to LCD, part of S&P Global
moved closer to exiting bank- Market Intelligence. That is on Payless ShoeSource Gymboree True Religion Apparel
ruptcy protection this month, top of the leverage often as-
lenders owed a majority of its sumed in the buyout itself. PRIVATE-EQUITY BACKER
Barry Rosenstein, founder of activist investor Jana Partners. debts will take control of the Gymboree’s June bank- Golden Gate Capital, Bain Capital TowerBrook
company. ruptcy filing occurred days af-

DEAL
Blum Capital Capital Partners
original goal. The retailers’ woes show a ter it couldn’t make a semian-
On top of that, researchers downside of the private-equity nual interest payment on debt DEBT AS OF BANKRUPTCY
are experimenting with mixing investing model. Financiers dating back to Bain Capital’s DEBT FROM LEVERAGED BUYOUT
silicone with chemicals Dow sometimes load companies $1.8 billion 2010 buyout. Pub-
Continued from the prior page has long manufactured, hoping with debt to improve the in- lic filings show Bain also re- $838M $1.09B $535M
will be poised for growth and to discover new materials. vestors’ returns. But if busi- ceived fees from Gymboree in As of filing As of filing As of filing
innovation. “From a customer perspec- ness conditions worsen, it can the years after the buyout. in April in June in July
“I’ve spent a decade rejig- tive, we’re in front of more become difficult for the com- Earlier this month, Gymbo-
gering the company’s portfolio people in more geographies, panies to make interest pay- ree’s unsecured creditors, in-
for the future,” he said. “I will and they can come to us with ments and pay off the debt. cluding vendors and landlords
tell you that I see nothing sa- a problem and we can find the “A large number of private- owed an estimated $220 mil-
cred in the portfolio, ever.” solution,” Chief Financial Offi- equity takeovers of public re- lion, said in court papers they
Both Dow and DuPont say cer Howard Ungerleider said. tailers occurred in the 2011 to have been investigating poten-
everything is on the table dur- The original breakup plan 2013 time frame, when money tial claims against Bain and $382M $1.05B $545M
ing the breakup review, and can be revised if 11 members was cheap and interest rates other insiders. The creditors,
people familiar with the mat- of the DowDuPont board were low,” said restructuring which are slated to receive
From 2012 LBO From 2010 LBO From 2013 LBO
ter say there are likely to be agree. The 16-member board is attorney Walter Curchack of nothing, point to dividends
changes to the original plan. composed of eight directors Loeb & Loeb LLP. “Retail is a and fees received by Bain and Note: Debt as of bankruptcy includes debt owed to banks
Without naming anyone, from each company. cyclical business and there’s its affiliates. Representatives and other lenders. Excludes trade and other creditors.
Sources: Dealogic; bankruptcy filings; public filings THE WALL STREET JOURNAL.
Mr. Liveris said “noisy” inves- Days after the review was little room for error, which for Gymboree and Bain de-
tors who don’t understand the announced in May, Third Point puts an overleveraged retailer clined to comment.
chemicals business are trying released a proposal it said particularly at high risk.” True Religion filed for didn’t respond to requests for related to a so-called advisory
to push him to create value in would add $20 billion in mar- Since 2010, more than $90 chapter 11 protection in early comment. agreement, court papers show.
a spreadsheet. ket value when compared with billion in leveraged loans and July. Shortly after, a junior In 2011, a trustee recover- During that same time, Pay-
He said he wouldn’t judge the original plan. In its quar- debt lender, Ares Management ing cash for creditors of cata- less was also grappling with
the review until it is finished terly letter to investors, Glen- LP, raised concerns about the log retailer Orchard Brands issus such as dwindling mall
but added that any changes view said it largely backed Paying the Boss proposed restructuring plan, Inc. sued Golden Gate, alleging foot traffic and consumers
must take into account how Third Point’s proposal and Dividend-related leveraged loan which will leave the creditor the firm profited from a shifting to spending online.
employees would be affected. raised the prospect of calling a and high-yield bond volume for with a slim recovery while pri- roughly $310 million payout in Since the bankruptcy filing,
The business at the nexus special meeting to replace di- private equity-owned retail vate-equity backer Tower- 2007, loading the company hundreds of Payless stores
of the dispute is Dow Corning, rectors. Trian and Jana have borrowers Brook Capital Partners LP is with debt and putting it on have been closed, and employ-
a pioneer in silicones used in both privately pushed changes, slated to receive the same or “an inevitable and foreseeable ees have been laid off.
products from laundry deter- according to people familiar $20 billion higher return as Ares. Typi- path to bankruptcy,” according For Payless’ creditors, the
gent to building insulation. with the matter. cally in bankruptcy, lenders to court papers. Golden Gate tactic of raising their voice in
In one of its points in the 15 expect to be paid before eq- and the creditors later court paid off, to an extent.
proposal, Third Point esti- uity owners. reached a settlement, people Following heated exchanges in
mated that Dow Corning TowerBrook Capital took involved in the case say. filings and in the courtroom,
The original breakup would be worth $20.4 billion
10
the denim retailer private in a In Payless’s case, creditors as well as private negotia-
plan can be revised based on current valuations of $835 million buyout four years argued that hundreds of mil- tions, the private-equity back-
specialty-chemical firms, com- 5 ago. During the first-day hear- lions of dollars in debt put on ers and lenders have agreed to
if 11 members of pared with $11.9 billion as part ing, an attorney for Ares said the retailer due to Golden give more than $20 million to
the board agree. of a larger materials company. 0 the firm didn’t support the Gate and Blum ultimately led the company, which will be
Other activists say the ma- plan and an investigation may to the retailer’s financial col- used toward beefing up the
terials company should focus 2010 ’11 ’12 ’13 ’14 ’15 ’16 ’17 be needed to better under- lapse. Since the 2012 buyout, creditors’ recoveries. Mean-
on commodity chemicals with Note: Data exclude ‘retail food and drug’ stand TowerBrook’s role. A Payless took on more than while, the creditors have
sector. Amount for 2017 is through June.
Dow Chemical took full owner- low costs and little research, Source: LCD, a part of TowerBrook spokeswoman de- $700 million in debt to sup- agreed not to bring any legal
ship of the longtime joint ven- and silicones would compli- S&P Global Market Intelligence clined to comment, while a port the leveraged buyout, claims against the backers fol-
ture with Corning Inc. in a cate that. Analysts and other THE WALL STREET JOURNAL. True Religion representative dividend recaps and payments lowing the bankruptcy filing.
deal announced the same day investors also have said the

BUSINESS WATCH
as the DowDuPont merger. benefits to be gained by keep-
The activist investors want ing Dow Corning within Dow
Dow Corning’s assets to go to Chemical could be replicated if
the specialty-products com- Dow Corning was placed in the
pany carved out of DowDu- specialty-products company. TOSHIBA exists. Western Digital filed suit Hong Kong’s richest man is sell- TOBACCO
Pont, not the materials firm. Third Point is among the in California state court to block ing its fixed-line telecommunica-
The activists view the new biggest holders in Dow Chem- Partial Truce Is Set sale plans from proceeding. tions business for $1.86 billion. U.S. Raises Pressure
Dow as a commodity company ical. Even after selling some of With Western Digital In Friday’s agreement, entered CK Hutchison Holdings Ltd. On Cigarette Makers
and think more value would be its stake, it still owns $1 bil- as an order by the Superior is selling the telecom business
created if silicones were lion. It, Glenview and Jana to- Toshiba Corp. and Western Court of California in San Fran- to the New York-based private- U.S. health officials said Friday
grouped with other high-mar- gether hold 2.5%. Trian owns Digital Corp. reached a partial cisco, both sides retained the equity firm I Squared Capital. they want tobacco companies to
gin businesses. 1.1% of DuPont. truce in their dispute over their right to make their arguments The business, called Hutchison make all cigarettes with such low
Dow Chemical executives The activists say DuPont memory-chip joint venture in at an international arbitration Global Communications Invest- levels of nicotine that they are no
have emphasized that Dow and its chief executive, Ed- Japan, with Toshiba agreeing to proceeding brought by Western ment Holdings Ltd., provides ser- longer addictive, part of a regula-
Corning fits “hand-in-glove” ward Breen, appear more re- provide notice before it con- Digital. The two sides agreed vices to carriers and other busi- tory overhaul that threatens Big
with traditional chemicals. Ex- ceptive to their ideas than Mr. cludes any deal to sell its inter- that Toshiba would notify West- nesses in Hong Kong. Tobacco’s main moneymaker.
ecutives say having both sili- Liveris is. Mr. Breen told ana- est in the venture. ern Digital two weeks before It is the latest deal for Hong The Food and Drug Adminis-
cones and commodity chemi- lysts last week the review Toshiba has said it plans to any closing of a deal to sell Kong billionaire Li Ka-shing, CK tration also said it would encour-
cals together has helped grow aimed to “ensure maximum sell its memory-chip unit, includ- Toshiba’s chip unit. Hutchison’s owner. Last week, a age smokers to switch to prod-
sales. Dow Corning’s earnings shareholder value is created” ing its joint-venture interests, to —Peter Landers joint venture backed by the ty- ucts such as e-cigarettes that are
before interest, taxes, depreci- and the work was being done raise funds after its U.S. nuclear coon agreed to acquire Ger- less dangerous than cigarettes.
ation and amortization have as fast as it could be. unit, Westinghouse Electric Co., CK HUTCHISON many’s Ista International GmbH, The harm-reduction strategy is a
doubled since the takeover af- Mr. Liveris says he is filed for bankruptcy protection in a maker of metering equipment. break by the U.S. government
ter years of stagnant growth. aligned with Mr. Breen and in March. Western Digital says it I Squared to Acquire A sale price wasn’t disclosed but from an abstinence-only approach
Executives now expect sili- close contact, even briefly tak- has the right to veto any sale Fixed-Line Business the deal valued Ista at €4.5 bil- to fighting tobacco-related dis-
cones to generate $2 billion in ing a call from him during an under its contracts with Toshiba, lion ($5.3 billion). eases and deaths.
additional Ebitda, double the interview for this article. while Toshiba says no such right The conglomerate owned by —Dan Strumpf —Jennifer Maloney
THE WALL STREET JOURNAL. Monday, July 31, 2017 | B3

BUSINESS NEWS

Studio Bets Big to Compete in Hollywood

BY BEN FRITZ “The fact that Megan is rican-Americans by police
Hits and Misses building an independent outfit during riots in 1967 is open-
Hollywood’s newest studio Domestic box office totals of and taking the risks she is tak- ing near the end of a sum-
doesn’t operate out of a ma- previous Annapurna movies ing puts her in a pretty singu- mer packed with big budget
jestic multiacre lot or a sleek released by other studios lar space,” said Dede Gardner, “event” films, known in the
office tower but an unmarked a partner in Brad Pitt’s pro- industry as “tentpoles.” After
2012
former art gallery whose duction company, Plan B, that playing in 20 theaters this
The Master $16M
lobby is decorated with thou- has signed a deal to work on weekend, it will be released
Killing Them Softly 15
sands of VHS tapes arranged several projects with An- nationwide Friday against an
in a giant “A.” Zero Dark Thirty 96 napurna. adaptation of the popular
Megan Ellison’s Annapurna 2013 Ms. Ellison, who never Stephen King book “The Dark
Pictures has a distinct vibe American Hustle 150 gives interviews, declined to Tower.”
that isn’t imposing like Twen- Her 26 comment through a spokes- Annapurna didn’t initially
JASON LAVERIS/FILMMAGIC/GETTY IMAGES

tieth Century Fox or Universal 2014 woman. intend to release “Detroit” it-
Pictures, nor high-tech like Foxcatcher 12 Privately held Annapurna self. After financing the movie,
Netflix Inc. or Amazon.com 2015 doesn’t share financial re- the company late last year of-
Inc. Like its social-media savvy Joy 56 sults, but it has had a mixed fered it to other Hollywood
millennial founder, Annapurna record at the box office. studios, but was unable to
2016
projects an image that is retro, Along with such hits as “Sau- strike a deal. At least two
Everybody
artistic and bespoke, even as it Wants Some
3.4 sage Party” and “American companies passed after con-
is investing hundreds of mil- 98 Hustle” have been flops in- cluding its commercial pros-
Sausage Party
lions of dollars to compete di- cluding “Her” and “The Mas- pects were small, according to
20th Century Women 5.7
rectly against those giant ter.” Ms. Ellison has been people at studios who evalu-
companies and others that Source: Box Office Mojo frustrated working with other ated the film.
dominate Hollywood. Megan Ellison has tripled Annapurna’s staff to nearly 120. THE WALL STREET JOURNAL. studios that controlled when Early reviews for “Detroit”
Personally wealthy thanks her movies were released and have been positive. It garnered
to her father, billionaire Oracle leased by other studios, such to nearly 120 so it could re- comes as the original, mid- how they were advertised, a solid $365,455 at the box of-
Corp. co-founder Larry Ellison, as Sony Pictures Entertain- lease and market its own budget movies Ms. Ellison fa- leading her to build those ca- fice in 20 theaters this week-
the 31-year-old Ms. Ellison has ment and Viacom Inc.’s Para- movies, and produce televi- vors are struggling for atten- pabilities in-house, said the end.
produced and financed several mount Pictures. sion shows and videogames. tion against major studios’ people close to her. “This is the kind of movie
Oscar-nominated pictures in Last year, Ms. Ellison de- The release this past weekend superheroes and reboots. At With “Detroit,” Annapurna Hollywood used to make on a
the past five years, including cided she wanted more con- of “Detroit,” a historical the same time, deep-pocketed is using a particularly risky regular basis, but the indus-
mid-budget adult dramas trol over how her movies are drama from “Zero Dark Amazon and Netflix have ag- movie to make that leap, and try [now] relies on mega-
“Zero Dark Thirty,” “Her” and released and full credit, as Thirty” director Kathryn Big- gressively moved onto An- not only because so few mega-tentpoles that sell in
“Foxcatcher.” well as full profits, when they elow, marked the first time napurna’s turf, raising prices adult dramas have succeeded China,” said “Detroit” writer
Until now, though, An- succeed, according to people Annapurna has distributed for the hottest indie movie at the box office recently. and producer Mark Boal.
napurna has been a small familiar with her thinking. and marketed a film itself. ideas and increasing competi- The $35 million picture “Megan has a different busi-
company whose movies are re- She tripled Annapurna’s staff Annapurna’s expansion tion for consumers. about the killing of three Af- ness model.”

‘Dunkirk’ Fends Off Rivals

BY ERICH SCHWARTZEL cally panned animated movie fourth place. Taking the No. 3
starring the smiley faces and spot was Universal’s own
A pair of new releases icons that populate smart- “Girls Trip,” now the highest-
failed to unseat the World War phones, grossed $25.7 million in grossing live-action comedy of

MELINDA SUE GORDON/WARNER BROS/EVERETT COLLECTION

II drama “Dunkirk” from its second place. That is a fine start the year with $65.5 million.
top spot at the box office this for the film, released by Sony Both “Atomic Blonde” and
weekend. Corp.’s Sony Pictures Entertain- “The Emoji Movie” were given
“The Emoji Movie” and ment, considering it cost a mod- “B” grades by opening-week-
“Atomic Blonde” both arrived est $50 million to produce. end audiences, according to
with decent debuts, while sec- “We’re thrilled with it,” said the CinemaScore market-re-
ond-week grosses for Adrian Smith, Sony’s president search firm.
“Dunkirk” declined 44% to an of domestic distribution. In other box-office news,
estimated $28.1 million in the “There’s still a month of prime “An Inconvenient Sequel,” the
U.S. and Canada. summer moviegoing left.” follow-up to former Vice Presi-
Christopher Nolan’s ac- “Atomic Blonde,” an R-rated dent Al Gore’s 2006 documen-
claimed war drama, released action film starring Charlize tary on climate change,
by Time Warner Inc.’s Warner Theron released by the Focus opened in four locations and
Bros., has been a hit, with Features division of Comcast collected $130,000. It will ex-
$102.8 million so far. Corp.’s Universal Pictures, pand to more theaters in the
“The Emoji Movie,” a criti- grossed a fair $18.6 million in coming week. Second-week grosses for ‘Dunkirk’ came in at $28.1 million in the U.S. and Canada.

Energy Firms Pump Up Results

BY BRADLEY OLSON any two consecutive quarters
in the past two years.
The largest U.S. energy They generated more than
companies reported robust $30 billion in cash and man-
earnings on Friday, continuing aged to avoid sliding deeper
a quarter in which the world’s into debt, an increasingly im-
big oil firms have posted some portant barometer of an oil
of their strongest gains since a producer’s ability to survive
pronounced price crash began the crisis.
in 2014. In addition to cutting costs,
Exxon Mobil Corp. nearly many energy companies have
doubled its second-quarter reoriented their businesses to-
profit compared with a year ward projects that can be com-
ago, to $3.35 billion, and Chev- pleted quickly and produce
ron Corp. jacked up its bottom profits within a few years
line to $1.45 billion. rather than after more than a
The gains came even as oil decade of upfront, billion-dol-
prices fell again in the quarter, lar spending.
dipping below $50 a barrel, “For us to compete and
and questions about future de- win,” Exxon Vice President Jeff
mand continue to weigh on Woodbury told analysts on a
producers, underscoring the call, “we have got to be the
transition under way in the in- lowest cost-of-supply producer
dustry to curb ambitions, cut out there.”
costs and focus on smaller- While the sector’s improved
scale opportunities. performance doesn’t yet match
Friday’s tallies echoed re- precrash levels, it does back up
sults at Royal Dutch Shell executives who have told in-
PLC, Norway’s Statoil ASA and vestors in the downturn that
France’s Total SA. Collectively, the largest Western producers
the five energy companies this can thrive in a lower-price era.
year are off to their best start “The companies are at dif-
since 2014, generating excess ferent stages of learning how
cash and profits that outstrip to deal with this low-price en-
vironment,” said Brian Young-
berg, an energy analyst at Ed-
ward Jones. “They will need to
remain disciplined with their
spending or investors will
shun them.”
Oil prices have risen re-
cently to two-month highs on
momentum furthered by re-
cent inventory declines. Mar-
ket observers have long said a
sustained reduction in the
amount of oil being stored
would point to a partial price
recovery as it would indicate
greater demand. U.S. prices
this week settled above the
$49 mark for the first time
since May 30.
The push to a “short cycle”
strategy has helped companies
such as Exxon, Chevron and
Shell prepare for a world in
which prices don’t return to
$100 a barrel for many years,
if ever. Shell Chief Executive
Ben van Beurden said Thurs-
day the company had adjusted
to a climate in which prices
could stay “lower forever” be-
cause of the potential for de-
clining demand.
—Ezequiel Minaya
contributed to this article.
DANA MATTIOLI MERGERS & ACQUISITIONS REPORTER

Tesla Rolls Out New Model 3 Sedan

The Face of Real News
BY TIM HIGGINS

FREMONT, Calif.—Tesla
Inc. Chief Executive Elon
Musk on Friday disclosed new
pricing tiers, battery range
and other details of the all-
electric Model 3 sedan that he Dana Mattioli’s unrivaled access to the business world helped break the
hopes will help transform the
Silicon Valley niche car maker story of Berkshire Hathaway’s 2015 agreement to acquire Precision
into a more mass-market Castparts—the largest such deal in Warren Buffett’s storied career. The
company. timely, accurate reporting from Dana and her colleagues delivered scoop
The four-door sedan will
after scoop, including 8 out of the 10 biggest M&A deals that year.
start at $35,000, as promised,
REUTERS

but will also be offered in a

$44,000 version that has a Real journalists and real news from America’s most trusted newspaper.
range of as much as 500 kilo- A first production unit of Tesla’s Model 3 in Fremont, Calif.
meters between charges, 145
kilometers more than the base lieves the company can build duction goals. WATCH HER STORY AT WSJ.COM/DANA
model and higher than the all- 10,000 vehicles a week, or Later, during a live-
electric Chevrolet Bolt’s 383- 500,000 a year, by the end of streamed event outside the
kilometer range. next year and cautioned that factory, Mr. Musk showcased
The prices exclude any fed- the next few months could be the first deliveries of the se-
eral tax credits in the U.S. bumpy as the car maker ramps dan to employee customers,
Tesla has received more up production. Production of who will help identify any
than 500,000 reservations for the Model 3 began this month. glitches as they drive the auto-
the Model 3, Mr. Musk told re- Mr. Musk said any trouble mobile. Deliveries of the first Source: Pew Research Center, Political Polarization & Media Habits, 2014
porters at the auto maker’s with getting parts from suppli- vehicles to nonemployee buy-
© 2017 Dow Jones & Company, Inc. All rights reserved. 3DJ5146
factory in Fremont. ers could delay his plans. Tesla ers might begin in September
He reiterated that he be- has a history of missing pro- or October, according to Tesla.
B4 | Monday, July 31, 2017 THE WALL STREET JOURNAL.

TECHNOLOGY WSJ.com/Tech

Canada Touts Tech Jobs as U.S. Bars Door

BY DAVID GEORGE-COSH May from their native India
AND JACQUIE MCNISH after they had to leave the U.S.
when their H1-B visas expired
TORONTO—Canada’s tech- and renewal proved difficult.
nology sector, which has long They closed their first sales
struggled to compete with deal a month later.
sunny Silicon Valley, is seizing “Canada looks like the right
on the U.S.’s hardening stance place to grow,” said one, Sha-
on immigration in a bid to lure roon Thomas, fulfil.io CEO.
top talent. “I’m just surprised that we
The pitch: Come to Canada, didn’t think of it first.”
where there are cosmopolitan It can still be difficult to
cities, affordable health care poach engineers and program-
and, most importantly, more mers from Silicon Valley,
dian government announced a
pilot program aimed at cutting
this kind of wait and the red
tape involved. Under the pro-
gram, work permits and tem-
porary resident visas are is-
sued in two weeks instead of
one year.
Platterz Inc., an online-ca-
tering platform, has already
used the government program
for three new hires, two of
whom arrived in Canada last
week. “When we started, we

KEVIN VAN PAASSEN/BLOOMBERG NEWS

certainty around work permits
and entrance requirements
that many executives feel is
lacking under the Trump ad-
ministration.
Ben Zifkin, chief executive
of Hubba Inc., tells potential
employees currently in the
U.S.: “You don’t have to stay in
Canada forever, just the cur-
rent presidential term.” The
company, based in Toronto,
helps online retailers manage
product information.
Mr. Zifkin says he is only
half-joking. But his message is
part of a coordinated push for
talent by Canadian executives,
government officials and ven-
ture capitalists to pounce on
what they see as a rare oppor-
tunity for the nation’s matur-
ing tech sector.
“A year ago, the only people
I could talk to were ex-Canadi-
ans who missed home, but the
talent was lacking,” said Mr.
where large tech companies had someone from the govern-
such as Alphabet Inc.’s Google ment call us every day to walk
and Facebook Inc. reign. us through the process,” said
There, the salaries are higher, Eran Henig, CEO of the To-
the venture-capital sector big- ronto startup. “I never would
ger and the winters warmer. have expected that kind of at-
Meredith Trotter, a data tention from the government.”
scientist at Lumiata Inc., an Canada’s stepped-up re-
artificial-intelligence analytics cruitment effort is getting un-
firm in San Mateo, Calif., said derway at a time of expansion
Canada is trying to lure talent to its tech startups such as Shopify as the U.S. curbs immigration. she has plans to return to her in its tech industry. Startups
native Canada but hasn’t such as Shopify Inc., which de-
Zifkin, who returned last month H1-B visas, widely used to em- Extreme Venture, based in found anything superior to her velops software for online re-
from a recruiting trip in the ploy high-skilled workers in Toronto, helps relocate start- current job that would compel tailers, and Real Matters Inc.,
San Francisco Bay Area. There, the U.S. tech and other white- ups based in the U.S. and else- her to make the move now. a real-estate data and software
he met with 20 candidates for collar sectors. where to Canada and assists in “Even when those jobs start firm, have launched initial
senior management positions. “You’re running a startup. securing Canadian citizenship becoming real, I’m not sure I’ll public offerings in recent
“This time it’s much better.” You’re involved in one of the for employees. be ready to go home,” Ms. years. The country is becom-
The effort comes as the most uncertain businesses of “It’s such an easy sell some- Trotter said. ing a hub for artificial intelli-
Trump administration in April all time,” Ray Sharma, CEO of times,” said Mr. Sharma. “It’s Until recently, it could gence. Venture-capital invest-
launched a review aimed at Extreme Venture Partners, says like, ‘You had me at Canada.’ ” take as much as a year for ment hit a record in 2016, with
stricter enforcement of immi- he tells tech founders who One taker was fulfil.io, a foreigners offered a job in $3.2 billion Canadian dollars
gration rules and other laws aren’t U.S. citizens but are liv- cloud-based software platform Canada to receive a work (US$2.6 billion) invested in
governing entry of workers ing in the U.S or considering it. that aids companies in their permit, which immigration 530 deals, up 41% from the
into the U.S. “Now you’re introducing your supply-chain operations. Two lawyer Joel Guberman said previous year, according to the
Any changes could affect residency as part of that uncer- of the company’s founders de- was “unworkable.” Canadian Venture Capital and
thousands of foreigners on tainty? That’s crazy.” cided to come to Canada in But last month, the Cana- Private Equity Association.

Apple Drops Apps in China MIMS Cash Cow

The iPhone's average selling prices peak over the holidays, with the
new phones. iPhone sales drive Apple's gross profit margin, which is
BY JOSH CHIN in China. remove some VPN apps in Continued from page B1 off its March 2015 high.
Another company, Star China that do not meet the tem of apps and third-party
BEIJING—Apple Inc. has re- VPN, said on its Twitter ac- new regulations. These apps services. But the same forces iPhone's average selling price
$695
moved software from its app count that it, too, had received remain available in all other that made the iPhone ubiqui- $700
store in China that allowed us- the notice. Searches in the markets where they do busi- tous and reliable have also
ers to circumvent the country’s China App store for a number ness,” it said. made it about as exciting as 600
vast system of internet filters. of popular VPN apps turned up China’s internet regulators a Toyota Corolla.
500
Several popular apps giving no results Saturday evening. haven’t responded to multiple The next iPhone has the
users access to virtual private “We’re disappointed in this requests for comment about potential to upend that 400
networks, or VPNs, that tunnel development, as it represents their regulation of VPNs. stodgy image by being a
through China’s sophisticated the most drastic measure the Apple’s move is aimed at “halo device,” says Janell 300
system of internet filters dis- Chinese government has taken helping the company stay on Townsend, a professor of
appeared from the mainland to block the use of VPNs to the safe side of a raft of tough marketing at Oakland Uni- 200
China version of Apple’s App date, and we are troubled to new cybersecurity regulations versity in Rochester Hills,
100
Store on Saturday. see Apple aiding China’s cen- designed to solidify Beijing’s Mich., and a visiting profes-
One service, ExpressVPN, sorship efforts,” the Ex- grip on the Chinese internet. sor at the University of Zu- 0
said in a blog post that Apple pressVPN blog post said. Earlier this month, the Cuper- rich. Halo devices have ex-
had notified it that its iOS app Apple later confirmed the tino, Calif., technology giant ceptional features 1Q 2013 Q2 ’17
was removed from the Chinese removals in a written state- said that, because of the new representing key attributes
Apple Inc. gross profit margin
App Store. ment, citing new rules that re- rules, it planned to store all of of a brand and serve to in-
ExpressVPN published a copy quire VPN providers to obtain its Chinese customers’ data on fluence consumers’ percep- 42% March 31, 2015: 41%
of the notice, which said the app licenses from regulators. servers operated by a govern- tions of all products in the
included content that was illegal “We have been required to ment-controlled company. line, she says.
Take the Dodge Chal- 40
lenger SRT Demon. It has an

CHIPS those products to accumulate

data on customer behavior to
sell more products and re-
lated services.
product with volatile price
swings. But Samsung has in-
vested tens of billions of dol-
lars to place itself at the fore-
840-horsepower engine,
making it the world’s fastest
production car. Not many
people will shell out $85,000
38

Continued from page B1 “This isn’t just a one-shot front of new advances that for one, but it can draw 36
plenished by next year, drag- deal for Samsung,” said Tobey cram more memory, either them to its lesser siblings,
ging on Samsung’s revenue. Gonnerman, executive vice storage or multitasking ability, which start at $27,000.
Samsung has ascended dur- president at Fusion Worldwide, onto small-size chips. 34
ing a turbulent year for the an electronic-components dis- Intel concentrates on highly
South Korean company. Its de tributor. “Technology won’t differentiated processing chips Crazy New Tech 1Q 2013 Q2 ’17
facto leader, Lee Jae-yong, take a leap backward or be- for computers—and dominates A big reason companies Source: the company THE WALL STREET JOURNAL.
was arrested in February and come less mobile, so this won’t its key markets of personal have halo products is that
is on trial on corruption alle- be an anomaly for them.” computers and the servers they give them a way to test get people to pay more—as When the iPhone came out
gations that he denies. Sam- Samsung’s leap ahead of In- that drive corporate opera- new technologies, says Dr. it always does—by offering a in 2007, it was the epitome
sung’s rise reflects the trend tel in semiconductor sales also tions, cloud computing, and Townsend. While many of small amount of storage on of a “Veblen good”—rare
toward putting digital horse- reflects a fundamental differ- communications networks. the potential features of the the base model, and then and, at $599 with a two-year
power in items as diverse as ence in the two companies. Those products have brought anniversary iPhone are found charging $100 to $200 for contract, expensive.
smartphones and automo- Samsung’s chip unit focuses high margins, but revenue in other high-end smart- more. For the same reasons, an
biles, as well as the ambitions on memory chips, traditionally growth has been increasingly phones, notably the Galaxy expensive anniversary ver-
of tech companies to use a lower-margin commodity hard to come by. S8, Apple is said to be cook- sion could once again make
ing up other technologies, All About the ASP the iPhone a Veblen good,
ADVERTISEMENT such as an advanced 3-D sen- With a phone priced up- says M. Berk Talay, professor
sor array. ward of $1,400, Apple would of marketing at the Univer-
Legal Notices If crammed into a conven-
tional iPhone, all the new
have the opportunity to
move the single most impor-
sity of Massachusetts Lowell.
Much like the Mercedes-Benz
hardware might take too big tant metric on its balance vehicle line, where each class
BANKRUPTCIES of a bite of Apple’s margins.
Yet while Dodge is unlikely
  

 
  
 
     
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THE WALL STREET JOURNAL.
Trump’s Pick to Shake Up the Fed U.S. Bank
Tees Up
Randal Quarles is
expected to try to
reduce central bank’s
influence on lenders
BY RYAN TRACY
Randal Quarles became
skeptical of government inter-
vention during decades of
work in the financial world.
Now he is set to take the lead
in shaping oversight at one of
the greatest interveners of all:
the Federal Reserve.
Mr. Quarles, who would be
President Donald Trump’s first
appointee to the central bank,
is expected to be confirmed in
coming months for a four-year
term as Fed vice chairman for
supervision. That would both
make him the most influential
U.S. financial regulator and
give him a voice on monetary
policy.
His de facto predecessor,
former Fed governor Daniel
Tarullo, engineered broad new
curbs on risk-taking by the
largest U.S. banks. Mr. Quarles,
a former government official
who has made millions advis-
ing and investing in banks, has
a record that suggests he will
seek to reduce the Fed’s influ-
ence on bankers’ decisions
rather than expand it.
“Some refinements will un-
doubtedly be in order,” Mr.
Quarles told the Senate Bank-
ing Committee on Thursday,
referring to the U.S. regulatory
regime. “The key question will
be ensuring that…we do so
while maintaining the robust
resilience of the system to
Marquee Card Less Rewarding for J.P. Morgan
BY EMILY GLAZER
J.P. Morgan Chase & Co.’s
Sapphire Reserve credit card
has been popular with con-
sumers—maybe too popular.
Some at J.P. Morgan are
raising concerns that Sapphire
Reserve won’t make money for
the bank, due in part to high
demand and the card’s gener-
ous rewards. Meanwhile, the
lender is pushing for about
$200 million in fresh cost cuts
in the retail-banking unit that
oversees the card, people fa-
miliar with the matter say.
The scrutiny inside the
bank reflects changing eco-
nomics of the competitive pre-
mium-card market. Rewards
for consumers—paid for by
the bank—have gotten
sweeter. Spenders are becom-
ing savvier about maximiz-
ing benefits and avoiding bal-
ances that pad banks’ profits.
J.P. Morgan says it is mak-
ing a long-term bet on the mil-
lennial customers who favor
the card. Prospects will be-
come clearer in August, one
SEC
Columbia Professor
Is Weighed for Slot
The White House is prepar-
ing to nominate Columbia Uni-
versity law professor Robert
Jackson to a Democratic slot on
the Securities and Exchange
Commission, according to people
familiar with the matter.
The White House is currently
vetting Mr. Jackson after he
was recommended by Senate
Minority Leader Chuck Schumer
(D., N.Y.), these people said.
The selection process isn’t
complete and could still change,
one of the people said.
A White House spokes-
woman and Mr. Jackson didn’t
respond to requests for com-
ment. A spokesman for Mr.
Schumer declined to comment.
Uber said it is rolling out a credit card for its U.S. customers.
Barclaycard will be the issuer.
FINANCE & MARKETS
Mr. Quarles could become the most influential U.S. financial regulator if confirmed to the Fed.
shocks.” nizations of the late 19th cen-
Mr. Quarles’s approach may tury.
conflict with that of Fed Chair- Mr. Tarullo, who left the Fed
woman Janet Yellen, who sup- in April, cracked the whip on
ported Mr. Tarullo’s agenda. the largest U.S. banks in part by
Her term as chairwoman ends employing the element of sur-
in February. Mr. Quarles has prise. In “stress tests” and “liv-
separately advocated that the ing wills” examining how banks
Fed articulate a more rigid for- plan for the worst scenarios, he
mula for setting monetary pol- and other regulators ratcheted
icy, an idea Ms. Yellen has crit- up their expectations over time
icized. and publicly rebuked bankers
Friends and former col- for perceived failings—scold-
leagues said that if Mr. Quarles ings that the regulators said
does try to change direction at were necessary to clean up
the Fed, they expect him to what they saw as woeful risk
move slowly and methodically, management.
and to seek consensus. Cere- Bankers have called for
bral with a wry wit, Mr. Quar- years for more predictability in
les spent nights as a young the exams. At his confirmation
lawyer at Davis Polk & hearing Thursday, Mr. Quarles
Wardwell LLP reading the said the Fed should publish
firm’s files on railroad reorga- more information about the
year after its launch, when the
first Sapphire Reserve custom- Pushing Plastic
ers will decide whether they J.P. Morgan Chase new credit-card accounts opened, quarterly
want to spend another $450
on the card’s annual renewal 3.0 million
fee, without the generous 2.5 Before Sapphire Reserve card
sign-up rewards. If many flee, 2.0
it would add to the anxiety.
Gordon Smith, head of J.P. 1.5
Morgan’s retail-banking busi- 1.0
ness, this month ordered up 0.5
cost trims at the unit oversee-
ing cards, the people familiar 0 mon said on a conference call
with the matter said. A bank 1Q 2012 ’13 ’14
spokeswoman, Trish Wexler, Note: Excludes commercial cards
said any midyear cuts would Source: the company
take into account overall ex-
pense targets regardless of and when, the people familiar
specific products. with the process said.
“As part of any planning Banks such as J.P. Morgan
process you’re always looking generate credit-card revenue
for ways to eliminate waste,” from the annual fees custom-
she said. ers pay, the interest charged
Still, internal concerns on their balances and the fees
about the card are on the rise, merchants pay when the card
surprising for what has been is used at their businesses.
seen as a blockbuster at the The bank pays out when it of-
U.S.’s largest bank by assets. fers rewards, such as
At recent meetings, senior J.P. the 100,000-point sign-up bo-
Morgan employees reviewed nus that J.P. Morgan initially
models questioning whether offered on Sapphire Reserve.
the card would make money The bank offered the bonus
FINANCE WATCH
The five-seat commission is Uber is rolling out a credit
required to have a partisan bal- card for its U.S. customers,
ance. If Mr. Jackson is nomi- choosing Barclaycard, a unit of
nated, Senate lawmakers would Barclays, as the issuer, the com-
likely seek to speed up his con- panies said Friday. The card will
firmation by pairing him with be available in the fall, according
Hester Peirce, a Republican to a Barclaycard spokeswoman.
tapped earlier this month to fill Visa is expected to be the
another SEC vacancy. network for the card, according
Both would join an SEC down to a person familiar with the
to just three members: Demo- deal.
crat Kara Stein, Republican Mi- San Francisco-based Uber
chael Piwowar, and Jay Clayton, would be the first major ride-
the chairman, who is an inde- sharing company to launch a
pendent. —Andrew Ackerman credit card. It could help the firm
lock in more customer relation-
PAYMENTS ships, a crucial goal as it faces
an invigorated Lyft, which re-
Uber, Lyft Move cently raised fresh funds and
Into Credit Cards has been expanding into new
U.S. markets. Lyft is also work-
Ride-sharing rivals Uber ing on rolling out a credit card,
Technologies Inc. and Lyft Inc. according to people familiar with
may soon take their fight to their plans.
consumers’ wallets. Uber meanwhile has been
grappling with a series of scan-
dals, including charges it toler-
ated chauvinism, a lawsuit over
trade secrets and a depleted ex-
ecutive suite. It is nearing a de-
cision on a new chief executive
after the surprise resignation of
co-founder Travis Kalanick in
June.
Ride-sharing is a relatively
new sector in the credit-card
DAVID J. PHILLIP/ASSOCIATED PRESS
market, where partnerships with
banks in the travel sector have
been mostly dominated by air-
lines and hotels.
“This partnership represents
a unique opportunity for Barclay-
card to work with a globally rec-
ognized disrupter,” said a
spokeswoman for Barclaycard.
—AnnaMaria Andriotis,
Greg Bensinger
stress tests. “The benefits of
the transparency outweigh any
of the theoretical costs,” he
said.
Mr. Quarles also said he
would review rules about
banks’ capital levels as well as
the Volcker rule, which re-
stricts banks from trading un-
less it is on customers’ behalf.
He avoided specifics: “I don’t
have a view as to whether
[capital requirements] should
be higher or lower,” he said.
During his career, Mr. Quar-
les has repeatedly criticized
unpredictable policy-making.
“When governments have dis-
cretion, markets and citizens
cannot be sure how the gov-
ernment will act, and that un-
certainty results in ineffi-
ciency, delay and
’15 ’16
THE WALL STREET JOURNAL.
for about five months after
the card’s launch.
J.P. Morgan doesn’t disclose
how many Chase Sapphire Re-
serve cards it has issued. The
bank said it exceeded its 12-
month sales target in two
weeks and temporarily ran out
of the metal used to make the
cards.
J.P. Morgan’s second-quar-
ter card income, as reported,
fell 15% from the year-earlier
period to $1.06 billion. Credit-
card account openings, exclud-
Group Fights Finance Gender Gap
BY GEOFFREY ROGOW
State Street Global Advisors
has a plan to improve gender
diversity on corporate
boards. A New York City group
is focusing on getting women
in the pipeline first.
Girls Who Invest, founded
by Seema Hingorani, a former
chief investment officer for
the New York City Retirement
Systems, aims to increase the
number of women in leader-
ship and portfolio-manage-
ment roles in the asset-man-
agement industry by helping
mangers get more female job
candidates.
Surprisingly, the number of
female asset managers is
shrinking. According to data
from 2015, the most recent
available, 7% of investment
managers in the $15 trillion
mutual-fund industry were fe-
male, according to Morning-
star Inc. That is down from
10% in 2009.
Among its efforts, the non-
profit group organizes an in-
tensive summer educational
INTERNATIONAL INVESTMENT FUNDS
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Data as shown is for information purposes only. No offer is being made by
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States citizens and/or residents except as noted. Prices are in local currencies.
All performance figures are calculated using the most recent prices available.
politicization,” he wrote in the
2010 paper.
He said in 2015 that regula-
tory policy since the 2008 fi-
nancial crisis “tended to make
the government a player” in
the financial sector when “it
should be a referee.”
At the same time, Mr. Quar-
les has separated himself from
others who claim the “free
market” mantle. As a senior
Treasury official in the 2000s,
he advocated allowing foreign
governments to have more
ANDREW HARRER/BLOOMBERG NEWS
wiggle room in dealing with
bond investors—a policy op-
posed by some Wall Street
money managers. He once
called Timothy Geithner, Presi-
dent Barack Obama’s first
Treasury secretary and an ar-
chitect of the 2008 bailouts, “a
very strong choice” for the
cabinet position.
Ravi Menon, a Singaporean
official who engaged in last-
minute talks with Mr. Quarles
on a U.S.-Singapore trade deal,
wrote in 2004, “Right from the
start, we took a problem-solv-
ing approach aimed at finding
middle ground rather than try-
ing to convert each other on
ideological arguments.”
Still, Mr. Quarles’s back-
ground has raised concerns
among Democrats. As a bank-
ing lawyer at Davis Polk in the
1990s, he helped banks such
as J.P. Morgan Chase & Co.
navigate regulatory limits to
expand their securities busi-
nesses.
Despite Democrats’ con-
cerns, Republicans alone have
the votes to confirm Mr. Quar-
les for the job, and none criti-
cized him Thursday.
ing commercial cards, totaled
2.1 million, down 22% from the
year-earlier quarter.
J.P. Morgan executives ac-
knowledge the bank doesn’t
immediately make money on
each new card and customer.
“You expense the acquisition
costs over 12 months. The
benefit comes over seven
years,” J.P. Morgan Chairman
and Chief Executive James Di-
’17 this month.
“These are the customers
that everybody wants to ac-
quire,” Marianne Lake, the
bank’s chief financial officer,
said on the call. “We now have
them, and we intend to deepen
relationships with them.”
The big question is whether
the consumers want to stay in
this relationship. Customer re-
newal rates for premium
credit cards can range from
60% to 90%, said Robert Ham-
mer, founder and CEO of
credit-card industry consul-
tant R.K. Hammer.
—AnnaMaria Andriotis
contributed to this article.
program, joining with profes-
sors at several large universi-
ties and executives at asset-
management firms.
Following this four-week
education program, where
these college students receive
what Ms. Hingorani calls a
“crash-course M.B.A.,” the
The number of female
asset managers is
shrinking, according
to Morningstar.
students embark on six-week
paid internships at companies
such as Bank of America Corp.,
Oaktree Capital Group LLC
and Wellington Management
Co.
This summer, about 60
women are taking part in the
program, which began on the
campus of the University of
Pennsylvania. Next year, the
group hopes to have about 100
FUND NAME
n Chartered Asset Management Pte Ltd - Tel No: 65-6835-8866
Fax No: 65-6835 8865, Website: www.cam.com.sg, Email: cam@cam.com.sg
CAM-GTF Limited
For information about listing your funds,
please contact: Freda Fung tel: +852 2831
2504; email: freda.fung@wsj.com
Monday, July 31, 2017 | B5
Auto-Loan
Refunds
BY EMILY GLAZER
Wells Fargo & Co. said it
plans to make refunds to cer-
tain auto-loan customers who
may have been improperly
charged for auto insurance.
Late last week, the bank
said it found 570,000 custom-
ers who may have been af-
fected from policies placed be-
tween 2012 and 2017, and that
they will get refunds or ac-
count adjustments totaling
around $80 million.
Franklin Codel, head of
Wells Fargo consumer lending,
said the bank takes responsi-
bility for its failure to manage
the insurance program and
apologized to customers.
The problems come on the
heels of Wells Fargo’s sales-
practices scandal last year, in
which bank employees opened
as many as 2.1 million ac-
counts using fictitious or un-
authorized customer informa-
tion.
Regarding the auto loans,
Wells Fargo said customers’
contracts require them to
maintain collateral-protection
insurance on behalf of the
lender throughout the term of
the loan. Wells Fargo bought
that insurance, known as CPI,
from a vendor on a customer’s
behalf if there was no evidence
the customer already had the
insurance, the bank said.
The vendor is National
General Insurance, a company
the bank had joined with for
years, a person familiar with
the matter said.
A spokeswoman for Na-
tional General, Christine Wor-
ley, said it “feels confident
with its compliance in this
highly regulated industry.”
Wells Fargo said that, in re-
sponse to customer complaints
in July 2016, it began a review
of the program and third-party
vendor practices. Based on
that review, it discontinued
the program last September.
The New York Times earlier
reported the problems with
Wells Fargo’s auto insurance,
citing a report from consultant
Oliver Wyman prepared for the
bank examining National Gen-
eral insurance policies sold to
Wells Fargo customers from
January 2012 through July
2016. It found the insurance
was often more expensive than
auto-insurance customers had
already obtained on their own.
Wells Fargo said it has
“gone through a comprehen-
sive review using independent
consultants” that determined
certain external vendor pro-
cesses and internal controls
were inadequate.
—Ryan Tracy
contributed to this article.
women at Penn and the Uni-
versity of Notre Dame.
Ms. Hingorani said when
she had asked most invest-
ment executives why they
don’t have more women, the
most common answer was
they don’t get resumes from
women.
Within the asset-manage-
ment industry, alternative as-
sets—which includes private
equity, real estate and hedge
funds—has the lowest percent-
age of female representation.
Adding a few more women to
these areas, which run large
pools of money, could help
Girls Who Invest reach its goal
of having 30% of the world’s
investible capital managed by
women by 2030, Ms. Hingorani
says.
The issue of women in
management was in focus last
week after index-fund giant
State Street said it voted
against the re-election of di-
rectors at 400 companies this
year on grounds they failed to
take steps to add women to
their boards.
NAV —%RETURN—
GF AT LB DATE CR NAV YTD 12-MO 2-YR
OT OT MUS 07/21 USD 308395.12 2.1 3.3 0.3
B6 | Monday, July 31, 2017 THE WALL STREET JOURNAL.

MARKETS DIGEST Data as of Friday, July 28, 2017

Nikkei 225 Index STOXX 600 Index S&P 500 Index Data as of 4 p.m. New York time
Last Year ago
19959.84 t 119.80, or 0.60% Year-to-date s 4.42% 378.34 t 3.98, or 1.04% Year-to-date s 4.68% 2472.10 t 3.32, or 0.13% Trailing P/E ratio 23.94 25.03
High, low, open and close for each 52-wk high/low 20230.41 16083.11 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 * 18.94 18.42
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 1.97 2.11
All-time high: 2477.83, 07/26/17

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

20500 395 2480

20000 390 2450

19500 385 2420

19000 380 2390

Session high
65-day moving average 65-day moving average
DOWN UP
t

Session open Close 18500 375 2360

Close Open
t

65-day moving average

18000 370 2330
Session low
Bars measure the point change from session's open
17500 365 2300
Apr. May June July May June July Apr. May June July

International Stock Indexes Data as of 4 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 3 p.m. ET
World The Global Dow 2848.22 –2.86 –0.10 2384.42 • 2851.08 12.5 Country/ Spread Over Treasurys, in basis points Yield
MSCI EAFE 1931.73 –4.32 –0.22 1614.17 • 1944.18 14.7 Coupon Maturity, in years Yield Latest Previous Month Ago Year ago Previous Month ago Year ago
MSCI EM USD 1062.97 –3.09 –0.29 838.96 • 1067.03 23.3 2.750 Australia 2 1.818 45.9 45.1 32.9 82.6 1.818 1.687 1.537
2.750 10 2.693 40.5 38.5 24.3 36.7 2.697 2.473 1.876
Americas DJ Americas 595.33 –0.65 –0.11 503.67 • 596.96 10.2
3.000 Belgium 2 -187.6 -185.5 -189.5 -126.9 -0.488 -0.538 -0.558
-0.517
Brazil Sao Paulo Bovespa 65497.13 219.74 0.34 56162.38 • 69052.03 8.7
0.800 10 0.819 -147.0 -149.8 -154.5 -135.2 0.815 0.685 0.157
Canada S&P/TSX Comp 15128.65 –62.71 –0.41 14349.10 • 15922.37 –1.0
0.000 France 2 -0.463 -182.2 -178.9 -179.4 -123.8 -0.422 -0.436 -0.527
Mexico IPC All-Share 51213.60 –43.76 –0.09 44364.17 • 51713.38 12.2
1.000 10 0.805 -148.4 -151.2 -151.9 -137.0 0.800 0.711 0.139
Chile Santiago IPSA 3856.62 20.25 0.53 3127.54 • 3856.62 19.7
0.000 Germany 2 -0.683 -204.2 -203.6 -198.2 -132.1 -0.669 -0.625 -0.610
U.S. DJIA 21830.31 33.76 0.15 17888.28 • 21830.31 10.5
0.500 10 0.544 -174.5 -177.2 -185.9 -159.8 0.540 0.371 -0.089
Nasdaq Composite 6374.68 –7.51 –0.12 5046.37 • 6422.75 18.4
0.050 Italy 2 -0.019 -137.8 -139.3 -170.9 -76.1 -0.026 -0.351 -0.051
S&P 500 2472.10 –3.32 –0.13 2085.18 • 2477.83 10.4
2.200 10 2.127 -16.1 -21.4 -21.5 -30.4 2.099 2.015 1.205
CBOE Volatility 10.29 0.18 1.78 9.36 • 22.51 –26.7
0.100 Japan 2 -0.112 -147.2 -148.3 -147.5 -106.1 -0.116 -0.118 -0.350
EMEA Stoxx Europe 600 378.34 –3.98 –1.04 328.80 • 396.45 4.7 0.100 10 0.078 -221.0 -224.3 -217.0 -178.4 0.069 0.060 -0.276
Stoxx Europe 50 3086.75 –37.38 –1.20 2730.05 • 3276.11 2.5 4.000 Netherlands 2 -0.676 -203.5 -202.1 -194.9 -129.3 -0.654 -0.592 -0.583
Austria ATX 3239.73 –14.61 –0.45 2166.58 • 3254.34 23.7 0.750 10 0.654 -163.4 -167.6 -167.0 -148.0 0.637 0.560 0.029
Belgium Bel-20 3944.56 –41.04 –1.03 3365.38 • 4041.03 9.4 4.750 Portugal 2 0.043 -131.6 -129.3 -121.7 -23.2 0.074 0.140 0.479
France CAC 40 5131.39 –55.56 –1.07 4321.08 • 5432.40 5.5 4.125 10 2.878 59.0 63.3 72.6 144.0 2.945 2.956 2.949
Germany DAX 12162.70 –49.34 –0.40 10144.34 • 12888.95 5.9 2.750 Spain 2 -0.334 -169.3 -167.9 -163.6 -85.9 -0.312 -0.279 -0.148
Greece ATG 820.02 1.39 0.17 551.61 • 858.08 27.4 1.500 10 1.530 -75.9 -81.3 -81.4 -41.6 1.499 1.416 1.093
Hungary BUX 35750.65 –78.05 –0.22 27023.94 • 36143.37 11.7 4.250 Sweden 2 -0.702 -206.2 -207.7 -200.9 -137.0 -0.710 -0.652 -0.659
Israel Tel Aviv 1451.48 … Closed 1378.66 • 1478.96 –1.3 1.000 10 0.703 -158.5 -167.0 -167.7 -139.9 0.642 0.552 0.110
Italy FTSE MIB 21430.36 –204.36 –0.94 16098.37 • 21787.90 11.4 1.750 U.K. 2 0.255 -110.4 -110.1 -106.2 -58.3 0.266 0.295 0.128
Netherlands AEX 525.53 –4.82 –0.91 438.61 • 536.26 8.8 4.250 10 1.218 -107.1 -111.0 -107.2 -79.5 1.202 1.158 0.714
Poland WIG 62366.50 194.80 0.31 46171.72 • 62537.74 20.5 1.375 U.S. 2 1.359 ... ... ... ... 1.367 1.357 0.711
Russia RTS Index 1014.44 –16.51 –1.60 903.04 • 1195.61 –12.0 2.375 10 2.288 ... ... ... ... 2.312 2.230 1.509
Spain IBEX 35 10536.10 –67.30 –0.63 8263.50 • 11135.40 12.7
Sweden SX All Share 561.69 –4.90 –0.86 485.25 • 596.72 5.1 Commodities Prices of futures contracts with the most open interest 3:30 p.m. New York time
Switzerland Swiss Market 9019.31 1.52 0.02 7593.20 • 9127.61 9.7 EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.; MDEX: Bursa Malaysia
South Africa Johannesburg All Share 54883.21 –5.68 –0.01 48935.90 • 54888.89 8.4 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 7/27/2017
Turkey BIST 100 107699.72 –691.99 –0.64 72519.85 •108391.71 37.8 One-Day Change Year Year
U.K. FTSE 100 7368.37 –74.64 –1.00 6634.40 • 7547.63 3.2 Commodity Exchange Last price Net Percentage high low
389.25 1.50 0.39% 417.25 374.00
Asia-Pacific DJ Asia-Pacific TSM 1674.76 –6.09 –0.36 1407.97 • 1680.85 17.7 Corn (cents/bu.) CBOT
Soybeans (cents/bu.) 1012.50 5.00 0.50 1,047.00 907.00
Australia S&P/ASX 200 5702.80 –82.20 –1.42 5156.60 • 5956.50 0.7
Wheat (cents/bu.)
CBOT
CBOT 481.50 1.75 0.36 574.50 430.75
China Shanghai Composite 3253.24 3.46 0.11 2953.39 • 3288.97 4.8
Live cattle (cents/lb.) CME 112.500 -1.075 -0.95% 122.850 99.125
Hong Kong Hang Seng 26979.39 –151.78 –0.56 21574.76 • 27131.17 22.6
Cocoa ($/ton) ICE-US 2,067 54 2.68 2,281 1,767
India S&P BSE Sensex 32309.88 –73.42 –0.23 25765.14 • 32383.30 21.3
Coffee (cents/lb.) ICE-US 137.85 1.90 1.40 163.75 115.50
Japan Nikkei Stock Avg 19959.84 –119.80 –0.60 16083.11 • 20230.41 4.4
Sugar (cents/lb.) ICE-US 14.36 -0.07 -0.49 20.50 12.74
Singapore Straits Times 3330.75 –23.96 –0.71 2787.27 • 3354.71 15.6
Cotton (cents/lb.) ICE-US 68.80 -0.09 -0.13 75.72 66.15
South Korea Kospi 2400.99 –42.25 –1.73 1958.38 • 2451.53 18.5 Robusta coffee ($/ton) ICE-EU 2139.00 -2.00 -0.09 2,286.00 1,885.00
Taiwan Weighted 10423.05 –85.32 –0.81 8902.30 • 10513.96 12.6
Copper ($/lb.) COMEX 2.8785 0.0010 0.03 2.8835 2.4850
Source: SIX Financial Information;WSJ Market Data Group Gold ($/troy oz.) COMEX 1276.10 9.60 0.76 1,307.00 1,160.80
Silver ($/troy oz.) COMEX 16.710 0.137 0.83 18.780 14.340
Currencies London close on July 28 Aluminum ($/mt)* LME 1,944.00 10.50 0.54 1,972.00 1,688.50
Tin ($/mt)* LME 20,630.00 280.00 1.38 21,225.00 18,760.00
Yen, euro vs. dollar; dollar vs. major U.S. trading partners US$vs,
Fri YTDchg Copper ($/mt)* LME 6,356.00 85.50 1.36 6,356.00 5,491.00
Country/currency in US$ per US$ (%) Lead ($/mt)* LME 2,324.00 17.00 0.74 2,445.00 2,022.00
10% Europe Zinc ($/mt)* LME 2,811.00 1.00 0.04 2,958.50 2,450.50
WSJ Dollar index 0.6010 1.6638 –10.5
s Bulgaria lev Nickel ($/mt)* LME 10,155.00 195.00 1.96 11,095.00 8,780.00
Croatia kuna 0.1585 6.308 –12.1 Rubber (Y.01/ton) TCE 204.50 -10.00 -4.66 n.a. n.a.
0
Euro zone euro 1.1748 0.8512 –10.5
s Czech Rep. koruna-b 0.0451 22.172 –13.7 Palm oil (MYR/mt) MDEX 2653.00 -24.00 -0.90 2692.00 2376.00
–10 Euro s Yen Denmark krone 0.1580 6.3301 –10.5 Crude oil ($/bbl.) NYMEX 49.75 0.71 1.45 58.36 42.29
Hungary forint 0.003856 259.34 –11.9 NY Harbor ULSD ($/gal.) NYMEX 1.6411 0.0340 2.12 1.8065 1.3703
Iceland krona 0.009671 103.40 –8.5 RBOB gasoline ($/gal.) NYMEX 1.6458 0.0261 1.61 1.8366 1.3805
–20 Norway krone 0.1263 7.9156 –8.4
0.2760 3.6227 –13.5
Natural gas ($/mmBtu) NYMEX 2.941 -0.026 -0.88 3.5490 2.8300
2016 2017 Poland zloty
Russia ruble-d 0.01680 59.507 –2.9 Brent crude ($/bbl.) ICE-EU 52.23 0.71 1.38 60.13 44.88
US$vs, US$vs,
YTDchg YTDchg Sweden krona 0.1232 8.1188 –10.9 Gas oil ($/ton) ICE-EU 486.25 10.75 2.26 532.25 405.50
Fri Fri
Country/currency in US$ per US$ (%) Country/currency in US$ per US$ (%) Switzerland franc 1.0328 0.9682 –5.0
Turkey lira 0.2832 3.5315 0.2 Sources: SIX Financial Information; WSJ Market Data Group
Americas Hong Kong dollar 0.1280 7.8103 0.7
Ukraine hryvnia 0.0386 25.9100 –4.3
Argentina peso-a 0.0562 17.7843 12.1
India rupee
Indonesia rupiah
0.0156
0.0000750
64.1150
13327
–5.7
–1.5
U.K. pound 1.3127 0.7618 –6.0 Cross rates London close on Jul 28
Brazil real 0.3182 3.1425 –3.5 Middle East/Africa
Japan yen 0.009020 110.87 –5.2
Canada dollar 0.8040 1.2439 –7.5 USD GBP CHF JPY HKD EUR CDN AUD
Kazakhstan tenge 0.003057 327.09 –2.0 Bahrain dinar 2.6521 0.3771 –0.03
Chile peso 0.001536 651.20 –2.8 Australia 1.2517 1.6431 1.2928 0.0113 0.1603 1.4705 1.0064 ...
Macau pataca 0.1242 8.0540 1.7 Egypt pound-a 0.0559 17.8775 –1.4
Colombia peso 0.0003332 3000.89 –0.0 Canada 1.2439 1.6326 1.2845 0.0112 0.1593 1.4610 ... 0.9936
Malaysia ringgit-c 0.2336 4.2815 –4.6 Israel shekel 0.2808 3.5614 –7.5
Ecuador US dollar-f 1 1 unch
New Zealand dollar 0.7506 1.3323 –7.7 Kuwait dinar 3.3064 0.3024 –1.0 Euro 0.8512 1.1174 0.8792 0.0077 0.1090 ... 0.6845 0.6800
Mexico peso-a 0.0563 17.7562 –14.4
Pakistan rupee 0.0095 105.355 0.9 Oman sul rial 2.5977 0.3850 –0.00 Hong Kong 7.8103 10.2534 8.0660 0.0704 ... 9.1760 6.2791 6.2397
Peru sol 0.3082 3.2446 –3.2
Philippines peso 0.0198 50.548 1.9 Qatar rial 0.2760 3.623 –0.5 Japan 110.8670 145.5400 114.5000 ... 14.1950 130.2400 89.1400 88.5700
Uruguay peso-e 0.0352 28.380 –3.3
Singapore dollar 0.7368 1.3572 –6.2 Saudi Arabia riyal 0.2666 3.7503 –0.01 0.9682 1.2712 ... 0.0087 0.1240 1.1375 0.7785 0.7735
Venezuela bolivar 0.098911 10.11 1.2 Switzerland
South Korea won 0.0008906 1122.87 –7.0 South Africa rand 0.0767 13.0314 –4.8
U.K. 0.7618 ... 0.7867 0.0069 0.0975 0.8950 0.6125 0.6085
Asia-Pacific Sri Lanka rupee 0.0065049 153.73 3.6 Close Net Chg % Chg YTD % Chg
0.7989 1.2517 –9.9 Taiwan dollar 0.03304 30.270 U.S. ... 1.3127 1.0328 0.0090 0.1280 1.1748 0.8040 0.7989
Australia dollar –6.7 WSJ Dollar Index 86.14 –0.33 –0.38 –7.31
China yuan 0.1484 6.7374 –3.0 Thailand baht 0.02996 33.380 –6.8 Sources: Tullett Prebon, WSJ Market Data Group Source: Tullett Prebon

Key Rates Top Stock Listings 4 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 1.23167% 0.49590% ¥ TakedaPharm 4502 5640.00 0.20 16.65 CHF RocheHldgctf ROG 242.50 -0.16 4.26 Last: 164.28 t 1.29, or 0.78% YTD s 16.5%
Three month 1.31056 0.75910 Asia Titans HK$ TencentHoldings 0700 304.80 -1.17 60.67 £ RoyDtchShell A RDSA 2115.50 0.88 -5.66
Six month 1.45500 1.11170 HK$ AIAGroup 1299 59.50 -1.98 36.00 ¥ TokioMarineHldg 8766 4634.00 -0.77 -3.38 € SAP SAP 90.30 -0.55 9.04 High 170
One year 1.72900 1.43210 ¥ AstellasPharma 4503 1383.00 2.22 -14.81 ¥ ToyotaMtr 7203 6228.00 -0.35 -9.45 € Sanofi SAN 81.59 -0.75 6.10 50–day 165
Close moving average
Euro Libor AU$ AustNZBk ANZ 29.70 -1.98 -2.37 AU$ Wesfarmers WES 40.53 -0.66 -3.82 € SchneiderElectric SU 66.96 -2.39 1.29 Low 160
One month -0.39786% -0.36857% AU$ BHP BHP 25.33 -1.25 1.08 AU$ WestpacBanking WBC 31.90 -1.69 -2.15 € Siemens SIE 115.75 -0.04 -0.90 t
Three month -0.37729 -0.30214 HK$ BankofChina 3988 3.79 -1.04 10.17 AU$ Woolworths WOW 26.51 -0.82 10.00 € Telefonica TEF 9.62 -1.72 9.09 155
Six month -0.29900 -0.19343 HK$ CKHutchison 0001 102.10 0.29 16.15 € Total FP 42.99 -0.02 -9.99 150
One year -0.18743 -0.06500 HK$ CNOOC 0883 8.72 -0.57 -10.10 Stoxx 50 CHF UBSGroup UBSG 16.90 -2.87 5.96
145
Euribor AU$ CSL CSL 125.94 -2.24 25.43 € Unilever UNA 49.44 -0.93 26.38
CHF ABB ABBN 22.67 0.89 5.54
One month -0.37100% -0.37100% ¥ Canon 7751 3850.00 0.73 16.84 £ Unilever ULVR 4327.00 -0.77 31.42 5 12 19 26 2 9 16 23 30 7 14 21 28
€ ASMLHolding ASML 129.85 -2.29 21.75
Three month -0.32900 -0.29700 ¥ CentralJapanRwy 9022 17710 0.97 -7.90 € Vinci DG 75.33 -2.50 16.43 May June July
€ AXA CS 25.14 -0.53 4.84
Six month -0.27200 -0.18600 HK$ ChinaConstructnBk 0939 6.47 -0.61 8.38 £ VodafoneGroup VOD 220.30 -1.10 10.23
€ AirLiquide AI 105.00 -1.69 -0.62
One year -0.15200 -0.04900 HK$ ChinaLifeInsurance 2628 24.70 -1.20 22.28 CHF ZurichInsurance ZURN 293.00 ... 4.49
180.65
Yen Libor HK$ ChinaMobile 0941 83.45 0.12 1.52
€
€
Allianz
AB InBev
ALV
ABI 103.35
-0.77
-1.57
15.06
2.78 DJIA Stoxx 50
One month -0.02800% -0.03771% HK$ ChinaPetro&Chem 0386 5.93 -0.84 7.82 £ AstraZeneca AZN 4481.50 3.62 0.99 Last: 3086.75 t 37.38, or 1.20% YTD s 2.5%
Three month -0.01350 -0.00771 AU$ CmwlthBkAust CBA 83.76 -1.52 1.64 € BASF BAS 79.64 -0.13 -9.82
$ AmericanExpress AXP 84.80 1.13 14.47
Six month 0.00971 0.00550 ¥ EastJapanRailway 9020 10445 0.14 3.42 € BNP Paribas BNP 66.10 0.15 9.17
$ Apple AAPL 149.50 -0.70 29.08 3250
One year 0.11229 0.09386 ¥ Fanuc 6954 23295 0.11 17.56 £ BT Group BT.A 310.40 -1.82 -15.40
$ Boeing BA 241.27 0.11 54.98
$ Caterpillar CAT 114.10 -0.24 23.03 3200
Offer Bid ¥ Hitachi 6501 721.10 -1.04 14.10 € BancoBilVizAr BBVA 7.71 0.08 21.38
TW$ Hon Hai Precisn 2317 117.50 ... 39.55 $ Chevron CVX 108.12 1.89 -8.14 3150
Eurodollars € BancoSantander SAN 5.80 -0.14 16.96
¥ HondaMotor 7267 3077.00 -0.10 -9.90 $ CiscoSystems CSCO 31.52 -0.16 4.30
One month 1.3200% 1.2200% £ Barclays BARC 205.10 -1.68 -8.21 3100
KRW HyundaiMtr 005380 149500 2.05 2.40 $ Coca-Cola KO 46.01 -0.24 10.97
Three month 1.3800 1.2800 € Bayer BAYN 107.70 -0.69 8.65
3050
HK$ Ind&Comml 1398 5.42 -1.09 16.56 $ Disney DIS 109.96 -0.04 5.51
Six month 1.4100 1.3100 £ BP BP. 443.65 -0.24 -12.94
$ DuPont DD 83.98 -0.72 14.41
One year 1.8000 1.7000 ¥ JapanTobacco 2914 3895.00 1.75 1.33 £ BritishAmTob BATS 4960.00 -6.80 7.32 3000
¥ KDDI 2922.00 0.88 -1.27
$ ExxonMobil XOM 79.60 -1.52 -11.81
Latest 52 wks ago 9433 € Daimler DAI 59.85 -0.73 -15.37 $ GeneralElec GE 25.53 -1.01 -19.21 5 12 19 26 2 9 16 23 30 7 14 21 28
¥ Mitsubishi 8058 2395.50 0.61 -3.80 € DeutscheTelekom DTE 15.56 -0.54 -3.88 May June July
Prime rates $ GoldmanSachs GS 223.61 0.96 -6.62
¥ MitsubishiElectric 6503 1705.00 -0.23 4.63 £ Diageo DGE 2442.00 1.39 15.73
U.S. 4.25% 3.50% $ HomeDepot HD 148.08 0.24 10.44
¥ MitsubishiUFJFin 8306 702.40 -0.80 -2.47 € ENI ENI 13.26 0.30 -14.29
Canada 2.95 2.70 $ Intel INTC 35.31 0.97 -2.65
1604.00 0.53 -0.19 1518.50
Japan
Hong Kong
1.475
5.00
1.475
5.00
¥
¥
Mitsui
Mizuho Fin
8031
8411 196.50 -0.66 -6.34
£
£
GlaxoSmithKline
Glencore
GSK
GLEN 331.25
-0.82
0.17
-2.78
19.43
$
$
IBM
JPMorganChase
IBM
JPM
144.29
91.28
-0.54
-0.29
-13.07
5.78
Dow Jones Industrial Average P/E: 20
¥ NTTDoCoMo 9437 2560.50 -0.83 -3.85 £ HSBC Hldgs HSBA 743.60 -1.38 13.20 $ J&J JNJ 131.85 0.78 14.44 Last: 21830.31 s 33.76, or 0.15% YTD s 10.5%
Policy rates
ECB 0.00% 0.00%
AU$ NatAustBnk NAB 29.97 -1.77 -2.28 € INGGroep INGA 15.81 -0.53 18.25 $ McDonalds MCD 155.85 -0.70 28.04
Britain 0.25 0.50
¥ NipponTeleg 9432 5382.00 0.52 9.57 £ ImperialBrands IMB 3315.50 -3.79 -6.41 $ Merck MRK 64.11 0.66 8.90 22000
Switzerland 0.50 0.50
¥ NissanMotor 7201 1107.50 -4.11 -5.78 € IntesaSanpaolo ISP 2.90 -0.07 19.70 $ Microsoft MSFT 73.04 -0.16 17.54
¥ Panasonic 6752 1508.50 0.43 26.82 € LVMHMoetHennessy MC 213.15 -1.34 17.50 $ Nike NKE 58.67 0.89 15.42
21500
Australia 1.50 1.75
HK$ PingAnInsofChina 2318 57.20 -0.95 47.42 £ LloydsBankingGroup LLOY 66.50 -1.48 6.38 $ Pfizer PFE 33.15 0.45 2.06
U.S. discount 1.75 1.00 21000
Fed-funds target 1.00-1.25 0.25-0.50
$ RelianceIndsGDR RIGD 48.85 -0.41 54.83 € LOreal OR 176.05 -2.76 1.53 $ Procter&Gamble PG 90.21 -0.52 7.29
Call money 3.00 2.25
KRW SamsungElectronics 005930 2388000 -4.10 32.52 £ NationalGrid NG. 934.70 -1.11 -9.96 $ 3M MMM 199.72 -0.16 11.84 20500
¥ Seven&I Hldgs 3382 4490.00 -0.18 0.83 CHF Nestle NESN 81.70 0.18 11.84 $ Travelers TRV 127.21 1.06 3.91
Overnight repurchase rates 20000
U.S. 1.13% 0.48%
¥ SoftBankGroup 9984 9168.00 -2.25 18.07 CHF Novartis NOVN 81.65 -0.12 10.19 $ UnitedTech UTX 118.87 0.15 8.44
Euro zone n.a. n.a.
¥ Sony 6758 4533.00 -1.33 38.41 DKK NovoNordiskB NOVO-B 265.00 0.38 4.04 $ UnitedHealth UNH 191.15 1.18 19.44 5 12 19 26 2 9 16 23 30 7 14 21 28
¥ Sumitomo Mitsui 8316 4188.00 -0.48 -6.10 £ Prudential PRU 1809.50 -1.34 11.18 $ Visa V 99.15 -0.42 27.08 May June July
Sources: WSJ Market Data Group, SIX HK$ SunHngKaiPrp 0016 121.40 1.76 23.88 £ ReckittBenckiser RB. 7351.00 -1.41 6.75 $ Verizon VZ 47.94 0.27 -10.19 Note: Price-to-earnings ratios are for trailing 12 months
Financial Information, Tullett TW$ TaiwanSemiMfg 2330 213.00 -1.16 17.36 £ RioTinto RIO 3504.00 0.23 10.94 $ Wal-Mart WMT 79.81 0.04 15.47 Sources: WSJ Market Data Group; Birinyi Associates
THE WALL STREET JOURNAL.
Buyer Blames China Bashing as Deal Stalls
A China-backed firm whose
deal to buy an American semi-
conductor company has stalled
before a U.S. government panel
By Eva Dou in Beijing
and Kate O’Keeffe in
Washington
is taking the unusual step of
going public with its frustra-
tions, saying China-bashing in
the U.S. is holding up the ac-
quisition.
Principals with Canyon
Bridge Capital Partners Inc.
said their interest in Portland,
Ore.-based Lattice Semicon-
ductor Corp. is purely commer-
cial and that they have tried to
address the national-security
concerns of the Committee on
Foreign Investment in the U.S.
Still, nine months after Canyon
Bridge said it first approached
the panel, the $1.3 billion deal
remains stuck, a delay the part-
ners said is chiefly political.
Since the presidential cam-
paign, “the concerns about all
things China has been put un-
der a very harsh light and em-
phasized in a very unfortunate
way,” Canyon Bridge partner
Ray Bingham said in an inter-
view. He said politics “more
than anything” accounted for
the scrutiny the deal is facing.
Mr. Bingham’s willingness
and that of his fellow partners
Hungary Sells ‘Panda’ Debt; More Offerings Expected
BY SAUMYA VAISHAMPAYAN
China’s bond market is
opening up—to the govern-
ment of Hungary.
The European country last
week raised 1 billion yuan ($148
million) by selling bonds in the
onshore Chinese market. Hun-
gary’s sale of these so-called
panda bonds—yuan-denominated
debt issued by foreign govern-
ments or companies in China’s
domestic market—was the first
by a country since Poland last
year, according to Dealogic.
The bonds were priced to
yield 4.85%.
There are rumblings of
Enjoy a
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Park
China Goes Semiconductor Shopping
Chinese companies are seeking to buy microchip assets, but some
deals have fallen through because of political pushback.
China’s top outbound deals in the semiconductor sector since 2010
COMPLETED
Announced Target (Location)
June 13, 2016 Nexperia
(Netherlands)
Jan. 6, 2015 Tatung (Taiwan)
Aug. 14, 2014 OmniVision
Technologies (U.S.)
WITHDRAWN
Announced Target (Location)
Dec. 8, 2015 Fairchild
Semiconductor
International (U.S.)
Dec. 11, 2015 Siliconware Precision Tsinghua University
Industries (Taiwan)
May 23, 2016 Aixtron (Germany)
Source: Dealogic
to talk about their deal’s trou-
bled review is unusual. Compa-
nies rarely discuss dealings
with CFIUS, the secretive mul-
tiagency committee that
screens foreign investments for
national security risks.
The Canyon Bridge-Lattice
tie-up has been a lightning rod
more sales. Portugal has
started discussions with Chi-
nese authorities about a bond
issue, though the size and tim-
ing aren’t yet settled, accord-
ing to Portugal’s Ministry of
Finance. The Philippines plans
to issue panda bonds this year,
according to local reports. The
Bureau of the Treasury in the
Philippines didn’t respond to
requests for comment.
Why the interest, given that
the flow of money out of
China is restricted by capital
controls? For starters, the
bond sales are largely sym-
bolic. The $148 million raised
by Hungary in China is a drop
WSJ TALK / E XPE RIE NCE / OFFER / GE TAWAY
FINANCE & MARKETS
Acquirer Deal value
China Investment Corp., $2.8
Wise Road Capital billion
Haocan (Shanghai) Equity
$1.9
Share Investment Fund
Hua Capital Management,
$1.9
Citic Capital,
Citic Securities
Acquirer Deal value
Hua Capital Management, $2.5
China Resources National billion
$1.7
Fujian Grand Chip
$0.8
Investment Fund, Xiamen
Bohao Investment
THE WALL STREET JOURNAL.
in an intensifying struggle be-
tween the U.S. and China over
semiconductors—the chip tech-
nology that powers computers,
mobile phones and much mili-
tary hardware.
Washington grew wary last
year following repeated at-
tempts by Chinese companies
in its planned total gross bond
issuance of €26.2 billion
($30.6 billion) for 2017.
Like most countries that
raise funds overseas, Hungary
plans to repatriate the pro-
ceeds of its sale. In China, that
is less of a problem for coun-
tries than for companies, ac-
cording to experts, who say
such plans are typically dis-
closed to regulators before a
deal is completed.
Emerging countries, seeking
cheap sources of cash, often
issue debt in a number of cur-
rencies. China’s bond market is
the third-largest in the world,
so it makes sense for some
to buy U.S. semiconductor mak-
ers. Canyon Bridge’s struc-
ture—a Palo Alto, Calif.-regis-
tered private-equity firm
funded by the Chinese govern-
ment—raised red flags among
members of Congress. Then
came the presidential campaign
when Donald Trump portrayed
China as a trading predator,
further souring the atmosphere
for Chinese deals, which have
been facing more scrutiny from
CFIUS in recent months.
Canyon Bridge is now on its
third attempt to get approval
from CFIUS, after twice failing
to win it within the review pe-
riod, each roughly 2½ months
long. The committee is led by
the Treasury Department and
includes representatives from
the Defense, State, Justice and
Commerce departments, among
others. “Protecting our national
security is the primary focus of
CFIUS, and we take that re-
sponsibility very seriously,” a
Treasury spokesman said.
Canyon Bridge managing
partner Ben Chow said he and
his partners were transparent
with CFIUS about the source of
their funding, which he said is
99% from China Reform Hold-
ings Corp., a state-owned in-
vestment company funded by
China’s overnment. “We have
never hidden anything,” Mr.
Chow said in the interview.
countries to try it out, espe-
cially as Chinese bonds are
eventually expected to be in-
cluded in major bond indexes.
“If it proves a success, they
open up another channel for
their government to tap at any
time,” said Sean Chang, head
of Asian debt investment at
Baring Asset Management in
Hong Kong, who owns Hungar-
ian dim-sum bonds, yuan
bonds sold outside China.
Interest from foreign gov-
ernments in China’s bond mar-
ket can be politically moti-
vated, too, meant to improve
relations with the world’s sec-
ond-largest economy, accord-
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Slowing Spree
China’s outbound, completed
deals in the semiconductor sector
$6 billion
Full year
1H
4 rules amid its efforts to stem
2 of Foreign Exchange on Fri-
0
2014 ’15 ’16
Source: Dealogic
THE WALL STREET JOURNAL.
Lattice Chief Executive Darin
Billerbeck said in a separate in-
terview that the companies
have offered to tighten safe-
guards on intellectual property
to prevent it from being trans-
ferred to China and that in an
initial meeting with CFIUS, the
panel “gave zero indication” of
any problems. “They said,
‘Looking at the data you’re pre-
senting, that shouldn’t be a big
deal,’” he said.
CFIUS has since communi-
cated to the companies that it
doesn’t intend to grant ap-
proval due to what it said were
unresolved national-security
concerns, according to people
familiar with the matter.
ing to bankers and investors.
China is working to attract
foreigners to its bond market.
Trading began earlier this
month through a program that
enables global investors with
trading accounts in Hong Kong
to access the interbank bond
market. Last year, China
opened its interbank bond
market to foreigners with
trading accounts in China.
Foreign companies and gov-
ernments have been able to tap
the panda-bond market since
2005. Chinese authorities
broadened access in late 2015,
and foreign companies took
advantage of that last year.
© 2017 Dow Jones & Co., Inc. All rights reserved. 6DJ5681
Monday, July 31, 2017 | B7
Beijing Goes
After Banks
On Currency
BEIJING—China’s foreign-
exchange regulator, in a rare
move, accused several banks
of negligence or violations of
outflows of capital.
The State Administration
day said that it found irregu-
larities in local branches of
nine banks when handling for-
eign-exchange transactions.
’17
The regulator has penalized
nonfinancial firms and individ-
uals for moving funds offshore
by faking deals or through un-
derground banks before, but it
is the first time the regulator
has exposed banks’ alleged
wrongdoing.
A local branch of the Indus-
trial Bank Co. failed to con-
duct due diligence in checking
the documentation of 15 trade
deals valued at $162 million,
the regulator said. Those deals
turned out to be fake, and the
regulator slapped a fine of
900,000 yuan ($133,470) on
that branch, the agency said.
More than a dozen employ-
ees at a branch of China Min-
sheng Bank purchased foreign
exchange for an executive at
the branch and friends of that
executive through the employ-
ees’ own annual quotas for
foreign exchange, the regula-
tor said.
Other banks penalized in-
clude local branches of Bank
of Ningbo Co. and Agricultural
Bank of China Ltd.
Notice of the actions was
released late Friday in Beijing.
The banks couldn’t be reached
for comment.
Beijing has been ramping
up efforts to halt a flood of
money leaving the country in
response to an economic slow-
down and a depreciation in
the yuan since the second half
of 2015. The regulator has had
an easier time controlling out-
flows this year, given U.S. dol-
lar weakness. The yuan has
risen against the U.S. dollar by
about 3% this year after drop-
ping more than 7% last year.
—Liyan Qi
B8 | Monday, July 31, 2017
Why the Consumer Keeps Chugging Along
Questions about the
health of the U.S. consumer
have ticked up in recent
weeks, with another tepid
GDP reading on Friday and
earnings reports from major
credit-card lenders showing
rising delinquencies. For
some investors, those
signals amplified concerns
about the spending outlook
at a time of soft wage
growth, stalling car sales
and a growing overhang of
auto and student-loan debt.
But some key measures of
consumer health show why
many investors remain
upbeat: Consumer leverage
and monthly obligations
remain far below the levels
they reached on the eve of
the Great Recession.
Consumers have been
cautious on revolving debt,
such as credit cards and
home-equity loans—where
they got hit hard during the
recession. The mortgage
market remains tight and
homes are expensive (bigger
down payments are
required), which is keeping a
lid on home-loan growth.
While consumer credit
excluding mortgages is
hitting new highs, reflecting
the spike in student debt and
auto loans since the crisis,
total household leverage is
not rising and debt service
ratios have fallen. The
consumer picture isn’t a
uniformly happy one, but for
now the outlook appears
relatively upbeat.
WSJ
subscribers can get
The Daily Shot—
a chart-by-chart briefing
on markets and economics—
sent to their email
each morning. Subscribe at
wsj.com/newsletters
*Annualized quarterly GDP Sources: Federal Reserve (leverage, delinquency, mortgages, nonrevolving debt, consumer credit, credit-card debt, home-equity loans); Bureau of Labor Statistics (wage growth)
Email: heard@wsj.com
German, U.S. Yields Differ Less
Many of the trades em-
braced by markets after
President Donald Trump’s
election have been slowly un-
winding in 2017. Here is an
important one that could
have further to go: the gap
between U.S. and German
government bond yields.
The spread between 10-
year Treasurys and bunds
ballooned after Mr. Trump’s
November victory to a level
not seen since before the fall
of the Berlin Wall, around 2.3
percentage points by the end
of 2016. U.S. yields rose
sharply on the idea of refla-
tion and stimulus, while Eu-
rope appeared stuck in a rut.
At 1.75 percentage points, the
gap is close to its pre-elec-
tion level.
But even that is unusual
by historical standards. Be-
tween 1990 and 2014, the
spread was only rarely wider
than 1 percentage point, and
over that period averaged
just 0.2 point, according to
data from FactSet.
Such a tight relationship
between German and U.S.
bonds reflected the long
global bull market for bonds
European Investment Banks Suffer From American Envy
Life isn’t getting any eas-
ier for Europe’s investment
banks.
A string of results on Fri-
day showed they are falling
further behind U.S. rivals in
the business of trading bonds
and currencies, although some
are doing better in equities.
Low volatility at home and a
lack of scale in the more ac-
tive and profitable U.S. mar-
ket are taking their toll.
In investment banking, ad-
vising on deals and capital
raising, Europeans are per-
forming worse, too, with
only UBS Group getting close
to the revenue gains re-
ported by U.S. banks.
The trouble for the Euro-
peans is that the more
Overall household leverage remains well below peak levels, one positive sign for the U.S. consumer.
Total debt as a share of household disposable income, quarterly
Consumer credit plus mortgage debt
100%
75
50
25
0
1960
Red flags include a recent slowdown in wage growth, an uptick in credit-card delinquencies and steadily rising nonrevolving debt.
Median wage growth, monthly
Change from a year earlier, three-month rolling average
6%
Recessions
4
2
0 0
2000 ’05
Consumer credit (excluding mortgages) has risen to new highs, but credit-card and mortgage debt are down from a decade ago.
Consumer credit as a share of
disposable income, quarterly
Excluding mortgages
30% Recessions
20
10
0 0
2000 ’05 ’10
HEARD ON THE STREET
Continental Drift
Yield spread between 10-year U.S. Treasurys and German bunds
2.4 percentage points
2.2
2.0
1.8
1.6
1.4
2016
Source: FactSet
in the glory years of globali-
zation. Relatively synchro-
nized monetary policy meant
yields fell together on both
sides of the Atlantic.
Where policy goes now is
key. Markets doubt how far
the Federal Reserve might
get with its tightening, and
seem unflustered by the
prospect of the central bank
shrinking its balance sheet.
Investors may be too relaxed,
but in the absence of fiscal
stimulus and inflation, much
money U.S. banks make in
their domestic market, the
more firepower they will
have to deploy on winning
business elsewhere. As banks
like Morgan Stanley and Citi-
group return to strength, the
White House’s deregulatory
agenda for banks might give
this extra impetus.
Credit Suisse Group stood
out as having a particularly
rough second quarter, mainly
due to a much worse perfor-
mance in both equity and
bond trading in Asia, a mar-
ket on which it is pinning its
turnaround story.
Low volatility in curren-
cies and weak activity
among clients in interest-
rate-related trading hurt all
MARKETS
THE DAILY SHOT By Lev Borodovsky and Colin Barr
U.S. recessions
1970
Growth has
slowed in
recent months
’10 ’15 ’17
Credit-card debt as a share
of GDP, quarterly*
26.6% 8%
Recessions
6 60
4 40
2 20
’15 2000
FINANCIAL ANALYSIS & COMMENTARY
’17
THE WALL STREET JOURNAL.
higher yields for Treasurys
might be hard to achieve in
the near term.
The European Central
Bank, meanwhile, is set to
move out of emergency-pol-
icy territory. Support for low
yields on German bunds is
likely to diminish as the ECB
starts to move gently toward
an exit from its bond pur-
chases. While policy rates
are likely to remain ultralow
for a long time to come, that
implies a steeper yield curve
banks. Only Deutsche Bank,
which reported Thursday,
did marginally better than
the U.S. average, although
the German bank fell down
on its equities business,
which saw the biggest reve-
nue drop among its peers.
One bright spot for sev-
eral banks was the business
of funding equities trades for
hedge funds, which makes
Deutsche’s major loss of
ground there look doubly
painful. BNP Paribas ap-
peared to benefit most from
Deutsche’s woes, with its eq-
uities revenue up 24% from
the second quarter of 2016
in dollar terms, although it
said strong equity-deriva-
tives results were also a big
1980 1990
Credit-card delinquency rate, quarterly
8%
6 12
Recessions
4 Recent
2 4
2000 ’05 ’10
Home mortgages as a share
of GDP, quarterly*
Recessions
80%
Recession peak
0 0
’05 ’10 ’15 2000
in Germany, with the central
bank exerting less influence
over longer-term interest
rates.
An important constraint
on the ECB’s continuing bond
purchases is in Germany;
even though the ECB is talk-
ing about the flexibility of
the program, any tweaks
seem unlikely to result in
larger purchases of bunds.
Meanwhile, the eurozone
economy is growing strongly,
reducing the allure of Ger-
man debt as a haven. The
rise in the euro this year
suggests that faith in the
currency bloc is recovering.
German yields still look out
of sync with economic good
news such as the record high
in the influential Ifo business
climate index.
The spotlight moves to
ECB President Mario Draghi’s
speech at the Fed’s Jackson
Hole conference in August.
His last appearance there in
2014 foreshadowed eurozone
QE, sending the U.S.-German
spread wider. This summer’s
visit could bring the two
sides closer again.
—Richard Barley
Falling Down
Change in second-quarter
fixed-income revenue from
prior year in dollar terms
-36% UBS
-25 Credit Suisse
-21 Barclays
-17 BNP Paribas
-14 Deutsche Bank
-16 U.S. average
Source: the companies
THE WALL STREET JOURNAL.
part of that.
BNP’s revenue gains were
far ahead of the pack. Bar-
clays and UBS both managed
to do a little better than the
U.S. average of a 1% increase.
125%
Debt
exceeds
income
2000
Auto and student loans (nonrevolving
debt) as a share of GDP, quarterly*
16%
8
reversal
0
’15 ’17 2000
Home-equity loans
as a share of GDP, quarterly*
4%
Recession peak
3
2
1
’05 ’10 ’15
OVERHEARD
Online shoppers can com-
miserate with Jeff Bezos.
Those who prefer to compari-
son-shop and eschew Ama-
zon.com’s “Buy now with 1-
click” feature put items they
want to buy in their carts.
Sometimes, though, so-called
dynamic pricing gives them a
rude surprise as the price
rises before they can return
to complete their order.
There is no place with
prices quite as dynamic as
the stock market, of course,
and Mr. Bezos learned that
the hard way last week.
While he probably didn’t have
a shiny plaque that reads
“World’s Richest Person ” in
his virtual shopping cart, he
got the accolade on Thursday
after Amazon’s share price
gave him a net worth on pa-
per of around $92 billion,
overtaking Microsoft co-
founder Bill Gates.
But then the shares of
Amazon dipped in late trading
and fell even more on Friday
in reaction to disappointing
results.
Another item for the wish
list.
Barclays’s equity revenue
rose 4% in dollar terms and
UBS’s was up 3%.
There is a further threat
to European banks in the
form of planned changes to
global capital rules that
could increase equity re-
quirements. This has become
somewhat less of a concern
since rule makers said banks
are likely to have up to 10
years to comply with up-
dated rules.
Meanwhile, European
banks’ best hope is that U.S.
regulators don’t loosen the
leash on American banks too
much. Otherwise, the Euro-
peans will have little chance
of recovering lost ground.
—Paul J. Davies
THE WALL STREET JOURNAL.
The Great Recession
Consumers
dial back
debt
2010 ’17
14.7%
Up from 9.3%
in 1Q 2000
Recessions
’05 ’10 ’15 ’17
Recessions Recession peak
2000 ’05 ’10 ’15
THE WALL STREET JOURNAL.
WSJ.com/Heard
U.S. Growth
Is in a Rut,
But Not Bad
The U.S. economy has
been far from inspiring, but,
hey, it could be worse.
The Commerce Depart-
ment on Friday reported that
gross domestic product ex-
panded at a 2.6% annual rate
in the second quarter, after
increasing (a downwardly re-
vised) 1.2% in the first quar-
ter. With the rebound in
growth owing more to tem-
porary factors and measure-
ment issues than anything
fundamental, the average of
the two figures of 1.9% is
probably the better reflec-
tion of GDP’s underlying
trend.
Since the recession ended,
GDP has expanded at a 2.1%
annual rate. Everybody
would have liked, and many
people expected, growth to
be stronger. Then again, the
economy weathered a lot
during those years. Some-
times being stuck in a rut
isn’t such a bad thing.
Moreover, as slow as
growth has been, it has been
sufficient for the economy to
keep adding jobs. Even
though wage growth has
been lackluster, the pace of
hiring has bolstered house-
hold income. Next Friday’s
jobs report will likely show
that hiring remains strong.
Half of the message for in-
vestors is that they shouldn’t
expect the economy to sud-
denly shift into higher gear,
particularly with the stimu-
lus hopes that accompanied
President Donald Trump’s
move to the White House
looking doubtful.
But the other half of the
message is that the economy
can absorb a lot, and despite
all of the political uncertain-
ties the U.S. faces, the risk of
recession—typically the
stock market’s biggest dan-
ger—remains low. That
counts for a lot.
—Justin Lahart